Board composition in the affiliates of family business groups in Turkey: a longitudinal analysis

Abstract

Recently, both supranational and national institutions have been advocating an increase in outsider representation on boards of directors. However, studies conducted so far reveal that the board composition prevailing in many emerging economies contradicts with the demands of these institutions. Thus, Turkey, as an emerging economy, is a suitable context to investigate if the recent pressures have been able to create a change in insider dominated boards of emerging economy firms. Therefore, the main objective of this study is to investigate if the board compositions of business group affiliates in Turkey have changed over time. A second objective is to find out if there is any association between board composition and export performance in the context of business group affiliates. For this aim, boards of six family-owned business group affiliates have been analyzed as of 2003, 2005, and 2007. The data were collected mainly from archival sources such as annual reports and corporate governance compliance reports of the focal company and the business group that it is affiliated with. Frequency analyses, t-tests, one-way ANOVA test, and correlation analyses were used for the statistical analysis of the data. Findings reveal that board composition of the affiliated companies has not gone through a major change between the years of the analysis. Boards are mostly composed of insider directors who are dependent on the owner-family. Moreover, this study also displays to some extent that there is a positive correlation between total insider representation and export performance of the companies. Overall, it seems that increasing outsider representation on boards is not likely to be actualized as a consequence of the current pressures in a short period of time. Stronger pressures over a longer period of time may help the diffusion of outsider representation on boards. Besides, directors who are appointed on the basis of their experience, expertise, knowledge may have a positive impact on export performances of the companies.