Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities

Elmagrhi, M.H., Ntim, C.G., Malagila, J., Fosu, S., and Tunyi, A.A. (2018). ‘Trustee Diversity, Governance Mechanisms, Capital Structure and Performance in Top UK Charities’, Corporate Governance, Forthcoming

36 Pages Posted: 6 Jan 2018

See all articles by Mohamed Elmagrhi

Mohamed Elmagrhi

University of Huddersfield, Huddersfield Business School, Queensgate, Huddersfield, HD1 3DH; Swansea University, School of Management; University of Huddersfield - Business School

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

John Kalimilo Malagila

University of Essex; Southampton Business School

Samuel Fosu

University of Birmingham - Birmingham Business School; De Montfort University

Abongeh A. Tunyi

The University of Sheffield

Date Written: January 4, 2018

Abstract

Purpose: We investigate the association among trustee board diversity (TBD), corporate governance (CG), capital structure (CS) and financial performance (FP) using a sample of UK charities. Specifically, we investigate the effect of TBD on CS, and ascertain whether CG quality moderates the TBD-CS nexus. Additionally, we examine the impact of CS on FP, and ascertain whether the CS-FP nexus is also moderated by TBD and CG quality.

Design/methodology/approach: We employ 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, we 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. We find similar, but relatively weak results for the presence of Black, Asian and Minority Ethnic trustees. Second, we 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, we find that CS structure has a positive effect on FP, but this is moderated by TBD and CG quality. Our evidence is robust to different econometric models that adjust for alternative measures and endogeneities. We interpret our findings within the explanations of a theoretical perspective that captures insights from different CG and CS theories.

Originality/value: Existing studies on TBD, CG, CS and FP in charities are rare. Our study distinctively attempts to address this empirical lacuna within the extant literature by providing four new insights with specific focus on UK charities. First, we provide new evidence on the relationship between TBD and CS. Second, we offer new evidence on the moderating effect of CG on the TBD-CS nexus. Third, we provide new evidence on the effect of CS on FP. Finally, we offer new evidence on the moderating effect of TBD and CG on the CS-FP nexus.

Keywords: Trustee Board Diversity, Women And Ethnic Minority Trustees, Governance Mechanisms, Capital Structure And Performance, Charities, UK

JEL Classification: G3, G34

Suggested Citation

Elmagrhi, Mohamed and Elmagrhi, Mohamed and Ntim, Collins G. and Malagila, John and Fosu, Samuel and Fosu, Samuel and Tunyi, Abongeh A., Trustee Board Diversity, Governance Mechanisms, Capital Structure and Performance in UK Charities (January 4, 2018). Elmagrhi, M.H., Ntim, C.G., Malagila, J., Fosu, S., and Tunyi, A.A. (2018). ‘Trustee Diversity, Governance Mechanisms, Capital Structure and Performance in Top UK Charities’, Corporate Governance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3096604

Mohamed Elmagrhi

University of Huddersfield, Huddersfield Business School, Queensgate, Huddersfield, HD1 3DH ( email )

HD1 3DH
United Kingdom
07455392947 (Phone)

Swansea University, School of Management ( email )

Bay Campus
Skewen
Swansea, SA1 8EN
United Kingdom
07455392947 (Phone)

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

Collins G. Ntim (Contact Author)

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

John Malagila

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Southampton Business School ( email )

Faculty of Business, Law and Art
University of Southampton
Southampton, SO17 1BJ
United Kingdom
+442380595318 (Phone)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/jm1u10.page

Samuel Fosu

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

De Montfort University ( email )

Leicester, LE1 9BH
United Kingdom

Abongeh A. Tunyi

The University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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