Improve Corporate Governance Research Articles

The Impact of ESG Performance on Innovation Research

High-quality economic and social development has become the main theme of the current era, and the promotion of corporate ESG development is of great significance to the implementation of the new development concept of "innovation, harmony, greenness, openness and sharing". This paper takes 3,784 listed companies in Shanghai and Shenzhen A-shares from 2011 to 2021 as research samples, and conducts research on ESG performance and corporate innovation with the help of Stata17.0 software, based on which it further examines the roles of financing constraints, the proportion of QFII, and the characteristics of senior executives in this influence path. The study finds that: (1) ESG performance has a significant role in promoting corporate innovation; (2) ESG performance can alleviate financing constraints and increase the QFII ratio, thus enhancing corporate innovation; (3) executives with academic background and overseas study background can positively regulate the relationship between ESG performance and corporate innovation. (4) Firms in the eastern and central regions can promote R&D investment by improving ESG performance, and firms in the central region can promote corporate innovation performance more significantly by improving ESG performance. (5) Firms in the national region are able to promote innovation output by improving ESG performance, but state-owned enterprises are unable to improve R&D investment through ESG performance. The findings provide some empirical basis for further promoting corporate strategy development and improving corporate governance mechanisms.

Corporate Governance and Profitability of Insurance Companies: Empirical Insights from Pakistan

This research seeks to explore how corporate governance affects the profitability of insurance companies in Pakistan. The empirical analysis utilizes data from a panel of 35 insurance firms covering the period from 2004 to 2022, employing the random effect technique for model estimation. Profitability, measured by Return on Assets (ROA), is the primary metric. The findings reveal that leverage, liquidity, premium growth, risk, and corporate governance significantly influence the profitability of insurance companies in Pakistan. However, age, tangibility, and inflation exhibit an insignificant relationship with performance in the insurance sector. Notably, corporate governance emerges as a pivotal variable with a broad impact on these companies. The study suggests that improving corporate governance practices is crucial for insurance companies to enhance profitability and overall performance.

Development of management accounting functions in the corporate governance system

Problematic issues of the development of theory of management accounting in context of improving corporate governance and increasing requirements from various stakeholders to its information support are increasingly becoming the object of research by domestic and foreign scientists. The purpose of this study is to identify the trends in the development of management accounting in the conditions of digitalization of the economy, and the transformation of business processes under the influence of changes in business environment as well as justification and substantiation of the new functions of management accounting in connection with the changing requirements of corporate governance and the need to improve its information support. To achieve this goal, the methods of synthesis and analysis, abstraction, deduction and induction, comparison and systematization were used, as well as a critical analysis of existing views on the essence of management accounting, its functions and possible development scenarios, taking into account transformations in accounting science and practice observed in the third decade of the XXI century. In the process of work the results of own researches conducted and received within the framework of the scientific school of the Financial University “Accounting-analytical and control processes of economic subjects of information society” and in the course of practical activity of the authors were used. Based on the analysis of literary sources, the requirements of national and international standards in the field of both accounting and financial reporting and in sustainable development, current accounting practices and corporate governance practices, new management accounting functions have been identified and justified, the implementation of which is aimed at the formation and presentation of better quality data and information as part of corporate reporting with predictive value. The results obtained can be used by economic entities in optimizing accounting and control processes and developing internal regulations on management accounting, as well as by accounting regulatory entities and professional organizations in developing recommendations in the field of management accounting for various economic entities.

PENGARUH SOCIAL CAPITAL DAN INTELECTUAL CAPITAL TERHADAP FIRM PERFORMANCE

Businesses focused on sustainable growth would consider intangible assets with unique characteristics that are difficult to imitate in order to provide their business a competitive edge to be the most valuable productive assets. The purpose of this study is to examine the role that the company's intangible assets—specifically, its social and intellectual capital—have in improving overall performance. Manufacturing companies listed on the IDX between 2016 and 2020 make up the study's population. In order to address current hypotheses, the analytical procedure consists of testing the measurement model and structural model. The study's findings demonstrate that intellectual capital directly improves a company's success. But it hasn't been demonstrated that other intangible assets, including social capital, have a direct effect on the firm performance. The results of this model are expected to contribute in improving corporate governance and increasing stakeholder trust in company performance.

