Benefits Of Corporate Governance Research Articles

Research on the Measures and Cost Benefits of Corporate Governance

Corporate governance is an important mechanism for protecting and promoting the interests of shareholders and promoting the healthy development of the companies. Corporate governance is a framework and principle of the internal organization management that aims to balance power among different stakeholders and to safeguard stakeholders' interests. Enterprises at different levels need effective corporate governance to maintain the positive development of the enterprise. Therefore, this paper analyzes corporate governance in firms through qualitative and theoretical analyses with the aim of exploring the measures that generate corporate governance, the costs, and benefits of these measures, and to make recommendations to improve corporate governance. Enterprises need to establish independent director accountability mechanisms to strengthen the regulatory awareness of the enterprise in the face of the problems of corporate governance. Meanwhile, it needs to establish incentive mechanism to encourage, optimize the equity structure and sound managerial market to help enterprises improve the management mechanism.

Impact of corporate governance and CEO remuneration on bank capitalization strategies and payout decision in income shocks period.

The purpose of this research is to explore corporate governance and CEO remuneration with banks capitalization strategies and payout policy within the Pakistani banking context. Data were obtained from the financial statements of scheduled banks listed on the Pakistan stock exchange from 2005 to 2020. The findings of the research study revealed that corporate governance mechanisms that promote the bank's shareholders' interests are linked to low capitalization strategies. The size of the board of directors has a significant impact on the capitalization of banks. Banks' capitalization techniques are also adversely correlated with effective board size. The shareholder benefits from low capitalization. Corporate governance is positively related with banking sector instability, as seen by this negative correlation. Bank capitalization strategies have a significant impact on CEO remuneration. In the event of an income shock, dividend payout is essential. Banking sector payout policies are negatively related with corporate governance. In the event of a negative income shock, financial institutions reduce dividends. As a result, it has been argued that effective corporate governance benefits shareholders by reducing capitalization tactics and limiting financial institutions' aggressive payouts.JEL classificationG21, G30, G32, G35.

Corporate social responsibility and future bankruptcy

PurposeThis study aims to investigate the cross-sectional differences on the association between corporate social responsibility (CSR) and future bankruptcy along the dimensions of political connection and corporate governance strength. This study intends to provide evidence on the tangible benefits for firms to invest in social capital of CSR activities and offer insights on what firms may benefit more from CSR expenditure.Design/methodology/approachRunning a logistic regression on the determinants of bankruptcy model after controlling for financial stress factors based on prior literature, this study examines the moderating effect of political connection and corporate governance on the association between corporate social responsibility and future bankruptcy.FindingsCurrent study documents that the negative association between corporate social responsibility and future bankruptcy is only significant for politically connected firms, but insignificant for non-politically connected firms. Specifically, the authors find that one standard deviation increase of CSR expenditure significantly reduces the propensity of future bankruptcy by 53.20% for politically-connected firms. Conversely, the negative relation between CSR only exits for firms with weak corporate governance but do not exit for firms with strong corporate governance.Research limitations/implicationsCurrent study provides evidence on the tangible benefits for firms to invest in social capital of CSR activities and offers additional insights on what firms may benefit more from CSR expenditure.Originality/valueCurrent study extends the research to examine the cross-sectional variations in the negative association between CSR performance and the propensity of bankruptcy. The positive moderating effect of political connection on CSR and bankruptcy suggests that political connection and CSR are complements in reducing the propensity of future bankruptcy. A more pronounced negative association between CSR and bankruptcy for firms with weaker governance suggests that firms with weak corporate governance benefits more in engaging CSR activities than firms with strong corporate governance.

Corporate governance and financial performance: evidence from listed SMEs in India

