Connected board of directors: A blessing or a curse?

Stephen Y L CHEUNG; Cheong Wing Chung; Weiqiang TAN; Wenming WANG

doi:10.1016/j.jbankfin.2013.03.001

Connected board of directors: A blessing or a curse?

Stephen Y L CHEUNG^*, Cheong Wing Chung, Weiqiang TAN, Wenming WANG

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › peer-review

12 Citations (Scopus)

Abstract

This study attempts to identify the connection between the board of directors (BoD) and the controlling shareholder. We investigate how this connection affects the corporate governance practice and market performance of Hong Kong listed firms. Our results reveal that close connections between the BoD and the controlling shareholder have a negative effect on corporate governance practice. Our findings also indicate a lower market valuation for firms with a connected BoD. The evidence suggests that the market discounts the value of firms with a connected BoD. The evidence seems to reinforce the importance of the role of independent non-executive directors (INEDs) to enhance the independence of BoD.

Original language	English
Pages (from-to)	3227-3242
Number of pages	16
Journal	Journal of Banking and Finance
Volume	37
Issue number	8
DOIs	https://doi.org/10.1016/j.jbankfin.2013.03.001
Publication status	Published - Aug 2013

Scopus Subject Areas

Finance
Economics and Econometrics

User-Defined Keywords

Board structure
Corporate governance
Family ownership
Hong Kong
OECD principles

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10.1016/j.jbankfin.2013.03.001

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title = "Connected board of directors: A blessing or a curse?",

abstract = "This study attempts to identify the connection between the board of directors (BoD) and the controlling shareholder. We investigate how this connection affects the corporate governance practice and market performance of Hong Kong listed firms. Our results reveal that close connections between the BoD and the controlling shareholder have a negative effect on corporate governance practice. Our findings also indicate a lower market valuation for firms with a connected BoD. The evidence suggests that the market discounts the value of firms with a connected BoD. The evidence seems to reinforce the importance of the role of independent non-executive directors (INEDs) to enhance the independence of BoD.",

keywords = "Board structure, Corporate governance, Family ownership, Hong Kong, OECD principles",

author = "CHEUNG, {Stephen Y L} and Chung, {Cheong Wing} and Weiqiang TAN and Wenming WANG",

note = "Funding Information: We appreciate helpful comments received from Wei Jian and Yang Yi. Tan thanks for the Strategic Development Fund of Hong Kong Baptist University. The authors alone are responsible for all limitations and errors that may relate to the paper.",

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AU - CHEUNG, Stephen Y L

AU - Chung, Cheong Wing

AU - TAN, Weiqiang

AU - WANG, Wenming

N1 - Funding Information: We appreciate helpful comments received from Wei Jian and Yang Yi. Tan thanks for the Strategic Development Fund of Hong Kong Baptist University. The authors alone are responsible for all limitations and errors that may relate to the paper.

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N2 - This study attempts to identify the connection between the board of directors (BoD) and the controlling shareholder. We investigate how this connection affects the corporate governance practice and market performance of Hong Kong listed firms. Our results reveal that close connections between the BoD and the controlling shareholder have a negative effect on corporate governance practice. Our findings also indicate a lower market valuation for firms with a connected BoD. The evidence suggests that the market discounts the value of firms with a connected BoD. The evidence seems to reinforce the importance of the role of independent non-executive directors (INEDs) to enhance the independence of BoD.

AB - This study attempts to identify the connection between the board of directors (BoD) and the controlling shareholder. We investigate how this connection affects the corporate governance practice and market performance of Hong Kong listed firms. Our results reveal that close connections between the BoD and the controlling shareholder have a negative effect on corporate governance practice. Our findings also indicate a lower market valuation for firms with a connected BoD. The evidence suggests that the market discounts the value of firms with a connected BoD. The evidence seems to reinforce the importance of the role of independent non-executive directors (INEDs) to enhance the independence of BoD.

KW - Board structure

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KW - Family ownership

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JO - Journal of Banking and Finance

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Connected board of directors: A blessing or a curse?

Abstract

Scopus Subject Areas

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