Effect Of Corporate Governance Mechanisms Research Articles

Corporate governance, policies, and outcomes: The appointment of military connected boards and sustainability

AbstractThis paper explores whether a military connected board is an effective corporate governance mechanism, leading to sustainable corporate policies and outcomes. Appointing military‐experienced directors could be a firm's good and ethical business strategy if it positively influences firms' decision making process and eventually outcomes. Relying on over 6800 firm‐year observations over the period of 2000–2018 in the Thai stock market, we find military connected boards mis‐utilize firms' resources, representing a weakening governance mechanism―in line with agency cost theory. Specifically, firms with military officials on their boards are highly levered, keep low cash reserves, pay low dividends, but underinvest, and historically underperformed. However, we find a positive relationship between military connected boards and firm value, measured by Tobin's Q, representing potential future growth and supporting resource dependency hypothesis. Although backward‐looking analyses point toward irresponsible and unsustainable corporate policies which ultimately destroy corporate outcomes, forward‐looking evidence sees a good use of military connected board members in bidding on the government's projects.

The Effect of Corporate Governance Mechanisms on Integrated Reporting (IR) Quality: The Case of FTSE100 Companies

The Effect of Corporate Governance Mechanisms on Integrated Reporting (IR) Quality: The Case of FTSE100 Companies

Whistleblowing sebagai Strategi Peningkatan Tata Kelola Perusahaan

Efforts to implement good corporate governance are often hindered by various types of cases such as acts of fraud, causing large losses and disrupting corporate governance. Prevention of fraud cases is very important to prevent this impact. This research focuses on the description of the literature about the importance of implementing whistleblowing in improving corporate governance, especially preventing fraud in a company. This research is a type of qualitative research using the library research method with the content analysis approach. The results of the study describe that the use of whistleblowing in several private and public companies proves the important role of whistleblowing in achieving effective corporate governance. Whistleblowing actions taken not only resulted in the dismissal of parties proven to be involved in fraudulent transactions, but also contributed significantly to the emergence of whistleblowing as an effective corporate governance mechanism. The implications of this research can be used as new insights on the use of whistleblowing for corporate governance that is able to minimize fraud in the future

Board characteristics, ownership structures and bank profitability: Evidence from Sri Lanka

Despite theoretical literature stating that corporate governance mechanisms enhance the banking sector performance, empirical studies over the past decades have inconclusive evidence over the effectiveness of such mechanisms. Several studies argued that some mechanisms led to diminishing banking profitability. Hence, the scope of this study is to investigate the effectiveness of corporate governance mechanisms in driving the banking profitability. The evidence is based on 13 licensed commercial and specialized banks in Sri Lanka during the period from 2011 to 2020. It examines the relationship between profitability indicators such as return on assets (ROA) and return on equity (ROE) against seven variables related to board characteristics and ownership structures through a panel data regression model. Each regression model is initially estimated with pooled OLS method and then tested with fixed and random effects methods based on the Hausman test results. The findings suggest that board size, frequency of board meetings, representation of non-executive directors in boards, gender diversity, directors’ share ownership and economic growth are significant determinants of ROA. In contrast, board size, frequency of board meetings, bank size and economic growth are associated with ROE, summarizing that the shareholders concentrate less on ownership structures in the Sri Lankan banking sector. This broadly supports the stakeholder theory where the corporate governance mechanisms ensure enhanced returns to all stakeholders rather than the shareholders’ returns. The results also suggest that the existing corporate governance requirements for the Sri Lankan banks require careful revisits to further promote their effectiveness.

Do political connections cause over-indebtedness? Empirical evidence from China’s listed construction firms

PurposeThis study aims to investigate the relationship between political connections and the over-indebtedness of firms in the construction industry. Furthermore, this study explores the moderating effect of corporate governance mechanisms with monitoring intent on this relationship.Design/methodology/approachThis study uses the data from China’s listed construction firms for the years 2010–2019 to run the fixed-effect regression. This study constructs the optimal capital structure mathematical model by following the trade-off approach.FindingsThe research results show that most of China’s listed construction firms are surprisingly over-indebted in the long run. This study affirms that political connections positively impact the over-indebtedness of China’s listed construction firms. However, corporate governance can alleviate the impact of political connections on the over-indebtedness of China’s listed construction firms.Originality/valueThere were limited studies to discuss the relationship between political connections and the over-indebtedness of construction firms, and no particular attention has been given to the moderating effect of corporate governance mechanisms on the relationship between political connections and over-indebtedness. Moreover, in calculating the over-indebtedness of China’s listed construction firms, this study considers the financial characteristics of China’s construction firms when building the mathematical model of optimal capital structure, which makes the calculation results of over-indebtedness closer to reality.

