Impact Of Internal Governance Research Articles

Impact of internal governance on investment policy: Evidence from CEO voluntary turnovers

The theoretical and empirical literature suggests that CEO might not make risky long-term investments if the CEO believes that the benefit of such investments would not materialize or is not recognized by the market until after the CEO has retired. This paper tests the predictions of the Acharya, Myers, and Rajan (2011) internal governance model to counteract the CEO’s tendency to forego such investments on a sample of voluntary CEO turnovers. We find that the optimal level of sharing of tasks between the CEO and her top-management team, the firm’s internal governance, is dependent on the CEO’s career horizon. Additionally, we find the effect of internal governance only matters for older CEOs. We also find that the closer the internal governance is to the optimal level, the smaller is the underinvestment for an older outgoing CEO. We find that the new incoming CEO divests profitably the assets acquired under good internal governance. Finally, we find that optimal internal governance is found to have positive effects on corporate innovation. Our results are robust to continuous matching by generalized propensity score and controlling for the CEO’s explicit pay-performance sensitivity, succession plan, and pay duration.

The Impact of Internal Governance on Conservatism: Evidence from Australia

ABSTRACT Financial reporting decisions can be influenced by the distribution of executive decision-making power. We examine whether internal governance, the process through which the power to make decisions is distributed between CEOs and their subordinates, can influence the level of conservatism in such decisions. We show that firms with better internal governance are more conservative. We also find that the effect is more pronounced for firms with less powerful and older CEOs, those with subordinate executives who contribute more, and those who are more mature. We conduct various tests that confirm the robustness of our results. Unlike other studies that focus only on CEOs, we examine how the top management team as a group and the power distribution between CEOs and key subordinates shape financial reporting quality. Our study can inform various stakeholders, including firms aiming to appoint executives and strengthen their internal governance. JEL Classifications: G34; M12; M41; M50.

Internal Governance and Cost Stickiness

ABSTRACTInternal governance is the bottom-up governance mechanism within the top management team (hereinafter referred to as “TMT”) through which key subordinates internally monitor the Chief Executive Officer (CEO). We find that cost stickiness is negatively associated with internal governance after controlling for legitimate economic reasons of cost stickiness, suggesting that internal governance mitigates agency-based cost stickiness. Consistent with the agency explanation, the results show that the impact of internal governance on cost stickiness is stronger for firms with lower future-value creation of selling, general, and administrative (SG&A) costs. In addition, we document that the impact of internal governance on cost stickiness is more pronounced for firms with more-effective board monitoring. This paper extends a growing literature that investigates the impact of internal governance on corporate decisions and complements existing studies on the role of various governance mechanisms in mitigating agency-based cost stickiness.JEL Classifications: M41; G30.

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.

Impact of Internal Governance on a CEO’s Investment Cycle

Impact of Internal Governance on a CEO’s Investment Cycle

Internal governance mechanisms and the performance of decentralized financial systems in Niger

PurposeThe purpose of this paper is to study the effect of internal governance mechanisms on the financial and social performance of Niger’s decentralized financial systems (DFS).Design/methodology/approachThis paper investigated the impact of the board size and the CEO/chairman duality on financial performance and sustainability, respectively, measured by the return on assets (ROA) and operational self-sufficiency on one side and social performance measured by the size of loans granted and the percentage of female borrowers on the other side.FindingsThe results show that board size positively and significantly affects the ROA. The author also concludes that the duality of decision and control functions promotes the financial viability of the DFS. Regarding the impact of internal governance on social performance, the author finds that board size positively and significantly affects loan size.Research limitations/implicationsThis study focuses on Niger’s 13 largest DFSs. However, an analysis that also includes smaller firms may show different results.Practical implicationsA board size of between 5 and 15 members is recommended. This would help to incorporate key skills and the active involvement of all members.Originality/valueThis research highlights the importance of including internal governance mechanisms, underscores an interesting problem and answers questions raised in the existing literature by invalidating or confirming the results that have been obtained thus far. As the players in the microfinance sector recognize that sound governance is an important factor for a successful outcome in any microfinance institution objective, the paper helps shed some light on the situation of DFS in Niger.

Impact of internal governance on creating entrepreneurial universities: a study based on Sri Lankan universities

Becoming an entrepreneurial university is the key strategy that needs to be adopted by public universities at present. When becoming an entrepreneurial university they need to adopt innovative and entrepreneurial approaches in the provision of their products and services and develop partnerships, networks and other relationships with public and private organizations. To adopt for all these internal governance structure (university structure and leadership) of the public universities plays a key role. This research intends to identify how far Sri Lankan public universities organizational structure and entrepreneurial leadership behavior has supported on becoming entrepreneurial universities. The study has developed two hypothesis and primary data collected from four public universities has been analyzed through regression analysis. Finally, outcomes of this research identified that university structure has a significant negative impact in the process of becoming an entrepreneurial university as well as entrepreneurial leadership behavior is still lacking from Sri Lankan context.

The Impact of Internal Governance on Bearing the Risk of City Commercial Banks

Improving the internal governance is the key factor to promote the development of banking stability, especially for the banks which are just stepping on the right way. This article chose 23 city commercial banks, which had more than 50 billion assets, as the object of study and got the data of them through reading their annual reports from 2008 to 2014 for the empirical study. From the research, we found out that there was no significant relationship between the nature of the bank’s largest shareholder and the banking risk, and the ownership concentration, board size, salary incentive and regional GDP had an opposite relationship with the banking risk, the independent director proportion and banking risk were positively related.