Component Of Corporate Governance Research Articles

Effectiveness of internal controls mechanisms in preventing and detecting fraud

This review examines the effectiveness of internal control mechanisms in preventing and detecting fraud within organizations. Internal control mechanisms are essential components of corporate governance, designed to safeguard assets, ensure the accuracy of financial records, and promote operational efficiency. The study begins by defining internal controls and their critical role in fraud prevention and detection, highlighting the significance of a robust control environment. The components of the internal control environment, risk assessment, control activities, information and communication, and monitoring activities are discussed to provide a comprehensive understanding of their structure and function. Preventive controls, such as segregation of duties, authorization processes, and access controls, are analyzed to assess their role in minimizing the risk of fraud occurrence. Case studies and examples of organizations with effective preventive measures are presented to illustrate best practices. The challenges and limitations faced by organizations in implementing preventive controls are also explored. Detective controls, including reconciliation processes, internal audits, and whistleblower hotlines, are evaluated for their ability to identify and expose fraudulent activities. The review reviews case studies demonstrating the success of detective controls in uncovering fraud and discusses the obstacles organizations encounter in maintaining effective detection mechanisms. The evaluation section of the study focuses on metrics and indicators used to assess the effectiveness of internal controls, such as the reduction in fraud incidents and increased detection rates. Tools and techniques for evaluation, including internal and external audits, are examined to understand their role in ensuring control effectiveness. The review concludes by offering best practices for enhancing internal control mechanisms, emphasizing continuous monitoring, employee training, and the adoption of advanced technologies. The critical role of management in fostering a culture of ethical behavior and supporting internal audit functions is underscored. Recommendations for organizations and directions for future research are provided to guide ongoing efforts in fraud prevention and detection. Keywords: Fraud Prevention, Internal Control, Detective Control.

Executive compensation contract effectiveness and firms' green technology innovation structure

As a crucial component of corporate governance, exploring the impacts of the executive compensation contract on green innovation structure is conducive to promoting green transition. Based on a sample of Chinese listed companies from 2012 to 2022, this study reveals a significant enhancement of the executive compensation contract in corporate green innovation structure. The finding points out that the executive compensation contract can stimulate corporate green innovation activities, promoting substantive green innovation. This impact operates mainly through mitigating managers` myopia, and enhancing corporate management levels.

Board roles required for IT governance to become an integral component of corporate governance

Digitization is fundamentally changing how organizations create and deliver business value, with information technology (IT) leveraged to improve business processes and controls. Its pervasive effects upon organizations’ risk exposures and performance requires boards’ prudent and integrated consideration of the resultant IT opportunities and risk management. However, IT governance research suggests that boards’ governance of IT is more commonly delegated and relegated to management and committees than integrated as part of their corporate governance practices. In response, our study contributes timely and structured understanding of boards’ roles and the mechanisms required for IT governance to become an integrated component of corporate governance.

THE POSSIBILITIES OF APPLYING ARTIFICIAL INTELLIGENCE FOR THE PURPOSE OF DEVELOPING INTERNAL CORPORATE CONTROL

Internal corporate control is one of the important components of effective corporate governance. Its mechanisms are designed to serve the internal objectives of the company and its internal stakeholders. As a general rule, internal corporate control should contribute to safeguarding the company's assets by preventing errors and inappropriate actions through the appropriate promotion of policies, procedures and technical safeguards. Artificial intelligence has become a natural attribute of the post-industrial age and its application in the area of internal corporate control has become welcome. These include data analytics, predictive analytics, automation of routine tasks, fraud detection, artificial intelligence processing, continuous monitoring and customisable alerts. Harnessing them tends to substantially elevate the corporate governance process. Corporate governance is an attempt to implement systems of risk analysis, verification, evaluation and control that contribute to the effective management of their operation. Therefore, the concept of corporate governance will need to be addressed in conjunction with risk management throughout the organisation and the evolution of the financial management and internal control system. The purpose of the research is to investigate the mechanisms of internal corporate control efficiency in the Republic of Moldova, to substantiate the directions and strategies for organizing internal control of corporate financial resources.

