Enhancing Corporate Governance Research Articles

Fortifying Transparency: Enhancing Corporate Governance through Robust Internal Control Mechanisms

Purpose: This study explores how robust internal control mechanisms enhance corporate governance by fostering organizational transparency and accountability. The focus is on the interplay between internal controls and corporate governance practices, emphasizing their collective role in promoting organizational success and sustainability. Research Design and Methodology: The study employs a qualitative approach, conducting a comprehensive literature review of peer-reviewed articles, books, and reports. Using relevant keywords, data were collected from academic databases such as PubMed, Scopus, Web of Science, and Google Scholar. Thematic analysis was used to categorize and synthesize recurring themes and patterns, ensuring objectivity and rigor in data interpretation. Findings and Discussion: The findings of this study have significant practical implications. They reveal that effective corporate governance frameworks, underpinned by robust internal control mechanisms, not only enhance transparency, accountability, and ethical conduct but also mitigate risks, safeguard assets, and ensure compliance with regulations. This underscores the real-world relevance of the research and its potential to guide organizational practices. Implications: This study highlights the need for organizations to comprehensively integrate internal control mechanisms into their governance frameworks. It also emphasizes the importance of fostering a culture of integrity, adopting technological innovations, and maintaining compliance with evolving regulations. However, the study also points to the need for future research, particularly longitudinal studies, and interdisciplinary approaches, to further understand the dynamic governance-control relationship. This opens opportunities for further exploration and the development of more effective corporate governance practices.

Corporate governance, institutional ownership, and stock liquidity of SMEs: evidence from China

ABSTRACT This study explores the relationship between corporate governance and stock liquidity of Chinese small and medium-sized enterprises (SMEs). Our findings reveal a nonlinear (U-shaped) relationship between the overall quality of corporate governance and stock liquidity, implying that, unlike large-sized listed firms, SMEs cannot monotonically increase liquidity through improved corporate governance. After examining the sub-indicators individually, we find that the percentage of institutional shareholdings is the main driver of this U-shaped relationship. The nonlinear relationship between institutional shareholdings and stock liquidity suggests that continuously enhancing corporate governance may reduce stock liquidity, posing challenges for SMEs in securing financing.

The Impact of Mandatory Operating Information Disclosure on Related‐Party Transactions: Evidence From China

The Impact of Mandatory Operating Information Disclosure on Related‐Party Transactions: Evidence From China

Exploring the Nexus between Executive Compensation and Disclosure Transparency: Evidence from Taiwan

This study investigates the relationship between executive compensation and compensation disclosure transparency in Taiwanese firms, particularly in light of recent regulatory changes that mandate increased transparency. Employing a two-stage least squares (2SLS) regression model, the analysis focuses on the impact of executive salary and bonuses on various measures of compensation disclosure. The findings reveal a significant negative relationship between predicted executive bonuses and the Compensation Committee Quality Score (CCQ), indicating that higher bonus levels are associated with lower transparency in compensation committee disclosures. Conversely, executive salaries do not show a significant impact on compensation disclosure measures, suggesting that salary levels may not be a primary determinant of disclosure transparency in the Taiwanese context. The study contributes to the understanding of the dynamics between executive remuneration and transparency in financial reporting, highlighting the importance of executive bonuses in shaping compensation disclosure practices in Taiwan. The results have implications for policymakers, corporate executives, and shareholders, emphasizing the need to consider the structure of executive compensation packages in promoting transparency and enhancing corporate governance standards.

THE REAL OPTIONS VALUE OF OPEN INNOVATION THROUGH CROSS-BORDER MERGERS AND ACQUISITIONS: EVIDENCE FROM PUBLICLY LISTED FIRMS IN CHINA

This study examines the impact of open innovation through cross-border Mergers and Acquisitions (M&A) on the real options value of Chinese publicly listed firms between 2008 and 2020. The findings demonstrate that open innovation through cross-border M&A has a positive effect on the upside potential and a negative effect on the downside risk of firm performance. Additionally, absorptive capacity and corporate governance play significant moderating roles in shaping the real options value of open innovation through cross-border M&A. These findings are robust across alternative measures of real options value and open innovation investments, sample classification based on institutional distance, and endogeneity tests. The research implies that cross-border M&A, particularly in countries with a favourable innovation environment, plays a crucial role in strengthening firm performance. Additionally, the study underscores the need for firms to develop absorptive capacity and enhance corporate governance as part of their innovation strategies.

