Relationship between intangible assets, called-out directors’ operational dichotomy and corporate financial performance

https://doi.org/10.35912/ijfam.v5i2.1298
Published: Sep 11, 2023

Abstract:

Purpose: This study examines the relationship between intangible assets (INTAN), Executive Directors (EDs), Non-Executive Directors (NEDs) and corporate financial performance.

Research methodology: This study utilizes multivariate regression models to analyze datasets of 670 firm-year observations, from 2012-2020.

Results: Our main OLS and FE multivariate regression results in Model 2 suggest that INTAN, CHAIR, CEOs, CFOs and strong BDIND significantly increase corporate financial performance. In Model 1 of our main tables (Tables 5 and 6), INTAN and CHAIR do not appear to be significant, although their observed signs suggest that they increase corporate financial performance. Except for YEAR, the rest control variables significantly affect corporate financial performance. Taken together, these results provide conclusive evidence that INTAN, CHAIR, CEOs, CFOs and BDIND have positive and significant effects on corporate financial performance. We, therefore, recommend that Nigerian companies should strengthen their corporate governance mechanisms to boost financial performance.

Limitation: The study is limited by incomplete data on all variables, especially relating to running Fixed Effects models, where the data is unbalanced.

Contribution: The study extends the literature on call-out Board members’ operational dichotomy.

Novelty: This is the first from a developing economy to make a testable hypothesis on the relationship between intangible assets and corporate financial performance.

Keywords:
1. Corporate governance
2. intangible assets
3. executive directors
4. non-executive directors
5. financial performance
Authors:
Etumudon Ndidi Asien
Department of Accounting, Faculty of Management Sciences, Federal University Otuoke, P.M.B.126 Yenagoa, Bayelsa State, Nigeria
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Asien, E. N. (2023). Relationship between intangible assets, called-out directors’ operational dichotomy and corporate financial performance. International Journal of Financial, Accounting, and Management, 5(2), 149–164. https://doi.org/10.35912/ijfam.v5i2.1298
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Issue & Section
Vol. 5 No. 2 (2023): September
Articles
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References

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    Asien, E. N. (2019). Effects of operating segments financials on choice of basis of segmentation and number of operating segments: a lagged analysis. EuroMed Journal of Management, 3(1), 25-41.

    Asien, E. N. (2021). Firm-level characteristics as determinants of tax havens and tax haven share: Nigerian evidence. African Journal of Accounting, Economics, Finance and Banking Research, 14(14), 27-50.

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    Cribari-Neto, F. (2004). Asymptotic inference under heteroskedasticity of unknown form. Computational Statistics & Data Analysis, 45(2), 215-233.

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    Li, K., Qiu, B., & Shen, R. (2018). Organization capital and mergers and acquisitions. Journal of financial and quantitative analysis, 53(4), 1871-1909.

    Messabia, N., Fomi, P.-R., & Kooli, C. (2022). Managing restaurants during the COVID-19 crisis: Innovating to survive and prosper. Journal of Innovation & Knowledge, 7(4), 100234.

    Mnzava, B. (2022). Do Foreign Directors affect Corporate Performance? Evidence from Tanzanian listed Firms. African Development Finance Journal, 1(1), 25-46.

    Muniandy, B., & Hillier, J. (2015). Board independence, investment opportunity set and performance of South African firms. Pacific-Basin Finance Journal, 35, 108-124.

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    Olaoye, S. A., Akingbade, A. O., & Okewale, J. A. (2020). Intangible Assets and Financial Performance of Nigeria’s Deposit Money Banks. KIU Journal of Humanities, 5(2), 391-395.

    Peters, R. H., & Taylor, L. A. (2017). Intangible capital and the investment-q relation. Journal of Financial Economics, 123(2), 251-272.

    Tabachnick, B. G., Fidell, L. S., & Ullman, J. B. (2007). Using multivariate statistics (Vol. 5): pearson Boston, MA.

    Theodossiou, I., & White, M. J. (1998). Does tenure affect earnings? Journal of Economic Studies.

    Van Essen, M., van Oosterhout, J. H., & Carney, M. (2012). Corporate boards and the performance of Asian firms: A meta-analysis. Asia Pacific Journal of Management, 29(4), 873-905.

    Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431-460.

    Westphal, J. D., & Milton, L. P. (2000). How experience and network ties affect the influence of demographic minorities on corporate boards. Administrative science quarterly, 45(2), 366-398.

    William H, M., & Michael, J. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics.

    Williams, R. J., Fadil, P. A., & Armstrong, R. W. (2005). Top management team tenure and corporate illegal activity: The moderating influence of board size. Journal of Managerial issues, 479-493.

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    Zalewska, A. (2014). Gentlemen do not talk about money: Remuneration dispersion and firm performance relationship on British boards. Journal of Empirical Finance, 27, 40-57.

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  2. Al-Gamrh, B., Al-Dhamari, R., Jalan, A., & Jahanshahi, A. A. (2020). The impact of board independence and foreign ownership on financial and social performance of firms: evidence from the UAE. Journal of Applied Accounting Research, 21(2), 201-229.
  3. Andren, T. (2005). Econometrics. Thomas Andren Ventus Publishing APS.
  4. Asien, E. N. (2019). Effects of operating segments financials on choice of basis of segmentation and number of operating segments: a lagged analysis. EuroMed Journal of Management, 3(1), 25-41.
  5. Asien, E. N. (2021). Firm-level characteristics as determinants of tax havens and tax haven share: Nigerian evidence. African Journal of Accounting, Economics, Finance and Banking Research, 14(14), 27-50.
  6. ASIEN, E. N. (2022). Effects of Emerging and Extant Corporate Governance Structures on Firms’ Financial Performance. FUOYE JOURNAL OF ACCOUNTING AND MANAGEMENT, 5(1).
  7. Belsley, D. A., Kuh, E., & Welsch, R. E. (1980). Regression diagnostics: Identifying influential data and sources of collinearity. Wiley Series in Probability and Mathematical Statistics.
  8. Boguth, O., Newton, D., & Simutin, M. (2022). The fragility of organization capital. Journal of financial and quantitative analysis, 57(3), 857-887.
  9. Brown, L. D., & Caylor, M. L. (2009). Corporate governance and firm operating performance. Review of quantitative finance and accounting, 32(2), 129-144.
  10. Brown, P., Beekes, W., & Verhoeven, P. (2011). Corporate governance, accounting and finance: A review. Accounting & finance, 51(1), 96-172.
  11. Bushee, B. J. (1998). The influence of institutional investors on myopic R&D investment behavior. Accounting review, 305-333.
  12. Chahine, S., & Tohmé, N. S. (2009). Is CEO duality always negative? An exploration of CEO duality and ownership structure in the Arab IPO context. Corporate Governance: an international review, 17(2), 123-141.
  13. Cohen, J., Cohen, P., West, S., & Aiken, L. (2003). Applied multiple regression/correlation analysis for the behavioral sciences. Lawrence Erlbaum Associates. Mahwah, NJ.
  14. Conyon, M. J., & Peck, S. I. (1998). Board control, remuneration committees, and top management compensation. Academy of Management Journal, 41(2), 146-157.
  15. Cribari-Neto, F. (2004). Asymptotic inference under heteroskedasticity of unknown form. Computational Statistics & Data Analysis, 45(2), 215-233.
  16. Daryanto, A. (2020). Tutorial on heteroskedasticity using heteroskedasticityV3 SPSS macro. The Quantitative Methods for Psychology, 16(5), 8-20.
  17. Drury, C., & El-Shishini, H. (2005). Divisional performance measurement: An examination of the potential explanatory factors: Chartered Institute of Management Accountants.
  18. Eisfeldt, A. L., & Papanikolaou, D. (2013). Organization capital and the cross?section of expected returns. The Journal of Finance, 68(4), 1365-1406.
  19. Fiegener, M., Nielsen, J., & Sisson, J. R. (1996). Tenure characteristics of outside directors and financial performance: Results from the banking industry. American business review, 14(1), 89-96.
  20. Goh, C. F., Rasli, A., & Khan, S.-U.-R. (2014). CEO duality, board independence, corporate governance and firm performance in family firms: Evidence from the manufacturing industry in Malaysia. Asian Business & Management, 13(4), 333-357.
