Sound Corporate Governance Practices Research Articles

Effects of ease of doing business and components of good corporate governance on foreign direct investment: Evidence from the Western Balkans

The research aims to quantify the effect of easy doing business (EDB) on foreign direct investments, especially their resulting consequences. Meanwhile, the research combines supplementary components that are associated with sound corporate governance practices, consisting of control of corruption (CC), lending interest rate (LIR), regulatory quality (RQ), and governance effectiveness (GE). To achieve the stated aim, the research employs secondary data from 2015-2022 and employs regression analysis as the analytical approach. Following examining outcomes, it is observed that EDB and GE have a statistically significant positive effect, while the variables resulting in a significantly negative effect on FDI were LIR and RQ. Concerning CC, there have been surprising results since it has harmful effects that are nevertheless statistically insignificant. Research from the perspective of science's contribution and creative thought relies on the application of a quantitative approach with a mixture of variables that directly affect FDI. The discoveries of the research definitely will challenge numerous stakeholders who operate within this field, such as scholars, and researchers, while nonetheless not omitting the implication of members who are additionally competent in the legislative part. The conclusions of this research will encourage an in-depth review of the implications for policymaking. Specifically, it requires upgrading certain regulations to make them more attractive for FDI.

Audit and Board Committee Expertise and Financial Statement Fraud among Listed Oil and Gas Firms in Nigeria

Financial statement fraud is the intentional falsification of financial information in order to defraud investors, creditor or other stakeholders. This study focused on the influence of audit and board committee expertise on financial statement fraud among Oil and Gas firms in Nigeria. The sample consist of seven (7) oil and gas companies listed on the Nigerian stock exchange group (NGX) over a period of 2013-2022, the study used panel regression. Financial statement fraud used as Dependent Variable is measured using the Beneish M-score model, while the independent variable was audit Committee Expertise and Board Committee Expertise using Accounting/Financial background. Findings show that an insignificant association exists between audit committee expertise, the composition of the board and financial statement fraud. This research suggests that regulatory bodies and industry association persist in their efforts to endorse sound corporate governance practices and addressing the challenging associated with board committee expertise.

Who affects CEO compensation? Firm performance, ownership structure, and board diversity

This paper examines the relation among firm performance, ownership structure, and board gender diversity on the firm board and CEO compensation, i.e., total compensation, salary-based compensation, and bonus-based compensation. The paper employs a unique dataset from S&P 1500 firms from 2007 to 2018. The empirical results suggest that large and diversified boards are the main determinants of CEO compensation, in line with the theory. Moreover, longer-tenured CEOs who also hold the board chairperson position receive greater compensation and bonuses than their peers. In addition, a firm financial performance affects CEO compensation, with the influence being more pronounced in the CEO's total compensation. This paper adds to the existing literature on CEO compensation, corporate governance, and board attributes, especially when revealing empirical support for the link between board diversity and CEO compensation against a strong demand for sound corporate governance practices.

Exploring the Role of AI in Corporate Governance: Leveraging Potential for Productivity, Efficiency, and Competitive Advantage

The role of AI in corporate governance is crucial, as companies seek to leverage their potential to increase productivity and efficiency, and AI is increasingly being used to automate processes, provide insights, and improve decision-making, thereby enabling companies to gain a competitive advantage. The importance of this research lies in highlighting the role of AI in corporate governance, analyzing the impact of this role in enterprise business development based on application to corporate governance systems, as well as identifying the basic needs of governance-based companies to make the most of AI operations. Corporate governance is one of the key tools to counter the effects of recent economic changes, the global financial crisis, and the structural deficiencies of many companies, due to sound corporate oversight and oversight, as well as to sound corporate governance practices. expertise and skills, as well as dysfunctional financing structures the inability to generate sufficient internal cash flows to meet their accrued liabilities, and a lack of transparency. Keywords: Artificial intelligence, corporate governance, technology, digital transformation.

