Impact Of Corporate Governance Mechanisms Research Articles

Does corporate governance influence environmental, social and governance disclosure practices of state‐owned enterprises? An international study

AbstractThis paper provides fresh insights into the impact of corporate governance mechanisms on environmental, social and governance (ESG) disclosure practices of state‐owned enterprises (SOEs). To accomplish this study's research objective, we collected ESG and corporate governance data from Refinitiv Eikon's database on a balanced sample of 253 SOEs from 37 worldwide countries over 5 years (2018–2022), obtaining a total of 1265 observations. A battery of fixed and random effects panel regression models has been estimated to test the impact of board characteristics, like board size, board independence, board gender diversity, number of board meetings, Chief Executive Officer (CEO) duality and the presence of a corporate social responsibility (CSR) committee, on overall and individual ESG disclosure scores of sampled SOEs. Results show that while board size and CEO duality negatively affect SOE ESG disclosure, board independence and gender diversity, as well as the number of board meetings and the existence of a CSR committee, exert a positive influence.

The Influence of Corporate Governance Mechanisms on Fraud Probability: Evidence from Russian Companies

This study examines the impact of corporate governance mechanisms on the probability of corporate fraud occurrence. We evaluate the board size, the degree of independence, and the frequency of meetings of the board and its committees. We also attempt to analyse the board’s gender diversity, but since boards are not gender-diverse in Russia, the significance of this variable cannot be tested. Our empirical study is based on 160 observations of MOEX-listed Russian companies, among which fraudulent behaviour has been revealed in 32 companies over a 5-year period from 2014 to 2018. The relationship between the probability of fraud occurrence and corporate governance was investigated employing a logit model. The data was collected from firms’ annual reports and Thomson Reuters Eikon. Data on fraud cases is based on the evidence from the press (including the leading news sources and specialised websites). We detected a significant negative relationship between nomination and remuneration committee chairmen’s independence, the share of independent directors, the independence of board and audit committee chairmen and the likelihood of fraud. We also discovered the insignificant influence of board and its committees’ size and their meetings’ frequency on fraud probability. This paper contributes to the academic research on the relationship between corporate governance mechanisms and probability of fraud occurrence, emphasizing the special role of the establishment of nomination and remuneration committee chairman independence in Russian companies.

Impact Of Corporate Governance Mechanism On Capital Structure Decision On Non-Financial Sectors Of Emerging Countries

The study aimed to evaluate the effect of  Corporate Governance Dynamic on  Leverage on non-financial sectors of emerging countries (Pakistan, India, and Bangladesh ) during the study period of 2014 to 2023. The nature of the study is quantitative and secondary therefore data has been extracted from the respective websites of the companies and stock exchange  from the pharmaceutical, cement, and food industries. Moreover, the  Random effect model was used to on the bases of diagnostic test to identify the cause and effect. The findings of the study reveal that director remuneration, and board education in Pakistan showed positive and significant effects but Board size, board experience showed significant and negative effects on the capital structure decision. While board diversity, firm size found an insignificant association with leverage in Pakistan. For firm size showed an insignificant effect but board size, direct remuneration, and board education showed a negative and significant effect on leverage while board experience, board diversity was a positive and significant effect on leverage. Moreover, in India, board experience, board diversity, and board education was a significant but negative effect on leverage but board size, direct remuneration, firm size showed a positive and significant effect on the leverage of non-financial firms.

THE POST COVID EFFECT OF CORPORATE GOVERNANCE ON FIRM PERFORMANCE: A STUDY ON PRIVATE COMMERCIAL BANK IN BANGLADESH

Due to extensive corporate disgraces and catastrophes around the globe, there has been a transformed attention in the influence of corporate governance (CG) and firm performance (FP). The mainstream of research concerning CG and its effect on FP has been assumed in developed markets and countries, mostly the US and UK, but somewhat little indication is provided in the developing countries like Bangladesh. This report has examined the impact of corporate governance mechanisms on firm performance from Bangladesh’s perspective. This study primarily employs agency theory that indicates that the firms with strong corporate governance outperform firms with weaker governance. We used Board Size, Board composition, board expertise and CEO chair duality as variables of CG and EPS, ROA, and ROE as indicators of FP. We collected information from the managers, senior managers, and CFOs of private financial institutions (commercial banks) in Bangladesh for 2022-2023 financial years. The results reveal that size, composition and expertise of board could extremely influence FP positively whereas CEO chair duality could influence negatively. The outcomes of the analyses advocated that firms that comply with good corporate governance practices can expect to achieve higher return on assets and firm performance. It implies that worthy corporate governance applies lead to reduce the various costs inside the organization. Hence, it is concluded that firms of the developing world can possibly enhance their performance by implementing decent corporate governance practices. Therefore, it is desired for firm to separate CEO chair duality to achieve better performance through direct management supervision in Bangladesh.