Does CEO overconfidence affect workplace safety?

We study the impact of CEO overconfidence on workplace safety. We provide robust evidence of a positive relation between CEO overconfidence and workplace injury rates, implying that CEO overconfidence impairs workplace safety. In cross-sectional analysis, we find that the documented effect is amplified among firms with greater concentration of decision rights in headquarters and higher employee turnover, while is mitigated among firms with stronger labor union presence and more effective corporate governance mechanisms. Additional analysis points to increased employee workload and poor corporate safety culture as the mechanisms behind the documented detrimental effect of CEO overconfidence on workplace safety.

EFFECTIVENESS OF CORPORATE MANAGEMENT: CURRENT PROBLEMS AND PERSPECTIVES

Corporate governance is the basic form, which involves combining the interests of various stakeholders. In the process of transformation of the economy, the main goal was the formation of the private sector and the development of entrepreneurship. Privatization played an important role in achieving the mentioned goal. The process of privatization of state property is a result of the current globalization in the world. One of the main tasks of privatization is the formation of a corporate system of ownership. That is why the result of the mentioned process should be improved and highly technologically developed services, increased production and financial efficiency. Accordingly, the process of ownership redistribution will be a normal and effective mechanism of corporate control when the efficiency of the corporations' activities will increase and, accordingly, economic growth will take place. Unfortunately, such processes were more the exception than the rule in Georgia. Thus, we can unequivocally state that privatization could not solve the main task - to increase the efficiency of the work of newly created joint-stock companies. It was expected that owners interested in more efficient management would emerge. But the emergence of multiple ownership instead of one owner - the state, had a weak effect on the increase in the effectiveness of the internal management mechanisms and its results. At the same time, the ability to promptly resolve issues of ownership and overall strategic leadership has become significantly more difficult. One of the main reasons for this is that effective corporate governance mechanisms were not offered alongside the increase in ownership.&nbsp

Pengaruh Mekanisme Corporate Governance terhadap Manajemen Laba dengan Asimetri informasi sebagai Variabel Interveing

This study aims to determine the effect of corporate governance mechanism (managerial ownership, institutional ownership, and audit committees) on earning management with information asymmetry as an intervening variable. The type of research is quantitative using secondary data in the form of data from the financial statements of company listed in Indonesia Sharia Stock Index (ISSI). The sampling method in this study uses purposive sampling with a sample of 78 companies listed in ISSI with 3 years period. Then the results obtained were processed with Eviews-12. The analysis used included descriptive statistical test, classical assumption test, path analysis regression test and hypothesis testing. Based on the test results obtained: managerial ownership does not have significant negative effect on earning management. Institutional ownership has a significant negative effect on earning management. Audit committees does not have negative effect significant on earning management. Information asymmetry has a positive significant effect on earning management. Managerial ownership does not have effect on information asymmetry. Institutional ownership has a negative significant on information asymmetry. Audit committees does not have effect on information asymmetry. Managerial ownership, institutional ownership and audit committees can mediate earning management with information asymmetry.