Interlocking directorships and firm performance: the role of board diversity

PurposeThis study aims to examine the impact of interlocking directorships on firm performance in Turkey, with a specific focus on the moderating role of board diversity.Design/methodology/approachUsing a panel dataset comprising the top 100 firms listed on Borsa Istanbul from 2014 to 2018, this study employs regression analysis to investigate the relationship between interlocking directorships, board diversity, and firm performance. It firm-level financial data and directorship information to assess the effects of interlocking directorships on firm performance while also considering the moderating influence of board diversity.FindingsThe findings of this study reveal several important insights. First, the results confirm the “busyness hypothesis” as an increase in the number of interlocks per director negatively impacts firm performance, indicating reduced monitoring effectiveness. However, the study also demonstrates that board diversity plays a significant moderating role. Specifically, board diversity positively influences the relationship between interlocking directorships and firm performance, suggesting that a diverse board can mitigate the negative effects of interlocks and enhance overall firm performance.Originality/valueThis study contributes to the existing literature in several ways. First, this study extends our understanding of the relationship between interlocking directorships and firm performance, considering contingency factors in the Turkish market. Second, our findings imply that board diversity mitigates the negative impact of busy interlocking directorates and improves firm performance, which provides invaluable directions to firms in setting their boards. Moreover, this research enhances corporate governance practices in Turkey and beyond in other emerging markets with similar corporate governance mechanisms by identifying the importance of board diversity and its moderating influence.

Cross‐ownership and corporate ESG investment: Promotion or suppression?

AbstractEnvironmental, social, and governance (ESG) investing is the new mainstream of sustainable development in the “dual‐carbon” era and serves as a crucial indicator for assessing enterprises' high‐quality development. Cross‐ownership, as an important participant in the capital market, significantly influences corporate business decisions. However, whether the impact of cross‐ownership on corporate ESG investment manifests as a synergistic governance effect or competitive collusion effect is a vital question. This study empirically investigates the impact of cross‐ownership on ESG investment, using listed companies in heavily polluting industries from the Shanghai and Shenzhen A‐shares between 2015 and 2022 as the research sample. The findings reveal that cross‐ownership positively influences corporate ESG investment by reducing information asymmetry, alleviating financing constraints, and enhancing corporate governance. This research not only expands the theoretical understanding of cross‐ownership and corporate ESG investment but also offers empirical guidance for improving corporate governance mechanisms and attaining sustainable development.

Good Corporate Governance and Firm Value before and after covid-19 Case Study of Manufacturing Companies in Indonesia

This study investigates the impact of independent commissioners, audit committees, institutional ownership, and managerial ownership on the firm value of Indonesian manufacturing companies, both before and during the COVID-19 pandemic. Employing a quantitative research design and associative research approach, our findings reveal a positive relationship between independent commissioners and firm value, supporting existing literature on the role of independent commissioners in enhancing corporate governance. Conversely, the analysis indicates a negative influence of audit committees on firm value, emphasizing the need for a balanced approach to their formation to avoid undue restrictions on managerial autonomy. The examination of institutional and managerial ownership’s effects on firm value yields inconclusive results, suggesting the need for further exploration. Additionally, our study evaluates the impact of the COVID-19 pandemic on firm value using a dummy variable and a t-test, revealing no significant change in values during the pandemic. The focus on the Indonesian manufacturing sector provides valuable context, suggesting potential sector-specific resilience to pandemic challenges. Overall, this research contributes nuanced insights into corporate governance dynamics and their resilience in the face of unprecedented global events.

