Corporate Governance Information Research Articles

A complex network analysis approach to bankruptcy prediction using company relational information-based drivers

Corporate bankruptcy prediction is a long-standing topic of interest for a variety of stakeholders. Various prediction methodologies have been proposed to achieve more accurate predictions. So far, most studies have focused on making predictions using artificial intelligence models fed with accounting information only or a combination of accounting information and other category or categories of information. This study proposes new corporate governance drivers that exploit company relational information using board of directors’ networks of companies and the concept of node embeddings obtained by mapping large directors’ networks to lower-dimensional spaces. The contribution of these new drivers to the overall prediction performance is assessed using data on UK companies listed on the London Stock Exchange. The proposed two-stage methodology consists of devising new drivers in the first stage followed by risk class prediction in the second stage. We examine different complex network structures that capture the diversity of connectivity patterns observed in directors’ networks. Empirical results suggest that the proposed network-based drivers that use company relational corporate governance information significantly improve the performance of bankruptcy prediction.

A Complex Network Analysis Approach to Bankruptcy Prediction using Company Relational Information-based Drivers

Corporate bankruptcy prediction is a long-standing topic of interest for a variety of stakeholders. Various prediction methodologies have been proposed to achieve more accurate predictions. So far, most studies have focused on making predictions using artificial intelligence models fed with accounting information only or a combination of accounting information and other category or categories of information. This study proposes new corporate governance drivers that exploit company relational information using board of directors’ networks of companies and the concept of node embeddings obtained by mapping large directors’ networks to lower-dimensional spaces. The contribution of these new drivers to the overall prediction performance is assessed using data on UK companies listed on the London Stock Exchange. The proposed two-stage methodology consists of devising new drivers in the first stage followed by risk class prediction in the second stage. We examine different complex network structures that capture the diversity of connectivity patterns observed in directors’ networks. Empirical results suggest that the proposed network-based drivers that use company relational corporate governance information significantly improve the performance of bankruptcy prediction.

Does internal control improve enterprise environmental, social, and governance information disclosure? Evidence from China

AbstractEnvironmental, social, and governance (ESG) is a relatively new concept that emphasizes how to contribute to creating sustainable businesses. However, research on factors that influence ESG development is insufficient. This study explores how internal control influence enterprise ESG information disclosure, using 2009–2021 data from China's A‐share listed companies. The findings show a substantial positive correlation between internal control quality and corporate ESG information disclosure. Particularly, the internal control quality significantly affects corporate governance information disclosure. Moreover, the connection between internal control quality and enterprise ESG information disclosure is significantly and positively moderated by media attention. Specifically, negative media evaluations have significant impacts on enterprises. The main findings remain valid even after conducting multiple robustness tests, such as the lag test, propensity score matching, instrumental variable method, and alternative measurements for the key variables. This study widens the theoretical research frontier of internal and external supervision mechanisms.

Impact of Environmental Regulation on Corporate Green Technological Innovation: The Moderating Role of Corporate Governance and Environmental Information Disclosure

Environmental degradation is an important issue facing the world today. Microcosmically, green technical innovation is needed to decrease environmental pollution. Therefore, exploring the relationship between the two is of great significance for promoting environmental protection and sustainable development. Thus, this research elucidates the interaction between green innovation (GI) and environmental regulations (ERs). This study utilizes the fixed effects model to examine how government environmental protection subsidies (EPSs) in market-incentive ER and environmental management system certification (EMSC) in voluntary participatory ER affect GI among listed companies in China. The sample observation period is from 2012 to 2021. Additionally, the impact of corporate governance (CGL) and environmental information disclosure (EID) on the relationship between ERs and GI within businesses is investigated. The empirical results show that both government environmental protection subsidies and environmental management system certification positively affect green innovation, and both corporate governance and environmental information disclosure positively moderate the impact of government environmental protection subsidies and environmental management system certification on green innovation. The above empirical results are still valid after a robustness test and can guide the formulation of government ERs, as well as corporate strategies for environmental management and GI.

