Board Accountability Research Articles

Legal Perspective on the Use of Artificial Intelligence in Corporate Governance in Nigeria: Potentials and Challenges

Abstract From a legal standpoint, this paper critically examines the potential and challenges in deploying Artificial (AI) Intelligence in corporate governance in Nigeria. The examination revealed that leveraging AI in corporate governance could enhance corporate efficiency in Nigeria through improved decision-making, risk management, financial reporting, and stakeholder protection and engagement. However, possible bias and data privacy breaches are significant risks that pose ethical challenges when AI is deployed in corporate governance. Particularly, Nigeria is bisected by several socio-economic challenges, such as a lack of a robust AI framework and insufficient technological expertise to develop and optimize AI systems. Furthermore, Nigeria currently lacks comprehensive national AI legislation, thereby resulting in the absence of a legal basis for the effective deployment of AI in corporate governance and board management. Against this backdrop, this paper proposes an AI-based corporate governance framework, which can be adapted into future legislative reforms to streamline decision-making processes and improve board accountability and stakeholders’ protection in companies. Overall, it argues that AI legislation and policies are vital to the success of efforts to implement AI-based corporate governance in Nigeria.

Trustee Board Accountability and Accounting for Costs: A Practice Perspective

Trustee Board Accountability and Accounting for Costs: A Practice Perspective

Effect of Board Accountability on Financial Performance of Selected Saccos in Kiruhura District, Uganda

Board accountability and Financial Performance are significant concepts among SACCOs in Uganda due to their involvement in the financial inter mediation process. In spite of the several interventions by Bank Uganda, a number of banks and other financial institutions have failed to operate forcing the regulators to intervene to ensure sanity in the financial system. The purpose of this study was to investigate the effect of corporate governance on financial performance of SACCOs in Kiruhura District, Uganda and the specific objective were; To examine the effect of board accountability on financial performance of selected SACCOs in Kiruhura District, In this study, a cross-sectional survey research design was employed, adopting quantitative and qualitative approaches research approaches. A total population of 342 people were used at a confidence level of 95% or error of 0.05 and the sample size was 184 respodents who involved the staff and members taken from the six SACCOs registered in Kiruhura district’s, Uganda as of January 2023.The obtained data for analysis was divided into two phases. First, descriptive statistics on the respondents and the preliminary data analysis were performed using SPSS version 20.0. These statistics included multicollinearity, mean and standard deviation, outliers and extreme values, and missing values and in the second phase, the structural relationships between the variables in the suggested conceptual model were tested and examined using structural equation modeling (SEM). Jaffrey’s Amazing Statistical Program (JASP) version 0.17.2.0 was used to implement SEM. The findings of the study were: The effect of board accountability (BAC) on financial performance was found to have a negative effect (g = -0.908), implying that the data failed to support the direct relationship between BAC and FiP, thus not supporting H01, Therefore the study concludes that SACCOS will do less well financially the more its board assumes accountability for the company’s decisions and communicates them openly to stakeholders.the study recommends that the board of directors should be more effective in ensuring that they communicate the decisions clearly and appropriately so that SACCO’s maximize shareholders wealth. SACCO’s should seek best strategies of communicating and sharing the accountability feedback with SACCO members to generate maximum benefits for everyone.

Board of Directors and Financial Restatement: Evidence from The Two-Tier System

Purpose : This study investigates the role of the characteristics of the Board of Directors (BoD) on financial restatements. The characteristics are reviewed based on board tenure, board size, board independence, female board, foreign board member, board level education, board accounting expertise, and dual board position. Method : The research sample is a manufacturing company on the Indonesia Stock Exchange for 2017-2021. The analytical tool used is logistic regression. Findings : This study found that five board characteristics negatively affect financial restatements: board tenure, board size, board independence, female board, and board accounting expertise. On the other hand, a dual position has a positive effect on financial restatements. Meanwhile, foreign board and board education do not significantly affect financial restatements. Novelty : First, considering BoD as a decision maker in the company, board characteristics influence group dynamics in collaboration and communication to implement corporate governance. Second, studies that analyze the impact of executive boards on financial statements still need to be expanded, especially in Indonesia, which adheres to a two-tier system. Third, previous studies that examine the role of BoD and financial restatements have provided contradictory evidence, and many studies still need to prove the effectiveness of the BoDs’ characteristics on financial restatements. Keywords : Director; Female; Restatement