Executive compensation contract effectiveness and firms' green technology innovation structure

As a crucial component of corporate governance, exploring the impacts of the executive compensation contract on green innovation structure is conducive to promoting green transition. Based on a sample of Chinese listed companies from 2012 to 2022, this study reveals a significant enhancement of the executive compensation contract in corporate green innovation structure. The finding points out that the executive compensation contract can stimulate corporate green innovation activities, promoting substantive green innovation. This impact operates mainly through mitigating managers` myopia, and enhancing corporate management levels.

Effects of Audit Committee on Fraudulent Financial Reporting Among Listed Firms in Kenya.

Fraudulent financial reporting poses significant risks to the integrity of financial markets, investor confidence, and the overall economy. As a result, effective corporate governance mechanisms are crucial in mitigating the occurrence of fraudulent activities. The audit committee, as a key component of corporate governance, plays a vital role in overseeing financial reporting and providing assurance on the reliability of financial statements. This paper aims to explore the effects of audit committee characteristics on fraudulent financial reporting of listed firms in Kenya. Specifically, the study assessed the effect of Audit Committee; gender, financial expertise, size and independence on fraudulent financial reporting. The study was anchored on the Fraud Pentagon theory. Explanatory research design and longitudinal research design was employed in this study where secondary panel data was obtained through content analysis from audited financial statements spanning from 2012 to 2021. The study targeted listed firms in Kenya during the study period and only firms that met the inclusion and exclusion criteria were retained. After applying the inclusion/exclusion criteria only 40 firms formed the study population. Data was analyzed using descriptive and inferential statistics with the significance of each independent variable being tested at 95% confidence level. The findings show that Gender (β1 = -.1154, p=.000.05) and Financial expertise (β2 = -.200, p=.000.05), Size (β3 = -.1457, p=.001.05), and Independence (β4 = -.1818, p=.000.05) had negative and significant effect on fraudulent financial reporting on firms in Kenya. Thus, the study concluded that audit committee characteristics such as gender variability, audit committee size, audit committee financial expertise and audit committee independence significantly influence fraudulent financial reported among listed firms in Kenya. Based on the findings, the study recommends enhancing the effectiveness of the audit committee in preventing fraudulent financial reporting, organizations should strive for gender diversity within the committee. This can be achieved by actively seeking and appointing qualified female candidates to the audit committee. Promoting diversity ensures a range of perspectives and experiences, leading to more robust discussions, increased scrutiny of financial reporting practices, and improved decision-making. Secondly, Organizations should prioritize the independence of the audit committee by ensuring that committee members are free from any conflicts of interest and have no direct ties to management. Additionally, Organizations should carefully consider the size of the audit committee to optimize its effectiveness in addressing fraudulent financial reporting. Lastly, Organizations should establish mechanisms for continuous monitoring and evaluation of the audit committee's performance. Regular assessments of the committee's effectiveness in detecting and preventing fraudulent financial reporting can help identify areas for improvement.

Corporate Governance Mechanisms on Earnings management in the Indonesian Banking Sector

Research Aims: This research aims to examine the influence of corporate governance on earnings management. The corporate governance variable is proxied by independent commissioners, audit committees, and audit quality. The data in this research is secondary data originating from the financial reports of banking companies listed on the Indonesia Stock Exchange in 2019-2022. 
 Design/methodology/approach: The analytical techniques used to test the hypothesis in this research are descriptive statistics, classical assumption tests, and multiple linear regression analysis. The type of data used in this research is quantitative data. The sample for this research was obtained using a purposive sampling method, and a sample of 116 banking companies was obtained.
 Research Findings: Test results using multiple linear regression show that the independent commissioner variable does not affect earnings management. the audit committee variable has negative impact on earnings management while audit quality variable have a significant positive effect. Test results also show that the control variable ROA has a significant negative influence on earnings management (EM). However, the leverage control variable does not influence management (EM).
 Theoretical Contribution/Originality: This research contributes by providing nuanced insights into the specific impact of corporate governance components on earnings management within Indonesian banking companies. The findings offer a deeper understanding of the intricate relationships between governance mechanisms and financial practices.
 Research limitation and implication: Limitations include the focus on banking companies and the specific time frame. Future research may explore diverse sectors and extend the study period. The results imply the need for policymakers and practitioners to recognize the varying impacts of different corporate governance components on earnings management for effective financial oversight.