Corporate Governance and Financial Performance of Listed Firms in Nigeria

The objective of this study was to investigate the impact of corporate governance practices on the financial performance of listed companies in Nigeria. The study encompassed three industries: manufacturing, finance, and oil and gas, spanning the years 2010 to 2020. Employing a content analysis approach, data were collected from corporate websites and the Securities and Exchange Commission website. A total of 33 businesses were selected for the study. The study's analysis revealed that a majority of the corporations disclosed the majority of their corporate governance policies. Notably, the banking industry exhibited the highest level of corporate governance disclosure compared to other sectors. This implies that a company's decision to publish its corporate governance information online in Nigeria might be influenced by the regulatory environment of the sector. However, intriguingly, the research did not establish a correlation between a company's corporate governance score and its financial performance. Nevertheless, there was notable variation in the extent of corporate governance reporting across different sectors. In light of these findings, the report recommends that the Securities and Exchange Commission's code of best practices should be made obligatory for all industries in Nigeria. Furthermore, the establishment of a compliance team is advised to ensure that businesses across all sectors in Nigeria adhere to the regulatory mandates outlined in the code of corporate governance.

Retracted: The Impact of Intelligent Accounting Information Management on Corporate Governance Information Transparency

Retracted: The Impact of Intelligent Accounting Information Management on Corporate Governance Information Transparency

Representation of corporate governance information

Introdução: Na ciência da informação a multidisciplinaridade é entendida como o nível inicial para associação de disciplinas de diferentes ciências, que enquanto representação do conhecimento se propõe a fomentar uma realização comum, como abordamos a governança corporativa. Tratar o desenvolvimento histórico do termo governança como fonte de informação para identificar a especificidade do vocabulário, mantendo a garantia literária, consolida a formatação do vocabulário próprio, podendo derivar inclusive nas conexões por sinonímia, homografia ou polissemia. Todos estes argumentos de estudo da informação da governança, tratados preliminarmente de forma multidisciplinar, podem criar os caminhos para buscar novas conexões e integrações, permitindo a criação de um contexto informacional que fomente o estado da prática da governança. Objetivo: Criar um espaço conversacional sobre governança corporativa para representar a formação de constructos organizados e correlacionados a partir de suas propriedades e do fluxo informacional nas organizações. Metodologia: Revisão da literatura sobre os termos, o significado, o uso, as propriedades, e ressignificação de conteúdos aplicados à governança, considerando a especificidade terminológica, a garantia literária, o método dedutivo e as técnicas relacionadas à análise terminológica para formação de constructos. Resultado: Modelo de domínio no contexto da governança aplicado a uma situação de governança corporativa para análise do valor agregado. Conclusão: Definir um modelo de representação da informação, composto por termos associados em função de suas propriedades e características, extraídos por análise coetânea e cronológica do uso do termo governança, inova de forma multidisciplinar a ciência da informação, abrindo perspectivas para sua aplicação em novos fenômenos sociais.

Earnings management risk and audit pricing: Evidence from big bath accounting

AbstractWe examine whether big baths (large and non‐recurring charges) affect auditors’ risk assessments and therefore result in higher audit fees. Prior studies have found that there is an asymmetric reaction from auditors on firms’ income‐increasing/decreasing accruals. We argue that auditors’ response to big baths is distinguishable from other types of earnings management as big baths provide incremental information to auditors beyond other earnings manipulation indicators. Our findings show that audit fees are significantly higher for firms with big baths, compared to other firms. We also present evidence that the positive relation between big baths and audit fees is stronger for firms with weaker corporate governance and greater information asymmetry. Overall, our results suggest that auditors expand their audit effort to mitigate the greater audit risk attributable to big baths, which in turn lead to higher audit fees.

