Corporate Governance Instruments Research Articles

Corporate governance in ensuring the quality of financial and sustainability reporting in times of uncertainty

Purpose: The paper assesses the impact of uncertainty on financial and sustainability reporting. It also indicates the impact of corporate governance mechanisms in strengthening corporate reporting quality in times of uncertainty.Methodology/approach: The main research method is the analysis of the scientific and professional literature. The method of analysis and synthesis was used for inference.Findings: The article reveals key aspects of uncertainty in financial reporting and corporate sustainability reporting. It shows the impact of inherent uncertainty, as well as economic and business uncertainty. It interprets the empirical results presented in the literature on corporate governance mechanisms in ensuring corporate reporting quality in times of uncertainty. The article identifies the risk of fraudulent reporting as a consequence of uncertain conditions and reveals the features of corporate governance institutions and instruments that help mitigate this risk.Research limitations/implications: The article does not contain a detailed analysis of the legislative premises for the functioning of corporate governance mechanisms. Infer-ence unifies corporate governance systems and is based on empirical results presented in the literature. The limitations may set the path for future scientific research. The article explains the possibilities of using corporate governance mechanisms to ensure the quality of corporate reporting in times of uncertainty, and its implications may support managers, controllers, auditors, accountants and regulators.Originality/value: Due to the lack of exhaustive research in the research area, the article reduces the cognitive gap in the Polish literature.

Exploration of Corporate Governance Challenges in Public Sector Information Systems- An Auditor General Perspective

The aim of this article is to explore the obstacles that are within the South African public sector, preventing information systems from operating as efficiently as they could. The significance of the research lies in the fact that the accomplishment of the objectives outlined in the South African national development plan 2030 and the medium-term strategy framework is dependent on the performance of the public sector. In the course of the research, annual and general reports from the website maintained by the Auditor General of South Africa from 2017 through 2021 were used. This study made use of the qualitative analysis software, Atlas.ti 7 which was employed to analyse textual data in annual reports. The investigation of the difficulties posed by corporate governance in the South African public sector were unveiled from themes emerging form the use of thematic analysis. The research uncovered issues with both the macro and the micro levels of corporate governance in the South African public sector. The macro concerns that were brought to light were difficulties in the structure of information systems, an economic downturn, changes in the leadership of the government, and a lack of credible information offered to people. Poor leadership accountability, inadequate information technology capabilities, poor project management, poor information management, inadequate and ineffective disaster recovery, regression in information technology governance, and delay in filling information technology vacancies were some of the micro-obstacles of corporate governance that affected information systems. According to the findings of the research, a transformational approach should be used to solve the issues by first gaining an awareness of how users view the role that information technologies play in the running of public bodies. In addition, instruments of corporate governance that relate to information systems in the public sector should be assessed to gauge their effectiveness in the South African environment.

Carbon emissions, corporate governance, and hostile takeover threats

AbstractExploiting a unique measure of takeover vulnerability principally based on state legislations, we investigate how corporate carbon reduction efforts are influenced by the takeover market, which is widely regarded as a crucial instrument of external corporate governance. Our results show that more takeover exposure brings about significantly greater efforts to reduce carbon emissions. A rise in takeover susceptibility by one standard deviation improves carbon reduction performance by 12.81%. The findings corroborate the notion that the takeover market, acting as an external governance mechanism, compels managers to adopt policies that benefit shareholders in the long run. Our results imply that carbon emissions are a crucial corporate outcome as it is subject to the pressure from the takeover market. Companies should pay a close attention to this matter. Further analysis robustly validates the results, including propensity score matching, entropy balancing, an instrumental variable analysis, and heteroscedastic identification. Our measure of takeover vulnerability is plausibly exogenous and thus probably reveals a causal effect, rather than a mere association.

