Independent Board Of Directors Research Articles

Political connections of independent directors and earnings quality: The case of French firms

This paper examines the impact of political connections of independent board directors on earnings quality. We used two proxies of earnings quality, namely, discretionary accruals and real earnings management. Based on a sample of 1,936 firm-year observations from 2012 to 2022, our results reveal that firms with politically connected independent directors are more likely to display lower earnings quality in higher discretionary accruals and greater real activities manipulation. These results suggest that the monitoring role of independent directors in constraining earnings management practices, as emphasized by the agency theory, may be compromised by political connections.

Board composition, ownership structure and dividend policy: Evidence from NSE listed companies in India

Purpose The purpose of the study is to analyse the influence of board composition and ownership structure on the dividend pay-out policy of selected listed Indian companies. Design/methodology/approach The top 30 companies listed on National Stock Exchange were examined for a period of three financial years from 2019 to 2021. Due to the cross-sectional and time-series character of the data, fixed effect panel model is used as the primary analytical approach. Findings The results revealed that there is a significant and positive association between board size and dividend policy. The results confirm that the firms with higher Indian ownership and non-institutional ownership distribute higher levels of dividend. No significant association was found between board independence and dividend decisions of ratios. Finally, it is observed that there is a positive impact of return on assets on dividend policy. Research limitations/implications Future studies can confirm the impact of ownership determinants and board characteristics on dividend distribution policy by taking stock dividends into account and enlarging the sample size of developing market businesses. They can also investigate ownership factors including management ownership and international ownership, in addition to other board attributes like qualification, tenure and age. This will offer a more thorough comprehension of how these variables relate to dividend policy. Practical implications Because they are better able to assess the financial position and make educated judgments, a diverse and independent board of directors may result in more strategic and cautious dividend policies. The dividend policy of a firm is also influenced by its ownership structure and strategic objectives; small or primary shareholders may exert pressure for larger payments. By focusing on long-term strategic goals rather than immediate requirements, managers may guarantee that interests are aligned. The findings of this study offer significant guidance to management and regulators about the dividend policy of publicly listed corporations. Social implications According to agency theory, the link between ownership structure, board composition and dividend policy may be explained by agency conflicts. Independent directors are necessary for the board to make decisions that effectively balance the interests of management and shareholders, particularly when it comes to paying dividends. According to studies, companies with non-executive directors have greater interest alignment and fewer agency issues. In addition, the ownership structure and makeup of the board are important factors in lowering agency conflicts and enhancing corporate governance procedures. Companies may improve their governance procedures and increase value for shareholders by resolving conflicts of interest. Originality/value The research paper contributes to the existing body of knowledge by analysing and uncovering significant and unknown relationship between board composition, ownership structure and dividend policy. The paper explores the relationship between specific ownership structures and dividend policy in context of a developing country where limited research exists and addresses a research question that has not been extensively studied before.

Unveiling the transition: Factors influencing true and fair view reporting in the accrual-based accounting migration of Malaysian federal statutory bodies

This study delves into the factors impacting the adoption of true and fair financial reporting during the transition to accrual accounting in Malaysian Federal Statutory Bodies (FSB). Despite administrative reforms from the 1980s to the most recent reformation, Malaysia’s public sector performance has lagged, prompting this investigation into the adoption of Malaysian Public Sector Accounting Standards (MPSAS) and accrual accounting in response to the delayed performance of Malaysia's public sector. The research was based on self-administered, Five Likert-scale questionnaires distributed to all heads of public accountants in 132 FSBs. There were 99 questionnaires returned for analysis. The final analysis used 99 usable responses, and the data was analyzed using SPSS. The results indicated significant correlations between Economic Consequences, Political Interventions, and True and Fair View reporting. Economic consequences were found to have the most significant impact on true and fair reporting, supported nuanced relationships, and political interventions. The findings of the regression analysis provided evidence for intricate associations, however, it is important to realize some constraints methods were acknowledged, such as demographic limits and the reliance on quantitative methodologies. The independent Board of Directors (BOD) and the higher-level management ensure those factors, such as the impact of Political Interventions on the reporting process under their scrutiny, as well as take proactive implementation measures to prevent the escalation of the management level from worsening. Top management can ensure that, the economic decisions made have to be thorough, as they dramatically impact reporting. The study provides valuable insights into financial reporting dynamics, suggesting avenues for future research to address identified limitations and incorporate qualitative methodologies.