From governance to stability: How party organizations in private enterprises influence stock price crash risk

This article delves into the data of A-share listed private companies from 2010 to 2022, utilizing a DID model to conduct a comprehensive study on how the establishment of party organizations affects the risk of stock price crashes. The research reveals that party organizations significantly mitigate the risk of stock price crashes in private enterprises, particularly in areas with higher marketization levels, among younger companies, and in companies with weaker internal governance. The introduction of party organizations bolsters internal oversight mechanisms, enhancing corporate governance quality and encouraging companies to embrace social responsibilities and ethical standards, thereby minimizing risk accumulation.

Noncontrolling shareholders' network centrality and corporate earnings management: Governance or conspiracy?

Corporate governance is undermined by the tunneling of controlling shareholders. Social networks play a positive role in corporate governance; hence, the question is whether noncontrolling shareholders can take advantage of their network position to participate in corporate governance and subsequently influence earnings management. Our findings indicate that noncontrolling shareholders' network centrality can impede positive accrual-based earnings management and primarily functions as a governance mechanism via external governance. Also influencing the relationship between positive accrual-based earnings management and noncontrolling shareholders' network centrality are the religious culture in different regions and the nature of corporate property rights. Our study contributes to the debate about the role of noncontrolling shareholders by providing direct evidence that the network centrality of noncontrolling shareholders plays an active role in enhancing corporate governance and accounting information quality.

The Impact of The Computerized Accounting Information System in Reducing Financial Risks in Jordanian Commercial Banks

Purpose: The purpose of this study was to assess the impact of computerized accounting information systems (CAIS) on reducing financial risks within Jordanian commercial banks listed on the Amman Stock Exchange. This involved examining the components, characteristics, and benefits of CAIS in this context. Methods: The study employed a questionnaire-based approach to gather information, distributing 75 questionnaires among financial managers and internal auditors within Jordanian commercial banks. A total of 64 questionnaires were retrieved and analyzed to draw conclusions. Results and Discussion: The analysis revealed a significant impact of various variables related to computerized information systems in mitigating financial risks within the sampled banks. This finding underscores the importance of CAIS in enhancing risk management practices within the banking sector. Notably, the study highlights the necessity of corporate governance implementation and the preparation of specialized reports to enhance financial risk disclosure processes. Implications of the Research: The findings of this research have several implications for both academia and practice. Firstly, they emphasize the crucial role of CAIS in reducing financial risks within commercial banks. Secondly, they underscore the importance of implementing robust corporate governance mechanisms to strengthen risk management frameworks. Additionally, the study suggests the need for further research to explore the impact of accounting information systems on different types of risks and their consequent effects on financial performance. Originality/Value: This study contributes to the existing literature by providing insights into the specific context of Jordanian commercial banks and their utilization of CAIS for managing financial risks. By identifying the components, characteristics, and benefits of CAIS in this setting, the research adds valuable knowledge to the field of accounting and finance. Moreover, its recommendations for enhanced corporate governance practices and specialized reporting can inform practical strategies for risk management in banking institutions.

Research on the Reform of Authorized Capital System in Chinese Stock Companies: Against the Background of the Implementation of the New Company Law

With the rapid development of the Chinese economy and the continuous improvement of the market economy system, joint-stock companies, as an important form of economic organization, have gradually become the main force of economic development. In order to adapt to the new development trend, China has successively introduced a series of laws and regulations, attempting to reform and improve the authorized capital system, enhance corporate governance, protect investor rights, and promote the healthy development of the market economy. This article analyzes the current situation and problems of the statutory capital system of Chinese joint-stock companies, and based on this, analyzes the reform effects of the new Company Law on the authorized capital system of joint-stock companies. It also explores the transformation path of the authorized capital system of Chinese joint-stock companies after the implementation of the new Company Law, providing reference opinions for the development of joint-stock companies and the optimization of the efficiency of capital system reform.

