Context Of Corporate Governance Research Articles

Boardroom Culture: An Argument for Compassionate Leadership

In this paper I present an argument for introducing compassion into the boardrooms of large corporations. A series of corporate scandals and failures have led the UK’s government to investigate what has been going wrong in some large corporations. These investigations have identified destructive corporate cultures emanating from greedy and self-serving leaders in boardrooms. Problems in the economic and corporate system in which lack of trust is paramount point towards a need for change. Our economic landscape has also shifted from an industrial economy to a knowledge economy bringing about changes from industrial models and economies of scale towards a global, digital and more creative and changing economy that focuses on continuing innovation. The old ways of running a company are no longer appropriate and we require different skills and characteristics in our CEOs. Increasingly, it is becoming necessary to adopt a more compassionate way of running businesses. CEOs need to be more emotionally and socially intelligent. Compassion is a potentially progressive way forward in the world of business. It is already recognised in the medical world – the NHS has an embedded culture of compassion. Corporate actors might also learn from feminist ideals of caring and compassion that could provide direction for developing compassionate leadership models. Some progressive corporate leaders have shown the potential for successful alternatives. Already in law there is a recognised role for compassion in numerous fields which may signal some new approaches to be adopted in the company law and corporate governance context.

The board of directors and firm performance: empirical evidence from listed companies

PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.

Corporate Governance and Climate Change: Smoothing Temporal Dissonance to a Phased Approach

SUMMARY Projections for climate change extend decades into the future, and usually to the end of this century due to the long-lived nature of greenhouse gases (GHGs). Predominant normative frameworks for corporate governance are primarily short-term in nature, creating a temporal dissonance within the context of corporate governance and climate change. Adding to this complexity, the energy transition itself has temporal paradoxes and implications for the global economy – the transition away from fossil fuels cannot be too sudden and sharp, but an urgent yet stable, phased transition is required. Statutory interventions in the UK have imposed on directors the requirement to consider the long-term profitability of companies. New initiatives, such as the task force on climate related disclosures (TCFD), the Enterprise Principles, and the Oxford-Martin Principles, also advocate for directors to consider the risks from climate change, including emissions scenarios which take into account short-, medium- and long-term scenarios. It is by using a phased approach to climate risk that a smoothing of this temporal dissonance between corporate governance and climate change can be initiated by businesses. While many of these new governance initiatives do not yet provide the requisite level of specificity to demonstrate how a phased approach could be adopted by particular companies, the TCFD guidance does provide some tools which would allow companies to adopt a phased approach, however the types and levels of detail of these tools should be increased for a variety of types of industry.

Capital structure, corporate governance, and the effect of Sarbanes-Oxley

The Sarbanes-Oxley Act represented a major legislative action designed to increase transparency and accountability in U.S. corporations. Within the context of agency theory and corporate governance, the expectation is that the enactment of Sarbanes-Oxley impacted the agency relationship of firms and hence affected the corporate governance structure. With these changes, the question arises as to the capital structure decisions of corporations which have previously been shown to be related to agency measures and corporate governance. It is the objective of this research to examine the capital structure of U.S. firms as they relate to corporate governance measures and to determine the effect, if any, of Sarbanes-Oxley.

Capital structure and earnings management: evidence from recent French corporate governance context

The aim of this research is to show how the capital structure policy is affected by earnings management and corporate governance characteristics. This study is performed on a sample of SBF 120 listed companies over the period 2009-2014. Raman and Shahrur's (2008) model is used for calculation of discretionary accruals. Using two fixed-effects models, we confirm the significant relationship between earnings management and capital structure. Also, we find significant relationships between capital structure and some board of directors' characteristics such as size, independence and CEO duality. Finally, we find significant influence of institutional participation and profitability on capital structure policy. These findings add new evidence to the existing literature about capital structure determinants and provide a confirmation of the significant effects of both earnings management and board of directors' characteristics on the company's debt level.

