Irina Berezinets, Yulia Ilina and Anna Cherkasskaya
The purpose of this paper is to investigate the link between board structure and performance of public companies in Russia – an emerging market with unique institutional…
Abstract
Purpose
The purpose of this paper is to investigate the link between board structure and performance of public companies in Russia – an emerging market with unique institutional background and a variability of corporate governance (CG) practices across its companies.
Design/methodology/approach
Panel data analysis was applied on a sample of 207 Russian companies that frequently traded in the Russian Trading System during the period 2007-2011, in order to test hypotheses on the relationships between board size, board independence, gender diversity, presence of board committees and financial performance, as measured by Tobin’s Q.
Findings
The results show a positive relationship between Tobin’s Q and the board’s gender diversity. The analysis demonstrates that smaller and bigger boards are associated with a greater Tobin’s Q value.
Originality/value
The findings provide additional evidence of how board structure is related to its effectiveness and corporate performance in countries with concentrated ownership, highly variable CG practices and a lack of proper implementation of corporate law and governance codes. The paper contributes to the existing empirical evidence on the advantages of small and large-sized boards and on gender diversity, and is the first investigating the relationship between Russian companies’ board committees and market-based performance. The results regarding board independence and committees suggest that these mechanisms are still not widely recognized for their role in CG and company performance in Russia.
Details
Keywords
Irina Berezinets and Yulia Ilina
This paper aims to deal with the issue of shareholder activism of private equity investors in public companies. The study identifies characteristics of target firms and investors…
Abstract
Purpose
This paper aims to deal with the issue of shareholder activism of private equity investors in public companies. The study identifies characteristics of target firms and investors related to the likelihood of private equity activism. The research also examines whether shareholder activism strategy of private equity investors is associated with the better performance in future and value creation of target firms.
Design/methodology/approach
The paper applies econometric modeling to hand-collected data on private equity investments in listed companies, in the form of private investment in public equity and open-market share purchases, from eight Continental Europe’s countries for the period 2005–2014.
Findings
The findings indicate that the probability of shareholder activism is higher if the target firm’s industry corresponds to the private equity investor’s industry specialization, if the private equity firm is older, if the target is larger and the average ownership share purchased by the investor is higher. Conversely, the probability of shareholder activism is lower where a private equity firm invests in the target for the first time. A target firm with an activist investor has poorer operational performance results one year following the investment compared to a target firm with a passive private equity investor.
Research limitations/implications
Results from the analysis of transactions in Continental Europe countries with French and German legal origin may be not generalizable to other markets with the different legal tradition and institutional environment.
Originality/value
This research provides new empirical evidence on private equity activism in listed companies of Continental Europe. By distinguishing between active and passive investments, testing rarely considered characteristics to provide valuable insights and analyzing the effect of activism on the target firm’s performance, the study contributes variously to the still-limited body of literature on private equity activism in public companies with a governance structure based on concentrated ownership. The findings emphasize the relationship between shareholder activism and both target and investor’s characteristics from perspective of mitigating agency problem and value creation in target firms. By simultaneously investigating investments in public companies from several European markets, the study complements empirical evidence mostly obtained from studies of a single national market.
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Irina Berezinets, Tatiana Garanina and Yulia Ilina
The purpose of this paper is to define the contribution of intellectual capital (IC) of the board of directors (BDs) in generating IC of a company, to develop a definition of the…
Abstract
Purpose
The purpose of this paper is to define the contribution of intellectual capital (IC) of the board of directors (BDs) in generating IC of a company, to develop a definition of the IC of the BDs, as well as two of its major elements: human capital (knowledge, skills, and experience of board members, etc.), and social capital (relationships and networking opportunities of board members), and to clarify the relationship between these elements and financial performance indicators of companies based on a literature review on the topic.
Design/methodology/approach
A literature review and analysis was applied as this study’s research design.
Findings
The authors suggest that IC is generated not only by company staff, but also by governing bodies, particularly the BDs, whose members are not always under contract with the company in the traditional sense. Members of the board use their knowledge, experience, and networking opportunities to build IC for effective monitoring, advising, and providing the company with resources. In this sense, the BDs serves as a source of IC for a company, being the main internal corporate governance mechanism that leads to value creation in a company, taking into consideration the interests of all stakeholders.
Practical implications
The research indicates that the personal characteristics of board members may influence the performance of a company. Therefore, companies should be recommended to carefully select candidates for nomination to the board.
Originality/value
This study contributes to further development of the concept of IC of the BDs by bringing together the theory in the field and the empirical results of studies on the various elements of board capital in a company’s value creation.