Institutional Evolution and Corporate Boards

Victor Zitian Chen, Bersant Hobdari, Pei Sun, Jerry Goodstein

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    We argue that corporate boards are a dynamic repository of human- and social capital in response to external institutional evolution. Theoretically, integrating institutional economics, agency theory and resource dependence theory, we explain that evolution of market-, legal- and political institutions restructures the particular context in which board members play their two primary roles: monitoring the CEO on behalf of the shareholders, suggested by the agency theory, and supporting the CEO by providing resources, knowledge and information, suggested by the resource dependence theory. Such particular contexts entail the external competitive environment and the principal-agency relationship in corporate governance, amplify (or weaken) the need for certain type of board roles, and ultimately require corporations to reconfigure the human- and social capital embedded within the board. Additionally, since the board changes are typically proposed by the block shareholders, whose motivation for doing so is closely associated with a corporation’s financial performance, we further argue that financial performance is a key moderator of the relationships between institutional evolution and changes in board makeups. Using an unbalanced panel covering more than 3000 firms from 17 Western European countries (15 European Union countries plus Norway and Switzerland) and 28 emerging economies over the period 2000-2012, we have found supportive empirical evidence.
    Original languageEnglish
    Title of host publicationProceedings of the 56th Annual Meeting of the Academy of International Business : Local Contexts in Global Business
    EditorsKlaus Meyer, Tunga Kiyak
    Place of PublicationEast Lansing, MI
    PublisherAcademy of International Business
    Publication date2014
    Publication statusPublished - 2014
    EventAIB 2014 Annual Meeting : Local Context in Global Business - Westin Bayshore, Vancouver, Canada
    Duration: 23 Jun 201426 Jun 2014
    Conference number: 56


    ConferenceAIB 2014 Annual Meeting
    LocationWestin Bayshore
    Internet address
    SeriesAcademy of International Business. Annual Meeting. Proceedings

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