Corporate Governance Index Research Articles

Corporate governance and financial distress: Asian emerging market perspective

PurposeThe purpose of this paper is to examine the impact of corporate governance index (PAKCGI) on firm financial distress for a sample of 152 non-financial firms listed at Pakistan Stock Exchange (PSX) over the period from 2003 to 2017.Design/methodology/approachTo examine the impact of PAKCGI on financial distress (Altman Z-Score), random effect model is applied. The PAKCGI is a self-constructed index based on the five important factors of corporate governance practices, i.e. board of directors, audit committees, right of shareholders, disclosures and risk management. The binary coding approach is adopted for the construction of PAKCGI. Altman Z-Score model is used as a proxy for financial distress indicator. The absolute value of Altman Z-score has been taken as financial distress indicator.FindingsThe outcomes of the study indicate a positive impact of PAKCGI on risk of firms’ financial distress. The positive coefficient of PAKCGI implies that the good corporate practices work as catalyst to reduce risk of financial distress in Pakistan. A significant negative impact of block holders on financial distress suggests that the concentrated block ownership take monopolistic decision to protect their interests. It has also been observed that significant positive impact of institutional ownership on financial distress exists in the Pakistani listed firms. Furthermore, this study also reveals that significant negative association between board size, CEO duality and financial distress indicator.Research limitations/implicationsThe findings may encourage the Pakistani listed companies to follow and implement good corporate governance practices, which would lead to increase the confidence of investors, regulators and stakeholders.Originality/valueThe current study extends the corporate governance literature by examining the relationship between the corporate governance attributes and the financial distress status of Pakistani listed companies. From the academic perspective, this paper adds to the knowledge concerning the association between corporate governance practices and risk of financial distress in emerging markets.

Pay Senedi Fiyat Yönünün Makine Öğrenmesi Yöntemleri ile Tahmini: Borsa İstanbul Örneği

In this study, stock price with the calculated next three-month average of five manufacturing industry companies in the Borsa Istanbul 30 Index and the Corporate Governance Index was predicted with the data of the 2010/3 and 2020/3 periods. The dataset consisted of quarterly nine financial statements and five macroeconomic variables with a three-month average of the sample companies. Artificial Neural Networks, Classification and Regression Tree, and K- Nearest Neighbor Algorithm were used as prediction methods. A 10-fold cross-validation method was used in all methods in the study. In Artificial Neural Networks, Classification and Regression Tree analysis, the models that gave the best results in line with the given parameter ranges were obtained by using the determining the best parameters and performance criteria function. According to the results of the analysis, general classification accuracy was achieved 98.05% for Artificial Neural Networks, 96.10% for Classification and Regression Tree, and 92.20% K-Nearest Neighbor Algorithm. “Net Profit Margin”, “Price/Earning”, “Profit Per Share”, “CDS Premium (3-month average)”, “Consumer Confidence Index” were found as important variables that divided the data into two in the creation of the Classification and Regression Tree (CART) analysis. This result shows that the models used in this study can be incorporated into the models used by investors.

Accelerating Company Performance through Dividend Payout Policy: A Trend Analysis of Automobile Sector Listed in Pakistan Stock Exchange

The study explains the relationship of dividend payout policy on the business performance of companies that exist in automobile sector of Pakistan. 100 companies are selected from automobile sector. Relationship of dividend payout policy and business performance was controlled with four variables based on relevant theories. These variables include size of company, growth of company leverage debt to equity ratio and corporate governance index. Panel data is collected from 2012-2017 six years and then analyzed with unit root, descriptive statistics, correlation analysis, OLS regression, Lagrange multiplier, Huasman test, fixed effect and Random effect models. Following key findings for each research objective were obtained by applying the adopted research method on the data through the adopted method of analyses: The results showed that the automobile companies showed positive relationship between their dividend payout policy and profitability and it was concluded that both dependent and independent variables are positively related in this sector and size, growth and leverage are the controlling predictors of the relationship.