PurposeCorporate governance across small and medium enterprises (SMEs) is undergoing unremitting changes, primarily due to the listing of SMEs on SME exchanges. The changing aspects of governance may influence the financial performance of SMEs. This paper examines how corporate governance influences the financial performance of listed SMEs in the context of developing economies like India. Ownership concentration (promoters' holding) and information disclosures measure corporate governance in this examination.Design/methodology/approachThe sample for this study includes 88 listed SMEs from the Bombay Stock Exchange (BSE) SME platform in India. The data are collected for the period between 2018 and 2020. The study employs panel data analysis. The fixed effects model, coupled with the computation of cluster robust standard errors, is used to test the relationship between variables.FindingsThe results demonstrate that ownership concentration is not significantly related to financial performance. Further, information disclosures are inversely significant for financial performance. The results show that agency problems and information asymmetry plague the sampled firms. Further, the results of the study are indicative of inefficiencies in the governance structures of SMEs. Thus, it is evident that listed SMEs fail to reap the benefits of corporate governance.Practical implicationsThe study's findings should enlighten SME owners and managers on the benefits of corporate governance for SMEs. This is a pressing need at current times as the listing of SMEs is shifting the landscape of SME governance. Today, all firms, including SMEs, are expected to adopt and maintain near internationally benchmarked corporate governance standards. Secondly, the study's implications on how the ownership and information disclosures can be used to influence the financial outcomes of SMEs will benefit the overall business ecosystem. The policyholders and academics can use this study to boost the regulations and research in line with each other.Originality/valueReforming monitoring mechanisms of firm activities and restructuring disclosure practices are essential for SMEs to produce better financial outcomes. The true benefits of corporate governance cannot be realized without attention to financial performance. The study is relevant to practitioners, lawmakers and academics to advance corporate governance for SMEs.

Reforms in the Management System in State Enterprises in Montenegro

The efficiency of each member of the management of state-owned companies with clients, ie users (citizens) of their services, is very important for business communication. Through a proactive relationship with the media, clients and taxpayers, the Department of Communications and International Cooperation contributes to establishing a positive atmosphere with the citizens of Montenegro. Scientific research on the subject of this paper will make a significant contribution by pointing out the way of working in state-owned enterprises, the importance of examples of six principles of the Organization for Economic Cooperation and Development (OECD), the benefits of corporate governance, and point out gaps and offer possible solutions. would contribute to improving the provision of services of general interest to the satisfaction of both the owner and the user of the public enterprise service. It is of great importance to point out the future legal solutions on the performance of communal activities to change the competence, and thus the management of state communal enterprises in Montenegro. The specific contribution of the research is reflected in the consideration of the reform of state-owned enterprises in Montenegro, needs and assumptions for reform, preparation of state-owned enterprises for knowledge-based society, informatization of state-owned enterprises, socially responsible business and their information system. By accepting the basic concept of quality and treating citizens and other users of their services in a different way, the work of state-owned enterprises must be better, faster and cheaper. Related to this is the hypothesis of this paper that the ruling parties and changes in the business environment inevitably require new concepts of governance and the six principles of OECD corporate governance in state-owned enterprises have not been applied.

IMPLEMENTATION OF CORPORATE GOVERNANCE AT POSCO

Corporate Governance is a structure consisting of shareholders, directors, managers, a set of objectives to be achieved by the company, and tools that will be used in achieving goals and monitoring performance. This study aims to determine the application and benefits of Corporate Governance at POSCO, using descriptive qualitative analysis methods. The application of the principles of Corporate Governance at POSCO has been carried out since 1997 through the management philosophy of "Corporate Citizenship: Building a Better Future Together". For example, the principle of equality is carried out by POSCO by making stronger shareholder protection through the Cumulative Voting System to strengthen the rights of small shareholders. The principle of independence is implemented through the separation of share ownership from company management, assigning 7 out of 12 members of the BoD (Board of Directors) to be external directors, and to separate the functions of the CEO and Chairman of the Board. The principle of responsibility is applied through the establishment of an audit committee, the Corporate Social Responsibility program. Corporate Governance had earned POSCO many national and international awards

“Corporate governance” and performance in nonprofit organizations

Corporate governance has received substantial scholarly attention for decades, although the focus of this research has by and large been on publicly traded for-profit organizations. However, agency problems are increasingly recognized in nonprofits. As such, we examine the application of corporate governance logic in the context of nonprofits. Our study relies on nearly a decade of data spanning 6853 US-based charities and comprising nearly US$346 billion in total revenue. Our results show that common corporate governance practices—such as independent boards, chief executive officer oversight, and transparency—enhance the degree to which donor contributions are allocated toward a charity’s mission. Overall, we assess the broader applicability and benefits of corporate governance and build on literature highlighting links between for-profit and nonprofit organizations. In doing so, we demonstrate the usefulness of governance in this economically and socially consequential context.

The Corporate Governance Case for Board Gender Diversity: Evidence from Delaware Cases

Gender diversity on company boards is becoming an increasingly important issue. The theoretical bases for the desirability of gender diversity regulations can be understood under three categories i.e. social benefits; business benefits; and corporate governance benefits. Since corporate governance is the main task of the board of directors, the corporate governance case for board gender diversity needs to be developed further. This article tests the corporate governance benefits of board gender diversity by conducting a qualitative content analysis of Delaware cases. The observations from this study are then analysed against the quantitative and qualitative literature on the about the corporate governance benefits of board gender diversity. The findings suggest that gender diversity might help boards overcome some impediments to effective functioning in certain cases but also suggests other complementary solutions to make boards more effective. The article thus, builds the corporate governance case for board gender diversity, but also sets out its limits.

