1. Home
  2. Volume 7 - Number 1
  3. Corporate board structures and intellectual capital: evidence from banks in Africa
New submission
Issues
Journal Information
Aims and ScopeEditorial BoardEditorial Advisory BoardJournal Policies
Resources
For Readers
For Authors
For Editors
For Reviewers
Publication EthicsCall for Special Issue
ISSN
ISSN 2615-9821
ISSN(Previous) 2588-1396

Volume 7 - Number 1 | March 2023

Corporate board structures and intellectual capital: evidence from banks in Africa

Nicholas Asare, Francis Aboagye-Otchere, and Joseph Mensah Onumah

28/03/2023 94 0 0
Like Buy now 20.000 đ
Corporate governance Intellectual capital Board structures Banks Africa.

Abstract:

Purpose
This study examines the nature of the relationship between board structures (BSs) and intellectual capital (IC) of banks in Africa.

Design/methodology/approach
Using annual data from financial statements of 366 banks from 26 African countries from 2007 to 2015, the study estimates IC using the value-added intellectual coefficient (VAIC) and BSs using board size, board independence and board gender diversity. The system generalized method of moments and panel-corrected standard error estimation strategies are used to estimate panel regressions.

Findings
There is a significant negative relationship between board independence and intellectual capital. The results also indicate that the IC of banks does not depend on board size and board gender diversity.

Practical implications
The study's findings provide evidence of the extent to which BSs have been instituted to support investments in intellectual capital as a means of improving the performance of banks in Africa.

Originality/value
This study provides some empirical evidence from Africa's banking sector to justify that banks with better IC have boards that are less independent. This study is one of the few studies that employs many countries' data.

References:

