Determinants of board structure: Evidence from Australia

Abstract

Linck, Netter and Yang (2008) investigate the determinants of board structure in the high litigation-risk and low ownership-concentration environment of the U.S. In contrast, using a hand-collected data set of over 1,000 firms, this paper investigates the determinants of board structure in the low litigation-risk and high ownership-concentration environment of Australia. Multivariate analyses suggest that while board size and board independence are increasing in firm size, CEO duality is decreasing in firm size. Additional tests suggest that high ownership concentration increases board size, decreases board independence and increases CEO duality. These results imply that if high litigation-risk against directors (as in the U.S.) has a monitoring role in corporate governance, ownership concentration appears to offer an alternative governance mechanism in low-litigation-risk countries such as Australia.