Corporate Governance In Public Sector Research Articles

Main Predictor(s) of Good Corporate Governance in National Government Departments: A Decision-tree Classification and Prediction Analyses

Purpose: Good public sector corporate governance leads to good management, stewardship of public wealth, public engagement, and ultimately, better outcomes for citizens. As South Africa has one of the worst Gini coefficients in the world, its public sector should effectively address the challenges of inequality, poverty, and unemployment. Yet, almost 30% of national and provincial government departments obtain unfavourable audit outcomes. Methodology: Supporting the drive for clean audit outcomes that equate to good corporate governance, the research objective was to determine the predictors of national government departments’ corporate governance success. The study used CHAID (chi-squared automatic interaction detection) analyses, a decision-tree technique based on information reported over a 13-year period. Findings: The CHAID analyses indicated that national government departments’ corporate governance success is primarily explained by three factors, namely: a quality internal audit function (main predictor), the number of fraud incidents, and the number of internal control weaknesses. Implication: Even though all the variables in this study receive attention in literature and regulation, the problem of unfavourable audit outcomes persists. The question is where to focus on resolving the problem. Regulators may take note of where to focus their efforts in strengthening elements of good corporate governance.

INTERNAL AUDIT FUNCTION, MANAGEMENT SUPPORT AND CORPORATE GOVERNANCE IN PUBLIC SECTOR

Having strong corporate governance (CG) in public sectors is very imperative. An effective CG may, to some extent, prevent mismanagement of public monies. Internal audit function might be a significant contributor to achieve this. However, little attention was given on the role of internal audit function within public sector’s CG subject. As such, this paper presents a conceptual discussion on the potential effects of internal audit function attributes on the Malaysian public sector’s CG, and the potential moderating effect of management support on this relationship. Institutional and agency theories were employed to synthesise relevant literature on internal audit function, management support, and CG in public sector setting. Subsequently, a conceptual framework was developed and ten propositions were established. The originality of this paper was in its comprehensive arguments on the possible association of internal audit function attributes on CG of the Malaysian public sector. Moreover, this paper attempted to examine the role of management support in this association. Additionally, the use of the institutional and agency theories offered essential insights pertaining to internal audit function attributes and management support subjects within the context of CG of the public sector. This study is timely in that it offers insights into how the internal audit function may improve the management of public financial resources.

Board Structure and Firm Performance: Evidence from State Owned Enterprises in Kenya

The study examines the relationship between board structure and firm performance in the state owned enterprises in Kenya. Data was collected from 25 state owned enterprises in the commercial and manufacturing sector covering the period 2014 to 2016. To establish the relationship between the variables the study employed panel data regression, with fixed and random effects. The study findings established that board size had a positive and significant effect on firm performance. In contrast board independence had negative and significant effect on firm performance. The study findings indicate that that large boards improved firm performance while board independence had a negative impact on firm performance. Results for control variables firm size and firm age were positive and statistically significant. The findings from this study contributes to literature in corporate governance in public sector where comparatively empirical evidence is limited. The findings will prove useful in guiding policy in corporate governance practices in the public sector in Kenya. Keywords: Corporate governance, Board size, board independence, Firm Performance, State Owned enterprises. DOI: 10.7176/RJFA/11-16-04 Publication date: August 31 st 2020

Using management control to understand public sector corporate governance changes

PurposeWithin the context of recent post-localism developments in the English local government, this paper aims to show, first, how management controls have become more enabling in response to changes in rules of public sector corporate governance and, secondly, how changes in management control systems gave rise to new corporate governance practices.Design/methodology/approachTheoretically, the paper mobilises the concept of enabling control to reflect on contemporary changes in public sector corporate governance. It draws on the International Federation of Accountants’ (IFAC) and Chartered Institute of Public Finance and Accountancy’s (CIPFA) new public sector governance and management control system model and data gathered from a longitudinal qualitative field study of a local authority in North East England. The field study used interviews, observation and documentation review.FindingsThis paper suggests specific ways in which the decentralisation of policymaking and performance measurement in a local authority (present case) gave rise to enabling corporate governance and how corporate governance and management control practices went some way to aid in the pursuit of the public interest. In particular, it shows that the management control system can be designed at the operational level to be enabling. The significance of global transparency for supporting corporate governance practices around public interest is observed. This paper reaffirms that accountability is but one element of public sector corporate governance. Rather, public sector corporate governance also pursues integrity, openness, defining outcomes, determining interventions, leadership and capacity and risk and performance management.Practical implicationsInsights into uses of such enabling practices in public sector corporate governance are relevant for many countries in which public sector funding has been cut, especially since the 2007/2008 global financial crisis.Originality/valueThis paper introduces the concept of enabling control into the public sector corporate governance and control debate by fleshing out the categories of public sector corporate governance and management control suggested recently by IFAC and CIPFA drawing on observed practices of a local government entity.

