Governance Code Research Articles

Effect of The Board of Directors Size, Independence, and Frequency of Board Meetings on Audit Fees: Evidence From GCC Market

Purpose: This study aims to examine the potential impact of board size, board independence, and meeting frequency on audit fees for companies listed on the financial markets of the United Arab Emirates (UAE). Design/Methodology/Approach: The Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) are the two financial markets in the UAE. The data utilised in the investigation were obtained from the ADX and the DFM. The data was gathered over six years, from 2011 to 2016. The final sample comprises 312 observations. The study employs descriptive and correlation tests, in addition to multiple regressions, as statistical methods. Findings: The analysis revealed a strong correlation between audit fees and both the independence and frequency of board meetings. The findings demonstrated a positive correlation between stringent corporate governance procedures and the requirement for superior audit quality, resulting in higher audit costs. The results also indicated a significant correlation between business size, profitability, leverage, and audit fees. Originality/Value: Due to the recent implementation of the corporate governance code in the UAE and its financial markets, including the ADX and DFM, the efficacy of the code remains uncertain and, therefore, subject to scrutiny. Inadequate governance and audit standards may adversely impact the integrity of financial reporting. Nevertheless, there is limited empirical research investigating the elements influencing the quality of financial reporting in the UAE. This study contributes to the existing literature by enhancing comprehension of the impact of the board of directors on audit quality, utilising data from a GCC country.

Corporate governance and firm performance: Evidence from political instability, political ideology, and corporate governance reforms in Pakistan

AbstractWe examine impact of corporate governance on firm performance following the implementation of the changes to the Code of Corporate Governance of Pakistan in 2012. Our sample period from 2008 to 2022 include periods of political instability and shifts in Pakistan's political landscape, providing an opportunity to examine the effectiveness of corporate governance mechanisms in enhancing accounting‐ and market‐based firm performance measures. We find significant improvements attributed to reforms in the regulatory framework surrounding corporate governance practices particularly from expanded scope and composition of boards and audit committees. This led to broader capabilities and effective controls, thus improving firm performance and investor confidence more so during periods of political instability and changes in political ideology.

The Impacts of Board Diversity on CSR Performance--based on the UK Corporate Governance Code 2024

With the process of globalization and the rapid development of companies, corporate social responsibility (CSR) has received increasing attention. Based on triple bottom line (TBL), companies must not only achieve economic progress, but also be expected to fulfill CSR, making contributions to the natural environment and the community prosperity. As a vital part of the company management, the composition of the board of directors has always been a focus of attention. There are many standards and indicators for corporate governance (CG), including the UK Corporate Governance Code 2024, which will be utilized as the theoretical basis for this research. This research focuses on the principles of diversity of the board, and their impacts on CSR. Surrounded this topic, the latest opinions published in recent years will be groped and analyzed.

Relationship between sharia supervisory board attributes and sustainable development goals (SDGs) financing in Islamic banks

ABSTRACT It has been widely believed that Islamic finance holds a potential role in achieving sustainable development goals (SDGs). Hence, considering the power of the Shari’a Supervisory Board (SSB) to approve or reject Islamic banking products, this paper investigates the association between SSB attributes and Islamic banks’ SDG financing. The study utilized unbalanced data generated from a sample of 32 fully Sharia-compliant Islamic banks across nine (9) countries between 2013 and 2021. The findings reveal that SSB size and SSB financial expertise significantly reduced Shariá-compliant financing for agriculture, education, and health economic activities. Besides, while SSB foreign scholars have an insignificant association with agriculture and education financing, they significantly reduced financing for health. In contrast, SSB meetings and SSB gender diversity significantly increased funding for these activities. These findings could assist regulators in revising the SSB codes of governance to enhance their effectiveness in supporting Islamic banks’ activities aimed at achieving SDGs.