Environmental disclosure practices in mixed ownership models: A study of Chinese private enterprises.

Environmental information disclosure is critical avenue for stakeholders to gauge the fulfillment of corporate environmental responsibilities, as well as a key path for companies to gain social reputation and achieve sustainable development. To achieve both economic and social sustainability and improve the environmental information disclosure by private firms, this study delves into the impact mechanism and realization path of mixed ownership reform on environmental information disclosure among Chinese private enterprises listed between 2010 and 2020. Utilizing a panel fixed effect model, we scrutinize the interplay between state capital involvement and the disclosure of environmental information by private enterprises. Our findings reveal that state capital involvement may encourage private enterprises to disclose environmental information through resource allocation and governance improvements. The higher the shareholding ratio of state-owned participating shareholders, the more it helps private firms to disclose environmental information. State-owned shareholders play a pivotal role in the appointment of supervisors, directors, and executives, effectively improving corporate governance mechanisms and positively moderates how private companies with state-owned capital participate in disclosing environmental information. Moreover, the magnitude of media coverage and the public opinion pressure faced by private enterprises further amplify the influence of state-owned capital involvement on environmental information disclosure. Additionally, our research reveals that corporate profitability partially interplays with the effects of state-owned capital disclosure of environmental information by private companies. According to the research results, we recommend that the government proactively promote mixed ownership reform with private enterprises as the main participants, fully leveraging the resource advantages and influence of state-owned capital. At the same time, it is imperative to strengthen the governance effect of internal state-owned shareholders and external public opinion supervision in private enterprises. Enhancing profitability is also identified as a key driver for private enterprises to engage in more robust environmental information disclosure practices.

The audit committee and earnings management: new evidence from the H-share listed companies on the exchange stock of Hong Kong

ABSTRACT This paper selects H-share companies listed on the Stock Exchange of Hong Kong from 2008 to 2018 as research samples and designs an OLS regression model to empirically test the impact of the quality of the audit committee measured by the four aspects of the characteristics of the audit committee on the earnings management level of the company based on the Jones model. It concludes that when the overall quality of the company’s audit committee is higher, the company’s earnings management level is lower. This conclusion strongly proves that the establishment and effective operation of an audit committee plays an important role in improving corporate governance and restraining earnings manipulation by the management team and the governance role. This paper provides empirical evidence to help corporation leaders and stakeholders make better decisions on management and investment on H-share listed companies. The innovation and contributions and to audit and earnings management literature and implications and innovation for regulators and investors are also discussed.

Stock market liberalization and corporate investment revisited: Evidence from China

Recent reform in China has made a subset of Chinese stocks available to foreign investors, partially opening up China's stock market. Our difference-in-differences analysis shows that this liberalization reform boosts investments in investable firms relative to noninvestable ones, with results robust to various sensitivity analyses. Besides capital inflows and risk sharing, a potential but underexplored channel is improved corporate governance due to direct and indirect pressures from foreign investors, which lowers the cost of capital and improves capital allocation efficiency. Consistent with this corporate governance channel, we find that the liberalization reform reduces investable firms’ agency costs, increases their investment efficiency and total factor productivity, and improves their operating performance. Further analysis finds that the positive investment effect from the liberalization reform is stronger among firms that were poorly governed before the reform.

Bank Digital Transformation and Enterprise Innovation—Evidence from China

With the rapid advancement of digital technology, the banking industry has embarked on a journey of digital transformation. While existing literature primarily examines how these changes impact the banks themselves, our study focuses on a relatively unexplored aspect: the direct influence of bank digital transformation on the performance and behavior of borrowing enterprises. The research objective of this study is to explore the influence of bank digital transformation on the innovation performance of borrowing enterprises and the underlying mechanisms. Leveraging data from Chinese listed companies and commercial banks, we find a positive effect of bank digital transformation on enterprise innovation output as measured by firms’ patent applications. The findings remain robust across alternative model specifications, controls for regional digital economy development levels, and bank financial performance, as well as alternative measures of bank digital transformation. Mechanism tests show that bank digital transformation contributes to corporate innovation by alleviating corporate financial constraints and improving corporate governance. Further research demonstrates that bank digital transformation also helps promote corporate innovation efficiency as measured by the proportion of patent output to total R&D input and corporate innovation output as measured by firms’ invention patent applications and patent grants. Additionally, borrowing firms’ own digital transformations may substitute for bank digital transformation in their effect on innovations.

