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Board Composition and Regulatory Change: Evidence from the Enactment of New Companies Legislation in New Zealand

Author

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  • Steven F. Cahan
  • Brett R. Wilkinson

Abstract

We examine whether New Zealand firms changed the composition of their boards of directors due to the 1994 enactment of the new Companies Act. We explore two possible effects. First, outside directors may have been more attractive, and firms may have used more outside directors after the new Companies Act. Alternatively, the new duties and associated penalties could have made outside directorships less attractive and harder to fill, and firms may have used less outside directors. Our results show that the proportion of outside directors increased by about 5% after the new Companies Act. This supports the view that the value of outside directors increased after the Act and suggests that the political process can change corporate governance mechanisms.

Suggested Citation

  • Steven F. Cahan & Brett R. Wilkinson, 1999. "Board Composition and Regulatory Change: Evidence from the Enactment of New Companies Legislation in New Zealand," Financial Management, Financial Management Association, vol. 28(1), Spring.
    • Handle: RePEc:fma:fmanag:cahan99
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    Citations

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    Cited by:

    1. Glenn Boyle & Xu (Jane) Ji, 2011. "New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010," Working Papers in Economics 11/36, University of Canterbury, Department of Economics and Finance.
    2. Alix Valenti, 2008. "The Sarbanes-Oxley Act of 2002: Has It Brought About Changes in the Boards of Large U. S. Corporations?," Journal of Business Ethics, Springer, vol. 81(2), pages 401-412, August.
    3. repec:vuw:vuwscr:19213 is not listed on IDEAS
    4. Ji, Xu (Jane) & Boyle, Glenn, 2011. "New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010," Working Paper Series 19213, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    5. Alastair Marsden & Andrew K. Prevost, 2005. "Derivatives Use, Corporate Governance, and Legislative Change: An Empirical Analysis of New Zealand Listed Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(1‐2), pages 255-295, January.
    6. M. Andrew Fields & Phyllis Y. Keys, 2003. "The Emergence of Corporate Governance from Wall St. to Main St.: Outside Directors, Board Diversity, Earnings Management, and Managerial Incentives to Bear Risk," The Financial Review, Eastern Finance Association, vol. 38(1), pages 1-24, February.
    7. Alastair Marsden & Andrew K. Prevost, 2005. "Derivatives Use, Corporate Governance, and Legislative Change: An Empirical Analysis of New Zealand Listed Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(1-2), pages 255-295.
    8. Glenn Boyle & Xu (Jane) Ji, 2011. "New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010," Working Papers in Economics 11/36, University of Canterbury, Department of Economics and Finance.
    9. Gromov, Vladimir (Громов,Владимир) & Malinina, Tatiana (Малинина, Татьяна), 2015. "Directions of Improvement of Russian Tax Legislation in the Part of Taxation of Capital Gains of Assets [Направления Совершенствования Российского Налогового Законодательства В Части Налогообложени," Published Papers mak16, Russian Presidential Academy of National Economy and Public Administration.

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