Corporate Governance and Corporate Social Responsibility Practices in Listed Deposit Money Banks in Nigeria

The increasing emphasis on Corporate Social Responsibility and its potential impact on stakeholder’s satisfaction and financial performance have driven the need for this research. This study examined the relationship between corporate governance and corporate social responsibility (csr) practices among listed deposit money banks in Nigeria. Ex-post facto research design was employed. The population of the study comprised of the 15 deposit money banks in Nigeria listed on the Nigerian Exchange Group (NGX) as at 31st December,2022, which formed the sample size using census sampling method. Data were obtained from the annual audited financial reports of the banks from the period 2011 to 2022. Data were analysed using the Panel Corrected Standard Errors (PCSE) regression method. The findings revealed that there is a significant positive relationship between transparency measured by the transparency index and CSR practices, a significant positive relationship between environmental sustainability measured by the Dow jones sustainability indices and CSR, and stakeholders’ engagement measured by stakeholder’s feedback score has a positive but insignificant relationship with CSR practices. The study concluded that adherence to corporate governance codes, especially in areas of environmental sustainability and transparency, enhances csr practices. It recommended that Deposit money banks should pay keen attention to corporate governance practices, especially in environmental sustainability. Regulators are also advised to entrench stakeholders’ engagement committees in corporate governance codes to foster better stakeholder engagement.

Функция контроля совета директоров финансовой организации

In compliance with dated by 2014 Code of corporate governance, ʻthe Board of directors carries out strategic management, determines the main principles of risk management and internal control and also controls the executive bodies and carries out other key functionsʼ. The Central Bank of the Russian Federation issued in 2019 the Guide for the members of the board of directors ʻin financial organizations, and emphasizes in this document that in financial organizations the board of directors carries out two main functions — the function of control and strategic managementʼ. This is not casual that the regulator calls first the function of control as the most significant. The control function of the board of directors in financial organization is the subject of the study in the present article.

Nexus of Corporate Governance, Financial Reporting Quality and Investment Efficiency

This paper examines the relationship between corporate governance, financial reporting quality, and investment efficiency using data from 207 non-financial firms listed on the Pakistan Stock Exchange (PSX) for a period of 9 years from 2008 to 2016. Since the Pakistan Corporate Governance Code was revised in 2012, therefore consistent with previous studies, the effect of the promulgation of the new corporate governance code on financial reporting quality is also analyzed. Thus, using the GMM model, the results of the study show that the Corporate Governance Code 2012 improves the quality of financial reporting. Owners of family firms confiscate the wealth of minority shareholders by deteriorating the quality of financial reports. Independent directors of the board and independent directors of the audit committee effectively monitor the financial reporting process. Family ownership, board independence and audit committee independence interact with the code in affecting financial reporting quality and substitute or complement each other. Inefficient investments decrease financial reporting quality. Furthermore, the new governance code has an incremental effect on the relationship between investment inefficiency and financial reporting quality.

Corporate Governance Status of the IT Companies Listed on the Bucharest Stock Exchange

Abstract The paper presents the corporate governance status for the information technology (IT) companies listed on the Bucharest Stock Exchange for 2022, the most recent year for which the companies’ annual reports are available. The paper is part of the authors’ research series which focuses on SMEs from the Romanian IT sector, as one of the most dynamic sectors with growth perspectives nationally. Corporate governance is essential for the business success and sustainability of any company. It provides a framework made of principles, processes and practices for a company to be directed and controlled. In general, it covers aspects of efficiency and accountability for the board of directors, shareholders, management, statutory committees and control systems. For listed companies, these aspects are complemented by regulatory compliance, disclosure and transparency, as well as stakeholders’ engagement. The research is based on a content analysis supplied by Bucharest Stock Exchange, the reports of the IT listed companies and local and international financial institutions. The corporate governance status of the listed companies and the sector overall is determined by using the provisions of the Bucharest Stock Exchange Corporate Governance Codes for the main market and junior SMEs market (called AeRO) and analyzing, through a binary analysis, the annual comply or explain statements of the listed companies. Results show that IT listed companies on the Bucharest Stock Exchange comply with the majority of the provisions of the Corporate Governance Code, even though certain gaps need to be addressed.