The role of corporate governance in attracting foreign investment: An empirical investigation of Saudi‐listed firms in light of vision 2030

AbstractFollowing the introduction of the Saudi Vision 2030, diverse developments have been considered concerning corporate governance as an effort to open Saudi Arabia's economy to the world. Identifying the significance of attracting foreign investment is considered an approach to accomplish one of the vision's targets. The objective of this study is to investigate the impact of improved corporate governance policies on the magnitude of foreign investment. Regression analysis was employed using the data of 153 listed companies in the Saudi Stock Exchange (Tadawul) from 2015 to 2019 to examine the effect of three corporate governance indicators on foreign investment. Specifically, ownership structure was represented by institutional ownership, ownership concentration and managerial ownership. Board composition was identified by board size and independence. Executive pay was measured by the total top executive pay and the presence of long‐term incentive plans (LTIPs). Findings indicated that foreign investment is positively associated with ownership concentration, board independence and the presence of LTIPs in compensation packages. A negative and significant association was found with institutional ownership and managerial ownership.

To Be Rated or To Be Indexed: Corporate Governance Rating Experience in Borsa Istanbul

We aim at answering whether it is more noteworthy for investors to attain or sustain corporate governance goals by examining how the market reacts towards announcements regarding corporate governance ratings (CGR) and corporate governance index (XCORP) including the firms listed in Borsa Istanbul within the sample period of 2007-2018 using a standard event study methodology. We found that, although both announcements produce relatively weak signals, joint announcements made upon XCORP inclusions along with first ever CGR (attainment) have more significance when compared to single announcements of subsequent CGR (sustainment) in the pre-event period. However, we also determined that the impact of subsequent CGR announcements in the post-event period was more profound. Our results revealed that the market anticipates XCORP inclusions whereas subsequent CGR are unexpected. Besides, the weak support for signaling hypothesis was considered to result from the obscuring effects of current legislation and market practices.

Study of executive compensation of public and private sector enterprises in India - impact on corporate governance

Executive compensation in India is strictly legislated and regulated. The purpose of this paper is to evaluate the executive compensation between private and public sector companies in the NIFTY 50 Index companies after the implementation of corporate governance reforms in India. This study is important because the Government of India is doing business using taxpayers money in owning and managing public sector companies, thus it is incumbent that these public sector companies are run efficiently and effectively. The study establishes that companies in the private sector pay significantly high executive compensation than that of companies in the public sector in terms of CEO pay and total executive pay thereby impacting corporate governance in India. An implication of this study is that it establishes huge gaps in executive compensation in the Indian corporate landscape, thus, posing challenges to governance of public sector companies in India. It makes a case for governance reforms in terms of executive compensation for top management of public sector companies.

CEO compensation and shareholder value creation: impact on corporate governance in India

CEO compensation and shareholder value creation: impact on corporate governance in India

Corporate Governance, Environmental and Social Responsibility and Firm Performance: Evidence from Egypt

This research examines the impact of corporate governance on firm performance, as well as it examines the indirect relationship through mediating environmental social responsibility between the corporate governance and firm performance. Panel data regression was performed on a sample of 66 non -financial firms in Egypt during the period from 2010-2018. The model parameters were estimated using generalized least square regression. Six corporate governance indicators (Ownership concentration, Female directorship, Role Duality, Board independence, Board size and Audit reputation) were chosen in testing the hypothesized relationship between corporate governance practices with firm performance, which was measured by return on asset, return on equity and Tobin's q. Moreover, environmental social responsibility factor is measured using the S&P/EGX ESG ratings Published index. The results show that environmental social responsibility partially mediates the relationship between audit reputation, role duality and ownership concentration with return on asset. Moreover, the results show that environmental social responsibility fully mediate the relationship between role duality and return on equity. On the other hand, the results show environmental social responsibility doesn’t mediate the relationship between corporate governance and Tobin's q.

