IDEAS home Printed from https://ideas.repec.org/a/bla/acctfi/v61y2021i1p977-1015.html
   My bibliography  Save this article

Does prestigious board membership matter? Evidence from New Zealand

Author

Listed:
  • Mosammet Asma Jahan
  • Martien Lubberink
  • Karen Van Peursem

Abstract

This study investigates whether ‘prestigious’ multiple board membership is positively associated with firm performance. We employ Resource Dependency theory to explain why performance outcomes may be improved by the presence of ‘prestigious’ multiple directorships. Our analysis relies on extensive hand‐collected data on New Zealand company directorships. The results support the contention that ‘prestigious’ multiple directorships are related to better accounting and market performance. Conclusions reflect upon how Resource Dependency theory informs this phenomenon and how ‘prestigious’ board members may be a valuable resource for firms. We also reveal how these findings expose a new avenue for board governance research.

Suggested Citation

  • Mosammet Asma Jahan & Martien Lubberink & Karen Van Peursem, 2021. "Does prestigious board membership matter? Evidence from New Zealand," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 977-1015, March.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:1:p:977-1015
    DOI: 10.1111/acfi.12601
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/acfi.12601
    Download Restriction: no
    File URL: https://libkey.io/10.1111/acfi.12601?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stephen P. Ferris & Murali Jagannathan & A. C. Pritchard, 2003. "Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments," Journal of Finance, American Finance Association, vol. 58(3), pages 1087-1111, June.
    2. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    3. Zied Guedri & Aurélien Eminet, 2010. "The role of nominating committees and director reputation in shaping the labor market for directors : an empirical assessment," Post-Print hal-02312529, HAL.
    4. Amy J. Hillman & Albert A. Cannella & Ramona L. Paetzold, 2000. "The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change," Journal of Management Studies, Wiley Blackwell, vol. 37(2), pages 235-256, March.
    5. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    6. Claudio Loderer & Urs Peyer, 2002. "Board Overlap, Seat Accumulation and Share Prices," European Financial Management, European Financial Management Association, vol. 8(2), pages 165-192, June.
    7. Mark Kroll & Bruce A. Walters & Peter Wright, 2008. "Board vigilance, director experience, and corporate outcomes," Strategic Management Journal, Wiley Blackwell, vol. 29(4), pages 363-382, April.
    8. Aditi Gupta & David Otley & Steven Young, 2008. "Does superior firm performance lead to higher quality outside directorships?," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 21(7), pages 907-932, September.
    9. Pathan, Shams & Faff, Robert, 2013. "Does board structure in banks really affect their performance?," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1573-1589.
    10. Klein, April, 1998. "Firm Performance and Board Committee Structure," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 275-303, April.
    11. Philippa Wells & Jens Mueller, 2014. "Boards of directors in New Zealand: what do they reveal about governance?," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 12(3), pages 334-357.
    12. Jiraporn, Pornsit & Davidson III, Wallace N. & DaDalt, Peter & Ning, Yixi, 2009. "Too busy to show up? An analysis of directors' absences," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 1159-1171, August.
    13. Cashman, George D. & Gillan, Stuart L. & Jun, Chulhee, 2012. "Going overboard? On busy directors and firm value," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3248-3259.
    14. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, vol. 9(Apr), pages 7-26.
    15. Helen Kang & Mandy Cheng & Sidney J. Gray, 2007. "Corporate Governance and Board Composition: diversity and independence of Australian boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 194-207, March.
    16. Krishna Reddy & Stuart Locke & Frank Scrimgeour & Abeyratna Gunasekarage, 2008. "Corporate governance practices of small cap companies and their financial performance: an empirical study in New Zealand," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 4(1), pages 51-78.