The concept and essence of corporate governance

The article is devoted to the study of the basic concepts and essence of corporate governance. The main aspects of corporate governance are characterized, including its objectives, functions, principles, structure and role in the stable functioning of enterprises. It is determined that corporate governance can be viewed as a set of legal, economic, organizational norms and rules within which a corporation (company) operates, and on the basis of which the relations between all its participants are built. Corporate governance unites various participants in corporate relations, each of which takes care of its own interests, establishes mechanisms and methods of interaction between them. It is highlighted that most studies related to corporate governance have a rather narrow focus and are conducted exclusively at one of these levels. The issue under study is multifaceted and also includes the definition of functions and components of corporate governance, which include: creating a strategy and setting goals, ensuring financial stability, ensuring transparency and compliance, and facilitating interaction with stakeholders.

Analysis of the Connection Between Executive Remuneration and Corporate Fiscal Achievement

The interplay between top executive pays and fiscal achievements remains at the forefront of discourse in organizational leadership and governance frameworks. Understanding the connection between executive incentives and performance outcomes is crucial for effective corporate governance. This study dives deep into the tapestry of research that dissects these nuanced interactions. Executive compensation, a critical component of corporate governance, directly influences the behaviors and decision-making of top executives. Simultaneously, financial performance serves as a key indicator of a company's operational health and ability to generate value. According to the analysis, the relationship between both is complete and multifaceted. In some cases, higher levels of executive remuneration are positively correlated with improved financial performance, while negative correlations also exist. The relationship between the two is influenced by characteristics, e.g., corporate governance, industry characteristics, company performance, and individual executive characteristics. Numerous studies are currently available on the relationship between the two. However, it is important to acknowledge the limitations and shortcomings of the existing studies, which may impact the generalizability and applicability of the findings. In conclusion, the nexus between executive compensation and financial output is a complex and multidimensional issue that requires further in-depth research and study.

Financial and non-financial disclosures on sustainable development: The mediating role of environmental accounting disclosure practices

Purpose: Environmental accounting is a complementary and contributory component of corporate governance that can achieve sustainable growth and development. This study investigates the financial and non-financial disclosures that influence sustainable development through the mediating effect of environmental accounting disclosure practices. Research methodology: Self-administered questions in a closed-ended questionnaire were used, employing a five-point Likert scale to quantify opinions. Data were collected purposively and physically by the researchers from 338 respondents using a pretesting modified process, a pilot survey, a final survey, and finally analyzed using the PLS-SEM. Results: Our study reveals that non-financial disclosure has both direct and indirect effects on sustainable development through environmental accounting disclosure practices, while financial disclosure only has indirect effects. Environmental accounting disclosure practices exert a statistically significant influence and predictive power on sustainable development. Limitations: Our study is limited to listed textile companies, without considering non-listed textiles, ready-made garments (RMG), and other listed manufacturing companies in Bangladesh. Contribution: The study findings convey a meaningful message to listed textile companies, their managers, researchers, regulators, and practitioners, urging them to integrate and enhance environmental practices for sustainability. These findings contribute significantly to the literature and may influence multinational buying companies. Novelty: This pioneering accounting research aims to articulate the scale and theoretical validation of accountants’ perceptions by studying the mediating effect of environmental accounting disclosure practices between financial and non-financial disclosures and sustainable development through PLS-SEM.