CORPORATE CULTURE MODEL IN SYSTEM CORPORATE GOVERNANCE : UKRAINIAN REALITIES

The purpose of the article is to analyze the substantive and qualitative characteristics of corporate governance in Ukraine, identify problems of its development and develop a scientific approach to form an organizational model of corporate culture as a factor of successful development. The author's research based on the essence of the concept of "corporate governance" in order to improve the content characteristics of this. With the active use of data collection and regression analysis methods, the level of corporate governance in Ukraine was determined. The qualitative indicators of corporate governance analyzed using the rating indicators of the Global Competitiveness Index. In such conditions, it becomes necessary to form an organizational model of corporate culture in the corporate governance system. The article substantiates the need to use the organizational model of corporate culture in the activities of Ukrainian companies, taking into account the problems of the development of corporate governance in Ukraine. This has a scientific and applied character in the context of political and economic turbulence in today's economic conditions. The organizational model of corporate culture proposed by the author will contribute to the activation and development of communication interaction between corporate management and all stack holders. This will also influence the formation of effective management decisions and create the basis for cooperation based on trust. The use of an organizational model of corporate governance in the performance of assigned tasks to personnel will increase their responsibility, cohesion, productivity and improve the socio-psychological climate in the company. The above features will help the corporate management of the company to harmoniously arrange and consolidate the list of work performed by each employee in the organizational structure of the company in such a way that everyone does their own thing in accordance with the existing professional competencies. Thus, the proposed organizational model of corporate culture will allow Ukrainian enterprises to effectively manage human resources and implement a development strategy in the long term.

Does corporate social performance lead to better financial performance? Evidence from Turkey

<abstract> <p>In the past two decades, research on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) has seen considerable growth; however, evidence from Turkey remains scarce, and the results are not uniform. To address this lack, this study investigates the impact of CSP on CFP from the perspective of stakeholder theory. Following the investigation of 47 publicly listed companies from the BIST Corporate Governance Index (XKURY) in the period 2014–2018. The results demonstrate that CSP positively affects CFP in both the short and long term. This study addresses the lack of Turkish experience, and the results indicate that CSP is an intangible resource in corporate strategy that can improve the competitive power of Turkish enterprises. Furthermore, the study emphasizes the positive role of CSP in short-term and long-term CFP in the Turkish context from the stakeholder perspective. The results have implications for Turkish policymakers regarding the rational use of corporate social responsibility (CSR) to promote economic development and insights for Turkish enterprises in terms of gaining stakeholders' trust and improving investors' valuation through the strategic use of CSR to achieve long-term, sustainable development of enterprise competitiveness and finance.</p> </abstract>

Foreign Ownership and the Enforcement of Corporate Governance Reforms

This study examines whether a stronger corporate governance enforcement regime influences the investment decisions of foreign portfolio investors in an emerging market context. Using a natural experiment provided by an Indian corporate governance regulatory reform introduced in 2000, but for which stricter sanctions for non-compliance were imposed in 2004 our results provide strong evidence that governance reforms that include stricter sanctions for non-compliance lead to higher foreign ownership. In the context of prevalence of weak enforcement (of existing regulations) in emerging markets, this study provides empirical support to the notion that strictly enforcing the existing governance regulations has the potential to attract higher level of foreign investment. The results suggest that policy measures aimed at attracting foreign investors in emerging markets should not only concentrate on adopting the best international corporate governance practices but should also signal strong enforcement of these regulations by assigning significant penalties for non-compliance.

The effect of corporate governance indicators on enhancing the financial performance of industrial listed companies on the Amman Stock Exchange

This paper investigated the impact of corporate governance on enhancing the financial performance of industrial companies. The sample of the research consisted of 55 industrial companies listed at the Amman Stock Exchange (ASE) during the period 2014-2018. Data were collected from the firms' annual financial statements using content analysis approach. The results confirmed that the audit committee and ownership structure had positive and significant effects on two dimensions of financial performance. In view of research findings, the study recommends companies to raise some awareness about the importance of corporate governance, in addition to strengthening supervisory procedures by legislators.

PENGARUH TINGKAT KESEHATAN BANK DAN STRUKTUR MODAL TERHADAP RETURN SAHAM (Studi pada Perusahaan Perbankan yang Terdaftar di Bursa Efek Indonesia Periode 2015-2017)

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Good Corporate Governance on Stock Prices of Companies Listed in the KOMPAS 100 Index 2014-2018

This research aimed to analyze the effect of good corporate governance on stock prices. It was conducted on companies listed on the Indonesia Stock Exchange which were included in the KOMPAS100 Index in 2014-2018 by using a purposive sampling technique. Data analysis used was a panel data regression method with a fixed-effect model - least square dummy variable. The results of the study show that the number of board of the commissioner meetings, return on assets, earnings per share, and price to book value had significant effects on stock prices in a positive direction; the number of directors, education/training for corporate secretaries, and price to earnings ratio had positive but insignificant effects; the number of independent commissioners and the number of board of the director meetings had negative but insignificant effects on share prices. The novelty in this study was the addition of the variable of company secretary as an indicator of corporate governance, which was not found in previous studies. Besides, this study added a dummy interaction to see the effect of the level of corporate compliance on corporate governance.

