Implications For Corporate Governance Research Articles

External guarantees and ESG performance in China: Resource constraints or impression management?

External guarantees provided by listed firms are prevalent in China, influencing firms' motivations and capabilities concerning other business strategies. ESG (Environmental, Social, and Governance) represents a strategic imperative for companies aiming at sustainable development. Understanding how external guarantees impact ESG performance is essential for advancing the ESG agenda. This study examines the relationship between the intensity of external guarantees and ESG performance among Chinese listed firms from 2009 to 2021. Our results consistently show a negative correlation between external guarantee intensity and ESG performance, impacting all ESG pillars and remaining robust through various robustness and endogeneity checks. The mechanisms underlying this impact include reduced resources, diminished stakeholder welfare, and hindered green innovation. The extent of this impact is influenced by environmental regulation, social trust, and market position while unaffected by the needs for impression management. These findings suggest that regulatory interventions in external guarantees could improve ESG outcomes, with significant implications for policymakers and corporate governance.

Does shared tenure between board of directors and CEO affect R&D investment?

Psychology literature suggests that shared tenure between individuals affects how they communicate and share information. Given that the relationship between board of directors and CEO involves extensive interactions and information-sharing to maintain shareholders' interests, this study seeks an answer as to whether that shared tenure between directors and CEO affects R&D investments. Using a sample of firms listed in the UK FTSE350 index between 2010 and 2019, we find that directors–CEO shared tenure positively affects R&D intensity. The study has implications for corporate governance and strategic management literature by highlighting Board–CEO shared tenure as a new factor affecting R&D investments. This study has implications for practice and policy-makers. In particular, companies that are eager to strengthen corporate governance and maintain sustained innovation might consider the shared tenure between directors and CEO.

The pathways of board diversity in European contexts: Exploring the influence of director types on firm performance

This research paper explores the impact of board diversity on firm performance, with a particular focus on different types of board members. The study examines gender, age, tenure, education, and nationality diversity among board members for their effects on firm performance. Using a multi-country dataset and various performance proxies, the paper employs panel regression analysis to assess the relationships. The findings reveal nuanced effects of diversity, with gender diversity among independent and non-executive directors, age diversity among executive directors, and education diversity among executives showing positive impacts. The dominant pathway among these effects is the strategic role of directors, as suggested by the resource dependence theory. However, the paper also highlights the inappropriateness of a one-size-fits-all approach to board diversity, which can have either positive or negative effects depending on the context. Overall, the research contributes to the understanding of board diversity and its implications for corporate governance and firm performance.

Corporate Governance Implications for Sustainable Performance: Focus on Leading Energy Producers in Denmark, Estonia, Latvia, Lithuania, and Sweden

Corporate Governance Implications for Sustainable Performance: Focus on Leading Energy Producers in Denmark, Estonia, Latvia, Lithuania, and Sweden

When the Principal Is the Firm’s Problem: Principal Costs and Their Corporate Governance Implications

When the Principal Is the Firm’s Problem: Principal Costs and Their Corporate Governance Implications

Early warning systems for financial distress: A machine learning approach to corporate risk mitigation

This research explores the development of an early warning system for corporate financial distress using machine learning techniques to address key challenges in corporate risk mitigation. The main objective is to enhance predictive accuracy by integrating financial and non-financial data, addressing class imbalance, and ensuring model interpretability. The research design involves the formulation of a new machine learning model, leveraging cost-sensitive learning and feature selection, and is tested with a numerical example using logistic regression. Methodologically, the study adopts a data-driven approach that incorporates diverse financial ratios, macroeconomic variables, and market sentiment indicators to predict corporate distress. The numerical results from a basic logistic regression model demonstrate poor performance, especially in handling class imbalance, revealing limitations in traditional statistical models. However, the research suggests that machine learning methods, particularly ensemble learning with cost-sensitive algorithms, offer superior predictive accuracy and practical applicability. The study concludes that integrating advanced techniques and diverse datasets leads to more reliable early warning systems, with significant implications for corporate governance and financial risk management. Future research should explore more sophisticated machine learning models and extend real-world applications across various industries and economic conditions.

