Board Characteristics, Compliance, and Firm Performance: Empirical Findings from Colombia

Hernán Herrera-Echeverri, Sandra Gaitan, Luis Antonio Orozco, Nidia Soto-Echeverry
  • Latin American Business Review, October 2018, Taylor & Francis
  • DOI: 10.1080/10978526.2018.1540935

Importance of Board characteristics on firms

Photo by Dimitri Bong on Unsplash

Photo by Dimitri Bong on Unsplash

What is it about?

Board of directors are importance to improve management effectiveness and increase firm value. We have showed that firm performance is higher for firms with boards that fulfill their strategic work. We use a novel database with 13,346 private Colombian firms from 2008 to 2010 to show how some particular directors’ characteristics make it possible to take additional specific actions to continue improving firm performance.

Why is it important?

Research on the relationship between the board of directors and firm performance have found no concluding results. This study find that compliance is a central issue in how the board of directors reduces agency problems and improves firm performance. Second we show that the boards with the best composition (those with experts and that avoid conflict of interests in their members) have a higher probability of implementing good actions to improve firm performance. And finally this study demonstrate that firms with good performance strive to engage high quality members on their boards.

Perspectives

Sandra Gaitan (Author)
Universidad EAFIT

Understanding how the board of directors is involved in the proper functioning of firms is essential to contribute to guidelines for managerial practice.

Read Publication

http://dx.doi.org/10.1080/10978526.2018.1540935

The following have contributed to this page: Dr Luis Antonio Orozco and Sandra Gaitan