Auditor choice and nonaudit fees: Evidence from group‐affiliated Indian firms

AbstractWe study the interplay between auditor as an instrument of corporate governance and the ownership structure of firms in the Indian context. Our study is motivated by the literature on agency problems occurring from both the conflicts of interests between owners and managers (Type I problem) and those between dominant and passive stockholders (Type II problems). Investors controlling Group‐affiliated firms have incentives and influence to monitor their firms, resulting in amelioration of Type I problems, which is expected to result in lower demand for high‐quality auditors. However, in situations where Type II problems dominate, the Group‐affiliated firms have incentives to, (i) mitigate conflicts with minority shareholders by using high‐quality auditors, and (ii) strengthen the perception that their auditors are independent. We find that Indian group‐affiliated firms tend to choose BigN auditing firms and that upon selection of a BigN auditor, there is no difference in the magnitude of nonaudit services purchased by both the Group‐affiliated and non‐Group‐affiliated firms, but when a non‐BigN auditor is chosen, the Group‐affiliated firms purchase significantly higher nonaudit services as compared to firms not affiliated to groups, suggesting that when Group‐affiliated firms select reputed auditors they also strive to maintain the perception that auditors are independent.

Business Students Expectations of Brazilian Corporate Governance: Insights for a Sustainable Path in an Emerging Business Environment

This paper aimed to better understand business students’ expectations of Brazilian corporate governance after recent scandals, focusing on capturing their perceptions after the Lava Jato (Car Wash) police investigation. Adapting a prior survey applied to business students, data were collected from three colleges in São Paulo, the largest city in Latin America, with a total of 328 responses. The data were initially submitted to confirmatory factor analysis (CFA), after which we employed a structural equation model (SEM). Our main finding indicates that students are skeptical of an increase in Brazilian corporate governance after this police operation. This result is supported by the prior literature and denotes student consciousness of the need for deep reforms in the business environment and compliance rules. Furthermore, strategic human resources management is the most prominent corporate governance tool today, and the survey revealed disbelief that the Board of Directors and internal audits will act as potential inhibitors of fraud and corruption. These findings are associated with a broad view related to sustainability which denotes that future firm leaders, who are currently business students, comprehend that an ethical business environment needs to be built by professionals who are able to understand the role of corporate governance mechanisms. This paper contributes to the literature by offering a holistic assessment of business student perceptions and encourages a discussion of current models and instruments of Brazilian corporate governance. The scarcity of studies involving education and governance can be considered a constraint to building sustainable companies from a long-term perspective. Comprehending business students’ perceptions about corporate governance mechanisms can be considered a path to increasing the number of business courses with topics aligned with practical effects on environmental, social, and governance subjects, mainly when these mechanisms are evaluated from an integrated perspective.

THE IMPACT OF CORPORATE GOVERNANCE AND ITS CONSEQUENCES ON PROTECTING THE BANK’S ASSETS: EMPIRICAL EVIDENCE FROM KOSOVO BANKS

This study aims to analyze the relationships between corporate governance instruments on the wealth of financial intermediaries in wide-ranging. The data employed in this study are secondary data from nine (9) commercial banks and covered the years 2013-2020. The approach used in data processing is a 2SLS estimation and multilevel mixed-effects for the dependent variable natural logarithm of total assets. The results provided by the econometric analysis show that board size, sovereign committees, Net Interest Margin (NIM), Non-Performing Loans (NPL’s), and equity to liabilities have an important impact on the protection of the assets of financial institutions. While surprising results have been generated in the composition of the board structure in terms of gender diversity, they have turned out to be insignificant. The originality and value of this study lie in the approach of including the characteristics of the board, as well as the combination of some financial indicators different from previous studies, which makes more comprehensive the study of the impact of board composition on increasing the wealth of banks.

Implementation of Corporate Governance Principles and Instruments into the healthcare System of Kazakhstan

The Republic of Kazakhstan is constantly moving towards modernization of medical and healthcare services. The industry of healthcare, while being a top priority for the government and a socially sensitive industry, has processes and business operations of any other sector and therefore was a subject of reforms in terms of governing and control. Corporate governance has proven to be an effective tool for large-scale businesses and therefore is chosen as a path to efficient and productive healthcare delivery solutions. This is the first of a series of articles about corporate governance in healthcare in the Republic of Kazakhstan. It contains a brief overview of corporate governance as it is and in healthcare settings and the national healthcare system.Keywords: Corporate Governance, healthcare reforms, Republic of Kazakhstan.

