A new perspective on board composition and firm performance in an emerging market

Abstract

Purpose

This paper seeks to examine the relationship between board composition and firm performance using a board‐level aggregation variable.

Design/methodology/approach

This study uses linear regression to analyze the relationship between board role typology and firm performance using a panel data set of 277 non‐financial listed Malaysian firms over the period 2002‐2007.

Findings

The empirical results show that firm‐boards with a high representation of outside and foreign directors are associated with better performance compared to those firm‐boards that have a majority of insider executive and affiliated non‐executive directors.

Research limitations/implications

The findings seem to imply that in widely owned firms a higher proportion of outsiders on the board reduces under‐investment and agency problems, which has significant economic implications.

Originality/value

This is the first study to use a board‐level aggregation variable to demonstrate the impact of boards' resourcefulness on firm performance.

Citation

Ameer, R., Ramli, F. and Zakaria, H. (2010), "A new perspective on board composition and firm performance in an emerging market", Corporate Governance, Vol. 10 No. 5, pp. 647-661. https://doi.org/10.1108/14720701011085607