Do Indian banks perform better in corporate governance than other SAARC nations? An empirical analysis

Purpose This paper aims to investigate the role of corporate governance on the bank profitability of Indian banks vis-à-vis South Asian Association for Regional Cooperation (SAARC) nations. Design/methodology/approach For the Corporate Governance Index, the authors examined board accountability, transparency and disclosure and audit committee, while Tobin’s Q, return on equity and return on assets are used to measure the bank’s profitability. The study used a two-stage analysis based on balanced panel data for robust findings. Sample of this study consists of 60 commercial banks from India and 60 banks from SAARC nations for the period of 2009–2021. This study used panel regression and a generalized method of moment approach using the CAMELS framework on banking industry-specific variables to determine their respective impacts. Findings The findings of this study suggest that board accountability is positive and significantly affects the profitability of banks as indicated by return on assets, return on equity and Tobin’s Q. In contrast, the audit committee has a positive and insignificant impact on return on assets, return on equity and Tobin’s Q, while transparency and disclosure have a negative and significant impact on these metrics. Furthermore, the country dummy result shows a significant positive impact on all the bank performance parameters, implying that Indian banks have the highest degree of convergence with corporate governance as compared to other SAARC nations. Research limitations/implications This study provides insight to the regulators, policymakers and financial institutions to evaluate the role of corporate governance in emerging economies. However, the findings of the study should be interpreted with caution, as the results are sensitive to the disparity between India and other SAARC nations' government policies, climatic circumstances and cultural or religious traditions. Originality/value To the best of the authors’ knowledge, this is the first attempt to gauge the performance of Indian banks vis-à-vis SAARC nations using the CAMELS framework approach. Further, findings of this study suggest some novel evidence tying corporate governance quality with the profitability of banks among SAARC nations.

INFLUENCE OF FAMILY OWNERSHIP, BOARD AND TOP MANAGEMENT CHARACTERISTICS ON THE QUALITY OF WEBSITE CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE IN INDONESIA

Background and Purpose: This study aims to investigate the effect of family ownership, board characteristics (board foreign experience and board accounting expertise), and top management characteristics (management education level) on the quality of website Corporate Social Responsibility (CSR) disclosure via corporate website among the top companies listed in the Indonesia Stock Exchange (IDX). This study adds to the body of literature by examining the moderating effect of family ownership towards the relationship between board characteristics and website CSR disclosure, which is useful for investors who might have concerns on the level of CSR disclosure as a gauge of firm ethics, particularly in respect to family-owned firms.
 
 Methodology: Sample of this study consisted of 100 non-financial companies listed in Indonesia Stock Exchange (IDX) for the year of 2019. To test the study’s hypothesis, multiple linear regression analysis was applied.
 
 Findings: Empirical results from this study have shown that family ownership is negatively related to the quality of website CSR disclosure. Board foreign experience has a positive effect on CSR disclosure practices in their respective corporate websites. Meanwhile, top management education level was found to have a negative and statistically significant relationship with the quality of voluntary website CSR disclosure. Lastly, this study demonstrated that family ownership moderates the relationship between board accounting expertise and the quality of CSR disclosure on corporate websites.
 
 Contributions: This study contributes to the literature on CSR disclosure by introducing a set of index measuring the quality of voluntary website CSR disclosure, which captures not only the variety, but also the richness of CSR information. The moderating role of family ownership on such relationships, which is rarely investigated in the context of developing countries, was also explored by this study.
 
 Keywords: CSR disclosure, voluntary disclosure, family ownership, board characteristics, top management.
 
