Corporate Governance Management Research Articles

Role of non-executive directors in corporate governance

In the article there is an analysis of the non-executive director’s legal status and functions, including independent one, within the one-tier corporate governance structure in Ukraine. The study aims to examine the powers of non-executive directors, the scope of their functions, and the criteria for independence, to provide a clear understanding of their role in corporate governance in Ukraine. Author establishes that a director in a one-tier corporate governance structure is an individual elected by the general meeting of shareholders to the board of directors and assumes the official from the moment of election, regardless of the title. The article defines non-executive directors as members of the board of directors who perform control and risk management functions regarding the corporation’s activities and those of the executive directors. The fulfilment of these functions by non-executive directors contributes to balanced corporate governance. Author explores that the independence of a non-executive director involves the absence of any relationship with the corporation and compliance with other independence criteria determined by legislation, the corporation’s charter, and/or board regulations. Author also concludes that a shareholder can be elected to the position of a non-executive director, if this does not contradict the corporation’s charter, and/or board regulations. Author examines the conditions and criteria under which a shareholder elected as a non-executive director can be considered independent. The study demonstrates that the text of Law № 2465-IX contains an error technicus, which complicates the ability of shareholders within a one-tier structure to correctly apply the legal norms regarding independence criteria. Finally, risk management is identified as a key function of non-executive directors, which includes several stages: risk identification, analysis, evaluation, the implementation of risk mitigation measures, and monitoring the effectiveness of these measures. This ensures compliance with legislation and the protection of shareholders’ rights, including minority shareholders, and other stakeholders of the corporation. The article significantly contributes to a better scientific understanding of the role and functions of non-executive directors.

Board Independence And Financial Distress: Insights From India

Resource Dependency Theory (RDT) posits that organizations depend on external resources to navigate uncertainty and sustain growth, with independent directors in corporate governance acting as key intermediaries, providing expertise, external networks, and strategic oversight. This study employs Panel [Random Effect (RE)] regression to analyze the impact of independent directors on the financial distress likelihood of 20 manufacturing companies listed on the NSE over the period 2019–2024. The findings reveal that firms with a higher number of independent directors exhibit a significantly higher risk of financial distress, reinforcing the notion that these directors aggravate financial vulnerabilities and enhance organizational instability. Background: Corporate frauds like the Satyam and Nirav Modi-PNB scandals highlight the severe consequences of deceptive practices, undermining financial markets and stakeholder trust. These incidents exposed vulnerabilities in governance and risk management, prompting regulatory reforms in India. Weak corporate governance facilitates fraud by allowing insufficient oversight and accountability. Recent reforms under the Companies Act, 2013, and SEBI's regulations aim to enhance transparency and reduce fraud risks. Strong corporate governance would be critical for financial stability, investor confidence, and achieving the "2047 Viksit Bharat" vision. Research explores how independent directors influence the likelihood of financial distress. Materials and Methods: This study investigates financial distress in manufacturing firms listed on the National Stock Exchange (NSE) through a panel data methodology. A random sample of 20 firms was selected to ensure representativeness, covering the period from 2019 to 2024, with banks and financial institutions excluded due to their distinct financial characteristics. Financial distress was assessed using the Altman Z-score, a widely recognized metric for evaluating financial distress. The independent variable in the study is Board Independence, i.e., the total number of independent directors on the Board. The control variables include Profitability, Leverage, and Activity. Panel data estimation techniques were used to address issues of endogeneity and heteroscedasticity. The Hausman test was conducted to determine whether to retain fixed or random effects for the analysis. Results: The Hausman test showed a p-value of 0.0.78 (greater than 0.05) which revealed that that random effect model is appropriate for the analysis. The analysis reveals a negative relationship between board independence and financial distress, indicating that an increase in the number of independent directors is associated with a higher likelihood of financial distress at 5% level of significance. Leverage significantly increases the likelihood of financial distress, while increased operational activity decreases it; Net Profit Margin is statistically insignificant. Conclusion: This finding challenges the conventional understanding of board independence, which is generally seen as a mechanism to enhance corporate governance by providing unbiased oversight, strategic guidance, and external resources