Digital transformation and corporate audit risk: Mediating effects of auditor behavior

Digital transformation has emerged as a critical factor in shaping the modern business landscape, with significant implications for corporate governance and audit risk. This study examines how digital transformation affected corporate audit risk in Chinese A-share listed companies from 2011 to 2022. Employing comprehensive empirical analyses, we discover that corporate audit risk is greatly decreased by digital transformation, with this relationship partially mediated by changes in audit fees, audit input, and audit opinions. The effects are more pronounced in state-owned firms. Our findings highlight the importance of integrating digital tools in auditing practices to mitigate risk and enhance audit quality. This study contributes to the understanding of how digital transformation influences auditor behavior and audit processes, providing valuable insights for policymakers and corporate managers in the digital era.

The Investment Banks’ Hiring Practices in China: On or Off the Radar of the Foreign Corrupt Practices Act?

This study examines the hiring practices of investment banks in China, with a specific focus on JPMorgan's "Sons & Daughters" program. These practices have raised significant legal and ethical questions under the Foreign Corrupt Practices Act (FCPA). The objective is to analyze whether these practices violate the FCPA and to discuss their broader implications for global business ethics and regulatory compliance. Employing a comprehensive literature review, theoretical analysis, and case studies, the research investigates data from legal documents, academic articles, and regulatory reports. The findings indicate that the "Sons & Daughters" program, and similar hiring practices by other banks, constitute a grey area within FCPA enforcement. The study reveals systematic quid pro quo arrangements where investment banks hire relatives of Chinese officials in exchange for business opportunities, suggesting potential violations of anti-bribery provisions. The analysis underscores the enforcement challenges of the FCPA in diverse cultural and regulatory environments. It discusses the implications for corporate governance and the global financial industry, emphasizing the need for robust compliance mechanisms and higher ethical standards. The study concludes that while such hiring practices might offer competitive advantages, they undermine fair competition and ethical standards, necessitating stricter enforcement of the FCPA. The paper suggests measures to mitigate these risks and promote ethical hiring practices in the financial sector.

The Relationship Between Board Gender Diversity, Firm Life Cycle and Corporate Risk-taking

This study examines the impact of board gender diversity on corporate risk-taking, moderated by the firm life cycle stages. Data from 200 non-financial firms listed on the Pakistan Stock Exchange (2018–2022) were analyzed using the system generalized method of moments. Corporate risk-taking, the dependent, was measured using systematic risk and total-risk proxies. Results showed that board gender diversity had an insignificant effect, firm life cycle had a negative significant impact, while the interaction term (board gender diversity and firm life cycle) showed a positively significant impact on risk-taking measured by total risk. In contrast, both factors, along with their interaction, positively influenced risk-taking when assessed through systematic risk. The study further segmented the firm life cycle into five distinct stages, finding that the impact of board gender diversity on risk-taking varied across stages. For instance, at the introduction and maturity stages, board gender diversity positively affected risk-taking for both proxies. However, at the growth and decline stages, its impact was insignificant. These findings suggest variability in the relationship between board gender diversity and risk-taking, potentially influenced by the choice of risk proxies. Theoretically, this study contributes to the body of knowledge on how a firm’s life cycle and board gender diversity influence corporate risk-taking. This study’s insight also holds significant implications for corporate governance and policymaking because, contrary to popular belief, the findings suggest that board gender diversity does not uniformly reduce risk-taking; instead, its impact varies with the firm’s life cycle stage.

ESG, macroeconomic fundamentals and stock returns: Corporate governance implications from EU markets

This paper examines how Environmental, Social, and Governance (ESG) factors influence stock returns and economic performance in the EU. It delves into advanced economies, GIIPS (Greece, Ireland, Italy, Portugal, and Spain), and CEE (Central and Eastern Europe) countries. By analyzing data, the study highlights areas for improvement in the EU’s ESG performance, such as resource use and social equity. Interestingly, the analysis finds that strong corporate governance, particularly in CEE, is linked to higher stock returns, suggesting the value of sound regulations. Conversely, environmental performance shows a negative correlation with returns in CEE, likely due to the region’s historical dependence on heavy industry. Overall, this study emphasizes how ESG can guide investors towards companies promoting sustainable economic growth.