China stock market liberalization and company ESG performance: The mediating effect of investor attention

As China has begun to promote a high level of opening up of its stock market, ESG indicators have gradually become one of the important decision-making tools for overseas investors to invest in China's stock market. Using the data of Chinese listed companies from 2011 to 2022, this paper examines the impact of stock market opening on the ESG of listed companies and the mediating role of investor attention in this process by using the Difference-in-Differences (DID) and mediating effect models. Research shows that the opening of the stock market improves the ESG performance of listed companies by attracting more investor attention. Investor focus, investor sentiment, and investor interaction all constitute the intermediary channels through which the stock market opening affects ESG. The above mediating effect is established in most industries and is stronger in state-owned enterprises. This mediating effect plays the largest role in improving corporate governance, followed by social and environmental responsibility. The opening of China's stock market provides a model for emerging market countries to improve their ESG performance. Based on the research conclusions, we propose suggestions for addressing the mediating effect of investor attention, expanding the opening of the stock market to provide sufficient channels for investors to fully participate in market transactions, and differentiated ESG information disclosure.

Assessing the Effects of Urban Digital Infrastructure on Corporate Environmental, Social and Governance (ESG) Performance: Evidence from the Broadband China Policy

Urban digital infrastructure is the cornerstone of optimizing resource allocation and promoting sustainable economic development in the era of digital economy, and it will also affect corporate ESG performance. Based on the data of Chinese A-share listed companies from 2011 to 2021, an asymptotic difference-in-difference model is used to investigate the impact of urban digital infrastructure on corporate ESG performance based on the “broadband China” strategy and its underlying mechanism. This paper finds that urban digital infrastructure can promote corporate ESG performance. Further, urban digital infrastructure can contribute to corporate ESG performance by increasing research and development (R&D) investment, improving corporate governance, and increasing information transparency. Through heterogeneity analysis, the results show urban digital infrastructure contributes more significantly to the ESG performance of state-owned, small and medium, growth-stage, and low-profit companies and is more pronounced in non-heavy polluting companies and companies in the central and western regions. This paper has enhanced the theoretical framework of urban digital infrastructure and corporate ESG (environmental, social, and governance) performance, paving the way for a new approach to the collaborative development of cities and enterprises in pursuit of green and sustainable growth.

The impact of media attention on corporate tax avoidance: A study based on Chinese A-share listed companies

By using data from China's A-share listed companies from 2018 to 2021, This article studies the impact and mechanism of media attention on corporate tax avoidance. The results show that enterprises that receive more media attention have a lower level of tax avoidance, that is, media coverage can effectively reduce the level of tax avoidance. Furthermore, negative reporting on enterprises is more effective in reducing tax avoidance than positive or neutral reporting. Mechanism analysis shows that media attention can effectively promote enterprises to enhance internal control, thereby reducing tax avoidance. The results of heterogeneity analysis show that compared to non-state-owned enterprises and smaller enterprises, media attention has a higher impact on the tax avoidance level of state-owned and large enterprises. The research conclusion of this article indicates that strengthening media attention and supervision of enterprises is an effective measure to improve corporate governance and reduce tax avoidance.

Fraud in Listed Companies in China: Causes, Impacts and Countermeasures

In recent years, the issue of fraud in Chinese listed companies has been a topic of great concern. This paper aims to explore the causes of fraud in listed companies in China, its impact on the economy and investors, and propose some countermeasures. Through a comprehensive analysis of relevant literature and cases, we found that the root causes of fraud include insufficient supervision, moral hazard, financial pressure, and information asymmetry. These problems have had a negative impact on the development of China's capital market, harmed the interests of investors, and weakened the credibility of the market. However, by strengthening supervision, improving corporate governance mechanisms, improving information transparency, and strengthening investor education, we can effectively deal with fraud problems and maintain market order and investors' rights and interests.