The Effectiveness of Corporate Governance in Uganda: The Case of Private Companies

This paper examines the effectiveness of rules, procedures and Acts as instruments of corporate governance in Uganda, with interest in the performance of private companies. An extensive review of literature and ethnographic observation of the dynamic of corporate governance in private companies indicate that much as the private companies have adopted a hybrid regulatory framework of corporate governance, loopholes do still exist that have hindered the effectiveness of these instrument in the performance of private companies. Therefore there is need for strengthening corporate governance systems; however some of the weakness are attributed to the unsolved debate on key issues of corporate governance globally that trickles down to Uganda’s young corporate governance system in the private sector.

Sustainability of Agriculture: An Analysis Based on Financial Performance and Good Governance

Strategy to achieve food security is crucial for all countries around the world. This becomes more important for Indonesia as the fourth most populous country. This study evaluates Indonesia’s agricultural sustainability as one of the food security programs. In specific, the evaluation is based on micro-economics point of view by analysing the financial performance of the agricultural industries. This study also examines the role of ownership and external auditors as corporate governance instruments controlling a company achieving its ultimate objective. Conducting a quantitative study and examining Indonesia listed companies for the period of 2003-2018, the results show that most of Indonesia’s listed agricultural companies are not sustained as they were in bankruptcy zone. The ability of companies to manage the costs and commitment to do investments create value for the future, and the role of foreign ownership as one of governance instruments is found to be able to prevent agricultural companies from bankruptcy. The findings bring practical implications on the importance of financial literacy for managers of agricultural industries and good corporate governance practice to ensure the sustainability of agriculture.

The Relevance of Good Corporate Governance Practices to Bank Performance

The purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Cambodian banks. This paper considers foreign and domestic-owned banks in Cambodia. This study opts for a balanced sample of foreign and domestic owned banks for the period 2014-2018. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model is selected using the Hausman specification test where the result shows that the random effect model using generalized least square (GLS) regression is more suitable for the analysis. The findings show that Cambodian banks are having a substantially higher percentage of NEDs on their board, high implementation of governance procedures on board committees where on average the banks are having more than the required two board committees (audit and risk committees) as required by the Prakas on the governance of banks by National Bank of Cambodia. The average board size is around 8 members of which at least 3 members are having a postgraduate degree or a professional qualification. Policymakers need to improve on their supervisory function as the majority of the domestic and some foreign banks do not disclose their annual reports on their company website as required by the Prakas on Corporate Governance of Banks operating in Cambodia. Moreover, amendments should be made to the current corporate governance code for financial institutions as there are no explanatory notes that guide companies and therefore, the current guideline is open to individual and subjective interpretation.

The supervisory board as an instrument of internal corporate governance in a limited liability company

The supervisory board is a body of authority in the company treated as the basic internal mechanism of corporate governance. The aim of this article is to indicate the importance of the corporate supervision using the example of the supervisory board as a statutory body exercising permanent supervision over the activities of a limited liability company. The study attempts to determine what powers of the aforementioned body should be extended in the articles of association and, optionally, in other corporate documents. This article has been written from a perspective of a legal-dogmatic approach that forms the basis of the analysis of the presented problems, using applicable legal provisions and relevant literature. The conducted analysis shows that the power of the supervisory board cannot be increased in a way that infringes the functions of other company bodies. The supervisory board is expected to be involved in the day-to-day operations of the limited liability company and to make strategic decisions.

Sustainability Reporting: Empirical Evidence from Listed Firms of Fuel and Power Sector of Bangladesh

