Corporate Governance Regulations Research Articles

Do Female CEOs Moderate the Link between Female Directors on Audit Committees and Audit Quality: Evidence from the UK

We examine female chief executive officers (CEOs) in the context of women directors on audit committees (ACs) and audit quality. Previous research has yet to examine whether the presence of a female CEO affects the relationship between female membership in AC and audit quality. This study focuses on FTSE 350 firms, covers the period 2009-2015, and utilizes ordinary least-squares regression to test our hypothesis. The research found a positive relation between the proportion of female directors on ACs and the quality of the audit in the event of a female CEO. Furthermore, the finding is robust to endogeneity bias. In addition, our result is robust to an alternative audit quality proxy. Appointing women to CEO roles in businesses can further increase the link between women on ACs and audit quality. In addition, the results of the study support the efforts of corporate governance regulators to expand the number of female directors.

Regulatory reforms, board independence and earnings quality

We investigate the exogenous increase in the proportion of independent non-executive directors (INEDs) in response to the corporate governance regulations 2012 in Singapore and Vietnam to estimate the effectiveness of INEDs in restraining earnings management. We also investigate the moderating effect of two important characteristics of INEDs: education and tenure on the relationship between regulations 2012 and earnings management. Our core findings show that voluntary adopters with better INEDs education and optimal tenure experience a significant decrease in earnings management compared to mandatory adopters with lower of INEDseducation and suboptimal tenure.

Do Share Repurchases Crowd Out Internal Investment in South Africa?

Researchers in developed countries have questioned whether share repurchase activity influences internal investment. The aim of this study was to investigate the relationship between share repurchases and internal investment (defined as capital expenditure, employment expenditure, and research and development) in South Africa, as little was known about this relationship in developing countries. A quantitative research methodology was followed, employing the data of South African listed companies during the 2002–2017 period. A significant negative relationship was noted between share repurchases and employment expenditure when considering all companies, while high-growth companies exhibited a significant negative relationship between share repurchases and capital expenditure. The negative relationships could indicate that companies increase share repurchases to the detriment of internal investment (especially employment). Alternatively, it may imply that share repurchase and internal investment decisions are determined simultaneously, with companies decreasing internal investment and increasing share repurchases in the absence of identifiable profitable projects (or increasing internal investment and decreasing share repurchases when growth opportunities are available). These findings could be useful to shareholders, corporate governance regulators and activists. Given the high unemployment and income inequality in South Africa, the results support a call for the improved regulation of share repurchases to ensure effective monitoring.

An overview of Corporate Governance Laws and Regulations applicable to the Banking Industry in Sri Lanka

An overview of Corporate Governance Laws and Regulations applicable to the Banking Industry in Sri Lanka

Board Attributes and Corporate Social Responsibility: A Systematic Literature Review and Future Research Perspectives

The relationship between board attributes and corporate social responsibility (CSR) has gained considerable attention from academicians and researchers in the past few decades. This systematic literature review paper aims to analyse empirical evidence on the impact of board characteristics on CSR. A content analysis of 159 articles extracted systematically from the Scopus and WOS databases revealed a significant upsurge in the area in the last decade mainly in the past three years. It was found that a large majority of the existing works were single-country studies mainly from the developed nations; though cross-country works and research from developing countries have gained momentum in recent years. The study highlighted important trends in publication in the area, the most researched as well as less analysed board attributes, various measures of CSR variables, the type of sample organisations considered, and commonly used research techniques. The study makes a useful contribution to the extant literature by providing insight into the existing works and indicating knowledge gaps and future research perspectives. The findings of the study would also be useful for the policy makers and regulators in further strengthening the corporate governance codes and regulations, so as to help organisations in improving their social performance.

