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Board structure, board activity and firm performance : The case of Korea
- Board structure, board activity and firm performance
- Kim, Jootae; Kang, Jai S.
- San Francisco State University
| Title |
Board structure, board activity and firm performance
Similar Titles
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|---|---|
| Sub Title | The case of Korea |
| Material Type | Article |
| Author(English) |
Kim, Jootae; Kang, Jai S. |
| Publisher |
[San Francisco] : San Francisco State University |
| Date | 2015 |
| Journal Title; Vol./Issue | Journal of International Business and Economy:Vol. 16(No. 2) |
| Pages | 23 |
| Subject Country | South Korea(Asia and Pacific) |
| Language | English |
| File Type | Link |
| Subject | Economy < Economic Administration Economy < Others |
| Holding | San Francisco State University |
| License |  |
Abstract
In agency theory, it is asserted that boards with a high ratio of outside directors can monitor management effectively, but empirical results from past studies are not consistent. We suggest the “process perspective” as an alternative approach, arguing that the board activity, rather than the board structure, impacts the firm’s financial performance; and apply this perspective to Korean companies. We test the impact of board structure on both board activity and profitability, and then the impact of board activity on firm profitability. The test results were: the board structure [measured by the ratio of outside directors in the board membership] does not have positive influence on either board activity or profitability [measured by ROA] in Korean firms; however, the board activity, measured by the rate of outside directors’ participation in board meetings, has a positive relationship with a firm’s profitability. (The rest omitted)
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