Corporate governance and equity value: empirical evidence from Nigerian firms

PurposeThe purpose of this study is to examine the impact of selected corporate governance (CG) variables on the equity value multiple (EVM) of listed firms in Nigeria.Design/methodology/approachThe research used data obtained from 100 firms listed on the Nigerian Stock Exchange (NSE) from 2014 to 2018. A generalized method of moment was used to estimate the relationship, whereas principal component analysis was used to generate composite values of EVMs.FindingsFindings reveal a significant association between board size, board independence, board gender diversity, managerial shareholding, audit committee independence, disclosure of CG information and EVM at a 1% level of significance.Research limitations/implicationsThis study was limited to firms that disclosed information on CG and EVMs.Practical implicationsThese empirical findings lend support to agency theory, which suggests the use of various CG variables as a way of reducing principal-agent conflicts. It also lends support to resource dependency theory from a gender diversity perspective.Originality/valueThe study is a pioneering effort toward unlocking the relationship between some CG variables and the EVMs, focusing on firms listed on the NSE.

Nexus of environmental, social, and governance performance in China‐listed companies: Disclosure and green bond issuance

AbstractThis study establishes a connection between existing literature on corporate environmental, social, and governance (ESG) matters, information disclosure, and green bonds by employing the issuance of green bonds to indicate investors' acknowledgment of a company's sustainable activities. Prior research has not adequately addressed the relationship between ESG performance, disclosure, and green bond issuance. A novel dataset has been compiled by merging ESG performance and information disclosure data of Chinese‐listed companies spanning from 2016 to 2020, alongside green bond issuance information from the Wind and Hexun databases. Concurrently, China's pursuit of carbon neutrality necessitates the establishment of a green, low‐carbon, and circular economy framework. ESG has surfaced as an indispensable instrument for appraising a company's sustainability and advocating the enhancement of its information disclosure systems, thereby aiding investors in forming well‐informed judgments. This study scrutinizes the correlation between each facet of ESG performance, disclosure, and green bond issuance, from the perspective of companies listed in emerging markets. The findings corroborate that companies exhibiting commendable ESG practices are more predisposed to issuing green bonds, particularly when such practices are suitably disclosed. The identified evidence will spur the enforcement of obligatory ESG disclosure regulations, further propelling China's advancement in ecological civilization and green finance.

Board Effect and the Moderating Role of CEOs/CFOs on Corporate Governance Disclosure: Evidence from East Africa

Synopsis The research problem This study examines the effects of board size and board independence, as well as the interaction effect between board independence and CEOs/CFOs on corporate governance disclosure practices. Motivation Despite corporate governance (CG) reforms around the world, research evidence indicates that the levels of corporate governance disclosures (CGDs) in developing countries remain poor due to weak institutions and corporate governance systems. In particular, the corporate boards as a key mechanism of CG and the board nomination processes in East Africa remain largely opaque and dominated by majority shareholders, chief executive officers, and chief finance officers (CEOs/CFOs), giving rise to opportunistic behaviors that may be detrimental to firm value. The distinctive feature of the board nomination process/CG system in East Africa has implications for monitoring and corporate governance disclosure practices and compliance and calls for systematic research in this under-explored subject. Hypotheses H1: The association between board size and corporate governance disclosure will be positive. H2: The association between board independence and corporate governance disclosure will be positive. H3a: The presence of the CEO on the nomination/remuneration committee will negatively moderate the relationship between board independence and corporate governance disclosure. H3b: The presence of the CFO on the nomination/remuneration committee will negatively moderate the relationship between board independence and corporate governance disclosure. H3c: The presence of the CEO and CFO on the nomination/remuneration committee will negatively moderate the relationship between board independence and corporate governance disclosure. Target population Stakeholders including firm managers, practitioners, regulatory authorities, policymakers, and investors. Adopted methodology Ordinary least squares (OLS), fixed-effects model, and system generalized method of moments (GMM). Analyses Using a large and hand-collected dataset comprising 1000 firm-year observations from 2007 to 2017 in East Africa, this study develops a corporate governance disclosure index (CGDI) of East Africa consisting of 164 provisions. To test our hypotheses, this study adopts three analytical approaches, namely OLS and fixed-effects (FE) regressions and the two-stage system GMM to address the endogeneity concerns. Findings We find that large boards and independent directors are associated with greater disclosure of CG information. Our analysis suggests that CEO/CFO power negatively moderates the link between board independence and corporate governance disclosure, unlike those environments with stronger institutions and corporate governance systems. Thus, firms whose CEO and CFO are involved in remuneration or nomination committees disclose less CG information. The combined effect of the CEO and CFO on selection and remuneration committees and an independent board in reducing corporate disclosure appears more pronounced for the post-financial crisis period compared with the crisis period.