The aim of this study is to observe the extent of sustainability reporting practice and to investigate the influential factors in determining the sustainability reporting in the fuel and power industry of Bangladesh. This research study develops a self-structured sustainability reporting index (SRI) based on established guidelines and previous studies. Content analysis has been used to observe the practice of sustainability reporting and board composition, ownership structure and firm characteristics have been used as the proxies of determinants of sustainability reporting. The study found that the average mean of sustainability reporting measured by the index is only 20.14% which indicates a very poor quality of sustainability reporting. Among the three components of sustainability reporting, economics sustainability disclosure has the highest index value and environmental sustainability disclosure has the lowest index value. But the positive sign is that the disclosure level of sustainability reporting is gradually increasing over the years. The multiple regression result shows that sustainability reporting practice is more prevalent inbigger firms and older firms. This study also shows that there is no significant association of sustainability reporting with board composition and ownership structures which implies that corporate governance instruments are not playing their effective role in ensuring sustainability reporting. The results recommend that the regulatory authority should develop mandatory guidelines for sustainability reporting or enforce existing global guidelines like GRI to improve the practice of sustainability reporting. The study also suggests that efficient corporate governance mechanism may play a vital role in increasing the extent of sustainability reporting in Bangladesh. Journal of Business Studies, Vol. XLII, No. 1, April 2021 Page 175-212

How Far Has Audit Quality been Researched?

The audit has a significant function as an instrument of external corporate governance, and audit quality. Affect audit governance. The overall objective of the audit is to obtain reasonable assurance that the financial statements do not contain substantial misstatements due to fraud or error, to issue an audit report following auditing standards. This study aims to determine the development map of audit quality research that is indexed by Scopus and other reputable journals with the keyword "Audit Quality". The data analyzed were 893 selected publications. The development map of audit quality research was analyzed using the VOSviewer application program to find out the bibliometric map. The results showed that the number of publications on the development of audit quality research indexed Scopus from the last 5 years since 2017-2021 experienced a significant increase and the words most used by the author are audit quality, human, dan clinical audit.

Internal Governance Instruments: Codes and Policies

Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders and effective governance requires a structure through which the objectives of the company are set, the means of attaining those objectives and monitoring performance are determined, and the company and its people are held accountable. Since the elements of corporate governance include ethics, risk management, compliance and administration, companies must establish and maintain the appropriate “control environment” in order for their corporate governance procedures to be effective. One of the first steps in establishing the appropriate control environment is the adoption and dissemination of corporate governance instruments and this chapter covers of the content of key governance-related codes, policies and procedures including principles of corporate governance, codes of conduct and ethics for the entire enterprise, board of directors’ code of conduct, CEO/CFO code of ethics, “independent director” requirements and guidelines that the nominating or corporate governance committee can follow in evaluating prospective candidates for the board of directors and sustainability-related instruments.

With other people’s money: Campaign financing as an agency problem

Agency theory explanations for corporate political activity assume that managers distort resource allocation to invest in political connections to pursue personal benefits. While distorted resource allocations yield poor earning quality, we expect that companies with efficient governance may curb this opportunistic behavior. We used matching procedures to identify the effects of financing political campaigns on the earning quality of the firm. We assembled an original panel of listed firms in Brazil from 1998 to 2013. We found that firms that donated to electoral campaigns had a lower earning quality than nondonor firms. Firms with superior corporate governance instruments were able to reduce the harmful effects on earning quality. These results support the tenets of agency theory in explaining why firms engage in politics.

Executive remuneration and the limits of disclosure as an instrument of corporate governance

Why does disclosure continue to be seen as a panacea for failings in corporate governance, despite mounting evidence that it is a weak instrument of control? Through a micro-historical study of the constitution and deliberations of the Greenbury committee, which placed executive remuneration disclosure at the heart of UK corporate governance, we demonstrate how disclosure was discursively constructed by elite business leaders as a primary requirement of accountability of agents to owners. Our research, conducted twenty years after the publication of the Greenbury recommendations in 1995, is based on oral history interviews with surviving members of the committee and its professional advisers, who came to lament that their efforts perversely had helped escalate rather than moderate top executive pay. We argue that disclosure is a poor surrogate for real engagement by owners in corporate governance, and propose four general conditions that, if satisfied, might lead to increased accountability.

