Adoption Of Corporate Governance Mechanisms Research Articles

INCOME SMOOTHING AND CORPORATE GOVERNANCE

Income smoothing is a strategy aimed at altering accounting results in order to reduce fluctuations. In the other hand, by adopting corporate governance mechanisms it may be possible to reduce information asymmetry and, consequently, reduce the possibility of smoothing results. The general objective of the present study was to investigate the relationship between the adoption of corporate governance mechanisms and income smoothing. Financial data were selected from 211 Brazilian public companies between 2000 and 2015. The firms were separated according to whether or not they adhered to B3’s differentiated corporate governance segments. Income smoothing was measured using both the model by Eckel (1981) and a version of the model proposed by Leuz et al., (2003). The analysis was performed using non-parametric Wilcoxon rank sum tests and descriptive analyses. Based on the descriptive analysis, it was not possible to state that the group of firms adhering to the corporate governance levels had a smaller proportion of companies that smooth results; and the hypothesis that the degree of income smoothing is lower for such companies was not confirmed. The assumption that levels of corporate governance reduce the possibility of income smoothing was not validated based on non-parametric tests. Based on the descriptive analysis, it was concluded that both the proportion of companies that smooth results, and the degree of smoothing by organizations following the B3’s corporate governance levels are not lower than the ones shown by companies that do not follow the levels.

Mecanismos de governança em universidades sem fins lucrativos: um ensaio teórico

Este ensaio teórico teve como objetivo compreender a dinâmica dos mecanismos de governança corporativa para as universidades sem fins lucrativos. O estudo foi realizado por meio de um ensaio teórico, de natureza reflexiva e interpretativa, buscando aprofundar a temática com base em articulações teóricas. Foi possível verificar a existência de conflitos de agencia, contudo o tema governança corporativa para universidades sem fins lucrativos é incipiente e faltam estudos que desenvolvam a temática no segmento do ensino superior, em especial para universidades sem fins lucrativos, que têm vivenciado significativas transformações no seu modelo de gestão em face da crescente competitividade no setor, do intenso processo de regulação pelas políticas educacionais e das mudanças na relação com o conhecimento. Os resultados demonstram que a adoção de mecanismos de governança corporativa pelas universidades sem fins lucrativos pode contribuir para atenuar conflitos de agencia, embora a teoria da agência desenvolva a relação (conflitos) em organizações de capital aberto com finalidade de lucro, no contexto das universidades sem fins lucrativos contata-se, além do conflito entre principal e agente, o conflito de agência entre gestores e stakeholders.

Probability of financial distress and proposed adoption of corporate governance structures: Evidence from Pakistan

This study examines the role of voluntary adoption of corporate governance mechanisms in mitigating the financial distress status of firms. Using the sample of 52 firms from non-financial sector li...

Voluntary corporate governance structure and financial distress: Evidence from Australia

We examine the role of voluntary adoption of corporate governance mechanisms in mitigating the financial distress status of firms. Using a sample of 171 financially distressed and 106 healthy listed Australian firms over the 5-year period prior to the introduction of the ASX Corporate Governance Council Code in 2003, we find support for the argument that the adoption of certain corporate governance mechanisms is beneficial for firms, as reflected in a reduced likelihood of financial distress. In particular, greater levels of blockholder and director ownership and the existence of a separate audit committee are associated with lower financial distress likelihood. We also find causal evidence that the voluntary adoption of particular corporate governance structures leads to lower levels of financial distress, rather than financial distress recognition leading to corporate governance structural reform.

Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting

Prior research suggests that voluntary environmental governance mechanisms operate to enhance a firm’s environmental legitimacy as opposed to being a driver of proactive environmental performance activities. To understand how these mechanisms contribute to the firm’s environmental legitimacy, we investigate whether environmental corporate governance characteristics are associated with voluntary environmental disclosure. We examine an increasingly important attribute of a firm’s disclosure setting, namely the disclosure of greenhouse gas (GHG) information. GHG information represents proprietary non-financial information about the firm’s exposure to environmental concerns and is related to the firm’s operations and future profitability. Thus, we expect governance participants would view such information as a potentially important strategic device for managing stakeholders’ demands for information concerning environmental risks. We find that the presence of an environmental committee and a Chief Sustainability Officer (CSO) is positively associated with the likelihood of GHG disclosure and that CSOs are associated with disclosure transparency. Further analysis reveals that the likelihood of disclosure is associated with committee size, number of committee meetings, expertise of committee members and CSO, and overlap between the environmental committee and audit committee. Only expertise of the environmental committee members and the CSO are associated with GHG disclosure transparency, while larger committees tend to be associated with lower transparency. Our results are particularly important to those with interests in evaluating the potential role that corporate governance mechanisms play in responding to stakeholder concerns about environmental risks. Directors and officers who are considering appointment to similar governance positions, may wish to consider what attributes would make such governance positions more influential.

Determinantes do nível de governança corporativa das empresas brasileiras de capital aberto do setor de consumo cíclico da BM&FBOVESPA

The study propose to investigate, from a ranking of corporate governance, which characteristics determine the adoption of corporate governance mechanisms by publicly traded companies listed on the BM&FBovespa that make up the cyclical consumption industry. The research is characterized as descriptive and quantitative approach. The sample consists of 62 companies that make up the cyclical consumption industry of BM&FBovespa. The analysis included the year 2011. We calculated four indexes of corporate governance: the board of directors, investor relations, audit, and a general index, obtained by averaging the first three indexes. The evidences indicate that the presence of institutional investors negatively influence the adoption of governance mechanisms linked to the board. Indicate that the investment opportunity positively influences the adoption of attributes investor relations and growth opportunity, audit attributes. The size and degree of intangibility positively influence the corporate governance index. We conclude that different characteristics of different forms influence the corporate governance of firms and the intangibility degree is the most significant variable in determining the levels of Corporate Governance.

Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting

Prior research suggests that voluntary environmental governance mechanisms operate to manage a firm’s reputation as opposed to being a driver of proactive environmental performance activities. In understanding how such corporate governance mechanisms can operate as a symbolic practice, we investigate whether environmental corporate governance characteristics are associated with voluntary environmental disclosure. We examine an increasingly important attribute of a firm’s disclosure setting, namely the disclosure of greenhouse gas (GHG) accounting information. GHG information represents proprietary non-financial information about the firm’s exposure to environmental concerns and is related to the firm’s operations and future profitability. Thus, we expect governance participants would view such information as a potentially important strategic device for managing stakeholder impressions regarding environmental risks. We find that the presence of an environmental committee and a chief sustainability officer (CSO) is positively associated with the likelihood of GHG disclosure and that CSO’s are associated with increased disclosure transparency. Further analysis reveals that the likelihood of disclosure is associated with committee size, number of committee meetings, expertise of committee members and CSO, and overlap between the environmental committee and audit committee. Only expertise of the environmental committee members and the CSO are associated with GHG disclosure transparency, while larger committees tend to be associated with lower transparency. Our results are particularly important to those with interests in evaluating the potential role that corporate governance mechanisms play in responding to stakeholder concerns about environmental risks. Directors and officers who are considering appointment to similar governance positions, may wish to consider what attributes would make such governance positions more influential.

The Effect of the Mandatory Adoption of Corporate Governance Mechanisms on Executive Compensation

This study investigates empirically the effect of corporate governance principles on executive compensation and firm performance prior to and after the adoption of the first Greek Law on corporate governance. Prior to the adoption of the law, managers were not compensated in line with their performance. Since its introduction, a significant link has been observed between executive compensation and company performance as measured by accounting measures of performance. Following the adoption of corporate governance principles by law, the main mechanism that controls executive compensation is the election of independent non-executive board members. The results are robust to alternative accounting measures of performance.

The effect of the mandatory adoption of corporate governance mechanisms on earnings manipulation, management effectiveness and firm financing

PurposeThe purpose of this paper is to examine the effect of the mandatory adoption of corporate governance mechanisms on serious firm issues (earnings manipulation, management effectiveness and firm's financing).Design/methodology/approachCross‐sectional analysis is employed to investigate the association between the corporate governance mechanisms that have been introduced by the L.3016/2002 and earnings manipulation, management effectiveness and firm's financing.FindingsThis study finds that the mandatory corporate governance mechanisms decrease firms' weighted average cost of capital, increase firm's financing and have no impact on firms' effectiveness and earnings manipulation.Practical implicationsThis study provides insights regarding the extent to which the mechanisms of corporate governance provided by the L.3016/2002, improve the quality of financial statements prepared by Greek companies. The conclusions of the study are useful for the providers of equity and debt capital, the legislators and the shareholders.Originality/valueThe paper tests, empirically, the effect of the mandatory corporate governance mechanisms on earnings manipulation, management effectiveness and firm's financing.

Voluntary Adoption of Corporate Governance Mechanisms

This paper empirically examines the extent to which firms adopt recommended but not required corporate governance guidelines. We examine the governance practices of approximately 200 Canadian firms on the TSX/S&P Index in each of five years. With this novel hand-collected data set, we establish that firms voluntarily implement suggested domestic best practices as well as the U.S. mandatory governance practices. In addition, we demonstrate that this voluntary behaviour has been increasing over time. We find that the presence of a majority shareholder or executive block holder is negatively associated with voluntary adoption. By contrast, the presence of either significant investment opportunities or a high level of research and development expenditures encourages the firm to improve the value of the index reflecting board quality. Our intuition is that these factors are indicative of a firm's need or desire to access capital markets in the future. As a result, we reason that firms implement governance mechanisms primarily to appeal to prospective investors.

Voluntary Adoption of Corporate Governance Mechanisms

We model firms’ incentives to voluntarily adopt corporate governance mechanisms and hypothesize that management’s ability to extract private benefits, the need for external funds, and the ease with which a firm’s assets may be monitored are important determinants of the level of governance. Using hand-collected data, we test these hypotheses and examine firms’ propensity to adopt recommended but not required governance standards from their home and neighboring country’s jurisdictions. We document that a significant level of voluntary adoption occurs and that this level has been both increasing over time and declining in variability across firms. Governance mechanisms are least likely to be voluntarily implemented when management controls a significant portion of common stock votes or a majority owner exists. In contrast, voluntary adoption increases when the firm faces significant investment opportunities and employs large levels of expenditures which are difficult to monitor such as research and development expenses.

The Adoption of Corporate Governance Mechanisms: A Test of Competing Diffusion Models

We develop alternative diffusion models of two corporate governance mechanisms—joint venture and M-form organizational structure—using relevant concepts from the resource-based theory. Using data on joint venture adoption from one homogeneous industry (information technology) sector and employing both linear and nonlinear estimations, we test the explanatory power of the internal-influence model in comparison with a competing model of external-influence. Our empirical results support the internal-influence model in this sector with additional evidence for generalizability provided through a multisector sample of joint venture formation. In contrast, empirical results on the diffusion of M-form structure are more consistent with the external-influence model.