The Nexus between Executive Compensation and Firm Performance: Does Governance and Inequality Matter?

Purpose: The main aim of this study is to empirically investigate the relationship between executive compensation, inequality, and corporate governance, thus filling a gap in extant literature.
 Design/methodology/approach: The methodology used calculated the salary Gini (s-Gini) and governance indices (G-index) for companies in the sample and these were used as proxies for inequality and corporate governance respectively. The dataset is panel in nature. It comprises 46 conveniently selected largest JSE listed companies (by market capitalisation). A 2-step system GMM was used to determine if s-Gini and G-index were channels through which executive compensation could influence company performance. While considering a dynamic specifi-cation, the GMM estimator addressed possible endogeneity bias. GMM estimation method addressed potential over or underestimation of the relationship between company performance and executive compensation because it was considered more efficient on shorter panels. GMM analysis on companies listed on the JSE Top40 index was from 2008 to 2020. Overall, the methodology and analysis employed provide valuable insights into the complexities between executive compensation, inequality, corporate governance, and company performance, shedding light on important factors that can influence company's performance.
 Findings: Results indicated that as executive compensation improved, company performance deteriorated. Furthermore, varied impact of inequality on performance measures were recorded. The observation was that inequality influenced performance in diverse ways. This accentuated the convoluted nature of this relationship. The study also established that both inequality and corporate governance are channels through which executive remuneration affects performance. Additionally, a positive nexus between governance and net profit margin was discovered.
 Research limitations/implications: The results imply that: higher executive pay does not always yield better com-pany performance; the effects of executive pay on performance are mediated by the level of inequality within the company and the quality of corporate governance practices; good corporate governance practices can enhance financial performance. It is recommended that companies should prioritise espousal of sound corporate governance practices because they have positive influence on performance. Moreover, diligent attention must be given to how executive compensation is configured. Poorly designed compensation packages erode company value. Conversely, properly structured ones may enhance performance and successively improve company value. This study is focused solely on the Top40 largest listed companies in South Africa. The findings may not be generalisable to all listed entities, as there could be variations in the relationship between executive compensation, inequality, and corporate governance across companies of different sizes. By concentrating on the largest entities, the study may gloss over nuances that exist in smaller companies. However, it is important to state that the insights gained from this research are still valuable and can provide useful guidance to policymakers, shareholders, and other stakeholders in under-standing the interaction of the variables examined within the context of larger firms. Future research should consider expanding the sample to include a broader range of listed entities to obtain a more comprehensive understanding of these relationships across the entire corporate landscape.
 Originality/value: This study contributes to research gap highlighted by Core et al.

The Moderating Effect of Institutional Shareholders on the Relationship between Board Attributes and Auditor Selection among Listed Financial Service Firms in Nigeria

The study examines the moderating effect of institutional ownership on the relationship between board attributes and auditor selection among listed financial service firms in Nigeria. It investigated whether institutional shareholding moderate the relationship between board size, board independence, board gender diversity, board meeting attendance and auditor selection among listed financial firms in Nigeria. The study used secondary data extracted from the published financial statements of the sampled firms for the period 2007 to 2020. The population of the study consists of 53 listed financial service firms in Nigeria. The study adopts correlational research design using logistic regression as a tool of analysis. This study presents evidence that higher levels of institutional ownership strengthen the effect of board attributes (gender diversity and board meeting attendance) on auditor selection. Hence, the result implies that managers may face stringent monitoring when institutional investors, board gender diversity and board meeting attendance interacts. Such superior monitoring may compel managers to consider hiring an industry specialist auditor to audit the firm which leads to boosting the firm’ value. The finding of this investigation has an important policy implication on enhancing sound corporate governance practices, particularly for firms operating in developing countries where the market for corporate control is ineffective.

