Effective Governance Mechanisms Research Articles

Customer Complaint Avoidance: A Randomized Field Experiment of Platform Governance Based on Value Co-Creation and Appropriation

From the theoretical perspectives of value co-creation and value appropriation in platform governance, this study explores how a platform can design motivation mechanisms to induce the proactive efforts of providers to reduce customer complaints. We conducted a field experiment on a major Chinese peer-to-peer real estate platform offering long-term rental properties. Specifically, when a renter (customer) complaint about a host (provider) occurs, we sent reminder messages to other unaffected hosts in the same neighborhoods (as the affected host) and urged them to proactively prevent similar complaints. The reminder messages varied in terms of their emphasis of the roles of different stakeholders in platform-based value co-creation (provider-emphasized vs. customer-emphasized) and how they explicated different value appropriation mechanisms (competition-based vs. cooperation-based). Results show that compared to the control message, customer-emphasized messages effectively motivated providers’ proactive efforts to reduce customer complaints. Contrastingly, provider-emphasized messages led to the undesirable outcome of increasing customer complaints, possibly due to providers’ shirking behavior. We also found that a competition-based value appropriation mechanism strengthened the motivating effect, whereas a cooperation-based mechanism undermined the motivating effect. The study provides important theoretical and practical implications for platforms on the design of effective governance mechanisms.

Impact of Parent Companies and Multiple Large Shareholders on Audit Fees in Stakeholder-Oriented Corporate Governance

This study aimed to investigate the impact of parent companies and other multiple large shareholders (MLSs) on the audit fees in Japanese firms, where stakeholder-oriented corporate governance is adopted. In such a firm, monitoring by many stakeholders can mitigate conflicts among shareholders. However, because the key stakeholders of these firms tend to resolve information asymmetry problems through insider communication, the level of audit effort is affected not only by the audit risk from principal–principal conflicts, but also by the demands of key stakeholders. Japanese parent companies tend to spin off their departments with high growth potential and provide incentives to lower subsidiaries’ cost of capital through information disclosure. Therefore, parent companies require greater audit efforts, and consequently, audit fees are expected to be higher. However, when MLSs are shareholders of the listed subsidiary, they can obtain relevant information via private communication. Thus, the need for quality accounting information will be smaller, the level of audit effort required will be smaller, and as a result, audit fees will be smaller. The results are consistent with these expectations. This paper contributes to the sustainable growth and economic development of firms and markets and has implications for the development of effective corporate governance mechanisms.

Does corporate governance induce green innovation? An emerging market evidence

PurposeThis study aims to investigate the effect of corporate governance (CG) mechanisms (board size, independent commissioner and ownership concentration) on green innovation (GI) in publicly traded companies of Indonesia as an emerging market.Design/methodology/approachArchival data relating to CG and GI were collected for five years (2016–2020). A total of 640 observations were obtained and analyzed using a random effect model.FindingsThe results indicate that effective governance mechanisms can encourage GI implementation to promote company sustainability. Respectively, the board size, independent commissioner and ownership concentration positively and significantly affect GI. These results imply that the optimal board size will result in effective coordination and cooperation in making GI decisions. Likewise, the proportional independent commissioners in the board structure will serve an effective oversight function. And concentrated ownership can influence executives to prefer innovation policies, such as GI.Research limitations/implicationsFirst, only a few CG mechanisms were used in this investigation. Therefore, further research needs to consider other mechanisms such as the number of commissioners, internal and external commissioners. Second, this research focused solely on Indonesia as an emerging market. Future research can be expanded to include countries with other emerging market characteristics. Third, different GI measurements from this study should be considered in future studies.Practical implicationsPractically, the results of this study are expected to provide policy recommendations, including optimizing the CG mechanisms as a control tool to achieve organizational sustainability through GI according to stakeholder expectations. This can be achieved by optimizing the size of the board of directors. The low value of the board size coefficient implies that optimization of board size is needed to encourage GI. The company can gain directors’ competence, experience and skill to increase innovation performance. In addition, maximizing the role of independent commissioners in overseeing is required for continuous innovation activities. Finally, the control of large shareholders is also necessary to encourage the implementation of GI because they could influence management to make innovative decisions.Originality/valueThis study extends and contributes to the extant CG and GI literature. There is little evidence that reveals how CG mechanisms affect GI, particularly in emerging market settings. The findings offer some important evidence for improving CG in driving GI implementation.

