Board Members' Financial Education and Firms' Performance: Empirical Evidence for Bucharest Stock Exchange Companies
After the accounting scandals and the financial crisis, regulators have stressed the need for more financial experts on boards. Several studies conducted in countries with developed capital markets report positive effects of board financial competencies. As each country offers a different context and specific institutional factors this paper addresses the subject in the context of Romania. The Romanian capital market offers an interesting research field because of the heterogeneity of listed firms. After analyzing board members education based on public information posted on listed companies websites and their annual reports we found a positive association between the proportion of board members holding a postgraduate degree in financial fields and market based performance measured by Tobin q. We found also that the proportion of Board members holding degrees in financial fields is higher in bigger firms and firms with more concentrated ownership.
[1] R. B. Adams and D Ferreira "Women in the boardroom and their impact
on governance and performance", Journal of Financial Economics, vol.
94, no. 2, 2009, pp. 291- 309.
[2] R.B Adams, B.E Hermalin and M.S. Weisbach "The role of boards of
directors in corporate governance: a conceptual framework and survey",
Journal of Economic Literature, vol 48, no 1, 2010, pp 58-107.
[3] A.Agrawal and S Chadha "Corporate governance and accounting
scandals", Journal of Law and Economics, vol 48, 2005. pp 371-406.
[4] K. Bantel S.Jackson "Top management and innovations in banking:
Does the composition of the top team make a difference?", Strat. Mgt. J.,
Summer Special Issue, vol 10, 1989, pp 107-124.
[5] S. Bhagat, B. Bolton and A Subramanian "CEO education, CEO
turnover, and firm performance", working paper, 2010, available on line
at
http://www.rmi.gsu.edu/faculty/PAPERS_W/Subramanian/CEO_Educat
ion_and_CEO_Turnover080310.pdf
[6] L. T. W Cheng, R. Y. K Chan and T. Y. Leung "Management
demography and corporate performance: evidence from China",
International Business Review, vol. 19, no. 3, 2010, pp. 261-275.
[7] J. Chevalier and G. Ellison "Are some mutual fund managers better than
others? Cross-sectional patterns in behavior and performance", Journal
of Finance, vol. 54, no. 3, 1999, pp. 875-899.
[8] S. Darmadi "Board Diversity and Firm Performance: The Indonesian
Evidence", 2011. available on line at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1727195
[9] N.Feleagâ, L. Feleagâ, V.D Dragomir, A.D Bigioi "Corporate
Governance in emerging economies: The case of Romania", Theoretical
and Applied Economics, Vol. 18, no. 9, 2011, pp 5-16.
[10] J.H. Golec "The effects of mutual fund managers- characteristics on
their portfolio performance, risk and fees", Financial Services Review,
vol. 5, no. 2, 1996, pp. 133-148.
[11] A.A.Gottesman and M.R. Morey "Does a better education make for
better managers? An empirical examination of CEO educational quality
and firm performance", working paper, 2006 available on line at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=564443
[12] J.R. Graham, C.R.Harvey ÔÇ×How do CFOs make capital budgeting and
capital structure decisions,Journal of Applied Corporate Finance, vol.
15, no. 1, 2002, pp. 8-23.
[13] D. C. Hambrick P.A. Mason PA "Upper-echelons: the organization as a
reflection of its top managers", Academy of Management Review, vol 9,
no 2, 1984, pp. 193-206.
[14] D.C. Hambrick, T.S. Cho, T. S and M,-J. Chen "The influence of top
management team heterogeneity on firms' competitive moves",
Administrative Science Quarterly, vol 41, no 4, 1996, pp. 659-684.
[15] R.M. Haniffa and T.E. Cooke "Culture, Corporate Governance and
Disclosure in Malaysian Corporations" ABACUS, vol. 38, no; 03. 2002,
pp 317-341.
[16] R. Haniffa. and M. Hudaib "Corporate governance structure and
performance of Malaysian listed companies",, Journal of Business
Finance and Accounting, vol. 33, no. 7-8, 2006, pp. 1034-1062.
[17] M.A. Hitt and B.B. Tyler "Strategic Decision Models: Integrating
Different Perspectives", Strategic Management Journal, vol. 12, 1991,
pp. 327-351.
[18] I.A. Ienciu "The Relationship between Environmental Reporting and
Corporate Governance Characteristics of Romanian Listed Entities",
Journal of Accounting and Management Information Systems, vol. 11,
issue 2, 2012 pp. 267-294 .
[19] M. Ionaşcu, L. Olimid "Corporate Governance practices and analysts
forecasts accuracy evidence for Romania", World Academy of Science,
Engineering and Technology, vol. 77, 2011, pp. 947 - 951.
