Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities

Mohamed Elmagrhi, Collins Ntim, John K. Malagila, Samuel Fosu, Abongeh A. Tunyi

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Purpose:
This paper aims to investigate the association among trustee board diversity (TBD), corporate governance (CG), capital structure (CS) and financial performance (FP) by using a sample of UK charities. Specifically, the authors investigate the effect of TBD on CS and ascertain whether CG quality moderates the TBD–CS nexus. Additionally, the authors examine the impact of CS on FP and ascertain whether the CS–FP nexus is moderated by TBD and CG quality.

Design/methodology/approach:
The authors use a number of multivariate regression techniques, including ordinary least squares, fixed-effects, lagged-effects and two-stage least squares, to rigorously analyse the data and test the hypotheses.

Findings:
First, the authors find that trustee board gender diversity has a negative effect on CS, but this relationship holds only up to the point of having three women trustees. The authors find similar, but relatively weak, results for the presence of black, Asian and minority ethnic (BAME) trustees. Second, the authors find that the TBD–CS nexus depends on the quality of CG, with the relationship being stronger in charities with higher frequency of meetings, independent CG committee and larger trustee and audit firm size. Third, the authors find that CS structure has a positive effect on FP, but this is moderated by TBD and CG quality. The evidence is robust to different econometric models that adjust for alternative measures and endogeneities. The authors interpret the findings within explanations of a theoretical perspective that captures insights from different CG and CS theories.

Originality/value:
Existing studies that explore TBD, CG, CS and FP in charities are rare. This study distinctively attempts to address this empirical lacuna within the extant literature by providing four new insights with specific focus on UK charities. First, the authors provide new evidence on the relationship between TBD and CS. Second, the authors offer new evidence on the moderating effect of CG on the TBD-CS nexus. Third, the authors provide new evidence on the effect of CS on FP. Finally, the authors offer new evidence on the moderating effect of TBD and CG on the CS–FP nexus.
Original languageEnglish
Pages (from-to)478-508
Number of pages31
JournalCorporate Governance (Bingley)
Volume18
Issue number3
DOIs
Publication statusPublished - 1 May 2018

Fingerprint

Charity
Governance mechanisms
Corporate governance
Capital structure
Financial performance
Moderating effect
Multivariate regression
Design methodology
Two-stage least squares
Ordinary least squares
Econometric models
Firm size
Endogeneity
Gender diversity
Audit firms
Governance structure
Asia
Fixed effects
Large firms
Ethnic minorities

Cite this

Elmagrhi, Mohamed ; Ntim, Collins ; Malagila, John K. ; Fosu, Samuel ; Tunyi, Abongeh A. / Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities. In: Corporate Governance (Bingley). 2018 ; Vol. 18, No. 3. pp. 478-508.
@article{26fa2f15122c412e9654792d45fa0220,
title = "Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities",
abstract = "Purpose:This paper aims to investigate the association among trustee board diversity (TBD), corporate governance (CG), capital structure (CS) and financial performance (FP) by using a sample of UK charities. Specifically, the authors investigate the effect of TBD on CS and ascertain whether CG quality moderates the TBD–CS nexus. Additionally, the authors examine the impact of CS on FP and ascertain whether the CS–FP nexus is moderated by TBD and CG quality.Design/methodology/approach:The authors use a number of multivariate regression techniques, including ordinary least squares, fixed-effects, lagged-effects and two-stage least squares, to rigorously analyse the data and test the hypotheses.Findings:First, the authors find that trustee board gender diversity has a negative effect on CS, but this relationship holds only up to the point of having three women trustees. The authors find similar, but relatively weak, results for the presence of black, Asian and minority ethnic (BAME) trustees. Second, the authors find that the TBD–CS nexus depends on the quality of CG, with the relationship being stronger in charities with higher frequency of meetings, independent CG committee and larger trustee and audit firm size. Third, the authors find that CS structure has a positive effect on FP, but this is moderated by TBD and CG quality. The evidence is robust to different econometric models that adjust for alternative measures and endogeneities. The authors interpret the findings within explanations of a theoretical perspective that captures insights from different CG and CS theories.Originality/value:Existing studies that explore TBD, CG, CS and FP in charities are rare. This study distinctively attempts to address this empirical lacuna within the extant literature by providing four new insights with specific focus on UK charities. First, the authors provide new evidence on the relationship between TBD and CS. Second, the authors offer new evidence on the moderating effect of CG on the TBD-CS nexus. Third, the authors provide new evidence on the effect of CS on FP. Finally, the authors offer new evidence on the moderating effect of TBD and CG on the CS–FP nexus.",
keywords = "Trustee board diversity, Women and ethnic minority trustees, Governance mechanisms, Capital structure and performance, Charities, UK",
author = "Mohamed Elmagrhi and Collins Ntim and Malagila, {John K.} and Samuel Fosu and Tunyi, {Abongeh A.}",
year = "2018",
month = "5",
day = "1",
doi = "10.1108/CG-08-2017-0185",
language = "English",
volume = "18",
pages = "478--508",
journal = "Corporate Governance (Bingley)",
issn = "1472-0701",
publisher = "Emerald Group Publishing Ltd.",
number = "3",

}

Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities. / Elmagrhi, Mohamed; Ntim, Collins; Malagila, John K.; Fosu, Samuel; Tunyi, Abongeh A.