  1. Abeysekera, I. (2007), “Intellectual capital reporting between a developing and developed nation”, Journal of Intellectual Capital, Vol. 8 No. 2, pp. 329-345.
  2. Abeysekera, I. (2010), “The influence of board size on intellectual capital disclosure by Kenyan listed firms”, Journal of Intellectual Capital, Vol. 11 No. 4, pp. 504-518.
  3. Aboagye, A.Q. and Otieku, J. (2010), “Are Ghanaian MFIs' performance associated with corporate governance?”, Corporate Governance: The International Journal of Business in Society, Vol. 10 No. 3, pp. 307-320.
  4. Aboagye-Otchere, F. (2014), “International Financial Reporting Standards (IFRS), financial disclosure and corporate governance disclosure in Ghana”, Unpublished PhD thesis, University of Ghana, Legon).
  5. Abor, J. and Fiador, V. (2013), “Does corporate governance explain dividend policy in Sub‐Saharan Africa?”, International Journal of Law and Management, Vol. 55 No. 3, pp. 201-225.
  6. Al-Ghanem, W. and Hegazy, M. (2011), “An empirical analysis of audit delays and timeliness of corporate financial reporting in Kuwait”, Eurasian Business Review, Vol. 1 No. 1, pp. 73-90.
  7. Al-Musalli, M.A.K. and Ismail, K.N.I.K. (2012), “Corporate governance, bank specific characteristics, banking industry characteristics, and intellectual capital performance of banks in Arab Gulf Cooperation Council (GCC) Countries”, Asian Academy of Management Journal of Accounting and Finance, Vol. 8, Supp. 1, pp. 115-135.
  8. Alhassan, A.L. and Asare, N. (2016), “Intellectual capital and bank productivity in emerging markets: evidence from Ghana”, Management Decision, Vol. 54 No. 3, pp. 589-609.
  9. Arellano, M. and Bond, S. (1991), “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations”, The Review of Economic Studies, Vol. 58 No. 2, pp. 277-297.
  10. Arellano, M. and Bover, O. (1995), “Another look at the instrumental-variable estimation of error-components”, Journal of Economics, Vol. 68, pp. 29-52.
  11. Asare, N. (2018), “An investigation into board structures, intellectual capital and performance of Banks in Africa”, PhD thesis, University of Ghana, Ghana, ugspace.ug.edu.gh.
  12. Asare, N., Onumah, J.M. and Simpson, S.N.Y. (2013), “Exploring the disclosure of intellectual capital in Ghana: evidence from listed companies”, Journal of Accounting and Marketing, Vol. 2 No. 3, pp. 1-7.
  13. Asare, N., Alhassan, A.L., Asamoah, M.E. and Ntow-Gyamfi, M. (2017), “Intellectual capital and profitability in an emerging insurance market”, Journal of Economic and Administrative Sciences, Vol. 33 No. 1, pp. 2-19.
  14. Asare, N., Laryea, M.M., Onumah, J.M. and Asamoah, M.E. (2020), “Intellectual capital and asset quality in an emerging banking market”, Asian Journal of Accounting Research, Vol. 6 No. 1, pp. 55-68, doi: 10.1108/AJAR-05-2020-0034.
  15. Bailey, D. and Katz, J.N. (2011), “Implementing panel-corrected standard errors in R: the PCSE package”, Journal of Statistical Software, Code Snippets, Vol. 42 No. 1, pp. 1-11.
  16. Barney, J. (1991), “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17 No. 1, pp. 99-120.
  17. Blundell, R. and Bond, S. (1998), “Initial conditions and moment restrictions in dynamic panel data models”, Journal of Econometrics, Vol. 87 No. 1, pp. 115-143.
  18. Boone, C. and Hendriks, W. (2009), “Top management team diversity and firm performance: moderators of functional background and locus of control diversity”, Management Science, Vol. 55 No. 2, pp. 165-180.
  19. Cerbioni, F. and Parbonetti, A. (2007), “Exploring the effects of corporate governance on intellectual capital disclosure: an analysis of European biotechnology companies”, European Accounting Review, Vol. 16 No. 4, pp. 791-826.
  20. Chen, F.-C., Liu, Z.-J. and Kweh, Q.L. (2014), “Intellectual capital and productivity of Malaysian general insurers”, Economic Modelling, Vol. 36, pp. 413-420.
  21. Daryaee, A., Pakdel, A., Easapour, K. and Khalaflu, M.M. (2011), “Intellectual Capital, corporate value and corporate governance (evidence from Tehran stock exchange (TSE))”, Australian Journal of Basic and Applied Sciences, Vol. 5 No. 2, pp. 821-826.
  22. Duho, K.C.T. (2020), “Intellectual capital and technical efficiency of banks in an emerging market: a slack-based measure”, Journal of Economic Studies, Vol. 47 No. 7, pp. 1711-1732, doi: 10.1108/JES-06-2019-0295.
  23. Duru, A., Iyengar, R.J. and Zampelli, E.M. (2016), “The dynamic relationship between CEO duality and firm performance: the moderating role of board independence”, Journal of Business Research, Vol. 69 No. 10, pp. 4269-4277.
