EFFECT OF BOARD SIZE ON THE FINANCIAL PERFORMANCE OF MERGED INSTITUTIONS
DOI:
https://doi.org/10.47672/ajf.99Keywords:
Board size, Financial performance, Merged institutions.Abstract
Purpose: The purpose of this study was establishing the effect of board size on the financial performance of merged institutions.
Methodology: The study adopted a mixed methodology research design. The study population included all the 51 merged financial service institutions in Kenya. Purposive sampling was used. Primary data was obtained from questionnaires and a secondary data collection template was also used. The researcher used quantitative techniques in analyzing the data. Descriptive analysis for the study included the use of means, frequencies and percentages. Inferential statistics such as correlation analysis was also used. Panel data analysis was also applied. Further, a pre and post merger analysis was used.
Results: Board size had a significant relationship with financial performance of merged institution.
Unique contribution to theory, practice and policy: It was recommended that, firms are place a remarkable degree of emphasis on the area of corporate governance and to some extent embark on eliminating CEO duality. The study also recommends a board size (6 and 8) for better financial performance. This will reduce the problem of free rider and enhance effective monitoring and decision making. It will also bring about cohesion among the board members.
Downloads
References
Adams, R. B. &Mehran, H. (2005). Corporate Performance, Board Structure and its Determinants in the Banking Industry. Master's Thesis.
Aggarwal, R. & Kyaw, N. A.(2010). Capital structure, dividend policy, and multinationality: Theory versus empirical evidence.International Review of Financial Analysis,19 (2), 140-150.
Agrawal, A., Jaffe, J..&Mandelker, G.N. (2012). The post-merger performance of acquiring firms: A re-examination of an anomaly. The Journal of Finance, 47(4), 1605-1621.
Berger, A. N. & Bonaccorsi diPatti, E.(2011). Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance,30 (4), 1065-1102.
Berger, A. N. & Humphrey, D.B. (2012). Megamergers in banking and the use of cost efficiency as an antitrust defense. Antitrust Bulletin 37: 541-600.
Berger, A. N. &DeYoung,R.(2011). The effects of geographic expansion on bank efficiency.J Finance Serv Res,19:163-184.
Berger, A. N. (2013). The efficiency effects of bank mergers and acquisition: A preliminary look at the 1990s data. In Amihud, Y. and Miller, G. (eds). Bank Mergers and Acquisitions. Boston: Kluwer Academic Publishers
Berger, A. N., Demsetz, R. S.& Strahan, P. E. (1999). The consolidation of the financial services industry: Causes, consequences, and implications for the future. Journal of Banking and Finance, 23 (2-4), 135-194.
Berger, A.N.& Humphrey,D.B. (2012). Bank Scale Economies, Mergers, Concentration, and Efficiency: The U.S. Experience, Research paper 94-25, Financial Institutions Center, Wharton School, University of Pennsylvania
Berger, A.N.&Humphrey, D.B. (2012). Efficiency of financial institutions: International survey and directions for future research. Board of Governors of the Federal Reserve System, Finance and Economics Discussion Paper Series, No. 11.
Carpenter, M. A., Davison, R. B., Devers, C. E., Haleblian, J. & McNamara, G. (2009). Takingstock of what we know about mergers and acquisitions: Areview and research agenda.Journal of Management, 35 (3), 469-502.
Cartwright, S., & Cooper, C. L. (2013). The role of culture compatibility in successful organizational marriage. The Academy of Management Executive, 7(2), 57-70.
Collins, M., Hagendorff, J. & Keasey, K. (2007). Bankgovernance and acquisition performance, Corporate Governance. An International Review,15 (5), 957-968.
Fluck, Z. &Lynch, A.W. (2011). Why Do Firms Merge and then Divest? A Theory of Financial Synergy.Journal of Business, 72 (3):319-46.
Ghosh A. (2011). Does operating performance really improve following corporate acquisitions? Journal of Corporate Finance, 7(2), 151-178
Grinblatt, Mark & Titman, Sheridan (2012). McGraw-Hill. Financial Markets and Corporate Strategy.
Healy, P.M., Palepu, K.G. & Ruback, R.S. (2012). Does corporate performance improve after mergers? Journalof Financial Economics, 31(1992), 135-175.
Heracleous, L. &Lan, L. L., (2010) Rethinking agency theory: The view from law.Academy of Management Review, 35 (2), 294-314.
Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. (2009). Strategic Management: Competitiveness and Globalisation Concepts. South-Western, London
Jensen M.C.&Ruback R.S. (2003). The Market of Corporate Control The Scientific Evidence. Journal of Financial Economics,11: 5-50.
Jensen, M C (2013). The Modern Industrial Revolution, Exit, and the Failure of Internal Control System. Journal of Finance, 48: 831-880;
Jensen, M. C. & Meckling W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Financial Economics, 3(4),305- 360. Journal of Financial Economics 31, 135-176.
Jensen, M. C.(1986). Agency costs of free cash flow, corporate finance, and takeovers,The American Economic Review, 76 (2): 323-329.
Lubatkin, M. (2007). Merger Strategies and Stockholder Value. Strategic Management Journal, 8 (1):39-53.
Marangu, K. (2007). Effects of mergers on financial performance of non listed banks in Kenya (Doctoral dissertation, University of Nairobi.).
Moeller S.B., Schlingemann F.P.& Stulz R.M. (2014). Firm size and the gains from acquisitions.Journal of Financial Economics,73: 201-22
Moeller, S. B., Schlingemann, F. P., & Stulz, R. M. (2005). Wealth destruction on a massive scale? A study of acquiring"firm returns inthe recent merger wave. The Journal of Finance, 60(2), 757-782.
Mohamed, B. (2009). Board of directors' size and performance in the banking industry, International Journal of Managerial Finance, 5(2), 201 - 221.
Ochieng, A. (2013). Bank consolidations and competition the issue of Kenya's many small banks, Marketing Intelligence Banking Industry Survey, 18-24.
Ross, S. A., Westerfield, R.W. and Jordan, B.D., 2001, Essentials of Corporate Finance, McGraw-Hill Inc.
Shapiro, S. P.(2005). Agencytheory.Annual Review of Sociology, 31 (1), 263-284.
Vaara, E. (2012). On the Discursive Construction of Success/Failure in Narratives of Post-Merger Integration. Organizational Studies, 23 (2):211-48.
Vermeulen, F. & Bakerma, H. (2011). Learning though Acquisitions Academy of Management Journal, 44 (3):457-76.
Wang, C., & Xie, F. (2009). Corporate governance transfer and synergistic gains from mergers and acquisitions. Review of Financial Studies, 22(2), 829-858.
Young, S.D., & O'Byrne, S.F. (2001). EVA and value-based management: Apractical guide to implementation. New York: McGraw Hill.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2016 Agnes Ogada, George Achoki, Amos Njuguna
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