Capital structure and earnings management: evidence from recent French corporate governance context

The aim of this research is to show how the capital structure policy is affected by earnings management and corporate governance characteristics. This study is performed on a sample of SBF 120 listed companies over the period 2009-2014. Raman and Shahrur's (2008) model is used for calculation of discretionary accruals. Using two fixed-effects models, we confirm the significant relationship between earnings management and capital structure. Also, we find significant relationships between capital structure and some board of directors' characteristics such as size, independence and CEO duality. Finally, we find significant influence of institutional participation and profitability on capital structure policy. These findings add new evidence to the existing literature about capital structure determinants and provide a confirmation of the significant effects of both earnings management and board of directors' characteristics on the company's debt level.

Determinants of Capital Structure within the Context of Corporate Governance in Egypt

This study aims to investigate the characteristics of corporate governance that impact the capital structure decisions in listed firms in Egypt, to test the efficiency of the research results conducted in the developed Western countries in an emerging economy. A sample of 240 observations from the most active non-financial companies collected in the period 2009-2014 was used for hypothesis testing. Multiple regression models (OLS) were used for data analysis. Seven variables are used in measuring the attributes of corporate governance; they are the managerial ownership, institutional shareholding, shares owned by a large block, board size, board composition, separation of CEO/Chair positions and audit type. Four ratios were calculated for measuring the capital structure, they are long-term and short-term debt to assets, total debt to assets and debt to equity. The results suggest that corporate governance attributes have a significant impact on the capital structure decisions of listed Egyptian companies. In addition, firm-specific factors such as profitability, tangibility, growth opportunities, corporate tax, firm size and non-debt tax shields influence the choice of capital structure in Egypt. The results showed the same relationship with what was obtained in developed Western countries. The paper offers some contribution in the literature and helps to understand the impact of corporate governance on Egypt's capital structure as an emerging economy.

KURUMSAL YÖNETİM KAPSAMINDA VİZYON, MİSYON VE DEĞERLER: TÜRK BANKACILIK SEKTÖRÜ ÜZERĠNE BĠR DEĞERLENDİRME

Kurumsal yönetim kavramı genel olarak eşitlik, şeffaflık, hesap verebilirlik ve sorumluluk ilkeleri üzerine kurulmaktadır. Bankalar açısından kurumsal yönetim ise, belirlenmiş hedefler ve düzenlemeler ile bankacılık etik kuralları doğrultusunda, tüm paydaşların hak ve menfaatlerini koruyacak biçimde bankaların yönetilmesini ifade eder. Kurumsal yönetimin bankalarda uygulanmasında temel ilke, bankaların misyon ve vizyonunun belirlenmesi, kurumsal değerlerin ve etik kuralların oluşturularak kamuoyuna açıklanmasıdır. Bu çalışmada Türkiye'deki özel ve kamu sermayeli mevduat, katılım, kalkınma ve yatırım bankalarının misyon, vizyon, değerleri ve etik kodları ele alınarak analitik incelemesi yapılmıştır. Bu kapsamda bahse konu bankaların misyon ve vizyonlarında vurgulanan temel konular ile değerlerin iş ve sosyal değerler açısından ve temel değerlere uygunluk açısından değerlendirmesi yapılmıştır. Özellikle, Türk Bankacılık Sektörü'nde açıklanan kurumsal yönetim ilkelerinin değerlere yansıması üzerinde durulmuştur. Çalışmanın sonucunda Türk Bankacılık Sektörü'nde yer alan özel ve kamu sermayeli mevduat, katılım, kalkınma ve yatırım bankalarının vizyon, misyon ve değerler açısından benzerlik ve farklılıkları değerlendirilerek uluslararası standartlar çerçevesinde iyi uygulama önerileri sunulmuştur.

