Corporate Governance Characteristics Research Articles

Navigating board dynamics: Configuration analysis of corporate governance's factors and their impact on bank performance.

This research utilizes the fsQCA technique to investigate how a combination of corporate governance conditions or factors collectively influences the performance of banks. Examining key elements such as board size, busy directors, independent directors, CEO duality, and women on the board, the research employs data collected from the annual reports of 30 banks spanning from 2010 to 2020. The necessary condition analysis (NCA) underscores that no individual condition or factor is indispensable for the ultimate outcome. Nevertheless, the sufficiency analysis reveals distinct solutions, each representing a unique set of conditions or factors sufficient to generate the outcome. The study concludes that the relationship between corporate governance characteristics and bank performance is complex and multifaceted, with neither ROA nor ROE reliant on a singular input condition or factor. The theoretical contributions of the findings align with or partially support various theories and propositions within the realm of corporate governance. Notably, the application of fsQCA contributes to enhance the methodological understanding of corporate governance studies in existing literature.

Climate change disclosure performance and audit fees: evidence from Australia

Purpose This study aims to examine the relationship between climate change disclosure performance (CCDP) and audit pricing. The moderating effect of corporate governance characteristics on that relationship is also investigated. Design/methodology/approach Using a sample of top 300 Australian Securities Exchange listed non-financial firms over the period 2008–2019, this study investigates the association between CCDP and audit fees. The findings are robust to a difference-in-difference test thereby alleviating potential endogeneity concerns. Findings CCDP is found to be significantly positively related to external auditor fees. Research limitations/implications The findings show some important implications for firm management, regulators, investors and auditors. This study presents empirical evidence that climate change, as a factor of external risk, influences audit fees. Practical implications Firms with governance structures characterized by larger more independent boards, larger audit committees and audit committees with a higher level of independence significantly moderate the relationship between CCDP and audit fees. Social implications Investors’ demand for firm transparency and disclosure of information regarding the risks of climate change, effects and opportunities has increased significantly over the past decade, as these factors could have a significant effect on valuation and investment decisions. Originality/value Importantly, stakeholders need to be aware of the costs of climate change, the quantification of climate change impacts and how firms address climate change in their business risk management processes. This study quantifies the impact of CCDP on auditor risk assessments via audit fees.

The role of Japanese corporate governance features in explaining rating differences between global and Japanese rating agencies

Many Japanese bond issuers believe that global credit rating agencies (CRAs)—Moody's and S&P—do not consider the unique corporate governance structure in Japan and assign lower credit ratings even though the “main bank” relationship in Japan can significantly reduce the default risk of these companies. Using 5,814 rated corporate bonds issued by 558 non-financial firms in Japan from 2003 to 2021, we find that local CRAs (R&I and JCR) weigh unique Japanese corporate governance features more heavily and assign higher ratings to Japanese corporate bonds relative to global CRAs. Our results further suggest that the degree of rating differences between local and global CRAs for individual issuers results from systematically different assessments of company-specific risk by these CRAs. Our data also reveal that the importance of main bank ties in Japanese corporate governance remains intact in more recent years, contrary to previous findings.

Impact of Corporate Governance Characteristics on Integrated Reporting Quality: An Empirical Analysis, Evidence from India

The research on integrated reporting (IR) has grown swiftly over the past decade, and specific attention is given to the disclosure quality of IR information across the globe. The objective of this study is to investigate the association between board characteristics and integrated reporting quality. The analysis selected 46 Indian listed companies with 138 firm-year observations over three years. The study found a positive impact of board size, CEO duality, non-executive board members, financial leverage, the COVID-19 crisis and firm size on IR quality. The study found a negative effect of gender diversity, board activity and profitability on IR quality. This study is the first to examine the effect of board features on the implementation and adoption of IR in the Indian context. Moreover, the study offers key insights for researchers, practitioners, accounting bodies, government agencies, investors and policymakers into the use of integrated reporting and sound decision-making.