Investigating CSR Disclosures and Aggressive Financial Reporting in Relation to Tax Aggressiveness: Can Board Structure Change The Status Quo?

In recent years, academic researchers and policymakers have increasingly discussed the role of Corporate Social Responsibility (CSR) disclosures and aggressive financial reporting in tax aggressiveness. Tax aggressiveness can be defined as a company's eagerness in using legal loopholes and other methods of tax reduction. Companies must evaluate how their tax practices affect their reputation and adhere to tax reporting and CSR standards. The objective of this research is to investigate in the relationship between CSR disclosures and aggressive financial reporting on tax aggressiveness moderated by board structures. The board's internal control function is expected to reduce tax aggressiveness-related risks. The study employed static panel data regression analyses on 665 firm-year data from the Indonesia Stock Exchange from 2016 to 2020. This study discovered that a larger board size could diminish the negative relationship between CSR disclosure and tax aggressiveness in particular industries while strengthening the positive relationship between aggressive financial reporting and tax aggressiveness. The current work suggests that companies with more independent boards of directors could increase the negative association between CSR disclosure and tax aggressiveness while reducing the positive association between aggressive financial reporting and tax aggressiveness. This study could reference future corporate policy regarding the most effective board structures to minimise tax aggressiveness.

The influence of capital structure and operational performance on financial performance with governance and financial risk as mediation in Insurance Companies in Indonesia

This study examines the influence of capital structure and operational performance on financial performance, with governance and financial risk as mediators. The sam- ple for this research comprises insurance companies listed on the Indonesia Stock Exchange in 2013-2021 with a total of 72 firm-year observations. The data used are secondary data obtained from annual and financial reports accessed via idx.co.id. The independent variables are capital structure, measured using the Debt Equity Ratio (DER), and operational performance, measured using liquidity. The mediating variable is the governance variable, measured by the independent board of directors (DKI), and financial risk is measured using Risk Based Capital (RBC). The depen- dent variable in this study uses financial performance as measured by Return On Assets (ROA). The results prove the following: (1) Capital structure has a positive and significant effect on financial performance. (2). Operational performance has a negative and significant effect on financial performance. (3). Capital structure had a positive and significant effect on DKI. (4) Operational performance has a significant negative effect on financial risk. (5) DKI does not mediate the influence of capital structure on financial performance. (6) Financial risk fully mediates the influence of operational performance on financial performance. (7). DKI has a negative and significant effect on financial performance. (8). Financial risk has a negative and significant effect on financial performance.

CEO narcissism and ESG misconduct

This paper analyzes how narcissistic CEOs behave regarding irresponsible environmental, social, and governance (ESG) strategies and whether this behavior is influenced by managerial power and the uncertainty of the environment in which the firm operates. Using a sample of Spanish firms from 2015 to 2019, the study finds that narcissistic CEOs avoid engaging in irresponsible ESG practices to safeguard their reputation and receive positive recognition from stakeholders and society. The results also suggest that the effect of CEO narcissism on ESG practices is moderated by CEO power and an uncertain environment. Narcissistic CEOs with more managerial power tend to avoid engaging in unethical ESG practices. Meanwhile, CSR committees and/or independent board directors limit the unethical ESG practices of narcissistic CEOs, confirming the relevance of both governance mechanisms in constraining ESG misconduct.

The Performance of Manufacturing Companies in Indonesia is Reviewed From The Characteristics of The Board of Directors, Audit Committee and Ownership

Purpose - This research aims to prove the influence of the characteristics of the board of directors, audit committee, and ownership on the performance of manufacturing companies in Indonesia.
 Research Method - Manufacturing companies that are registered on the IDX are used as objects in this research using a purposive sampling method and were obtained from 124 manufacturing companies in 2018-2022. Testing and analysis used Eviews 12 and IBM SPSS Statistics 25 software.
 Findings - The results of this study are ownership concentration which has a significant positive effect and independent audit committee, independent board of directors have a significant negative effect on company performance. The results of this research are that ownership concentration has a significant positive effect on company performance. Independent audit committees and independent boards of directors have a significant negative effect on company performance. Meanwhile, other variables do not have a significant effect on company performance. 
 Implication - GCG can help companies create effective policies. It also can help companies build the trust of stakeholders and shareholders.