Corporate governance from colonial Ceylon to post-civil war Sri Lanka

This paper examines the corporate governance mechanisms in Sri Lanka, a country that only a little more than a decade ago emerged from a 30-year long civil war. We focus on the evolution of Sri Lanka’s corporate governance from historical, sociocultural, and institutional perspectives. Taking Sri Lanka as a case where inclusiveness and reconciliation at the board level is important, we aim to diagnose the key corporate governance issues which we then broaden towards other South Asia developing countries and provide a research agenda. Many Sri Lankan firms suffer from typical Asian-style agency problems; conflicts of interest between (i) minority and majority shareholders, (ii) shareholders and debtholders, and (iii) shareholders and stakeholders. The most prevalent agency problem is the expropriation of minority shareholders’ rights through ownership pyramids, cross-holdings, or intermediate private firms. Although creditor protection laws limit the expropriation of debtholders’ rights, firms’ widespread use of political connections forces banks to grant cheap credit at favorable terms. Poor stakeholder management creates agency problems following window dressing of ESG disclosures, corporate opacity, and ethnicity-and gender-based discrimination in the workplace. This study shows that social norms and ethical values play a non-negligible role in the functioning of the corporate governance regulation and in corporate culture in Sri Lanka.

Information Technology Governance and Corporate Boards’ Relationship with Companies’ Performance and Earnings Management: A Longitudinal Approach

In accordance with the segregation of oversight from management decision making, the board-level information technology governance is accountable for supervising managerial IT activities. This research empirically analyzes the impact of board-level IT governance on the performance and earnings management practices of Saudi Arabian stock exchange (Tadawul)-listed companies between 2008 and 2020. The study sample includes cross-sectional time-series data from 154 firms with 18,018 firm-year observations. This study used regression analysis and other econometric models to examine probable endogeneities. The findings show that only the return on assets’ operational performance is positively and significantly related to board-level IT governance among the three performance metrics (return on assets, return on equity, and Tobin’s Q). This indicates that a higher proportion of members with IT experience and the presence of a board-level IT professional as chief information officer/chief technology officer and an IT committee positively impact operational performance. Finally, board-level IT governance competence and other governance attributes do not deter earnings management practices. Therefore, countries like Saudi Arabia should enhance their corporate governance environment considering the increasing significance of IT governance (control, service, and monitoring). There is also a need to review provisions of the Saudi Arabia Corporate Governance Regulations, especially for board composition, the appointment of independent and IT-literate directors, and penalties for non-compliance with regulations.

Corporate governance mechanisms and firm performance in Saudi Arabia before and during the COVID-19 outbreak

This study examines the impact of corporate governance mechanisms on the performance of listed firms in Saudi Arabia before and during the coronavirus disease (COVID-19) pandemic. The study applied univariate, bivariate, and multivariate analyses to data collected from 258 annual reports from 2019 to 2020. The results show that during the COVID-19 pandemic, firm market performance (Tobin’s Q ratio) has decreased with larger board size, more board meetings, while it has increased with board experience, board education, and board gender (number of women on the board). Moreover, during the COVID-19 pandemic, board gender was found to have a significant positive impact on the firm’s operational performance (return on assets), implying that gender diversity on boards plays a crucial role in times of crisis. The findings have significant implications for Saudi Arabian firms, managers, investors, and policymakers. Furthermore, the latest corporate governance regulations in Saudi Arabia are almost certain to have a significant impact on firm performance, particularly during times of crisis. In addition, corporate governance regulations should consider the importance of small board size, lower board independence, board member experience and education, and board gender diversity to improve corporate performance, especially in times of crisis. Governments and regulators should collaborate to reduce the financial and economic impact of the COVID-19 pandemic. Comprehensive policies are needed to address the negative consequences of current and future crises.

The impact of remuneration governance on chief executive officer overpayment

Background: Chief executive officer (CEO) payment and company performance are highly controversial, and existing research has focused on this link for decades. The study was conducted in South Africa where corporate governance regulators have introduced measures to improve the relationship between CEO pay and performance.Aim: This research aimed to explore the problem by extending Pepper and Gore’s (2015) behavioural agency theory to examine the moderating effect of remuneration governance on the CEO pay – company performance relationship.Setting: The study focused on the Top 100 listed companies in which several regulations concerning CEO pay were introduced, which provided the opportunity to examine such regulations on the alignment of CEO pay and company performance.Method: Panel data from 67 company annual reports were analysed over two decades with 871 datapoints, divided into three periods corresponding with the introduction of regulations. Analyses included corrected panel standard errors and estimated generalised least squared hierarchical multiple regression and moderated multiple regression analyses.Results: Results showed a statistically significant positive relationship between company performance measures and total CEO remuneration (including long-term incentives [LTIs]) for each of the three periods. We found that LTIs tied to performance-vested criteria and CEO minimum shareholding do enhance pay-performance sensitivity. Results further suggest that the behavioural agency theory is incomplete and researchers should consider the role of remuneration governance in moderating CEO overpayment.Conclusion: Remuneration governance should be refined through the inclusion of retrospective CEO remuneration disclosure to increase pay-performance sensitivity.Contribution: This research contributes to knowledge of CEO payment and company performance.