Internal Audit Effectiveness: Multiple Case Study Research Involving Chief Audit Executives and Senior Management

The focus of this study is the relationship between chief audit executives (CAEs) and senior management (SM) and its relationship with internal audit (IA) effectiveness. The study reveals differences between more and less effective IA functions and offers explanations by studying organizational, personal, and interpersonal factors within the German corporate governance context. The findings show that the pattern of interaction between CAEs and SM is a key determinant of IA effectiveness. This study highlights the danger of viewing customer satisfaction as the key measure of IA effectiveness since in practice expectations can vary significantly and as sometimes very little may be demanded. Moreover, CAEs typically adjust to expectations, upward and downward. CAEs can drive the agenda as well. When it comes to personality factors, “Fingerspitzengefühl” and swimming in the organization characterize the successful internal auditor. IA designations for CAEs were not found to be of added value. At the organizational level, the findings show that companies that are considered as “hidden champions” demand and benefit from effective IA practices.

Shareholder protection, income inequality and social health: A proposed research agenda

This paper develops a proposed research agenda in order to highlight how corporate governance, accounting and company law are relevant to the consideration of income inequality and wider social health. To illustrate this proposed research agenda, this paper draws on corporate governance research in the law and finance tradition, as well as macro-level studies in accounting concerned with the wider corporate governance context, in order to consider the association between shareholder protection, income inequality and child mortality. Under 5 child mortality is an objective indication of a country’s ability to nurture its children. In an influential body of work, La Porta et al. (1997a, 1997b, 1998, 2008) concluded that a common law legal system which protected the interests of shareholders gave rise to better economic and social outcomes. However, drawing on corporate governance and accounting literature we contend that such a conclusion is flawed. The findings of this paper suggest that common law countries (i.e. those with the greater legal protection for investors) have worse social outcomes in terms of under-5 child mortality.

The Development and Application of the Directorss Duty of Care and Diligence Rule in Australia

This paper places Australian directors’ duties legislation in the corporate governance context. A discussion of the general principles and the sources of duties is designed to offer an insight into the various areas of law that govern the conduct of company directors. Focusing on directors’ duty of care and diligence, we offer a detailed examination of the wording of the first Australian statutory provision. Further, we provide a comprehensive analysis of how the law evolved over the past two centuries. An exhaustive review of published cases provides the backbone of the study to highlight the interaction between statutory provisions and the evolution of directors’ duties through Australian case law. We review recent cases to provide an insight into the state of the art in Australia. Exploring the development of the law through recent cases allows the consolidation of current knowledge into a concise set of learnings.

CORPORATE GOVERNANCE AND CAPITAL STRUCTURE IN BRAZIL: STOCK, BONDS AND SUBSTITUTION

ABSTRACT Purpose: To study the Brazilian bond and stock markets for testing the stock market development theory of Demirgüc-Kunt and Maksimovic (1996). Originality/gap/relevance/implications: This paper tests the substitution hypothesis of stock market development, from debt to stocks, in a context of improved corporate governance, by analyzing the data with cointegration techniques. The findings show that the rejection of substitution hypothesis, as the bond market has a positive and significant association with stock market improvements. The findings also show that improving the quality of corporate governance could lead equity capital and borrower capital sources to be complementary and not substitutes, suggesting that Brazilian stock market reform has created a virtuous development cycle. Key methodological aspects: Positivist research using quantitative methodology. Data from a sample of 171 firms during 20 years, analyzed with cointegration. The null was a negative association between bond and stock markets. Summary of key results: Null rejection, non-consistent to theoretical framework. The results have shown a positive and significant association between stock and debt in an improved corporate governance context. Key considerations/conclusions: Improving the quality of corporate governance could lead equity capital and borrower capital sources to be complementary, and not substitutes, suggesting that Brazilian stock market reform has created a virtuous development cycle.

Organizational Governance, Board of Directors, and the Influence of Context in Emerging Markets

This paper aims to build corporate governance theory to inform company success in the context of emerging markets. Success for a company listed in an emerging market is contingent on being able to effectively manage a range of business, economic, social and political considerations unique to that emerging country. This paper explains the significance of incorporating context with corporate governance systems to inform how can organizational governance and board of directors affect firm performance. Theory developed in the context of emerging markets provides the basis for more widely applicable emerging stock market insight into theory of context and practice of corporate governance.