ESG Strategy Through the Integrated Business Model in Congruence with Circular Economy: Does Independent Board Members Matter?

The purpose of this study is to examine the impact of the integrated Business Model disclosures on the financial performance of the top 30 Malaysian PLCs, moderated by a 50% presence of Independent Board of Directors as proposed by the Malaysian Code of Corporate Governance 2017 (MCCG 2017). The paper’s design will adhere to the purposive sampling methodology, utilizing descriptive statistics, multiple regression analysis, and quantitative content analysis derived from the International Integrated Reporting Council (IIRC)’s Integrated Report, along with previous studies. This approach aims to analyze the annual reports and integrated reports, aiming to explore the Integrated Business Model disclosures within the top 30 Malaysian PLCs. The originality of this paper lies in the design of the new Independent Board of Directors Scoring Index, which aims to identify the best disclosures among the top 30 Malaysian PLCs. This scoring index could prove beneficial to both academicians and practitioners, extending its utility beyond the Top 30 PLCs. The study serves as a systematic review of recent research developments in Integrated Business Model disclosures within the Integrated Report and the Annual Reports of the top 30 Malaysian PLCs.
 Keywords: ESG, Circular Economy, Governance, Integrated Report, Business Model, Independent Board of Directors

THE EFFECT OF FINANCIAL AND CORPORATE GOVERNANCE FACTORS ON THE FORCED FINANCIAL RESTATEMENT LIKELIHOOD: EVIDENCE FROM MALAYSIA

Background and Purpose: Forced financial restatement (FFR) creates a major concern as it has an instantaneous and disastrous effect on a firm’s share price. Whilst studies focusing on FFR are limited, this study investigated the financial and corporate governance influences that affect the FFR likelihood within the emerging background of Malaysia. This study aims to provide new evidence and insights to Malaysian regulators in developing strategies to reinforce financial reporting quality.
 
 Methodology: The influences of board independence, political connection, audit committee financial expertise, government-related institutional ownership, family ownership and control, corporate reporting quality, and financial distress on FFR occurrence were investigated. A multivariate logistic model was employed on 4,759 firm-year observations from 2002 until 2012.
 Findings: Findings revealed that aggressive accounting influences the FFR likelihood. Based on the results, the number of independent board directors, the presence of politically connected investors or management, working capital accruals management, real earnings management, and the financial health of the firm amplified the FFR occurrences.
 
 Contributions: This study enriches the body of knowledge on FFR by investigating a wider range of financial and corporate governance factors as possible determinants of FFR.
 
 Keywords: Forced financial restatement, opportunistic, accruals management, real earnings management, Malaysia.
 
 Cite as: Slack, R., Othman, I. W., Stratling, R., Syed-Yusuf, S. N., & Wan Mohd Radzi, W. S. (2023). The effect of financial and corporate governance factors on the forced financial restatement likelihood: Evidence from Malaysia. Journal of Nusantara Studies, 8(TI), 147-176. http://dx.doi.org/10.24200/jonus.vol8issTIpp147-176

Syariah Governance and Disclosure Islamic Corporate Social Responsibility: A Comparative Study of Indonesian and Malaysian Islamic Banking

The existence of the Sharia Supervisory Board in the Sharia banking GCG structure is a unique feature that distinguishes it from the GCG structure of conventional banks. The inconsistency of the results of previous research related to the relationship between GCG and CSR disclosure is the motivation of this study, in addition to the differences in the progress of Indonesian and Malaysian Islamic banks. The research population of Islamic banking is listed on the Indonesia Stock Exchange and the Malaysia Stock Exchange. Research period on 2016 – 2019 before covid 19 pandemic. The research sample was determined based on purposive sampling, 12 Islamic banks in Indonesia and 14 Islamic banks in Malaysia was selected. The method of analysis is multi group using Partial Least Squares. The results of this study provide empirical evidence that the Sharia Supervisory Board, Board of Commissioners and Board of Directors have not succeeded in playing a role in increasing I-CSR disclosure except for the Independent Board of Commissioners and Independent Board of Directors. The results of the study also have not shown any differences in the influence of GCG on I-CSR in Indonesian and Malaysian Islamic banking.

