Board diversity and firm risk-taking in the tourism sector: Moderating effects of board independence, CEO duality, and free cash flows

2021 ◽  
pp. 135481662110143
Author(s):  
Ozgur Ozdemir ◽  
Ezgi Erkmen ◽  
Fatemeh Binesh
Keyword(s):  
Risk Taking ◽  
Composite Index ◽  
Cash Flows ◽  
Board Independence ◽  
Firm Risk ◽  
Board Diversity ◽  
Ceo Duality ◽  
Reduction Effect ◽  
Task Oriented ◽  
Free Cash Flows

This study examines the effect of board diversity on risk-taking for tourism firms and analyzes the moderating effect of board independence, CEO duality, and free cash flows in this proposed relationship. Using a composite index of board diversity and a sample of tourism firms from the US hotel, restaurant, and airline industries, we find that greater board diversity leads to lower risk-taking, measured in standard deviation of return on assets. Moreover, we report that the risk-reduction effect of board diversity is more profound when tourism firms have less board independence and less free cash flows for investments. When board diversity is decomposed into relation-oriented and task-oriented diversity attributes, we find that only the task-oriented diversity is influential in reducing firm risk-taking for tourism firms. Akin to main analysis, the board independence and free cash flows are significant moderators of the relationship between task-oriented diversity and firm risk-taking.

Board diversity and corporate risk: evidence from China

2019 ◽  
Vol 20 (2) ◽  
pp. 280-293 ◽  
Author(s):  
Kalim Ullah Bhat ◽  
Yan Chen ◽  
Khalil Jebran ◽  
Zulfiqar Ali Memon
Keyword(s):  
Risk Taking ◽  
Fixed Effects ◽  
Fixed Effects Model ◽  
Board Diversity ◽  
Content Type ◽  
Listed Firms ◽  
Governance Practices ◽  
And Gender ◽  
Task Oriented ◽  
Corporate Risk

Purpose The purpose of this study shows how overall board diversity influences corporate risk-taking. Board diversity is quantified into task-oriented diversity (tenure and education) and relation-oriented diversity (age and gender). Further, this study tests whether the association of board diversity and corporate risk varies across state-owned firms (SOEs) and non-state-owned firms (NSOEs). Design/methodology/approach The authors used a sample of Chinese listed firms over the period 1999-2017. The results are estimated using the fixed-effects model. To deal with the endogeneity problem and single model bias, the authors use a dynamic model, i.e. two-step generalized method of moment’s model. Findings The results show that both task-oriented and relation-oriented diversity reduces corporate risk. Further, the authors document that overall board diversity reduces risk-taking across different types of firms, that is, SOEs and NSOEs. These results are consistent after controlling for endogeneity problems. Practical implications The results provide implications for enhancing corporate governance practices by considering overall board diversity as an important factor influencing corporate decisions. The findings suggest that policymakers and shareholders should consider different diversity attributes important for the composition of a board, which can enhance board outcomes. Originality/value Most of the prior studies considered only one dimension of diversity, and therefore, have overlooked the overall board diversity. Unlike prior studies, this study considers four board diversity attributes – age, gender, tenure and education, and further tests their association with corporate risk. Further, this study also examines the effect of overall diversity on corporate risk in SOEs and NSOEs.

scholarly journals Determinants of Intercorporate Investments: An Empirical Investigation of Indian Firms

2020 ◽  
Vol 9 (1) ◽  
pp. 1
Author(s):  
Vedika Saxena ◽  
Seshadev Sahoo
Keyword(s):  
Empirical Investigation ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Cash Flows ◽  
The Other ◽  
Board Independence ◽  
Industry Effect ◽  
Earnings Per Share ◽  
Service Sectors ◽  
Free Cash Flows

We examine the determinants of intercorporate investments for a sample of 127 firms listed in the National Stock Exchange (NSE) in India for the period 2015–2019. This research indicates that the investor firm’s intercorporate investments are influenced by free cash flows, dividend yield, promoter holding, and leverage. Interestingly, contrary to anecdotes in the financial press, the investor firms where promoter holding (equity) is more, prefer to invest less in the other firm’s capital (as part of intercorporate investment). Using OLS regression, this analysis does not find evidence for the variables, that is, the firm’s age, the capital expenditure required, growth in earnings per share, board independence, and CEO duality for significant influence on intercorporate investments. Further tests for industry effect reveal the consumer and retail sector’s intercorporate investments to be significantly different (i.e., lower) from the manufacturing and service sectors.

scholarly journals CEO Duality Leadership And Firm Risk-Taking Propensity

2011 ◽  
Vol 24 (1) ◽  
Author(s):  
Kong-Hee Kim ◽  
Robert Buchanan
Keyword(s):  
Empirical Evidence ◽  
Risk Taking ◽  
Governance Structure ◽  
Control Mechanisms ◽  
Risk Minimization ◽  
Firm Risk ◽  
Managerial Behavior ◽  
Corporate Governance Structure ◽  
Ceo Duality ◽  
Corporate Strategic Management