A COMPREHENSIVE REVIEW OF THE IMPACT OF ARTIFICIAL INTELLIGENCE ON MODERN ACCOUNTING PRACTICES AND FINANCIAL REPORTING

The rapid integration of artificial intelligence (AI) into various industries has catalyzed transformative changes in accounting practices and financial reporting. This comprehensive review explores the multifaceted impact of AI on modern accounting, shedding light on the ways in which advanced technologies are reshaping traditional financial processes. The implementation of AI in accounting has led to increased efficiency and accuracy in routine tasks. Automation of data entry, reconciliation, and routine bookkeeping activities has not only reduced the risk of human errors but has also allowed accountants to redirect their focus towards more strategic and value-added activities. Machine learning algorithms are adept at analyzing vast datasets, identifying patterns, and predicting financial trends, enabling accountants to make more informed decisions. Furthermore, AI has revolutionized the auditing process, enhancing the detection of anomalies and fraudulent activities. Through continuous monitoring and analysis of financial data, AI-powered systems can quickly identify discrepancies, mitigating risks and ensuring the integrity of financial reports. This has profound implications for regulatory compliance and corporate governance, fostering greater transparency and accountability. In the realm of financial reporting, AI has played a pivotal role in improving the quality and timeliness of information. Natural Language Processing (NLP) technologies enable the extraction of valuable insights from unstructured data sources, facilitating the generation of comprehensive and insightful financial reports. This not only accelerates the reporting process but also enhances the communicative value of financial information to stakeholders. Despite the evident benefits, the widespread adoption of AI in accounting brings forth challenges such as ethical considerations, data security, and the need for upskilling the workforce. Ethical concerns regarding bias in AI algorithms and the responsible use of automation in decision-making processes necessitate a thoughtful approach towards AI integration in accounting practices. In conclusion, this review underscores the transformative impact of AI on modern accounting practices and financial reporting. As organizations navigate this technological revolution, a balanced approach that addresses ethical concerns while maximizing the benefits of AI will be crucial for the continued evolution of the accounting profession. Keywords: Impact, Artificial Intelligence, Modern, Accounting, Practices.

Management tone and corporate social responsibility: Evidence from Chinese listed companies' involvement in rural revitalization

This study delves into the correlation between management tone in annual reports and corporate engagement in rural revitalization by analyzing data from publicly listed Chinese companies between 2016 and 2022. Our investigation reveals a significant positive correlation between an optimistic management tone and elevated corporate involvement in rural revitalization efforts. The findings underscore that a management's positive and forward-looking stance can stimulate enhanced corporate contributions toward rural development, with a more pronounced effect observed in case of non-state-owned entities and those under financial constraints. Furthermore, evidence suggests that the manipulation of management tone negatively affects corporate engagement in rural revitalization. These insights accentuate the critical role of management tone in shaping corporate social responsibility (CSR) initiatives, particularly within the realm of rural development. The study has strategic implications for corporate governance and communication, given that management tone can influence CSR activities and strategies, and suggests policy avenues for encouraging corporate participation in rural revitalization.

The Evergrande Story: A Look into Chinese Corporate Law and the Redefinition of Privately Owned Enterprises and Their Relationship to State-Owned Enterprises in the Chinese Economy

