Essays on Corporate Governance in Belgian Private Firms: Determinants of Board and Firm-level Outcomes

Date: 31 October 2013

Venue: University of Antwerp, Promotiezaal Grauwzusters - Lange Sint-Annastraat 7 - 2000 Antwerp

Organization / co-organization: Faculty of Applied Economic Sciences

PhD candidate: Jonas De Maere

Principal investigator: Prof. dr. Ann Jorissen

Co-principal investigator: Christoph Van der Elst

Short description: PhD Jonas De Maere - Faculty of Applied Economic Sciences

Abstract: Theories of corporate governance have originally been developed for large listed firms. The focus of this dissertation is on the importance of corporate governance for private firms. Research has shown that boards of directors in private firms have a valuable role to fulfill with regard to advisory tasks and managerial support. This dissertation is composed out of three different essays with each study focusing on a different aspect of the board of directors. The first study is about board composition in bankrupt firms. The results show that differences exist between boards that went bankrupt and non-bankrupt firms. We find that firms with a more independent board (in terms of CEO duality) and with boards in which directors hold longer tenures are less likely to go bankrupt. Firms in which directors hold more outside directorships, however, are found to have a higher likelihood of going bankrupt. With these findings we acknowledge the importance of control and advisory tasks of the board of directors with regard to firm survival. In the second study we investigate the relationship between information provision to the board and board task involvement (in terms of control and advisory tasks). The results show that information provision is positively related to board task involvement. Yet, the positive effect of information on board task involvement marginally decreases when more information is provided. This is not illogical since directors only meet episodically and have limited time and cognitive capacity to processes information. Furthermore we find that the relationship between information provision and board task involvement is moderated by board composition. The effect of information is more positive in case of CEO duality and in absence of an independent director. With these results we confirm that independent boards are important for the effectiveness of corporate governance, and we reveal that information in private firms might serve as a substitute for board independence. The third study is about the moderating effect of firm ownership on the relationship between board processes (in terms of effort, cognitive conflict, and communication) and board task involvement. We particularly study the difference between family and non-family firms. The results show that effort and communication are positively related to board task involvement. With regard to the moderating effect we find that the positive effect of communication on control and advisory tasks is larger in non-family firms. With these results we acknowledge that board functioning depends on the ownership characteristics of the firms. Based on the findings of these three studies we summarize that the effectiveness of the governance depends on the organizational context. We conclude that each firm has to decide which governance configuration fits the organization best.