Composición de Juntas directivas y desempeño de las firmas:evidencia para Colombia

Abstract

One of the instruments widely considered as a key element in Corporate Governance is the Board of Directors, given its significant influence over management behaviour and its monitoring character. Based on previous research work, it is safe to say that Colombia has a poor investor protection environment and that some characteristics of the Boards of its listed firms may have a lot to do with it. Using a sample of 77 listed colombian firms for the 1998-2004 period, we carefully examine the relationship between three different measures of Board Structure and the performance and valuation figures obtained by these firms. We found that, as expected, affiliation to a business conglomerate plays a major role in a firm having low ratios of board independence. Unusually high patterns of board interlocking are detected for the Sindicato Antioqueño business group, whereas non-affiliated firms seem to have very few links between them. Board turnover seem to be negatively correlated with firm performance, and its not signficantly different across firms, regardless of their business group affiliation condition. The effect of board independence on firm performance is not monotonic: for low levels of CR, independence has a positive impact, but once CR reach certain treshold levels, then the Board of Directors becomes ineffective as a monitoring instrument and thus there is no effect on firm performance. Results suggest that since major listed firms in Colombia are closely held, then the impact of having more independent boards on firm performance is not straightforward.

One of the instruments widely considered as a key element in Corporate Governance is the Board of Directors, given its significant influence over management behaviour and its monitoring character. Based on previous research work, it is safe to say that Colombia has a poor investor protection environment and that some characteristics of the Boards of its listed firms may have a lot to do with it. Using a sample of 77 listed colombian firms for the 1998-2004 period, we carefully examine the relationship between three different measures of Board Structure and the performance and valuation figures obtained by these firms. We found that, as expected, affiliation to a business conglomerate plays a major role in a firm having low ratios of board independence. Unusually high patterns of board interlocking are detected for the Sindicato Antioqueño business group, whereas non-affiliated firms seem to have very few links between them. Board turnover seem to be negatively correlated with firm performance, and its not signficantly different across firms, regardless of their business group affiliation condition. The effect of board independence on firm performance is not monotonic: for low levels of CR, independence has a positive impact, but once CR reach certain treshold levels, then the Board of Directors becomes ineffective as a monitoring instrument and thus there is no effect on firm performance. Results suggest that since major listed firms in Colombia are closely held, then the impact of having more independent boards on firm performance is not straightforward.