Board Composition and Regulatory Change: Evidence from the Enactment of New Companies Legislation in New Zealand

As published in Financial Management, Vol. 28, No. 1, Spring 1999

Posted: 28 Oct 2000

See all articles by Steven F. Cahan

Steven F. Cahan

University of Auckland Business School

Brett R. Wilkinson

Baylor University - Department of Accounting & Business Law

Abstract

We examine whether New Zealand firms changed the composition of their boards of directors due to the 1994 enactment of the new Companies Act. We explore two possible effects. First, outside directors may have been more attractive, and firms may have used more outside directors after the new Companies Act. Alternatively, the new duties and associated penalties could have made outside directorships less attractive and harder to fill, and firms may have used less outside directors. Our results show that the proportion of outside directors increased by about 5% after the new Companies Act. This supports the view that the value of outside directors increased after the Act and suggests that the political process can change corporate governance mechanisms.

JEL Classification: G30, K22, M41

Suggested Citation

Cahan, Steven F. and Wilkinson, Brett R., Board Composition and Regulatory Change: Evidence from the Enactment of New Companies Legislation in New Zealand. As published in Financial Management, Vol. 28, No. 1, Spring 1999, Available at SSRN: https://ssrn.com/abstract=242784

Steven F. Cahan (Contact Author)

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Brett R. Wilkinson

Baylor University - Department of Accounting & Business Law ( email )

Waco, TX 76798
United States

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