Corporate Governance Structure Research Articles

From Cadres to Managers: The Double-hundred Action Programme and China's State-owned Enterprise Reform

Abstract Reforming China's state-owned enterprises (SOEs) is a complex endeavour. Among recent initiatives, the double-hundred action (DHA) programme stands out for its ambition, especially in its aim to revamp corporate governance structures and management systems. A notable change is that top executive positions are now open to a wider and more diverse candidate pool and are no longer restricted to Party cadres. Based on fieldwork and interviews at a DHA-selected enterprise, this paper explores the DHA's impact on SOE functioning and governance. Our research reveals unanimous support among top executives for the policy, despite stringent performance appraisals and limitations on future promotion opportunities. The policy has significantly transformed recruitment, performance evaluation and remuneration within the enterprise under study. However, although top executive recruitment is no longer tied to Party membership, the Party still exerts its influence through key appointments on the board of directors.

The impact of corporate governance and ownership structure on the capital structure decisions of Saudi listed firms

The impact of corporate governance and ownership structure on the capital structure decisions of Saudi listed firms

Family Management and Historical Origins: The Italian Experience

ABSTRACTResearch Question/IssueThe purpose of this paper is to analyze the long‐run determinants of the corporate structure of Italian firms to explain the persistent role of a long‐run tradition of civic capital that has favored interpersonal trust, fostered cooperation outside of the narrow ties of family members and limited the diffusion of family businesses managed predominantly by family members.Research Findings/InsightsWe examined a large sample of Italian listed and not listed firms and identified those that operate in current municipalities that in the past used to be independent communes. Such firms featuring experiences of civic engagement are today less likely to be owned by a family and run by family management.Theoretical/Academic ImplicationsOur findings highlight the role of institutions as drivers of corporate governance and signal that long forgotten institutions, by modifying local social capital, may interact with family social capital and have important persistent effects on current corporate governance arrangements. Therefore, significant elements of path dependency may explain current patterns of unbundling of ownership and management.Practitioner/Policy ImplicationsPersistent corporate governance structures are difficult even for policymakers to modify. Our findings suggest that political measures should favor the accumulation of social capital at the local level when aiming to change ownership and management arrangements and limit the misallocation of resources due to family management.

The Big Bank Scam: Failure of Corporate Governance

The case deliberates the series of events exposing serious shortcomings in corporate governance and risk management practices of one of India’s oldest and most venerable financial institutions but also cast a glaring spotlight on various unfathomable issues of corporate governance such as weak institutionalisation of whistleblowing mechanism, ethical lapses and regulatory oversight within the banking sector. The case provides an opportunity to understand the key components of corporate governance structure and consequences of poor corporate governance. The case highlights the responsibility of the board of directors and audit committee and discusses the changes required in the corporate governance structure necessary to ensure that such incidents do not take place. The case attempts to unearth the weaknesses in the bank’s internal processes that led to a scam of this magnitude and why it remained ongoing and undetected for several years. We found that there is a need for banks to leverage the latest advancements in technology to upgrade their internal functions and processes and make them more accountable and transparent. Further, it also opens the debate on whether public sector banks and other financial institutions should be guided solely by the profit maximisation motive, or they also meet their social obligations.

