Effect Of Corporate Governance Practices Research Articles

Effect of Corporate governance on Financial Distress among the Firms Listed at Nairobi Securities Exchange

This study delves into the intricate effect of corporate governance on financial distress in Kenya among the firms listed at the Nairobi Securities Exchange. The recent economic growth and development in Kenya have attracted increased attention to the effectiveness of corporate governance practices adopted by businesses. The study examines the effect of various corporate governance factors, such as Board Size, Board Independence, Audit Committee Independence, and Firm Size, on financial distress in listed companies on the Nairobi Securities Exchange. To evaluate the significance of each factor in influencing financial distress, the analysis employs a Type I Sum of Squares approach using XLSTAT software. The findings reveal that Board Size and Firm Size exhibit highly significant relationships with financial distress, indicating their crucial roles in influencing a company's financial stability. Furthermore, Board Independence demonstrates a statistically significant relationship with financial distress, underscoring the importance of independent directors in mitigating financial risks. Although Audit Committee Independence exhibits borderline significance, it provides indications of a potential relationship with financial distress. Overall, the study offers valuable insights into the factors affecting financial distress in Kenyan companies and emphasizes the significance of robust corporate governance practices in ensuring financial stability and resilience.

Board Composition and Non-Performing Loans among Commercial Banks in Tanzania

Objective – This paper investigates the effect of board composition on non-performing loans (NPLs) for a sample of 31 commercial banks in Tanzania.Design/methodology – A quantitative study methodology was employed using annual data covering the period of 2011-2020. The authors used a one-step generalised method of moments (GMM) approach to estimate the effect of board composition on the percentage growth of NPLs in Tanzania.Results – The paper concludes that the number of board members with financial expertise, the board size, the audit committee, and the presence of female directors significantly negatively impact the bank’s NPLs and hence aid in lowering the bank’s NPLs. In contrast, an increase in board size, lagged NPLs, credit committees, independent directors, board meetings, and advances in deposit ratio significantly increases the level of NPLs, which is consistent with the agency theory.Research Limitations/Implications – Inconsistencies in the reported variables from various databases during the study and afterwards, as well as a lack of data for some banks in specific years. Shareholders should actively establish good corporate governance in the commercial banks (CBs) they own to reduce NPLs at an acceptable rate of less than 5%. Also, the Central Banks of Tanzania should encourage CBs to implement effective corporate governance practices by enacting rules and regulations to reduce NPLs. To minimize loan losses, authorities should impose micro-prudential supervision on commercial banks’ lending behavior. Novelty/Originality – The paper includes bank size and ownership using a one-step difference and one-step system (GMM) approach to measure the effect, which is usually not the case with most studies.

Effect Of Corporate Governance On Performance Of Listed Banks

Following the recent corporate scandals and turbulences in the Ghanaian financial sector, a fierce debate on banks and corporate performance nexus has emerged. While literature on banks-corporate performance subject remain highly contested, evidence within the Ghanaian contest is sparse. This paucity of literature has motivated this study to examine the effect of corporate governance practices on commercial banks’ performances within the Ghanaian contest drawing evidence from the Ghana Stock Exchange market for the period 2009-2019. Correlational analysis and fixed effect and random effect regression estimator have been employed as the main estimation techniques. Results show that board diversity positively influence corporate performance indicators such ROA and EPS. The study further found that size of the board of directors has negative effects on bank’s performance. Another very important discovery from this study was that, composition of board of directors has effects on bank’s performance. Thus, independent board of directors have positive effects on bank’s performance. Ownership concentration has negative effects on bank’s performance in that larger ownership was usually associated with higher risks. As a sequel, policy should aim at enhancing corporate governance practices while females should be given a fair representation on board committees. The study again advises that independent directors should be included in the board to achieve greater firm results. The arrangement of company ownership should be assessed and controlled. Concentrated ownership structure in specific should be promoted and banks should strive to increase the size of the Independent Board to improve results

The Role of Internal Audit in Enhancing Corporate Governance Practices in the Nigerian Manufacturing Sector

