Determinants of the quality of external board evaluation in the UK
ISSN: 1472-0701
Article publication date: 13 July 2021
Issue publication date: 8 October 2021
Abstract
Purpose
This study aims to examine the influence of the following on the quality of externally facilitated board evaluation, namely, the timing of adoption of external board evaluation, type of evaluators and the independence of external facilitators.
Design/methodology/approach
The statements on board evaluation in annual reports of a sample of FTSE 350 companies were content analysed to measure the quality of externally facilitated board evaluation. This paper then used descriptive analysis and inferential statistics to demonstrate the possible association between the timing of adoption, as well as the type and independence of external facilitators and the quality of externally facilitated board evaluation.
Findings
Results reveal some effects of the timing of adoption, as well as the type and independence of external facilitators on the quality of externally facilitated board evaluation.
Practical implications
Shareholders should be aware of the timing of adoption, as well as consider the types and independence of external facilitators, given their influence on the quality of externally facilitated board evaluation. Regulatory authorities should provide more specific guidance on what types of professional organisations can be engaged as external facilitators and on the implementation of externally facilitated board evaluation, to promote its quality.
Originality/value
Several studies have provided theoretical accounts on how board evaluation should be conducted to ensure its effectiveness. However, there is a dearth of empirical literature, which examines the quality of externally facilitated board evaluation. This study develops a quality measure for externally facilitated board evaluation and shows the effect of the timing of adoption, types and independence of external facilitators on its quality. The study forges ahead institutional theorising of external board evaluation.
Keywords
Acknowledgements
This paper is developed from a research project funded by the UK Committee of Department of Accounting and Finance (CDAF) early-career research bursary. We, therefore, highly appreciate the financial assistance of the CDAF. An earlier version of this manuscript was presented at the British Accounting and Finance Association Conference in London, UK in 2018 and the Financial Reporting and Business Communication Conference in Bristol, the UK in 2016. We also greatly appreciate the helpful comments of Professor Niamh Brennan, Professor Christopher Napier, Professor Emeritus Pauline Weetman and Professor Philip J. Shrives and other participants in the above-mentioned two academic conferences on different versions of this paper. Particular thanks go to Mr Jamie Hurst, who assisted the authors with the coding of the data for this article.
Funding information: The UK CDAF early-career research bursary. This bursary has no grant number.
Citation
Sobhan, A. and Adegbite, E. (2021), "Determinants of the quality of external board evaluation in the UK", Corporate Governance, Vol. 21 No. 7, pp. 1362-1392. https://doi.org/10.1108/CG-06-2020-0256
Publisher
:Emerald Publishing Limited
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