The Impact of Corporate Governance Mechanisms on Value Creation in Family Firms: Evidence from an Emerging Economy

Corporate governance (CG) is a system by which firms are directed and controlled. Through its mechanisms, it ensures optimal levels of efficiency, exploits opportunities, and prevents conflicts of interest between directors, shareholders, and stakeholders. The studies do show a positive relationship between CG and performance, but they are conducted in developed countries with stable legal and economic environments. Thus, CG contributes to the value creation (VC) of the firms. But in family firms, the concentration of power resulting from the overlapping of its subsystems (family, business, and ownership) influences the functioning of CG, and probably, VC. Setting goals, monitoring results, or controlling performance can be some of its forms. But we do not know the influence in emerging countries.The aim of the study is to empirically analyze the financial contribution of CG mechanisms to the VC of listed family firms in a Latin American economy. The results show the importance of the size of the board of directors, the participation of independent directors, and the duality of the chief executive officer. All the latter are important, considering the high representation of the family firms, their traditional concentration of power, the level of legal or regulatory weakness level, the uncertainty and instability of market conditions. The study is relevant due to the lack of evidence in emerging markets.

The impact of corporate governance mechanisms on earnings quality during the COVID-19 Pandemic. Evidence from the UK

Abstract This study aims to analyze the impact of corporate governance practices on the earnings quality of 228 firms located in the United Kingdom throughout the period from 2019 to 2022. Our fundamental concept states that there is a negative relationship between the efficiency of corporate governance practices within the organization and the probability of participating in earnings manipulation. The findings of our empirical study offer substantiation for our claims, as they demonstrate that companies with boards of directors marked by notable autonomy and financial capabilities, along with the presence of effective audit and compensation committees, experience an improvement in the quality of their earnings. JEL classification numbers: G32, G34, M40, M41. Keywords: Corporate Governance, Earnings Quality, Board of Directors, Audit Committee, Compensation Committee.

The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model

This study aims to contribute to the existing literature by examining the relationship between corporate governance (CG) attributes and real-based earnings management (REM) in the context of an emerging market economy. The study employs a sample of 78 Egyptian Exchange (EGX)-listed companies covering the period from 2008 to 2017, yielding a total of 780 observations. To address dynamic endogeneity concerns between CG mechanisms and REM, the dynamic panel system-generalized method of moments (SGMM) estimator is used as the main analytical tool. The findings reveal that managerial and family ownership are negatively and significantly correlated with REM proxies, except for the ABCFO measure. By contrast, government and institutional ownership exhibit contrasting results, depending on the REM proxies used. The CG-EM relationship is influenced by several conflicting theoretical perspectives, including agency theory, institutional theory, stewardship theory, and resource dependence theory, resulting in inconsistent empirical findings. To the best of the authors’ knowledge, this study is the first to detect Real-earnings manipulation practices (REM) in the Egyptian context using six models to confirm the validity, reliability, and robustness of the findings. Additionally, the study employs an advanced statistical technique that considers endogeneity, heteroscedasticity, and simultaneity in the relationship between CG mechanisms and earnings quality. The results highlight the importance of considering the institutional and legal context of a country when analyzing the impact of corporate governance mechanisms on earnings quality, as the practice and implementation of governance mechanisms vary across countries.

The impact of corporate governance mechanisms on mitigating banks’ propensity for risk-taking

The impact of corporate governance mechanisms on mitigating banks’ propensity for risk-taking

Advancing Sustainable Development Goals: The Impact of Corporate Governance Mechanisms and Industry Type on Business Contributions

The 2030 Agenda for Sustainable Development calls for global businesses to support Sustainable Development Goals (SDGs). This study examines the impact of corporate governance mechanisms, particularly board of directors' roles, on SDG achievement through company disclosures and explores industry type as a moderating factor. Analyzing 408 IDX-listed companies from 2018-2020, the study finds that CEO independence, independent boards of commissioners, and frequent board meetings can enhance SDG achievement as reported in financial statements. However, industry types may affect SDG achievement, potentially reducing the influence of CEO independence and independent boards of commissioners. The research highlights the significance of corporate governance mechanisms and industry type in promoting SDG achievement in businesses

IN LIGHT OF THE CURRENT ECONOMIC STATUS: DO BOARD CHARACTERISTICS AND RISK MANAGEMENT COMMITTEES PROMOTE FIRM PERFORMANCE IN SAUDI ARABIA?

