Effect Of Corporate Governance Mechanisms Research Articles

The effect of corporate governance mechanisms on audit quality: evidence from the UK FTSE-350 listed companies

The effect of corporate governance mechanisms on audit quality: evidence from the UK FTSE-350 listed companies

The effectiveness of corporate governance mechanisms on fraud prevention and detection

The effectiveness of corporate governance mechanisms on fraud prevention and detection

A review of corporate governance effectiveness: Developed vs emerging markets

In recent years, a thriving academic debate evaluating the trend of convergence in corporate governance regulations around the world (Samanta, 2020) has taken place. Academics and practitioners question the transplantation of corporate governance regulatory environment, typically from the developed world to emerging countries, without much consideration for local economic and business environment and culture. Based on a review of empirical studies published in high-quality journals from 2001 to 2021, we synthesize evidence related to the effectiveness of corporate governance mechanisms in developed markets compared to emerging markets. We focus on benefits accruing from these mechanisms in reducing agency costs of firms in terms of improved accounting performance, market valuation, and financial reporting quality of firms. We find that only a few governance mechanisms, for example, board diversity, family management, and equity-based compensation for top management are effective in reducing agency conflicts and promoting good governance. Other governance-improving tools seem to vary in terms of the degree of effectiveness in developed and emerging markets. The analysis suggests that cultural, political, economic, and legal features of an economy should be considered carefully by policy makers and regulators while adapting corporate governance regulations from developed economies in emerging markets.

What Drives Shareholders' Reaction To CEO Turnovers, Dividend Changes, and Block Trades? A Theoretical Background

Abstract This study presents a review of theoretical concepts described in the literature that explain how corporate events might be perceived by investors. The theoretical discussion in this paper is related to three corporate events: CEO turnovers, dividend payouts, and block trades. The objective of this analysis is to identify and systemise the theoretical background for the drivers of shareholders' responses to these three corporate decisions. In other words, I will provide answers to the following questions: why is the market reaction sometimes positive and other times negative, and why is it sometimes stronger and other times weaker? Based on the literature review, I will show that each of the analysed corporate events might be perceived by shareholders as either positive or negative signals concerning perspectives and future cash flows. Consequently, corporate events might drive share prices up or down. However, shareholder reaction to one type of the event, such as CEO turnovers, will not always be homogeneous – only positive or negative. The strength of this reaction may also vary. The main reasons for these variations are the effectiveness of corporate governance mechanisms, investors' perceptions of the event, the event's peculiarities, and the company's characteristics, as well as other relevant circumstances and factors.

The Effect of Corporate Governance Mechanisms on Integrated Reporting (IR) Quality (Case of Ftse100 Companies)

The Effect of Corporate Governance Mechanisms on Integrated Reporting (IR) Quality (Case of Ftse100 Companies)

The effect of corporate governance mechanisms on audit quality: evidence from the UK FTSE-350 listed companies

The effect of corporate governance mechanisms on audit quality: evidence from the UK FTSE-350 listed companies

Agency cost: Ownership structure and board composition — An empirical analysis

This study evaluates the ownership structure and board composition as an effective corporate governance mechanism to control agency costs. It uses pooled ordinary least squares (OLS) regression methodology on the annual panel data from 2010–2011 to 2021–2022 for 985 non-financial companies listed on the National Stock Exchange (NSE) of India, collected from the ProwessIQ database. Globally, agency costs have been measured mainly by two proxies: asset turnover ratio (ATR) and operating cost ratio (OPEX) whereas, this study has used two additional proxies: return on total assets (ROA) and interest coverage ratio (ICR). The study also takes into account the impact of all types of ownership holdings namely, promoters’, government, domestic and foreign institutional investors on the agency cost. It is observed that agency costs are significantly lower with both foreign and domestic institutional investor ownerships and it is inversely related to the number of independent directors, as well as the size of the board. The findings of this study, on the one hand, will be beneficial for the corporate houses in resolving the problem of principal-agent conflicts whereas, on the other side, it will help the policymakers in deciding the policies with respect to the composition of the board members and ownership structure.