Integrating corporate governance and forensic accounting: A sustainable corporate strategy against fraud

In the realm of financial oversight and corporate management, forensic accounting (FA) holds a critical position, serving as a central control mechanism and being widely recognized as an essential component of corporate governance. FA plays a crucial role as a central control mechanism and is acknowledged as a pivotal element of corporate governance. Consequently, it needs to continuously adapt in response to shifts in corporate governance practices, while the role of internal auditors transforms to actively support corporate sustainability. The aim of this research is to assess the effectiveness of FA and explore its relationship with corporate governance, based on the relevant literature. Thus, the main objectives of the present study are to identify the internal control attributes that influence the quality of its performance and to evaluate how corporate governance contributes to enhancing the quality of FA. To achieve the aim and the objectives of the paper, a literature analysis was carried out. The main contribution of the present paper is to refresh the existing body of knowledge on contemporary FA and its interplay with corporate governance.

Nexus Between Possibility of Fraudulent Financial Reporting and Corporate Governance: Evidence from Bangladesh

This paper intends to test the nexus between the possibility of fraudulent financial reporting and the corporate governance in Bangladesh. The content analysis of annual reports has been performed for 125 Bangladeshi listed manufacturing companies. In this study, we apply more than one fraud indicator models such as Altman Z-score and Beneish M-score models to determine more accurately the chance of fraudulent financial reporting. The chance of fraudulent financial reporting is determined based on whether either one or both of Altman Z-score and Beneish M-score models show red flags of potential fraud. This study found that board members with finance or accounting backgrounds are less likely to practice in misleading financial reporting since they may have the knowledge essential to understand fraudulent financial reporting strategies. This result implies that qualified directors may supervise financial reporting practices better, hence improving the quality of financial reports. Alternatively, some other components of corporate governance, such as board size, board independence, director ownership, gender diversity, and auditors' independence, have insignificant impacts on fraudulent financial reporting practices. This outcome indicates that these Bangladeshi corporate governance components may not be as strong in improving financial reporting credibility. In the context of Bangladesh, this is the first empirical study with management and policy implications. To the best of the writers’ knowledge, no article yet has been worked on the possibility of fraudulent financial reporting which calculated by multiple models and its relationship with the corporate governance in the context of Bangladesh.

Adapting Corporate Governance for Sustainable Organizational Performance: A Case Study of the Banking Sector in Pakistan amid the COVID-19 Pandemic

Purpose - Corporate governance is a crucial aspect of creating a corporate culture that emphasizes transparency, fairness, and openness. The COVID-19 pandemic has caused a global financial crisis, which has increased attention to corporate governance issues. In light of this, the objective of this study is to examine the impact of corporate governance on the sustainable organizational performance of the banking sector in Pakistan particularly in the context of COVID-19.
 Study Design/Methodology/Approach - This research analyses the annual reports of sample banks and uses secondary data from 2016 to 2022; therefore, there is no doubt about the reliability and validity of the data. This study measured firm sustainable financial performance based on accounting data, using return on assets, return on equity, and earnings per share. The suggested model was investigated by the generalized method of moments through the Arellano-Bond Dynamic Panel-Data estimator.
 Findings - The overall findings of the study reveal that corporate governance components such as board size, audit committee independence, number of board meetings, and chief executive officer duality have a significant impact on organizational performance. Furthermore, the Fixed Affect model indicates that CEO duality has no discernible effect on organizational sustainable performance, while board size, audit committee independence, and the frequency of board meetings all positively affect it.
 Practical and theoretical implications- This study has implications for all stakeholders of the banking system, economic policymakers, and academicians by highlighting the importance of components of corporate governance that enhance overall organizational performance. Theoretically, compliance with corporate governance regulations should lower agency costs, which will improve the overall business's performance now and in the future.
 Originality/Novelty- This study indicates that the use of corporate governance practices enhances and improves the overall sustainable performance of the banking sector. This study adds value to the existing body of literature by considering corporate governance and its association with organizational performance, particularly from the COVID-19 perspective.