BREAKING BARRIERS: FEMALE DIRECTORS, EARNINGS MANAGEMENT, AND THE INFLUENCE OF EDUCATION AND SUSTAINABILITY REPORTING

<p><strong>Background</strong>: The role of women directors in corporate governance has received increasing attention, especially regarding their impact on earnings management. Recognizing this role is critical as companies need to increase transparency and accountability in their financial practices, while recognizing the role of sustainability.</p><p><strong>Objective</strong>: These studies aim to find out, whether female participation in the board of directors can reduce earnings management practices, by adopting different types of measurements for the female variable.</p><p><strong>Research Method</strong>: The applied methods are purposive sampling where 49 samples collected from Indonesia Stock Exchange (IDX) that consistently publishing financial and sustainability report with a timeframe of 2018-2022. Implementing data panel regression method using Stata application.</p><p><strong>Result</strong>: The result indicate that, three female director can reduce earnings management, while independent commissioner and GRI disclosure are positively related to earnings management.</p><p><strong>Originality/Novelty of Research:</strong> This studies use different kind of measurements towards female director variables, to proving applied theory are still relevant and to resolve the limitation of previous studies to find the critical effect of female directors participation to decreasing earnings management in Indonesia.</p><p> </p>

Sustainability assessment of small hydropower from an ESG perspective: A case study of the Qin-Ba Mountains, China

Small hydropower (SHP) has made significant contributions to economic and social development in rural and remote mountainous regions. However, the adverse ecological-environmental impacts resulting from the SHP sector and challenges in hydropower management have become major areas of concern. From an Environmental, Social, and Governance (ESG) perspective and using three SHP stations (GXD, WZL, and SJB) in the Qin-Ba Mountains as case studies, we constructed a sustainability assessment system comprising 18 indicators across three dimensions. The hesitant fuzzy linguistic term sets (HFLTSs) and cloud models were employed to determine the sustainability level of SHP by characterizing the hesitancy of the evaluator and the uncertainty of the evaluated data. (1) The ecological-environmental protection (E) dimension was assigned the greatest weight, followed by the dimensions of social responsibility contribution (S) and corporate governance management (G). The weights of certain indicators, including the water qualification rate, river morphology maintenance, guaranteed rate of instream flow, comprehensive utilization, and production safety standardization grade were relatively high, conforming to the current context of green development prioritization in which ecological-environmental protection is of the utmost importance. (2) The overall sustainability levels of all three SHP stations were “good”, with the E-dimension contributing the most and the G-dimension contributing the least to the sustainability goal. (3) The GXD, WZL, and SJB stations were ranked first, second, and third, respectively, in terms of their sustainability scores. This study provides an innovative perspective for the sustainability assessment of SHP. The evaluation method can be generalized to encompass multi-attribute decision-making problems. The findings of this study can aid in addressing the shortcomings associated with SHP development and promote sustainability within the SHP industry.

Do Independent Directors Affect Real Earnings Management Practices? The Case of Indonesian Two-Tier Board System

The question regarding the role of independent directors in corporate governance in general and in limiting real earnings management practices in particular has long been debated. This study, therefore, attempts to address this question by investigating the influence of independent directors on real earnings management (REM) from the perspective of Indonesian two-tier board system.