Faktor Yang Memengaruhi Manipulasi Laba Perusahaan Manufaktur Yang Terdaftar Di BEI

The purpose of this research is empirically to examine the effect of CEO Tenure, Earning Power, and Financial Stability with Corporate Governance as a moderating variable on Earning Manipulation in manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2015-2019 period. This research used 64 samples and 320 data selected by purposive sampling technique. Earning Manipulation measured by using M-Beneish Score. Binary logistic regression analysis used on analyzing research data and the IBM SPSS Statistics 25 Program used as a research analysis tool. Based on the hypothesis testing result show that CEO Tenure and Earning Power do not have effect to Earning Manipulation, however Financial Stability has positive significantly effect to Earning Manipulation. Corporate Governance cannot moderate the effect of CEO Tenure and Earning Power on Earning Manipulation. The implication of this research is the need of an effective governance mechanism to reduce the impact of financial instability on earnings manipulation practices, which will prevent stakeholders from loss.

Role of corporate governance in quick response to Covid-19 to improve SMEs’ performance: evidence from an emerging market

This paper aims to evaluate the role of corporate governance on performance of the small and medium-sized enterprises by exploring the mediating role of social responsibility engagement and environmental responsibility engagement between corporate governance and firm performance in the context of an emerging market. The paper follows a quantitative approach. The study sample was composed of 495 responses covering top executives, managers, and experts. The Analysis of a moment structures (AMOS version 20) was used to analyze the small and medium-sized enterprises data in an emerging economy in Southeast Asia in the year 2021. Our findings revealed that corporate governance has a significant and positive relationship with firm performance, social responsibility engagement and environmental responsibility engagement. In addition, social responsibility engagement and environmental responsibility engagement are found to mediate the relationship between corporate governance and firm performance. To the best of our knowledge, this is the first research that explores the mediating role of social responsibility engagement and environmental responsibility engagement between corporate governance and firm performance for the small and medium-sized enterprises. This study has novel contributions by providing important insights into the effective corporate governance mechanism and how corporate governance contributes to improving firm performance towards sustainability through engaging in social and environmental responsibility. Additionally, its application to food the small and medium-sized enterprises in the current context of an emerging economy in Southeast Asia reinforces the originality of this study. This study contributions are of great interest to academics, experts, business practitioners, and policymakers.

Rationalizing Critical Cost Overrun Factors on Public Sector Housing Programmes

The cost overrun phenomenon on projects worldwide creates a major source of risk that warrants investigation. The prevailing factor school of thought provides strong empirical evidence that critical factors contributing to cost overruns are both context-specific and project-specific. Although many studies have been conducted identifying factors and causes of cost overruns, very few studies have investigated root causes. Additionally, a limited body of knowledge is available within the context of Small Island Development States (SIDS). To fill this gap, the objectives of this study were to identify and determine the main critical factors contributing to the cost overrun phenomenon in public sector social housing programmes (PSSHPs). These selected factors were thereafter categorized under leading root causes, and their severity was determined based on primary stakeholders’ perspectives. One hundred and twenty-three factors were identified from the literature, of which forty-one critical factors were extracted and grouped under four root causes based on a pilot survey of relevant public sector housing experts in the Trinidadian and Jamaican construction sectors. These refined factors and root causes were formulated into a questionnaire survey. One hundred and five responses were obtained from professionals who had a minimum of five years’ experience in various phases of public housing delivery. The severity of these critical factors was evaluated, ranked, and categorized using the relative importance index (RII) approach. The findings uncovered the leading root cause, which is political in nature. The top five critical factors are the selection of politically aligned contractors, the intentional design of inadequate contracts, the project actors' deliberately underestimating costs, the partisan project management team, and strategic misrepresentation. These findings are unique to SIDS and contribute to knowledge to reframe contemporary project management practices, which focus mainly on technical causes. Finally, as existing technical solutions are ineffective in curbing cost overruns in PSSHPs, these findings also inform public sector policymakers to focus on prioritization, control, and mitigation of political risks in formulating effective governance mechanisms. Doi: 10.28991/ESJ-2022-06-03-016 Full Text: PDF

Ownership, capital structure and operating loss of acquiring firms

PurposeThe article aims to investigate the effects of ownership and capital structure on postacquisition operating performance.Design/methodology/approachThe article extends the ongoing literature from an operating loss perspective and provides empirical evidence on the probability of acquirers’ operating loss in relation to ownership and capital structure. The operating performance of publicly listed manufacturing firms in China was tracked up to five years since the completion of the mergers and acquisitions (M&A) during 2003–2014.FindingsThe empirical results show that, in a five-year postacquisition period, state-owned enterprises (SOEs) are more likely to experience operating loss than non-SOEs. The likelihood of the operating loss is negatively associated with ownership concentration, implying that concentrated ownership may serve as an effective corporate governance mechanism in the emerging economy and improve postacquisition performance. The rise in leverage increases the likelihood of postacquisition operating loss, indicating that the costs of debt may outweigh the benefits.Originality/valueThe findings contribute to the literature on ownership, debt governance and post-M&A performance from an emerging economy perspective.