The current study aimed to investigate the impact of corporate governance mechanisms on the profitability of listed companies within the Saudi Stock Exchange (SSE). The methodology involved data collection from the SSE for the fiscal year 2021, with a research sample comprising 60 corporations. The study's independent variables encompassed the size of the board of directors, frequency of board meetings, and the presence of risk management practices. The dependent variable was corporate performance, as indicated by the return on assets (ROA). To enhance the evaluation of the relationship between the independent variables and the dependent variable, the study also incorporated a control variable - the size of the corporation. The study's findings unveiled that a larger board size had a positive impact on the performance of Saudi corporations. Furthermore, both an increased frequency of board meetings and the implementation of risk management practices exhibited positive effects on corporate performance. This research contributes significantly by exploring the direct influence of board size, board meeting frequency, and risk management practices on the performance of SSE-listed companies. The study's novelty lies in its comprehensive examination of these specific corporate governance mechanisms and their correlation with return on assets.

The moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and firm performance

Purpose Financial flexibility, investment efficiency and effective corporate governance mechanisms have been issues of concern to stakeholders. Yet, little empirical evidence on the combined moderating effects investment efficiency and corporate governance mechanisms on the nexus between financial flexibility and firm performance. This study aims to address this gap and extend the extant literature by examining the moderating effects of corporate governance and investment efficiency on the nexus between financial flexibility and financial performance. Design/methodology/approach The empirical study is based on progression analysis using a sample of 13,865 US listed companies selected from BoardEx (WRDS) for the period (2010–2022) with 89,198 firm-year observations. Findings Findings of this study indicate that financial flexibility improves firm value as well as accounting performance. Furthermore, the results reveal that both investment efficiency and corporate governance moderate the effect of financial flexibility on firm performance. The authors complement and extend the literature on the optimal investment strategies domain by showing that the combined impact of corporate governance mechanisms and investment efficiency strengthens the nexus between financial flexibility and firm performance. Research limitations/implications Key limitations of this study due to the characteristics of the sample selection: country-specific context and proxies used by this study. Practical implications Findings of this study have managerial and theoretical implications for firms’ boardrooms, institutional and individual investors, regulators, academics and other stakeholders regarding behavioural aspects of investment decision-making. Originality/value The authors’ novel contribution to the extant literature is articulated by the conceptual framework underlying this study and by the new evidence regarding exploring the combined effect of corporate governance mechanisms on nexus between financial flexibility and companies’ performance.

The impact of corporate governance mechanisms on corporate failure: an empirical evidence from Palestine Exchange

PurposeThe purpose of this research is to examine the impact of governance mechanisms on corporate failure.Design/methodology/approachThis study used a hypothesis-testing research design to collect data from the annual reports of 35 companies listed on Palestine Exchange from 2010 to 2019. Descriptive and inferential statistics were employed, along with correlation analysis to evaluate linear relationships between variables. The variance inflation factor was used to test multicollinearity, and binary logistic regression was utilized to develop the research model.FindingsThere is a significant positive relationship between board of directors' independency, institutional ownership and the quality of external audit, and corporate failure reduction. No significant relationship has been found among corporate governance variables such as board size, board meetings' frequency, board members' remuneration and audit committee existence, and corporate failure reduction.Research limitations/implicationsSeveral empirical research studies have developed models to predict corporate failure using accounting and financial data. However, limited research has empirically investigated the impact of the different mechanisms of governance on corporate failure prediction.Practical implicationsThe research highlighted the significance of companies' commitment to governance principles and their impact on predicting failure. The study suggests that decision-makers and managers can adopt different governance mechanisms to support corporate success and avoid those that may lead to negative consequences and failure.Originality/valueThis research is the first in Palestine to use a comprehensive list of corporate governance mechanisms to predict the failure of companies listed on the Palestine Stock Exchange between 2010 and 2019.