Corporate governance is a crucial aspect of any organization, especially in the Nigerian manufacturing sector. Effective corporate governance practices are essential for promoting transparency, accountability, and sustainable business growth. Internal audit plays a significant role in ensuring that these practices are adhered to and maintained. This conceptual paper aims to explore the role of internal audit in enhancing corporate governance practices in the Nigerian manufacturing sector through review of scholarly literature. The article revealed that internal audit plays a vital role in enhancing corporate governance practices in the Nigerian manufacturing sector. The internal audit function provides independent and objective assurance to the board and management that the organization's systems and processes are operating effectively, efficiently, and ethically. The paper also highlighted the challenges faced by internal auditors in Nigeria, including inadequate resources, lack of awareness about the internal audit function, and the perception that internal audit is only focused on financial reporting. The study recommends that the internal audit function should be adequately resourced, and internal auditors should receive continuous professional development training to keep up with emerging trends and best practices in corporate governance. Overall, this study provides valuable insights into the crucial role of internal audit in enhancing corporate governance practices in the Nigerian manufacturing sector. The study's findings can guide organizations in improving their corporate governance practices by leveraging the internal audit function's strengths to enhance transparency, accountability, and sustainable business growth. Keywords: internal audit, corporate governance, Nigerian manufacturing sector, sustainable business growth DOI: 10.7176/RJFA/14-10-04 Publication date: May 31 st 2023

Corporate Governance Practices and Financial Distress: Empirical Evidence from Listed Companies in Sri Lanka

The study aims to investigate the impact of corporate governance on financial distress of listed companies in Sri Lanka. Board size, board composition, CEO duality, board meeting, director ownership, and audit committee size are proxies for corporate governance while financial distress is measured by the Altman Z-score. Altman Z-score measures financial distress inversely and bigger the Z-score indicates the smaller the risk of financial distress. Using hundred and eight individual observations of firms listed in Sri Lanka for the period of 2019 to 2021 and employing fixed effects model, the effect of corporate governance practices on financial distress is evaluated. The results from panel data regression analysis reveal that firms having large number of directors on the board have a low likelihood of financial distress of listed companies in Sri Lanka. Furthermore, when a chief executive officer serves as the chairman of the board at a company, the more likely it is that the company will experience financial distress. But, board composition, audit committee size, board meeting and director ownership have not shown any significant impact on financial distress. The current study also provides evidence that firm-specific characteristics such as firm size, leverage and profitability, could be useful as to determining the likelihood of financial distress. The findings may be of prominence to the academic researchers, practitioners, and regulators who are interested in discovering the quality of corporate governance practices in a developing market and its impact on financial distress.

The Impact of Corporate Governance Practices on Non-Performing Loans in Iraqi Banks; The Moderating Effect of Concentrated Ownership

This study aims to examine the connection between corporate governance mechanisms and non-performing loans (NPLs) using agency theory. In addition, the study examines the moderating effect of concentrated ownership (CO) between NPLs and financial distress. The study adopts a sample of 42 Iraqi banks from 2017–2021 with 210 observations. Panel estimation utilised a regression estimator to test the research hypotheses of the study. Three regression models were used to test the hypotheses after obtaining the appropriate model. Our findings showed that non-executive directors, board financial experience, and risk management committee affected NPLs negatively. At the same time, the audit committee was an insignificant effect on NPLs. Moreover, concentrated ownership as moderating interacts with the relationship between corporate governance factors and NPLs. This study enhances the knowledge and implications of the theory used for corporate governance dimensions. It provides feedback and a map through which Iraqi regulators and decision-makers can improve the effectiveness of corporate governance practices in relation to NPLs control, which should enable Iraqi regulators and policymakers to improve the corporate governance system, especially since corporate governance is a new issue in Iraq. The study also offers the researchers, academics, regulators, and policymakers' proof of the detrimental impact of CO on NPLs since this study provided an original contribution by using CO in this position. Therefore, evaluating CO as a moderating function provides several literary and theoretical insights that can be a focusing area of future studies.