Stewardship, institutional investors monitoring, and firm value: Evidence from the United Kingdom

Stewardship encourages institutional investors to perform a monitoring function through cooperation and collective action. The United Kingdom was the first country to publish a Stewardship Code. This motivates us to investigate the monitoring role of institutional investors in the UK. We find that institutional ownership has a positive influence on firms' one-year future valuation and quality of corporate governance practices. The positive relationship identified is mainly driven by independent and long-term (ILT) institutional ownership. We additionally demonstrate that acquirers with higher ILT institutional ownership make better acquisition decisions. The performance of cross-border acquisitions does not differ from the performance of domestic deals. Overall, our results are consistent with the view that ILT institutional investors contribute to firm monitoring and promoting sound corporate governance practices, which can be attributed to their long-term investment horizons and arm’s-length relationships with investee companies.

Effect of Corporate Governance Practices on Organizational Performance of State Corporations in the Health Sector, Kenya

Sound corporate governance practices are a major contributor to effective and efficient management of State Corporations in the health sector in Kenya. Since independence, the level of accountability in management of State Corporations has continued to decline despite the availability of various monitoring structures like legal frameworks, ethics and integrity, policies and the code of conduct and ethics intended to provide a clear road map to successful performance of the State Corporations. The objective of this study was to determine the effect of corporate governance practices on the performance of the State Corporations in the health sector in Kenya. The study adopted a descriptive research design with a population comprising of the health State Corporations. Primary data was collected the using questionnaires. Data was analyzed using SPSS software. The results indicated that accountability and organizational performance of health State Corporations is positively and significantly related. The results further indicated that transparency and organizational performance of health State Corporations is positively and significantly related Board Responsibility and organizational performance of health State Corporations is positively and significantly related. Moral Integrity and organizational performance of health State Corporations is positively and significantly related The study concluded that corporate governance practices have a positive and significant effect on organizational performance of State Corporations in the health sector in Kenya. The study recommended that the management of the State corporations should establish certain control mechanisms that ensure accountability. The study recommended that there should continuous internal check and audit on the part of management and low level of management to ensure adequate accountability systems in the State Corporations. Keywords: Corporate Governance, Organizational Performance & State Corporations

BOARD INDEPENDENCE AND CAPITAL STRUCTURE OF NIGERIAN NON-FINANCIAL LISTED FIRMS: THE MODERATING ROLE OF INSTITUTIONAL OWNERSHIP

The Nigerian corporate environment has the potentials for high information asymmetry and less disclosure due to the weak institutional structure and an ineffective market for corporate control. These instances may undermine the monitoring capacity of independent directors in the boardroom. Thus, signifying the need for a complementary corporate governance mechanism to boost investors’ confidence. This research views that institutional investors have the incentives to strengthen board governance, given their sophisticated financial expertise and management skill. Therefore, this paper measures the moderating role of institutional ownership on the relationship between board independence and firms’ capital structure. The study analysed the balanced panel data of 56 Nigerian non-financial listed companies for seven years (2012-2018) using the random effects technique. This study presents evidence that higher levels of institutional ownership strengthen the effect of board independence on the firms’ leverage and vice versa. Hence, the result implies that managers may face stringent monitoring when institutional investors and independent directors interact. Such superior monitoring may compel managers to take on higher leverage to boost firm’ value. Our finding has an important policy implication on enhancing sound corporate governance practices, particularly for firms operating in developing countries where the market for corporate control is ineffective.

The Impact of Executive Compensation on Banking Performance: Evidence from the Ghanaian Banking Crises

During the period 2012-2018, nine Ghanaian banks went bankrupt, causing depositors and shareholders to lose billions of Ghana Cedis. This development stunned the whole Ghanaian community, as many had not anticipated the occurrence of a banking crisis of that magnitude, since most of these banks were renowned indigenous banks. One of the fundamental causes of these banks’ failure was a lack of sound corporate governance practices. In this regard, the current study attempts to focus on one of the corporate governance practices—executive compensation—by giving an in-depth analysis of how poor executive compensation contributed to the failure of these banks. The study found that there was weak adherence to common execution compensation principles and practices of corporate governance. Banks did not have the appropriate compensation systems designed for the banks’ executives and non-executives. In addition, the compensation committee of some banks was not properly constituted whereas others had no compensation committee.