Improving financial performance through corporate governance management: empirical evidence from listed service firms in Nigeria

This study focused on corporate governance and financial performance of parastatals in Nigeria. Five (5) banks were selected which are First Bank Plc, United Bank of Africa Plc, Guarantee Trust Bank Plc, Zenith Bank Plc and Fidelity Bank Plc. The data obtained to test and validate the hypotheses were from secondary sources concerning the variables of interest. However, the data generated are as follows; 2015 – 2022 (8 years) financial statements of five sampled banks which provided information about the variables tested and discussed. The data analysis revealed that measures of financial performance (ROA, BOD & BS), recorded means and standard deviations of 0.021966, 13.8, 13.8 and 0.0136177, 2.988868, 2.988868 respectively. The low standard deviation recorded by each of the measures of financial performance suggests that the return on asset of the respective sampled banks, members of their board of directors and board size have proximity with their respective average values. The respective minimum values recorded for ROA, BOD and BS are 0.0025847, 2 and 2; whereas the maximum values were 0.0561668, 19 and 19 respectively. This implies that the minimum of all the measures is not below 0.0561668 and the maximum did not exceed 19. It is concluded that Board composition which entails Board of Directors and Board Size has no significant effect of the financial performance of firms. The study recommended that efforts to improve corporate governance should focus on the value of the stock ownership of board members, since it is positively related to both future operating performance and to the probability of disciplinary management turnover in poorly performing banks.

Independent directors’ information acquisition and corporate innovation: Evidence from corporate site visits

This study investigates how independent directors’ information acquisition affects corporate innovation. Exploiting a unique dataset from the Chinese market, we document that firms patent more and have more high-quality technical patents after independent directors conduct corporate site visits. The positive relation is more pronounced for firms with stronger external governance, higher information acquisition cost, greater advisory needs, and more independent directors having innovation backgrounds. The results are robust when we address the endogeneity concerns, use alternative measures of patent output, and examine citations. Our findings suggest that independent directors’ advisory function is more effective when they have better access to firm-specific information, and provide new evidence on the relation between information asymmetry and the effectiveness of independent directors in corporate governance.

Corporate Social Responsibility Disclosure and Performance in China: Does the Background of Foreign Women Directors Matter?

In the context of economic advancement, developing economy firms are witnessing a growing influx of directors with foreign backgrounds who are joining their corporate boards. Giving the significance of this emerging labor market trend for board members and the particular value of women directors in corporate governance, this study delves into the impact of women directors’ foreign backgrounds on a firm’s corporate social responsibility (CSR) disclosure and performance. Using a dataset of listed firms on Shanghai and Shenzhen stock exchanges from 2010 to 2019, we find that the foreign education and the work experience of women directors improve firm CSR disclosure and performance. Corporate boards with a higher proportion of women directors with foreign education experience tend to disclose more CSR information. And women directors with foreign work experience have a more pronounced impact on enhanced CSR performance. This study provides new insights into integrating stakeholder, social role, and neo-institutional theories to advance the understanding of CSR engagement in emerging economies.

A Study of the Role of the Board of Directors in Corporate Governance Based on UK Listed Companies

Companies are directed and controlled by corporate governance. It acts on the company internally and externally. The board of directors is responsible for the governance of the company; that is to say, the board of directors is the brain of the company, while corporate governance is the blood distributed throughout the company, which not only supplies blood to the whole, but also reflects the situation. Therefore, with regard to the role of the board of directors in corporate governance, this paper objectively analyzes the importance of the board of directors in corporate governance from theory to practice and from the internal composition of the board of directors to the impact of the board’s actions on the enterprise as a whole based on United Kingdom (UK) listed companies.

The Impacts of the Board of Directors in a Company

It is acknowledged that the existence of the board of directors is essential. The board of directors is a group jointly appointed by all members of the company. It is responsible for supervising and managing the work of senior managers in the management of the company, to protect and realize the interests of shareholders. Therefore, the role of the board of directors deserves to be investigated. This paper will analyze several examples of board governance of UK listed companies, and use a small amount of data analysis to illustrate the positive and negative role of the board of directors in corporate governance.