Effect of Corporate Governance Mechanism and Operating Cash Flow on Financial Distress

This study aims to examine the effect of corporate governance mechanisms and operating cash flows on financial distress. The variable of corporate governance mechanism is measured through managerial ownership, institutional ownership, and audit committee. Managerial ownership can reduce conflicts of interest between principals and agents, while institutional ownership and audit committees are related to increasing supervision over company management. So, a good corporate governance mechanism can avoid financial distress. The adequacy of operating cash flow also greatly affects the efficiency and effectiveness of the company's operational activities. If the company has a negative operating cash flow, it will greatly hamper the company's operational activities. Companies can experience financial distress. This study uses data from manufacturing companies that have negative EBIT values ​​for two years from three years of observation in 2017-2019 as the research sample. This study uses the SEM-PLS analysis tool to answer the proposed hypothesis. The results showed that managerial ownership, institutional ownership, and audit committee had no significant effect on financial distress while operating cash flow negatively significantly effect of financial distress. The greater the operating cash flow value, the smaller the possibility of the company experiencing financial distress. Conversely, the smaller the operating cash flow value, the greater possibility of the company experiencing financial distress.

Effects of Corporate Governance Mechanisms on Climate Change Disclosures: Evidence from Listed Banks in an Emerging Economy

This study examines the effects of corporate governance mechanisms on climate change disclosure in Bangladeshi-listed banks. The corporate governance mechanisms used in the study were board size, board meetings, board independence, audit committee size, audit committee independence and audit committee meetings. A climate change disclosure index (CCDI) was developed to assess the sample banks’ climate change disclosures. From 2013 to 2018, data on climate change disclosures and corporate governance mechanisms were collected from the annual reports of all 30 listed banks. Employing a feasible GLS (FGLS) model for panel data, the findings demonstrated that increasing audit committee meetings, independent directors on the board and audit committee size positively and significantly increased climate change disclosures of listed banks in Bangladesh. Unlike prior climate change research on listed banks in Bangladesh, this study has included the audit committee attributes and the sponsor-directors’ ownership as determinants of climate change disclosures. This research offered a novel viewpoint on the significant positive impact of sponsor-directors’ ownership on climate change information disclosure. These findings have practical implications for governments, regulatory authorities, investors, green groups and other organisations working on climate change issues in the country.

Corporate governance mechanisms, royal family ownership and corporate performance: evidence in gulf cooperation council (GCC) market

This research is motivated by the increasing importance of the Gulf Cooperation Council (GCC) economies within the world economy and the lack of research on corporate governance mechanisms in these countries. This study examines the relationship between corporate governance mechanisms and firm performance in GCC countries, focusing on the uniqueness of royal family ownership. We further investigate whether corporate governance mechanisms affect the royal family ownership–firm performance relationship. The data sample of the study includes 266 company-year observations over the period of 2009–2017. Results demonstrate that board size with less than nine members on board and audit quality (AUQ) are effective corporate governance mechanisms because their monitoring functions can enhance firm performance. However, our result demonstrates that firm performance significantly deteriorates with institutional ownership, chief executive officer duality (CEODU) and local auditors (AUQL). The result also shows that royal ownership has a significant positive effect on firm performance. In line with the resource dependency theory, this finding indicates that royal members who have a link with the external environment are more likely to have easy access to vital resources to aid in business performance improvement. Further analysis found that the big four international audit firms (AUQ) and AUQL positively moderate the relationship between royal ownership and firm performance. The finding suggests that AUQL and the big four international auditors play a complementary role in the governance system by strategising with royal members who own shares in the firm to further enhance firm performance. With the existence of royal family ownership, which is common amongst corporations in monarchy countries, the results of our study should help corporations in the GCC region to establish the best governance mechanisms to enhance firm performance.

Who monitors the monitors? An examination of listed companies in an emerging market context

The growing number of corporate scandals globally highlights the importance of effective corporate governance mechanisms. Many of the corporate governance frameworks that are rooted in the agency theory advocate the election of independent non-executive directors, an independent chairperson, and a lead independent director. Shareholder voting on the election or re-election of directors (hereafter referred to as ‘director re-elections’) has been largely unexplored in South Africa—a country widely recognised as a pioneer in the corporate governance field and yet marred by several corporate scandals in recent years. In this study, an unbalanced panel data set was thus constructed comprising voting outcomes and board-level characteristics of companies listed on the Johannesburg Stock Exchange from 2014 to 2020. Significant positive relationships were noted between shareholder voting opposition to director re-elections and both board size and board tenure. Shareholders who cast opposing votes mainly did so because of their concerns about the lack of director independence, at board, committee, and nominee level. The findings of this study were explained in the context of the agency, stakeholder, stewardship, and resource dependence theories. It is recommended that nomination committees use more robust selection criteria for directors. Shareholders are also encouraged to vote more actively on director re-elections to monitor these monitors.

