Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict

Agyemang Badu Ebenezer

doi:doi:10.11648/j.jppa.20170101.14

| Peer-Reviewed

Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict

Agyemang Badu Ebenezer

Published in Journal of Public Policy and Administration (Volume 1, Issue 1)

Received: 9 May 2017 Accepted: 2 June 2017 Published: 25 July 2017

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

The purpose of this paper is to investigate the impact of board monitoring intensity on firm performance and further investigate the moderating effect of agency conflict on the relationship between monitoring intensity and firm performance. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. The paper compute agency score using principal factor analysis and examine the moderating effect on the relationship between board composition measures and firm performance. Our findings which are robust across a number of econometric models that deal with different kinds of endogeneities indicate a positive and statistically significant relationship between board monitoring intensity and firm performance. A further examination using the agency score computed from principal factor analysis of the four main agency proxies indicates that agency conflict moderate the relationship between monitoring intensity and firm performance.

Published in	Journal of Public Policy and Administration (Volume 1, Issue 1)
DOI	10.11648/j.jppa.20170101.14
Page(s)	35-43
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

Monitoring Intensity, Firm Performance, Agency Conflict, Agency Theory

References

[1]	Ahmad, A. C., Houghton, K. A., &Yusof, N. Z. M. (2006). The Malaysian market for audit services: Ethnicity, multinational companies and auditor choice. Managerial Auditing Journal, 21(7), 702-723.
[2]	Ahmad-Zaluki, N. A., & Wan-Hussin, W. N. (2010). Corporate governance and earnings forecasts accuracy. Asian Review of Accounting, 18(1), 50-67.
[3]	Balafas, N., & Florackis, C. (2014). CEO compensation and future shareholder returns: Evidence from the London Stock Exchange. Journal of Empirical Finance, 27, 97–115.
[4]	Bebchuk, L. A., Fried, J. M., & Walker, D. I. (2002). Managerial power and rent extraction in the design of executive compensation. The University of Chicago Law Review, 69, 751–846.
[5]	Berle, A. A., and Means, G. C. (1932). The modern corporation private property. Transaction Publication.
[6]	Carter, N. M., & Wagner, H. M. (2011). The Bottom Line: Corporate Performance and Women’s Representation on Boards (2004–2008). Catalyst.
[7]	Chia-Ching Cho, Chu-Hua Wu, (2014) "Role of auditor in agency conflict and corporate governance: Empirical analyses of Taiwanese firms", Chinese Management Studies, Vol. 8 Issue: 3, pp. 333-353.
[8]	Conger, J. A., Finegold, D. and Lawler, E. (1998). Appraising boardroom performance. Harvard business review, 76, pp. 136-164.
[9]	DeFond, M. L. and Francis, J. R. (2005). Audit research after Sarbanes-Oxley, Auditing: A Journal of Practice and Theory, Vol. 24, pp. 5-30.
[10]	Dey Aiyesha (2008) Corporate Governance and Agency Conflicts, Journal of Accounting Research, Vol. 46(5), USA.
[11]	Ding, D. Z., Akhtar, S., & Ge, G. L. (2006). Organizational differences in managerial compensation and benefits in Chinese firms. The International Journal of Human Resource Management, 17, 693–715.
[12]	Donaldson, L. and Davis, J. H. (1994). Boards and company performance research challenges the conventional wisdom, Corporate Governance. An International Review, 2(3), 151-160.
[13]	Dharwadkar, B., George, G., & Brandes, P. (2000). Privatization in emerging economies: An agency theory perspective. Academy of Management Review, 25, 650–669.
[14]	Ezzamel, M., and Watson, R. (1993). Organizational Form, Ownership Structure Corporate Performance: A Contextual Empirical Analysis of UK Companies. British Journal of Management, 4(3), 161-176.
[15]	Gales, L., &Kesner, I. (1994). An analysis oí board of director size and composition in bankrupt organizations. Journal of Business Research, 30: 271-282.
[16]	Gales, L. M. and Kesner, I. F., (1994). An analysis of board of director size and composition in bankrupt organizations. Journal of Business Research, 30(3), pp. 271-282.
[17]	Ghosh, C., Nag, R. and Sirmans, C. (2000). The pricing of seasoned equity offerings: Evidence from REITs. Real Estate Economics, Vol. 28 No. 3, pp. 363-384.
[18]	Habib, M.; Johnson D and Nalik N. (1997). “Spinoffs and Information.”Journal of Financial Intermediation 6: 153–76.
[19]	Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880.