  24. El‐Bannany, M. (2008), “A study of determinants of intellectual capital performance in banks: the UK case”, Journal of Intellectual Capital, Vol. 9 No. 3, pp. 487-498.
  25. Fama, E.F. and Jensen, M.C. (1983), “Separation of ownership and control”, Journal of Law and Economics, Vol. 26, June, pp. 301-325.
  26. Goebel, V. (2015), “Estimating a measure of intellectual capital value to test its determinants”, Journal of Intellectual Capital, Vol. 16 No. 1, pp. 101-120.
  27. Goh, P.C. (2005), “Intellectual capital performance of commercial banks in Malaysia”, Journal of Intellectual Capital, Vol. 6 No. 3, pp. 385-396.
  28. Gujarati, D. and Porter, D. (2003), “Multicollinearity: what happens if the regressors are correlated”, Basic Econometrics, p. 363.
  29. Habib, A. (2015), “The new Chinese accounting standards and audit report lag”, International Journal of Auditing, Vol. 19 No. 1, pp. 1-14.
  30. Hermalin, B.E. and Weisbach, M.S. (2003), “Boards of directors as an endogenously determined institution: a survey of the economic literature”, FRB New York - Economic Policy Review, Vol. 9 No. 1, pp. 7-26.
  31. Hidalgo, R.L., Garcı´a-Meca, E. and Martı´nez, I. (2011), “Corporate governance and intellectual capital disclosure”, Journal of Business Ethics, Vol. 100 No. 3, pp. 483-495.
  32. John, K. and Senbet, L.W. (1998), “Corporate governance and board effectiveness”, Journal of Banking and Finance, Vol. 22 No. 4, pp. 371-403.
  33. Joshi, M., Cahill, D. and Sidhu, J. (2010), “Intellectual capital performance in the banking sector: an assessment of Australian owned banks”, Journal of Human Resource Costing and Accounting, Vol. 14 No. 2, pp. 151-170.
  34. Kalim, R. and Lodhi, S.A. (2002), “The knowledge based economy: trends and implications for Pakistan”, Pakistan Development Review, Vol. 41 No. 4, pp. 787-804.
  35. Kamath, G.B. (2008), “Intellectual capital and corporate performance in Indian pharmaceutical industry”, Journal of Intellectual Capital, Vol. 9 No. 4, pp. 684-704.
  36. Kaplan, R.S. and Norton, D.P. (2004), Strategy Maps: Converting Intangible Assets into Tangible Outcomes, Harvard Business School Press, Harvard.
  37. Kennedy, P. (2008), A Guide to Econometrics, 6th ed., Blackwell Publishing, Oxford.
  38. Kusi, A.B., Gyeke-Dako, A., Agbloyor, E.K. and Darku, A.B.( (2018), “Does corporate governance structures promote shareholders or stakeholders value maximization? Evidence from African banks”, Corporate Governance: The International Journal of Business in Society, Vol. 18 No. 2, pp. 270-288.
  39. Kyereboah-Coleman, A. (2006), “Corporate board diversity and performance of microfinance institutions: the effect of gender”, Studies in Economics and Econometrics Vol. 30 No. 3, pp. 19-33.
  40. Kyereboah-Coleman, A. and Biekpe, N. (2006), “The relationship between board size, board composition, CEO duality and firm performance: experience from Ghana”, Corporate Ownership and Control, Vol. 4 No. 2, pp. 114-122.
  41. Li, J., Pike, R. and Haniffa, R. (2008), “Intellectual capital disclosure and corporate governance structure in UK firms”, Accounting and Business Research, Vol. 38 No. 2, pp. 137-159.
  42. Li, J., Mangena, M. and Pike, R. (2012), “The effect of audit committee characteristics on intellectual capital disclosure”, Accounting and Business Research, Vol. 44 No. 2, pp. 98-110.
  43. Makki, M.A.M. and Lodhi, S.A. (2009), “Impact of intellectual capital on return on investment in Pakistani corporate sector”, Australian Journal of Basic and Applied Sciences, Vol. 3 No. 3, pp. 2995-3007.
  44. Makki, M.A.M., Lodhi, S.A. and Rahman, R. (2008), “Intellectual capital performance of Pakistani listed corporate sector”, International Journal of Business and Management, Vol. 3 No. 10, pp. 45-51.
  45. Mannix, E. and Neale, M. (2005), “What differences make a difference? The promise and reality of diverse teams in organizations”, Psychological Science in the Public Interest, Vol. 6 No. 2, pp. 31-55.
  46. Marr, B., Gray, D. and Schiuma, G. (2004), “Measuring intellectual capital – what, why, and how?”, in Bourne, M. (Ed.), Handbook of Performance Measurement, Gee, London.
  47. Mohamad-Nor, M.N., Shafie, R. and Wan-Hussin, W.N. (2010), “Corporate governance and audit report lag in Malaysia”, Asian Academy of Management Journal of Accounting and Finance, Vol. 6 No. 2, pp. 57-84.
  48. Mujtaba, N. and Williams, A. (2011), “Corporate governance and board composition: a comparison of GCC boards with UK, European and US boards”, Report issued by corporate governance consultants, Manama, Bahrain.