Capital market effects of corporate transparency and sustainability: evidence from an emerging economy

PurposeThe study aims to examine the association between corporate transparency and firm value (capital market effect) and investigate whether auditor choice moderates this relationship.Design/methodology/approachThis study uses the Malaysian Institute of Corporate Governance (2017) data set, which provides scores on anti-corruption commitment, organisational transparency and sustainability of Malaysia’s top 100 listed firms. The methodology entails an ordinary pooled least square regression method for empirical research.FindingsThe positive association between corporate transparency and firm value is more evident in anti-corruption and sustainability initiatives. More importantly, government-linked companies have higher scores. Firms with enhanced anti-corruption commitment are more likely to have higher firm value, and this relationship is more evident for politically connected firms. This study also finds that auditor choice is associated with the firm value in the sampled listed firms.Practical implicationsThe findings provide implications for investors and regulators on the role of corporate transparency in an emerging capital market.Social implicationsThe study recommends that emerging market regulators continue enhancing corporate governance codes and practices to improve reporting transparency for listed firms.Originality/valueThis study contributes to the growing literature on sustainability disclosures by incorporating corporate reporting transparency, explicitly relating to firms’ commitment to anti-corruption, organisational transparency and sustainability.

Assessing the Role of Board Composition and Ownership Structure in Enhancing Corporate Governance Effectiveness in Indian Family-Owned Enterprises

This paper explores the influence of board composition and ownership structure on the effectiveness of corporate governance in Indian family-owned enterprises. The research aims to uncover the unique dynamics that these factors play in governance practices and their subsequent impact on business success. Through a qualitative analysis, including comparative studies and case studies of prominent Indian family businesses, the study delves into various governance models and assesses their effectiveness. Key findings indicate that diverse and well-structured boards, coupled with clear ownership distributions, significantly enhance governance practices, leading to better strategic decisions and increased business sustainability. The paper concludes with actionable recommendations for Indian family-owned enterprises seeking to improve their governance frameworks. This study contributes to the broader understanding of corporate governance in emerging markets, offering insights that are valuable to both academics and practitioners in the field of business management.

Analyzing the impact of environmental strategies on corporate governance and long-term performance

This study delves into the complex relationships between corporate governance, environmental strategies, and the enduring success of publicly traded companies. Through empirical analysis, the study explores how adopting diverse sustainability measures influences stakeholder involvement, board structure, and shareholder value creation. This study combines an extensive dataset of financial information from listed companies with a quantitative examination of corporate governance practices. It also incorporates detailed case studies of leading firms implementing noteworthy environmental strategies. The study uses correlation analysis to assess environmental strategies' influence on corporate governance dynamics and long-term performance within this sector. The study highlights a positive correlation between robust environmental strategies and enhanced corporate governance practices. These include heightened board diversity, increased stakeholder engagement, and strengthened risk management frameworks. Notably, the study establishes a strong link between proactive sustainability efforts and outstanding long-term financial performance, as evidenced by key performance indicators such as return on equity and total shareholder return.

Revolutionizing green business: The power of academic directors in accelerating eco‐innovation and sustainable transformation in China

AbstractThis study investigates the relationship between academic directors and corporate eco‐innovation in Chinese A‐listed firms in the context of the growing urgency of climate change. Based on the argument that academic directors bring advanced knowledge, skills, experience, and expertise to a corporate board and are more socially responsible and ethical, we hypothesized that academic directors would have a positive influence on corporate eco‐innovation. We also examine how this nexus is moderated by pollutant firms and firms having qualified foreign institutional investors (QFIIs). Our results suggest that academic directors have a positive and significant impact on corporate eco‐innovation. The findings remain robust even after employing alternate proxies for both independent and dependent variables, minimizing reverse causality and endogeneity concerns, and addressing self‐selection bias through the entropy balancing method. Additionally, our study reveals that the positive nexus between academic directors and eco‐innovation is more pronounced in pollutant firms and firms having QFIIs. This study contributes to the literature on corporate governance, eco‐innovation, and emerging markets by providing evidence of the positive influence of academic directors on eco‐innovation, highlighting the importance of their contribution to enhancing corporate governance mechanisms to promote environmentally friendly activities and sustainability practices. Furthermore, our findings offer insight into the role of QFIIs in strengthening the positive association between academic directors and eco‐innovation, suggesting that foreign investors can support and encourage firms to adopt environmentally friendly practices for long‐term benefits.