Internal governance mechanisms and information value of banks’ earnings

PurposeThis study examines the association between internal corporate governance mechanisms (i.e. board of directors and audit committee) and the information value of bank earnings. The authors comparatively assess this association across different bank types, Islamic versus conventional banks. The authors also investigate the mediating effect of Shariah governance.Design/methodology/approachThe authors utilize a unique and an international sample of 723 bank-year observations representing 100 listed banks from 16 countries during the period 2007–2015. The authors investigate the characteristics of the board of directors and audit committee (i.e. size and independence) and employ three core analyses for earnings informativeness (i.e. earnings persistence, cash flow predictability and reliability of loan loss provisions). Additional analyses address Shariah supervisory boards’ (SSBs’) size, financial expertise and multiple outside directorships. The authors use the random-effect Generalised Least Squares (GLS) estimation technique and provide several robustness checks and sensitivities.FindingsThe authors find that, on average, having large and independent boards (and audit committees) increases the informativeness of reported earnings for banks. Conditional on bank type, our results report strong evidence for differential effects across the two alternative banking systems. In Islamic banks, large and independent board of directors (and audit committees) is positively associated with all measures of information value. There is insignificant evidence for conventional banks. However, SSBs show no significant effect on the reported earnings’ informativeness.Originality/valueThis is the first study, to the best of our knowledge, that empirically and comparatively assesses the information value of reported earnings in association with effective internal governance while recognizing the institutional characteristics of different bank types. The authors offer new insights to policymakers, investors and other stakeholders located within countries operating on a dual banking system. The results could help regulators to improve their rules/guidance related to double-layer governance and financial reporting quality.

Effect Of Corporate Governance On Performance Of Listed Banks

Following the recent corporate scandals and turbulences in the Ghanaian financial sector, a fierce debate on banks and corporate performance nexus has emerged. While literature on banks-corporate performance subject remain highly contested, evidence within the Ghanaian contest is sparse. This paucity of literature has motivated this study to examine the effect of corporate governance practices on commercial banks’ performances within the Ghanaian contest drawing evidence from the Ghana Stock Exchange market for the period 2009-2019. Correlational analysis and fixed effect and random effect regression estimator have been employed as the main estimation techniques. Results show that board diversity positively influence corporate performance indicators such ROA and EPS. The study further found that size of the board of directors has negative effects on bank’s performance. Another very important discovery from this study was that, composition of board of directors has effects on bank’s performance. Thus, independent board of directors have positive effects on bank’s performance. Ownership concentration has negative effects on bank’s performance in that larger ownership was usually associated with higher risks. As a sequel, policy should aim at enhancing corporate governance practices while females should be given a fair representation on board committees. The study again advises that independent directors should be included in the board to achieve greater firm results. The arrangement of company ownership should be assessed and controlled. Concentrated ownership structure in specific should be promoted and banks should strive to increase the size of the Independent Board to improve results

Innovation-Driven Policies, Corporate Governance Structure and Total Factor Productivity in Chinese Sports Sector: Evidence from Listed Sports Firms

The sports industry, an emerging industry with low pollution and low emissions, plays an important role in the sustainable development of human society. Using 489 observations from a panel of 128 sports firms listed on the New Third Board in China from 2015 to 2020, this study investigated the effects of three different innovation-driven policies on the total factor productivity of sports firms and the moderating role of governance structure on this relationship. The results showed that high-tech enterprise tax relief was an important policy tool to promote the total factor productivity of sports enterprises, but the direct effects of government subsidies and pre-tax deduction of R&D expenses were not significant. In addition, governance structure had a positive moderating effect on the relationship between innovation-driven policies and the total factor productivity of sports firms. The positive effect of the pre-tax deduction of R&D expenses policy was more significant for sports firms with larger and more independent boards of directors. This study provides new insight into innovation policy development for the sports industry by showing that corporate governance has a significant impact on the effectiveness of innovation-driven policies. Furthermore, the findings provide practical guidance for both managers and government–industry policymakers in the sports industry.

