Does Board Interlock Control High-Tech Firm Performance? Evidence from ASEAN's Growth Triangle Countries
DOI:
https://doi.org/10.26740/jaj.v12n2.p117-131Keywords:
ASEAN countries, Firm performance, High-tech firm, Woman interlock, Board interlock, Independent interlockAbstract
The aim of this study is to explain the board interlock association on high-tech firm performance in three growth ASEAN countries. The research samples were 109 high-tech listed manufacturing firms, consisting of 38 Indonesian firms, 37 Malaysian firms, and 34 Thai firms in the 2015-2018 period. The study used panel regression analysis. The research found that corporate governance through interlock directorates is a determinant of high-tech firm performance. The low human capital with high-tech capabilities in ASEAN countries can be overcome by interlocking and facilitating companies to access strategic information. This study also found a positive association between director woman interlock and corporate performance. On the other hand, an independent director who does interlocking actually has a negative effect on company performance. This research is the first research on board interlock in high-tech firms in ASEAN growth countries, Indonesia, Malaysia, and Thailand. There is still limited research involving more than one country, especially developing countries, in studying the interlock board relationship on the company performance. The highlight of this study is to compare the effects of the three interlocks, interlocking directorate, woman interlock, and independent interlock, and their associations on the profitability of high-tech firms. Investors can have an in-depth understanding of the role of the type of interlock that affects the profitability and make the right decision in investing.
References
Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291–309. https://doi.org/10.1016/j.jfineco.2008.10.007
Adeabah, D., Gyeke-Dako, A., & Andoh, C. (2018). Board gender diversity, corporate governance and bank efficiency in Ghana: a two stage data envelope analysis (DEA) approach. Corporate Governance (Bingley), 19(2), 299–320. https://doi.org/10.1108/CG-08-2017-0171
Arena, C., Cirillo, A., Mussolino, D., Pulcinelli, I., Saggese, S., & Sarto, F. (2015). Women on board: Evidence from a masculine industry. Corporate Governance (Bingley), 15(3), 339–356. https://doi.org/10.1108/CG-02-2014-0015
Arioglu, E. (2020). Female board members: the effect of director affiliation. Gender in Management, 35(2), 225–254. https://doi.org/10.1108/GM-05-2019-0080
Arora, A., & Sharma, C. (2016). Corporate governance and firm performance in developing countries : evidence from India. Corporate Governance: The International Journal of Business in Society, 16(2), 420–436. https://doi.org/10.1108/CG-01-2016-0018
Barroso-Castro, C., Villegas-Periñan, M. del M., & Casillas-Bueno, J. C. (2016). How boards’ internal and external social capital interact to affect firm performance. Strategic Organization, 14(1), 6–31. https://doi.org/10.1177/1476127015604799
Boyd, B. K., Haynes, K. T., & Zona, F. (2011). Dimensions of CEO-Board Relations. Journal of Management Studies, 48(8), 1892–1923. https://doi.org/10.1111/j.1467-6486.2010.00943.x
Burt, R. S. (1980). Cooptive Corporate Actor Networks: A Reconsideration of Interlocking Directorates Involving American Manufacturing. Administrative Science Quarterly, 25(4), 557–581. https://doi.org/10.2307/2392281
Caiazza, R., & Simoni, M. (2019). Directorate ties: a bibliometric analysis. Management Decision, 57(10), 2837–2851. https://doi.org/10.1108/MD-01-2018-0085
Cowling, M., Ughetto, E., & Lee, N. (2018). The innovation debt penalty: Cost of debt, loan default, and the effects of a public loan guarantee on high-tech firms. Technological Forecasting and Social Change, 127(May 2016), 166–176. https://doi.org/10.1016/j.techfore.2017.06.016
Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20–47.Donaldson, L. (1990). The Ethereal Hand : Organizational Economics and Management Theory. Academy of Managament, 15(3), 369–381.
Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO governance and shareholder returns. Australian Journal of Management, 16(1), 49–64.