 Cite as: Melati, I., Arshad, R., Ahmad Nadzri, F. A., Nair, R., & Hermawan, A. A. (2023). Influence of family ownership, board and top management characteristics on the quality of website corporate social responsibility disclosure in Indonesia. Journal of Nusantara Studies, 8(TI), 351-381. http://dx.doi.org/10.24200/jonus.vol8issTIpp351-381

The Corporate Responsibility of the Cleanliness Department For Waste Management

Garbage is one of the environmental problems that become global problems that have not had a way out. In Indonesia alone, waste management that carried out by the Department of Sanitation has not been successfully implemented waste management in accordance with quality standards that have been set in the legislation. The waste management causes environmental pollution and hazards to public health. This is the importance of waste management and the regulation that regulate it. The Sanitation Department as the public sector who carry out the tasks assigned by the Regional Government in accordance with the Law No.18 of 2008. In this corporate accountability, accountability is divided into accountability of attendance, accountability of the board, or corporation and Board accountability. In corporate liabilities in public places such as the Sanitation Department, the State acts as a legal entity. The responsible board is determined by determining who directs the mind and has the authority to implement or prevent the follow-up imposed by the law.

Auditors’ Use of In‐House Specialists

ABSTRACTUsing Public Company Accounting Oversight Board (PCAOB) inspection data from 2006 to 2018, we examine the use of auditor‐employed specialists in audit engagements. First, we find that the use of specialists is increasingly prevalent and related to clients’ size and complex accounting estimates. Second, the use of specialists is positively associated with the incidence of audit process deficiencies (identified by PCAOB inspections) but is not associated with output‐based audit‐quality proxies (restatements or absolute discretionary accruals). Hence, although process deficiencies are more likely to occur in engagements with higher use of specialists, financial reporting quality is not negatively impacted. Third, the use of specialists is positively associated with the likelihood of goodwill impairments and negatively associated with engagement profitability. Finally, cross‐sectional tests suggest that board accounting expertise is a salient condition for more effective use of specialists. Collectively, our findings align with concerns noted by the PCAOB and prior experimental and survey studies. Although specialists assist auditors with the audit of complex estimates, engagements with comparatively high specialist use entail an incremental risk of audit process deficiencies.

The Moderating Influence of Intellectual Capital on the Relationship Between Corporate Governance Attributes and Financial Performance in Nigeria

Corporate governance and intellectual competencies can provide corporate attractiveness and accomplishment. Hence, this study investigated the moderating effects of intellectual capital on the relationship between corporate governance attributes and the financial performance of listed companies in Nigeria. The study adopted ex post facto and correlational research designs. The population of the study was twenty-one (21) listed consumer goods manufacturing firms as of year-end 2020. The study used a census approach to determine a sample size of twenty-one (21) firms. Secondary data from the published annual financial reports of the sampled firms were used for data analysis. Descriptive statistics, correlation coefficient and multivariate analysis were used. The regression analysis revealed that board size has a positive and insignificant relationship with the return on equity of listed consumer goods manufacturing firms in Nigeria; Board independence has a positive and significant relationship with the return on equity of listed consumer goods manufacturing firms in Nigeria; board compensation has a negative and significant relationship with return on equity of listed consumer goods manufacturing firms in Nigeria; board diligence has a positive and significant relationship with return on equity of listed consumer goods manufacturing firms in Nigeria and intellectual capital positively and significantly moderates the relationship between corporate governance mechanism and return on assets of listed consumer goods manufacturing firms in Nigeria. The study concludes that intellectual capital moderates the relationship between corporate governance attributes and the financial performance of listed consumer goods manufacturing firms in Nigeria. The study recommends among others policymakers from listed firms should emphasise good corporate governance practices with quality intellectual input as a means of improving the level of financial performance. Hence, the implementation of corporate governance practices should be in terms of board accountability and transparency through quality human resources for the financial performance of listed firms in Nigeria.

Corporate governance attributes and financial reporting quality

The study's objective was to analyse the relationship between corporate governance attributes and financial reporting quality from a developing country perspective. Data was collected through quantitative content analysis of annual reports and audited financial statements (2012 to 2018) of Zambian-listed companies. This was a longitudinal study that involved panel data analysis. Therefore, a Hausman test was conducted to select the model to use. Panel regression analysis was used as a data analysis technique. Results show a statistically significant positive relationship between board size and financial reporting quality. A positive but statistically insignificant relationship existed between board accounting expertise, board gender diversity, audit committee independence and financial reporting quality. A negative but insignificant relationship existed between board independence and financial reporting quality. The corporate governance system alone cannot guarantee quality financial information by reporting entities. This could be related to the lack of an effective corporate governance system. Therefore, authorities must consider strengthening the regulatory enforcement mechanisms to ensure that companies achieve high financial reporting quality.