  49. Naimi, M., Nor, M., Rohami, S. and Wan-Hussin, W.N. (2010), “Corporate governance and audit report lag in Malaysia”, Asian Academy of Management Journal of Accounting and Finance, Vol. 6 No. 2.
  50. Nkundabanyanga, S.K. (2016), “Board governance, intellectual capital and firm performance Importance of multiplicative effects”, Journal of Economic and Administrative Sciences, Vol. 32 No. 1, pp. 20-45.
  51. Owusu, G.M., Saat, N.A.M., Suppiah, S.D.K. and Siong, H.L. (2017), “IFRS adoption, institutional quality and foreign direct investment inflows: a dynamic panel analysis”, Asian Journal of Business and Accounting, Vol. 10 No. 2, pp. 43-75.
  52. Ozkan, N., Cakan, S. and Kayacan, M. (2017), “Intellectual capital and financial performance: a study of the Turkish banking sector”, Borsa Istanbul Review, Vol. 17 No. 3, pp. 190-198.
  53. Pearce, J.A. and Zahra, S.A. (1992), “Board composition from a strategic contingency perspective”, Journal of Management Studies, Vol. 29 No. 4, pp. 411-438.
  54. Pfeffer, J. (1972), “Size and composition of corporate boards of directors”, Administrative Science Quarterly, Vol. 17 No. 2, pp. 218-229.
  55. Pulic, A. (2004), “Intellectual capital: does it create or destroy value? Measuring intangible assets – the state of the art”, Journal of Business Performance, Vol. 8 No. 3, pp. 62-68.
  56. Pulic, A. (2008), The Principles of Intellectual Capital Efficiency – a Brief Description, Croatian Intellectual Capital Center, Zagreb.
  57. Swartz, N.P. and Firer, S. (2005), “Board structure and intellectual capital performance in South Africa”, Meditari Accountancy Research, Vol. 13 No. 2, pp. 145-166.
  58. Valverde, S.C. and Ferna´ndez, F.R. (2017), “The determinants of bank margins in European banking”, Journal of Banking and Finance, Vol. 31 No. 7, pp. 2043-2063.
  59. Wagiciengo, M.M. and Belal, A.R. (2012), “Intellectual capital disclosures by South African companies: a longitudinal investigation”, Advances in Accounting, Incorporating Advances in International Accounting, Vol. 28 No. 1, pp. 111-119.
  60. Weir, C. and Laing, D. (2000), “The performance-governance relationship: the effects of Cadbury compliance on UK quoted companies”, Journal of Management and Governance, Vol. 4, pp. 265-281.
  61. Wernerfelt, B. (1984), “A resource-based view of the firm”, Strategic Management Journal, Vol. 5 No. 2, pp. 171-180.
  62. Williams, S.M. (2000), “Association between gender and colour diversity of board structure on the intellectual capital performance of publicly listed companies from and emerging economy: evidence from South Africa”, Working Paper, University of Calgary, Canada.
  63. Williams, R.J., Fadil, P.A. and Armstrong, R.W. (2005), “Top management team tenure and corporate illegal activity: the moderating influence of board size”, Journal of Managerial Issues, Vol. 17, pp. 479-493.
  64. Wintoki, M.B., Linck, J.S. and Netter, J.M. (2012), “Endogeneity and the dynamics of internal corporate governance”, Journal of Financial Economics, Vol. 105 No. 3, pp. 581-606.
  65. Wooldridge, J.M. (2003), “Cluster-sample methods in applied econometrics”, The American Economic Review, Vol. 93 No. 2, pp. 133-138.
  66. Yaacob, N.M. and Che-Ahmad, A. (2012), “Adoption of FRS 138 and audit delay in Malaysia”, International Journal of Economics and Finance, Vol. 4 No. 1, p. 167.
  67. Yatim, P., Kent, P. and Clarkson, P. (2006), “Governance structures, ethnicity, and audit fees of Malaysian listed firms”, Managerial Auditing Journal, Vol. 21 No. 7, pp. 757-782.
  68. Youndt, M.A., Subramaniam, M. and Snell, S.A. (2004), “Intellectual capital profiles: an examination of investments and returns”, Journal of Management Studies, Vol. 41 No. 2, pp. 335-361.

Further reading

  1. Garcı´a-Meca, E. and Martı´nez, I. (2005), “Assessing the quality of disclosure on intangibles in the Spanish capital market”, Business Review, Vol. 17 No. 4, pp. 305-313.
  2. Joshi, M., Cahill, D. and Sidhu, J. (2013), “Intellectual capital and financial performance: an evaluation of the Australian financial sector”, Journal of Intellectual Capital, Vol. 14 No. 2, pp. 264-285.
  3. Nkundabanyanga, S.K., Ntayi, J.M., Ahiauzu, A. and Sejjaaka, S.K. (2014), “Intellectual capital in Ugandan service firms as mediator of board governance and firm performance”, African Journal of Economic and Management Studies, Vol. 5 No. 3, pp. 300-340.
  4. Waweru, N. (2014), “Determinants of quality corporate governance in Sub-Saharan Africa: evidence from Kenya and South Africa”, Managerial Auditing Journal, Vol. 29 No. 5, pp. 455-485.

Related articles