[20]	Jensen, M. C., &Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
[21]	Kyereboah-Coleman, A. &Amidu, M. (2008). Examine the link between small business governance and performance: A case of small and medium scale enterprises in Ghana. Journal of African Business, 9(1), 121-143.
[22]	La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58, 3–27.
[23]	McColgan P. (2001): Agency theory and corporate governance: A review of the literature from a UK perspective, working paper, Department of Accounting &Finance, University of Strathclyde.
[24]	Mizruchi, M. S. (1983). Who controls whom? An examination of the relation between management and boards of directors in large American corporations. Academy of management Review, 8(3), 426-435.
[25]	Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147-175, MYNERS.
[26]	Ntim, C. G. (2009). Internal corporate governance and firm financial performance: evidence from South African listed firms. PhD thesis, University of Glasgow.
[27]	Ntim, C. G., Opong, K. K., and Danbolt, J. (2012). Relative Value Relevance of Shareholder versus Stakeholder Corporate Governance Disclosure Policy Reforms in South Africa, Corporate Governance: An International Review, 20(1), 84-105.
[28]	Ntim, Collins G. (2015) Board diversity and organizational valuation: unravelling the effects of ethnicity and gender. Journal of Management & Governance, 19 (1). pp. 167195.
[29]	Ntim, C. G., Lindop, S., Osei, K. A., & Thomas, D. A. (2015). Executive compensation, corporate governance and corporate performance: A simultaneous equation approach. Managerial and Decision Economics, 36, 67–96.
[30]	Ntim, Collins G. (2016). Corporate Governance, Corporate Health Accounting and Firm Value: The Case of HIV/AIDS Disclosures in Sub-Saharan Africa. The International Journal of Accounting, 51 (2). pp. 155-216. ISSN 0020-7063.
[31]	Oniwinde, I. (2010). Corporate Governance in Nigeria Manufacturing Industry Ogun: Covenant University. Unpublished (Bsc Degree Thesis), Covenant University.
[32]	Peng, M. W., Wang, D. Y. L., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39, 920–936.
[33]	Saleh, N. M., Iskandar, T. M., & Rahmat, M. M. (2007). Audit committee characteristics and earnings management: Evidence from Malaysia. Asian Review of Accounting, 15(2), 147-163.
[34]	Sanchez-Marin, G., & Baixauli-Soler, J. S. (2014). CEO reputation and top management team compensation. Management Decision, 52, 540–558.
[35]	Sanda, A., Sackey, J., & Faltholm, Y. (2011). Managerial competence and non-performance of small firms in a developing economy. International Journal of Contemporary Business Studies, 2(3), 6-24.
[36]	Smith, C. W. and Jensen, M. C., (2000). Stockholder, Manager, Creditor interests: applications of agency theory. Theory of the firm: Governance, Residual claims organizational forms, Harvard University Press, Available at SSRN: http://ssrn.com/abstract=173461.
[37]	Smith, C., and Watts R. “The Investment Opportunity Set and Corporate Financing, Dividend, and Compensation Policies.” Journal of Financial Economics 32 (1992): 263–92.
[38]	Vafeas, N., (1999b). The Nature of Board Nominating Committees and their Role in Corporate Governance. Journal of Business Finance & Accounting, 26(1-2), pp. 199-225.
[39]	Van Essen, M., Otten, J., & Carberry, E. J. (2015). Assessing managerial power theory. Journal of Management, 41, 164–202.
[40]	Van Der Walt, N. and Ingley, C. (2003). Board Dynamics and the Influence of Professional Background, Gender and Ethnic Diversity of Directors, Corporate Governance. An International Review, 11(3), pp. 218-234.
[41]	Van den Berghe, L. & Leveran, A. (2007). Indentifying key determinant of effective boards of directors, working paper.
[42]	Walsh, J. P., & Seward, J. K. (1990). On the efficiency of internal and external corporate control mechanisms. Academy of Management Review, 15(3), 421-458.\.
[43]	Weisbach, M. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20: 431-460.
[44]	Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40, 185–211.

Cite This Article

Plain Text BibTeX RIS

APA Style

Agyemang Badu Ebenezer. (2017). Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict. Journal of Public Policy and Administration, 1(1), 35-43. https://doi.org/10.11648/j.jppa.20170101.14

Copy | Download

ACS Style

Agyemang Badu Ebenezer. Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict. J. Public Policy Adm. 2017, 1(1), 35-43. doi: 10.11648/j.jppa.20170101.14

Copy | Download

AMA Style

Agyemang Badu Ebenezer. Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict. J Public Policy Adm. 2017;1(1):35-43. doi: 10.11648/j.jppa.20170101.14