Corporate governance and financial fraud occurrence – case study on Romanian companies

PurposeThe aim of this study is to approach the way in which corporate governance influences the occurrence of financial fraud, as expressed by the M-Beneish score. In order to get further into the topic, we have first computed a corporate governance score based on the comply-explain statement and then selected a few elements that are part of the corporate governance reporting: equilibrium of board members (EQUIL), independence of board members (INDEP), selection of the board members (NOM), remuneration policy (REM), audit committee (AUDIT) and the proportion of female directors on boards (GenF). They were tested, one by one, using the financial fraud score to see the way in which they interact.Design/methodology/approachThe study is conducted on a sample of 65 companies listed on the Bucharest Stock Exchange (BSE) for the 2016–2022 period. The data were processed using three-stage general least square [general least squares (GLS), with iteration, igls and option] with a common first-order panel-specific autocorrelation correction, so as to explain how a poor adoption of the corporate governance score and its elements has a negative implication for the M-Beneish score, controlling for the auditor opinion, type of auditing company and if the company is privately owned.FindingsThe results support most of our research hypothesis, revealing that a poor adoption of the corporate governance score and its components – AUDIT, EQUIL, INDEP and GenF – negatively influences the M-Beneish score, i.e. a low corporate governance score will lead to an increase in financial fraud. This is an encouraging aspect, for an improved adoption of the corporate governance principles reduces the occurrence of financial fraud.Research limitations/implicationsThis is a study that concerns the relationship between corporate governance and financial fraud for the case study for Romania.Practical implicationsThe study highlights the importance of adopting the corporate governance code applied to the Romanian business environment. By measuring the presence of financial fraud appearance through the M-Beneish score, we have managed to outline the negative relationship between the two components. Thus, it is an important aspect of which companies should take account, so they will have long-term benefits and ensure the continuity of the business.Social implicationsThe policy implications of this project are for policymakers, so that they will understand how a good corporate governance mechanism will enhance high-performing businesses. Different aspects regarding corporate governance were validated and are in the process of being validated. Managers can extract and try to understand and apply the good characteristics of corporate governance for the well-being of their companies. At a broader level, the macroeconomic environment will increase its own well-being while encouraging market players to enhance qualitative corporate governance reporting. There is no doubt that corporate governance has a positive impact on businesses.Originality/valueThe study highlights the importance of adopting the corporate governance code as applied to the Romanian business environment. By measuring the occurrence of financial fraud using the M-Beneish score, we have managed to outline the negative relationship between the two components. Therefore, this is an important aspect that companies should take into account in order to have long-term benefits and ensure the continuity of their business.

The determinants of corporate social responsibility (CSR) committee: executive compensation, CSR-based incentives and ESG performance

Purpose This paper aims to investigate whether executive compensation, corporate social responsibility (CSR)-based incentives, environmental social and governance (ESG) performance and firm performance are the significant predictors of CSR committees, in addition to CEO, firm and corporate governance characteristics, from the tenet of stakeholder and managerial power theories. Design/methodology/approach Switzerland is an exemplary country from the perspective of corporate governance and executive compensation. This empirical study includes a panel data set of listed Swiss companies, so fixed-effect logistic regression has been used. Findings It has been found that the companies that offer CSR-based incentives and higher compensation to their CEOs and have better ESG performance are more likely to have CSR committees. Practical implications This empirical paper fills the gap in the literature, guides practitioners about the factors that influence the creation and efficiency of CSR committees, and inspires regulatory bodies to ponder on a mandatory CSR committee to form resilient and sustainable organizations worldwide. Social implications COVID-19 has re-emphasized the prominence of sustainability and the stakeholder approach. Thus, this paper indicates that CSR committees require the adaption and implementation of a holistic sustainability policy that integrates both external and internal factors and thereby provides a whole process for sustainability issues. Originality/value The impact of CSR committees on corporate social performance (CSP) has already been investigated. However, the predictors of CSR committees have been less scrutinized in the literature.