Internationalization of SMEs: Do Board Characteristics Matter?

All around the globe, SMEs constitute the backbones of the countries' economies, with their contribution to a very high level of employment and enterprises, as well as GDP creation. Despite their significance in their economies, SMEs' engagement in export activities is limited, which could be enhanced with better corporate governance initiatives. The purpose of this study is to examine the association between one of the main components of corporate governance, i.e., board of directors (BOD), and SME internationalization. We apply stratified sampling by city, size, and sector to fairly reflect the SME population in Turkey, collecting data from 469 SMEs. To quantify the board characteristics, we construct a board index, composed of seven board-related variables. Then, we estimate cross-sectional regressions including firm-specific control variables and legal and industry dummies. Our findings show that the board index is strongly and positively associated with SME internationalization, implying SMEs can reach higher internationalization levels by fostering a more attentive approach toward the composition and functioning of their BODs. By focusing on the individual board characteristics, SMEs are likely to enhance their BODs’ monitoring and controlling functions in addition to their resource-acquiring functions, ultimately leading to higher internationalization levels.

ЭФФЕКТИВНОЕ КОРПОРАТИВНОЕ УПРАВЛЕНИЕ – КЛЮЧ К УСПЕШНОМУ ФУНКЦИОНИРОВАНИЮ БАНКОВСКОЙ ОРГАНИЗАЦИИ

The article discusses the main components of corporate governance in banks, which are crucial for maintaining the stability and reliability of the banking business. Particular attention is paid to the role of the Board of Directors, which is the main authority for overseeing the strategic course of the company and its activities. The issues of risk management, transparency and openness of information, shareholders' rights and compliance with regulatory requirements are also highlighted.

Corporate governance components and intellectual capital: Evidence from Jordanian banks

This study investigates the impact of corporate governance components on intellectual capital performance in Jordanian banks. The research purpose is to gain insights into the relationship between various corporate governance components, including board size, board independence, CEO duality, and concentration of ownership, and their influence on intellectual capital efficiency. Ordinary Least Squares regression analysis is employed using data from 156 Jordanian banks by adding two control variables, total assets, and return on equity (ROE) to explore their potential influence. The obtained results reveal significant associations between certain corporate governance factors and intellectual capital efficiency. Ownership concentration demonstrates a direct and statistically relationship with IC performance, indicating that more concentrated ownership leads to improved management and utilization of intellectual capital resources. Additionally, return on equity shows a significant positive correlation with intellectual capital efficiency (Adj R2 was 22.5%). However, the study does not find significant relationships between board size, Chief Executive Officer (CEO) duality, and board independence with intellectual capital efficiency in Jordanian banks. These results suggest that the impact of these governance factors on IC performance may be more context-dependent and nuanced within the banking industry.

Pengaruh Komponen Good Corporate Governance Pada Nilai Perusahaan

Good corporate governance appears to control behavior and resolve conflicts between parties within the company. This study aims to determine the effect of good corporate governance components on firm value. This study examines 88 companies listed twice a year in the SRI-KEHATI Index in 2019-2022. The components of good corporate governance in this study are proxied by managerial ownership, institutional ownership, independent commissioner composition, and board size. This study uses firm size as a control variable. 
 The analysis technique used is multiple linear regression analysis. The results of the analysis show that managerial ownership, institutional ownership, and board size have a positive and insignificant effect (95 percent confidence level) on firm value while the composition of independent commissioners has a significant positive effect on firm value. The implication of this research is that companies with a high composition of independent commissioners indicate that independent commissioners supervise and coordinate well in maintaining a balance between the interests of majority and minority shareholders so that it has an impact on increasing firm value.