Corporate governance in ensuring the quality of financial and sustainability reporting in times of uncertainty

Purpose: The paper assesses the impact of uncertainty on financial and sustainability reporting. It also indicates the impact of corporate governance mechanisms in strengthening corporate reporting quality in times of uncertainty.Methodology/approach: The main research method is the analysis of the scientific and professional literature. The method of analysis and synthesis was used for inference.Findings: The article reveals key aspects of uncertainty in financial reporting and corporate sustainability reporting. It shows the impact of inherent uncertainty, as well as economic and business uncertainty. It interprets the empirical results presented in the literature on corporate governance mechanisms in ensuring corporate reporting quality in times of uncertainty. The article identifies the risk of fraudulent reporting as a consequence of uncertain conditions and reveals the features of corporate governance institutions and instruments that help mitigate this risk.Research limitations/implications: The article does not contain a detailed analysis of the legislative premises for the functioning of corporate governance mechanisms. Infer-ence unifies corporate governance systems and is based on empirical results presented in the literature. The limitations may set the path for future scientific research. The article explains the possibilities of using corporate governance mechanisms to ensure the quality of corporate reporting in times of uncertainty, and its implications may support managers, controllers, auditors, accountants and regulators.Originality/value: Due to the lack of exhaustive research in the research area, the article reduces the cognitive gap in the Polish literature.

The Influence of Corporate Governance Mechanisms on Financial Reporting Fraud (A Study on Property & Real Estate Sector Companies Listed on IDX in the Years 2018-2022)

The objective of this study is to investigate the impact of corporate governance mechanisms on financial statement fraud. The study focuses on board of commissioners, independent commissioners, managerial ownership, institutional ownership, and audit committees. Purposive sampling is used, targeting property and real estate companies listed on the Indonesian Stock Exchange from 2018 to 2022. The sample consists of 16 companies, resulting in a total of 80 data points over a 5-year period. Data analysis techniques include descriptive statistics and logistic regression analysis using SPSS software version 26. The findings reveal that the audit committee plays a positive role in preventing financial statement fraud, while the other factors examined do not exhibit significant influence

The Impact of Corporate Governance Mechanism on Fair Value Measurement in the Indonesian Banking and Financial Industries

Fair value is one of an important measurement since the diffusion of International Financial Reporting Standards around the world. Studies of manager opportunistic behaviors through fair value numbers in developing countries have been overlooked. This study aims to investigate the influence of corporate governance mechanism towards an opportunistic behavior through fair value measurement i.e. fair value inputs level 3. This study applied multiple regression and used samples of banking and financial companies listed in Indonesia Stock Exchange between 2015 and 2019. The corporate governance is proxied by three measurements i.e. managerial ownership, institutional ownership and audit committee educational background. This study finds that managerial ownership and institutional ownership have positive influences on fair value inputs level 3. Meanwhile, the independent commissioners and audit committee educational background have negative influences on fair value inputs level 3. Therefore, this study provides evidence that independent commissioners and audit committee educational background can reduce management opportunistic behaviors which is conducted through fair value measurement.

The relationship between corporate governance mechanisms and financial performance: The case of listed industrial companies in Oman

The purpose of the study is to examine the impact of corporate governance mechanisms on the financial performance of listed industrial companies in Oman. As the main research method, panel data regression analysis was used to analyze data from 36 Omani industrial companies, listed on the Muscat Stock Exchange for the period 2017–2021. Three regression models were developed using three dependent variables (Return on Assets, Return on Equity, Return on Sales), seven independent variables (Board Size, Independent and Non-executive Board Members, Board Meeting, Chief Executive Officer, Dummy variable for Board Change, Dummy variable for the Secretary on the Board, Dummy variable for Internal Auditor), and two control variables (Leverage, Size of the company). According to the research results, a negative influence of the Board Size and Dummy variable for the presence of the Secretary on the Board on the Return on Assets indicator at 10% and 5% significance level was found; moreover, there is a positive influence of Leverage and Size of the company at the 1% and 5% significance level on Return of Assets. Although, none of the independent variables used has a significant impact on the Return on Equity indicator. Return on Sales is significantly affected only by two control variables, i.e., a negative impact of Leverage at the 10% significance level and a positive impact of the Size of the company at the 10% significance level. The results obtained in the study indicate the imperfection of the corporate governance mechanisms implemented by Omani industrial companies in the field of ensuring financial efficiency.