THE ROLE OF ETHICAL PRACTICES IN ACCOUNTING: A REVIEW OF CORPORATE GOVERNANCE AND COMPLIANCE TRENDS

This comprehensive review delves into the pivotal role of ethical practices in accounting, specifically focusing on corporate governance and compliance trends. Ethical considerations in accounting are not merely regulatory checkboxes but constitute the moral compass guiding financial professionals towards transparency, integrity, and accountability. The review provides a glimpse into the core themes explored in this review. The contemporary business landscape is marked by increased scrutiny of ethical practices within accounting frameworks. This review navigates the intricate interplay between ethical considerations, corporate governance structures, and compliance trends that collectively shape the ethical fabric of financial reporting. Examining corporate governance practices reveals their intrinsic link to ethical conduct in accounting. Effective governance structures serve as bulwarks against financial improprieties, fostering a culture of responsibility and ethical decision-making. The review scrutinizes evolving corporate governance models, their impact on financial transparency, and the role they play in mitigating risks associated with unethical accounting practices. Compliance trends, both globally and regionally, are explored to understand the ever-evolving regulatory landscape. Stringent compliance requirements act as safeguards, ensuring adherence to ethical standards. This review investigates how organizations navigate the complex web of regulatory frameworks, emphasizing the importance of proactive compliance measures in upholding ethical standards and fortifying the trust of stakeholders. Ethical considerations are not confined to regulatory frameworks; they permeate the organizational ethos, influencing decision-making at every level. The review delves into case studies and real-world examples to illustrate the tangible consequences of ethical lapses, emphasizing the need for a robust ethical foundation in accounting practices.  In conclusion, the review underscores the indispensable role of ethical practices in accounting, illuminating the symbiotic relationship between corporate governance, compliance trends, and ethical conduct. As businesses navigate an era of increased accountability, understanding and embracing ethical imperatives in accounting emerge not only as legal mandates but as essential components for sustaining trust, fostering transparency, and fortifying the integrity of financial reporting practices. Keywords:  Ethical Practices, Accounting, Corporate, Governance, Compliance.

Influence of Corporate Governance Structure on Financial Fraud in Listed Companies

Influence of Corporate Governance Structure on Financial Fraud in Listed Companies

Listed companies’ internal control index construction on corporate governance structure and corporate performance: Basis for improved strategic framework

Listed companies’ internal control index construction on corporate governance structure and corporate performance: Basis for improved strategic framework

Corporate governance structure and climate‐related financial disclosure: Conventional banks versus Islamic banks

AbstractThis paper examines whether the different corporate governance structures of conventional banks (CBs) and Islamic banks (IBs) have varying effects on their respective climate‐related disclosure (CRD). Employing a unique dataset of CBs and IBs' CRD and corporate governance structures for the period of 2016–2019, we found that their respective corporate governance structures did indeed affect their CRD in different ways. Our findings suggest that CBs disclose more climate‐related information than IBs because IBs focus on Sharia compliance which does not emphasise the protection of the environment, while CBs may be more responsive to shareholders' and stakeholders' demands on climate and environment. These effects were stronger with the quality of governance, that is, CBs disclose more climate‐related information with the governance quality, while IBs disclose even less when their governance quality increases. The findings of this study have important implications for climate change, especially the Paris Accord and The 26th Meeting of the Conference of Parties (COP26). There are also policy implications for sustainable financial markets and the financial services sector.

Lead Independent Directors and Internal Information Environment

ABSTRACTResearch Question/IssueThis study explores the relationship between the presence of a lead independent director (LID) and firms' internal information environment. LIDs are elected independent members of the board who perform key duties for the independent directors and the board, including reviewing and approving board meeting agendas, chairing non‐executive board meetings, and acting as a liaison between the CEO and other independent directors. We hypothesize that LID presence lowers information barriers between the CEO and the rest of the board members, enabling more rapid information acquisition and integration and enhancing the internal information environment of the firm.Research Findings/InsightsUsing a sample of US publicly listed companies from 2001 to 2019, we document that LID presence on the board is positively associated with proxies of internal information quality that reflect better information acquisition and information integration: accuracy and precision of management earnings forecasts, speed of earnings announcement, and absence of material weaknesses in internal controls. These results are robust to alternative model specifications, including entropy balancing, Heckman two‐step correction for self‐selection bias, firm fixed effects, and placebo tests. Further analyses suggest that LIDs with financial expertise and audit committee memberships are more effective in positively influencing internal information quality. We also show that LID presence is positively associated with several proxies of external information quality.Theoretical/Academic ImplicationsWe build on agency theory to argue that LIDs improve internal information quality by reinforcing the information quality benefits of unified leadership while mitigating potential compromises in information quality arising from entrenchment. Similarly, we use arguments emanating from the novel strategic leadership systems theory to posit that a LID appointment facilitates the tasks of the CEO and the board, enhancing the effectiveness of both groups in their respective roles: the CEO in making operating and investment decisions and the board in strengthening oversight while bringing cohesion in their shared role of strategy visioning and implementation.Practitioner/Policy ImplicationsOur findings suggest that there is scope for shareholders to consider LID appointments as an addition to their firms' corporate governance structures to enhance the internal information environment and decision‐making efficiency. Policymakers can also encourage LID appointments on the board when promoting best practices in corporate governance through regulatory guidelines.