Abstract In December 2021, Evergrande, the second-largest private property developer in China, defaulted on its debt and became the most indebted firm in the world with over $300 billion in liabilities. Its default marked the beginning of a real estate crisis in China, one that is still in the process of being resolved. The Chinese State, through its State-owned enterprises (SOEs), has played an enormous role in mitigating the crisis. Had it not, it is very unlikely that Evergrande would remain in existence today, with huge ramifications for Chinese society and the national economy. This article undertakes a case study of Evergrande, a privately owned enterprise (POE) that exhibits SOE characteristics, to shed further light on the web of interactions between large enterprises in China. It reconsiders how ‘private’ some POEs are in the Chinese economy and argues that, at a certain level, both SOEs and POEs operate in a co-dependent manner. Not only does this challenge the conventional distinction between SOEs and POEs, but it also has wide-ranging implications for corporate governance in China. Indeed, SOEs find themselves having to bail out POEs and are exerting control over POEs in which they have no equity stake. SOEs are thus financially burdened with protecting all large enterprises including POEs, whereas POEs can operate in an unregulated fashion and receive rents from their close ties to SOEs. Altogether, this article’s analysis showcases the operation of various themes of Chinese corporate governance and contributes to the existing literature seeking to understand the unique role of the State in Chinese enterprises.

GREEN BONDS AND SUSTAINABLE FINANCE: EMERGING TRENDS IN CORPORATE INVESTMENT STRATEGIES

The increasing urgency of climate change and environmental degradation has prompted a significant shift in corporate investment strategies towards sustainable finance, particularly through green bonds. This paper explores the emergence of green bonds as a pivotal instrument in corporate finance aimed at funding projects that have positive environmental impacts. We analyze the growth of the green bond market, identifying key trends, challenges, and opportunities within corporate investment strategies. By examining case studies and recent data, this study aims to elucidate the evolving landscape of sustainable finance and its implications for corporate governance, risk management, and stakeholder engagement. The findings underscore the importance of integrating sustainability into corporate financial frameworks to foster a resilient and responsible economic future.

Factors affecting the intention of purchasing life insurance in Dong Nai province

Life insurance not only plays a role in financial protection and savings for individuals and families, but also contributes to ensuring social security and sustainable economic development. Therefore, the article aims to determine the factors affecting individual customers' intention for buying life insurance in Dong Nai province. On that basis, the authors propose that the implication of corporate governance contributes to increasing the intent to purchase life insurance products. In the research paper, the authors used a qualitative method through document research, studying documents related to the research topic. Quantitative research was carried out with a sample of 350 customers, multiple linear regression analysis, and identified five factors with a significance level of 5%. Finally, the authors have proposed five governance implications in order of priority: Safety, social influence, convenience, ease of use, and benefits. Research results contribute to orientation for insurance organizations to improve the quality of life insurance products to better serve customers.

Factors influencing the intention to buy microinsurance: A case study of low-income customers in Ho Chi Minh City

Microinsurance is a form of insurance for low-income people that is being expanded in developing countries, including Vietnam. In addition, microinsurance plays the financial protection and savings role for individuals and families with low income, ensuring social security and sustainable economic development. Therefore, the article aims to determine critical factors influencing low-income customers' intention to buy microinsurance in Ho Chi Minh City. On that basis, the authors propose that the implication of corporate governance contributes to increasing the intent to purchase microinsurance products/services. In the research paper, the authors used a qualitative method by interviewing five managers of five companies related to insurance, finding five factors related to the research topic. Quantitative research was carried out with a sample of 400 customers with low income, using multivariate linear regression analysis, and five factors with a significance level of 5 percent were identified. Finally, the authors have proposed five governance implications in order of priority: Safety, social influence, convenience, ease of use, and benefits. Research applications contribute to orientation for insurance organizations to improve the quality of microinsurance products/services to better serve customers and other low-income people.

Is the past really gone? How CEOs’ socialist imprinting affects corporate green innovation in China

ABSTRACT Combining imprinting and institutional views, we extend previous literature on the implications of ideological imprinting and corporate governance for organisational strategies. Specifically, this study examines how the CEOs’ socialist imprinting formed in the planned economy era guides them to pursue corporate green innovation as senior executives later on. Using longitudinal data (2014–2021) from 3589 publicly listed companies in China, we find that: (1) CEOs’ socialist imprinting is positively associated with the level of corporate green innovation; (2) the positive relationship between CEOs’ socialist imprinting and corporate green innovation is more salient for firms with the greater governance involvement of corporate party organisation; (3) the positive relationship between CEOs’ socialist imprinting and corporate green innovation is more salient for state-owned enterprises.

