Board characteristics and firm performances in emerging economies. Lessons from Romania

This study investigates correlations between board characteristics and firm performances. For this purpose, six board characteristics were chosen: (1) equilibrium between non-executive and executive members of the board of directors; (2) independence of board members; (3) selection of board members by the assistant role of the Nomination Committee; (4) training the members’ competences; (5) remuneration policy of board members by the assistant role of the Remuneration Committee; (6) improuving the accountability and transparency of financial information by the assistant role of the Audit Committee. The financial performances are represented by Return on assets (ROA) and Tobin’s Q. The present study sample consists of 55 Romanian non-financial companies which are listed on the Bucharest Stock Exchange (BSE) in 2012. We found the following characteristics in the majority of boards of directors: equilibrium between non-executive and executive members, independence of the members and concerns on training competences. On the other hand, the majority of companies do not have, within their governance system, advisory committees (such as Nomination, Remuneration or Audit Committees), which are meant to help the board in its decision-making. No statistically significant association was found between any of the board characteristics and performances represented either by Tobin’s Q or ROA, but the findings are in line with numerous studies conducted in developing countries and may be explained by various shortcomings which characterise the lagging of transition economies.