The Impact of Corporate Social Responsibilities on Earnings Management: Evidence from Vietnam

Purpose: This study aims to assess whether listed companies comply with regulations on social responsibility disclosure and the regulatory role of CEO power impact earnings management. Theoretical framework: corporate social responsibility (CSR) has become a decisive factor in business performance and is consequential to the sustainable existence of enterprises in the world's competitive environment (Buckingham, 2012; Mark, 2012; Yinyoung et al., 2016; Enric, 2018) and also a concern in the context of many concerns about social and environmental issues. Design/methodology/approach: The study uses a data sample of 418 companies listed on the two stock exchanges HOSE and HNX in the period 2016 - 2020 through the method of general feasible least squares (FGLS) to measure the impact of corporate social responsibility and the impact of social responsibility with the regulation of CEO power on earnings management. Findings: This empirical evidence has provided reliable evidence to help listed companies have the incentive to comply with regulations on CSR disclosure to increase their prestige and attract investment. Research, Practical & Social implications: The research results admit that companies that comply with regulations on CSR disclosure have limited profit management, and in the case of influential executives, the impact of CSR on profit management is more substantial. Originality/value: the study only examines the impact of CSR combined with CEO power, so it is not possible to have an overview of the CEO's impact on the implementation of corporate CSR on EM and CSR in the regulation of corporate governance to EM. Therefore, this is the author's future research direction when considering this issue.

Corporate governance regulation in regulatory space of a developing country: actors, strategies and outcomes

PurposeThis study seeks to deepen the understanding of the political process underlying the establishment and evolution of corporate governance (CG) regulations in a developing country.Design/methodology/approachDrawing on regulatory space concept (Hancher and Moran, 1989) and Oliver's (1991) typology of strategic responses, the authors identify which actor participated in and benefitted from the establishment of a new transnational CG regulation in Pakistan. Data were collected through interviews and from the published secondary sources.FindingsThe findings highlighted regulations are being influenced and shaped up by the political process of negotiation, bargaining, manipulation and domination between powerful and resourceful actors in a given regulatory space. National regulators and regulatees can be indeed fervent opponents to the transnational regulations when it comes to protecting their well-rooted national interests.Originality/valueThis study contributes to the accounting literature by illustrating political processes through which internationally recognised CG practices are resisted, negotiated and implemented in the developing countries. The regulator must pay attention that the outcome of the regulatory change process is the result of carefully crafted and conscious strategies of actors in the regulatory space.

The Impact of Corporate Governance on the Financial Performance of Listed Companies: Evidence from Saudi Arabia

This study investigates the role of corporate governance regulations on the financial performance within listed companies in Saudi Arabia. 120 organisations were selected from Saudi Stock Exchange, Tadawul, over a period of four years between 2016 to 2019 for 565 observations. The data were gathered about the intendent variable of board independence, board size, board meeting, board interlocking, in addition to firm size and leverage as moderators. The independent variable was Tobin’s q. The result of this study shows that there is a negative relationship between board size and board interlocking on one hand and financial performance of the listed companies on the other hand. Other independent variables of independent directorships and frequency of board meeting were shown to have a positive effect on financial performance. The outcome of this study supports the theoretical foundations of stakeholder theory about the importance of reducing the monopoly of the agents (directors on board) over the decisions of the company. Such reduction of the effect of directors can be done through maximising the number of meetings accompanied by maximising the number of independent directors on board. Also, by reducing board interlocking, the influence of directors will shrink while increasing board size will slow down the process of taking decisions which affect companies’ performance.

