The Impact of Board Composition on Accounting Profitability of the Firm

Abstract

The issue about corporate governance became more prominent in recent years as a result of corporate scandals and misconduct of executives. Firms, board members, and executives have been subject to criminal and civil actions over hidden debt, inflated earnings, insider trading, tax evasion, misuse of funds, and breaches of fiduciary duties. Firms such as Enron, WorldCom, and Tyco became well-known because of huge failures in governance. In addition to the scandals, nowadays, we can see that the financial crises have brought attention for today’s debate of corporate governance issue as well. Board is the major component of corporate governance like chief executive officer (CEO), shareholders, stakeholders or community in general. This board is authorized to decide on the operations, management, and strategy of the company on behalf of the shareholders. Since the board members suppose to represent their interests.

DOI: 10.5901/jesr.2014.v4n5p37