Do CEOs with new compound surnames have better ESG performance? Evidence from China

In the cultural context of “the children follow the father's surname,” the incorporation of both parents' surnames into the children's surnames (i.e., the “new compound surnames” phenomenon) reflects the conceptual change that occurred during the modernization of society. Using a sample of Chinese A-share listed firms from 2011 to 2020, this study examines whether firms led by CEOs with new compound surnames are associated with better environmental, social, and governance (ESG) performance. We find that firms led by CEOs with new compound surnames have significantly higher ESG performance scores. This finding holds after an array of robustness checks. We also find that the effect of CEOs with new compound surnames on ESG performance is more pronounced for non-state-owned enterprises, firms led by CEOs with lower personal economic motivation, and firms located in areas with higher marketization. Our study contributes to the research on executive characteristics and informal institutions by exploring the informativeness of CEOs' new compound surnames and has important implications for corporate governance.

Innovations in accounting and auditing: A comprehensive review of current trends and their impact on U.S. businesses

The landscape of accounting and auditing is undergoing a transformative evolution, driven by rapid technological advancements, regulatory changes, and shifting business paradigms. This comprehensive review delves into the contemporary innovations shaping the realm of accounting and auditing and assesses their profound implications for U.S. businesses. Technological innovations, particularly the integration of artificial intelligence and machine learning, have revolutionized traditional accounting processes. Automation tools and advanced data analytics are streamlining routine tasks, enhancing accuracy, and enabling accountants to focus on more strategic, value-added activities. The paper explores how these technological advancements are reshaping the skill sets required in the accounting profession and the consequent impact on professional development and education. Furthermore, the study investigates the evolving role of auditors in an era dominated by Big Data. The adoption of data analytics and blockchain technology is enhancing audit efficiency, transparency, and the overall quality of financial reporting. The analysis emphasizes the importance of auditors embracing these innovations to provide more timely, accurate, and insightful assessments of financial statements. Regulatory changes, such as the implementation of new accounting standards and reporting requirements, also feature prominently in this review. The study examines the challenges and opportunities arising from these regulatory shifts and assesses their impact on financial reporting practices in U.S. businesses. As businesses adapt to these innovations, the paper explores the broader implications for decision-making, risk management, and corporate governance. It sheds light on how the changing landscape of accounting and auditing influences the strategic decision-making processes of organizations, with a focus on fostering transparency and accountability. In conclusion, this comprehensive review synthesizes the multifaceted innovations in accounting and auditing, offering insights into the current trends shaping the industry and their far-reaching consequences for U.S. businesses. The research contributes to a deeper understanding of the challenges and opportunities associated with these transformations, guiding stakeholders in navigating this dynamic landscape effectively.

Does managerial overconfidence affect capital structure rebalancing for entrepreneurial firms?

PurposeThe behavioural theory adds a new paradigm of analysis with the assumptions of the decision maker’s cognitive biases and their repercussions on financing decisions. The aim of the study is to analyse the repercussions of these biases on the adjustment speed of firm’s capital structure toward the optimal level.Design/methodology/approachBased on a partial adjustment model, the study uses the Dynamic Panel Fractional estimator to analyse panel data from 4,990 Portuguese entrepreneurial firms.FindingsThe results show that the cognitive overconfidence bias impacts the entrepreneurial firm’s capital structure. In fact, the firms run by overconfident managers adjust more slowly than their counterparts. Furthermore, the findings suggest that entrepreneurial firms make relatively fast adjustments toward the optimal debt level and follow a hierarchical financing order in the funding process.Practical implicationsThe results of this paper are not only interesting to the academia, but also contain practical implications for corporate, institutional and business policy and governance. First, the paper introduces a new measure of cognitive bias in optimistic managers, which is useful for current and future academic research. Also, in practical terms, the findings of the paper reveal that when a company is contemplating hiring a manager, it should consider whether they need an optimistic or non-optimistic manager based on the company's present life cycle or situation.Originality/valueThe current analysis extends the existing literature. The study suggests that financial classical and behavioural paradigms should not be separated, which can provide evidence to help narrow the gap between these two major perspectives.