Corporatization of Professional Bodies: A Comparative Study of the Chartered Institute of Government Finance Audit and Risk Officers (CIGFARO) and Institute of Local Government Management (iLGM)

Corporatization of professional bodies may be seen as a new phenomenon, but it has been a call since the 1980s when many professional bodies started experiencing decline. Although corporatization, as practice, is a private sector concept, applying it in the management and administration of professional bodies is likely to provide a better turn-around in how professional bodies are managed. Part of corporatization is having corporate governance structures including ethics codes which are meant to professionalize professional bodies. This study therefore compared the Chartered Institute of Government Finance Audit and Risk Officers (CIGFARO) and Institute of Local Government Management (iLGM) with a view to establish if they apply corporatization.

Research on the Role of Accounting Information Disclosure and Corporate Governance Structure in Protecting Shareholders' Rights and Interests

The influence of accounting information disclosure and corporate governance structure on the protection of shareholders' rights and interests is a complex and key research topic. This paper discusses how accounting information disclosure and corporate governance structure work together to protect shareholders' rights and interests, aiming at revealing its internal mechanism and influence path. It is found that high-quality accounting information disclosure and optimized corporate governance structure can significantly enhance the protection of shareholders' rights and interests. First of all, transparent disclosure of accounting information helps shareholders to understand the financial situation and operating performance of enterprises, so as to make wise investment decisions. Secondly, an effective corporate governance structure can restrict the self-interest behavior of management, reduce the risk of insider control and further protect the rights and interests of shareholders. Therefore, for enterprises, it is very important to constantly improve the accounting information disclosure system and optimize the governance structure, which not only helps to enhance the overall value of enterprises, but also strengthens the trust and loyalty of shareholders to enterprises.

ANALYSIS AND EVALUATION OF CORPORATE GOVERNANCE QUALITY IN ENTERPRISES

Purpose. To examine the theoretical and methodological foundations of the concept of corporate governance quality in enterprises and their application. Generalization of the theoretical approach to formulating the essence of corporate governance and its quality. Examination of quality assessment methods. Analysis of indicators characterizing the quality of corporate governance. Formulation of measures to improve the quality of corporate governance. Methodology. The research methods included: analysis and synthesis - in substantiating the essence of corporate governance and formulating its structural components; graphical method - in presenting visual analysis results; logical generalization method - in analyzing theoretical approaches to organizing corporate governance. Results. This paper examined the concept, structure, and types of corporate governance. Key elements and approaches to its definition were considered. The process of implementing enterprise strategy was examined. Generalized studies on the quality of corporate governance were reviewed. A rating assessment of corporate governance quality was formulated. Preconditions for the formation of corporate conflicts among key participant groups were examined. A rating assessment of the potential for resolving and preventing corporate conflicts was discussed. An assessment of corporate governance rating was developed, including a component that evaluates the subjective composition of corporate relationship participants. Scientific novelty. Lies in the analysis of enterprise activities and calculation of a possible option to increase the corporate governance quality rating of the enterprise. Practical significance. The paper contains practical recommendations aimed at improving the existing mechanism for assessing the quality of corporate governance in enterprises.