Product market competition and stock price crash risk: Exploring the role of managerial ownership

The purpose of this paper is to examine whether product market competition is a means of external shareholders’ protection likely to decrease the stock price crash risk. The results show that product market competition is an effective corporate governance mechanism that is likely to constrain managers to disclose bad news regularly to the market, which in turn mitigates the risk of stock price crashes. The results also show that the negative effect of product market competition on stock price crashes is more pronounced for owner-managers. These results suggest that managerial ownership is likely to align managerial interests with shareholders ones.

Pengaruh Mekanisme Tata Kelola Perusahaan, Tanggung Jawab Sosial Perusahaan dan Manajemen Laba terhadap Kinerja Keuangan

The purpose of this study is to analyze the effect of corporate governance mechanisms (the proportion of the board of commissioners, institutional ownership, audit quality), the effect of corporate social responsibility, and the effect of earnings management on financial performance. The population of the research carried out was taken from company reports listed on the Indonesia Stock Exchange, where all samples used were financial reports, reports from 2017 to 2021. The sample was quoted using a purposive sampling technique, namely quoting samples based on certain characteristics. This study uses a quantitative method where the sample used is 70 companies with 222 data samples. Descriptive statistics, Chow test, Hausman test, R test, t test and F test are used as data analysis methods. Based on the research that has been done, it is found that there is no significant relationship between the independent board of commissioners, institutional ownership, audit quality, earnings management and corporate social responsibility, so the hypothesis in this study is rejected.

Effect of Corporate Governance on Free Cash Flow via Dividend Payout

ABSTRACT This study aims to investigate the effect of corporate governance mechanisms (i.e., board composition, insider ownership, block holder ownership, and audit quality) on free cash flow (FCF) through the dividend policy of the firms listed on the Pakistan Stock Exchange (PSX). The sample of non-financial firms was taken from the KSE-100 index from 2008 to 2017. The mediation technique developed in 1986 by Baron and Kenny is used. The results revealed that CG mechanisms help to minimize the agency problem of free cash flow. Strong governance attributes results in higher dividend payment. This study concludes that a high dividend payout has a negative effect on FCF. Overall, this study confirms the full mediating effects of dividend payout on the relationship between board independence and FCF, insider ownership and FCF, audit quality and FCF, and partial mediation of dividend payout on the link between board meetings and FCF. The results suggest that firms should build and execute their policies relating to corporate governance to manage their resources efficiently; this can help reduce FCF and minimize agency problems.

Accounting Conservatism and Earnings Quality

Purpose—The study on the relationship between accounting conservatism and earnings quality is not new. However, the results are inconsistent and mixed, and to some degree, even contradictory, which represents a gap in the literature. The purpose of this study is to provide some explanations for these mixed results in the literature by investigating the effect of corporate governance mechanisms, as a moderator variable (which has not been considered in the literature before), on the relationship between accounting conservatism and earnings quality based on the Dechow and Dichev model and the modified Jones model. Design/methodology/approach—The statistical model used in this study is a multivariate regression model; furthermore, the statistical technique used to test the hypotheses is panel data. Findings—The findings reveal that the adopted models (Dechow and Dichev) and the corporate governance mechanisms (such as board independence, large shareholders, and institutional ownership) can have a moderating effect on the relationship between accounting conservatism and earnings quality. These findings are exciting, contribute to the current literature, and explain some of the reasons for mixed results. Practical implications—The findings of the current study provide an important guideline for firms to consider the impact of adopted models (Dechow and Dichev), as well as the corporate governance mechanisms (such as board independence, large shareholders, and institutional ownership) on the relationship between accounting conservatism and earnings quality. Originality/value—Examining the impact of Dechow and Dichev models as well as the corporate governance mechanisms on the relationship between accounting conservatism and earnings quality is new in this paper. It can explain part of the reasons for the mixed and inconsistent results in the literature.

Dynamics of corporate governance mechanisms - family firms’ performance relationship- a meta-analytic review

The corporate board is considered an effective corporate governance mechanism (CGM) of family firms (FF), playing a critical monitoring role and enhancing FF performance. FF and corporate governance (CG) literature, however, shows mixed opinions about the relationship between various board attributes and its impact on FF performance. FFs are, in general, quite different from non-FFs in their ownership structures, family shareholders’ involvement and control on the board, and the implications of the agency problem. Therefore, the association between governance mechanisms (in the form of board attributes) and FF performance is not null. The present study aims to provide a clearer understanding of the relationships between board attributes and FF performance by performing a meta-analysis of 47 recent empirical publications in varying contextual settings. Although results indicated that several board attributes have significant relationships with FF performance, variations in their strength and direction were reported in two contextual settings: country culture and the legal origin of the firm. Our results provide deeper insights into effective CG for FFs and concrete suggestions for equipping the board with suitable attributes to enhance firm performance. This study explains why managers should consider contextual settings when making decisions about an FFs’ board structure.