Effect of Company Performance on GCG and Control of Operation Cost

Aims: The research aims to investigate and analyze the relationship between state equity involvement, corporate strategy, and the application of good corporate governance principles, as well as the relationship between operating cost control and firm success.
 Study Design: Research design this is Explanatory Research by doing analysis Descriptive analysis and Verification.
 Place and Duration of Study: The information utilized includes both primary data gathered through questionnaires and secondary data gathered from SEO Businesses in Indonesia receiving SEP.
 Methodology: State Equity Participation, Business Strategy, Good Corporate Governance, Operational Cost Control, and Company Performance are the Subjects of This Study. The company secretary, internal control unit, and finance department are the study's units of observation. Structural equation modeling is the research methodology employed (SEM). Research design this is Explanatory Research by doing analysis Descriptive analysis and Verification.
 Results: The findings of this study indicate that there is an influence between the variables of State Equity Participation (SEP) and Business Strategy (BS) on Good Corporate Governance (GCG). There is an influence between the variables of State Equity Participation (SEP), Business Strategy (BS), and Good Corporate Governance (GCG) on Operational Cost Control (OCC). However, there is no influence between the variables of Good Corporate Governance (GCG), Operational Cost Control (OCC), and State Equity Participation (SEP) on Company Performance (CP). But there is an influence between the variables of Business Strategy (BS) on Company Performance (CP).
 Conclusion: The investigation revealed that there is a connection between State Equity Participation (SEP) and Good Corporate Governance (GCG). The variable state equity participation (SEP) has an impact, as well, on the operational cost control (OCC). The findings of the research on the Business Strategy (BS) variable also have an impact on Good Corporate Governance (GCG). The Business Strategy Variable (BS) is also related to Operational Cost Control in a meaningful way (OCC), and there was no correlation between the components of Good Corporate Governance (GCG) and Company Performance (CP).

The role of internal auditing on corporate governance: its effects of economic and environmental performance.

Internal auditing has been an elementary and powerful component of corporate governance in business strategies. It is highly acknowledged as an important business control system in the realm of quality management. Business performance does not come by itself; it needs plenty of aids and capabilities. Existing studies have investigated the business performance with fewer outcomes in corporate sustainability, firm, and environmental performance. We present analysis and validated improvised hypothesis through structural equation modeling (SEM), using analysis of a moment structures (AMOS), on empirical evidence gathered from 304 Chief Executive Officer (CEOs) in Top Multinational Companies of Pakistan (TMCP). In this paper, we examine the role of internal audit functionality as an influencing factor via corporate governance in corporate sustainability, firm performance, and environmental performance. Moreover, business quality and performance are maintained using functions such as interests of shareholders, personnel and finance. Results suggest that internal audit functionality and corporate governance significantly influence corporate sustainability, firm performance, and environmental performance. Additionally, CEOs and top managers of TMCP are advised to concentrate on internal audit functionality with a mediating role of corporate governance that in turn encourages corporate sustainability, firm performance, and environmental performance.

Executive compensation controls and corporate cash holdings.

As a crucial component of internal corporate governance, remuneration controls possess the potential to influence the cash holdings of firms. However, identifying the causal relationship between these controls and such holdings presents a considerable challenge. To address this research gap, this paper leverages the implementation of China's Guidance on Further Regulating the Remuneration Management of Heads of Central Enterprises as a quasi-natural experiment to investigate the relationship between executive remuneration controls and firms' cash holdings, utilizing a double-difference approach. Based on an analysis of a sample of listed companies from 2007-2012, the results indicate that firms subject to regulated executive compensation exhibit lower cash holdings. To ensure the robustness of these findings, various statistical techniques such as parallel trend tests, variable replacement, propensity score matching, and placebo tests were employed. Additionally, a mechanism test was conducted, whereby the mediating effect of executive compensation controls on firms' cash holdings was examined, revealing a reduction in internal agency costs. Finally, the analysis of heterogeneity demonstrated that the impact of executive compensation controls on firms' cash holdings was more pronounced in companies with high-quality internal controls, stronger management oversight, and lower information asymmetry.