INVESTIGATING THE INFLUENCE OF BOARD OF DIRECTOR CHARACTERISTICS ON THE FIRM PERFORMANCE

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NIKBAKHT M.R.; SEYEDI SEYED AZIZ; HASHEM ALHOSSEINI ROUZBEH

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Journal: Journal of Accounting Advances Year:2010 | Volume:2 | Issue:1 (58/3) Page(s): 251-270

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Title

INVESTIGATING THE INFLUENCE OF BOARD OF DIRECTOR CHARACTERISTICS ON THE FIRM PERFORMANCE

Author(s)

NIKBAKHT M.R. | SEYEDI SEYED AZIZ | HASHEM ALHOSSEINI ROUZBEH | Issue Writer Certificate

Keywords

FIRM PERFORMANCEQ2

CORPORATE GOVERNANCEQ3

BOARDSQ2

Abstract

Introduction: No doubt the advent of joint-stock companies in the industrial world is one of the biggest economic developments and probably the most important factor of industrial development. Separation of ownership from administration, existence of natural difference in the function of their desirability resulting into the contrariety of benefits and thus forming owner-agent relationship and agency theory are the outcome of this phenomenon. The problem of the interference of rights in general and the risk of rights of minority shareholders to be lapsed by high level influential shareholders, specifically, has been an important owner-agent difficulty in most countries. Scandals of accounting and the downfall of companies like Enron, World Com of America and Tel Van Company in Australia have caused serious anxieties about FIRM PERFORMANCE, making use of the reported profit and moral problems of those who audit and prepare these reports. Legislative organizations in Australia and America reacted against bankrupt companies and disclosed embezzlement by improving the principle of CORPORATE GOVERNANCE. For the same purpose, U.S.A to respond to the above mentioned bankruptcy levied the law of Sarbanes-Oxley in July 2002. Regarding these reactions it is expected that FIRM PERFORMANCE and CORPORATE GOVERNANCE mechanisms are highly interrelated. This research is focused on achieving the effectiveness of some of these mechanisms and methods on the FIRM PERFORMANCE. Identifying the ways and means having an impact on the FIRM PERFORMANCE is very important. It is so that the investors being doubtful about the impartiality of the given information will behave more conservatively and consequently affect the efficiency of capital market. Research Questions or Hypothesis: One of the goals of the present study is to examine the relationship between the FIRM PERFORMANCE and the board size. So the first hypothesis is defined as the following:H 1: There is a significant relationship between the FIRM PERFORMANCE and the board size. Most of the studies highlight the relationship between the existence of outside directors in the combination of the board and the FIRM PERFORMANCE. Therefore the second hypothesis is defined as the following:H 2: There is a significant relationship between the existence of outside directors in the combination of the board and the FIRM PERFORMANCE. One of the aims of this study is to investigate the relationship between the number of meetings held by the board of directors in the company and the FIRM PERFORMANCE. Below the third hypothesis was introduced in this regard:H 3: There is a significant relationship between the FIRM PERFORMANCE and the number of meetings held by the board of directors in the company.Most of the research studies have found a relation (whether positive or negative) between the FIRM PERFORMANCE and the level of financial expertise in the board members. Therefore the fourth hypothesis of this research is determined as the following:H 4: There is a significant relationship between the FIRM PERFORMANCE and the level of financial expertise in the board members. Finally the fifth hypothesis of this research is determined as the following:H5: There is a significant relationship between the FIRM PERFORMANCE and the separation of chief managers’ roles from other BOARDS. Methods: In this research, the performance rank of the firms has been evaluated on the basis of five factors including income increase, operational profit increase, pure profit increase, propriety outcome and shareholders’ revenue outcome. Regarding previous research, the firm size and the financial leverage were considered as control variables. Therefore, the required data was gathered from 71 accepted companies in Tehran Stock Exchange, within 2001 and 2008; Spearman correlation test was utilized at the next step. Results: In this study results show that there is no significant relationship between board of director characteristics (including board size, the proportion of COF BOARDS, the number of BOARDS meetings, their financial knowledge, the separation of chief managers’ roles from other BOARDS) and the FIRM PERFORMANCE.Discussion and Conclusion:This study aimed at investigating the relationship between board of director characteristics (including board size, the proportion of COF BOARDS, the number of BOARDS meetings, their financial knowledge, the separation of chief managers’ roles from other BOARDS) and the FIRM PERFORMANCE. The results show that BOARDS do not carry out their responsibilities for reducing their representatives’ problems in Iran capital market and do not have a significant effect on FIRM PERFORMANCE.

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APA: Copy

NIKBAKHT, M.R., SEYEDI, SEYED AZIZ, & HASHEM ALHOSSEINI, ROUZBEH. (2010). INVESTIGATING THE INFLUENCE OF BOARD OF DIRECTOR CHARACTERISTICS ON THE FIRM PERFORMANCE. JOURNAL OF ACCOUNTING ADVANCES (JAA) (JOURNAL OF SOCIAL SCIENCES AND HUMANITIES), 2(1 (58/3)), 251-270. SID. https://sid.ir/paper/160412/en

Vancouver: Copy

NIKBAKHT M.R., SEYEDI SEYED AZIZ, HASHEM ALHOSSEINI ROUZBEH. INVESTIGATING THE INFLUENCE OF BOARD OF DIRECTOR CHARACTERISTICS ON THE FIRM PERFORMANCE. JOURNAL OF ACCOUNTING ADVANCES (JAA) (JOURNAL OF SOCIAL SCIENCES AND HUMANITIES)[Internet]. 2010;2(1 (58/3)):251-270. Available from: https://sid.ir/paper/160412/en

IEEE: Copy

M.R. NIKBAKHT, SEYED AZIZ SEYEDI, and ROUZBEH HASHEM ALHOSSEINI, “INVESTIGATING THE INFLUENCE OF BOARD OF DIRECTOR CHARACTERISTICS ON THE FIRM PERFORMANCE,” JOURNAL OF ACCOUNTING ADVANCES (JAA) (JOURNAL OF SOCIAL SCIENCES AND HUMANITIES), vol. 2, no. 1 (58/3), pp. 251–270, 2010, [Online]. Available: https://sid.ir/paper/160412/en

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