The board of directors and company performance in emerging markets

Abstract

This study investigates the board directors and their effect on company performance in emerging markets, particularly in the United Arab Emirates (UAE). Our findings robustly confirm that the UAE has adopted a board structure similar to that of Western countries. The results indicate the positive effects of leadership structure, board composition and audit committee independence on company performance. This is the first study to demonstrate that board structure is an important determinant in reducing agency problems and leading to improved company performance in unique ownership structures in emerging markets, such as exist in the UAE. It is also the first study to explore the board structure-firm performance relationship using a system-generalised method of moment’s estimator for the UAE market. The regulatory and policy implications suggested in this research are significant, not only for the UAE but also for application to other emerging markets. In this context, clear insights are provided for policymakers, regulators, managers, investors, and researchers involved in emerging markets.