The framework for board accountability in corporate governance

In the wake of the financial crisis, there has been much discussion about whether boards (particularly of banks) are sufficiently accountable. However, while a significant literature has grown up in relation to the study of accountability in various disciplines, particularly public administration and politics, in the field of corporate governance there has been little consideration of what accountability means or entails. This is problematic: without a clearer idea of the elusive concept of accountability, debates about board accountability may be at cross-purposes. It will be difficult to assess whether particular corporate governance mechanisms promote board accountability, and if not, why not. The lack of clarity can also mask accountability deficits. This paper addresses this gap, setting out why accountability is important and offering an account of what accountability means in the corporate governance context, focusing on board accountability, in order to provide a framework for future research.

Understanding and Assessing Governance Agents’ Relationships: The Contribution of Leader-Member Exchange Theory

It is a textbook truism that many corporate relationships among governance agents could be theoretically informed by the established agency paradigm. The economic based principal-agent theorization is however falling short of allowing researchers to evaluate the quality of such relationships. In this paper, we depart from the mainstream principal-agent theoretical argumentation by attending to “Leader-Member Exchange” theory (LMX theory), a commonly applied theorization in organizational psychology and communication management literature repertoire. We delineate relevant governance relationships among various governance agents across contexts and subsequently, theoretically argue the applicability of LMX theory in explaining their dyadic relationships. Interfacing LMX theory with corporate governance, we further provide the necessary instruments for measuring governance agents’ relationships quality. Despite the theoretical and argumentative nature of our research endeavour, this paper presents a novel attempt to theoretically demonstrate in light of the subtlety in governance scholarship with respect to the quality of corporate relationships prevailing in any established governance arrangements, that the LMX theory provides an applicable and useful framework through which the dynamics of corporate relationships within the context of corporate governance could be appropriately analyzed and evaluated.

Finance and Society: On the Foundations of Corporate Social Responsibility

This thesis consists of six chapters. The first four chapters explore different foundations of CSR. Chapter 1 studies the legal and institutional foundations of CSR around the world. Chapter 2 studies the agency foundations of CSR, with a focus on whether CSR should be regarded as an agency problem or value-enhancing tool. Chapter 3 studies the ownership foundations of CSR by investigating the role of family ownership and state ownership in driving corporate shareholder-stakeholder relationship. Chapter 4 investigates the cultural and cognitive foundations of CSR by focusing on how languages people speak around the world may explain cross-country and cross-firm variations in CSR practice. The fifth and sixth chapters look at the social influence of state-owned enterprises (SOEs) and the social context of corporate governance using Chinese data. Chapter 5 investigates how state presence in corporations through shareholdings and political connections affects managerial compensation, and how such state influence is attenuated following the removal of market friction. Chapter 6 extends the analysis of state influence to the context of international investment, and investigates how two major state control mechanisms – state ownership and managerial political connections – can influence globalization decisions and the degree of globalization of SOEs during different time and in different stages of international investment.

CEO reputation and top management team compensation

Purpose– The purpose of this paper is to clarify the influence of chief executive officer (CEO) reputation on top management team (TMT) compensation, proposing corporate governance characteristics as a moderator of the relationships between the power of top managers to extract rents and the importance of external signals. The study aims to expand the domain of executive compensation literature by including the role of CEO reputation in the context of non-Anglo-Saxon corporate governance systems.Design/methodology/approach– The paper opted for a panel methodology for the period 2004-2009, including 534 observations from Spanish listed companies. Data were obtained from several sources. Compensation and governance information was obtained from the Spanish Stock Exchange National Commission; data regarding CEO reputation were obtained from Spanish Corporate Reputation Monitor, and, finally, financial statement was obtained from the OSIRIS database.Findings– The paper provides empirical insights on the CEO reputation diffusion on TMT compensation, showing different scenarios depending on effectiveness of corporate governance. CEO reputation diffusion on TMT pay is strengthened or weakened by the organizational governance effectiveness. General evidence supports the notion that in countries characterized by an incomplete corporate governance system, boards – and also indirectly the structure of ownership – act as a catalyst for external signs of legitimacy, rather than for the organization's and stakeholders’ interests.Research limitations/implications– Because of the difficulty in pooling information for a long period from three different sources of data, the number of observations is not very large. Therefore, researchers are encouraged to test the proposed propositions further using other context of corporate governance.Practical implications– The paper includes implications for the development of effective governance mechanisms which promote an adequate link between the CEO reputation and the TMT compensation, avoiding rent extractions.Originality/value– The paper contributes to new international evidences regarding relations between top managers’ reputations and compensation. Specifically, it allows reinforcement of the importance of institutional arguments in the understanding of the effectiveness of governance mechanisms in large listed companies.

