Segmento de turistas nacionales

The board composition construct signifies the balance between non-executive directors (outside directors) and executive directors (inside directors). It is

operationalised traditionally in terms of percentage of non-executive directors (NED) on the board (Minichilli et al., 2012, Hearn, 2011, Miller and Del Carmen Triana, 2009, Kula, 2005, Nahar Abdullah, 2004, Kiel and Nicholson, 2003, Hillman and Dalziel, 2003, Erhardt et al., 2003). Grounded in agency theory, board independence is achieved when a majority of board members are non-executive directors (NEDs) (Kula, 2005, Adams and Mehran, 2005, Klapper and Love, 2004, Keenan, 2004). Therefore, by inference, NEDs are assumed to be more effective in monitoring top management of firms on behalf of the shareholders than executive directors. NEDs’ effectiveness is attributed to their independence from the firm and CEO (Kula, 2005, Adams and Mehran, 2005, Klapper and Love, 2004, Keenan, 2004). In other words, the argument here is that inside or executive directors (EDs) may lack independence and objectivity from management of firms and thus are not capable of reducing agency cost and protecting shareholder value creation. In fact, members of a board of directors who are connected with the day-to-day management of the firm are less effective monitors and controllers of management as their position as inside directors perpetuates agency problems and may not enhance shareholder value (Kula, 2005, Adams and Mehran, 2005, Klapper and Love, 2004, Keenan, 2004). Consistent with preceding argument, firm performance can only be enhanced through the inclusion of more NEDs than executive directors on corporate boards. Indeed, agency theorists argue more outsiders on the board means monitoring and control will be effective, and this will therefore translate into shareholder value maximisation which will mean an increase in the firm’s financial performance.

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The relationship between NEDs and firm performance has often generated some evidence suggesting that increasing the number of NEDs enhances performance. In fact, some studies have found a positive relationship ( e.g. Pearce and Zahra, 1992, Wagner III et al., 1998, Ibrahim and Samad, 2011, Kyereboah-Coleman, 2008, Dahya and McConnell, 2007), while other scholars have found no relationship between this nexus ( e.g. Bhagat and Black, 2002, Vafeas and Theodorou, 1998, Weir et al., 2002, Sanda et al., 2005). Owing to these mixed empirical findings, this study proposes the following hypotheses:

H01a: There is a statistically significant positive relationship between the

proportion of NEDs and firm financial performance as measured by ROCE and Q-ratio.

H11a: There is no statistically significant positive relationship between the

proportion of NEDs and firm financial performance as measured by ROCE and Q-ratio.

Based on agency theory, most researchers have investigated the impact of NED on firm performance in both advanced and emerging African economies. However, very limited research has been conducted using stewardship theory recommendation for more executive directors than NEDs even in advanced economies and there seems to be nonexistence of this construct in an African milieu. Stewardship theorists advocate for an insider-dominated board for easy decision making. Advocates of this theory opine that increase in firm financial performance is associated with a majority of EDs who naturally work towards value maximisation for shareholders (Nicholson and Kiel, 2007). It is argued that since inside directors’ work within the firm on a day-to- day basis, they understand the operation of the firm better than NEDs and so make superior decisions which enhance firm financial performance (Donaldson and Davis, 1994, Pearce and Zahra, 1992, Donaldson, 1990, Nicholson and Kiel, 2007). By inference, because EDs have a better knowledge of the firm, they inherently have superior access to relevant information and are therefore able to make better-informed decisions, which enhances financial performance.

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However, very few studies have provided empirical evidence to support the EDs–firm financial performance nexus. Indeed, as Nicholson and Kiel (2007) noted,

stewardship theorist literature has not established the processes which associate EDs with increased firm performance (attributed to favouritism towards agency theory), although by making superior decisions firm performance is affected positively. Hence, the following null and alternative hypotheses are proposed:

H01b: There is a statistically significant positive relationship between the

proportion of EDs and firm financial performance as measured by ROCE and Q-ratio.

H11b: There is no statistically significant positive relationship between the

proportion of EDs and firm financial performance as measured by ROCE and Q-ratio.

In addition to the proportion of non-executive directors and executive directors discussed above, there is a general agreement in CG scholarship, policy and practice that the presence of independent NEDs (referred to as non-executive directors who do not have a stake in the firm) increases board monitoring and controls and reduces agency cost (Nicholson and Kiel, 2007). Independent NEDs are unique from ordinary NEDs in that they have no link to any member of the company or shareholder of the company, whereas NEDs may have some stake in the company either as a shareholder or representative of shareholders, past employee of the firm or member of a special interest group etc. Therefore, independent NEDs (INEDs) will provide impartial judgements and may not suffer from conflict of interest (Terjesen et al., 2016). From agency theory perspective, INEDs curtail agency costs in corporations, which improves firm performance since these directors are impartial in their decision-

making process (Ntim, 2011, pp.7). Similarly, INEDs are opined to be able to increase independence in their advice role and monitoring and are able to discipline managers. In addition, from a resource dependency perspective, INEDs act a resource because of their experience, business contacts and reputation, which enhances firm valuation and performance (Nicholson and Kiel, 2007, Ntim, 2011).

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However, stewardship theory contends that, owing to the limited knowledge of INEDs, they are be unable to understand the complexities of a firm and therefore will be incapable of providing relevant advice to management of firms (Ntim, 2011, Weir and Laing, 2001). Others have argued that INEDs have limited time to perform their monitoring, control, advisory duties because they are part-timers and mostly are directors on other boards and may be too busy to serve (Haniffa and Hudaib, 2006, Lipton and Lorsch, 1992), which is detrimental to firm economic performance.

Drawing from the conflicting nature of the impact of INED, some studies have reported increase in firm performance (e.g. Kiel and Nicholson, 2003, Ntim, 2011, Weir et al., 2002) whereas others have reported negative associations (e.g. Agrawal and Knoeber, 1996, Mangena and Chamisa, 2008). In Africa, some authors have reported positive INED–firm performance relations. For example, Ghana Abor Abor (2007), Abor and Biekpe (2007) and Kyereboah-Coleman and Biekpe (2006b) reported positive associations. Khanchel El Mehdi (2007), Mangena et al. (2012) and Ntim (2011) also reported positive associations in Tunisia, Zimbabwe and South Africa respectively. However,Sanda et al. (2011) reported a negative association between INEDs and firm performance in Nigeria. A recent comparative study including Nigeria by Zattoni et al. (2017) reports that the effect of board

independence on firm financial performance is contingent on the specific national context. Following from this mixed extant empirical literature, this study hypothesises that:

H01c: There is a statistically significant positive relationship between the

proportion of INEDs and firm financial performance as measured by ROCE and Q-ratio.

H11c: There is no statistically significant positive relationship between the

proportion of INEDs and firm financial performance as measured by ROCE and Q-ratio.

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