[20] T. Jalbert, R. Rao and M. Jalbert "Does school matter? An empirical
analysis of CEO education, compensation, and firm performance",
International Business and Economics Research Journal, vol. 1 vo. 1,
2002, pp. 83-98.
[21] G. Kirkpatrick "The Corporate Governance Lessons from the
Financial Crisis", OECD Financial Market Trends, vol.2009
[22] A Klein " Firm performance and board committee structure", Journal of
Law and Economics , vol 41, no 1, 1998, pp. 275-303.
[23] S. Peters, M. Miller, S. Kusyk "How relevant is corporate governance
and corporate social responsibility in emerging markets?", Corporate
Governance, vol. 11, no. 4, 2011, pp. 429-445
[24] A.S. Râileanu, C.L. Dobroţeanu, L. Dobroţeanu, "Probleme de
actualitate cu privire la mâsurarea nivelului de guvernanţâ corporativâ ├«n
România", Audit Fiannciar, no. 1, 2011, pp. 11-15.
[25] A.Shleifer, R. Vishny "Large shareholders and corporate control",
Journal of Political Economy vol 94, 1986, pp. 461-488.
[26] N. Smith, V. Smith and M. Verner " Do women in top management
affect firm performance? A panel study of 2500 Danish firms",
International Journal of Productivity & Performance Management, vol
55, 2006, pp. 569-593.
[27] C. Stefânescu A. Pop. and M. Muresan "Corporate governance in
Romanian banking system: Does board of director's characteristics
influence banks' business strategy?", International Journal of Business
Research, vol. 10, no 2, 2010, pp. 272-280
[28] N. Vafeas and E. Theodorou "The relationship between board structure
and firm performance in the UK" , British Accounting Review, vol 30,
1998, pp. 383-407.
[29] M.F. Wiersema and K.A. Bantel "Top management team demography
and corporate strategic Change", Academy of Management Journal, vol
35, 1992, pp. 91-121.
[30] D. Yermack "Higher market valuations of companies with a small board
of directors", Journal of Financial Economics, vol 40, 2006, pp. 185-
211.
[1] R. B. Adams and D Ferreira "Women in the boardroom and their impact
on governance and performance", Journal of Financial Economics, vol.
94, no. 2, 2009, pp. 291- 309.
[2] R.B Adams, B.E Hermalin and M.S. Weisbach "The role of boards of
directors in corporate governance: a conceptual framework and survey",
Journal of Economic Literature, vol 48, no 1, 2010, pp 58-107.
[3] A.Agrawal and S Chadha "Corporate governance and accounting
scandals", Journal of Law and Economics, vol 48, 2005. pp 371-406.
[4] K. Bantel S.Jackson "Top management and innovations in banking:
Does the composition of the top team make a difference?", Strat. Mgt. J.,
Summer Special Issue, vol 10, 1989, pp 107-124.
[5] S. Bhagat, B. Bolton and A Subramanian "CEO education, CEO
turnover, and firm performance", working paper, 2010, available on line
at
http://www.rmi.gsu.edu/faculty/PAPERS_W/Subramanian/CEO_Educat
ion_and_CEO_Turnover080310.pdf
[6] L. T. W Cheng, R. Y. K Chan and T. Y. Leung "Management
demography and corporate performance: evidence from China",
International Business Review, vol. 19, no. 3, 2010, pp. 261-275.
[7] J. Chevalier and G. Ellison "Are some mutual fund managers better than
others? Cross-sectional patterns in behavior and performance", Journal
of Finance, vol. 54, no. 3, 1999, pp. 875-899.
[8] S. Darmadi "Board Diversity and Firm Performance: The Indonesian
Evidence", 2011. available on line at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1727195
[9] N.Feleagâ, L. Feleagâ, V.D Dragomir, A.D Bigioi "Corporate
Governance in emerging economies: The case of Romania", Theoretical
and Applied Economics, Vol. 18, no. 9, 2011, pp 5-16.
[10] J.H. Golec "The effects of mutual fund managers- characteristics on
their portfolio performance, risk and fees", Financial Services Review,
vol. 5, no. 2, 1996, pp. 133-148.
[11] A.A.Gottesman and M.R. Morey "Does a better education make for
better managers? An empirical examination of CEO educational quality
and firm performance", working paper, 2006 available on line at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=564443
[12] J.R. Graham, C.R.Harvey ÔÇ×How do CFOs make capital budgeting and
capital structure decisions,Journal of Applied Corporate Finance, vol.
15, no. 1, 2002, pp. 8-23.