Peny Pengaruh Praktik Tata Kelola Perusahaan terhadap Kinerja Keuangan Perusahaan Non-Keuangan Dimediasi Manajemen Risiko

The study was conducted to determine the effect of corporate governance components on financial performance mediated by risk management. In 2016-2020, non-financial sector companies on the IDX became the object of research. This research is quantitative by taking the data through financial reports. The technique applied to the research data testing is multiple linear analysis and path analysis. The results show that corporate governance practices such as auditor reputation, size of the board of commissioners, audit committee, board meetings, and financial reporting risk have a significant effect on financial performance where risk management acts as a mediation. Risk management is proven to have an effective influence in the company so that the management of corporate governance is better, and financial performance can be managed optimally. Risk management also helps to supervise and minimize any possible activities that will have an impact on causing risks, both internal and external risks.

Are social connections of independent directors all the same? Evidence from corporate monitoring

PurposeStudies on corporate boards examine how social ties between the CEO and independent board members affect the effectiveness of board monitoring. Much evidence suggests that social connections between the CEO and independent directors are associated with inadequate monitoring and lower firm value (Hwang and Kim, 2009; Fracassi and Tate, 2012). In this study, the authors note that social connections of the independent directors are of different nature and thus should not be treated as a homogeneous group; that is, the nature of connections among directors can be quite different from that between the CEO and directors, which is the primary focus of previous studies.Design/methodology/approachThe authors classify independent directors into four mutually exclusive groups based on their social connections to the CEO and other independent board members and examine what role each type of connection plays in corporate monitoring using panel data and cross-sectional fixed effect regressions.FindingsThe authors find that Only_CEO%, the proportion of independent directors who are connected only to the CEO, is negatively associated with monitoring intensity. Specifically, firms with higher Only_CEO% have larger CEO compensation, lower likelihood of dismissing the CEO, more co-opted board and worse firm performance. In contrast, No_CEO_Ind%, the proportion of independent directors who have no connection to either the CEO or other independent directors is associated with more effective monitoring. These findings suggest that independent directors with different degrees of social connections exhibit different monitoring qualities.Practical implicationsWhen more independent directors, who are connected exclusively to the CEO, are on the board, they consistently deliver low monitoring quality. However, when more independent directors with no connections to either the CEO or any independent directors are on the board, they enhance monitoring quality. These findings can be used to construct board structures with more effective monitoring ability.Originality/valueThis paper extends the literature on social networks in corporate finance. The authors show that independent directors with exclusive connections to other independent directors do not have a significant effect on board monitoring, but those truly independent directors are associated with better monitoring quality. These findings suggest that different types of social connections of independent directors play a different role in board monitoring and help extend our understanding of the function of social connections of independent directors in corporate governance.

Evaluate the importance of the board of directors to the corporate governance of large listed UK firms

People sometimes question the centrality of the board of directors as the British governance reform policy debate, because the daily impact of the board is hard to be perceived. However, when things go wrong, they become the focus of attention (Adams et al, 2010). Agency theorists believe that the board has two main functions: decision management and decision control (Amama & Grzegorz, 2014). The UK Code (Financial Reporting Council, 2014, p. 1) reflects the difference, pointing out that "corporate governance is the processes and a combination by which companies are directed and controlled" and "the board of directors is responsible for corporate governance". This paper will start from two major aspects of corporate internal governance and external governance, and evaluate the importance of the board of directors in agency relationship, independence and supervision, and crisis respectively, so as to illustrate that the important role of the board of directors in comprehensive corporate governance is inevitable and crucial, and the core position of the board of directors in the corporate governance mechanism.