Homogeneity and Heterogeneity in How Institutional Investors Perceive Corporate and Securities Regulations

We use an in-depth survey of institutional investors investing in Japan to reveal the homogeneity and heterogeneity of their views on corporate governance regulations. Their opinions exhibited high homogeneity in favoring legislative intervention in corporate management but nuanced heterogeneity with respect to the degree of intervention that they regarded as desirable. A certain cluster of investors, to which investment trusts and advisors were more likely to belong, tended to prefer stronger legal intervention; these investors favored strict tender-offer rules, and they more clearly supported intervention in the composition of boards and the pursuit of executive liability. These reactions may have been motivated by concern for the fact that a certain class of shareholders, particularly banks and insurance companies, was vulnerable to pressure by management, making it hard for corporations functioning autonomously to maximize shareholder values. The survey results suggest that shareholder composition may affect the necessity and effectiveness of legal interventions.

Do Publicly Listed Insurance Firms in Saudi Arabia Have Strong Corporate Governance?

Saudi Arabia has now opened its markets to foreign investors in line with its strategy to diversify its economy. However, investors need to feel confident that Saudi enterprises are being monitored and regulated appropriately. This study identifies the impact of improvements in Saudi corporate governance practices among insurance firms. The effects of corporate governance on the financial performance of 35 insurance firms listed on the Saudi stock market are examined from 2008 to 2014, including Shariah-compliant and life insurance firms. Four different methodologies are used: the generalised least squares random effect, fixed effect models, a difference-in-differences (DID) measurement for comparisons, and the probit model with average marginal effect to address endogeneity. The results indicate that firm performance is affected by information asymmetry. The 2009 exogenous shock from the Saudi regulatory change to board composition and audit committee size shows a positive effect on performance in the DID comparison. However, an increase in independent board and audit committee members has a significant negative effect. Other findings indicate that an increase in CEO (Chief Executive Officer) age has a positive effect on performance, as do three pay variables (director incentives, CEO and top executive pay, and above-the-mean director incentives). However, when CEO and top executive pay increases above the mean, the effect turns negative; this also happens with a change in CEO from poor performance. The results support the importance of Saudi insurance industry corporate governance regulation and reflect the improved governance perspectives of the Saudi Capital Market Authority and Saudi Arabian Monetary Agency.

The Effect of Corporate Governance Regulation on the Profitability of Insurance Companies in Indonesia

This study is driven by the growing importance of insurance companies in Indonesia and corporate governance as determinants of their profitability. Corporate governance is crucial in insurance companies as they provide instruments for risk transfers and savings mechanisms and promote investments in an economy. Our research examines the impact of implementing good corporate governance regulation POJK 73/2016 on the profitability of insurance companies in Indonesia. Using samples of all listed Indonesian insurance companies across 200 observations by employing LSDV panel data and 2SLS models, we found that the regulatory reform is negatively related to the company’s profitability and thus reduces performance. The outcomes of this study advocate for the continuation of fine-tuning of existing regulations so it could deliver the stated objectives.

A review of corporate governance effectiveness: Developed vs emerging markets

In recent years, a thriving academic debate evaluating the trend of convergence in corporate governance regulations around the world (Samanta, 2020) has taken place. Academics and practitioners question the transplantation of corporate governance regulatory environment, typically from the developed world to emerging countries, without much consideration for local economic and business environment and culture. Based on a review of empirical studies published in high-quality journals from 2001 to 2021, we synthesize evidence related to the effectiveness of corporate governance mechanisms in developed markets compared to emerging markets. We focus on benefits accruing from these mechanisms in reducing agency costs of firms in terms of improved accounting performance, market valuation, and financial reporting quality of firms. We find that only a few governance mechanisms, for example, board diversity, family management, and equity-based compensation for top management are effective in reducing agency conflicts and promoting good governance. Other governance-improving tools seem to vary in terms of the degree of effectiveness in developed and emerging markets. The analysis suggests that cultural, political, economic, and legal features of an economy should be considered carefully by policy makers and regulators while adapting corporate governance regulations from developed economies in emerging markets.