[13] D. C. Hambrick P.A. Mason PA "Upper-echelons: the organization as a
reflection of its top managers", Academy of Management Review, vol 9,
no 2, 1984, pp. 193-206.
[14] D.C. Hambrick, T.S. Cho, T. S and M,-J. Chen "The influence of top
management team heterogeneity on firms' competitive moves",
Administrative Science Quarterly, vol 41, no 4, 1996, pp. 659-684.
[15] R.M. Haniffa and T.E. Cooke "Culture, Corporate Governance and
Disclosure in Malaysian Corporations" ABACUS, vol. 38, no; 03. 2002,
pp 317-341.
[16] R. Haniffa. and M. Hudaib "Corporate governance structure and
performance of Malaysian listed companies",, Journal of Business
Finance and Accounting, vol. 33, no. 7-8, 2006, pp. 1034-1062.
[17] M.A. Hitt and B.B. Tyler "Strategic Decision Models: Integrating
Different Perspectives", Strategic Management Journal, vol. 12, 1991,
pp. 327-351.
[18] I.A. Ienciu "The Relationship between Environmental Reporting and
Corporate Governance Characteristics of Romanian Listed Entities",
Journal of Accounting and Management Information Systems, vol. 11,
issue 2, 2012 pp. 267-294 .
[19] M. Ionaşcu, L. Olimid "Corporate Governance practices and analysts
forecasts accuracy evidence for Romania", World Academy of Science,
Engineering and Technology, vol. 77, 2011, pp. 947 - 951.
[20] T. Jalbert, R. Rao and M. Jalbert "Does school matter? An empirical
analysis of CEO education, compensation, and firm performance",
International Business and Economics Research Journal, vol. 1 vo. 1,
2002, pp. 83-98.
[21] G. Kirkpatrick "The Corporate Governance Lessons from the
Financial Crisis", OECD Financial Market Trends, vol.2009
[22] A Klein " Firm performance and board committee structure", Journal of
Law and Economics , vol 41, no 1, 1998, pp. 275-303.
[23] S. Peters, M. Miller, S. Kusyk "How relevant is corporate governance
and corporate social responsibility in emerging markets?", Corporate
Governance, vol. 11, no. 4, 2011, pp. 429-445
[24] A.S. Râileanu, C.L. Dobroţeanu, L. Dobroţeanu, "Probleme de
actualitate cu privire la mâsurarea nivelului de guvernanţâ corporativâ ├«n
România", Audit Fiannciar, no. 1, 2011, pp. 11-15.
[25] A.Shleifer, R. Vishny "Large shareholders and corporate control",
Journal of Political Economy vol 94, 1986, pp. 461-488.
[26] N. Smith, V. Smith and M. Verner " Do women in top management
affect firm performance? A panel study of 2500 Danish firms",
International Journal of Productivity & Performance Management, vol
55, 2006, pp. 569-593.
[27] C. Stefânescu A. Pop. and M. Muresan "Corporate governance in
Romanian banking system: Does board of director's characteristics
influence banks' business strategy?", International Journal of Business
Research, vol. 10, no 2, 2010, pp. 272-280
[28] N. Vafeas and E. Theodorou "The relationship between board structure
and firm performance in the UK" , British Accounting Review, vol 30,
1998, pp. 383-407.
[29] M.F. Wiersema and K.A. Bantel "Top management team demography
and corporate strategic Change", Academy of Management Journal, vol
35, 1992, pp. 91-121.
[30] D. Yermack "Higher market valuations of companies with a small board
of directors", Journal of Financial Economics, vol 40, 2006, pp. 185-
211.
@article{"International Journal of Business, Human and Social Sciences:51284", author = "Mădălina Maria Gîrbină and Cătălin Nicolae Albu and Nadia Albu", title = "Board Members' Financial Education and Firms' Performance: Empirical Evidence for Bucharest Stock Exchange Companies", abstract = "After the accounting scandals and the financial crisis, regulators have stressed the need for more financial experts on boards. Several studies conducted in countries with developed capital markets report positive effects of board financial competencies. As each country offers a different context and specific institutional factors this paper addresses the subject in the context of Romania. The Romanian capital market offers an interesting research field because of the heterogeneity of listed firms. After analyzing board members education based on public information posted on listed companies websites and their annual reports we found a positive association between the proportion of board members holding a postgraduate degree in financial fields and market based performance measured by Tobin q. We found also that the proportion of Board members holding degrees in financial fields is higher in bigger firms and firms with more concentrated ownership.
", keywords = "financial education, corporate governance, board", volume = "6", number = "9", pages = "2362-5", }
