Is Financial Performance of Airline Companies Conditional to the Financial Education and Relevant Experience of Board of Directors?

Abstract

Numerous variables, particularly the members of the board of directors (BOD), affect the financial results of airline corporations. This study looks how the financial education and relevant work experience of board members, if any, affect the operating results of airline corporations in terms of accounting and stock market performance. The study based on quantitative information from 20 international airlines for seven years. The study utilized multivariate OLS regression approach for analyzing the impact of board attributes on the corporation's key financial performance indicators: Return on Capital Employed (ROCE), Return on Assets (ROA), Earnings Per Share (EPS), stock price appreciation, total risk, and systematic risk. The results indicate positive impact of financial education on ROCE, however, the impacts on other performance measures such as ROA, and EPS were minimal. It was also found that board size and board experience negatively impacted financial performance because bigger and more experienced boards may restrict flexibility and decisiveness in a dynamic setting, such as aviation. The analysis indicates that although financial training helps in capital resource distribution and utilization, there are diminishing returns due to superfluous experience, or size of the board, which may harm firm outcomes. These pieces of advice are useful for crafting policies around board construction in the airline sector, proving that financial knowledge is just as important as industry knowledge.