How to evaluate the quality of remuneration policy? Evidence from the Polish banking sector

AbstractIn our paper we use an institutional perspective to define the concept of the quality of remuneration policy. Traditional perspective focuses on pay-per-performance relationship between top executives' remuneration and companies' performance. This study is based on the assumption that the acquisition of normatively defined compensation practices and structures is more important for the successful organization than the practices which enhance efficiency defined on the basis of input (compensation) – output (company's performance) relationship. We examine the relationship between the quality of executive remuneration policy and corporate governance standards in banks with a controlling blockholder. Based on the sample of a hand-collected data on corporate governance characteristics, executive remuneration, and financial results of all public banks in Poland from 2005 to 2015, we find that the effective implementation of sound corporate governance practices should be rooted in the form of obligatory normative acts. Consistent with other studies we find a positive and statistically significant relationship between the corporate governance measures and the quality of remuneration policy. In particular, our study shows the significant role of two institutional factors positively determining the efficiency of incentive contracts: remuneration committees and institutional ownership. We also find that the banks controlled by foreign corporations, especially the US–UK–Ireland financial institutions, have a significantly more effective compensation policy than the banks controlled by domestic investors.

Lease Finance in Nigeria: Current Status, Challenges and Future Prospects

Objective – The Leasing industry in Nigeria is witnessing increased demand for assets under a given prevalence of rising domestic costs of purchase, shortage of foreign exchange for imports as well as persistent depreciation of the Naira. The objective of this paper is to analyze the current state of lease financing in Nigeria, the prospects and challenges with a view to assess the capacity of the industry to continue to provide this form of finance. Design/methodology –The paper adopts an exploratory research design with references to publications, websites and research articles relevant to the subject matter. A number of relevant publications on leasing in Nigeria were duly explored. Results – Our findings show that, the volume of lease finance has consistently grown over the last 14 years (2005-2018). Finance leases volume totaled 1.68 trillion naira in 2018 alone. Banks as market participants in the Nigerian lease industry finance other non-bank lessors while the non-bank lessors account for about 80% of lease transactions mostly to Micro, Small and Medium Scale Enterprises (MSMEs). Funding remains a major challenge restricting provision of leases to general supporting equipment and constraining leases of specialized assets (big-ticket leases). Prospects for lease finance obtain in terms of rising popularity of operating leases with lessors and lessees, attributable to the inherent mitigation against default risk. There is also potential for a growing customer base beyond MSMEs, with the influx of patronage by listed corporate firms especially those in the healthcare and education sectors. We identified financing partnerships, development of sound corporate governance practices, hastened inauguration of the Equipment Leasing Registration Authority and increased sensitization of potential leasehold product consumers on the benefits of lease finance, as critical success factors for the lease industry in Nigeria.

The Effect of Corporate Governance and Ownership Structure on Financial Performance of Listed Companies in Nepal

The paper attempts to analyze relationships among corporate governance, ownership structure and firm performance in Nepal. The study comprises of panel data set of 25 firms listed at Nepal Stock Exchange (NEPSE) covering a period of five years from 2012 to 2016. The econometric methodology for the study consists primarily of least squares dummy variable (LSDV) model, fixed and random effects panel data models and two-stage least squares (2SLS) model. The study finds bi-directional relationship between corporate governance and performance. Among corporate governance internal mechanisms; smaller board size, higher proportion of independent directors, reducing ownership concentration, improving standards of transparency and disclosure, and designing appropriate director compensation package are important dimensions that listed firms and regulators in Nepal should focus on. Ownership concentration is found to have positive effect on performance; however, it affects corporate governance negatively. This study raises understanding and provides empirical evidence for endogenous relationship between corporate governance and performance and offers support for principal-principal agency relationship. The results of this study lead to several practical implications for listed firms as well as policymakers of Nepal in promoting sound corporate governance practices and codes. For listed companies, the improvement in compliance with a code of corporate governance or voluntary adoption of best practices can provide a means of achieving improved performance.