A tale of two cities: Economic development, corporate governance and firm value in Vietnam

This study examines the moderating effect of financial and economic development on the relation between corporate governance and firm value in Vietnam, which has two exchanges, one located in the business center in the South, and the other located in the center of government in the North. This unique setting allows an investigation of corporate governance dynamics controlling for legal jurisdiction. The results show a positive relation between corporate governance and firm value in Ho Chi Minh City but not in Hanoi. The finding suggests that financial and economic development play critical roles in enhancing the benefits of corporate governance in emerging markets.

Corporate governance and credit rating in Islamic banks: Does Shariah governance matters?

We investigate whether Islamic banks with strong corporate governance benefit from higher credit ratings relative to Islamic banks with weaker governance and whether Shariah governance can affect the credit ratings of Islamic banks or not. We document, after controlling for Islamic bank-specific risk characteristics, that credit ratings are negatively associated with the number of blockholders, CEO power, the supervisory role of the Shariah board and investment deposits; and positively associated with share listing ownership, board independence, women directors, board directors expertise and Shariah board expertise. As well as, credit rating is higher for Southeast Asian Islamic banks and weaker for GCC Islamic banks.

The Effect of Corporate Governance on Debtholders: Evidence from CDS Spread Response to Shareholderss Votes

In this paper we provide causal estimates in support of the hypothesis that improvements in corporate governance benefit the debtholders. By using the outcome of votes on shareholder-sponsored governance proposals at annual meetings we find that passing a proposal that increases shareholder rights reduces the firm’s default risk as measured by adjusted CDS spreads. Exploiting the discontinuity in the vote outcome around the majority threshold, we find that passing a governance proposal lowers the cumulative adjusted CDS spreads by about 6 bps in a two-day window around the voting date. We find that CDS market reaction is larger in the case of non-G-Index related provisions and for non-investment grade firms. Moreover, consistent with the short-run market reaction, the firm credit rating improves on average by about half a notch in two years after the voting, further supporting the hypothesis in the long-term.

Basel III’s Corporate Governance Impact: How Increased Banking Regulations Pose Challenges to Corporate Compliance While Simultaneously Furthering Stakeholder Objectives

Basel III was primarily intended to provide additional regulations to prevent the collapse of financial institutions during times of liquidity crises. However, two primary reforms, namely the new capital adequacy framework and disclosure requirements, will not only prevent banks from failure during periods of financial distress, but also help promote corporate governance objectives. In the traditional model of corporate governance, shareholders will benefit from the stability of firms in which they have invested, as well as having access to accurate and complete financial statements. Additionally, non-shareholder stakeholders will benefit from increased systemic stability and avoiding the resulting problems that the 2007 financial collapse created, such as decreased access to consumer credit, stagnant wages, and skyrocketing unemployment. This article will attempt to outline the specific corporate governance benefits that Basel III will bring, focusing on how disclosure requirements and capital adequacy will help shareholders and stakeholders alike.

Harnessing the Benefits of Corporate Governance and Internal Audit: Advice to SME

Small Medium Enterprises (SME) are vital to economic growth in Malaysia and many emerging economies as they are major contributors to the gross domestic product. It is therefore imperative for SME to strengthen its governance, risk and control (GRC) system that is recommended by Corporate Governance (CG) code to support strong business performance. Internal auditor is the right party to provide assurance and consultancy on GRC for a firm to stay competitive. There is generally a lack of awareness among these enterprises regarding significance of internal audit and if there is awareness, there is a general aversion to adopting these practices because of the cost of implementation. This paper was carried out solely through analysis of extant literatures. We identified from reports and previous studies that SME failures are contributed by several factors including low productivity, lack of financing as well as inadequate skills and capabilities. The corporate governance literature posits that companies may achieve strategic, tactical and operational efficiency by embracing good CG principles which include risk management and controls mechanism. Further, internal audit enhance CG through assurance and consultancy work on GRC. Based on the findings from the review of extant literatures, it was found that current status of CG in SMEs are not impressive at all, mainly because of lack of awareness as well as high cost of implementation involved. However, good governance is still deemed important; hence we may argue that a separate set of corporate governance framework may work better for SMEs, similar to the adoption of a separate set of IFRS for SMEs.

