Monitoring board committee structure and market valuation in large publicly listed South African corporations
Monitoring board committee structure and market valuation in large publicly listed South African corporations
Purpose: We examine the association between the presence of monitoring board committees (i.e., audit, nomination, and remuneration) and market valuation in South Africa using a sample of 169 listed corporations from 2002 to 2007.
Design/methodology/approach: We distinctively employ fixed-effects and two-stage least squares regressions to innovatively investigate the association between the presence of monitoring board committees and market valuation.
Findings: We find a significant positive connection between the presence of monitoring board committees and market valuation, but only in corporations that have independent monitoring board committees and/or all three monitoring board committees that we have investigated simultaneously. This implies that the market values corporations with independent and/or the three monitoring board committees more highly. Our results provide empirical support for agency theory, which indicates that the presence of independent board committees increases the capacity of corporate boards to effectively advise, monitor and discipline top management, and thereby improving market valuation.
Originality/value: There is an acute dearth of studies examining the connection between the presence of monitoring board committees and market valuation generally, but particularly in developing countries. Therefore, our evidence contributes to the literature by demonstrating how the presence of monitoring board committees affects market valuation in a major developing African country. Further, we distinctively employ a number of econometric models that adequately control for different types of endogeneity problems and market valuation proxies.
Article type: Research paper
University of Southampton
Ntim, Collins G.
1f344edc-8005-4e96-8972-d56c4dade46b
22 August 2012
Ntim, Collins G.
1f344edc-8005-4e96-8972-d56c4dade46b
Ntim, Collins G.
(2012)
Monitoring board committee structure and market valuation in large publicly listed South African corporations
Southampton, GB.
University of Southampton
Record type:
Monograph
(Working Paper)
Abstract
Purpose: We examine the association between the presence of monitoring board committees (i.e., audit, nomination, and remuneration) and market valuation in South Africa using a sample of 169 listed corporations from 2002 to 2007.
Design/methodology/approach: We distinctively employ fixed-effects and two-stage least squares regressions to innovatively investigate the association between the presence of monitoring board committees and market valuation.
Findings: We find a significant positive connection between the presence of monitoring board committees and market valuation, but only in corporations that have independent monitoring board committees and/or all three monitoring board committees that we have investigated simultaneously. This implies that the market values corporations with independent and/or the three monitoring board committees more highly. Our results provide empirical support for agency theory, which indicates that the presence of independent board committees increases the capacity of corporate boards to effectively advise, monitor and discipline top management, and thereby improving market valuation.
Originality/value: There is an acute dearth of studies examining the connection between the presence of monitoring board committees and market valuation generally, but particularly in developing countries. Therefore, our evidence contributes to the literature by demonstrating how the presence of monitoring board committees affects market valuation in a major developing African country. Further, we distinctively employ a number of econometric models that adequately control for different types of endogeneity problems and market valuation proxies.
Article type: Research paper
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More information
Published date: 22 August 2012
Organisations:
Centre of Excellence in Decision, Analytics & Risk Research, Accounting
Identifiers
Local EPrints ID: 343638
URI: http://eprints.soton.ac.uk/id/eprint/343638
PURE UUID: 3fb1b118-3f6c-43bf-a241-ab91cbe44b1c
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Date deposited: 09 Oct 2012 15:20
Last modified: 11 Dec 2021 02:28
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