CORPORATE GOVERNANCE IN THE EUROPEAN BANKING SECTOR: SOME REMARKS ON DIVERSITY

This work discusses some of the critical aspects of bank corporate governance in the European Union. Enhancing sound corporate governance practices has become one of the major concerns in the supervisory authority’s agenda and one of the critical features to evaluate banks’ stability. The global rethinking about corporate governance rules has translated into a stronger focus on board diversity for EU banks. The existing literature and sound corporate governance practices support the view that different types of board members may bring different capabilities to their banks. Even if board diversity may add complexity to the functioning of the board, the advantages it brings are of utmost importance in the challenging environment banks are facing. This work highlights the fragmentation of the EU corporate governance rules as banks have to comply with 27 sets of different regulations and codes. This complexity should not be ignored, as member states’ specificities, legal systems, and a more general openness to diversity influence the effect reforms may have on banks’ performance and stability.

Corporate Governance and Organisational Performance: Analysis of Nigeria Stock Exchange Listed Companies

<p><em>Corporate governance is relevant in both developed and emerging economies. The study investigated the impact of corporate governance on organisational performance, using thirty (30) randomly selected listed companies in the Nigeria Stock Exchange (NSE) in the year 2016. The study focused on three corporate governance variables (i.e., Board Size, Board Independence, CEO Duality/Tenure); and two performance variables - i.e., Returns on Asset (ROA) and Returns on Equity (ROE). The study does not cover the market measure performance variable of Tobin’s Q. The study is an empirical research, with analytical research design. Secondary data, extracted from published annual reports of selected quoted companies and NSE website, is used for the study. The findings revealed a positive correlation between board size, independence directors, and performance variables; but, showed a negative correlation between CEO tenure and performance variables. The result showed that number of directors was not positively related to performance in selected quoted companies in terms of ROA; but, it revealed a positive correlation between board size and performance in terms of ROE. It also showed that the correlation between CEO tenure and performance variables was negative on the two performance variables (ROA and ROE). Regarding relationship between CEO Duality and performance variables (ROA and ROE), the result showed that CEO Duality has a positive correlation with ROA; but had a negative relationship with ROE. Generally, the study revealed that adoption of sound corporate governance practices by listed companies can improve their performance. Companies can benefit from this improved corporate governance practices by way of increased investment from investors and reduced capital cost. Shareholders confidence would be enhanced with attendant improvement in shareholders wealth. The nation’s economy would also benefit from sound corporate governance practices by way of improved GDP. </em></p>

Does investing in sound corporate governance pay? A South African study

Despite increased recognition of the importance of sound corporate governance practices in emerging markets, previous researchers reported inconclusive evidence on the association between corporate governance and financial performance. Authors that predominantly focused on board-related variables might, however, have failed to reflect the complex nature of corporate governance. The financial performance measures employed in the majority of previous studies also ignored the potential risk-reducing benefits that sound corporate governance could hold for emerging market firms. The purpose of this article was thus to investigate the relationship between a comprehensive measure of corporate governance and the risk-adjusted performance of selected South African companies. A unique corporate governance database was compiled by conducting content analysis on the considered companies’ annual reports over the period 2002 to 2010. Aspects related to nine corporate governance categories were taken into account. In addition to the accounting and market-based performance measures that were employed in previous studies, South African companies’ risk-adjusted performance was also taken into account. The capital asset pricing model and the Fama-French three-factor model were employed to estimate risk-adjusted abnormal returns for four corporate governance-sorted portfolios. Both estimations revealed that the portfolio comprising of companies with the highest corporate governance scores managed to significantly outperform the market.