Based on a sample of 290 large U.S. corporations, we find that dual positioning on both CEO and board chairperson positions at the corporate top leads to reduced firm risk-taking propensity, serving managerial risk minimization preferences. We also find empirical evidence that traditionally emphasized control mechanisms of board independence and managerial ownership are ineffective in controlling managerial behavior when CEO duality leadership exists. Additionally, the power balance obtained from concentrated shareholder ownership in the firm has significant impact on controlling managerial behavior regarding firm risk taking. The findings of this research contribute to reducing the controversy surrounding CEO duality leadership by furnishing empirical evidence of how CEO duality leadership in corporate governance structure affects managerial behavior in corporate strategic management.

scholarly journals Board diversity and corporate payout policy: Do free cash flow and ownership concentration matter?

2016 ◽  
Vol 14 (1) ◽  
pp. 373-383 ◽  
Author(s):  
Redhwan Ahmed AL-Dhamari ◽  
Ku Nor Izah Ku Ismail ◽  
Bakr Ali Al-Gamrh
Keyword(s):  
Cash Flow ◽  
Agency Problem ◽  
Cash Flows ◽  
Payout Policy ◽  
Free Cash Flow ◽  
Ownership Concentration ◽  
Board Diversity ◽  
Dividend Payout ◽  
Dividend Payments ◽  
Free Cash Flows

This study investigates the effect of board diversity in terms of gender and ethnicity on dividend payout policy when a firm has free cash flow agency problem. It also tests whether the probability of diverse boards would minimize free cash flow agency problem through making large dividend payments is more pronounced in firms with high ownership concentration. We find that our results differ based on how corporate dividend policy is measured, and vary by the level of free cash flows and ownership concentration. More specifically, we find that women’s (Malays’) presence on boards has positive impact on dividend yield (dividend payout), and this effect conditional on the level of free cash flows generated by firms. Our results also show that the role of female and Malay directors in forcing controlling shareholders of firms with substantial free cash flows to cash out the firms’ resources through making higher dividend payments is more prominent when the firms’ ownership structure is concentrated in the hand of largest shareholders. The findings of our study, to some extent, support the government calls for increasing the number of women participation on corporate boardrooms and the participation of Malays in corporate sector.

scholarly journals Corporate Governance Factors Drive Firms’ Earning Per Share: Evidence from Pakistan Stock Exchange Listed Companies

2021 ◽  
Vol 2 (2) ◽  
pp. 123-132
Author(s):  
YASIR KHAN ◽  
MUHAMMAD AMJAD ◽  
DR.SAIMA BATOOL ◽  
OBAID ULLAH BASHIR
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Ownership Concentration ◽  
Board Independence ◽  
Regression Result ◽  
Board Diversity ◽  
Ceo Duality ◽  
Independent Variables ◽  
Firm Financial Performance ◽  
The Impact

The aim of this study is to examine the corporate governance factors that drive the firms’ earning per share (EPS) sample of firms listed on Pakistan Stock Exchange (PSX) over the period of 2011 to 2016. This paper analyzed the impact and relationship of dependent variable (Earning per Share) and independent variables (Board Independence, Ownership concentration, CEO duality and Board diversity). The panel data collected from the sample of top 20 companies (market capitalizations) listed in Pakistan stock exchange. To investigate the relationship between variables the Pearson correlation and regression applied and to identify the impact of independent variables (board independence, ownership concentration, CEO duality and Board diversity) on dependent variable (earning per share) used regression tool. The study result of correlations and regression result revealed that board independence, ownership concentration and Board diversity have significant impact on performance while CEO Duality has negative impact on Firm financial performance.

scholarly journals Corporate Governance and Firm Performance: A Study of High Agency Costs of Free Cash Flow Firms

2018 ◽  
Vol 12 (2) ◽  
pp. 2724-2731
Author(s):  
Dan Lin ◽  
Lu Lin
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Cash Flow ◽  
Agency Costs ◽  
Composite Index ◽  
Cash Flows ◽  
Free Cash Flow ◽  
Return On Equity ◽  
Free Cash Flow Hypothesis ◽  
Free Cash Flows

Excessive free cash flows can lead to high agency problems as retaining free cash flow reduces the ability of capital market to monitor managers. Managers are also likely to waste the free cash flow on value-decreasing investments. Based on the free cash flow hypothesis, this study examines the relationship between corporate governance and firm performance of a sample of high agency costs of free cash flow firms, which is defined as firms that have high free cash flow and low investment opportunities. The sample firms are extracted from firms listed on the S&P/TSX composite index between 2009 and 2012. Using corporate governance scores provided by The Globe and Mail, this study finds that better corporate governance is associated with better firm performance, measured by return on equity. The results highlight the importance of corporate governance in protecting shareholders’ interests.

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