Analisis Pengaruh NPF, FDR, CAR, dan GCG terhadap Profitabilitas Bank Umum Syariah

This study aims to examine the effect of NPF, FDR, CAR and GCG on the profitability of Islamic commercial banks. The data used is secondary data in the form of annual financial reports from 10 Islamic Commercial Banks in Indonesia registered with the Financial Services Authority for the 2017-2020 period. The independent variables used are NPF, FDR, CAR, and GCG which are proxied by the board of directors, independent board of commissioners, and sharia supervisory board. While the dependent variable used is return on assets (ROA). Testing this hypothesis uses a path diagram that is processed with WarpPLS version 8.0. The results of this study indicate that the NPF, FDR, CAR and the sharia supervisory board have significant effect on the profitability of Islamic commercial banks, while the independent board of directors and commissioners have no significant effect on the profitability of Islamic commercial banks.

Manajemen Laba : Good Corporate Governance, Budaya Nasional & Korupsi Dalam Agency Cost

Agency Theory explains that company owners will incur agency costs to maintain the relationship between capital owners and management due to information asymmetry present in the company, one of which is earnings management practices. In line with research by Schwartz (1999) and Lacker & Tayan (2011), the policy of protecting assets owned by investors is determined by the quality of the legal system in force in a country and has direct implications for agency costs that must be incurred by investors. The implementation of Good Corporate Governance through an independent board of directors and audit committee policy provides improved corporate governance and early protection in the company so that the company's objectives are aligned with the objectives of the owners of capital. The purpose of this study is to determine and analyze the effect of the level of agency costs based on national cultural scores and the level of corruption, the role of independent boards of directors and independent audit committees on earnings management practices in companies listed on the Indonesia, Malaysia, Singapore, Philippines and Thailand stock exchanges in 2017 - 2019. The research data were obtained from the annual report reported by each company, and Hofstede's national culture score and the level of corruption perception issued by Tranparency International. This research is quantitative research with data analysis using multiple linear regression analysis. The results showed that the level of agency costs owned by a country had no significant effect on earnings management practices, while the independent board of directors and independent audit committee had a significant effect on earnings management practices and simultaneously agency costs, independent board of directors, and independent audit committee had a significant effect on earnings management practices. So it can be concluded that in dealing with agency problems, companies need to improve good corporate governance to support agency costs incurred by company owners in connection with preventing earnings management practices.

Corporate social responsibility assurance, board characteristics and social performance disclosure. Evidence of listed firms in India

AbstractThe study examines board characteristics, corporate social responsibility (CSR) assurance and social performance disclosure of listed firms before and after mandatory CSR reporting in India. We used the Indian stock market as the testing grounds and applied panel regression and difference‐in‐differences to analyse 960 firm‐year observations between 2010 and 2021. The first findings show that independent board directors and total board size are insignificant in CSR assurance engagement in a mandatory CSR policy period. However, CEO duality is less than likely causing CSR assurance engagement. The second findings show that CSR assurance engagement more than likely causes an increase in social performance disclosure before mandatory CSR policy implementation and increases social performance after policy implementation. The third findings show that the interactive effect of board characteristics (independent directors, total board size and CEO duality) and CSR assurance engagement causes an increase in social performance disclosure. The study sought clarity on the impact of CSR assurance and mandatory CSR reporting on information asymmetry problems to stakeholders. The study also contributes new knowledge on the influence of the interactive effect of board characteristics and CSR assurance on the social performance disclosure of listed firms in India.

