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Trustee board diversity, governance mechanisms, capital structure and performance in UK charities

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posted on 2023-06-10, 03:30 authored by Mohamed H Elmagrhi, Collins G Ntim, John Malagila, Samuel FosuSamuel Fosu, Abongeh A Tunyi
Purpose This paper aims to investigate the association among trustee board diversity (TBD), corporate governance (CG), capital structure (CS) and financial performance (FP) by using a sample of UK charities. Specifically, the authors investigate the effect of TBD on CS and ascertain whether CG quality moderates the TBD–CS nexus. Additionally, the authors examine the impact of CS on FP and ascertain whether the CS–FP nexus is moderated by TBD and CG quality. Design/methodology/approach The authors use a number of multivariate regression techniques, including ordinary least squares, fixed-effects, lagged-effects and two-stage least squares, to rigorously analyse the data and test the hypotheses. Findings First, the authors find that trustee board gender diversity has a negative effect on CS, but this relationship holds only up to the point of having three women trustees. The authors find similar, but relatively weak, results for the presence of black, Asian and minority ethnic (BAME) trustees. Second, the authors find that the TBD–CS nexus depends on the quality of CG, with the relationship being stronger in charities with higher frequency of meetings, independent CG committee and larger trustee and audit firm size. Third, the authors find that CS structure has a positive effect on FP, but this is moderated by TBD and CG quality. The evidence is robust to different econometric models that adjust for alternative measures and endogeneities. The authors interpret the findings within explanations of a theoretical perspective that captures insights from different CG and CS theories. Originality/value Existing studies that explore TBD, CG, CS and FP in charities are rare. This study distinctively attempts to address this empirical lacuna within the extant literature by providing four new insights with specific focus on UK charities. First, the authors provide new evidence on the relationship between TBD and CS. Second, the authors offer new evidence on the moderating effect of CG on the TBD-CS nexus. Third, the authors provide new evidence on the effect of CS on FP. Finally, the authors offer new evidence on the moderating effect of TBD and CG on the CS–FP nexus.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Corporate Governance (Bingley)

ISSN

1472-0701

Publisher

Emerald

Issue

3

Volume

18

Page range

478-508

Department affiliated with

  • Accounting and Finance Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2022-05-11

First Open Access (FOA) Date

2022-05-11

First Compliant Deposit (FCD) Date

2022-05-11

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