Moderating Effect of Corporate Governance Mechanism on the Relationship between Firm Attributes and Corporate Performance in Emerging Economy

The study examined the moderating effect of corporate governance mechanism on the relationship between firm attributes and corporate performance in emerging economy. Firm attributes was proxy using firm assets tangibility (FAT) and firm foreign listing (FFL); corporate performance was measured using Tobin's Q while the moderating variable of corporate governance mechanism was proxy using board size. The ex post facto design was adopted and the data for the study was collected from the annual reports and accounts of the 66 manufacturing companies listed under consumer goods sector, industrial goods sector oil & gas sector, ICT sector, healthcare sector and conglomerate sector of the Nigeria Exchange Group (NGX) as of December 31, 2022 for the period of 2016-2022. Panel Least squares model was used in the data analysis and the results of the study show a significant and positive association between firm assets tangibility, firm foreign listing and performance of listed manufacturing firms in Nigeria at 1% significant level. Corporate governance mechanism was also found to moderate the relationship between the firm assets tangibility, firm foreign listing and corporate performance at 1%-5% level of significance. The study therefore concludes that firm attributes ensure corporate performance. The study recommends that firms should find a way to ensure an optimal use of their tangible assets and also have a foreign stock listing as it ensures corporate performance. In addition, firms should ensure that they have effective corporate governance mechanism in place as it moderates the relationship between firm attributes and corporate performance.

The effects of corporate governance mechanisms on voluntary corporate carbon disclosures: evidence from the emerging economy

PurposeThis study examines the effects of corporate governance mechanisms on voluntary corporate carbon disclosure in Bangladeshi firms.Design/methodology/approachTo investigate the association between corporate governance mechanisms and corporate carbon disclosures, this study employs ordinary least square (OLS) methods. To mitigate the potential endogeneity concerns, the authors also introduce firm fixed effect (FE) and random effect (RE). Primarily, the study sample includes 250 firm-year observations over the period 2015–2019 for listed companies on the Dhaka Stock Exchange (DSE) in Bangladesh. Subsequently, corporate governance mechanisms that influence voluntary carbon disclosure were examined using both univariate and OLS models.FindingsThe findings of this study suggest that firms with a larger board size and more independent directors have a positive impact on the firm's intensity to disclose carbon-related information. However, no evidence has been found of the existence of an environmental committee, and the presence of female directors on the board tends to be associated with a higher level of voluntary corporate carbon disclosure.Originality/valueThe study offers necessary evidence of the determinants of corporate carbon disclosures, which will be useful for managers, senior executives, policymakers and regulatory bodies. To improve corporate governance practices and formulate separate sets of regulations and reporting criteria, disclosing extensive and holistic carbon-related information obligatory. Further, the outcomes of this study based on Bangladeshi firms can be comprehensive for other developing countries to take precautions to tackle the effect of global climate change.

Corporate governance as antecedents and financial distress as a consequence of credit risk. Evidence from Iraqi banks

This study examines the antecedents and consequences of credit risk (CR) in Iraqi banks' context from 2011 to 2020. POLS, FEM, and REM regression estimators were used to test the hypotheses after obtaining an appropriate model. The hypotheses test findings on CR antecedents reveal that the board's financial expertise, risk management committee, and foreign ownership have a negative impact on CR. Meanwhile, the results show an insignificant effect on CR of board independence, audit committee, institutional ownership, governmental ownership, and managerial ownership. Concentrating on the consequence of CR, the results stated that CR influenced financial distress (FD) positively. Finally, ownership concentration (OC) as moderating interacts with the association between CR and financial distress. The study enhances the knowledge and implications of the theory used for corporate governance dimensions. It provides feedback to regulators and policymakers on the effectiveness of corporate governance mechanisms regarding CR control. The study also offers the Iraqi regulators and policymakers evidence of the harmful impact of CR on financial distress, necessitating their protection of bank investors from such situations by improving established credit rules and laws. This study contributes to the existing body of knowledge by investigating the antecedents and consequences of credit risk in the banking sector. This study also took a further step by examining the moderating role of ownership concentration between CR and FD.

