Abstract:
The current study contributes to the existing body of literature on corporate governance and strategic management by providing empirical evidence analysing the effects of board composition on corporate strategy while considering the moderating role of ownership concentration.
This study uses theoretical pluralism incorporating agency theory and resource dependence theory to explain how board composition, in terms of size, leadership structure, and corporate ties, influence the board’s strategic function. The board’s strategic function is measured as the magnitude of strategic change, which is considered with respect to patterns of resource allocation both in terms of variation in firm strategy over time and deviation from industry norms. The Strategic Resource Allocation Profile (SRAP) captures six dimensions which, when observed over time, are thought to represent an organisation’s strategic decision-making patterns.
The basic model of this study first tests whether there is a direct relationship between board composition and the level of strategic change. It then incorporates ownership concentration as a moderating variable to test its effect on the relationship between board composition and strategic change.
Six models were constructed to test a set of six hypotheses. The models were applied to a sample of data from 433 listed U.S. firms over an eight-year period 2009-2016, and the hypotheses were tested using univariate and multivariate techniques.
The findings of this study suggest that board composition has a negative impact on strategic change. Specifically, board size, CEO duality, and interlocking directorships leads to less strategic change. The study finds partial support for the moderating effect of ownership concentration; the results reveal that high ownership concentration strengthens the negative impact of CEO duality and interlocking directorships but weakens that of board size.
The primary contribution of this research is its extension of the previous literature on the impact of board composition and ownership structure on strategic change. The findings may also assist stockholders desiring a more active adjustment of company strategies in considering the role of the board in corporate strategy decisions.
إحسان سمير كامل سمارة
Salford Manchester University – 2018