In: Corporate Governance (Bingley), Vol. 18, No. 3, 01.05.2018, p. 478-508.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities

AU - Elmagrhi, Mohamed

AU - Ntim, Collins

AU - Malagila, John K.

AU - Fosu, Samuel

AU - Tunyi, Abongeh A.

PY - 2018/5/1

Y1 - 2018/5/1

N2 - Purpose:This paper aims to investigate the association among trustee board diversity (TBD), corporate governance (CG), capital structure (CS) and financial performance (FP) by using a sample of UK charities. Specifically, the authors investigate the effect of TBD on CS and ascertain whether CG quality moderates the TBD–CS nexus. Additionally, the authors examine the impact of CS on FP and ascertain whether the CS–FP nexus is moderated by TBD and CG quality.Design/methodology/approach:The authors use a number of multivariate regression techniques, including ordinary least squares, fixed-effects, lagged-effects and two-stage least squares, to rigorously analyse the data and test the hypotheses.Findings:First, the authors find that trustee board gender diversity has a negative effect on CS, but this relationship holds only up to the point of having three women trustees. The authors find similar, but relatively weak, results for the presence of black, Asian and minority ethnic (BAME) trustees. Second, the authors find that the TBD–CS nexus depends on the quality of CG, with the relationship being stronger in charities with higher frequency of meetings, independent CG committee and larger trustee and audit firm size. Third, the authors find that CS structure has a positive effect on FP, but this is moderated by TBD and CG quality. The evidence is robust to different econometric models that adjust for alternative measures and endogeneities. The authors interpret the findings within explanations of a theoretical perspective that captures insights from different CG and CS theories.Originality/value:Existing studies that explore TBD, CG, CS and FP in charities are rare. This study distinctively attempts to address this empirical lacuna within the extant literature by providing four new insights with specific focus on UK charities. First, the authors provide new evidence on the relationship between TBD and CS. Second, the authors offer new evidence on the moderating effect of CG on the TBD-CS nexus. Third, the authors provide new evidence on the effect of CS on FP. Finally, the authors offer new evidence on the moderating effect of TBD and CG on the CS–FP nexus.

AB - Purpose:This paper aims to investigate the association among trustee board diversity (TBD), corporate governance (CG), capital structure (CS) and financial performance (FP) by using a sample of UK charities. Specifically, the authors investigate the effect of TBD on CS and ascertain whether CG quality moderates the TBD–CS nexus. Additionally, the authors examine the impact of CS on FP and ascertain whether the CS–FP nexus is moderated by TBD and CG quality.Design/methodology/approach:The authors use a number of multivariate regression techniques, including ordinary least squares, fixed-effects, lagged-effects and two-stage least squares, to rigorously analyse the data and test the hypotheses.Findings:First, the authors find that trustee board gender diversity has a negative effect on CS, but this relationship holds only up to the point of having three women trustees. The authors find similar, but relatively weak, results for the presence of black, Asian and minority ethnic (BAME) trustees. Second, the authors find that the TBD–CS nexus depends on the quality of CG, with the relationship being stronger in charities with higher frequency of meetings, independent CG committee and larger trustee and audit firm size. Third, the authors find that CS structure has a positive effect on FP, but this is moderated by TBD and CG quality. The evidence is robust to different econometric models that adjust for alternative measures and endogeneities. The authors interpret the findings within explanations of a theoretical perspective that captures insights from different CG and CS theories.Originality/value:Existing studies that explore TBD, CG, CS and FP in charities are rare. This study distinctively attempts to address this empirical lacuna within the extant literature by providing four new insights with specific focus on UK charities. First, the authors provide new evidence on the relationship between TBD and CS. Second, the authors offer new evidence on the moderating effect of CG on the TBD-CS nexus. Third, the authors provide new evidence on the effect of CS on FP. Finally, the authors offer new evidence on the moderating effect of TBD and CG on the CS–FP nexus.

KW - Trustee board diversity

KW - Women and ethnic minority trustees

KW - Governance mechanisms

KW - Capital structure and performance

KW - Charities

KW - UK

U2 - 10.1108/CG-08-2017-0185

DO - 10.1108/CG-08-2017-0185

M3 - Article

VL - 18

SP - 478

EP - 508

JO - Corporate Governance (Bingley)

JF - Corporate Governance (Bingley)

SN - 1472-0701

IS - 3

ER -