Corporate Governance and Legal Compliance in Indian Business Sector

This paper provides a comprehensive analysis of corporate governance and legal compliance within the Indian business sector. Corporate governance has evolved significantly in India, influenced by regulatory reforms and the growing importance of ethical business practices. The legislative framework controlling corporate governance consists in accordance with the Securities and Exchange Board of India's guidelines and the stock exchanges' requirements for listing. This analysis takes a close look at the fundamentals of corporate governance in India. Including board composition, shareholder rights, and transparency. It also delves into the complex landscape of legal compliance, encompassing labour laws, environmental regulations, and intellectual property rights. While the Indian business sector has made substantial progress in these areas, challenges such as regulatory complexity and enforcement issues persist. To mitigate these challenges, businesses are adopting best practices such as comprehensive compliance programs, ongoing training, and board accountability. Ultimately, adherence to corporate governance principles and legal compliance plays a pivotal role in attracting foreign investment, ensuring sustainability, and fostering long-term growth in the Indian business sector.

The impact of ASC 842’s new leasing standards on default likelihood by industry

PurposeThis paper aims to examine the impact on firm financial distress by industry of one of the most recent accounting changes in the treatment of operating leases, Financial Accounting Standard Board (FASB) Accounting Standards Update (ASU) No. 2016–02, Leases released February 25, 2016. ASU 2016–02, also known as ASC 842, considerably changed how firms account for operating leases.Design/methodology/approachThe authors use the Black–Scholes–Merton (BSM) option pricing methodology to estimate the change in default likelihood (DL) of nine different industries surrounding the adoption of ASC 842. In addition, the authors use univariate and multivariate analysis to test the statistical significance of firm-related factors.FindingsThe authors provide evidence that numerous industry’s DL increased following the FASB’s announcement of the new standard (ASC 842) regarding increased transparency in lease recognition. The effect is especially significant within the energy industry, although it is also shown in the consumer durables, manufacturing, hi-tech equipment, telecom, retail and wholesale and transportation industries. In addition, the authors find the effect is more pronounced for firms with high leverage, low financial slack, low operating return on assets, small market value and accounting for non-balance sheet recorded leases.Practical implicationsBy investigating different industries, this study’s findings provide crucial insight to managers seeking lease financing as an operational strategy in a post-implementation environment and help them understand the impact of this new standard on their firm. Furthermore, this study answers the call of policy makers and academics to provide insight into the impact of updated leasing standards.Originality/valueThis is the only empirical study that examines the impact of ASC 842 on the DL of publicly traded firms by industry.

Promoting Corporate Extraterritorial Sustainable Responsibility through the Lens of Social Licence to Operate

Mandatory corporate extraterritorial responsibilities to promote environmental, social and human rights awareness and recordkeeping have been criticised as green-washing, despite the progressive intent of such attempts. This article conducts an in-depth investigation of extraterritorial responsibility through the lens of the social licence to operate (SLO), using a hybrid methodology involving doctrinal, conceptual, black letter, interdisciplinary and socio-legal sources. We aim to give an overview of decided cases referred to the Supreme Court by the Court of Appeal, in the hope of offering academic groundwork for legalising corporate extraterritorial responsibility in the context of global value chains with the participation of multinational enterprises and various stakeholders, including those in very vulnerable positions in developing or the least developed countries. Previous research on the notion of the SLO has tended to focus on one particular industry, based on the assumption that an SLO is more relevant in corporate social responsibility (CSR)-sensitive sectors. This article will change the focus and aim to answer the question of whether building and maintaining SLOs can help companies to acquire the social legitimacy to fulfil extraterritorial social responsibility. We link the goals, ideals and breadth of SLOs to those of extraterritorial responsibility in order to provide supplementary support for legislators to achieve better compliance and risk management. We conclude that the benefits of seeking an SLO are that they can help to inform progressive extraterritorial legislative attempts, promote board accountability, and mitigate environmental and social risks.