SMEs -The Smart Enterprises

Small and Medium Enterprises (SMEs) are crucial for the economic growth and stability of any country and play a vital role especially for developing countries as they facilitate economic activity and provide employment thus contributing to poverty reduction. In the Indian context they can be considered as the backbone of national economy. The major constraints of SMEs are finance for initial capital and working capital, Line of credit from the suppliers, new technology to produce quality products/ give service, ability to hire qualified and professional staff for production, service and marketing. Majority of the banks consider lending to SMEs an unattractive venture due to a range of factors including information asymmetries and consequently high transaction costs, collateral requirement, financial products not meeting SME sector requirements in medium to long term Information asymmetries, due to inefficient legal system and weak governance structures of SMEs, result in higher transaction costs on the supply side. On the demand side we find most of the SMEs tend to shy away from formal modes of financing due to the high cost of credit, lengthy procedures, collateral requirements and lack of awareness about the benefits of corporate governance. External finance cannot be obtained by firms in their start-up phase as their management structures are not transparent and usually have intangible assets. International investors are often reluctant to invest in developing countries because their institutions do not provide an adequate level of security for their investment particularly in terms of enforceability of legal rights and governance framework. MNCs and international investors will be willing to forge partnership with SMEs only when their level confidence and trust increases regarding transparency and governance of the local partner. Another problem for most of the SMEs being family owned enterprises is that there is no clarity on the roles resulting in credibility problems and inability to arrive at strategic decisions. Good governance is vital for the development of a healthy and competitive corporate sector. For SMEs, corporate governance is about the respective roles of the shareholders as owners and the managers. It is about establishing rules and procedures to manage and run the enterprise. It has been empirically tested that good governance practices of a company gives a positive signal to investors. With the globalization of markets, international capital flows have become extremely valuable source of external financing. Good corporate governance leads to development of a framework that provides adequate protection to the interests of stakeholders and reinforces the fiduciary responsibilities of those vested with the authority to act on behalf of the stakeholders. This paper would analyze the current status of Indian SMEs and how, the introduction SMART governance frame work can make the SMEs SMART Enterprises.

Analyst Following, Corporate Governance And Valuation: Emerging-Market Evidence

<p class="MsoNormal" style="text-justify: inter-ideograph; text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none; tab-stops: 110.2pt;"><span style="color: black; font-size: 10pt;"><span style="font-family: Times New Roman;">This paper considers analyst following as a substitute way of disciplining companies and examines the joint impact of corporate governance and analyst following on valuation in an emerging-market setting.<strong style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-style: italic;"> </span></strong>I find that the interaction of analyst following and corporate governance on valuation is not significant for my whole sample. Breaking down the sample to common law versus code law countries indicates that, only for common law countries, <span style="mso-bidi-font-style: italic;">the positive relation between the quality of corporate governance and valuation is weaker for companies with greater analyst following than for companies with lower analyst following.<strong style="mso-bidi-font-weight: normal;"> </strong>This paper joins the stream of research on the monitoring role of financial analysts.</span></span><a name="OLE_LINK2"></a><a name="OLE_LINK1"><span style="mso-bookmark: OLE_LINK2;"><span style="font-family: Times New Roman;"> </span></span></a><span style="font-family: Times New Roman;"><span style="mso-bidi-font-style: italic;">It extends</span> Lang et al. (2004) by examining t<span style="mso-bidi-font-style: italic;">he joint impact of analyst following and corporate governance on valuation with a proxy of overall corporate governance quality. In addition, the finding from this paper suggests that analyst’s governance role is more pronounced in common law countries of emerging markets where </span>analyst service is in greater need.<strong style="mso-bidi-font-weight: normal;"><span style="mso-bidi-font-style: italic;"> </span></strong><span style="mso-bidi-font-style: italic;">The results have implications for investors, analysts and managers in the common law countries of emerging markets that firms with weak corporate governance benefit more from having a high level of analyst following in terms of market valuation. <strong style="mso-bidi-font-weight: normal;"></strong></span></span></span></p>

Corporate Governance in China: a Step Forward

Abstract Recently, the presumed benefits of corporate governance have become one of the most contentious issues especially for emerging markets in Asia where institutional settings are quite different from other parts of the world. Using an internationally accepted benchmark (OECD's Principles of Corporate Governance, OECD, 2004), this study evaluates the progress of corporate governance practice of Chinese listed companies. A corporate governance index (CGI) is constructed to measure the quality of corporate governance practices of the 100 largest listed firms in China during 2004‐2006. The results show that Chinese companies have been making progress in the corporate governance reform. The findings also show a positive relation between market valuation and overall corporate governance practices, as measured by the CGI, among these Chinese listed companies. Additional investigation reveals that the rights of shareholders are the main driver in the relationship.

