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The effects of board experience and independence on mitigating agency conflict

The effects of board experience and independence on mitigating agency conflict PurposeThe purpose of this paper is to investigate the impact of board experience and independence on mitigating agency conflict between shareholders and managers.Design/methodology/approachThis 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. Using agency and resource dependence theories, board experience and independence ignored in previous studies are selected for the study.FindingsThe findings of this paper indicate a negative and statistically significant relationship between board experience, board independence, and agency conflict. A further examination using an agency score computed from the principal factor analysis of the four main agency proxies indicates a significant and negative relationship between board independence and agency conflict, but a negative and statistically non-significant relation between board experience and agency conflict.Practical implicationsThe authors’ evidence has important implications for countries that are currently or contemplating pursuing board reforms to recommend the appointment of more independent and experience directors to corporate board.Originality/valueThis paper introduces a new proxy for assessing human and social capital of directors to test the integration hypothesis of a unique data set from Ghana and Nigeria toward mitigating agency conflict. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

The effects of board experience and independence on mitigating agency conflict

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2042-1168
DOI
10.1108/JAEE-08-2016-0072
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to investigate the impact of board experience and independence on mitigating agency conflict between shareholders and managers.Design/methodology/approachThis 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. Using agency and resource dependence theories, board experience and independence ignored in previous studies are selected for the study.FindingsThe findings of this paper indicate a negative and statistically significant relationship between board experience, board independence, and agency conflict. A further examination using an agency score computed from the principal factor analysis of the four main agency proxies indicates a significant and negative relationship between board independence and agency conflict, but a negative and statistically non-significant relation between board experience and agency conflict.Practical implicationsThe authors’ evidence has important implications for countries that are currently or contemplating pursuing board reforms to recommend the appointment of more independent and experience directors to corporate board.Originality/valueThis paper introduces a new proxy for assessing human and social capital of directors to test the integration hypothesis of a unique data set from Ghana and Nigeria toward mitigating agency conflict.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Nov 6, 2017

References