PENGARUH KINERJA KEUANGAN TERHADAP NILAI PERUSAHAAN DENGAN GOOD CORPORATE GOVERNANCE SEBAGAI VARIABEL MODERASI

This study will examine how the instruments of good corporate governance can moderate the impact of thefanancial performance of the company. Financial performance proxied by ROA, ROE and Leverage, while the value of the company with the Tobins Q. Good corporate governance is measured by the percentage ofinstitutional ownership. Hypothesis testing is done by multiple regression method with the classical assumption test first. The total population sample of 129 companies from manufacturing companies listed on the Stock Exchange. The results of this study is good corporate governance as a system that can regulate the division of duties, rights and obligations of parties interested in the life of the company, including shareholders, board members, and managers can improve company performance impact on company value.

Corporate governance and firm value: a comparative analysis of state and non-state owned companies in the context of Pakistan

PurposeThe purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Pakistan. This paper considers state- and non-state-owned enterprises and examines whether the influence of corporate governance on firm value varies across firms having different nature of ownership.Design/methodology/approachThis study opts for an unbalanced sample of state- and non-state-owned enterprises for the period 2010-2014. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model, is selected using Hausman specification test.FindingsThe notable findings show that board independence has a significant and positive relationship with firm value only for state-owned companies. Furthermore, the results show that market capitalization and return on assets have a significant and positive association with firm value for both state- and non-state-owned enterprises. All other variables are found insignificant for both state- and non-state-owned companies, but the results are consistent with those reported in previous studies.Practical implicationThe findings of the study suggest that fair induction of independent directors, appropriate board size and cost-benefit analysis to conduct frequent meetings can help corporations to improve their performance.Originality/valueThis study is adding to the current literature by providing new insights and shows that the impact of corporate governance on firm value varies across firms of different types of ownership, i.e. state- and non-state-owned enterprises.

Crony interlockers and the centrality of banks: the network of Moroccan listed companies

ABSTRACTIn this paper, we study crony capitalism through the lens of Moroccan listed companies and the role of the financial sector. We first highlight the role of banks in the history of Moroccan capitalism from the setting up of the French protectorate over Morocco to the dominance of some major family groups. Using a network analysis of board members of the Moroccan listed companies we confirm the centrality of finance compared to other sectors. We also measure the relational proximity to demonstrate that each cluster of the four main holding families has at least one financial company. Finally, we argue that crony interlockers, who are members of royal foundations and represent an institutional investor or a holding family that owns a bank and/or an insurance company, are the most central actors in the network of listed companies. Our contribution to crony capitalism in MENA analyses the politics of finance in a neoliberal and peripheral country such as Morocco. Boone and Henry [(2004). Neoliberalism in the Middle East and Africa: Divergent banking reform trajectories, 1980s to 2000. Commonwealth & Comparative Politics, 42(3), 356–392] had described the banking sector in Morocco as a private oligopoly. Here, we provide evidence that the monarchy and its entourage are capturing corporate governance instruments such as board membership to control economic activities.

Classification of Corporate Cultures on Corporate Enterprises

The article is devoted to the classification of types of corporate cultures on the basis of the works of foreign researchers ‒ R. Harrison, T. Deal and A. Kennedy, V. Schneider, K. Cameron and R. Quinn, E. Schein, who, in spite of the diversity and uniqueness of corporate cultures, identified and classified culture according to the processes taken place within the organization, the managerial aspect, organization orientation, organizational forms and management theory, values, beliefs and basic assumptions. The author describes the existing classifications of types of corporate cultures in the article, as well as determines that corporate culture as an instrument of corporate governance. The recognized classifications of corporate cultures were analyzed. Based on the classification of corporate cultures proposed by K. Cameron and R. Quinn, the author proposed her own classification of Leadership Cultures ‒ the classification of leadership characteristics that dominate on the various stages of the organization’s life cycle. In the article the author has traced changes in corporate culture in the process of the organization development: from its initial stage (the stage of birth) to the end of the life cycle (dying). The author proposed her own classification of corporate culture based the model of the organization life cycle, developed by I. Adizes. The choice of the author of I. Adizes’s model lies in the fact that the focus of this model is on both the growth of the organization and its regression. The key parameters of this model are the degree of flexibility and controllability (control). It is proposed to characterize corporate culture of the enterprise in the context of organization culture classification using the following parameters: ideas and innovations, structure, communication, mission and goals, people, conflicts, growth.