Corporate Governance in the Public Sector

From that exploration of current literature, an analysis of change management approaches and research findings in the area of organizational studies will be used to support the premise that corporate governance utilizing the “board of directors” model is more successful when viewed as a framework for positive organizational change in the public sector. Examination of aspects associated with the change process is therefore considered by many academics and practitioners of organizational change management to give a full account of the purpose, scope, and success of organizational change. Best practices processes that emerge from this research will benefit the accepting organization with ways to view the best and most appropriate approach to their change management initiatives. Since the 1990’s the role of corporate governance has been discussed as a remedy for the lack of accountability and probity in public sector organizations. Corporate governance is based on the “board of directors” model, and reflects a successful private sector management style. Although some elements of corporate governance can be transferred to the public sector, a lot of changes and modifications must be done to this concept if it is to be implemented successfully into public sector organizations. Public sector corporate governance is distinguished from the private sector by its need for significant objective diversity and management constructs. Also, the lack of a significant body of research regarding public sector corporate governance makes it distinct from the private sector.

Accrual-based earnings management in state owned companies

Purpose – Opposition to transnational calls for the adoption of accrual-based accounting in the public sector may stem from arguments that it is associated with poor earnings quality. The purpose of this paper is to determine whether state owned enterprises (SOEs) operating under accrual-based accounting manage their earnings, whether it is more prevalent vis-a-vis privately owned enterprises (POEs) and the conditions under which it is more likely to occur. Design/methodology/approach – This paper measures earnings management for a large sample of unlisted Italian SOEs and POEs using a framework developed by Stubben (2010). The authors use regression analysis to estimate the variables which predict abnormal accruals including firm size, leverage and profitability. Findings – The authors find no evidence that the level of state ownership (SO) is positively correlated with accrual-based earnings management. The authors also provide evidence that earnings management by SOEs decreases with firm size and increases with profitability. Research limitations/implications – While the study is the first to examine earnings management in a public sector accrual accounting environment for a sample of European firms, namely Italian firms, the authors call for more research into this issue examining public entities in other European Union (EU) member states or public entities other than SOEs. Practical implications – The EU recently introduced a new transnational accounting directive in which it prescribes the preparation of financial statements based on accrual accounting for all European public sector entities, arguing that it reduces the window dressing that is allowed by cash accounting. Since Italian SOEs already prepare their accounts on an accruals-basis, by analysing their accounting behaviour the authors are able to determine the variables which predict when earning management is more likely to occur in a public sector accrual accounting environment, and therefore the authors provide guidance which may be useful in shaping the transition process from cash accounting to accrual accounting by identifying the types of entities whose accounts should be subject to greater regulatory scrutiny. A better understanding of the relation between SO and earnings management will provide insight into public sector corporate governance and aid in the acceptance of transnational regulation that would otherwise significantly alter current accounting practices and possibly be opposed at a national level. Originality/value – Earnings management in a public sector accrual accounting environment had been analysed only for Chinese listed companies. The authors extend previous analysis to a sample of European (Italian) SOEs which are unlisted. The authors also extend previous work by determining the characteristics of firms which manage their earnings.

The worthiness of corporate governance in public sector the case of public healthcare sector in Greece

The objective of this paper is to measure the worthiness which the compliance of governance norms will provide to public organizations. We introduce the principles of corporate governance that should characterize the function of public sector and our analysis focuses on public hospitals. Sending appropriate designed questionnaires to an adequate sample of Greek public hospitals, we measure and analyze the impact that the implementation of a corporate governance code would have to hospitals’ administration, control system and communication with stakeholders. According to research’s results the implementation of a corporate governance code by public hospitals could add value to the provided healthcare services.

Governance at South African state‐owned enterprises: what do annual reports and the print media tell us?