The Board of Directors and the Audit Committee as Internal Governance Mechanisms and their Impact on Corporate Risk Disclosure in Light of COVID-19 Pandemic

The COVID-19 pandemic worsened during 2019, and it came to confirm the importance of implementing governance mechanisms in light of what the pandemic revealed that the weakness of governance mechanisms was one of the factors that contributed to the decline in performance of many companies during the pandemic, which prompted companies to rely on the best effective governance mechanisms; to deal with the risks resulting from the pandemic, and to disclose them transparently, to ensure the survival of companies in light of the challenges posed by the COVID-19 pandemic. Therefore, this study came to investigate the impact of the internal governance mechanisms (the board of directors and the audit committee) on the corporate risk disclosure of industrial companies listed on the Amman Stock Exchange in light of the COVID-19 pandemic. The descriptive statistical approach was used, and the study population consisted of workers in the board of directors and the audit committee in industrial companies, (80) questionnaires were distributed, the number of questionnaires retrieved and valid for analysis was (70) questionnaires. The study showed the existence of a statistically significant impact of the internal governance mechanisms (the board of directors and the audit committee) on corporate risk disclosure in industrial companies. The study recommended that industrial companies, in light of emergencies and uncertainties, constantly review their strategies and policies for dealing and disclose any risks that may result from those emergencies or uncertainties.

Impact of environmental, social and governance disclosure on dividend policy: What is the role of corporate governance? Evidence from an emerging market

AbstractThis study examines the nexus between environmental, social, and governance (ESG) disclosure and dividend policy by considering the major role of corporate governance. The sample consists of companies traded in the UAE financial markets during the period 2010–2020. Using data collected from Bloomberg and applying panel data regressions, the results indicated a positive relationship between ESG and dividend payouts. In addition, the results reveal that board of directors' independence is a mediator in the relationship between ESG disclosure and dividend payout, whereas institutional ownership and foreign ownership play a negative and positive moderating role between ESG and dividend payout, respectively. The findings could help UAE financial regulators integrate ESG information into the reporting process, implement effective corporate governance mechanisms to provide accurate information to shareholders, and manage their portfolios more efficiently. This study is the first to examine the relationship between ESG disclosure and dividend policies by considering corporate governance, and contributes to a better understanding of the financial impact of ESG disclosure on dividend policy.

Разработка эффективных механизмов корпоративного управления в госпитальном менеджменте

The relevance of the work topic is due to the need to substantiate approaches to the practical implementation of effective corporate governance mechanisms in hospital management in the Kazakhstan Republic conditions. This will make it possible to improve the effectiveness of the country's health system and to achieve its strategic objectives. Large clinics in Nur-Sultan were chosen as the research base. Research methods: formalized context analysis of literature, expert survey, strategic analysis. The results of the study: two formalized mechanisms of the hospital management system. The mechanisms developed will increase the efficiency of hospital management by increasing the level of formalization and introducing progressive methods of corporate governance.

CEO labor market and R&D investment in high-technology firms: an empirical study on the disciplinary effect of CEO labor market

AbstractPrevious corporate governance research has paid little attention to the role of chief executive officer (CEO) labor markets in controlling CEO behaviors because the CEO labor market has been considered inefficient. With the increasing mobility of top executives across firms, however, the potential of CEO labor markets to serve as an external disciplining force has been growing. In this study, we argue that CEOs will be more pressured to engage in desirable behaviors as the CEO labor market becomes more efficient. Using a longitudinal sample of S&P 1500 firms in high-technology industries in United States from 2011 to 2019, we found that CEOs tend to increase R&D investment as CEO labor market supply increases. We also found that the tendency is greater when external CEO succession is more frequent in the market. Our results demonstrate that CEO labor markets have the potential to function as an effective external governance mechanism.

