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Board of directors' environmental interface: Does it affect firm performance?
Abstract
This dissertation examines the relationship between corporate board of directors and firm performance from a resource dependency perspective. The study was undertaken to learn more about the resource dependency role performed by directors of publicly traded companies and how board members representing important environmental dimensions can affect firm performance. This study sought to answer four research questions: (1) Does greater coverage of the general environment factors by outside board members affect firm performance? (2) Does the number of industry representatives on the board affect firm performance? (3) Does the number of affiliated directors on the board affect firm performance? and (4) Is there a relationship between board size and firm performance? The study included four independent variables: (1) coverage of the general environment by outside board members, (2) number of industry representatives on the board, (3) the number of affiliated directors on the board, and (4) board size. The dependent variables for the study were four balanced scorecard-related corporate performance indicators: (1) return on equity, (2) market share, (3) sales per employee, and (4) profit margin. The dependent variables lagged the independent variables by one, two, and three years. The results of data gathered on fifty firms in the computer industry suggest that boards do perform a resource dependency role, serving as an interface between the firm and its environment. First, coverage of the general environment by outside board members has some significant positive effects on profit margin. Second, the number of industry representatives is unrelated to the performance indicators studied. Third, the number of affiliated directors is significantly related to market share, sales per employee, and profit margin. Lastly, board size is significantly and positively related to sales per employee. This study indicates that corporate boards can have an impact on corporate performance beyond serving as a control on management hegemony. Corporate boards can also provide benefits to the firm by providing links to resources and information necessary for firm prosperity.
Subject Area
Management
Recommended Citation
Nelson, Jeryl Leslie, "Board of directors' environmental interface: Does it affect firm performance?" (2000). ETD collection for University of Nebraska-Lincoln. AAI9977006.
https://digitalcommons.unl.edu/dissertations/AAI9977006