THE EFFECT OF CORPORATE GOVERNANCE ON THE FINANCIAL PERFORMANCE OF COMPANIES LISTED ON THE TEHRAN STOCK EXCHANGE

The present study investigated the effect of corporate governance on the financial performance of companies listed on the Tehran Stock Exchange. In this study, the duality of CEO duties and financial performance were considered as corporate governance mechanisms. Indicators like return on assets, return on equity and net operating profit after tax have been used to measure financial performance. The studied period was 2013 to 2017 and samples were member companies of Tehran Stock Exchange. The findings revealed that corporate governance and financial performance of companies listed on the Tehran Stock Exchange had a favorable significant association. With the ROE index, there was a significant positive association between board accountability and corporate performance. With the TQ index, there was a positive significant association between board accountability and company performance, and with the ROE index, there was a positive significant relationship between transparency level and firm performance. There was also a substantial positive link between the amount of transparency and business performance as measured by the TQ index, as well as a significant positive relationship between the audit committee and company success as measured by the ROE index.

Involuntary admission and treatment of mentally ill patients – the role and accountability of mental health review boards

No known cure exists for COVID-19, and medical practitioners are exhausted and at their wits’ end trying to find treatments that prevent patients from ending up in hospital or intensive care, or even dying. A variety of treatments tried by medical practitioners include standard registered medicine, investigational or so-called experimental, unapproved or preapproved medicines, emergency or compassionate-use authorised medicine and pre-market approved medicine. However, the medicines that can be accessed via each of these categories are at different stages of efficacy testing and knowledge about adverse effects, dosages and risks. To obtain ethical and legal informed consent, medical practitioners must deal with a lot of medical uncertainty, and care must be taken to ensure that the patient understands the difference in risks they may be willing to take depending on the medicine’s stage of development. Often additional information is required to obtain ethical consent as opposed to legal consent. A purely legal approach to informed consent, especially when dealing with the medical uncertainties of health emergencies and pandemics, may lead to patients’ consent lacking in enough substance to be truly considered legal and ethical. Informed consent as respect for autonomy in this sense requires more than the patient’s explicit agreement or compliance with a certain treatment proposal. This article explains the difference in consent content attached to each different stage of a medicine’s development, especially considering the additional difficulties posed by obtaining truly informed consent during a pandemic with uncertain characteristics, treatment and solutions.

Involuntary admission and treatment of mentally ill patients – the role and accountability of mental health review boards

The involuntary admission or treatment of a mentally ill individual is highly controversial, as it may be argued that such intervention infringes on individual autonomy and the right to choose a particular treatment. However, this argument must be balanced with the need to provide immediate healthcare services to a vulnerable person who cannot or will not make a choice in his or her own best interests at a particular time. A study carried out in Gauteng Province, South Africa (SA), highlighted the fact that the annual rate of involuntary admissions increased by almost double from 2007 to 2008. This could indicate that healthcare providers are not treating patients without their consent only when this is absolutely necessary. Alternatively, it could indicate that healthcare professionals are more aware of the provisions of the Mental Health Care Act and relevant national policy guidelines. Or it could suggest that more patients are presenting with mental illnesses or disorders that require their involuntary admission. It remains for strategies to be developed that change negative perceptions and inequities for individuals with mental illness. Above all, the strategies should be underpinned by inalienable respect for mentally ill individuals – a concept that was blatantly disregarded in the Life Esidimeni case. In this article, we highlight the functions of mental health review boards and their accountability where involuntary admissions are concerned, while emphasising the protections for mentally ill persons as a vulnerable population group, as set out in the SA Constitution.