Pengaruh Good Corporate Governance Terhadap Konservatisme Akuntansi

This study aims to empirically examine the effect of Good Corporate Governance on accounting conservatism. The population of this study is a publicly listed company on the Indonesia Stock Exchange(IDX) which is in the property and real estate sector in the period 2017-2019. The research sample was determined using the purposive sampling method which resulted in a research sample of 90 observations. The data analysis technique used in this research is multiple linear regression analysis. The test results show that the independent board of directors and commissioners have no effect on accounting conservatism. While the audit committee has a significant effect on accounting conservatism.

Integrated Business Model – Technology (IBM-T) reporting trends: Pre and Post Malaysian Code of Corporate Governance (MCCG) 2017

Purpose – This research examines the effects of the five primary factors that determine the top 100 Malaysian Public Listed Companies (PLCs) adoption of the Integrated Business Model - Technology (IBM-T), influenced by the presence of the Women on the Board of Directors, Independent Board members, and the Integrated Reporting 8 Content Elements initiatives.Design/methodology/approach – In order to explore the reporting of the IBM-T, the study have used the selective sampling method, means and standard deviation, document analysis, regularity of voluntary disclosure trend analysis, and the Paired-Sample T-Test derived from the MCCG 2012 and the MCCG 2017, as well as past research of the examination of the annual reports and integrated reports.Originality/value – In this paper, new research advancements in the areas of integrated reporting, business models, MCCG 2012, and MCCG 2017 are systematically reviewed. Other PLCs than Malaysian PLCs might use the ranking indices for the Integrated Business Model - Technology, Women Board of Directors, Independent Board of Directors, and the Integrated Reporting 8-Content Elements.

Integrated Business Model – Technology (IBM-T) practices: Bursa Malaysia Sector-Based Trends

Purpose – This study investigates the impact of the five main determinants of strengthening the Integrated Business Model – Technology (IBM-T) practices of the top 100 Malaysian Public Listed Companies (PLCs) through the Integrated Business Model – Technology components, moderated by the presence of the Women Board of Directors, Independent Board of Directors, and the Integrated Reporting 8 Content Elements study across the top 100 Malaysian PLCs.Design/methodology/approach – The methodology employed includes the purposive sampling method followed by descriptive statistics, content analysis, frequency of disclosures trend analysis and the One-Way ANOVA analysis derived from the Malaysian Code of Corporate Governance 2012 (MCCG 2012) and the Malaysian Code of Corporate Governance 2017 (MCCG 2017) together with previous studies of the analysis of the annual reports and integrated reports in order to explore the reporting of the Integrated Business Model - Technology, Women Board of Directors, Independent Board of Directors and the Integrated Reporting 8-Content Elements.Originality/value – This study is a systematic review of recent research developments in the Integrated Reporting, Business Model, MCCG 2012 and MCCG 2017. The Integrated Business Model - Technology, Women Board of Directors, Independent Board of Directors, and the Integrated Reporting 8-Content Elements scoring indices designed which could also be applied to other PLCs other than the Malaysian PLCs.

Pengaruh Karakteristik Dewan Direksi, Karakteristik Komite Audit, dan Manajemen Risiko Terhadap Kinerja Perusahaan

This study aims to examine the effect of the characteristics of the board of directors, the characteristics of the audit committee, and risk management on firm performance. The dependent variable in this study is the firm performance as measured using Tobin's Q. The independent variables in this study are CEO tenure, CEO duality, size of the board of directors, frequency of board of directors meetings, independent board of directors, gender diversity of the board of directors, size of audit committee, frequency of audit committee meetings, independent audit committee, and risk management. The control variables in this study are firm size, leverage, and profitability. The population in this study consists of mining sector companies listed on the IDX. Samples were taken for the years 2017-2021 and collected by purposive sampling method. The total sample of this research is 11 companies. The test was carried out using a partial least square (PLS) approach using WarpPLS 8.0 software. The results of the analysis show that the CEO tenure and the frequency of board of directors meetings have a negative and significant effect on firm performance. The audit committee size and audit committee meeting frequency variables have a positive and significant impact on firm performance. Meanwhile, the CEO duality, the size of the board of directors, the independent board of directors, the gender diversity of the board of directors, the independent audit committee, and risk management have no effect on the firm performance.