The Complementarity and Substitution Effects of CSR‐Focused Governance Mechanisms on CSR Decoupling

ABSTRACTResearch Question/IssueThe study examines whether CSR‐focused governance mechanisms (CSR committees, standalone CSR reports, and CSR contracting) operate as complements or substitutes for each other in mitigating CSR decoupling.Research Findings/InsightsThe study finds that CSR‐focused governance mechanisms diminish CSR decoupling and enhance CSR credibility in UK firms. In addition, the simultaneous presence of CSR committees and standalone CSR reports has a complementary effect in mitigating CSR decoupling. Conversely, the combinations of CSR committees and CSR contracting as well as standalone CSR reports and CSR contracting exhibit a substitute relationship. These impacts remain consistent when categorizing CSR decoupling into underreporting and overreporting. During the financial crisis of 2008–2009, the complementary relationship between CSR committees and CSR reports remained consistent, although the substitution between CSR committees and CSR contracting, and CSR reports and CSR contracting, is only observed after the crisis.Theoretical/Academic ImplicationsThe study innovatively contributes to the agency theory literature by adopting a bundle corporate governance approach while focusing on specific CSR governance mechanisms to address agency issues. It empirically shows that complementary combinations of CSR‐focused governance mechanisms signify a marginal benefit in reducing CSR decoupling, leading to a reduction in agency costs.Practitioner/Policy ImplicationsThe study offers several implications. First, it helps firms create ideal combinations of different CSR‐focused governance mechanisms that provide superior marginal benefits. Second, firms' stakeholders, especially the investors, could identify the usefulness of adopting CSR‐focused governance mechanisms in CSR reporting. Finally, it could also attract regulators' attention toward the weaker aspects of the existing corporate governance code regarding CSR.

Closing the gender wage gap in the boardroom: the role of compliance with governance codes

PurposeThis paper aims to analyse the gender wage gap (GWG) in the board of directors at the executive-director level. The authors aim to answer two questions: (1) Is the GWG explained by differences between males and females, by discriminatory causes or by both? and (2) what are the main factors that cause or increase the existence of GWGs? Specifically, the authors pay special attention to compliance with good governance codes as a fundamental variable in explaining the GWG.Design/methodology/approachThe study uses a sample of directors in Spanish companies listed on the continuous market from 2013 to 2021 and uses Blinder–Oaxaca decomposition and unconditional quantile regressions to analyse the GWG.FindingsThe findings demonstrate both discriminatory reasons and differences between individuals when explaining the GWG and showing that compliance with remuneration practices issued by good governance codes considerably reduces the GWG for all remuneration components.Practical implicationsThe study confirms adequacy of regulator remuneration recommendations but highlights GWG persistence within boards. To counter this, enforcing pay transparency aids female directors’ advancement, reducing bonuses’ impact on wage disparity, necessitating monitored laws for fairer compensation systems and meeting 40% of women directors’ proposals.Social implicationsPrimarily, this study significantly influences public attitudes towards GWG. Specifically, it calls for companies to not only increase female leadership representation but also to ensure equitable remuneration aligned with their male counterparts, conduct regular pay equity assessments, implement pay transparency policies and support work-life balance through flexible hours and parental leave. Furthermore, the work serves as a crucial resource for female directors, empowering them to advocate for their rights in the context of GWG.Originality/valueThis research offers nuanced insights into the GWG in corporate boards, corrects the main limitations of previous studies and calls for regulatory reinforcement and the active involvement of female directors and firms in creating equitable policies.