Role of Independent Directors Post Satyam Case

Independent directors are seen as accomplices of the board and as outside gatekeepers whose activity is to ensure that administration remains concentrated on conveying shareholder esteem. They are the guard dogs, the one liable for safe guarding the enthusiasm of minority shareholders. A genuine inquiry has been raised on the noteworthiness of such 'independent directors' after Satyam scandal emitted and four independent directors of the organization surrendered. The study aim and examines the effect of Satyam scandal over the job of independent directors in corporate administration. This research is a pure doctrinal research. It includes critical analysis of various reports like Kumar Mangalam Birla Committee’s Report on Corporate Governance, Blue Ribbon Report etc. The research also studies various judgments, articles and statutory provisions such as Clause 49 of Listing Agreement, regarding independent directors. The research instruments, for example, reports and decisions are both valid and dependable. The research uncovers that through different institutions through different legal choices and reports there have been a positive effect on corporate governance versus independent directors. This is a purely doctrinal research. It is limited to judgments passed by courts in India and enactments thereafter. The result of this study will facilitate the corporate institutions and their stakeholders to understand the necessity of corporate governance. It will also help them to understand that how independent directors can be beneficial in providing corporate governance. This study is probably is first to determine the impact of Satyam scandal over the role of independent directors in corporate governance. It offers a beneficial source to those corporate institutions, which are still lagging behind when it comes to corporate governance.

Education for the Sustainable Development and Corporate Social Responsibility in Higher Education Institutions (HEIs): Evidence from Greece

This paper investigates the Education for Sustainable Development in international and Greek Universities. It further aims to investigate how Greek students comprehend the Sustainable Development (SD) issues and Corporate Social Responsibility (CSR) and support, as future managers, its added value concerning the environmental, social and corporate governance management in the Greek Business Community. For this purpose, a literature review and a field research among Greek Higher Educational Institutions (HEIs) students has been conducted. The field research and other relevant researches conclude that the Greek HEIs have followed the international trends and started implementing CSR and Sustainable Development courses in their curriculum. Furthermore, they state that SD and CSR courses are very important for the shaping of a business ethics management, an environmentally friendly behavior and promote the stakeholders interests. Moreover, the field researches find there are strong parallels between the CSR orientation of Greek students and students and managers in other countries. For this reason, Greek Companies could play a significant role at this point, by allowing students to participate in their CSR initiatives. For Greek Higher Educational Institutions (HEIs) and students the SD and CSR, is more than just another scientific subject, as it is a way of completely altering existing way of business management, decision making and market behavior. Therefore, Greek Higher Educational Institutions and students argue that Sustainable Development and CSR are not issues that concern only academic and the corporate world but constitute a greater idea that everyone has to embrace.

Non-CEO top managers’ monitoring power and CEO pay-performance sensitivity in state-owned enterprises: Evidence from Chinese state-owned listed firms

Few studies have focused on the role of non-CEO top manager inside directors in corporate governance, especially in the context of emerging countries. Despite their tendency to be subject to CEOs, non-CEO top manager inside directors can counterbalance CEOs in specific situations. Using panel data on state-owned listed companies in China, we conduct an empirical study of how non-CEO top manager inside directors influence CEO pay-performance sensitivity under serious agency conflicts. We find that the proportion of non-CEO top manager inside directors is significantly negatively correlated with CEO pay-performance sensitivity in state-owned enterprises, whereas the shareholding proportion of the controlling shareholders weakens this relationship. Furthermore, we find that non-CEO top manager inside directors significantly increase executives’ on-the-job consumption. Our conclusions are robust to endogeneity testing and alternative specifications.

A Bibliometric Review of Global Research on Corporate Governance and Board Attributes

This paper conducts a bibliometric review of global research on the role of boards of directors in corporate governance. Boards of directors play a crucial role in the corporate governance of publicly traded firms, as they monitor the performance of top executives on behalf of shareholders and help to set the firm’s overall strategic direction. Our review documents most influential articles, authors, and journals in this area. The bibliometric analysis highlights the multi-disciplinary nature of research on boards of directors, covering the fields of finance and economics, accounting and auditing, and management and strategy. Furthermore, co-citation analyses reveal the core theoretical and conceptual articles on agency theory and ownership structure that provide the foundation for research on corporate governance and boards of directors. The review shows that, despite its practical importance, studies on how boards of directors contribute to corporate sustainability represent only a small fraction of the articles in this literature. This highlights the need for more research on this particular topic in the coming years. Moreover, the keyword co-occurrence analysis suggests other emerging research topics in the BDCG knowledge base are in the areas of gender diversity, CSR, and innovation, which pinpoints possible future research directions for scholars in the field.