Financial Performance of Banking Institutions: The Role of Management Ownership, Independent Commissioners, and Audit Committee

This research examines the impact of implementing effective corporate governance practices on the financial performance of banking firms publicly traded on the Indonesia Stock Exchange (IDX). The study focuses on banking businesses listed on the Indonesia Stock Exchange, including the population for analysis. A purposive sampling method was employed to select eight banking companies for the study. The utilized data source comprises secondary data consisting of annual report information about banking institutions. The employed data analysis methodology involves the application of the classical assumption test, which encompasses a normality test, a heteroscedasticity test, and a multicollinearity test. Additionally, all hypotheses are examined by partial, simultaneous, and determination coefficient tests. This study's findings suggest a favorable relationship between managerial ownership and independent commissioners; however, this relationship does not significantly impact financial performance. The audit committee has a notable and substantial impact on the financial performance of banking firms publicly traded on the Indonesia Stock Exchange (IDX).

Does corporate governance affect the performance and stability of Islamic banks?

Purpose This paper aims to investigate the impact of corporate governance practices on cost efficiency and financial stability for a sample of Islamic and conventional banks. In the analysis, the author uses a set of corporate governance variables that include, the board size, board independence, director gender, board meetings, board attendance, board committees, chair independence and CEO characteristics. Design/methodology/approach The author uses corporate governance data of Islamic banks that is unique in this field. In the analysis, the author also uses stochastic frontier analysis and panel vector autoregression models to quantify long-run and short-run statistical relationships between the operational efficiency of Islamic Banks and corporate governance practices. Findings According to the results, Islamic and conventional banks exhibit important differences in the effects of corporate governance practices on cost efficiency and financial stability. Results show that with a blind general adoption of corporate governance practices, Islamic banks may suffer a loss in their value since the adoption of the third layer of binding practices, over and above the already existing ones, imposed by the Sharia Board and the Board of Directors, may lead to cumbersome business operations. This conclusion is of importance to Islamic Banks since they struggle to survive in a very competitive international environment. Practical implications The author believes that the results may be of a certain value to regulators, policymakers and managers of Islamic banks. Based on the results, the author postulate that Islamic banks should select carefully international corporate governance practices. Social implications Islamic banks should not adopt additional third layer of binding practices as that would result lower performance and instability that would be damaging for the economy Originality/value This study employs a unique sample of Islamic banks that includes corporate governance data hand collected. Our findings of the corporate governance impact on Islamic banks performance and stability are therefore unique in the literature.

Quantifying the degree of change in supply chain determinants and resilience during the 2014–2015 economic crisis and the COVID-19 pandemic: placing emphasis

The study examines the management culture transformation in supply chains digitalisation. The hypothesis of the study was that the digitisation of culture in companies will become an important tool for optimising the internal and external environment in supply chain management, considering the needs of business, shareholders and society. The aim of the study is to identify the determinants of supply chain management that have changed against the backdrop of digitalisation. Using a conceptual approach, two crises in the context of supply chain management determinants were explored: the commodity price crisis (2014–2015) and the COVID-19 pandemic crisis (2020–2021). Three main determinants of management are considered: planning, tracking and reputation. The result of the initial conceptualisation is derived from reviews of case studies and pandemic resilience monitoring of the business environment and supply chain. A set of external and internal factors have been identified that each group of countries needs to develop in order to achieve sustainability in their local supply chains. The most important drivers of global supply chain resilience that need to be developed to offset the effects of major crises have been identified. The results of the study can be used for effective corporate governance practices and a better understanding of supply chain management culture in a digitalised and COVID-19 environment.

Corporate Governance and Market Base Performance of Commercial Banks of Nepal

Corporate governance contains the rules, regulations, system, code of conduct and procedures for proper management and operation of the firm. This study is focus on examining the ascendency of CG on market base performance of Nepalese banks measured by Tobin’s Q. The population of the study is the total number of ‘A’ grade banks licensed by Nepal Rastra Bank is 27 till January, 2021. The samples of the study were twelve commercial banks. Corporate governance is measured by LR, B Size, B Meeting and OWC. The mediating variables of the study are CAR, F SIZE, and NIM. This study basically utilized multiple regression analysis and found that LR, OWC, NIM and CAR have significant positive influence on performance measured by Tobin’s Q. However, B Meeting and B Size had significant negative influence on performance. Evidence suggests that corporate governance significantly influences the market base financial performance of Nepalese commercial banks measured by Tobin’s Q. Finally, Nepalese commercial banks can ensure their superior market base financial performance by enhancing effective corporate governance practices.