Board Diversity and Governance Outcomes of State Corporations in Kenya

Boards play a critical leadership role in good governance of Kenya’s state corporations, which exit by law to deliver effectual services to the citizenry. The sector has since independence undergone various reforms aimed at continuous improvement, mitigating inherent challenges and to deliver efficient service. In 2015, the Government of Kenya upscaled its governance architecture by sanctioning a governance code. Despite this endeavour, the state corporation’s ecosystem has recorded unimpressive outcomes on the corporate governance front. This study sought to establish the relationship between board diversity and governance outcomes of state corporations in Kenya. A descriptive survey design was used on a target population of 138 state corporations and a simple random sampling technique used to draw a 20% study sample, amounting to 28 state corporations. The study collected primary data using a structured questionnaire. A drop and pick method were used to administer the questionnaire to three respondents from each sampled state corporation upon consideration and application of accruing research protocols. The data collection instrument was pretested prior to the actual data collection to check reliability and validity upon which the emergent issues were corrected and instrumentation enhanced. The collected data was analysed using simple regression analysis vide SPSS version 21. The findings have been presented using tables. The study established a significant positive relationship between board diversity and inclusion and governance outcomes of state corporations in Kenya and concluded that board diversity and inclusion is a key driver of corporate governance outcomes. The study recommended that firms should mainstream diversity and inclusion in order to drive sustainable advantage in boards as a tool to effective leadership and governance. Future studies may be undertaken in the private sector for contextual comparability

Protection of stakeholders’ interests in the Indian corporate landscape: examining the “ifs and buts”

ABSTRACT In the last decade, the Indian corporate landscape has undergone a significant transformation, particularly in terms of establishing rights that benefit stakeholders. These reforms are said to prioritize the interests of stakeholders. New corporate legislations and governance codes are heralded as the harbingers of change. This article argues that despite the legislative reforms, the effectiveness of these changes is limited, and the interests of stakeholders remain largely unprotected. The article also traces the history of the idea of “stakeholderism” in India through legislative changes and judicial interpretations to illustrate the non-linear evolution of the concept guided solely by political-economic factors. The article argues that the laws governing corporations vis-à-vis the rights of stakeholders are nothing more than lip service, ultimately leading to a severe mismatch in the policy vision and implementation. After all, a well-intended law fails to achieve its desired objective if it is inadequately enforced.

Critical Perspectives of Organisational Behaviour towards Stakeholders through the Application of Corporate Governance Principles

Corporate governance is gaining interest not only from investors but companies that want to operate in international markets, prompting a more thorough analysis of the field to prioritise stakeholder interests alongside shareholder value. By adopting a holistic approach that considers stakeholders’ diverse needs and expectations, companies can build resilience, foster trust, and create sustainable value for all stakeholders, ensuring long-term success and societal impact. This paper analyses corporate governance principles applied at the international, European, and national levels, emphasising the importance of the field for the stakeholders. The practical approach of the paper analyses the application and compliance of the corporate governance code of 18 companies in the field of financial intermediation and insurance, which are listed on the Bucharest Stock Exchange, underlining the crucial role of transparency of operations in instilling confidence and reassurance in stakeholders. The conclusions present proposals for measures to improve corporate governance practices at the level of companies.

Indonesia Insurance Corporate Governance: A Literature Review

The aim of this research is to present and evaluate corporate governance framework for insurance companies in Indonesia based on previous researches related to corporate governance and The Indonesia Financial Services Authority Regulation. We evaluate concerning to governance objectives that include protecting shareholder interests, enhancing shareholder value, ensuring accountability, managing risk, promoting ethical behavior, transparency and disclosure, balancing interests, strategic decision-making, compliance with laws and regulations, efficient operations, long-term sustainability, stakeholder engagement, adapting to change, creating a positive reputation, and facilitating investment. We discuss the corporate governance framework for insurance companies in Indonesia based on the Indonesia Financial Services Authority regulation that states governance structure, corporate governance code, self-assessment & governance report, governance process and corporate governance principles to meet governance objectives. Although every year all insurance companies report corporate governance, but some companies have been stopped by the Authority. This raises research problems for the future relating to why insurance companies that have complied with corporate governance provisions have been stopped by the Authority.