    17. David A. Carter & Betty J. Simkins & W. Gary Simpson, 2003. "Corporate Governance, Board Diversity, and Firm Value," The Financial Review, Eastern Finance Association, vol. 38(1), pages 33-53, February.
    18. Grant Kirkpatrick, 2009. "The corporate governance lessons from the financial crisis," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2009(1), pages 61-87.
    19. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-750, July.
    20. Emma L. Schultz & David T. Tan & Kathleen D. Walsh, 2010. "Endogeneity and the corporate governance - performance relation," Australian Journal of Management, Australian School of Business, vol. 35(2), pages 145-163, August.
    21. John A. Pearce & Shaker A. Zahra, 1992. "Board Composition From A Strategic Contingency Perspective," Journal of Management Studies, Wiley Blackwell, vol. 29(4), pages 411-438, July.
    22. repec:bla:jfinan:v:58:y:2003:i:3:p:1087-1112 is not listed on IDEAS
    23. Eliezer M. Fich & Anil Shivdasani, 2006. "Are Busy Boards Effective Monitors?," Journal of Finance, American Finance Association, vol. 61(2), pages 689-724, April.
    24. Geoffrey C. Kiel & Gavin J. Nicholson, 2006. "Multiple Directorships and Corporate Performance in Australian Listed Companies," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(6), pages 530-546, November.
    25. Fich, Eliezer M. & Shivdasani, Anil, 2007. "Financial fraud, director reputation, and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 86(2), pages 306-336, November.
    26. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    27. John A. Wagner III & J. L. Stimpert & Edward I. Fubara, 1998. "Board Composition and Organizational Performance: Two Studies of Insider/outsider Effects," Journal of Management Studies, Wiley Blackwell, vol. 35(5), pages 655-677, September.
    28. Fitriya Fauzi & Stuart Locke, 2012. "Board Structure, Ownership Structure and Firm Performance: A Study of New Zealand Listed-Firms," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 8(2), pages 43-67.
    29. Hardjo Koerniadi & Chandrasekhar Krishnamurti & Alireza Tourani-Rad, 2014. "Corporate governance and risk-taking in New Zealand," Australian Journal of Management, Australian School of Business, vol. 39(2), pages 227-245, May.
    30. Hossain, Mahmud & Prevost, Andrew K. & Rao, Ramesh P., 2001. "Corporate governance in New Zealand: The effect of the 1993 Companies Act on the relation between board composition and firm performance," Pacific-Basin Finance Journal, Elsevier, vol. 9(2), pages 119-145, April.
    31. Andrew K. Prevost & Ramesh P. Rao & Mahmud Hossain, 2002. "Board Composition in New Zealand: An Agency Perspective," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(5‐6), pages 731-760.
    32. Wintoki, M. Babajide & Linck, James S. & Netter, Jeffry M., 2012. "Endogeneity and the dynamics of internal corporate governance," Journal of Financial Economics, Elsevier, vol. 105(3), pages 581-606.
    33. Mark A. Fox & Robert T. Hamilton, 1994. "Ownership And Diversification: Agency Theory Or Stewardship Theory," Journal of Management Studies, Wiley Blackwell, vol. 31(1), pages 69-81, January.
    34. James D. Westphal & James W. Fredrickson, 2001. "Who directs strategic change? Director experience, the selection of new CEOs, and change in corporate strategy," Strategic Management Journal, Wiley Blackwell, vol. 22(12), pages 1113-1137, December.
    35. Yasemin Y. Kor, 2003. "Experience-Based Top Management Team Competence and Sustained Growth," Organization Science, INFORMS, vol. 14(6), pages 707-719, December.
    36. Ahn, Seoungpil & Jiraporn, Pornsit & Kim, Young Sang, 2010. "Multiple directorships and acquirer returns," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2011-2026, September.
    37. Field, Laura & Lowry, Michelle & Mkrtchyan, Anahit, 2013. "Are busy boards detrimental?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 63-82.
    38. Hofer, Christian & Jin, Henry & Swanson, R. David & Waller, Matthew A. & Williams, Brent D., 2012. "The Impact of Key Retail Accounts on Supplier Performance: A Collaborative Perspective of Resource Dependency Theory," Journal of Retailing, Elsevier, vol. 88(3), pages 412-420.
    39. Monem, Reza M., 2013. "Determinants of board structure: Evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 9(1), pages 33-49.