Impact of Compliance with Principles on Board of Directors and Corporate Performance: Empirical Evidence from Sri Lankan Listed Companies

Board of directors in corporate governance is conceptualized as the perceived ability of a firm to constrain and direct corporate power so that it efficiently creates economic value and equitably distributes economic wealth. Accordingly, this study examines the relationship between the level of compliance with the principles on corporate governance related to the board of directors and corporate performance of listed firms in Sri Lanka using secondary data related to 133 listed companies from 2009 to 2016. This study constructed Board Index related to dimensions (principles): Chairmanship, Nomination Committee, Audit Committee, Remuneration Committee, and Re-election of directors, Company Secretary, Role of the Board, Board Meetings and Board Independence. This study employs panel regression model to examine the relationship between the Board Index (BI) and their relationship with corporate performance and performed with Hausman test for random and fixed effects. The findings indicated that the compliance with these principles are positively related to the financial performance and negatively related with market performance. Thus, this study provides empirical support for the agency perspective in the context of compliance requirements of board of directors leading to higher corporate performance. Insights of this research are offered to listed firms by the compliance of corporate governance principles have the potential to improve company performance. KE Y W ORDS : Agency Perspective, Audit Committee, Corporate Governance, Nomination committee, Remuneration Committee

Unocal Fifteen Years Later (And What We Can Do About It)

The coincidence of the new millennium and the fifteenth anniversary of the Delaware Supreme Court's announcement of a new approach to takeover law provides an appropriate occasion to step back and evaluate a remarkable experiment in corporate law - the Delaware Supreme Court's development of an intermediate standard for evaluating defensive tactics. I will argue that Unocal has developed into an unexplained and, I think, inexplicable preference that control contests be resolved through elections rather than market transactions. In doing so, I will highlight the remarkable struggle between the Chancery Court and the Supreme Court for Unocal's soul, a contest I will suggest the Supreme Court won only by fiat. I will also maintain that the current debate over shareholder-adopted bylaws that repeal or amend director-adopted poison pills provides a vehicle to reposition Delaware takeover law. Finally, I will end my retrospective on a note of praise. Intertwined with the development of Delaware takeover law is a reassessment and important expansion of the role of independent directors in corporate governance. There is no reason why this important development cannot be preserved if the Delaware Supreme Court chooses otherwise to restore balance to the law of takeovers.

The mediating effect of dividend payout on the relationship between internal governance and free cash flow

PurposeThis paper aims to examine the mediating effect of dividend payout on the relationship between internal governance mechanisms (board of directors and ownership structure) and the free cash flow level.Design/methodology/approachLinear regression models are used to investigate such relationships applying data from a sample of 207 non-financial firms listed on the Gulf Cooperation Council countries’ stock markets between 2009 and 2016. To test the significance of mediating effect, the author uses the Sobel test.FindingsThe author finds a partial mediation effect of dividend on the relationship between both board independence and managerial ownership and the level of free cash flow. The results confirm the major role of outside directors in corporate governance. This governance mechanism contributes to the protection of shareholders’ interests through a generous dividend policy. However, the author finds that large managerial shareholdings increase the level of free cash flow through lower dividend payouts. This result suggests that powerful managers follow their preference of retaining excess cash to their own interests.Practical implicationsThis paper offers insights to policy-makers of emerging economies interested in the development of the corporate governance. This study provides guidance for firms in the construction and implementation of their own corporate governance policies.Originality/valueThe main contribution of the present paper is to examine the dividend payout as a potential mediating variable between internal governance mechanisms and free cash flow. Moreover, it highlights the issue of efficient management of substantial funds in Sharia-compliant and non-Sharia-compliant firms.