Corporate Governance and banking performance in Portugal: The impact of variable - RAC_IMP (Impairments)

Effective corporate governance practices are essential to achieving and maintaining societal trust in the banking system, which is essential for the smooth functioning of the financial sector and the economy.<br /> Much of the literature associated with Corporate Governance considers, in addition to concepts, the implementation cycle and the corresponding models. Corporate Governance cycles are related to corporate bankruptcies and the negligence of the board of directors, which are more common when a long period of economic expansion is followed by a period of crisis, which demonstrates failures in Corporate Governance. The main objective of the research is to analyze the impact of variables associated with governance, structure, and economy on the economic and financial performance of banking institutions in Portugal. In the model, a risk measure is used to determine whether Corporate Governance has an impact on a bank's risk-taking, the Impairment Ratio for Credit to Customers in relation to Assets.<br /> After performing the significance test for each of the variables (student t test), it is possible to determine that the following variables will be excluded: Bank Size (LNAT), Customer Deposits (LNDEP), Interest Rate (TXJUR). We accept the following variables Corporate Governance (CG); Financial Autonomy (CPAT); Return on Average Assets (ROAA); GDP Rate Variation (TXPIB) and Inflation Rate (TXINF).

An Analysis of Corporate Governance and the Performance of Rural Banks in the Upper West Region, Ghana

The study used the mixed research design in examining corporate governance and rural bank performance in Ghana's Upper West Region. Purposive and simple random sampling techniques were used in the study. A sample size of 48 participants, composed of Bank CEOs/Managers, Board Members, Human Resource Managers, Heads of Administration and Senior Staff of four Banks was used. Questionnaires and interview guides were used for data collection. Data was analyzed both quantitatively and qualitatively. The study found that ownership concentration, audit quality, and board independence are important factors in good corporate governance and are influenced by business size, leverage, and board size, with a P-value of 0.073<0.1. It was also found that good corporate governance proxy by CEO duality, board independence, ownership concentration and audit quality have a substantial impact on rural bank performance. However, with a P-value>0.1, it was discovered that CEO duality has a detrimental impact on excellent corporate governance. Corporate governance challenges the banks face include clients’ default in repaying loans, inappropriate corporate governance practices, high operational costs of the banks and board members’ incompetence and perpetuation in office. The study concluded that corporate governance significantly affects the functioning of rural banks in the Upper West Region. The study recommended a reduction in the tenure of office of directors, putting in place appropriate rules and guidelines for the operations of the boards and ensuring effective checks and balances on the activities of the boards by way of ensuring effective corporate governance practices. Keywords: Corporate, Governance, Performance, Rural Banks, Upper West Region DOI: 10.7176/RHSS/12-16-01 Publication date: August 31 st 2022

International Financial Reporting Standards, Board Governance and Accounting Quality: Preliminary Ghanaian Evidence

IFRS adoption’s effect and board governance on accounting quality from Ghanaian perspective was examined using OLS technique between a seven-year periods (2013-2019). From the study, IFRS adoption negatively impacts accounting quality in an insignificant manner. The insignificant nexus was due to lax implementation of regulations by institutions with IFRS and incentive-performance tied schemes presented to managers. Additionally, all but profitability and institutional ownership have positively significant impact on accounting quality whilst board governance negatively affect accounting quality though not statistically significant. Finally, moderating the role of board governance on IFRS - accounting quality relation, evidence established from the regression is that board governance does not moderate relationship between IFRS adoption and accounting quality using discretionary accruals. Our study captured effective corporate governance practices using composite board governance index to moderate effect of IFRS on the nexus between board governance and accounting quality serving as central motivation to contribute to literature.

