Board Structure and Firm Performance: Evidence from Colombia

This paper studies the board structure and firm performance across 77 equity issuer corporations in Colombia for the 1998-2004 period. The sample is formed by 47 holding firms belonging to the top- two largest local conglomerates in the country, and 30 independent firms that were included as a control group. The paper presents for first time measures of board governance proxies such as independence, rotation, and members interlocking for this emerging market. Measurement results show that board independence is lower that international standards. Nonetheless, for the control group the mean is similar to levels reported for the US and India cases. Regarding interlocks of members, the study finds that on average in 1/4 of the sample, boards have at least one member that is a CEO of another firm, and more important is the fact that 1/5 of the firms there were reciprocal CEO's interlocking. Econometric results show that board independence has a positive effect on firms' valuation meanwhile higher board turnover rates have a negative effect on a firm's performance.

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