Impact Of Internal Corporate Governance Research Articles

Covid-19 disclosure: do internal corporate governance and audit quality matter?

PurposeThis study aims to examine the impact of internal corporate governance and audit quality on the level of COVID-19 disclosure in Egypt.Design/methodology/approachThe authors use manual content analysis to measure levels of COVID-19 disclosure in the narrative sections of annual reports. The authors analyze all companies listed on the Egyptian Stock Exchange over 2020–2021. The authors use different regression models to test the research hypotheses.FindingsThe analysis adds to the literature in two crucial respects. First, it provides a measure for COVID-19 disclosure in Egypt. Second, it provides evidence that governance mechanisms (board diversity, audit committee [AC] independence), auditor type and audit opinion affect the level of COVID-19 disclosure. The higher level of COVID-19 disclosure is associated with firms with more female directors on the board, being audited by one of the big four audit firms and receiving standard clean audit opinion. While the inexistence of an AC and more executives on the AC negatively affect COVID-19 disclosure levels.Originality/valueTo the best of the authors’ knowledge, it is the only paper that examines COVID-19 disclosure in the Egyptian context. It is also the first paper that provides evidence on the impact of internal governance and audit quality on COVID-19 disclosure.

Board governance, ownership structure and foreign investment in the Saudi capital market

PurposeThis paper aims to examine whether board governance mechanisms and ownership structure play a role in foreign investors’ decisions when buying shares in Saudi listed companiesDesign/methodology/approachForeign investment in the Saudi capital market started in 2015 and reached a peak in 2019, with corporate governance regulations having been updated in 2017. The authors tested the proposed relationships using hand collected data for all Saudi non-financial firms in 2019.FindingsThis study found that it does not play a role in attracting foreign investment in the Saudi capital market. Foreign investors also seem to avoid firms with concentrated ownership that either have high government or director ownership; however, accounting and market variables show significant impact on foreign investors' decisions. The outcomes of this study provide empirical evidence that current foreign investors in the Saudi stock market do not place enough merit on board governance and their investment decisions tend to depend on share performance. Thus, the results show that the current governance changes and capital market regulations in Saudi Arabia may not have been sufficient to stimulate the inflow of institutional foreign investment to the country to date, but rather they have attracted individual retail foreign investors.Originality/valueThis empirical study is one of only a small number of studies to investigate the impact of internal corporate governance on foreign ownership in developing countries and the first in the Saudi context. In fact, most previous governance research in Saudi Arabia focused on how board governance and ownership structure influences firm performance. A review of the prior studies found that only Badawi et al. (2019) examined the determinants of foreign ownership among Saudi listed firms. Thus, the present investigation extends that study by examining the role of board governance in attracting foreign investors.

Impact of internal corporate governance and self-regulation on financial performance: a study of international stock exchanges

Impact of internal corporate governance and self-regulation on financial performance: a study of international stock exchanges

Impact of internal corporate governance and self-regulation on financial performance: a study of international stock exchanges

Impact of internal corporate governance and self-regulation on financial performance: a study of international stock exchanges

Internal Corporate Governance Impact on Return on Equity in Financial Institutions in Nigeria

The main focus of the study is to ascertain the impact of internal corporate governance on the performance of financial institutions in Nigeria. The study adopted the historical research method. All the listed money deposit banks and other financial institutions in Nigeria that are listed formed the population of the study while the sampling method used is the purposive sampling technique. The data used for the analysis were secondary having been collected from existing annual accounts and reports of the 16 listed banks and other financial institutions in Nigeria. The variables on which data were collected include Returns on Equity (dependent variable), and Board Size, Board Composition, Size of Audit committee, Attendance at Board Meeting, and Ownership Concentration (the independent variables) and the period covered is 2009-2018. The data was analysed using SPSS v. 20.0 where the main tools used were the correlation coefficient (r), coefficient of determination (R 2 ), F-test statistic, and t-test statistic (used for the tests of hypotheses). All the tests of hypotheses have been carried out using 5% level of significance (otherwise called 95% confidence interval). The findings were the same for the five independent variables as none had significant impact Returns on Equity of financial institutions in Nigeria. The study recommended that financial institutions in Nigeria should do more than just paying lip service to the issue of board size, board composition, and audit committee size among others but to improve on the quality of such things that affect performance.

Agency Costs, Corporate Governance and the Nature of Controlling Shareholders: Evidence From French Listed Firms

This paper examines the impact of internal corporate governance on agency costs for French firms from 2000 to 2015. Our results reveal that shareholders themselves are not a homogenous group since they have no single common investment horizon. We found that managerial ownership is more effective in mitigating operational expenses. However, they take advantage of excessive spending on indirect benefits. We show that board of directors does not serve as a significant deterrent to excessive discretionary expenses. Finally, we found that dividend policy is a useful tool to reduce agency conflicts by reducing cash that is available for discretionary uses.