Hernández-lara, A. B., & Gonzales-bustos, J. P. (2019). The impact of interlocking directorates on innovation : The effects of business and social ties. Management Decision, 57(10), 2799–2815. https://doi.org/10.1108/MD-11-2017-1186
Ho, S. W. H. (2019). Preparedness for ASEAN Economic Community (AEC): a case study of Malaysian SME manufacturing sector. Journal of Asia Business Studies, 13(3), 384–411. https://doi.org/10.1108/JABS-01-2017-0018
Kallamu, B. S., & Saat, N. A. M. (2015). Audit committee attributes and firm performance : evidence from Malaysian finance companies. Asian Review of Accounting, 23(3), 206–231. https://doi.org/10.1108/ARA-11-2013-0076
Kılıç, M., & Kuzey, C. (2016). The effect of board gender diversity on firm performance: evidence from Turkey. Gender in Management, 31(7), 434–455. https://doi.org/10.1108/GM-10-2015-0088
Kohers,N., & Kohers, T. (2000). The Value Creation Potential of High-Tech Mergers. Financial Analysts Journal, 56(3), 40–50. https://doi.org/10.2469/faj.v56.n3.2359
Kwon, H. B., & Lee, J. (2019). Exploring the differential impact of environmental sustainability,operational efficiency, and corporate reputation on market valuation in high-tech-oriented firms. International Journal of Production Economics, 211(June 2018), 1–14. https://doi.org/10.1016/j.ijpe.2019.01.034
Lamb, N. H., & Roundy, P. (2016). The “ties that bind” board interlocks research: a systematic review. Management Research Review, 39(11), 1516–1542. https://doi.org/10.1108/MRR-02-2015-0027
Liao, F. N., & Chen, F. W. (2020). Independent director interlocks: effects and boundary on the earnings persistence of the firm. Economic Research-Ekonomska Istrazivanja , 0(0), 1–27. https://doi.org/10.1080/1331677X.2020.1788965
Markoczy, L., Sun, S. L., & Zhu, J. (2020). Few women on boards: What’s identity got to do with it? Journal of Business Ethics, 165(2),311–327. https://doi.org/10.1007/s10551-019-04104-z
Martin, G., Gözübüyük, R., & Becerra, M. (2013). Interlock and firm performance : The role of uncertainty in the directorate interlock-performance relationship. Strategic Management Journal, (September 2013), 1–43. https://doi.org/10.1002/smj
Merendino, A., & Melville, R. (2019). The board of directors and fi rm performance : empirical evidence from listed companies. Corporate Governance, 19(3), 508–551. https://doi.org/10.1108/CG-06-2018-0211
Nimtrakoon,S. (2015). The relationship between intellectual capital, firms’ market value and financial performance: Empirical evidence from the ASEAN. Journal of Intellectual Capital, 16(3), 587–618. https://doi.org/10.1108/JIC-09-2014-0104
O’Hagan, S. B. (2017). Anexploration of gender, interlocking directorates, and corporate performance. International Journal of Gender and Entrepreneurship, 9(3), 269–282. https://doi.org/10.1108/IJGE-09-2016-0032
OECD. (2017). OECD Survey of Corporate Governance Frameworks in Asia. 1–45.
Pfeffer, J., & Salancik, G. R. (1979). The External Control of Organizations. A Resource Dependence Perspective. The Economic Journal, 89(356), 969. https://doi.org/10.2307/2231527
Post, C., & Byron, K. (2014). Women on boards and firm financial performance: A meta-analysis. Academy of Management Journal, 17(2), 491–549. https://doi.org/10.1007/s10997-011-9186-1
Ramaswamy, V. (2019). Director interlocks and cross-cultural impact on strategies affecting shareholder–creditor conflicts: A conceptual analysis. Management Decision, 57(10), 2693–2713. https://doi.org/10.1108/MD-10-2017-0956
Reguera-Alvarado, N., de Fuentes, P., & Laffarga, J. (2015). Does Board Gender Diversity Influence Financial Performance? Evidence from Spain. Journal of Business Ethics, 141(2), 337–350. https://doi.org/10.1007/s10551-015-2735-9
Richardson, R. J. (1987). Directorship interlocks and corporate profitability. Administrative Science Quarterly, 32(3), 367–368. https://doi.org/10.2307/2392910
Saeed, A., Mukkaram, S. S., & Belghitar, Y. (2019). Read between the lines: Board gender diversity, family ownership, and risk-taking in Indian high-tech firms. International Journal of Finance and Economics, (October 2018), 1–23. https://doi.org/10.1002/ijfe.1784
Sanan, N. K., Jaisinghani, D., & Yadav, S. (2019). Corporate governance, firm performance, and business group affiliation: evidence from India. Management Decision. https://doi.org/10.1108/MD-03-2019-0376
Sarkar, J., & Sarkar, S. (2009). Multiple board appointments and firm performance in emerging economies: Evidence from India. Pacific Basin Finance Journal, 17(2), 271–293. https://doi.org/10.1016/j.pacfin.2008.02.002
Subramanian, S. (2018). Stewardship Theory of Corporate Governance and Value System: The Case of a Family-owned Business Group in India. Indian Journal of Corporate Governance, 11(1), 88–102. https://doi.org/10.1177/0974686218776026
Tan, K. M., Kamarudin, F., Bany-Ariffin, A. N., & Abdul Rahim, N. (2020). Moderation of directors’ education on board busyness-firm efficiency. Management Decision, 58(7), 1397–1423. https://doi.org/10.1108/MD-09-2017-0905
Wiley, C., & Monllor-Tormos, M. (2018). Board Gender Diversity in the STEM&F Sectors: The Critical Mass Required to Drive Firm Performance. Journal of Leadership & Organizational Studies, 25(3), 290–308. https://doi.org/10.1177/1548051817750535
Wooldridge, J. M. (2013). Introductory econometrics a modern approach 5th edition(5th ed.). Mason: South-Western. https://doi.org/10.4324/9781351140768-8
Yatim, P., Iskandar, T. M., & Nga, E. (2014). Board attributes and foreign shareholdings in Malaysian listed firms. Journal of Management and Governance, 20(1), 147–178. https://doi.org/10.1007/s10997-014-9301-1
Zona, F., Gomez-Mejia, L. R., & Withers, M. C. (2015). Board Interlocks and Firm Performance: Toward a Combined Agency–Resource Dependence Perspective. Journal of Management, 44(2), 589–618. https://doi.org/10.1177/0149206315579512
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 AKRUAL: Jurnal Akuntansi
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Abstract views: 590
,
PDF Downloads: 455
