Implications For Corporate Governance Research Articles

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.

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.

The Influence of Internal Control Quality on Corporate Financial Performance: An Empirical Analysis based on Panel Quantile Regression Model

This study delves into the relationship between internal control quality and the financial performance of Chinese-listed corporations. Employing a distinctive research approach featuring panel quantile regression, this study meticulously examines data spanning the period from 2011 to 2020, encompassing 953 Chinese-listed entities. The analysis, in comparison to conventional methods such as ordinary least squares (OLS) regression and fixed-effects models, consistently reveals a robust and statistically significant positive correlation between internal control quality and corporate financial performance. Notably, the findings of the panel quantile regression bring to the forefront a nuanced perspective, elucidating an enhancing effect of internal control quality on Return on Assets. Nevertheless, this effect diminishes as one ascends the quantile distribution, elucidating varying degrees of influence contingent upon the internal control quality spectrum. These findings underscore the pivotal role of effective internal control systems in augmenting financial performance, with implications for corporate governance. Furthermore, this research underscores the evolving nature of internal control frameworks, particularly in the context of digitalization, thus delineating an imperative area for prospective scholarly exploration.

What Factors Affect Conservatism? The Role of Board Gender, CEO Retirement and Financial Distress

This research aims to comprehensively analyze the intricate relationships between board gender, CEO retirement, financial distress, and accounting conservatism within the energy sector. Leveraging 164 firm-year observations spanning 2019-2021, our sample selection relied on a purposive sampling technique, with data availability serving as a primary criterion. Through multiple regression analysis, we rigorously tested hypotheses to unveil the nuanced dynamics at play. Contrary to expectations, our findings suggest that board gender does not exert a significant impact on accounting conservatism within energy firms. However, CEO retirement emerges as a pivotal factor positively influencing accounting conservatism. This illuminates the importance of leadership transitions in shaping conservative financial reporting practices. Notably, financial distress demonstrates a contrary effect, negatively impacting accounting conservatism. This novel perspective positions financial distress as a determinant factor, expanding the traditional boundaries of conservatism research within the agency theory framework. Our research significantly contributes to the literature by providing fresh insights into the contextual factors influencing accounting conservatism in the energy sector. The nuanced interplay of CEO retirement and financial distress unveils complex decision-making processes, offering practical implications for corporate governance and financial reporting practices in this industry. This study serves as a valuable resource for both practitioners and scholars seeking a deeper understanding of conservatism determinants in the specific context of energy companies.

Alien merchant chambers and enterprise innovation: Evidence from China

AbstractBased on social capital theory, this paper aims to investigate the impact of member enterprises of alien merchant chambers on enterprise innovation, within A‐share listed companies on the Shanghai and Shenzhen Stock Exchanges of China from 2010 to 2020. Additionally, the study seeks to explore the role played by social capital resulting from participation in these alien merchant chambers. Furthermore, we delve into the moderating effects of the number of alien merchant chambers and the degree of marketization in the enterprise's location. Moreover, we analyze the influence of heterogeneity in firm ownership and firm type. Our findings reveal that member enterprises of alien merchant chambers can increase their social capital and consequently promoting innovation; both the quantity of alien merchant chambers and the level of marketization in an enterprise's location positively influence this enhancement. Furthermore, the impact of state‐owned enterprises and non‐high‐tech enterprises on enterprise innovation, following their engagement with alien merchant chambers, surpasses that of non‐state‐owned enterprises and high‐tech enterprises. This research bridges the gap in understanding the corporate governance implications of alien merchant chambers, provides empirical evidence concerning Chinese alien merchant chambers, and addresses inquiries regarding the influence of merchant chambers' social capital. Additionally, it proposes a novel approach for listed companies to overcome resource constraints and to collaboratively pursue development, especially in light of the challenges posed by the COVID‐19 pandemic.

The Board Mix of Maltese Listed Entities and its Corporate Governance Implications

The Board Mix of Maltese Listed Entities and its Corporate Governance Implications

Institutional Investor Information Competition and Accounting Information Transparency: Implications for Financial Markets and Corporate Governance in China

Institutional Investor Information Competition and Accounting Information Transparency: Implications for Financial Markets and Corporate Governance in China

Influence Factors on Income Smoothing in Manufacturing Companies: Evidence from Indonesia's Stock Exchange


 
 
 
 
 
 This study investigates the determinants of income smoothing in Indonesian manufacturing firms listed on the stock exchange during 2016-2021. The research examines the impact of Institutional Ownership, Managerial Ownership, Return on Assets, Debt to Equity Ratio, and Ln Total Sales on Income Smoothing using binary logistic regression analysis. The findings reveal that Institutional Ownership, Managerial Ownership, and firm size significantly influence income smoothing, while Financial Leverage and Profitability do not exhibit significant effects on Income Smoothing. These results contribute to the understanding of income smoothing practices and hold implications for corporate governance and financial reporting practices in emerging markets.
 Highlight:
 
 Determinants of Income Smoothing: This study delves into the factors driving income smoothing in Indonesian manufacturing companies listed on the stock exchange between 2016 and 2021.
 Influential Factors: Institutional Ownership, Managerial Ownership, and firm size are identified as significant influencers of income smoothing, shedding light on their impact within this context.
 Implications for Governance and Reporting: The study's outcomes offer valuable insights for corporate governance practices and financial reporting strategies, particularly in the dynamic landscape of emerging markets.
 
