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Board structure, board activity and firm performance : The case of Korea

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  • Board structure, board activity and firm performance
  • Kim, Jootae; Kang, Jai S.
  • San Francisco State University


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Title Board structure, board activity and firm performance
Similar Titles
Sub Title

The case of Korea

Material Type Articles
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)