Corporate Governance Mechanisms and Stock Price Volatility: The Mediating Role of Dividend Policy: Evidence From Emerging Markets

This study is novel research aims to investigate the impact of corporate governance mechanisms on stock price volatility in the Egyptian stock exchange through the role of the dividend policy as a mediating variable. The study examines certain corporate governance mechanisms such as: board independence, board size, number of board meetings, CEO duality, and audit committee. The study used quarterly data on EGX 30 for the period 2012-2021. It was based on a sample of 25 stocks traded in the Egyptian stock exchange, not including the stocks of the financial sector. Leverage and size used as a controllable variables. Results revealed that corporate governance has an impact on stock price volatility and dividend policy. Board independence, board size, board meetings and audit committee have a significant negative impact on stock price volatility of listed Egyptian companies. A good corporate governance practices is a good sign to reduce the fluctuations in stock prices. However, CEO duality and size has no impact on stock price volatility. Leverage has a positive significant impact on stock price volatility. Accordingly, CEO duality and leverage is a sign of poor corporate governance. Egyptian investors need to consider the issue of corporate governance practices alongside with the risk associated with expected return when taking investment decisions. A new dimension which added to investigate the interrelationship between corporate governance mechanisms and stock price volatility is dividend policy as mediator factor. Dividend policy is the outcome of good corporate governance practices and has an impact on stock price volatility. Corporate governance is important for stimulating the dividend payments which in turn affect stock price volatility.

Board Structure, Directors’ Remuneration Disclosure Level and Firm Value in Malaysia

This study aims to determine the impact of corporate governance mechanism on the directors' remuneration disclosure level and firm value. Data were collected from annual reports of 200 selected companies listed in Bursa Malaysia from 2013 to 2019. Pooled OLS, longitudinal data and 2SLS was carried out to accomplish the objective. The results show that board independence significantly impact the directors’ remuneration disclosure level while CEO duality and board size are insignificant on the directors’ remuneration disclosure level. Another finding revealed that directors’ remuneration disclosure level and board size were significant in affecting the firm value. It was also found that directors’ remuneration disclosure does not mediated the relationship between board structure and firm value. This finding deserves the attention of the stakeholders, investors, policymakers, and organizations in modelling a high-level disclosure and governance structure in the corporate environment in enhancing firm value.

Good Corporate Governance Mechanisms and Financial Performance in Controlling Financial Distress

Purpose – This study aims to investigate the impact of corporate governance mechanisms on financial distress in firms listed on the Indonesia Stock Exchange (IDX). Methodology/approach – This study uses secondary data from the financial statements of firms, between 2014 and 2019. The number of samples that met the established criteria was 341 firms unbalanced panel, which were further analyzed using logistic regression and sub-group logistic regression analysis. Findings – This study concludes that corporate governance mechanisms (independent commissioners and board size of commissioners), has a mixed impact on financial distress. The larger of board commissioners, the better the company's financial condition, while the proportion of independent commissioners has no significant effect on financial distress. Profitability consistently has a significant effect on financial distress. Ownership i.e. state-owned enterprises (SOE) and non-state-owned enterprises (NSOE) change the direction and impact of liquidity, leverage and board size on financial distress. Novelty/value – Sub-group logistic regression using company ownership variables (i.e. SOE and NSOE) is the novelty of this study. In addition, this study provides insight for companies to always pay attention to profitability avoiding financial distress and and selection of independent commissioners who have relevant experience and background in managing the company.

THE EFFECT OF CORPORATE GOVERNANCE MECHANISMS ON INTEGRATED REPORTING: A STRUCTURAL EQUATION MODELLING (SEM) APPROACH

This study investigates the level of integrated reporting of Malaysian listed companies and explores the potential effects of corporate governance mechanisms on integrated reporting. The annual reports of 150 companies listed on the main market, Bursa Malaysia, for the year ended 2014 were examined to analyze the companies' integrated reporting practices using content analysis. An integrated reporting index was constructed following the key elements of the integrated reporting framework established by the International Integrated Reporting Committee (IIRC). The study considered four corporate governance mechanisms: board composition, board size, board diversity, and ownership structure. The study used Multiple regressions to measure the impact of corporate governance mechanisms on the companies' integrated reporting initiatives. Structural Equation Modelling (SEM) was used to measure the effect of corporate governance mechanisms on the level of the companies' integrated reporting. The results showed that Malaysian companies' reporting of financial and non-financial information has not yet been integrated. Based on SEM analysis, the results indicated that only one variable, namely, the board size, was associated with the extent of integrated reporting. Board size was the most significant variable that influenced the level of integrated reporting of Malaysian public listed companies in 2014. The study contributes to the integrated reporting literature. It presents empirical evidence that corporate governance mechanisms influence companies' disclosure of integrated reporting information and, thus, providing additional data or information that will be significantly helpful for other researchers. The study will also stimulate the interest of academics in research activities concerning the characteristics of corporate governance mechanisms on integrated reporting activities. The findings are limited to the context of the study. It only looks at corporate governance mechanisms as a critical driver of integrated reporting and uses only the annual report disclosures from a single year.