Copy | Download

@article{10.11648/j.jppa.20170101.14,
  author = {Agyemang Badu Ebenezer},
  title = {Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict},
  journal = {Journal of Public Policy and Administration},
  volume = {1},
  number = {1},
  pages = {35-43},
  doi = {10.11648/j.jppa.20170101.14},
  url = {https://doi.org/10.11648/j.jppa.20170101.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jppa.20170101.14},
  abstract = {The purpose of this paper is to investigate the impact of board monitoring intensity on firm performance and further investigate the moderating effect of agency conflict on the relationship between monitoring intensity and firm performance. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. The paper compute agency score using principal factor analysis and examine the moderating effect on the relationship between board composition measures and firm performance. Our findings which are robust across a number of econometric models that deal with different kinds of endogeneities indicate a positive and statistically significant relationship between board monitoring intensity and firm performance. A further examination using the agency score computed from principal factor analysis of the four main agency proxies indicates that agency conflict moderate the relationship between monitoring intensity and firm performance.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict
AU  - Agyemang Badu Ebenezer
Y1  - 2017/07/25
PY  - 2017
N1  - https://doi.org/10.11648/j.jppa.20170101.14
DO  - 10.11648/j.jppa.20170101.14
T2  - Journal of Public Policy and Administration
JF  - Journal of Public Policy and Administration
JO  - Journal of Public Policy and Administration
SP  - 35
EP  - 43
PB  - Science Publishing Group
SN  - 2640-2696
UR  - https://doi.org/10.11648/j.jppa.20170101.14
AB  - The purpose of this paper is to investigate the impact of board monitoring intensity on firm performance and further investigate the moderating effect of agency conflict on the relationship between monitoring intensity and firm performance. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. The paper compute agency score using principal factor analysis and examine the moderating effect on the relationship between board composition measures and firm performance. Our findings which are robust across a number of econometric models that deal with different kinds of endogeneities indicate a positive and statistically significant relationship between board monitoring intensity and firm performance. A further examination using the agency score computed from principal factor analysis of the four main agency proxies indicates that agency conflict moderate the relationship between monitoring intensity and firm performance.
VL  - 1
IS  - 1
ER  -

Copy | Download

Author Information

Agyemang Badu Ebenezer

Department of Business Administration, School of Business and Economics, Presbyterian University College, Abetifi, Ghana

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Agyemang Badu Ebenezer. (2017). Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict. Journal of Public Policy and Administration, 1(1), 35-43. https://doi.org/10.11648/j.jppa.20170101.14

Copy | Download

ACS Style

Agyemang Badu Ebenezer. Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict. J. Public Policy Adm. 2017, 1(1), 35-43. doi: 10.11648/j.jppa.20170101.14

Copy | Download

AMA Style

Agyemang Badu Ebenezer. Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict. J Public Policy Adm. 2017;1(1):35-43. doi: 10.11648/j.jppa.20170101.14

Copy | Download

@article{10.11648/j.jppa.20170101.14,
  author = {Agyemang Badu Ebenezer},
  title = {Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict},
  journal = {Journal of Public Policy and Administration},
  volume = {1},
  number = {1},
  pages = {35-43},
  doi = {10.11648/j.jppa.20170101.14},
  url = {https://doi.org/10.11648/j.jppa.20170101.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jppa.20170101.14},
  abstract = {The purpose of this paper is to investigate the impact of board monitoring intensity on firm performance and further investigate the moderating effect of agency conflict on the relationship between monitoring intensity and firm performance. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. The paper compute agency score using principal factor analysis and examine the moderating effect on the relationship between board composition measures and firm performance. Our findings which are robust across a number of econometric models that deal with different kinds of endogeneities indicate a positive and statistically significant relationship between board monitoring intensity and firm performance. A further examination using the agency score computed from principal factor analysis of the four main agency proxies indicates that agency conflict moderate the relationship between monitoring intensity and firm performance.},
 year = {2017}
}

Copy | Download

TY  - JOUR
T1  - Board Monitoring Intensity and Firm Performance Nexus: The Moderating Effect of Agency Conflict
AU  - Agyemang Badu Ebenezer
Y1  - 2017/07/25
PY  - 2017
N1  - https://doi.org/10.11648/j.jppa.20170101.14
DO  - 10.11648/j.jppa.20170101.14
T2  - Journal of Public Policy and Administration
JF  - Journal of Public Policy and Administration
JO  - Journal of Public Policy and Administration
SP  - 35
EP  - 43
PB  - Science Publishing Group
SN  - 2640-2696
UR  - https://doi.org/10.11648/j.jppa.20170101.14
AB  - The purpose of this paper is to investigate the impact of board monitoring intensity on firm performance and further investigate the moderating effect of agency conflict on the relationship between monitoring intensity and firm performance. This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. The paper compute agency score using principal factor analysis and examine the moderating effect on the relationship between board composition measures and firm performance. Our findings which are robust across a number of econometric models that deal with different kinds of endogeneities indicate a positive and statistically significant relationship between board monitoring intensity and firm performance. A further examination using the agency score computed from principal factor analysis of the four main agency proxies indicates that agency conflict moderate the relationship between monitoring intensity and firm performance.
VL  - 1
IS  - 1
ER  -

Copy | Download