The case for metagovernance: The promises and pitfalls of multisectoral nutrition service delivery structures in low‐ and middle‐income countries

AbstractWhile cross‐sector collaborations can create effective governance mechanisms for multi‐sectoral issues, little attention has been paid to how these arrangements operate in low‐ and middle‐income countries (LMICs), where state capacity is weak and the international donor sector is influential. A case study of the Scaling Up Nutrition (SUN) collaborative governance platform in Senegal is presented to explore how tensions between actors can be managed and how power is exercised through metagovernance. Through in‐depth interviews with policy actors (N = 30), network mapping of ties and activities among actors and document review, the study identifies challenges and opportunities for multi‐sectoral nutrition governance. The study identifies several challenges specific to scaling up multi‐sectoral policies including the relative power of non‐state actors, duplication of efforts and a lack of incentives for multisectoral collaboration across different sectors within government. The article concludes that to ensure democratic governance, government must be capable of metagovernance.

The Impact of Corporate Governance on the Financial Performance of the Banking Sector in the MENA (Middle Eastern and North African) Region: An Immunity Test of Banks for COVID-19

The purpose of this paper is to measure the impact of internal and external corporate governance mechanisms on the financial performance of banks in the under-researched Middle Eastern and North African (MENA) region during the COVID-19 pandemic period. Bank annual reports, the Orbis Bank Focus database, and World Bank reports were used to collect both financial and non-financial information on the banking sector, followed by fixed effects regressions and two-stage least squares. Results showed that the corporate governance measures of presence of independent members on the board of directors, high ownership concentration, lack of political pressure on board members, and strong legal protection, had positive effects on bank financial performance. Corporate governance mechanisms, such as performance-based compensation, the presence of women on boards, moderate size of the board, and anti-takeover mechanisms had no significant impact on bank performance during the crisis period. An effective internal and external corporate governance mechanism could improve the financial performance of banks in MENA countries in times of pandemics and crises.

Corporate Governance and Bank Liquidity Creation in Nigeria: Panel Vector Error Correction

The study surveyed the influence of sound corporate governance on banks’ liquidity creation in Nigeria using secondary data gleaned from annual reports and accounts of Five (5) quoted Deposit Money Banks (DMBs) in Nigeria between 2013 and 2019. The obtained data were subjected to several preliminary and inferential statistical analyses, the result of the descriptive statistics and PVEC Model revealed that all the specified indicators of Corporate Governance, for example, Board Size, Board Independence, and Audit Committee exact a positive influence on Banks Liquidity creation, while only Board Independence and Audit Committee have a significant influence on Liquidity creation of the selected banks. Thus, the study suggested that bank managers and policymakers must ensure that DMBs continuously design and implement effective corporate governance mechanisms to enhance their liquidity.

Research on Working Mechanism of Investigation and Treatment of Hidden Hazards in Construction Enterprises

Construction site in construction industry is characterized by short construction period, high risk and many potential hazards, which are very prone to safety production accidents. This paper establishes the working mechanism of hidden danger investigation and governance, innovates the model of hidden danger investigation and governance, clarifies the main responsibilities of participating units, determines the processes and measures of hidden danger investigation and governance, establishes an effective hidden danger investigation and governance mechanism which integrates government supervision, enterprise self-examination and social supervision, and effectively improves the level of enterprise safety supervision, so as to provide theoretical support and practical experience for relevant enterprises and units to draw on.

Birds of a Feather Flocking Together: Sustainability of Tax Aggressiveness of Shared Directors from Coercive Isomorphism

The purpose of the study is to examine the sustainability of the tax aggressiveness of shared directors from coercive isomorphism and whether social networks of directors have an impact on their tax aggressiveness. Specifically, the study intends to examine how tax knowledge diffuses across firms and how this knowledge diffusion affects connected firms. To test the constructed hypothesis, the panel logistic regression model is estimated using a firm-level panel dataset for the US and Pakistan to analyze cross-country differences, as the USA holds more legislation and effective governance mechanisms. The study covers the period of 2007–2019. The data required for the empirical analysis was collected from the Thompson Reuters database. The results of panel logistic regression show a significant relationship between tax aggressiveness and director’s connections, suggesting that information diffuses by board interlocks. Specifically, the estimates suggest that there is a positive and significant influence of connected directors on the probability that the tax aggressiveness spreads through coercive isomorphism, inferring that the sustainability of the tax aggressiveness of shared directors from coercive isomorphism is strong. Findings reveal that Pakistani firms, when compared to the USA, are more likely involved in tax aggression because of fewer legislations and tax reforms. The results also reveal that coercive isomorphism significantly mediates the relationship between board interlocks and tax aggressiveness. These findings provide valuable insights into detecting the tax aggressiveness of firms and the channels through which this spread. The study contributes to the scarce research on the impact of board interlocks on tax aggressiveness and the influence of coercive isomorphism on these impacts. This study can help tax authorities in identifying tax-saving strategies through connected directors. Secondly, this study provides empirical evidence to support the diffusion of information regarding tax aggression and provides mechanisms with which to detect tax aggression. Third, our choice of empirical context also helps us contribute to the management practice of firms. CEOs and boards should be wary of interlocks with organizations, lest they inadvertently become reticent and hence prove to be of no good.

