Board Restructuring in Government-Linked Companies: Control Driven or Performance Driven?

We study the effect of government transition on firm performance and the board composition of government-linked companies (GLCs) and explore the motivation for board restructuring of GLCs. Specifically, we examine two questions: (1) what the motivation is for board restructuring, and (2) whether the change in board composition affects subsequent firm performance. The empirical results indicate that the policy factor is the key determinant in board re-election of GLCs. The motivation of board restructuring after a powershift is mainly for control purposes rather than performance enhancement, which may explain why the market reacts negatively in the beginning to board restructuring announcements in GLCs. Furthermore, board restructuring after a powershift does not enhance subsequent firm performance.