Reconnoitering the impact of corporate governance on carbon emission disclosure in an emerging setting

Purpose This study aims to determine the influence of corporate governance characteristics on carbon emission disclosure in an emerging economy. Design/methodology/approach The study is based on S&P BSE 500 Indian firms for the period of 6 years from 2016–2017 to 2021–2022. The panel data regression models are used to gauge the association between corporate governance and carbon emission disclosure. Findings The empirical findings of the study support the positive and significant association between board activity intensity, environment committee and carbon emission disclosure. This evinced that the board activity intensity and presence of the environment committee have a critical role in carbon emission disclosure. On the contrary, findings reveal a significant and negative relationship between board size and carbon emission disclosure. Practical implications The present study provides treasured insights to regulators, policymakers, investors and corporate managers, as the study corroborates that various corporate governance characteristics exert significant influence on carbon emission disclosure. Originality/value The current research work provides novel insights into corporate governance and climate change literature that good corporate governance significantly boosts the carbon emission disclosure of firms. Previous studies examining the impact of corporate governance on carbon emission disclosure ignored emerging economies. Thus, the current work explores the role of governance mechanisms on carbon emission disclosure in an emerging context. Further, to the best of the author’s knowledge, the current study is the first of its kind to investigate the role of corporate governance on carbon emission disclosure in the Indian context.

Independence Reconceived

What makes a director independent? Scholars, regulators, and investors have grappled for decades with the fleeting notion of director independence. Originally conceived as guardians of shareholder interests that could safeguard a corporate board’s ability to check management’s power, independent directors have become a marquee feature of modern corporate governance. But do the corporate actions of directors that are considered “independent” under current standards comport with what we think independence requires? In many cases, the answer would seem to be “no.” From a lack of observable financial impact to the unabated flow of corporate scandals, independent directors seem to keep failing at the job they were championed to do.
 This Article addresses this puzzling tension, offering a novel theoretical and practical reframing of the decades-old discourse around independent directors. The historical focus on the classical managerial agency costs paradigm emphasized that directors who lack ties to the management team can prevent managerial slack or value extraction. However, this approach overlooks the critical role directors also have in curbing managerial overzealousness. In today’s governance ecosystem, directors are not only tasked with preventing managerial slack. They are increasingly tasked with preventing managerial overreach and misconduct even when such overreach or misconduct is compatible with promoting shareholder value. This has important theoretical and practical implications.
 This Article makes two key contributions to the literature. First, it reframes the question of what makes directors independent by supplementing the focus on agency costs as the driver for independence. By identifying a need to prevent boards from rubber-stamping managerial actions—even those taken in good faith—this Article suggests that a simple lack of ties to management fails as a litmus test for independence. Second, by reconceiving independence, this Article also provides tangible credence to the value of diversity on boards, the value and perils of hedge fund activism, and to the emerging discourse regarding ESG and stakeholderism.

An Empirical Study on Acquisition, Resale and Retirement of Treasury Stocks: Based on The Corporate Governance Characteristics and ESG Performance

This study presents the results of an empirical analysis of companies listed on the Korean domestic stock market from 2013 to 2021, following the 2011 revision of the Commercial Code. This study investigates how a company's governance structure and ESG activities affect the repurchase, resale, and retirement of treasury stock, and how such actions impact the company's market valuation. The empirical analysis shows that various corporate governance variables, including ownership structure, influence treasury stock-related actions. The impact on company value varies, depending upon the level of corporate governance variables. A company's ESG activities primarily have a positive impact on the repurchase and retirement of treasury stock. Furthermore, our study reveals that when companies with relatively low ESG evaluation ratings repurchase and retire treasury stocks, their value increases. However, the resale of treasury stock had a negative impact on company value for both the high and low ESG evaluation rating groups.