    40. Nadia Mans-Kemp & Suzette Viviers & Sian Collins, 2018. "Exploring the causes and consequences of director overboardedness in an emerging market," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 15(4), pages 210-220, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, December.
    2. Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2018. "Bank governance and performance: a survey of the literature," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(3), pages 236-256, July.
    3. Volonté, Christophe, 2015. "Boards: Independent and committed directors?," International Review of Law and Economics, Elsevier, vol. 41(C), pages 25-37.
    4. Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2017. "Supervisory boards, financial crisis and bank performance: do board characteristics matter?," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(4), pages 310-337, November.
    5. Tutun Mukherjee & Som Sankar Sen, 2022. "Impact of CEO attributes on corporate reputation, financial performance, and corporate sustainable growth: evidence from India," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-50, December.
    6. Ferris, Stephen P. & Jayaraman, Narayanan & Liao, Min-Yu (Stella), 2020. "Better directors or distracted directors? An international analysis of busy boards," Global Finance Journal, Elsevier, vol. 44(C).
    7. Kim, Keunyoung, 2022. "When are busy boards beneficial?," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 437-454.
    8. Sun, Liang, 2021. "Does the location of directors' additional positions matter? A new dimension of board structure," Global Finance Journal, Elsevier, vol. 49(C).
    9. Ghafran, Chaudhry & O'Sullivan, Noel & Yasmin, Sofia, 2022. "When does audit committee busyness influence earnings management in the UK? Evidence on the role of the financial crisis and company size," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    10. Le, Quyen & Vafaei, Alireza & Ahmed, Kamran & Kutubi, Shawgat, 2022. "Independent directors' reputation incentives and firm performance – an Australian perspective," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    11. Bennouri, Moez & Chtioui, Tawhid & Nagati, Haithem & Nekhili, Mehdi, 2018. "Female board directorship and firm performance: What really matters?," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 267-291.
    12. Fernández Méndez, Carlos & Pathan, Shams & Arrondo García, Rubén, 2015. "Monitoring capabilities of busy and overlap directors: Evidence from Australia," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 444-469.
    13. Zhou, Yifan & Kara, Alper & Molyneux, Philip, 2019. "Chair-CEO generation gap and bank risk-taking," The British Accounting Review, Elsevier, vol. 51(4), pages 352-372.
    14. Md Arafat Hossain & Elaine Yen Nee Oon, 2022. "Board leadership, board meeting frequency and firm performance in two‐tier boards," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 862-879, April.
    15. Qi Wang & Maoxia Sun & Kongwen Wang, 2023. "Do Reputation Incentives Matter? Busy Directors and Corporate Social Responsibility in China," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    16. Alexander Muravyev & Oleksandr Talavera & Charlie Weir, 2016. "Performance effects of appointing other firms’ executive directors to corporate boards: an analysis of UK firms," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 25-45, January.
    17. Marwa Elnahass & Kamil Omoteso & Aly Salama & Vu Quang Trinh, 2020. "Differential market valuations of board busyness across alternative banking models," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 201-238, July.
    18. Nguyen, Thi Tuyet Mai, 2017. "An examination of independent directors in Vietnam," OSF Preprints ay6dv, Center for Open Science.
    19. Etienne Redor, 2016. "Board attributes and shareholder wealth in mergers and acquisitions: a survey of the literature," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(4), pages 789-821, December.
    20. Jaskiewicz, Peter & Klein, Sabine, 2007. "The impact of goal alignment on board composition and board size in family businesses," Journal of Business Research, Elsevier, vol. 60(10), pages 1080-1089, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:acctfi:v:61:y:2021:i:1:p:977-1015. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaanzea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.