An Empirical Study on Multiple Corporate Directorships in New Zealand: A New Interpretation of Selected Governance Theories
This thesis contributes to the literature on Multiple Directorships (MDS) by providing new evidence that prestigious MDS are value enhancing relative to non-prestigious MDS for New Zealand listed companies. The recent debate surrounding the reasons for including multiple (busy) directors on the board as well as the diverse conclusions of prior studies on MDS draw attention to the fact that theoretically-informed possibilities of MDS are yet to be explored, especially in a setting where the higher incidence of MDS has been driven by a unique institutional environment. New Zealand is one example of such a setting. To explore one aspect of these issues, this research first asks whether there are firm ‘performance’ differences between prestigious MDS and non-prestigious MDS. The results of initial tests show that prestigious MDS have a positive influence on performance outcomes for their organizations, while there is a negative or no significant relationship between non-prestigious MDS and firm performance. These results also suggest a one-way causal effect of prestigious MDS on firm performance. Having determined the better value of prestigious MDS, the subsequent and primary question of this thesis is to explore ‘why’ differences may exist between the two categories of MDS. Three corporate governance theories, namely, Resource Dependence, Agency and Managerial Hegemony are employed to differentiate, and thus to help explain, the sources of prestigious MDS success. The results of the second set of tests reveal that the differences between prestigious and non-prestigious MDS can primarily be explained by firms’ needs for easier acquisition of critical resources, which are often associated with the level of agency conflicts and the presence of powerful CEOs. Empirical evidence then suggests that prestigious MDS potentially create value for New Zealand companies in terms of facilitating access to critical resources and minimizing agency conflicts as well as CEO influence on board oversight. The findings have potential policy implications, especially in an export-oriented economy with geographic isolation and small scale of population, such as New Zealand. Regulators, for instance, the Financial Markets Authority and Institute of Directors should be mindful of the need to retain expert (prestigious) directors and cautiously evaluate before initiating any new regulation regarding MDS.