Corporate governance and financial performance: evidence from Romania

PurposeThe purpose of this research is to evaluate the impact of adopting the principles of corporate governance on the financial performance of companies listed on the Bucharest Stock Exchange (BSE). To assess the implementation of corporate governance principles, the authors built an index based on the principles specified in the BSE Corporate Governance Code (CGC).Design/methodology/approachAn econometric analysis was conducted to estimate the impact that the authors’ corporate governance indicator had on financial performance, measured successively through Tobin's Q, return on equity (ROE), economic value added (EVA) and total shareholder return (TSR).FindingsFollowing the regression model, the authors noticed the absence of a significant impact of corporate governance practices on performance measured by ROE, EVA and TSR but instead, a significant and positive relationship for Tobin's Q rate was found.Research limitations/implicationsDue to the lack of data before the implementation of the BSE Code of Corporate Governance, the research period is limited to 2010–2015, but the authors’ future studies will try to extend the research period.Originality/valueAlthough numerous studies have been conducted to analyze the empirical relationship between corporate governance and financial performance, no conclusive results have been obtained. The diversity of these findings can refer to methods used in the construction of a corporate governance measure as well as to the accuracy of financial reporting.

Corporate governance in India from the internal stakeholder’s perspective

The underlying aim of the research paper is to evaluate the internal stakeholders’ perceptions of the current corporate governance regime in India. In order to analyze the internal stakeholder’s perception towards current corporate governance regime, regulations and issues, a structured questionnaire has been prepared covering various aspects of corporate governance like components and performance implications of corporate governance in India, major issues in corporate governance, corporate governance strategies and practices, key players etc. The majority of the respondents perceive that there is a need to make the internal and external corporate governance better, enhance the standards of accounting, audit and disclosures, prohibit or check related party transactions, improve relation between board and management, publicize corporate governance ratings of companies, strengthen stock exchanges to ensure transparency, improve access to new capital etc. The findings of the study has contributed to the future development of corporate governance regulations in India. It will aid regulators, policy makers, stock exchanges and think tanks to rethink their priorities and develop rules to incorporate best practices on corporate governance. Keywords: Corporate governance, Corporate governance practices, Regulatory framework, Listing agreement, Securities markets.

Evolution of Corporate Governance in Emerging Economies – Indian Experience

Evolution of corporate governance in India from 1850 to 2020 provides significant insights into how discontinuities in the corporate Eco system impacts corporate governance practices. Although the concept of corporate governance and monitoring board emerged in 1972 in USA and spread across the globe in 1990s, after the Cadbury Committee in UK submitted its report, the issues on the governance of joint stock companies bothered regulators and academicians, and of course, minority shareholders, much before the emergence of the term corporate governance. India saw three significant structural discontinuities from 1850 to 2020. The period 1850 to 1947 was the colonial era when Indian business groups were emerging. The managing agency system emerged during that period as an institution to address the twin challenges of capital scarcity and scarcity of managerial skills. This facilitated industrialisation and also increased concentration of ownership. 1947 to 1991 was the period when the Indian government adopted the command economy framework and implemented the same through five-year plans and the licensing system. Public sector enterprises emerged as the dominating force in the Indian economy, although private sector was allowed to operate in those sectors which were not reserved for the state sector. Obtaining a license to start a new industry or expand the existing capacity was the key to the success of a business enterprise. Managing agency system continued until 1970. Some business groups consolidated their position because they could stand at the front of the queue for obtaining the licences. In the closed economy, they operated in the sellers' market. Licensing system and closed market resulted in unrelated diversification. The change in the social structure also resulted in division in business group due to the weakening of the joint family norms. Moreover, public sector development financial institutions (DFIs) acted on the behest of political bosses, often supporting the management resulting in weak corporate governance. In 1991, the Indian government opened the India economy and the country ushered into the era of market economy. Licensing system was dismantled. During the period between 1990 and 2020, the capital market developed, New entrepreneurs entered the corporate sector. Mutual fund industry achieved high growth. FDI and FPI increased very significantly, and start-ups emerged and grew. In the year 2000, for the first time, Security and Exchange Board of India (SEBI), the capital market regulator, introduced the Code of corporate governance. Indian business survived in the competitive market. The Indian corporate governance code revised number of times in the past two decade bench-marking with global best corporate governance practices. However, Indian corporate sector being dominated by the family business, the question 'how independent are independent directors' remains. With significant increase in the shareholding of FDI and FPI in top 200 companies, the average standard of corporate governance is improving. This essay examines the evolution of corporate governance and how discontinuities impacted the evolution process. It also predicts how and why the Indian corporate governance practices are expected to improve in coming days based on the emerging trends.