Corporate Governance, Media Attention and Environmental Information Disclosure

Environmental information disclosure is an important element in the modernization of Chinese environmental governance system and governance capacity. Based on two perspectives of corporate governance and media attention, the relationship between the two and corporate environmental information disclosure is analyzed based on the research samples of Shanghai and Shenzhen A-share listed enterprises from 2017-2021. The empirical results of this paper show that: corporate governance and media attention can significantly enhance corporate environmental information disclosure; media attention has a significant moderating effect on corporate environmental information disclosure, which can further strengthen the relationship between corporate governance and environmental information disclosure, and this moderating effect is more obvious in state-owned enterprises.

Effects of corporate governance disclosure on profitability of public listed firms in Tanzania

This study investigated the effect of corporate governance information (CGI) disclosure on firms' profitability in the Dar es Salaam Stock Exchange (DSE). Twenty-one listed companies were studied for a period ranging from 2006 to 2021 using a mixed research method with an explanatory sequential design. Return on equity (ROE) and Return on Assets (ROA) was employed as dependent variables in the panel data analysis. CGI disclosure was an independent variable. The control variables were geographical diversification, firm age, size, and sales growth. Secondary data was obtained from DSE. Qualitative data was gathered via semi-structured interviews. Thematic analysis and a random effect model with two estimates (1 and 2) were used to analyze qualitative and quantitative data. The findings suggested a positive and significant effect of CGI disclosure on firm profitability. The findings add to the body of knowledge by signifying stakeholder theory. The study concluded that Disclosure of CGI might undeniably result in increased profitability. We recommended that firm managers look closely at CGI disclosure, enhance their disclosure practices, and invest in disclosure strategies that benefit stakeholders.

Information Selection in Default Prediction: Sri Lankan Bankers’ Perspectives

This study aims to ascertain the perceptions of bankers in Sri Lanka of the different default predictor information and the prediction performances. In semi-structured interviews, twenty-three credit risk and corporate banking managers from 26 banks in Sri Lanka were surveyed on their perceptions towards the application of accounting, share market and corporate governance information in corporate default prediction. The study follows mixed research design and uses semi-structured interviews to collect information of default prediction. Thematic analysis and t-tests were used to analyse the data. All the previous studies on corporate default prediction adopted quantitative methods to examine the role of different predictor information. This study contributes to the literature on redefining and realigning the corporate default prediction models with empirical quantitative findings. The results indicate that bankers in Sri Lanka have a generally positive perception of accounting information. They perceive governance information as being critical for credit decisions. However, no decisions are made using governance information. The majority of the bankers voiced negative perceptions about applying market information to their default prediction models. Further, bankers limit their default prediction models by devaluing or misunderstanding the role of different predictor information when making corporate lending decisions.

Corporate Governance in Ghana: A Proposal for Multi-Faceted Determinants of Corporate Governance Information Disclosure

Corporate Governance in Ghana: A Proposal for Multi-Faceted Determinants of Corporate Governance Information Disclosure

CEO Marital Status and Insider Trading

AbstractWe investigate the association between chief executive officers’ (CEOs’) marital status and their tendency to profit from insider trading. We argue that marriage can constrain CEOs’ opportunistic behaviour, which could increase litigation risk, and show that married CEOs earn lower insider trading returns compared to unmarried CEOs. Insider trades can be identified as either routine or opportunistic. We also find that married CEOs are less likely to engage in opportunistic trades, and they earn lower insider trading returns in firms with weaker corporate governance and higher information asymmetry. Our empirical results remain robust after accounting for several endogeneity tests.