BOARD CHARACTERISTICS AND AUDIT QUALITY: EVIDENCE FROM VIETNAM

This study investigates the relationship between key director characteristics, board composition, and audit quality in the context of Vietnamese listed firms on the Ho Chi Minh City Stock Exchange over the period 2015 to 2020. Based on the study of Mustafa et al (2017), we employ a comprehensive dataset comprising 415 firms, we utilize a random effects estimation model to analyze the nuances of these associations. Our findings reveal a noteworthy positive relationship between directors aged 36-55 and 46-55 years old and audit quality, suggesting that the experience and expertise of directors within these age brackets contribute positively to the enhancement of audit processes. Furthermore, our study identifies a significant positive impact on audit quality associated with interlocking directorships, emphasizing the importance of interconnected networks within corporate governance structures. In addition, our results highlight the influential role of boards populated by members holding Master's degrees, indicating a positive correlation between educational qualifications and clients' demand for high audit quality. This insight underscores the significance of academic prowess and specialized knowledge in fostering a climate conducive to rigorous audit practices.

Early career workers granted creative autonomy: agency shifts intern debate towards industry expectations

ABSTRACT This research contributes to debates on intern labour, particularly preparing young workers for careers in the culture industries and exploitative experiences that may hinder their success. The purpose of this study is to enrich our understanding of the skillsets required by young practitioners and how creative autonomy can be a fruitful conceptual tool to shift the internship debate from meaningful or (self-)exploitative, paid and unpaid, professional experiences. Through semi-structured in-depth interviews with current students and recent college graduates, the analysis shows participants earn creative autonomy by understanding the implicit and explicit expectations of the role and responsibilities of culture industry positions. Interviewees who understand these institutional practices and their role within corporate governance structures shed the status of interns and provide value by contributing meaningful work at the internship site. However, young workers who lack awareness of these industry dynamics of working conditions are typically neglected by site supervisors and assigned exploitative tasks. The findings describe how these individuals would benefit from structured internship programmes with site supervisors who help develop their skillset and learn industry norms through shadowing and observation to pursue more ideal career paths or professionally rewarding experiential learning experiences.

Board Independence and Earnings Stability: A Non-linear Perspective from Indian Companies

This research examines the relationship between board independence and earnings stability in Indian companies. The study focuses on the BSE-500 index constituents, which represent 4,044 firm-years from 2011 to 2022, and aims to fill gaps in the literature by providing insights into how various board characteristics affect earnings stability. The study employs a novel non-linear approach that integrates Resource Dependency Theory (RDT) and Stewardship Theory to assess the impact of board independence on earnings stability. The study uses a quadratic regression model to examine the relationship between board independence and earnings stability, with earnings stability measured using the Return on Assets Consistency Ratio (ROACR). The findings indicate an inverted U-shaped relationship between board independence and earnings stability, suggesting there is an optimal level of board independence that maximizes stability in earnings. The study also explores other factors such as asset turnover ratio, institutional ownership, leverage, promoter holdings, and firm size. This research highlights the importance of balanced board composition and provides valuable insights for policymakers and practitioners aiming to optimize corporate governance structures for sustainable firm performance.

Escaping Zombiness: Does Corporate Governance Have the Elixir of Life?

AbstractThis study investigates the influence of corporate governance on firms’ transition into and out of zombiness. We underscore the beneficial role of external members in the corporate governance structure and long‐tenured chief executive officers (CEOs) in facilitating access to the external resources that firms need to be successful. Using a sample of European listed firms over the period 2008–2018, we adopt a dynamic view of zombiness by identifying shifts in the state from zombie to non‐zombie and vice versa. The results show that board independence is a twofold panacea against zombies, prompting zombie recovery and preventing healthy firms from becoming zombies. By contrast, leadership independence, materialized by separating the CEO and chairperson roles, hampers the recovery of zombies, probably because the cost of lacking unified leadership may exceed the benefits of external dependence minimization. Finally, the results suggest that longer CEO tenure helps healthy firms avoid zombiness. When considering a broader array of stakeholders, government bailout programmes impair zombie recovery, and stronger trade unions help healthy firms escape zombiness. Overall, this study brings a ray of hope to the zombie problem and provides a better appraisal of when supporting zombies might be worthwhile vis‐à‐vis saving promising firms and bringing them back to life.