Study on the Impact of Corporate ESG Performance on Green Innovation Performance—Evidence from Listed Companies in China A-Shares

With the establishment of China’s “dual carbon” target and the promotion of high-quality development strategy, the role of green innovation has become increasingly important. Corporate ESG innovation, as a guiding principle for companies to practice sustainable development and an important signal for evaluating their environmental and social responsibilities as well as corporate governance level, deserves in-depth research on its impact on green innovation performance. This paper empirically analyzes the green innovation effect of corporate ESG (Environmental, Social and Governance) performance using Chinese A-share listed companies as a sample from 2009 to 2021. The research shows that corporate ESG performance can enhance green innovation performance. Mechanism analysis reveals that ESG performance mainly improves green innovation performance by alleviating financing constraints and enhancing human capital. Further research shows that all three sub-dimensions of ESG performance contribute to improving green innovation performance, with the strongest effect observed in corporate governance performance. ESG performance not only enhances strategic green innovation performance and independent green innovation performance but also improves substantial green innovation performance and collaborative green innovation performance. Therefore, the government should improve the ESG information disclosure system, increase support for companies with excellent ESG performance, and improve local talent policies to attract high-quality green innovation talents. Investors should incorporate ESG performance into their decision-making and strengthen the identification and use of ESG information. Companies should formulate ESG strategies, increase relevant investments, prioritize corporate governance improvement, and enhance the quality of ESG information disclosure through various means.

The Interplay of Firm, Industry, and Macroeconomic Factors in the Stock Returns of the Non-Financial Sector in Nepal

This research paper focused on the impact of firm-specific, industry-specific, and macroeconomic variables as it examined the dynamics of stock returns in the Nepalese non-financial sector. The study incorporated a comprehensive analysis of existing literature, methodology, and empirical findings from various studies conducted in Nepal and other countries. Five hydropower companies were the sample of the study. Pearson correlation result showed a negative correlation with a strong inverse relationship between the tangibility of a firm's assets and its stock returns. A significant negative correlation with inflation indicates a moderate inverse relationship between the inflation rate and stock returns. Regression results showed that companies' asset tangibility significantly impacts stock return. Firm size and gross domestic product did not have a statistically significant effect on stock return. However, the inflation rate and exchange rate significantly impacted stock return. Based on the study's findings, policymakers can consider implementing measures to promote a conducive environment for stock market development. This may include improving corporate governance frameworks, enhancing transparency and disclosure requirements, facilitating investor education programs, and ensuring macroeconomic stability through sound monetary and fiscal policies.

준수 또는 설명 방식에 따른 기업지배구조 핵심지표 미준수 사유의 설명과 기업가치 간 관계

[Purpose] The Comply or Explain (CoE) approach, a core principle of the Corporate Governance Code, encourages an improvement in corporate governance by affording each firm the discretion to choose an appropriate governance structure and by allowing capital market participants to assess the firm’s governance choice. In order to investigate whether the corporate governance disclosure system works in accordance with the spirit of the CoE approach, this study analyzes the relationship between disclosure of the status of compliance with the key indicators of corporate governance and firm value.
 [Methodology] Using a sample of listed firms that disclosed corporate governance reports from 2019 to 2021, we perform regression analysis to examine the relationship between the disclosure of compliance or explanations for non－compliance with key corporate governance indicators and firm value. Additionally, we analyze the content of the explanations for noncompliance.
 [Findings] We find that compliance with key indicators has a positive relationship with firm value, while explanations for non－compliance do not exhibit a significant relationship with firm value. We also find that the majority of non－compliers state only the fact that they do not comply with the key indicators or provide general explanations exemplified in guidelines and best practices for their non－compliance.
 [Implications] The mandatory disclosure system for corporate governance reports, under the CoE approach, is intended to enhance transparency and the long－term value of the firm through effective disclosure of corporate governance and will apply to all listed firms in 2026. We find that the explanations provided by non－compliers are neither specific nor significantly related to firm value. These findings suggest the need for a discussion on ways to enhance the understanding of the essence of the CoE principles, particularly the Explanation (E) element, among both firms and information users and to improve the quality of corporate disclosures.