The impact of flexible corporate governance disclosures on value relevance. Empirical evidence from South Africa

PurposeConsidering that the Johannesburg Stock Exchange (JSE) has enacted in its Listings Requirements, compliance of listed firms to International Financial Reporting Standards (IFRS) and King Code of Good Corporate Governance, this study aims to investigate the impact of internal corporate governance attributes on the value relevance of accounting information in South Africa.Design/methodology/approachThe fixed effect generalised least squares regression is used for the period from 2002 to 2014. Proxies for internal corporate governance are the size of the board, leadership structure, board activity, staggered board, boardroom independence, presence of key committees and board gender diversity. Value relevance is measured using the adjusted R2 derived from a regression of stock price on earnings and equity book values by following Ohlson’s accounting-based valuation framework.FindingsThe findings suggest that the net asset value per share is value-relevant in South African listed firms and also when the boardroom is largely independent. The value of earnings per share (EPS) is more robust when corporate governance structures, such as separating the roles of chief executive officer and chairperson, proportion of board-independent board members and presence of board committees, are in place. This suggests that EPS favours agency and resource dependence theories.Practical implicationsThe value relevance of accounting information in the South African financial market underscores the importance of requisite rules and supervision regarding financial reporting to allow asset owners and managers in the allocation of capital decisions. This study supports the view that corporate governance plays a key role in ensuring, amongst others, credible financial reporting. The outcome of this study could inform the JSE to enforce, even stricter, compliance with IFRS and corporate governance to improve the value relevance of financial information.Social implicationsSignificant corporate governance reforms around the world suggest that regulators and policy makers consider corporate governance as a pertinent tonic in ensuring, amongst others, credible financial reporting. The implications of the study might assure users of financial information of how compliance to corporate governance practices may influence the value of the firm. This paper provides empirical evidence in the South African context that EPS, unlike net asset value per share, is driven by corporate governance structures.Originality/valueThe period of this study is unique, because it covers a relatively stable economic period before the financial crisis, a challenging and unstable period of time when the financial crisis materialised, and the aftermath of the financial crisis. In addition, the examination period of the study also covers the two corporate governance reforms in South Africa, King II in 2002 and King III in 2009, as well as the new Companies Act No. 71 of 2008. These exogenous factors may influence the results.

Corruption, Marketisation and Corporate Tax Management in China: Evidence from Listed Firms

Most empirical research on the subject of tax management has emphasised the impact of internal corporate governance. Yet, the external governance mechanism regulating corporate behaviour is no less important, but far less studied. This study investigates how corruption and marketisation impact corporate tax management, which lowers corporate tax. It finds an inverted U-shape relationship between corruption and corporate tax management in China during the period of 2008 to 2013, with the effect positive at low to moderate levels of corruption and negative beyond these levels of corruption. However, marketisation, i.e., the greater reliance on market forces, is found to mitigate this impact of corruption on corporate tax management regardless of the level of corruption. In light of these findings, greater reliance on market institutions will directly and indirectly improve corporate decision making.

Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies

This study investigates the impact of internal corporate governance on the relation between disclosure quality and earnings management in the UK listed companies, in particular whether governance mechanisms have deterrent effect on earnings management similar to firms’ disclosure quality. Unlike prior literature, we measure a number of board and audit committee-related governance instruments, three disclosure quality proxies (i.e. Investor Relation Magazine Award, Forward-Looking Disclosure and Analyst Forecast Accuracy) and the Modified Jones Model to test the hypotheses of the study on a matched-pair sample data of Investor Relation Magazine Award winning and non-winning firms. Our findings in the OLS and sensitivity analyses using Heckman Procedure and 2SLS regressions consistently report a significant negative association between earnings management and disclosure quality for all proxies in restraining earnings management. In contrast, corporate governance variables are mostly insignificantly related to earnings management. This provides an emerging trend of the outperformance of disclosure quality over internal governance mechanisms in lessening earnings management. These findings warrant due attention of the policy makers, investors, corporate firms and other stakeholders in shaping a high-quality disclosure and governance regime in corporate settings to mitigate managerial manipulations of earnings across the countries in the world.

