Dan R. Dalton

META-ANALYTIC REVIEWS OF BOARD COMPOSITION, LEADERSHIP STRUCTURE, AND FINANCIAL PERFORMANCE

Careful review of extant research addressing the relationships between board composition, board leadership structure, and firm financial performance demonstrates little consistency in results. In general, neither board composition nor board leadership structure has been consistently linked to firm financial performance. In response to these findings, we provide metaanalyses of 54 empirical studies of board composition (159 samples, n = 40,160) and 31 empirical studies of board leadership structure (69 samples, n= 12,915) and their relationships to firm financial performance. These—and moderator analyses relying on firm size, the nature of the financial performance indicator, and various operationalizations of board composition— provide little evidence of systematic governance structure/financial performance relationships.

Number of Directors and Financial Performance: A Meta-Analysis

Although a host of theory-driven rationales suggest a relationship between board of directors size and firm performance, the literature provides no consensus about the direction of that relationship. A meta-analysis of 131 samples (N = 20,620) provided systematic evidence of nonzero, positive, true population estimates of board size-performance relationships.

Composition of the Top Management Team and Firm International Diversification

This study investigates the impact of various top management team characteristics on firm international diversification. Relying on data from 126 firms in the electronics industry, we find that certain top management team characteristics are related to international expansion. Specifically, results indicate that lower average age, higher average tenure, higher average elite education, higher average international experience, and higher tenure heterogeneity are associated with firm international diversification. The study reinforces the importance of top management team composition in internationalization decisions and suggests further research in this context.

The relationship between governance structure and corporate performance in entrepreneurial firms

Abstract Organizational scholars and practitioners alike continue to focus on the role of chief executive officers and boards of directors in small and entrepreneurial firms. The popular business literature suggests strong linkages between these individuals and firm performance among the largest firms; however, this linkage may be strongest in the more modestly sized firm. While there is little agreement concerning the nature and strength of this relationship, it is clear that this issue remains a fruitful area of investigation. This study examines the organizational agent/firm performance linkage focusing specifically on the role of founder chief executive officers (CEOs) and the composition of the boards of directors. Extant research would suggest that founder CEOs rely on dysfunctional governance structures (e.g., CEO duality, lower numbers of outside directors, lower proportions of outside directors) to a greater extent than their non-founder counterparts. Additionally, it is believed that these inappropriate governance structures will be associated with decreased firm performance. The 1989 Inc. 100 corporations provide the sample of firms to test these propositions. The data reveal that CEOs of these successful entrepreneurial firms do not demonstrate a tendency to adopt inappropriate governance structures. This finding is contrary to related research which has found that stable small corporation founder CEOs are less likely to utilize prescribed governance structures, jeopardizing firm performance. Founder CEOs of the Inc. 100, however, apparently realize the benefit of outside direction and elect to rely on the independent structure and outside board direction in similar degrees as their non-founder cohorts. The CEOs ability to sacrifice some measure of control by inviting outside direction may contribute to the overall high performance of this sample of firms. While no performance differences were apparent under either dual or independent board leadership, modest performance advantages were found with greater numbers and proportions of outside directors. These findings provide some support for the ability of founder and non-founder CEOs to relinquish the tight control and effectively guide the growth of the firm. The board of directors, then, provides a sensible tool when striving for the goal affirm growth. While it is unlikely that there is one optimal board configuration that will effectively guide the entrepreneurial firm to success, utilizing the expertise and resources provided by outside directors appears to enable the desired growth. Future investigations in this area may provide further understanding of the value of outside assistance and the specific types of outside directors that may best contribute to firm performance.

Board of directors leadership and structure: control and performance implications

Research examining the association of corporate governance structures and firm performance has relied almost exclusively on the large-scale firm. This may, however, be a limited forum for questions of this sort. Officers and boards of directors for the large-scale firm may lack the discretion—or the wherewithal—to effect changes In policy or outcomes. It Is In the smaller firm that such performance/governance linkages may be more easily observed. This study, then, focuses on a number of corporate governance structures and their relationships to firm performance for the smaller corporation. Ironically, the very organizations that the literature suggests might benefit most from independent governance structures are those that rely on them least.

1 The Fundamental Agency Problem and Its Mitigation: Independence, Equity, and the Market for Corporate Control

A central tenet of agency theory is that there is potential for mischief when the interests of owners and managers diverge. In those circumstances, and for a variety of reasons, managers may be able to exact higher rents than are reasonable or than the owners of the firm would otherwise accord them. While that foundational element of agency theory is secure, other elements derived directly from agency theory are far less settled. Indeed, even after some 75 years of conceptualization and empirical research, the three principal approaches that have long been proposed to mitigate the fundamental agency problem remain contentious. Accordingly, we provide a review of the fundamental agency problem and its mitigation through independence, equity, and the market for corporate control.

International experience in the executive suite: The path to prosperity?

Attention is increasingly focused on the potential individual career and firm-level benefits of international experience for upper level executives. This research examines the relationships between CEO international experience, CEO tenure, firm internationalization, succession events, and corporate financial performance. Results indicate a significant interactive effect between CEO tenure and outside succession on CEO international experience. In addition to a relationship with CEO international experience, there are two additional interactive effects in the examination of corporate financial performance: (1) CEO international experience and the degree of firm internationalization, and (2) CEO international experience and CEO succession. These interactive effects are evident in accounting and market indicators of corporate financial performance. Copyright

Governance and Strategic Leadership in Entrepreneurial Firms

Corporate governance has been a central focus of strategic management research, particularly the associations among governance structures, strategic leaders, and firm performance. Extant research, however, provides little evidence of systematic relationships in these areas. There are a series of theoretical/conceptual rationales suggesting that such relationships might be more pronounced in entrepreneurial firms. Accordingly, we provide an overview and synthesis of the entrepreneurship literature addressing the intersection of governance and strategic leadership with firm performance. The strongest relationships reflected in this literature are consistent with a resource dependence perspective of the firm. We conclude with several suggestions for advancing research in this important domain.

A DECADE OF CORPORATE WOMEN: SOME PROGRESS IN THE BOARDROOM, NONE IN THE EXECUTIVE SUITE

This study examines the extent to which women have circumvented the glass ceiling by empirically examining whether there has been an increase in women’s representation on corporate boards and CEO positions over the 10‐year period from 1987 to 1996. Results indicate greatly increased representation on corporate boards. There is, however, no evidence of progress in, or towards, the CEO suite. Moreover, there is no evidence of that circumstance abating in the next several years. The number of female inside directors, an intermediate, and requisite, position in the succession to CEO, is astonishingly small, only 0.006 percent. Notably, there has been no increase in that proportion over the last decade. Copyright

Signaling Firm Value through Board Structure: An Investigation of Initial Public Offerings

The relationship between boards of directors and firm performance, whether in the entrepreneurial context or otherwise, has long intrigued scholars. To date, no systematic relationship has been established, leading researchers to explore specialized contexts where such relationships may emerge. We believe the initial public offering (IPO) process provides a promising context. Relying on signaling theory, we investigate the relationship between board structure and IPO underpricing, a performance indicator unique to the IPO context, among a sample of IPOs during the 1990s. Consistent with signaling theory, board size and board reputation are negatively associated with IPO underpricing, but board composition and board leadership structure are not negatively associated with IPO underpricing.