PurposeThe overall objective of the study was to track, over a two‐year period, the reported incidences of corporate governance transgressions at five strategic South African state‐owned enterprises (SOEs).Design/methodology/approachTransgressions for each SOE were documented against the Organisation for Economic Co‐operation and Development's framework of best practice in governance for SOEs by reviewing annual reports and newspaper article citations over a two‐year period.FindingsWhile political intervention in the operational running of each SOE is apparent, government appears not to have fulfilled its oversight role of ensuring the sound governance of SOEs according to best practices. While the SOEs appear to comply with external governance demands, compliance to internal, self‐regulated governance appears to be lacking.Research limitations/implicationsThe use of annual reports and media reports to document governance practices are open to subjectivity. The broader extrapolation of findings based on five SOEs must be undertaken with caution.Practical implicationsThe present study alerts government to potential areas of corporate governance practices at South African SOEs that warrant attention. As South Africa has recently joined the BRICS bloc of developing countries, the findings from the present study could afford a starting point for future comparative study among this group of countries, which appears to evidence similar challenges with regard to governance within their SOEs.Originality/valueThe present study begins to elevate the debate on corporate governance at South African SOEs from public rhetoric to a deeper understanding of the nature of the major problems that warrant attention. Although limited in scope, the study contributes to the scarce academic literature on public sector corporate governance in Africa in general, and in the South African SOE sector in particular.

Factors Impacting the Adoption and Operation of Corporate Governance Reform in Australian State Government Departments

Corporate governance reforms are increasingly common in public sector organisations. Despite the scope of recent and ongoing public sector change, the processes used to adopt and operate public sector corporate governance reform are not clearly documented. In some cases there is evidence of reform failure. This study sought to identify and describe the variables associated with corporate governance change in Australian state government departments, particularly the factors that impact on the adoption and operation of reform. Concepts associated with scientific management (rational/technocratic influences) and organisational culture (political/cultural influences), and their impact on change, were combined to produce a framework that was tested in two phases. Phase one focused on the collection of qualitative data relating to corporate governance reform in the Victorian Department of Human Services. The second phase involved the collection of quantitative data from chief executives and senior executives in all Australian state government departments. The qualitative data collected in phase one was used to validate the conceptual framework which was then further tested using quantitative methods during phase two. Phase one and two findings were consistent with the conceptual model. In particular, a factor analysis of phase two results identified the adoption of change being influenced by leadership capability; external improvement drivers; internal improvement drivers; organisational politics; the capacity of an organisation to interpret knowledge; and changes in an organisation’s operating environment. The operation of reform was influenced by continuity of leadership; actions taken to embed change and build supportive attitudes to change; management of organisational politics; and the capacity of an organisation to understand change. The immediate implication of this research is the definition of a new model to manage corporate governance change. The rational/scientific and political/cultural factors identified by this project provide an integrated approach that can be drawn upon by change actors. It acknowledges the significance of the rational/scientific and political/cultural factors that come into play during corporate governance reform. This study has filled a gap relating to how public sector organisations go about making corporate governance changes and provides customised and practical recommendations for future corporate governance reforms in Australian state government departments. These include giving priority to corporate governance reform training (the research found that only around one in two senior officers had been trained in corporate governance reform) and further strengthening organisational leadership (leadership was identified as a critical factor at both the adoption and operation stages of corporate governance reform). This research provides new insight into understanding corporate governance change in an Australian public sector context and provides a model to more effectively manage future reform.

Organisational Structures Do Matter for Good Governance and Good Performance

The article explains why good public sector corporate governance is important for an economy's economic performance. Two contrasting case studies are then used, the Reserve Bank of New Zealand (RBNZ) and the Central Bank of Bosnia and Herzegovina (CBBH), to illustrate key elements that have engendered good governance and performance: a good statute, with clear objectives and accountability mechanisms; clearly stated roles for all participants; operational and financial independence; sound internal decision-making processes; formal plans and budgets; effective senior management and board monitoring. The article also discusses why the CBBH is one of the few successful state-level institutions in Bosnia.

Public Sector Corporate Governance Disclosures: An Examination of Annual Reporting Practices in Queensland

In the public sector, corporate governance is an expression that is yet to be explicitly defined. This paper examines the existing public sector literature in order to derive a set of broad principles of corporate governance in the public sector. These principles are then applied through a content analysis of corporate governance disclosures in a group of government‐owned corporations, state government departments, local governments and statutory bodies. The results indicate the set of principles derived is generally applicable to various forms of public entities. However, due to a lack of an established public sector corporate governance framework, the disclosure of corporate governance is piecemeal. Government‐owned corporations achieved better disclosure practices in most principles than other public sector bodies. The paper aims to stimulate debate on public sector corporate governance and provides a basis for a more extensive survey on corporate governance disclosures.

Corporate governance in the public services: Concepts and issues

Public sector corporate governance distinguishes itself from its private sector counterpart by the considerable diversity of objectives and management structures in the former. There is a need to address performance as well as conformance issues in public sector governance.