An empirical investigation of factors influencing the environmental reporting quality: evidence from France

PurposeThis study empirically tests a comprehensive set of relevant factors to explain environmental reporting quality. This study aims to understand whether environmental assurance has a direct effect on “environmental reporting quality”. In addition, this study also aims to examine the relationship between corporate governance and the quality of environmental reporting as measured by voluntary and timely reporting.Design/methodology/approachA number of econometric techniques are used including panel data specifications using a sample of French listed companies in SBF120 for the period 2012–2017.FindingsThe results demonstrate that the presence of an environmental audit committee and the size of the environmental external assurance firm has a significant effect on the level of voluntary reporting of environmental information. The results also reveal that the presence of the environmental audit committee, as well as the corporate social responsibility (CSR) committee, the size of the environmental external assurance and corporate governance index, affect the timely environmental reporting.Research limitations/implicationsThis study helps all market participants to more comprehensively evaluate the quality of environmental reporting in the French context and highlights whether various factors could affect the quality of the environmental information disclosed using a multi-theoretical framework.Originality/valueThis paper fills the gap in the literature by highlighting an unexplored field of literature about the quality of environmental reporting by linking on the division of the quality of environmental information reporting into sub-dimensions (voluntary reporting and timely reporting) in the French context. To the knowledge, no empirical study has been done on the timely reporting of environmental information in the French context or other contexts. The originality of the work consists of the fact that it is one of the first works that deal with the relationship between environmental external assurance, corporate governance and the quality of environmental reporting.

The Importance of Corporate Governance of Banks Concerning the Ownership in the International Environment

Abstract The analysis of the factors of corporate governance is divided into four thematic sections. In the first part corporate governance is defined as part of the broader economic context. The second part deals with the principles of corporate governance. In the third part, the relation between the index of corporate governance and individual indicators (an indicator of commitment, transparency, and disclosure, caring for partners, and control and audit) regarding ownership is defined. An analysis was undertaken for the countries of Central and Eastern Europe. A higher level of foreign ownership had a positive correlation with the corporate governance index. On the other hand, the correlation between state ownership and corporate governance index was not clear. The prevention of poor banking practices does not only lie in controlling functions, but also in the general corporate and risk-taking cultures, and the social perception of managerial roles, regardless of ownership structure.

Corporate performance and sustainability: Evidence from listed firms in Portugal and Spain

We examine the impact of various factors on the quality of environmental disclosure using a sample of listed companies in Portugal and Spain for the period 2010–2017 using the generalized method of moments (GMM) and adding a sustainability index created through principal component analysis (PCA). The econometric model has been used to show the practical implications of gender corporate governance (CG) indicators and the proposed index over the market and accounting-based performance measures. The study focuses on factors related to the strategy and vision of the firm, diversity within boards, and environmental factors. Results highlight that the presence of women on board increases both financial performance and sustainability practices, highly visible through market-based measures. Sustainability initiatives also increase financial performance which works also in the other way around. Still, sustainability practices by companies are highly dependent on their financial situation casting doubts on the effectiveness of the regulations obliging to insert certain types of measures within the company. Results are useful for regulatory parties, companies, and stakeholders. Companies should still be aware of the pressure posed by both shareholders and stakeholders regarding sustainability practices, and the increased gender diversity may have an intermediate role between CG, sustainability, and financial performance.