ОРГАНІЗАЦІЙНІ УМОВИ КОРПОРАТИВНОГО УПРАВЛІННЯ В АГРАРНОМУ ІНТЕГРОВАНОМУ ПІДПРИЄМСТВІ

The article is devoted to the study of scientific knowledge on the general organizational conditions for corporate governance in an agrarian integrated enterprise. Based on the analysis of scientific knowledge on the conditions and features of corporate governance in integrated agricultural structures, the authors have found that relations arise not between the owners of a corporation, but between the corporation and the owners, and thus relations in the group of owners are absent or minimized. In practice, the key element of contracting is not an attempt to determine the behavior of the CEO in all possible situations, but to develop a structured system of remuneration for managers. The main goal of this operation is to find the optimal combination of different types of remuneration for top managers, which will ensure mutually beneficial interests of both shareholders and managers of the corporation. The author proves that the most effective mechanism of internal control over the activities of a corporation's management personnel is to involve shareholders in protecting their interests through agents (outsiders) who are not employees of the corporation but are vested with certain controlling powers. It is assumed that these agents will not be directly related to the operational management of the corporation, and thus they become the defenders of the interests of the owners. It is found that there is a direct relationship between agency conflicts and corporate governance mechanisms. The result of the study is the identification of positive and negative aspects of capital concentration in a corporation. This leads to the conclusion that with an increase in the manager's shareholding, the level of agency conflicts decreases. The authors propose a detailed model of corporate governance that takes into account the interests of all participants. The conflict of interests between owners and managers of a corporate structure is investigated. The peculiarities of functioning of the external mechanism of control by the financial market in the corporate governance system and their shortcomings are highlighted. The institutional factors influencing the corporate governance system of an integrated agricultural enterprise are demonstrated. Keywords: corporate governance, agricultural enterprise, integrated structure, financial market, control mechanism.

УПРАВЛЕНИЕ РИСКАМИ В РАМКАХ КОРПОРАТИВНОГО УПРАВЛЕНИЯ

The article emphasizes the importance of risk management within the framework of the corporate governance system of an enterprise in the context of digitalization. The key trends and features of corporate governance in modern conditions are formulated. The need to implement innovative GRC strategies is substantiated in order to maintain the flexibility, sustainability and competitiveness of the enterprise in the market.

Corporate Governance Characteristics and Earnings Management of Quoted Non-Financial Firms in Nigeria

This study investigates the relationship between some corporate governance attributes and earnings management of listed firms in Nigeria. This study uses the correlational research design and purposively sampled secondarily sourced data over the period from 2005 to 2020 of 75 non-financial firms listed on the floor of the Nigerian Exchange Group (NXG). The Robust Least Squares Estimators results reveal that board independence (BODI) is positively significant with earnings management; board size (BODS board gender diversity (BGDIV) and audit committee size (ACS) are negatively significant with it while managerial ownership (MOWN); chief executive officer with military experience (CEOME) and number of foreign directors (NFODIR) are insignificant. While foreign income (FINCOME), year fixed effects (YDUM) and industry fixed effects (IDUM) dummies are negatively and statistically significant, the Big4 auditors is positively insignificant. The study concludes with some recommendations that management, among others, should maintain or increase the present level of board size, audit committee size and the number of females in the board since these variables deter management in managing earnings for the period under review.

Unveiling the Nexus: Exploring the Impact of Corporate Governance on the Financial Performance of Acquiring Companies in the Indian Context

This study investigates the effect of corporate governance characteristics on the financial performance of 124 listed Indian companies that have undergone mergers and acquisitions between 2014 and 2020. It employs several performance measures, such as short-term capital market performance, long-term capital market performance, accounting- and market-based measures, and firm-level control factors. The study finds board size to be a positive and significant factor affecting short-term market performance. Furthermore, it also documents weak linkages with other corporate governance variables, such as board independence and CEO duality. Regarding control variables, leverage, company age, price-to-book ratio, and research and development expenses significantly impact acquiring companies’ financial returns. The findings add to our understanding of corporate governance’s impact on performance in cases such as mergers and acquisitions.