THE EFFECT OF CORPORATE GOVERNANCE MECHANISMS ON INTEGRATED REPORTING: A STRUCTURAL EQUATION MODELLING (SEM) APPROACH

This study investigates the level of integrated reporting of Malaysian listed companies and explores the potential effects of corporate governance mechanisms on integrated reporting. The annual reports of 150 companies listed on the main market, Bursa Malaysia, for the year ended 2014 were examined to analyze the companies' integrated reporting practices using content analysis. An integrated reporting index was constructed following the key elements of the integrated reporting framework established by the International Integrated Reporting Committee (IIRC). The study considered four corporate governance mechanisms: board composition, board size, board diversity, and ownership structure. The study used Multiple regressions to measure the impact of corporate governance mechanisms on the companies' integrated reporting initiatives. Structural Equation Modelling (SEM) was used to measure the effect of corporate governance mechanisms on the level of the companies' integrated reporting. The results showed that Malaysian companies' reporting of financial and non-financial information has not yet been integrated. Based on SEM analysis, the results indicated that only one variable, namely, the board size, was associated with the extent of integrated reporting. Board size was the most significant variable that influenced the level of integrated reporting of Malaysian public listed companies in 2014. The study contributes to the integrated reporting literature. It presents empirical evidence that corporate governance mechanisms influence companies' disclosure of integrated reporting information and, thus, providing additional data or information that will be significantly helpful for other researchers. The study will also stimulate the interest of academics in research activities concerning the characteristics of corporate governance mechanisms on integrated reporting activities. The findings are limited to the context of the study. It only looks at corporate governance mechanisms as a critical driver of integrated reporting and uses only the annual report disclosures from a single year.

Non-financial reporting and corporate governance: a conceptual framework

PurposeThis paper aims to develop a conceptual framework informed by a literature review. This framework aims to deepen and broaden the understanding of the relationship between corporate governance mechanisms and non-financial reporting (NFR) through qualitative research approaches.Design/methodology/approachA review of corporate governance and NFR literature and existing research frameworks leads to the development of a conceptual framework to encourage future qualitative accounting research on the corporate governance mechanisms for NFR.FindingsFew studies consider the complex interrelationships between NFR and corporate governance mechanisms. Quantitative studies using secondary data sources dominate accounting research on the topic. Of the small number of qualitative studies, many are theoretical and offer little new knowledge about the effectiveness of corporate governance mechanisms in practice. The research framework, developed from a literature review and consideration of multiple qualitative approaches, proposes numerous avenues for future research.Research limitations/implicationsThis paper is based on a scoping review of the literature using peer-reviewed journal papers. Other researchers may have identified additional literature for inclusion, including grey literature.Practical implicationsMore qualitative research into NFR and corporate governance mechanisms may help to guide practitioners seeking to incorporate sustainability into their governance practices.Social implicationsThe critical relationship between NRF and corporate governance is under-explored in research yet has significant consequences for organisations pursuing sustainability.Originality/valueThe authors develop a conceptual framework for qualitative accounting research on NFR and corporate governance, addressing key outstanding questions in this area and considering different theoretical perspectives when approaching this critical topic. Although there is scope for further research in general in this promising area, including quantitative reviews and discursive studies, qualitative research would be of particular value. The authors also outline multiple directions for nurturing academic debate.

Corporate governance and executive compensation: do they impact on operating performance and valuation of real estate firms?

PurposeCorporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can prevent issues and corporate scandals as the company ensures greater transparency and accountability. Accordingly, this paper aims to investigate the relationship between shareholder-oriented corporate governance mechanisms, value and performances in the real estate sector.Design/methodology/approachThis paper investigates the relationship between corporate governance mechanisms, performance and value in a sample of 111 USA real estate firms. After collecting data from 2014 to 2018, this paper tests the research hypothesis using the linear fixed-effect model.FindingsThe results demonstrate a positive impact of shareholder-oriented corporate governance mechanisms on performance and value. In particular, firms with no chief executive officer (CEO) duality and staggered board mechanisms and recognizing excess variable compensation to the firms' executive have a significantly higher Tobin's Q, return on assets (ROA) and price-to-book performance.Practical implicationsThe implications are twofold: on the one hand, this motivates shareholders to establish new corporate control mechanisms to maximize value, attract more capital and improve operating performance. On the other hand, this allows investors to direct the investors' resources toward real estate firms with effective corporate governance mechanisms that may return higher performance and value.Originality/valueFocusing on the real estate industry, where governance is expected to have a lower impact due to solid regulation, especially in real estate investment trusts (REITs), the research allows the formulation of industry-specific inferences that may be generalized for the general market.