Effect of Corporate Governance on the Performance of Financial Institutions in Nigeria

This study investigated the relationship between corporate governance and the performance of some selected commercial banks in Nigeria. The purpose of the study is to ascertain the causal relationship between these two variables – corporate governance and financial performance. The study employed cross sectional survey research design, capturing 12 commercial banks studied over the period of 5 years (2015-2020). The matrixes of corporate governance that was used are size of the board, accountability of the board, diversity of the Board. Financial performance indicator is return on investment. Data was collected for the both independent and dependent variables. The independent variables which are board accountability, board size and board diversity were investigated against the financial performance of the selected banks. This is to underscore the causal relationship between these variables and Return on Investment (ROI). Return on Investment (ROI) is our indicator of financial performance. The sample size of the study is 15 financial institutions (commercial banks) using purposive sampling techniques. The study utilized secondary source of data, which include the financial reports of these banks and the corporate governance internal documents of these banks. The data collected was analyzed using multi linear regression data analysis techniques. The population for the study was derived from the Nigerian stock exchange which are 22 in number. The study therefore used census sampling to select all the 22 banks. However, data was only collected for 12 due to incomplete data for the remaining 10. The finding revealed that there is no significant relationship between board size and ROI, there is no significant relationship between board diversity and ROI, and finally, there is also no significant relationship between board accountability and ROI. The study provides an in-depth relationship between the board size, board diversity, board accountability and ROI of commercial banks.

Regulating against False Corporate Accounting: Does the Companies Act 71 of 2008 Have Sufficient Teeth?

This article questions whether the enforcement mechanisms in the Companies Act 71 of 2008 (the Act) are adequate deterrents to financial reporting misconduct and whether they provide suitable sanctions to punish wrongdoers. The South African regulatory approach to company directors and financial reporting compliance places great emphasis on stakeholder protection and board accountability. By criminalising the publication of false financial statements, providing civil remedies to prejudiced stakeholders and robust protection for whistleblowers, empowering regulatory agencies to investigate allegations of accounting fraud and penalise transgressors, and by creating a broad net of liability for corporate decision-makers who allow or cause the publication of false financial reporting, the Act takes a firm stance that accounting fraud must be discouraged. The Act’s enforcement mechanisms in respect of financial reporting are commendable, but detection and enforcement will likely remain challenging unless a concerted effort is made to educate the public about financial reporting misconduct and its dangers, sufficient funding is provided to the regulatory agencies, consistent use is made of the available criminal, civil, and administrative remedies, and Parliament reconsiders the appropriateness of the maximum penalties for accounting fraud.

The Greek paradigm of corporate governance and board of directors

Corporate governance encompasses a multidisciplinary approach, which includes the internal and external factors that affect the interests of a company’s stakeholders. The Greek corporate governance framework of listed companies has initially been established in accordance with EU regulation and soft law recommendations, in order to enhance board accountability and transparency, empower shareholders’ activism and promote financial disclosure. In that regard, it has recently been reformed by the provisions of Law 4706/2020, aiming mainly: to empower the strategic and supervisory role of the board of directors, by introducing a clear description of the obligations of non-executive and independent non-executive directors and by including the establishment of an “adequacy (internal fit-and-proper) policy” for the appointment of board members. Accordingly, two new compulsory committees are added, the nomination and the remuneration committee, which should entirely be composed by non-executive members and are invested with an advisory role in determining the remuneration policy and proposing board candidates. Furthermore, the adoption of a Corporate Governance Code is rendered substantial for all listed companies. These provisions illustrate specifically the reform of the internal corporate governance structures, which should be implemented having regard to the general principles of transparency and proportionality

Corporate Governance, Shariah Governance, and Credit Rating: A Cross-Country Analysis from Asian Islamic Banks

This study aimed to investigate the association between corporate governance characteristics, shariah governance characteristics, and the credit rating of Asian Islamic banks. To do so, we collected data from 22 banks during the 2006–2018 period. In total, we observed 286 data points. Credit rating was measured through an adaption of the credit rating scale that measured the long term credit of Islamic banks on an ordinal scale. From these data, 19 scores (Aaa) were considered high credit ratings and 1 score (C) was considered a low credit rating. Descriptive statistics, correlations, and the ordered logit regression model were applied in a panel setting. We found that the board interlock, board independence, CEO duality, and board foreign directorship negatively affected credit ratings. We also found that the board size, board accounting, finance knowledge, presence of women on the board, shariah board size, presence of supervisory shariah board, the shariah board interlock, and presence of female shariah scholars all were positively associated with credit ratings. This study suggests that Islamic banks can access more funds with higher shariah compliance. As such, we concluded that evaluating organizations’ credit ratings must consider shariah governance attributes as determinants of the credit rating of Islamic banks.