Dominant-owner CEOs, board of directors and firm performance in emerging economies: Exploring the moderating impact of quad-qualified directors

Abstract

There have recently been many calls to explore corporate governance in emerging economies, as these countries have distinctive characteristics such as a weaker institutional environment and the dominating influence of controlling shareholders. The literature has revealed that, in such institutional settings, there is the risk that powerful insiders maximize their own benefits at the expense of minorities and firm performance. This study advances our knowledge of corporate governance in emerging economies by exploring the moderating impact of quad-qualified directors – i.e., directors with independence, expertise, bandwidth, and motivation – on the relationship between dominant-owner CEOs and firm performance. We tested our hypotheses on a large cross-sectional sample of Indian listed firms. Our results show that dominant-owner CEOs undermine company performance, but quad-qualified directors may improve board monitoring and consequently attenuate their negative influence. Our findings support the soundness of the quad-qualified model for boards of directors, and contribute to the growing literature investigating which directors’ attributes may have a significant impact on board monitoring and firm performance.