The Impact of Capital Market Opening on Enterprise Green Technology Innovation: Insights from the Shanghai–Hong Kong Stock Connect

China’s economy has experienced a period of remarkable growth and entered a stage of high-quality development, necessitating the implementation of innovative eco-friendly practices involving green technology innovation. The capital market environment plays a direct role in influencing the sources and scale of external financing for businesses, thus affecting their green technology innovation activities. The Shanghai–Hong Kong Stock Connect (SHSC) mechanism in China is the first official two-way opening of China’s capital market. Therefore, this paper regards the SHSC policy as a quasi-natural experiment platform for the opening of the capital market and employs a difference-in-difference methodology to investigate the impact of the SHSC policy on enterprise green technology innovation and its influence mechanisms. The overall sample covers Chinese A-share listed enterprises from 2012 to 2017. The findings demonstrate that the SHSC policy significantly enhances the level of green technology innovation by enhancing corporate governance and alleviating financing constraints. Non-state-owned enterprises are more affected than state-owned ones, and there is no significant difference in the impact between heavily polluting industries and non-heavily polluting ones.

Revisiting the Effect of Dividend Policy on Firm Performance and Value: Empirical Evidence from the Korean Market

This study investigates the relationship between dividend policy, firm performance, and value within the Korean market, taking into account the unique context of Chaebol ownership structures. Utilizing a robust dataset of 5478 observations from the Korean Composite Stock Price Index, our empirical analysis employs advanced regression models, revealing distinctive effects of various dividend policy measures through the lenses of interest alignment and managerial entrenchment hypotheses. Surprisingly, while cash dividend payments exhibit a robust positive impact on Tobin’s Q and market-to-book ratios, suggesting an overall positive link with market valuations, a closer inspection reveals divergent impacts for Chaebol and non-Chaebol firms. In Chaebol entities, dividend policy proxies consistently demonstrate positive effects on performance metrics, aligning with the interest alignment hypothesis and highlighting strategic signaling efforts. Conversely, non-Chaebol firms exhibit intriguingly negative impacts, supporting the managerial entrenchment hypothesis and implying potential challenges to market value. Firms should prioritize transparent communication on dividend policies for improved investor decision making and enhanced corporate governance in the dynamic Korean market.

Does Financial Expertise within the Audit Committee Mitigate Stock Price Crash Risk? Unraveling the Impact of Accounting Proficiency on Market Vulnerability.

Stock price crashes can have severe consequences for investors and the overall financial market. This study investigates whether financial expertise within the audit committee can effectively mitigate stock price crash risk, with a specific focus on the impact of accounting proficiency on market vulnerability. By incorporating a comprehensive empirical analysis and recent scientific references, we aim to shed light on the crucial question of how audit committees' composition influences market stability. Drawing upon recent scientific references, including Smith and Johnson (2023) in the Journal of Accounting and Finance Research, Chen, Wang, and Li (2022) in the Journal of Financial Economics, and Zhang and Lee (2021) in the International Journal of Accounting and Auditing Research, we explore the relationship between financial expertise within audit committees and their ability to act as a safeguard against stock price crashes. Our research methodology involves analyzing data from various financial markets to ascertain the potential effectiveness of audit committees with members possessing higher levels of financial expertise in preventing or mitigating stock price crashes. By integrating insights from these recent scientific articles, we present a comprehensive examination of the influence of accounting proficiency on market vulnerability. The findings of this study will contribute significantly to the existing literature on corporate governance and market stability. Policymakers, investors, and corporate boards will gain valuable insights into the role of financial expertise within the audit committee in managing stock price crash risk and promoting market resilience. Ultimately, these insights can inform decision-making processes and enhance corporate governance practices to foster more stable and sustainable financial markets.

Enhancing Corporate Governance Through Rigorous and Insightful Auditing Processes

Enhancing Corporate Governance Through Rigorous and Insightful Auditing Processes