Living up to your codes? Corporate codes of ethics and the cost of equity capital

PurposePrevious literature provides mixed evidence about the effectiveness of a code of ethics in limiting managerial opportunism. While some studies find that code of ethics is merely window-dressing, others find that they do influence managers' behavior. The present study investigates whether the quality of a code of ethics decreases the cost of equity by limiting managerial opportunism.Design/methodology/approachIn order to test the hypothesis, the authors perform an empirical analysis on a sample of US companies in the 2004–2012 period. The results are robust to a battery of robustness analyses that the authors performed in order to take care of endogeneity.FindingsEmpirical results indicate that a higher quality code of ethics is associated with a lower cost of equity. In other words, firms with a more comprehensive code of ethics and better-designed implementation procedures limit managerial opportunism and pay a lower cost of equity because they are perceived by investors to be less risky.Research limitations/implicationsPractical implicationsSocial implicationsOriginality/valueThe authors contribute to the literature in two ways. First, by looking at the market reaction to the code of ethics, thus capturing all its indirect possible benefits and second, by measuring not only the existence but also the quality of a code of ethics. Based on the results, policymakers may choose to further promote codes of ethics as an effective corporate governance mechanism.

Media attention and regulatory efficiency of corporate violations: Evidence from China

We examine the influence of media attention on the regulatory efficiency of corporate violations in a restrictive media environment. Using a hand-collected sample of corporate violations in China during 1998–2018, we find that fraudulent firms accompanied by more negative media attention are associated with a higher hazard rate of the violation being investigated and enforced. The effect is not diminished by the political connections of the fraudulent firms and is robust after controlling for potential confounding factors. Our findings suggest that by influencing regulatory efficiency, the media serve as an effective governance mechanism even in markets with strict media control.

Governance and Performance of Agri-Food Exporting SMEs

Moroccan SME's are involved in local development and are currently the subject of several studies. Furthermore, Moroccan SMEs are crucial to the country's economic growth since they produce value, create employment, and play an important role in local development. The goal is to identify the factors that influence its export performance. This performance can be influenced by the governance system, which is defined as a set of mechanisms that have the effect of limiting managers' powers and influencing their decisions. In this light, the purpose of this paper is to demonstrate, using a sample of food SME's in Agadir city, that a good governance system improves export performance and accelerates the process of SME internationalization. Based on the findings of this study, we can infer that SMEs with effective internal governance mechanisms, such as an internal control and consultation body and strong hierarchical control, may improve their export performance and, as a result, their internationalization potential.

The Role of Risk Management, Sustainability Disclosure Practices, and Islamic Finance in Nigeria Business Environment

The Nigerian business environment is currently beclouded with various kinds of risks, fear, and uncertainty that culminate into the collapsing of so many businesses and the relocation of several multinational and local firms to other countries. The business and the environment are in a social contract that leaves them with both opportunities and threats hence the business cannot take place in a vacuum. The interconnectivity between businesses and their environment is that of mutuality. Mutual in the sense that the business influences its environment and the environment as well guarantees the legitimacy of the business considering the interest of all relevant stakeholders. That is, a business is influenced by its environment of operation such that its success depends on the ability to adapt to its immediate and entire environment to make the environment of businesses favorable. Therefore, the objective of this study is to explore conceptually the Nigerian Business Environment (NBE) considering the roles of risk management, sustainability disclosure practices, and Islamic finance. The method adopted by the study is the review of past investigations to gain insight into the NBE. Based on the insight from extant literature and in consonance with assumptions of legitimacy theory, the study concludes that risk management, sustainability disclosure practices, and Islamic finance promote the NBE. The study added to existing literature looking at the NBE from the present perspective (i.e. risk management, sustainability disclosure practices and Islamic finance). The study has implications for the government and policy-makers, companies, the business community, and other stakeholders in terms of creating a conducive business environment in Nigeria through the provision of infrastructure, effective corporate governance mechanisms, good stakeholder management.