Corporate Governance and Ownership Structure Effect on Corporate Social Performance: Evidence from Non-Financial Industries of Pakistan

This paper will examine the diversified associations between corporate governance and ownership structure impact on corporate social performance in dissimilar industries across Pakistan non-financial.  The OLS models regression are estimation to using data from 2011 to 2020, that the non-financial industries of Pakistan. Corporate governance including board independence (BINDP), board size (BSIZE), and audit size and committee (A&COM), and structure ownership including, ownership managerial (MOWN), ownership family (FOWN), and ownership concentration (COWN), inspires of organizations corporate social performance with environmental and social risk market capitalization. Generally, the outcomes significant of ownership structure and corporate governance is recognized in industries of non-financial different at a joint level while examines the organizations with a risk whole risk market capitalization disclosure.  That suggest to identifying the ownership structure and corporate governance can risk mitigate the market capitalization disclosure non-financial industries in term of correlation the corporate social performance improving and the developed the benefits with the calculation of identical female director in women on board and family ownership organizations (independent or executive) to the panel. This study also demand consideration to the corporate governance and improve structure ownership to enhance the corporate social responsibility in industries non-financial with market risk capitalization analysis, whereas risk control performance of industries analysis after complement by critical mass and independent directors properties.

Do stock swap bidders suspend their stock trading? Evidence from China

Chinese firms can suspend trading of their stocks when they announce major events. We find that stock-swap acquirers tend to suspend stock trading after a significant stock price run-up. Suspending bidders also show significantly high announcement returns if the bidder pays with stocks, while the returns are negatively associated with the pre-suspension run-up. However, the positive return disappears in the long run. These results suggest stock-swap bidders take advantage of stock trading suspension when they identify overvaluation, providing direct evidence that stock-financed acquirers have an incentive to manage stock prices. The results are robust to firms' corporate governance structures.

Gender diversity in corporate boards of companies listed on the Johannesburg Stock Exchange: a quantile regression approach

Purpose This paper aims to explore the effect of female’s presence in corporate governance structures to reduce agency conflicts, using a quantile regression approach. Design/methodology/approach The research investigates the relationship between company performance and boardroom gender diversity using quantile regression methods. The study uses annual data of 111 companies listed on the Johannesburg Stock Exchange from 2010 to 2020. Findings The study reveals that women on the board impact firm return on assets and enterprise value, varying across performance distribution. This contrasts fixed effect findings but aligns with two-stage least squares. However, quantile regression indicates that female executives and independent non-executive directors have notably negative impacts in high and low-performing companies, highlighting non-uniformity in the board gender diversity effect compared with previous assumptions. Practical implications The empirical findings suggest that companies with no women directors on the board are generally more likely to experience a decrease in performance and enterprise value relative to companies with women directors on the board. As recommended through the King Code of Corporate Governance, it is thus valuable to companies to ensure gender diversity on the board of directors. Originality/value The research confirms through rigorous statistical analyses that corporate governance policies, principles and guidelines should include gender diversity as a requirement for a board of directors.

Cross-owners as monitors: more supervisory or distracted? Evidence from China

ABSTRACT In recent decades, cross-ownership becomes a rapidly growing phenomenon in capital markets across various countries. However, there remains an absence of consensus regarding the efficacy of cross-shareholders in monitoring within the realm of corporate governance. This study delves into this quandary by employing regression analysis on data spanning the years 2007–2018 from Chinese listed firms. Our findings reveal that cross-ownership significantly mitigates agency costs, a conclusion robustly supported through a battery of tests. Key mechanisms driving this phenomenon include information advantage and governance experience, facilitated through channels such as increased shareholding and director appointments. Notably, this positive effect is more pronounced in non-state firms, firms with less concentrated ownership, greater analyst attention, and less trustworthy auditors. In sum, our results underscore the constructive role played by cross-owners in fortifying corporate governance structures.