Link between board structure and national culture: A comparative analysis

Abstract

As a result of the separation of ownership from control and relationship between the owners as principals and managers as agents, the so-called agency problem arises. In order to alleviate the agency problem in transition economies, internal corporate governance mechanisms are applied. Culture is considered as one of the most important factors within an informal institutional framework that is often associated with the effectiveness of corporate governance mechanisms. Starting from the fact that the board is an important internal mechanism, this paper examines the national culture as a determinant of the board structure based on a widely accepted cultural framework developed by Geert Hofstede. The aim of the research is to obtain relevant scientific knowledge on whether the board structure, analyzed through board composition and size, differs in countries that have similar dimensions of national culture. The research is carried out on a sample of 60 companies in Serbia and Montenegro. Relying on the T-test, the research showed that the boards composition in these countries differs, while their average size is the same. This pilot study mitigates the research gap that exists in domestic literature and represents the basis for future research in this area.

Keywords

• corporate governance
• corporate governance mechanisms
• national culture
• board structure