Appraising Japan's Appraisal Remedy

Appraisal is making a comeback in Japan. Until recently, it was an underutilized and largely forgotten legal transplant introduced by the Americans during the Occupation Period (1945-1952). Following a major reform to Japan’s corporate law with the enactment of the Companies Act in 2005, however, appraisal has drawn considerable academic attention and produced an unprecedented wave of appraisal litigation in Japan – much of it involving listed companies. The spotlight is now on appraisal’s function as a check on managerial and controlling shareholder conduct – but why are shareholders turning to appraisal when they have other options? With a sophisticated concept of ‘fair value’ and litigated with unique ‘non-contentious’ procedures, Japan’s appraisal is thoroughly Japanese – and effective compared to other shareholder remedies in Japan’s Companies Act. The Japanese success with appraisal proves that appraisal can play a central role in modern corporate law and governance – at least within a certain corporate governance context. It is also a timely reminder that shareholder remedies need not (and probably should not) be unmodified American legal transplants, and that above all, local adaptations and context matter.

Policy's Beneficiaries of Corporate Governance and Diversification Strategy

The present study is highly important because, when used properly, it can lead to an immediate positive impact on organizational management. Therefore it offers the chance to cumulate the interests of all stakeholders of a company, leading it upward. The study pays special attention to prospects for management/diversification/corporate governance in an attempt to provide an objective perspective on the system, highlighting those weaknesses that require intervention. Governance started in Romania, in conceptual terms and regulations, in the early 2000s. The delay is explained by the fact that the political, legal, economic and social realms were developed slowly and difficultly. Recently however, the context of corporate governance in Romania has changed. Accountability and transparency have become key factors not only for shareholders, but also for investors, lenders, suppliers and other parties involved. Good corporate governance adds value and helps reducing the cost of capital, providing effective financing capital from bidders. In this context, it is worth analyzing, based on statistical data, the degree of development of corporate governance in Romania. Indicators are tied to the board's attributes, in particular board structure, size, independence, frequency of meetings and other factors. The source is the official data published by companies listed on the Bucharest Stock Exchange (BVB). The results will be compared with results of other studies conducted in the case of emerging countries and the European average. The relationships between public managers and owners of financial or non-financial interests must be built on the corporate governance principles.

Governança corporativa em uma fundação de serviços hospitalares: um estudo de caso no Brasil

No contexto da governança corporativa, também se encontram as fundações de apoio às universidades e seu respectivo conselho curador, suposto responsável pelas práticas desse conceito. Com isso, a presente pesquisa buscou analisar as boas práticas de governança corporativa nessa organização do terceiro setor, na visão dos conselheiros, seguindo as principais normas do Instituto Brasileiro de Governança Corporativa. Para este estudo, montou-se uma revisão bibliográfica e análise do caso numa Fundação de Serviços Hospitalares brasileira, realizado no segundo semestre do ano de 2012. O método utilizado consistiu na aplicação de questionários ao Conselho Curador da fundação, envolvendo itens de governança corporativa. Os resultados revelaram uma associação dos princípios de boa governança com as práticas do conselho curador, demonstrando que, na maioria dos aspectos analisados e de forma parcial, esse cumpre com a sua função de disseminador da governança corporativa em um setor ainda pouco estudado pela sociedade.