IFRS adoption, firms’ investment efficiency and financial reporting quality: a new empirical assessment of moderating effects from Saudi listed firms

PurposeUnder a gradual long-term plan of the Saudi Stock Market (TADWUAL) from 2016, Saudi Arabia decided to work with International Financial Reporting Standards (IFRS) board to fully adopt its accounting standards. Saudi Arabia has undergone several reforms in governance and standards of internal controls are changing rapidly. This study aims to assess whether IFRS adoption has any moderator role in the relationship between disclosure quality and firm-specific characteristics in the Saudi Stock Market.Design/methodology/approachThis study assesses whether IFRS adoption has any moderator role in the relationship between disclosure quality and firm-specific characteristics in the Saudi Stock Market. The key research hypotheses postulate that compared to IFRS status, after adoption, several independent variables influence the disclosure level. The analysis covers a local sample of 184 Saudi listed firms over the period 2016 to 2020. Using an in-depth content analysis technique, the voluntary disclosure and number of annual report pages are measured manually and year by year to capture levels and unique characteristics. The authors apply cross-sectional regression, first difference method, Pooled OLS and feasible general least square estimations. The mean of disclosure level increases from 33.03% in 2016 to 56.14% in 2020.FindingsThe results reveal that the vast majority of firm-specific characteristics were significant in pre-IFRS adoption period. First difference analysis shows a significant impact of firm size and non-executive composition on the disclosure level. The authors confirm that IFRS adoption plays a critical role in the quality of firms’ financial reports and supports to create a conducive economic environment in Saudi Arabia.Practical implicationsFirst, the implementation of IFRS adoption should impact the Saudi accounting information and disclosure quality in Saudi context markedly. Second, firm-specific characteristics align with corporate governance are the main determinants of accounting information and transparency; therefore, focusing on this angle enables regulators and policymakers to mitigate uncertainty and asymmetric information. Third, the findings of this research state that there is a negative relationship between disclosure quality and board meetings. This encourages policymakers to reconsider the number of board meetings in firms that was not as high as in the developed markets. Notwithstanding all previous implications, it is recommended that future research undertake a various quasi-experimental design such as a difference-in-difference approach to estimate the causal effect of corporate governance mechanisms on IFRS 7 mandatory disclosure requirements on in Saudi Arabia context.Social implicationsThere is a lack of studies on this realm and such as these studies will enrich the understanding of aspects of IFRS adoption and contribute to the prior empirical literature. Importantly, the extend of this sample into other Gulf Cooperation Council countries and exhibition the difference effect can be very useful to enrich the knowledge of IFRS adoption aspects in corporate disclosure and accounting information quality.Originality/valueSaudi Arabia has undergone several reforms in governance, and their standards of internal controls are changing rapidly. This has been attributed to the importance of providing guidelines, practices and regulations for listed companies. One of the major turning points of financial reporting quality in Saudi listed firms was adoption of IFRSs. This adoption deems to be necessity in ensuring the highest level of transparency and information reliability. Based on the findings of this research, the present investigations set up a platform and furnish many implications for policymakers, companies’ board of directors, financial analysts and other related authorities. The results should provide policymakers with greater insight of the relationship between disclosure quality and corporate-specific characteristics throughout the IFRS adoption periods. Thus, the results derived from this study can be effective and useful for the IFRS adoption committee in the Saudi Organization for Certified Public Accountants (SOCPA). According to the best of the authors’ knowledge and based on official secondary information sourced from the SOCPA website, there are several standards that are subject to difficulties in measurement and are modified from time to time, such as: IFRS1, IFRS8, IFRS12, IFRS16 and IFRS18.

Corporate Governance, Audit Oversight Board and Tax Avoidance: Malaysian Family Listed Firms

The aim of this study is to examine the impact of corporate governance and Audit Oversight Board (AOB) on tax avoidance of family-owned listed on Bursa Malaysia. Consistent with prior research, this study uses effective taxes rate (ETR) to measure tax avoidance. Using a sample of 1,333 firm-year observations of Malaysian family-owned public listed companies from 2014 to 2018, this study finds corporate governance and AOB affects tax avoidance practice. In particular, the findings indicate that there are significant and negative relationship between audit committee size and AOB and ETR. The results suggest that audit committee size and AOB are the most effective corporate governance mechanism in mitigating tax avoidance strategies of such firms.