Directorship, collateralized shares, risk, and performance of Taiwan banking industry

In recent years, considerable concerns have arisen over the issue of corporate governance in banks’ supervision. One of the major issues has been investigated whether the sound mechanism of corporate governance benefits bank risk management and performance. The collateralized shares, serving stocks as collaterals, are one of financial leverage approaches and it is likely to be an incentive for block shareholders to misapply assets due to the deviation between the controlship and the ownership. The objective of this study is to examine whether the attitude of the board of directors toward risk will affect the bank risk and performance. Quarterly data of commercial banks listed either on the Taiwan Stock Exchange or GreTai Securities Market from 1999 to 2007 are examined in this study. The results show that the collateralized shares may have contributed to a lower return due to a higher risk and they are in line with previous studies our results are in line with previous researches. In conclusion, the monitoring mechanism should enforce relatively regulations more strictly to avoid the agency problems. Especially to the insiders of influence such as board of directors or block shareholders, more strictly regulations and the disclosure of relatively information should be necessary. The result will be expected to lead to better understanding of the nature of the collateralized shares and laying the groundwork for realizing that is the collateralized shares worth monitoring. It may provide policy implication for the regulators in the later monitoring requirement

The effects of corporate governance on firms’ credit ratings

We investigate whether firms with strong corporate governance benefit from higher credit ratings relative to firms with weaker governance. We document, after controlling for firm-specific risk characteristics, that credit ratings are negatively associated with the number of blockholders and CEO power, and positively related to takeover defenses, accrual quality, earnings timeliness, board independence, board stock ownership, and board expertise. We also provide evidence that CEOs of firms with speculative-grade credit ratings are overcompensated to a greater degree than their counterparts at firms with investment-grade ratings, thus providing one explanation for why some firms operate with weak governance.

The Implementation of Corporate Governance Principles in an Emerging Economy: a critique of the situation in Cyprus

When the Cyprus economy was booming in the 1990s, key issues emanating from sound corporate governance, such as accountability, transparency and effective independent boards were not deemed important. However, largely as a result of the Cyprus stock exchange collapse of 2000, this view changed. In September 2002, due to the collapse, the Cyprus Stock Exchange implemented a Corporate Governance Code predicated largely on Anglo‐Saxon principles of corporate governance.This paper reports the result of a study into levels of compliance with the Code by companies listed on the Cyprus Stock Exchange. The findings indicate that only a small minority complied with all significant aspects of the Code, and the vast majority did not comply with any. While the Code was well intended, the intended reforms do not appear to have significantly improved corporate governance. This is perhaps not surprising, given that the Cyprus equity markets and corresponding legislative support pertaining to corporate governance are in their infancy. In addition, some typical free market controls (e.g. low degree of concentration of ownership, reliable and timely information flows and opportunities for investor diversification) that facilitate international institutional investment do not exist in Cyprus. This suggests that the introduction of a Corporate Governance Code in Cyprus, or other developing economies, is likely to have only minimal impact unless it is supported by other initiatives. However, recent developments in Cyprus relating to greater education as to the benefits of corporate governance, as well as more stringent listing rules for companies lacking aspects of corporate governance, suggest that Cyprus is making serious endeavours to improve the corporate governance of its listed companies.

Dividends and Tax Policy in the Long Run

There is a long-standing debate as to whether changes in shareholder-level taxes have an effect on firm dividend policy. The traditional view is that tax changes influence dividends, while the new view is that there generally is no such effect. In support of the traditional view, recent observers point to the rise in dividends following the reduction in the tax rate on dividends in 2003. In fact, the resurgence in dividends has been so strong that President Bush has made it one of his top legislative priorities to permanently extend the tax cut, which is currently set to expire at the end of 2010. The popular assumption is that the rise in dividends - and any associated economic and corporate governance benefits - will only continue if the lower rate is made permanent. This Article challenges that assumption. Using finance theory and empirical evidence from the U.S. and other countries, this Article shows that the relationship between dividends and taxes over the long run is more complex than dividend tax cut proponents suggest. Because the 2003 tax cut was only a temporary cut, making it permanent may actually have an effect that is opposite of what is intended. The implication is not that a temporary tax cut is preferable to a permanent one, but rather that the attempt to influence corporate behavior through the tax laws should be resisted as either futile or potentially counterproductive.