Corporate governance and board effectiveness: beyond formalism

A. Levrau () and Lutgart van Den Berghe

Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School

Abstract: Mainstream research on boards of directors has been focusing on a direct relationship between board characteristics and firm performance, but up till now the results are inconclusive. Different reasons are put forward to explain this inconsistency, but it can be argued that ‘traditional’ board research has been neglecting potential intervening variables. In this paper we present a process-oriented model for board effectiveness by relying on the corporate governance literature and the literature on group effectiveness. We follow the input-process-output approach to extract the significant variables from literature and integrate them into a research framework for studying board effectiveness. In particular, we identify three intervening variables (cohesiveness, debate and conflict norms) which we believe mediate the effects of board characteristics on board performance. The rationale for including these ‘process’ variables is the belief that the interactions and relationships among board members determine to a large extent the collective outcomes of the board of directors. In this respect, the model goes beyond the traditional structural attributes of boards of directors to include behavioural or attitudinal measures of board effectiveness. It also highlights the need for a multi-disciplinary approach in empirical research on boards of directors.

Pages: 40 pages
Date: 2006-10-04
New Economics Papers: this item is included in nep-bec
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Working Paper: Corporate governance and Board Effectiveness: beyond formalism (2007)
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