The Impact of Internal Corporate Governance on the Timeliness of Financial Reports of Jordanian Firms: Evidence using Audit and Management Report Lags

This study explores the influence of board independence, board size, CEO duality, board diligence, board financial expertise and presence of audit committee as well as the type of sector on the timeliness of financial reports among selected Jordanian companies. The timeliness of the financial reports is measured by audit report lag (ARL) and management report lag (MRL). This study covers 112 firms listed on the Amman Stock Exchange for the years 2011 and 2012. The results of the ARL model indicate that companies that have members of board who are independent from management take a significantly shorter time to prepare and issue their financial reports. The results indicate that companies with greater number of board of directors are related with a higher audit report lag. The results also show that companies that separated the CEO and chairman's roles are quicker in publishing financial reports than companies combining the roles of CEO and chairman. In addition, boards of directors with more meetings make the audit report lag shorter. The findings also support that argument that the existence of an audit committee could resolve the information asymmetry between management and external auditors that, in turn, would lead to reduced audit report lag and management report lag. However, the results of the MRL model show that management report lag is related positively to large board size and board diligence and negatively to the existence of audit committee. This study concludes that the good structures of corporate governance play a key role in improving the quality of timeliness of financial reports. DOI: 10.5901/mjss.2015.v6n1p430

Is corporate governance relevant during the financial crisis?

We study the impact of internal corporate governance on performance during the current financial crisis for a comprehensive cross-country sample of 4046 publicly traded non-financial firms from the U.S. and 22 developed countries. Using a broad-based index of corporate governance quality, we find that well governed firms do not outperform poorly governed firms. We explore three potential explanations for the lack of significant impact of corporate governance quality on performance. First, we examine whether cross-country differences in institutional development have an impact on the effect of corporate governance on performance. Second, we investigate whether a narrowing down of the informationally efficient segment of the stock markets during the crisis can explain the results. We do not find support for either of these conjectures. Finally, we examine whether stock markets generally became less efficient in incorporating firm-specific information into stock prices during the crisis. Our empirical evidence is consistent with the latter view that during the crisis stock markets in developed countries became less efficient in incorporating firm-specific information into prices.

Is Corporate Governance Relevant During the Financial Crisis?

We study the impact of internal corporate governance on performance during the current financial crisis for a comprehensive cross-country sample of 4046 publicly traded non-financial firms from the U.S. and 22 developed countries. Using a broad-based index of corporate governance quality, we find that well governed firms do not outperform poorly governed firms. We explore three potential explanations for the lack of significant impact of corporate governance quality on performance. First, we examine whether cross-country differences in institutional development have an impact on the effect of corporate governance on performance. Second, we investigate whether a narrowing down of the informationally efficient segment of the stock markets during the crisis can explain the results. We do not find support for either of these conjectures. Finally, we examine whether stock markets generally became less efficient in incorporating firm-specific information into stock prices during the crisis. Our empirical evidence is consistent with the latter view that during the crisis stock markets in developed countries became less efficient in incorporating firm-specific information into prices.

Is Corporate Governance Relevant During the Financial Crisis? Cross-Country Evidence

We study the impact of internal corporate governance on performance during the current financial crisis using a comprehensive cross-country sample of 4046 publicly traded non-financial firms from 23 countries. Using a broad-based index of corporate governance quality, we find that well-governed firms do not outperform poorly governed firms. We explore two plausible explanations for the lack of significant impact of corporate governance quality on performance. First, we examine whether cross-country differences in institutional development have an impact on the effect of corporate governance on performance. Second, we investigate whether a narrowing down of the informationally efficient segment of the market during the crisis can explain the results. We do not find support for either of these conjectures. Our work suggests that existing corporate governance arrangements do not go far enough in mitigating steep declines in performance during the global financial crisis.

Corporate Governance, External Market Discipline and Firm Productivity

Using a sample of Australian companies over the 2000-2005 period, we examine the impact of internal corporate governance on firm’s total factor productivity, taking into account the interaction between internal governance and external market discipline. Our empirical findings point to a substitution effect between product market competitiveness and firm-level corporate governance. Overall, internal corporate governance mechanisms – more efficient boards and greater CEO stock-based compensation – are effective instruments for improving firm productivity. However, internal governance is less effective when a firm faces a highly competitive product market. We find only weak empirical support for an association between firm’s ownership structure and productivity, and no support for an association between industry takeover intensity and firm productivity.

Corporate governance, external market discipline and firm productivity

Using a sample of Australian companies over the 2000–2005 period, we examine the impact of internal corporate governance on firm's total factor productivity, taking into account the interaction between internal governance and external market discipline. Our empirical findings point to a substitution effect between product market competitiveness and firm-level corporate governance. Overall, internal corporate governance mechanisms – more efficient boards and greater CEO stock-based compensation – are effective instruments for improving firm productivity. However, internal governance is less effective when a firm faces a highly competitive product market. We find only weak empirical support for an association between firm's ownership structure and productivity, and no support for an association between industry takeover intensity and firm productivity.