Corporate Governance and Financial Distress: Empirical Evidence from listed Consumer Services Firms in Sri Lanka

Objective - COVID – 19 has created unique and very profound challenges for almost all listed firms in Sri Lanka. The purpose of the study is to examine the influence of corporate governance practices on the financial distress status of listed companies in the consumer services sector in Sri Lanka. Methodology/Technique – To assess the level of corporate governance, the current study constructs six dimensions of corporate governance, such as board size, board composition, CEO duality, board meeting, director ownership, and audit committee size. The Altman Z-score is used as a proxy for financial distress and measures it inversely. The bigger the Z-score indicates the smaller the risk of financial distress. Using 108 individual observations of consumer services firms listed on the Colombo Stock Exchange for the period of 2019 to 2021 and employing the fixed effects model, the effect of corporate governance practices on financial distress is evaluated. Findings - The results from panel data regression analysis reveal that firms having a large number of directors on the board have a low likelihood of financial distress of listed consumer services companies in Sri Lanka. Furthermore, when a chief executive officer serves as the chairman of the board at a company, the more likely it is that the company will experience financial distress. The current study also provides evidence that firm-specific characteristics, such as firm size, leverage, and profitability, could be useful in determining the likelihood of financial distress. Novelty - This study extends the existing literature by investigating the association between corporate governance practices and financial distress in listed companies in the emerging markets during the period of the COVID 19 pandemic. Type of Paper: Empirical. JEL Classification: G30, G34 Keywords: Board size, CEO duality, corporate governance, financial distress Reference to this paper should be referred to as follows: Balagobei, S; Keerthana, G. (2022). Corporate Governance and Financial Distress: Empirical Evidence from listed Consumer Services Firms in Sri Lanka, Acc. Fin. Review, 7(1), 39 – 50. https://doi.org/10.35609/afr.2022.7.1(1)

Corporate Governance and Audit Report Lag on Financial Sector Companies Listed in IDX 2018-2020

Purpose: This study aims to determine the effect of corporate governance practices on the length of time for the annual financial statement audit that called Audit Report Lag (ARL).Method: This research used quantitative approach with a multiple linear regression models through ordinary least square and classic assumptions test. Selection of the sample using purposive sampling method, from financial sector company listed on the Indonesia Stock Exchange (IDX) for the period 2018 – 2020, 250 data were selected as a sample.Findings: It was found that board size, audit committee meeting and audit opinion variable give negative effect on ARL. Besides, Audit committee size give positive effect on Audit Report Lag.Novelty: This study enriched the literature by finding out that “others” sub sector in financial company didn’t have a specific regulation whereas previous research only focus on bank which alreasy have a strict regulation. This research’s implication is expected to give wider insight to company and regulator that can help them publish their financial reports on time.

Effect of Corporate Governance Practices on Performance of Manufacturing firms in Ireland

Corporate governance is a useful tool to minimize the conflicts of interests between stakeholders and management. The purpose of the study was to examine the impact of corporate governance practices on the performance of manufacturing firms in Ireland. The inferences of the study were based on the findings of the preceding studies. The study results showed that corporate governance practices have a positive effect on performance. The implementation of corporate governance standards improves the financial performance of the company as well as positively impacts the internal efficiency of the firms. Good corporate governance is fundamental for a firm as it improves company image, increases shareholders' confidence and reduces the risk of fraudulent activities. Moreover, it was established by the study that good corporate governance principles incorporate transparency, accountability, responsibility, independence and fairness. Corporate governance is the combination of mechanisms, procedures and relations utilized by different institutions to regulate and run a firm. The main purpose of better corporate governance is to increase value for investors and stakeholders in the long run. The study noted that corporate governance is a useful tool to minimize the conflicts of interests between stakeholders and management. The study recommended that manufacturing firms in Ireland ensure that corporate governance practices are effective. The firms need to build a system of rules and practices that determine how a company operates and aligns the interest of all its stakeholders. Further, it is suggested that the firms need to have a good corporate governance system that ensures it follows a sound, transparent, and credible financial reporting system Keywords: Corporate governance policies, performance, manufacturing firms, Ireland

Effect of Corporate Governance on Corporate Performance: Sri Lankan Evidence

Effective corporate governance practices contribute significantly to various aspects of an organization as a strategic direction. This study examines the impact of corporate governance practices on corporate performance. The top fifty companies from five industries listed in the Colombo Stock Exchange were selected as the sample. Secondary data was extracted from financial statements covering a five year period from 2014 to 2019. Six corporate governance practices; financial acumen, board independence, board size, CEO duality, board committees, and board gender diversity were tested against corporate performance indicators: return on assets, return on equity, and Tobin’s Q. Results of multivariate analysis indicated that board size and committees positively impact on corporate performance, while other variables do not provide any significance. The findings of the study will fill some gaps in extant literature in the corporate governance field. It may also facilitate significant policy implications relating to corporate governance by strengthening existing rules and regulations in the institutional framework.