The Effect of Corporate Governance Mechanisms on the Quality of Financial Statements and Its Reflection on the Type of Auditor's Opinion

Corporate governance has become an important topic after the financial crises that occurred in many companies and led to their collapse in the nineties of the twentieth century, and technological developments affected accounting and the appropriateness of financial reports. Many corporations used corporate governance concepts to acquire the trust of investors who value transparency and information sharing. The goal of this research is to look at the impact of corporate governance structures on financial reports quality and how it relates to the type of external auditor. The findings of the study show that institutional shareholder ownership has a positive and significant link with financial report quality, and that the auditor's view diminishes the relationship between institutional shareholder ownership and financial report quality. The study concluded that managers' ownership has a positive and important relationship with the quality of financial reports, and the auditor's statement has no effect on the relationship between managers' ownership and the quality of financial reports. The structure of the board of directors has a positive and important relationship with the quality of financial reports, and the auditor's statement has no effect on the relationship between the structure of the board and the quality of financial reports. Finally, the size of the council has a positive and important relationship. The auditor's comments reduce the relationship between board size and the quality of financial reporting.

The Effect Of Corporate Governance Mechanisms On Financial Distress

In this study, the authors are interested in examining how institutional ownership, independent commissioners and audit committees influence financial distress. The population of all manufacturing companies listed on the Indonesia Stock Exchange from 2018 to 2021 totaling 106 samples. According to the criteria required in this study, only 19 companies were sampled for 2018 to 2021. The results showed that the Board of Directors has a positive influence significant effect on financial distress, the proportion of independent commissioners has no significant effect on financial distress, audit committee size has no significant effect on financial distress, and institutional ownership has a significant negative effect on financial distress

Corporate governance and cost of equity: the moderating role of ownership concentration levels

PurposeThe study analyzes the influence of corporate governance and ownership concentration levels on the cost of equity. Further, the authors extend the literature by investigating the moderating effect of ownership concentration levels (i.e. at 5%, 10% and 20%) on the relationship between corporate governance and the cost of equity.Design/methodology/approachThe study applies several robust panel regression techniques to a sample of 114 active non-financial companies listed on the Pakistan Stock Exchange from 2011 to 2016. Corporate governance was measured through a unique index comprising 30 governance attributes. The cost of equity was measured through the capital asset pricing model. Further, the authors construct three variables for ownership concentration levels, i.e. at 5%, 10% and 20%. To address the endogeneity problem, the one-lagged variable model and GMM approaches were also applied.FindingsThe results indicate that better corporate governance reduces the cost of equity, while ownership concentration at high thresholds would increase the cost of equity. Further, the authors find that ownership concentration at the 20% threshold moderates the relationship between corporate governance and the cost of equity. Thus, the authors argue that firms can minimize the risk faced by shareholders by implementing substantive corporate governance mechanisms. In addition, effective corporate governance mechanisms at high ownership concentration levels are imperative for managing the cost of equity.Originality/valueThe study reports novel evidence that ownership concentration at a high threshold moderates the effect of corporate governance on the cost of equity.

Pengaruh Mekanisme Corporate Governance dan Investment Opportunity Set (IOS) terhadap Nilai Perusahaan dengan Kualitas Laba Sebagai Variabel Mediasi

The purpose of this study was to determine the direct effect of corporate governance mechanism (managerial owners and institutional owners) and investment opportunity set (IOS) on firm value and the indirect effect through earnings quality as a mediating variable. The sample used is 10 state-owned companies registered on the Indonesian stock exchange during the period 2016-2020. This study used SEM-PLS analysis technique to analyze the data. The results of this study show that managerial ownership, institutional ownership and investment opportunity set (IOS) have no significant effect on earnings quality directly. Meanwhile, there are significant effect on managerial ownership, institutional ownership, investment opportunity set (IOS) and earnings quality to firm value. The result also shows that earnings quality as mediating variable is not able to mediate the relationship between managerial ownership, institutional ownership, investment opportunity set (IOS) and firm value.