 Keyword: Income Smoothing, Manufacturing Firms, Institutional Ownership, Managerial Ownership, Emerging Markets
 
 
 
 
 

The impact of executives' compensation and corporate governance attributes on voluntary disclosures: Does audit quality matter?

PurposeThis article investigated whether the executives' compensation and corporate governance attributes are aligned with stakeholders' demands for higher corporate voluntary disclosures. Moreover, the study also examined the moderating role of the auditor's reputation in the direction of association among executive compensation, corporate governance attributes, and voluntary disclosures.Design/methodology/approachThe study used a sample of S&P BSE index constituents' 90 Indian firms for 2017–2019. The voluntary disclosure scores were fetched from the India Disclosure Index Report published by FTI Consulting. This analysis was carried out in two parts by applying four panel-data regression models in the agency and signalling theories framework. First, the study examined the association between executive compensation, board strength, composition, gender diversity, and voluntary disclosures. Second, the article investigated the moderating role of the “Big 4” in the direction of association among executive compensation, corporate governance attributes, and voluntary disclosures.FindingsThe willingness of executives to share private information with stakeholders depends on the compensation they receive from their employer. The higher compensation paid to executives leads to a higher “tone from the top,” which is better aligned with stakeholder interests. Further, the research also found that bigger board sizes, a higher proportion of independent and woman directors (indicators of good governance), and an auditor's reputation are associated with increased voluntary disclosure.Research limitations/implicationsThe findings showed that the executives' compensation and corporate governance attributes are aligned with stakeholders' demand for higher voluntary information from firms. Moreover, the study also found that the “Big 4” play a moderating role in this direction. The choice of a reputed auditor indicates the firms' long-term positive future perspectives, which strengthens investor confidence in the financial market.Practical implicationsThe study suggests that fair executive compensation can address the agency problem.Originality/valueThis research furnishes managers and different stakeholders with significant implications of executives' compensation, corporate governance, and auditor's reputation in the best interests of a firm through reducing potential risks of information asymmetry.

Understanding board designs in Latin American firms: Insights from Brazil

Firms are facing an increasing pressure to conform to a globally-accepted good governance norm that is largely based on developing economies in order to increase board monitoring. However, many Latin American firms deviate from a set of recommended corporate governance practices by adopting board designs with practices associated with low board monitoring. We attribute this deviation to the interplay of capacity and willingness to bear the high costs of board designs with few barriers to board monitoring. In this study, we use a configurational approach to inductively identify the board designs of publicly listed Brazilian firms. Our findings uncover a typology of board designs corresponding to particular levels of firms’ capacity and willingness to bear the costs of board governance practices that conform to the good governance norm. We discuss our study’s implications for strategic corporate governance.

Implications of Good Corporate Governance (GCG) on Financial Statement Integrity

The development of a strategy by the government as a public organization to deal with the implementation of good corporate governance, which is now a requirement for each company in order to win global business competition and also overtake the problem of the economic crisis, is required by the rapid and massive advances in information technology that have occurred during the industrial revolution 4.0 era. The Agency theory was utilized to support this research since it fosters the formation of the notion of Good Corporate Governance in managing the company's business to reduce agency conflicts. Companies are required to be able to provide good financial reports. A solid financial report is one that maintains the integrity of the information it contains. The extent to which financial reports reflect financial facts fairly, honestly, and not more or less is referred to as their integrity. The goal of this study is to identify the implicit influence of good corporate governance (GCG) on the financial statements of different Indonesian enterprises. Research data is collected through financial reports and company annual reports. The SPSS statistical software was used to analyze the research data. The study's findings indicate that institutional share ownership and management support as part of Good Corporate Governance have a significant impact on the financial statements of Indonesian enterprises

The Implications of Corporate Governance on the Working Capital Efficiency of Manufacturing Companies: Evidence from Emerging Market

This article aims to evaluate the connection between corporate governance and working capital efficiency of manufacturing companies in India by providing evidence on the composition of board and its leadership structure on working capital efficiency. This article covers the top companies listed on the Bombay Stock Exchange (BSE) from 2014 to 2019 (498 firm–year observations). The study utilizes panel econometric methodology based on Generalized Least Squares (GLS) to check the interplay between corporate governance and working capital efficiency. The empirical results produce that audit committee meetings are very effective in the efficient management of working capital. Surprisingly, the authors found that CEO duality does have a significant impact on working capital efficiency. Overall, the findings highlight that corporate governance is an effective tool for monitoring working capital efficiently. The conclusion of this study may be utilized to offer management information if their working capital decisions are efficient or not and how they could increase the scope of their working capital decisions in light of corporate governance.