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Corporate Governance, Board Composition, Director Expertise, and Value: The Case of Quality Excellence

Author

Listed:
  • Andreas Charitou

    (University of Cyprus, Cyprus)

  • Ifigenia Georgiou

    (Aston Business School, UK & Cyprus International Institute of Management, Cyprus)

  • Andreas Soteriou

    (University of Cyprus, Cyprus)

Abstract

In this paper, we highlight the strategic role of the board of directors (BOD) in business excellence and its link with firm value. We empirically investigate the relationship between the composition of the BOD and the winning of a Malcolm Baldrige National Quality Award (MBNQA) or a local award explicitly based on the MBNQA criteria, a proxy for business excellence. Using a contingency approach, we examine several characteristics of the BOD, such as the number of inside directors, the number of directors who can be considered industry experts, and the number of directors with management expertise. We show that the likelihood of winning a quality award is positively associated with the number of outside directors with Ph.D. in the main object of business operations, and the number of outside directors with recent industry expertise. Subsequent residual analysis reveals that firm value is positively associated with the degree of the fit between board composition and quality management strategy. Specifically, operating income before depreciation, operating margin, Tobin’s Q, and ten-day raw and market adjusted returns, are positively related to the degree of fit, while cost per dollar of sales, negatively. Thus, we, conclude that an appropriate board structure that fits the QM strategy exists, and this fit is positively associated with firm value.

Suggested Citation

  • Andreas Charitou & Ifigenia Georgiou & Andreas Soteriou, 2016. "Corporate Governance, Board Composition, Director Expertise, and Value: The Case of Quality Excellence," Multinational Finance Journal, Multinational Finance Journal, vol. 20(3), pages 181-236, September.
    • Handle: RePEc:mfj:journl:v:20:y:2016:i:3:p:181-236
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    Citations

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    Cited by:

    1. Alex Johanes Simamora, 2020. "ASEAN Corporate Governance Scorecard and Firm Value," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 10(3), pages 66-80.
    2. Christina Vadasi & Michalis Bekiaris & Andreas Andrikopoulos, 2021. "Internal Audit Function Quality and Corporate Governance: The Case of Greece," Multinational Finance Journal, Multinational Finance Journal, vol. 25(1-2), pages 1-61, March - J.

    More about this item

    Keywords

    board of directors; corporate governance; director expertise; strategic role of the board quality management; quality awards;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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