Can Sound Corporate Governance Alleviate Corporate Failure? A Study of the Zimbabwean Financial Services Sector

This study, using the Ordinary Least Squares (OLS) Regression Model, investigated the extent to which good corporate governance practices can minimise or alleviate corporate failure in the Zimbabwean Financial Services Sector. The results of the study reflected that sound corporate governance has a positive effect on corporate success and can alleviate corporate failure. It is thus recommended that financial institutions continuously adhere to sound corporate governance practices to guarantee corporate success and alleviate the collapse of financial institutions as has been witnessed in the past. The findings of the study will assist policy makers, regulators and players in the financial services sector to adhere to sound corporate governance practices, given its impact on corporate success. Further research could be carried out with regards the implementation of sound corporate governance in parastatals, quasi-government institutions and private sector companies in other sectors other that the financial services sector and how it can be monitored or enforced.

Can Sound Corporate Governance Alleviate Corporate Failure? A Study of the Zimbabwean Financial Services Sector

This study, using the Ordinary Least Squares (OLS) Regression Model, investigated the extent to which good corporate governance practices can minimise or alleviate corporate failure in the Zimbabwean Financial Services Sector. The results of the study reflected that sound corporate governance has a positive effect on corporate success and can alleviate corporate failure. It is thus recommended that financial institutions continuously adhere to sound corporate governance practices to guarantee corporate success and alleviate the collapse of financial institutions as has been witnessed in the past. The findings of the study will assist policy makers, regulators and players in the financial services sector to adhere to sound corporate governance practices, given its impact on corporate success. Further research could be carried out with regards the implementation of sound corporate governance in parastatals, quasi-government institutions and private sector companies in other sectors other that the financial services sector and how it can be monitored or enforced.

Agency costs and organizational architecture of large corporate farms: evidence from Brazil

Drawing inspiration from American institutionalism and new institutional economics, this paper discusses the rise of large corporate farms as the transition from the classic capitalist firm to the corporate form of organization based on the separation of ownership and control. Three case studies from the Brazilian cerrado show the rise of large corporate farms to be enabled and impelled by the advance of agricultural production technologies and the search for scale economies. The key finding from the case studies is that complex technology not only necessitates large-scale farming but also generates technical and organizational solutions to the potentially pervasive agency problems. In addition to the use of sound corporate governance practices, these solutions include organizational architecture encompassing computer-aided accounting and budgeting systems, incentive-based compensation, clear definition of performance goals, and delegation of operational decisions to farm managers. Furthermore, organizational architecture has been shown to promote a culture of trust and accountability, which counteract the opportunistic tendencies of farm managers and workers.

Independent Directors, Corporate Governance and Company Performance - India

This study suggest that the independent directors role needs to strengthened to achieve the desired goal of corporate governance. In india, despite being listed, there is family ownership structure. This has an important influence on the priorities set by the board, and that these priorities will determine the firm performance and corporate governance, despite independent director monitoring, It is found that where independent directors enjoying good trust with the family councils and have financial experience could ensure success to the best interest of the widely dispersed shareholders and stakeholders. Understanding the influence of family and role of independent directors on the board of directors in turn on firm performance requires greater sensitivity to how corporate governance affects different aspects of effectiveness for different stakeholders and in different contexts. Hence a framework on the interaction between ownership, corporate boards and firm performance could help. This paper looks into the current scenario in Indian Corporate Sector and examine the role of Independent Director in Corporate Governance, in particular. We are looking at Companies Registered in India and how the role of Independent Directors brings about better corporate governance and whether this brings about improved company performance. Recourse to independent directors by private equity investors per se is not tied to performance increases. . Our study shows that independent directors impact the rate of return only on deals which require very specific skills, i.e. turnaround and buyout investments. Besides, busy independent directors do not seem to affect negatively the internal rate of return. Finally, independent directors tend to resign when performance is unsatisfactory and consent to shave losses when performances are negative. We are aware that Independent Directors (IDs) play a critical role in implementing sound corporate governance practices in companies.