The Impact of Corporate Governance and Ownership Structure on The Level Of Corporate Social Responsibility Disclosure of Listed Manufacturing Companies on The Ho Chi Minh Stock Exchange – Vietnam

Purpose: The study has provided an overview of the theoretical foundation and empirical evidence on the impact of corporate governance on the level of corporate social responsibility (CSR) disclosure among listed manufacturing companies on the Ho Chi Minh Stock Exchange in 2021, utilizing secondary data from 118 manufacturing firms. Theoretical framework: In accordance with Agency Theory, the Separation of Ownership and Management, and the Stakeholder Theory, this study aims to investigate the influence of corporate governance characteristics on the extent of corporate social responsibility (CSR) disclosure in the manufacturing sector. Results and conclusion: The quantitative research model is constructed with five corporate governance factors and one control variable related to company characteristics, including the board size, the proportion of female members in the board, the proportion of independent board members, the foreign ownership ratio, the state ownership ratio, and the company size. The results from the Ordinary Least Squares (OLS) regression analysis indicate that the majority of the corporate governance variables are correlated with the level of CSR disclosure, except for the proportion of independent board members. Research implications: The study suggests managerial implications to help businesses recognize the importance of corporate governance in CSR disclosure, aiming to enhance reputation and attract investments. Originality/value: Additionally, the results also demonstrate that company-specific factors, such as company size and financial leverage, significantly impact the company's profitability.

Corporate governance and reporting quality of accounts in China-listed firms. A moderating role of ownership pattern.

Financial reporting quality is critical for businesses, stakeholders, and government to ensure transparency and accountability. The purpose of this paper is to investigate the relationship between corporate governance, financial reporting quality, and ownership structure as a moderating factor for Chinese stock exchange-listed firms. Quantitative data of 550 listed firms from 2012 to 2022 are collected from the annual reports. For investigating the relationship between variables, panel data analysis with random and fixed effect models is used. Our results show that corporate governance's different attributes such as Auditor brand name, Existence of an audit committee, independent board, family ownership, and profitability have a significant negative impact on the audit report lag that decreases the lags and increases the financial reporting quality in China listed firms. Auditor opinion, Board diligence Board size, and CEO duality have a significant positive impact on the audit report lag that increases the lags and decreases the financial reporting quality of China-listed firms. Furthermore, our findings show that ownership concentration has no moderating effect between corporate governance, different attributes, and financial reporting quality. Family ownership, on the other hand, has a strong moderating effect between corporate governance characteristics and financial reporting quality. However, due to limitations, this study provides the opportunity for future research on corporate governance mechanisms in different cultures and environments. Moreover, this study has some important implications for investors, policymakers, and government.

Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway

This study aims to investigate the relationships between discretionary accrual earnings management (DEM), real earnings management (REM), institutional ownership, and audit quality in Malaysian firms. The study's findings are expected to offer insights into how these factors may influence Malaysia's progress towards the Sustainable Development Goals. We examine the relationship between DEM and REM to identify the potential simultaneous use of earnings management strategies. Additionally, we explore the impact of institutional ownership and audit firm size on a company's earnings management practices. Using data from the Kuala Lumpur Stock Exchange (KLSE) spanning 2016-2018 we conducted statistical analyses, including ANOVA, t-tests, and multiple regression. There were notable correlations between DEM and REM, suggesting that these earnings management techniques are being used concurrently. Notably, institutional ownership and audit firm size played substantial roles in firms' earnings management practices. Companies with higher institutional ownership and larger audit firms tended to exhibit lower levels of DEM and REM. However, these factors did not appear to moderate the DEM-REM relationship. These findings have critical implications for regulators and policymakers in addressing earnings management practices and enhancing corporate governance in Malaysia. Focusing on institutional ownership and audit firm size may help curtail such practices, contributing to Malaysia's progress towards the Sustainable Development Goals. Future research should explore other potential moderating variables and distinctive corporate governance features that could also impact the DEM-REM relationship.

Board composition, audit committee characteristics, and R&D expenditure

We examine the impact of board members’ expertise, chief financial officer (CFO) board membership, and audit committee characteristics on the level of research and development (R&D) expenditure. Using a sample of listed companies from 16 European countries over the period from 2014 to 2020, multivariate regression models and controls for endogeneity, our results show that firms with a CFO who serves as a board member reduce R&D expenditures, while enhanced board expertise has the opposite effect. We also find that audit committee financial expertise is positively associated with the level of R&D spending, while the independence of audit committee members reduces the propensity of firms to exhibit R&D expenditures. These results contribute to the academic and policy debate by offering novel insights into which combinations of corporate governance characteristics are more likely to affect variations in the level of R&D expenditure among firms.