Effects of Corporate Governance Disclosure on Profitability of Public Listed Firms in Tanzania

This study investigated the effect of corporate governance information (CGI) disclosure on profitability of firms listed in the Dar es Salaam Stock Exchange (DSE). 21 listed companies were studied for a period ranging from 2006 to 2021 using a mixed research method with an explanatory sequential design. Return on equity (ROE) and Return on Assets (ROA) were employed as dependent variables in the panel data analysis. CGI disclosure was an independent variable. Geographical diversification, firm age, firm size, and sales growth were the control variables. Secondary data was obtained from DSE. Qualitative data was gathered via semi-structured interviews. Thematic analysis and a random effect model with two estimates (1 and 2) were utilized to analyze qualitative and quantitative data respectively. The findings suggested that there was a positive and significant effect of CGI disclosure on firm profitability. The findings adds to the body of knowledge by signifying stakeholder’s theory. The study concluded that Disclosure of CGI may undeniably result in increased profitability. We recommended that firm managers should pay a closer look at CGI disclosure, enhance their disclosure practices, and invest in disclosure strategies that will benefit stakeholders.

Identification of the Financially Distressed Firms through Enclosure of Corporate Governance Information into the Altman Z-Score

Identification of the Financially Distressed Firms through Enclosure of Corporate Governance Information into the Altman Z-Score

Does corporate governance affect financial analysts' stock recommendations, target prices accuracy and earnings forecast characteristics? An empirical investigation of US companies.

This paper investigates how corporate governance quality affects the analyst’s stock recommendations, forecast efficiency and target price accuracy on New York Stock Exchange. In particular, as corporate governance is often uncertain and ambiguous to investors, expert financial advisors may use transparent corporate governance information to set their recommendations and improve the level of accuracy of their earnings forecasts. According to agency and signaling theories, good governance mechanisms aim to mitigate agency conflicts and boost corporate transparency. Thus, we argue that they can serve as mediators during the forecasting process and we expect a strong significant relationship between the effectiveness of corporate governance mechanisms and analyst activity. Five hypotheses are tested with a large sample of 154 US market firms over a 17-year period (2004–2020). Our empirical findings point out some special features of US stock markets. We find evidence that analysts tend to issue favorable recommendations, more accurate, less dispersed and more optimistic earnings forecasts for most well-governed firms. Furthermore, we show that higher-quality governance transparency is an important determinant of financial analysts’ behavior in the USA. The results also indicate that higher-quality governance appears valuable with financial analysts during pre- and post-crisis period, while it is not generally detected in COVID-19 times. However, we report the weakness of analysts’ outputs–governance quality for small firms. Thus, our findings cast doubts over the corporate governance-based analyst practices of US small and unaffiliated firms. The main implication of these findings is to improve understanding of how investors’ behavioral characteristics affect the transmission mechanism of information in money market and capital market prices. This paper has important implications for the decision making of financial analysts and investors by requesting firms to significantly improve their information environments in the good and bad times. It also offers insights into how firms establishing good corporate governance mechanisms can help the analysts to predict future stock prices.

Carbon trading market policies and corporate environmental performance in China

As an important practical exploration of energy saving and emission reduction through market mechanism, carbon emission trading market has important theoretical and practical significance on the impact of environmental performance of enterprises. This paper examines the impact of carbon market policy initiation and its improvement on corporate environmental performance. We found that: first, carbon market policy initiation can effectively improve corporate environmental performance; second, the impact of the degree of perfection of carbon market policy on corporate environmental performance has a threshold effect, and the optimal carbon market policy has a perfection interval of [0.723–0.758]; third, both internal corporate governance and corporate carbon information disclosure can form a synergistic effect with carbon market policy to promote corporate environmental performance improvement; fourth, the heterogeneity test shows that the carbon market policy has a more significant effect on the environmental performance improvement of low-cost transfer capability enterprises, high-energy-consuming enterprises and private enterprises. The findings of this paper provide new ideas to further promote the construction of governments carbon market and improve the environmental performance of enterprises.