Effect of Corporate Governance Practices on Organizational Performance of State Corporations in the Health Sector, Kenya

Sound corporate governance practices are a major contributor to effective and efficient management of State Corporations in the health sector in Kenya. Since independence, the level of accountability in management of State Corporations has continued to decline despite the availability of various monitoring structures like legal frameworks, ethics and integrity, policies and the code of conduct and ethics intended to provide a clear road map to successful performance of the State Corporations. The objective of this study was to determine the effect of corporate governance practices on the performance of the State Corporations in the health sector in Kenya. The study adopted a descriptive research design with a population comprising of the health State Corporations. Primary data was collected the using questionnaires. Data was analyzed using SPSS software. The results indicated that accountability and organizational performance of health State Corporations is positively and significantly related. The results further indicated that transparency and organizational performance of health State Corporations is positively and significantly related Board Responsibility and organizational performance of health State Corporations is positively and significantly related. Moral Integrity and organizational performance of health State Corporations is positively and significantly related The study concluded that corporate governance practices have a positive and significant effect on organizational performance of State Corporations in the health sector in Kenya. The study recommended that the management of the State corporations should establish certain control mechanisms that ensure accountability. The study recommended that there should continuous internal check and audit on the part of management and low level of management to ensure adequate accountability systems in the State Corporations. Keywords: Corporate Governance, Organizational Performance & State Corporations

The Effect of Corporate Governance Practices on Internal Control Efficiency: Study of Selected Firms

This study is an attempt to examine t he effect of corporate governance practices on internal control elements of risk assessment and monitoring activities. The study also seeks to determine the extent to which the act of good corporate governance affect the internal control measures in selected firms in Lagos Nigeria. In order to achieve the objectives of this study, a questionnaire was developed and distributed to a sample of top executives like directors, senior managers and accountants of the 226 selected firms. The total number of 226 questionnaires were returned out of which 210 were usable were returned and were valid for analysis this gives a response rate of 92% . Based on the results of the statistical analysis, the study indicated that corporate governance practices do contribute immensely to effective risk assessment and monitoring act to a high degree. The study also revealed that the commitment to risk assessment and monitoring activities strengthens the pillars of corporate governance at a high degree. These results show that the practices of corporate governance in firms have a significant effect in enhancing risk assessment and monitoring activities

Effect of Accountability Practices on County Government Performance in Kenya: A Case Study in Makueni and Marsabit County Governments

With devolution, it is expected that enhanced public involvement through participation and incorporation of other good governances’ practices would enhance accountability and performance of county (sub-national) governments in terms of timely delivery of services and accountability in resource utilization.However, previous studies indicate that counties are experiencing inefficient utilization of resources and poor timely delivery of services. About 41 percent of Kenyans were unsatisfied with performances of their counties in 2016, according to Transparency International Survey. This hinders effective performance. Conversely, some counties have performed well according to rating done by Policy Tracking Impact Public Affairs Consulting 2018, which ranked Makueni county government as the best performing county based on development projects and policies implied by counties.Therefore, the study sought to compare the effects of corporate governance practices on performances in Makueni and Marsabit counties. Marsabit County was chosen because despite Makueni being ranked the best, both counties experience almost similar challenges in their governance. The issues of low human capital development, cross-border community level conflicts, and low level of investment in infrastructure, high level of poverty, food insecurity, land degradations and poor health system are the common challenges that affect performance of the two county governments. Therefore, this study sought to examine the effects of accountability governance practices on the selected counties in Kenya. To accomplish the objectives, correlational research design and interpretivism research philosophy was adopted by the study. The target population consisted of county officials and heads of groups and the community leaders in the two counties. Primary data was collected and analyzed using a linear model to estimate the coefficients. The findings indicated that accountability had significant positive effect of 55.8 percent on county government performance. In this regard, the study recommended the need for counties to strengthen county resource management systems to boost accountability and ultimately its performance.