Corporate governance and financial fraud occurrence – case study on Romanian companies

PurposeThe aim of this study is to approach the way in which corporate governance influences the occurrence of financial fraud, as expressed by the M-Beneish score. In order to get further into the topic, we have first computed a corporate governance score based on the comply-explain statement and then selected a few elements that are part of the corporate governance reporting: equilibrium of board members (EQUIL), independence of board members (INDEP), selection of the board members (NOM), remuneration policy (REM), audit committee (AUDIT) and the proportion of female directors on boards (GenF). They were tested, one by one, using the financial fraud score to see the way in which they interact.Design/methodology/approachThe study is conducted on a sample of 65 companies listed on the Bucharest Stock Exchange (BSE) for the 2016–2022 period. The data were processed using three-stage general least square [general least squares (GLS), with iteration, igls and option] with a common first-order panel-specific autocorrelation correction, so as to explain how a poor adoption of the corporate governance score and its elements has a negative implication for the M-Beneish score, controlling for the auditor opinion, type of auditing company and if the company is privately owned.FindingsThe results support most of our research hypothesis, revealing that a poor adoption of the corporate governance score and its components – AUDIT, EQUIL, INDEP and GenF – negatively influences the M-Beneish score, i.e. a low corporate governance score will lead to an increase in financial fraud. This is an encouraging aspect, for an improved adoption of the corporate governance principles reduces the occurrence of financial fraud.Research limitations/implicationsThis is a study that concerns the relationship between corporate governance and financial fraud for the case study for Romania.Practical implicationsThe study highlights the importance of adopting the corporate governance code applied to the Romanian business environment. By measuring the presence of financial fraud appearance through the M-Beneish score, we have managed to outline the negative relationship between the two components. Thus, it is an important aspect of which companies should take account, so they will have long-term benefits and ensure the continuity of the business.Social implicationsThe policy implications of this project are for policymakers, so that they will understand how a good corporate governance mechanism will enhance high-performing businesses. Different aspects regarding corporate governance were validated and are in the process of being validated. Managers can extract and try to understand and apply the good characteristics of corporate governance for the well-being of their companies. At a broader level, the macroeconomic environment will increase its own well-being while encouraging market players to enhance qualitative corporate governance reporting. There is no doubt that corporate governance has a positive impact on businesses.Originality/valueThe study highlights the importance of adopting the corporate governance code as applied to the Romanian business environment. By measuring the occurrence of financial fraud using the M-Beneish score, we have managed to outline the negative relationship between the two components. Therefore, this is an important aspect that companies should take into account in order to have long-term benefits and ensure the continuity of their business.

Capital market effects of corporate transparency and sustainability: evidence from an emerging economy

PurposeThe study aims to examine the association between corporate transparency and firm value (capital market effect) and investigate whether auditor choice moderates this relationship.Design/methodology/approachThis study uses the Malaysian Institute of Corporate Governance (2017) data set, which provides scores on anti-corruption commitment, organisational transparency and sustainability of Malaysia’s top 100 listed firms. The methodology entails an ordinary pooled least square regression method for empirical research.FindingsThe positive association between corporate transparency and firm value is more evident in anti-corruption and sustainability initiatives. More importantly, government-linked companies have higher scores. Firms with enhanced anti-corruption commitment are more likely to have higher firm value, and this relationship is more evident for politically connected firms. This study also finds that auditor choice is associated with the firm value in the sampled listed firms.Practical implicationsThe findings provide implications for investors and regulators on the role of corporate transparency in an emerging capital market.Social implicationsThe study recommends that emerging market regulators continue enhancing corporate governance codes and practices to improve reporting transparency for listed firms.Originality/valueThis study contributes to the growing literature on sustainability disclosures by incorporating corporate reporting transparency, explicitly relating to firms’ commitment to anti-corruption, organisational transparency and sustainability.

Impact of Saudi corporate governance code and governance structures on industrial firms' performance in Saudi Arabia

This research focuses on examining how the recent Saudi Corporate Governance Code (SCGC) and internal governance structures within companies affect the performance of industrial firms listed on the Saudi Stock Exchange. The authors studied 62 industrial firms from 2012 to 2020. They analyzed data using two models to test their hypotheses, looking at firm performance through two financial indicators: return on assets (ROA) for the first model and return on equity (ROE) for the second. Both models considered the same factors: SCGC, the size and independence of the board, the size and independence of the audit committee, how often the audit committee meets, and how concentrated the ownership is. The results indicated that applying the SCGC leads to better company performance based on ROA. However, there was no noticeable impact on performance from the board or audit committee size. Likewise, having more audit committee meetings did not improve performance. On the other hand, the independence of the board and audit committee, along with ownership concentration, did have a positive effect on performance. This study adds to the discussion on the economic impacts of the SCGC in the Saudi market, offering valuable insights for companies, investors, and policymakers like the Capital Market Authority (CMA) and the Saudi Organization for Chartered and Professional Accountants (SOCPA). These insights could guide adjustments to the SCGC that better suit the unique aspects of the Saudi market.

