Corporate Governance, Board of Directors, and the Firm: A Maturing Field

• Published date: 01 September 2014
• DOI: http://doi.org/10.1111/corg.12082
• Author: Praveen Kumar,Alessandro Zattoni
• Date: 01 September 2014

Editorial

Corporate Governance, Board of Directors, and

the Firm: A Maturing Field

Praveen Kumar and Alessandro Zattoni

Corporate governancescholars are intensely interested in

the relationship between corporate governance (CG)

and f‌irm performance, broadly def‌ined. The role and effec-

tiveness of the board of directors (or “boards”) continue to

be at the center of CG research and inquiry because, in

most countries, boards serve as the representatives of

shareholders and have the f‌iduciary responsibility to

monitor management and improve performance (Kumar &

Sivaramakrishnan, 2008; Van den Berghe & Levrau,2004). Of

course, the performance of boards has attractedspecial scru-

tiny in recent years following a wave of corporate scandals

that raised serious doubts about their effectiveness. Indeed,

board composition and structure remain at the center of

policy debates as different countries attempt to develop

legal and institutional frameworks to improve board perfor-

mance and diversity.

There has been active research on boards by CG scholars

for over three decades. As is typical with f‌ields of scientif‌ic

inquiry,the focus of the literature has evolved over time. The

initial focus of board research was on def‌ining basic issues

and developing the conceptual frameworks to address these

issues. What is the role of boards? How do they inf‌luence

corporate governance – theoretically and empirically? By

utilizing agency-theoretic, institutional, and social-norm

based perspectives, the initial literature made enormous

strides in def‌ining the role of boards and understanding the

determinants of their composition and performance (see,

e.g., Adams, Hermalin, & Weisbach, 2010; Huse, Hoskisson,

Zattoni, & Viganò, 2011; Pugliese, Bezemer, Zattoni, Huse,

Van den Bosch, & Volberda, 2009). However, having

addressed the basic questions and generated some broad

empirical results with respect to the effects of boards on f‌irm

performance, the research agenda has evolved to examine

the role and effectiveness of boards in detail.In other words,

the recent board literature has started exposing the granular-

ity that attends board composition, task formulation, deci-

sion making, and ultimately board inf‌luence on the myriad

activities of the f‌irm.

CGIR has been in the forefront of publishing high quality

research that has moved forward the literature on boards.

For example, in the past year paperspublished in CGIR have

examined the effects of ownership structure on board com-

position (Sur, Lvina, & Magnan, 2013); studied the task for-

mulation and strategic decision making of boards (Bailey &

Peck, 2013; Machold & Farquhar, 2013); and analyzed the

relation of boards to auditor choice, earnings management,

and f‌inancial risk taking (Chan, Faff, Khan, & Mather, 2013;

Johansen & Pettersson, 2013; McNulty, Florackis, & Ormrod,

2013). This evolution of research on boards is consistent with

a maturing f‌ield of scientif‌ic study that moves from setting

up a basic research agenda to a process of continually ref‌in-

ing the arguments, providing conceptual frameworks and

developing stylized facts.

In this issue, we have four high quality research studies

that further sharpen our understanding of the effects of

boards in various aspects of f‌irm performance.

Chakrabarty and Bass examine corporate governance and

board performance in microf‌inance institutions (MFIs).

This is among the f‌irst CG studies relating to MFIs and is

thus of substantial interest. MFIs are having a major impact

on the bottom of the economic pyramid (BOP) in the

developing world and have tremendous potential to aid

the economic uplift of literally hundreds of millions of

people. But because of their BOP settings, MFIs also typi-

cally face “institutional voids.” Chakrabarty and Bass

provide a number of interesting f‌indings that are novel to

the CG literature. They f‌ind that boards that have more

socio-economic expertise and female representation are

more effective in terms of lowering the MFI’s costs of oper-

ating at the BOP. These results are of independent interest

to the literature. But their analysis also points to the impor-

tance of the effectiveness of agrarian institutions. In par-

ticular, they note that when agrarian institutions are

ineffective, the boards may have diff‌iculty in helping MFIs

reduce the costs of operating at the BOP. As this is one of

the f‌irst papers to examine CG in agrarian and impover-

365

Corporate Governance: An International Review, 2014, 22(5): 365–366

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12082