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.

Corporate Governance Characteristics and Firm Value of Deposit Money Banks in Nigeria

The degree of corporate and market procedures, lack transparency, distortions and poor corporate practices which results in corporate failures and abysmal corporate financial performance negatively influence corporate objectives. Hence, this study investigated the effects of corporate governance mechanisms on the value of deposit money banks in Nigeria from 2010 to 2020. The specific objectives include investigating the relationship between board size and Tobin q; evaluating the relationship between board independence and Tobin q; determining the relationship between board ownership and Tobin q; investigating the effect of gender diversity on Tobin q and evaluating the relationship between board meetings and Tobin q. The study population consisted of all deposit money banks and the Taro Yamene method of sample size determination was applied. The secondary data for the study was from the published financial statements of sampled banks for the period after the validity and reliability test of data. The data obtained were tested using univariate, bivariate and multivariate analysis. The results from the multiple regression results disclosed that board independence, the board size, ownership structure, gender diversity and board meetings positively and significantly influence the value of deposit money banks in Nigeria. The study concluded that corporate governance attributes positively and significantly affect the value of deposit money banks in Nigeria. The study made several recommendations amongst others that board sizes should be enhanced as this allows for the appropriate combination of directors. A large board increases the chance of directors having appropriate knowledge, skill and networks. The knowledge, skill and networks of directors may increase the financial performance of an organisation. Also, deposit money banks in Nigeria should have non-executive directors who act as professional advisers to ensure that competition among insiders encourages measures consistent with the maximisation of shareholder value. Hence, the implication of this study provides that the implementation of corporate governance characteristics enhances the value of firms in deposit money banks in Nigeria.

The Effect of Corporate Governance Structure on Fraud and Money Laundering

This paper aims to assess the effect of corporate governance mechanisms, including board members’ and audit committee members’ characteristics, particularly their independence, expertise in terms of finance and industry and efforts on the level of fraud and money laundering (ML) in financial statements of the listed firm on the Tehran Stock Exchange. The procedure of the study is descriptive correlation based on published information from firms listed on the Tehran Stock Exchange from 2014 to 2020, using a sample of 154 firms with 1071 observations. The method used for hypothesis testing is linear regression using panel data. The Benish model is used measure the level of fraud in financial statements, and for ML, the auditors’ opinion are used. The results show that board characteristics, including independence, financial expertise, industry expertise and board effort, as well as audit committee features, such as independence, financial expertise, industry expertise and audit committee effort, have a significant and negative impact on the fraudulent financial reporting and ML. Moreover, since this paper was carried out in an emerging financial market, particularly in Iran, to figure out the effect of corporate governance structures on financial statement fraud and ML, it can provide helpful information for investors and policymakers in this regard.

Mekanisme Corporate Governance dan Corporate Social Responsibility terhadap Tax Avoidance pada Perusahaan Sektor Pertambangan Batu Bara

This study aims to empirically examine the effect of corporate governance mechanisms as proxied by institutional ownership, independent commissioners, and audit committees as well as the implementation of corporate social responsibility on tax avoidance. This research method is descriptive communicative. The research was conducted on coal mining sector companies listed on the IDX for the 2017-2019 period. The research data used is secondary data obtained from the annual report. The research sample is 66 annual reports from 22 coal mining sector companies. The research data was processed and analyzed using SPSS 25 software. The data analysis method used descriptive statistics and multiple linear regression. The results showed, a) the t-value of institutional ownership was 1.023 with a significance value of 0.310>0.05; b) the t value of the independent board of commissioners is 0.527 with a significance value of 0.600>0.05; c) the audit committee t value is 0.213 with a significance value of 0.832>0.05; d) the t value of CSR is negative at -0.265 with a significance value of 0.792>0.05. In conclusion, the corporate governance mechanism which is proxied by institutional ownership, independent board of commissioners, and audit committee as well as corporate social responsibility does not contribute to tax avoidance in coal mining sector companies listed on the IDX.
 
 Keywords: Corporate Governance, Corporate Social Responsibility, Independent Board of Commissioners, Institutional Ownership, Audit Committee