Does equity market openness increase productivity? the dual effects of Shanghai-Hong Kong stock Connect program in China

This study investigates the dual effects of equity market openness on aggregate total factor productivity (TFP) growth and finds that gains in aggregate TFP can be driven by within-firm and reallocation effects across firms. Using a quasi-natural experiment based on China’s Shanghai-Hong Kong Stock Connect program, we find that equity market openness has a positive effect on firms’ TFP. Stock price efficiency is the mechanism underlying this improvement. Equity market openness reduces firms’ stock mispricing and improves corporate governance and investment efficiency through the feedback effect, thereby increasing TFP. Finally, we argue that equity market openness induces significant growth in capital stock and employment among high-TFP firms, driving them to achieve rapid growth and greater market share. The reallocation effect of equity market openness translates into aggregate productivity gains. This empirical study considers stock pricing as a mechanism to shed light on the dual effect of equity market openness on TFP growth.

Market reactions to the Business Roundtable August 19, 2019 announcement on the Purpose of a Corporation

AbstractThe Business Roundtable's “Purpose of a Corporation” letter announced a shift from stockholder primacy to stakeholder primacy. Interestingly, we contend the letter's language employed a technical efficiency emphasis, suggesting a firm's executives chose to make this shift because they believed doing so would improve the firm's financial performance, via improved corporate governance. We examine whether investors actually accepted the technical efficiency arguments at face value, or in contrast believed the announcements were merely a “rational myth,” what management thought investors would want to hear. We employ a 2‐day cumulative abnormal return (CAR) event study for 140 publicly‐held firms. Overall, we find investor support for the announcement. In addition, we found how returns to firms with prior similar announcements were negative at the time of the announcement. Also, the returns for firms having multiple signatories were positive and significant.

Private Equity as an Effective Tool for Capital Raising: Legal Risks and Countermeasures

Investors have contributed millions of dollars to private equity funds. These funds are now an indelible part of the world of trading. Private equity has gained popularity over the past ten years, which has sparked a number of discussions about it. Some people argue that private equity contributes a lot to the improvement of corporate governance and increase of the wealth. However, some hold the view that although private equity have some advantages, it has serious problems considering the misaligned interests between managers and investors and high debt ratios. By analyzing different opinions and gathering data about the performance of private equity, this article highlights the evaluation of private equity and LBO, including their unique advantages in mergers and acquisitions, and the potential risks they might bring to the corporation and investors of private equity funds. Also, the article advises some methods to cover the shortages including legislation, investor cooperation and information intermediaries for better use of private equity.

Does D&O insurance mislead creditors' lending decisions? Evidence from corporate debt maturity structure

AbstractThis study investigates whether directors' and officers' liability insurance (D&O insurance) misleads creditors' lending decisions by examining its effect on corporate debt maturity structure. We find that purchasing D&O insurance leads to increased corporate debt maturity, and this effect is more pronounced for firms with weaker corporate governance. These results suggest that creditors may view D&O insurance as an external monitoring tool that helps improve corporate governance. However, D&O insurance induces higher firm risk, but cannot help decrease agency costs or improve firm performance, that is, it results in more severe managerial opportunism. Our findings suggest that D&O insurance, to some extent, misguides creditors' lending decisions.

Is institutional common ownership commonly priced? Insights from the cost of equity capital

This study examines the effect of institutional common ownership on a firm's cost of equity capital. Recent literature on common ownership yields opposing predictions: increased strategic alliance in the product market could increase the non-diversifiable covariance risk of a firm's cash flows with other firms, leading to a higher cost of equity capital. However, reduced product market risk that is in part non-diversifiable could lead to a lower cost of equity capital. In both baseline and difference-in-differences settings, we document a negative and significant relation between common ownership and the cost of equity capital. We also provide direct evidence that common ownership reduces product market predation risk, distress risk, and overall risk while increasing stock liquidity. We do not find sufficient evidence that improved corporate governance drives the main findings. Overall, our findings indicate that institutional common ownership offers benefits to individual firms by reducing the cost of equity financing.