The Moderating Effect of Corporate Governance Mechanisms on the Nexus between Sustainability Reporting and the Value of Nigerian-Listed Manufacturing Companies

The study investigates the Moderating Effect of Corporate Governance on the Nexus between Sustainability Reporting (SR) on the Value of listed Manufacturing Companies in Nigeria, precisely the effect of Board Size (BS) and Board Independence (BI) on the nexus subsisting between SR and FV. Secondary data for 36 sampled companies was obtained from the Nigerian Exchange Group (NGX) database for eleven (11) years, 2012–2022, which was analysed using descriptive statistics and a two-step GMM system. Findings therefrom revealed that SR exhibits a positive and significant impact on EVA. At the same time, it was found not to influence Tobin's Q. Further revealed from the analysis was that none of the CG mechanisms introduced had a moderating effect on either of the FV proxies used. The study recommended that management provide clear and concise information on how sustainability initiatives align with the company's financial goals and contribute to value creation over time. These companies should invest in energy efficiency and resource management systems, develop sustainable products and services that meet market demand and align with sustainability goals to reduce their cost of capital. Also, the Financial Reporting Council of Nigeria (FRC) should make a provision requiring companies to appoint a significant number of the board with relevant knowledge in sustainability issues and that there is the need for them to review the Nigerian Code of Corporate Governance, specifically board composition, to include sustainability committees.

When the going gets tough: Board gender diversity in the wake of a major crisis

Gender diversity on corporate boards continues to present a significant challenge, exacerbated by significant external disruptions such as financial crises or the recent COVID-19 pandemic. These exogenous shocks pressure organizations to reconcile diversity imperatives with more immediate concerns arising from the crises at hand. Employing elements from gender role and institutional theories, we argue that major exogenous shocks will negatively affect (i.e., reduce) gender diversity in corporate boards. Moreover, we propose that female CEOs and the strength of institutional mechanisms (i.e., quotas and corporate governance codes) will moderate (i.e., weaken) the negative effect of these shocks on board gender diversity. We examine these hypotheses in the context of the last global financial crisis (GFC), employing a panel of 10,181 unique firms across 21 countries between 2000 and 2015. We apply a two-way fixed effect difference-in-difference research design, complemented by an extensive battery of additional analyses to ensure robustness. Our results confirm a substantial decline in board gender diversity following the GFC. However, we do not find empirical support for female CEOs or institutional mechanisms in mitigating these diversity reductions. Following these findings, we propose several implications for research and policy.

Peeking into Corporate Greenwashing through the Readability of ESG Disclosures

Faced with the widespread issue of greenwashing, there is a pressing need for an effective approach to assess the extent of corporate involvement in such hypocritical practices. This study aims to address this concern by examining the association between corporate ESG disclosures’ readability and greenwashing. We gauge the readability using a modified Fog Index and construct a company’s peer-relative greenwashing score based on data from third-party databases. The empirical analysis reveals a negative relationship between the level of corporate greenwashing and the readability of its ESG disclosures, suggesting that companies whose ESG disclosures are more readable are less likely to engage in greenwashing. This negative relationship is particularly pronounced in companies characterized by higher levels of information asymmetry. However, the relationship is weaker after 2018, when the “Code of Corporate Governance for Listed Companies” was implemented. In conclusion, our research highlights the significance of ESG disclosure readability in effectively conveying and predicting corporate greenwashing practices. This study provides valuable insights for investors seeking to evaluate corporate performance and make well-informed investment decisions.