Serving Two Masters: Corporate Governance Regulation in the Nigerian Insurance Industry

Serving Two Masters: Corporate Governance Regulation in the Nigerian Insurance Industry

Impact of board characteristics on firm green, sustainability and competitiveness performances

This explores the association between corporate governance mechanisms and firm green, sustainability and competitiveness performances in the Philippines. To evaluate the association between board characteristics and firm green, sustainability and competitiveness performances, a two-step system generalized method of moments (GMM) was utilized. Board size, board independence, CEO duality, management shareholding, and multiple directorships are the characteristics examined. Firm green, sustainability and competitiveness performances is measured using indicators such as return on assets (ROA) and Tobin’s Q ratio. Outcomes denote that board size, multiple directorships, and leverage have negative statistical relationships with firm green, sustainability and competitiveness performances using ROA as a financial measure. Moreover, firm size has a positive statistical relationship with ROA. This accords with the recent literature on corporate governance mechanisms. Enigmatically firm size has negative and statistical relation with firm green, sustainability and competitiveness performances using Tobin’s Q ratio as a measure of financial performance. Leverage has also been found to be positively related to firm performance. The consequence of this study clamps significant implications for practitioners and policymakers in developing countries, specifically in the Philippines. This will postulate insights into the crucial role of corporate governance practices in improving the green, sustainability and competitiveness performances of firms and accentuate the necessity to establish and enforce strong corporate governance mechanisms and regulations.

Future of Mining and Geology: Increase in the Use of Cave Mining Methods to Extract Ore Over the Next 30 Years

Abstract The mining industry faces a period of increasingly difficult challenges over the next 30 years. The increasing demand for traditional mineral resources will likely continue unabated as developing countries modernize and the transition from fossil fuels to renewable energy sources ramps up. Compounding the challenge will be more rigorous constraints on mining imposed by environmental, social, and corporate governance (ESG) standards and regulations, as well as the progression from open-pit and shallow underground deposits to large, deeper, potentially lower-grade deposits, where underground mass mining methods are the only viable option. The latter change will especially apply to metals that are critical to mass electrification, including the traditionally required metals such as Cu, Ni, Co, Mn, Zn, U, etc. The more expensive-to-produce critical metals, such as Li, rare earths, high-purity alumina, etc., are currently only used in smaller quantities, and thus open-pit mining of these may remain viable until their near-surface resources are depleted. The large-scale mining of Cu, Ni, and Mo in particular will increasingly rely on cave mining methods, as these are the only profitable underground methods capable of yielding the large tonnages necessary to meet global demands, such as raising living standards within developing countries and providing the foundation for mass electrification of modern society, and all at a time when shallow deposits mined by open pit are becoming scarce. The application of cave mining is thus expected to increase in the future for deep mineral deposits with characteristics that are suited to this mining method. However, poor cave mine performance and/or unpredicted rock-mass responses (e.g., mine-induced seismicity) during cave mining can threaten the viability of the mine and will reduce investor confidence in this method. Irrespective of whether mining is of a traditional metal on a very large (mass) scale, or of a presently critical metal that now has lower tonnage requirements, we predict that geology will need to be more comprehensively considered during mine planning and design—right from the early stages of mine study—because of the uncertainties that the host rocks (geology) present to mining. This will be especially important in complying with the ESG constraints that are being applied to mining companies, in addition to the concept of sustainability that they also seek to address. We review—and propose remediation research of—the various geology-related issues that are already causing concern during mass underground mining by caving of Cu ore; some of these issues are equally applicable to other types of mining, such as open-pit and narrow-width extraction.

GENDER DIVERSITY ON BOARDS OF DIRECTORS IN JOINT-STOCK CORPORATIONS IN TURKEY: COMBINING HARD AND SOFT LAW

The under-representation of women on corporate boards has received increased attention in terms of corporate governance over the last decade. The necessity of gender diversity on corporate boards is mostly based on economic rationale, which is insufficient due to two reasons; first, it is not always possible to find a correlation between female participation on boards and the interests of the shareholders, and second such a correlation for male members of the board is not sought. The economic rationale needs to be reinforced with an equality rationale that emphasizes women's rights to promote gender diversity on corporate boards. Equality rationale is precisely what corporate governance regulations can provide.It is debatable which type of regulation is the most effective among the strategies to increase the share of women on the boards. The regulations can be grouped under two broad types. The first includes the introduction of mandatory quota for women on boards, along with sanctions. The second approach is of a more voluntary character. The Corporate Governance Principles of Turkey, which regulates gender diversity on the corporate boards, have been drawn up with the latter being preferred. However, statistics show that Turkey is showing slow progress in this regard. This signals that the soft law approach did not have the desired impact on increasing the proportion of women on the corporate boards.