The Impact of Board Members’ Intellectual Capital on The Performance of Their Roles in State-Owned Enterprises: The Moderating Role of the Board’s Incentives

Abstract

One of the most challenging issues in corporate governance is the reduction of managers’ agency costs in state-owned companies. The purpose of this study is to find out if the three board’s incentives (financial services compensation, the board’s dependency on the CEO and the board’s dependency on the government) play a moderating role in the relation between the board's intellectual capital and performance of the board’s roles (strategic, control, providing resources and services) in state-owned enterprises. To collect data, 127 state-owned companies were selected and questionnaires, together with structural equation modeling (SEM), were applied. Findings show that the board's intellectual capital has a significant and positive impact on the performance of the board’s roles. Furthermore, financial service compensation has not moderated the impact of the board members’ intellectual capital on performance of their roles. On the other hand, the findings of this study show that the level of the board’s dependency on the CEO has moderated the impact of the board's intellectual capital on strategic role performance in a positive and significant way. Also, results confirm that the level of the board’s dependency on government has negatively moderated the impact of their intellectual capital on the control role performance.

Keywords

• intellectual capital
• board incentives
• corporate governance
• board performance appraisal
• state-owned enterprises.