The influence of Italian board characteristics on environmental, social and governance dimensions

PurposeThis study explored how board diversity affects environmental, social, and governance (ESG) performance in the Italian banking sector. Specifically, this study examined whether the presence of specific corporate governance (CG) characteristics (board diversity) in Italian Cooperative Credit banks is related to ESG dimensions.Design/methodology/approachThe authors examined a sample of 247 Italian Cooperative Credit banks for the period 2017–2021 and developed an econometric model by applying unbalanced panel data with firm fixed effects and controls per year. To verify the research hypotheses, the authors analyzed board diversity in terms of board attributes variables (size, gender diversity, age, activity, independence and corporate social responsibility/sustainability committee (CSR) and measured ESG dimensions using the ESG score provided by Refinitiv.FindingsThe findings suggest that board size, independence and the existence of a CSR/sustainability committee positively affect banks' ESG performance, while no significant relationship between board average age and ESG performance was found. The study also explored how the critical mass of women on a board affects ESG performance by testing the positive impact of gender diversity on ESG dimensions only up to a certain threshold of female directors.Research limitations/implicationsThis study is highly relevant to managers and investors who consider ESG issues in their decision-making processes. The findings support regulators by offering insights into ways to improve ESG performance through the specific design and application of governance mechanisms.Practical implicationsFrom a practical perspective, this investigation has implications for both practitioners and regulators, suggesting that chief executive officers (CEOs) and managers should pay more attention to CG aspects to improve ESG performance and that policy-makers should give greater consideration to these aspects of CG in their efforts to enhance ESG performance.Originality/valueThis study offers an in-depth analysis of banks' ESG practices and attempts to bridge the gap in the literature on ESG in the Italian banking industry. This study is the first to investigate the relationship between CG variables and ESG dimensions in this context.

CSR performance and firm idiosyncratic risk in a data-rich environment: The role of retail investor attention

In the Chinese stock market, there are many retail investors who focus on short-term profits and may consider corporate social responsibility (CSR) differently from institutional investors. We find that CSR significantly reduces firms’ idiosyncratic risk in the Chinese financial market. This result still holds after a series of robustness checks with potential endogeneity concerns. We further test the role of CSR as a nonfinancial informational supplement, the interplay of CSR with stock analyst forecasts and the effect of heterogeneity in corporate governance characteristics. Finally, we find that retail investors’ attention mediates the relationship between CSR and firms’ idiosyncratic risk. Our results have general implications for understanding the impact of CSR on retail investors.

Corporate governance and performance of state-owned enterprises in a least developed economy

Purpose: The main objective of the study was to investigate how corporate governance affects the performance of state-owned enterprises (SOEs) in a least developed economy.Design/methodology/approach: Both primary and secondary data from nine state-owned companies that operated between 2001 and 2016 were analysed in the study. The investigation used a quantitative methodology. Fixed effects, random effects and generalised method of moments (GMM) estimations were used to conduct regression analysis.Findings/results: The findings show that corporate governance characteristics affect SOE performance in a least developed economy. The performance of SOEs is influenced favourably by board structures, director tenure, reduced government ownership and leverage. Conversely, increased state ownership leads to subpar performance. The study also reveals that the presence of civil servants and directors with political affiliations in government-controlled companies has a negative effect on enterprise value.Practical implications: The use of multiple case studies to investigate SOEs in their natural setting has given some insights for both professional managers and policymakers interested in developing corporate governance frameworks to improve SOEs value in least developed economies, particularly in sub-Saharan Africa, even though the results are limited in terms of statistical generalisation because the study was based on a single country.Originality/value: The study fills a gap in the literature about how SOE performance is affected by corporate governance in least developed nations, where such research is underdeveloped.