  21. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of management review, 9(2), 193-206.
  22. Haniffa, R., & Hudaib, M. (2006). Corporate governance structure and performance of Malaysian listed companies. Journal of business finance & accounting, 33(7?8), 1034-1062.
  23. Ibrahim, N. A., Howard, D. P., & Angelidis, J. P. (2003). Board members in the service industry: An empirical examination of the relationship between corporate social responsibility orientation and directorial type. Journal of Business Ethics, 47(4), 393-401.
  24. Janský, P., & Palanský, M. (2019). Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment. International Tax and Public Finance, 26(5), 1048-1103.
  25. Joenoes, M. Z., & Rokhim, R. (2019). Does foreign board increase the company’s performance? the evidence from Indonesia. Journal of Economics, Business, and Accountancy Ventura, 22(2), 213-222.
  26. Kanakriyah, R. (2021). The impact of board of directors' characteristics on firm performance: a case study in Jordan. The Journal of Asian Finance, Economics and Business, 8(3), 341-350.
  27. Kooli, C. (2019). Governing and managing higher education institutions: The quality audit contributions. Evaluation and program planning, 77, 101713.
  28. Kundelis, E., & Legenzova, R. (2019). Assessing impact of base erosion and profit shifting on performance of subsidiaries of multinational corporations in Baltic countries. Equilibrium. Quarterly Journal of Economics and Economic Policy, 14(2), 277-293.
  29. Lev, B., Radhakrishnan, S., & Zhang, W. (2009). Organization capital. Abacus, 45(3), 275-298.
  30. Li, K., Qiu, B., & Shen, R. (2018). Organization capital and mergers and acquisitions. Journal of financial and quantitative analysis, 53(4), 1871-1909.
  31. Messabia, N., Fomi, P.-R., & Kooli, C. (2022). Managing restaurants during the COVID-19 crisis: Innovating to survive and prosper. Journal of Innovation & Knowledge, 7(4), 100234.
  32. Mnzava, B. (2022). Do Foreign Directors affect Corporate Performance? Evidence from Tanzanian listed Firms. African Development Finance Journal, 1(1), 25-46.
  33. Muniandy, B., & Hillier, J. (2015). Board independence, investment opportunity set and performance of South African firms. Pacific-Basin Finance Journal, 35, 108-124.
  34. Okoye, P., Offor, N., & Juliana, M. I. (2019). Effect of intangible assets on performance of quoted companies in Nigeria. International Journal of Innovative Finance and Economics Research, 7(3), 58-66.
  35. Olaoye, S. A., Akingbade, A. O., & Okewale, J. A. (2020). Intangible Assets and Financial Performance of Nigeria’s Deposit Money Banks. KIU Journal of Humanities, 5(2), 391-395.
  36. Peters, R. H., & Taylor, L. A. (2017). Intangible capital and the investment-q relation. Journal of Financial Economics, 123(2), 251-272.
  37. Tabachnick, B. G., Fidell, L. S., & Ullman, J. B. (2007). Using multivariate statistics (Vol. 5): pearson Boston, MA.
  38. Theodossiou, I., & White, M. J. (1998). Does tenure affect earnings? Journal of Economic Studies.
  39. Van Essen, M., van Oosterhout, J. H., & Carney, M. (2012). Corporate boards and the performance of Asian firms: A meta-analysis. Asia Pacific Journal of Management, 29(4), 873-905.
  40. Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431-460.
  41. Westphal, J. D., & Milton, L. P. (2000). How experience and network ties affect the influence of demographic minorities on corporate boards. Administrative science quarterly, 45(2), 366-398.
  42. William H, M., & Michael, J. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics.
  43. Williams, R. J., Fadil, P. A., & Armstrong, R. W. (2005). Top management team tenure and corporate illegal activity: The moderating influence of board size. Journal of Managerial issues, 479-493.
  44. Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data, 2nd eds. MA: MIT Press Cambridge.
  45. Zalewska, A. (2014). Gentlemen do not talk about money: Remuneration dispersion and firm performance relationship on British boards. Journal of Empirical Finance, 27, 40-57.