Weak Governance Structures Research Articles

CEO trustworthiness and investment efficiency: evidence from China

Purpose This study aims to investigate the influence of chief executive officer (CEO) trustworthiness on firm investment efficiency and explores how this relationship varies in different contexts, including product market competition (PMC), institutional investors, media coverage, analyst monitoring and ownership structure. Design/methodology/approach The authors examined a sample of A-Share non-financial firms listed on the Shanghai and Shenzhen Stock Exchanges from 2005–2018 by using panel date regression techniques. The robustness of the findings is affirmed through alternative measures of investment efficiency and various econometric techniques. Further, various endogeneity tests are conducted to confirm that the findings are not affected by potential bias. Findings The authors find a significant positive effect of CEO trustworthiness on firms’ investment efficiency and exhibit that CEO trustworthiness mitigates the issue of underinvestment rather than overinvestment. Further, PMC strengthens the association between CEO trustworthiness and investment efficiency. The influence is more pronounced when institutional investors, media and analyst monitoring are low and in non state-owned firms. Likewise, financial reporting quality is found to be an underlying mechanism for the positive association between CEO trustworthiness and investment efficiency. Research limitations/implications The reliance on a location-specific index of CEO trustworthiness may obscure its true nature, and caution is warranted when generalizing these results to other regions. Practical implications This study suggests that elevating a trustworthy CEO to the firm upper echelon can improve investment efficiency. Policymakers and investors should recognize and leverage the effect of CEO trustworthiness in firms, especially those with weaker governance structures. Originality/value This study enriches the literature about investment efficiency by introducing a novel determinant, CEO trustworthiness and establishes that it acts as an informal social institution that improves firms’ resource utilization in emerging economies with weak governing structures.

The Influence of Corporate Governance on Tax Avoidance and The Role of Independent Auditors in Vietnamese Firms

This research addresses how corporate governance mechanisms influence tax avoidance in Vietnamese firms and the role of independent auditors in detecting or mitigating tax avoidance. The purpose of the research is to explore the relationship between corporate governance structures (e.g., independent boards, audit committees) and tax behavior, as well as to assess how auditors interact with these governance mechanisms to ensure tax compliance. A qualitative case study approach was used to analyze six companies from different sectors and governance models (2 state-owned enterprises; 2 family-owned private companies; and 2 publicly listed companies) through 18 interviews conducted between May 2024 and October 2024 with 3 key individuals from each company, including: Independent auditor; Company CEO; Manager or administrator, along with documentary analysis of financial statements and tax filings. The research found that firms with stronger governance (e.g., independent boards and active audit committees) are less likely to engage in tax avoidance, while weak governance structures often lead to more aggressive tax strategies. Independent auditors were more effective in well-governed firms, but faced ethical challenges in weaker ones. These findings are significant because they highlight the importance of strengthening governance frameworks and ensuring auditor independence to reduce tax avoidance and improve corporate transparency in Vietnam.

Mega corruptions in mega projects: Debating the dynamics of dam construction in Ethiopia

Background This study critically examines the dynamics of corruption within Ethiopia’s dam construction projects, focusing on the Grand Ethiopian Renaissance Dam (GERD the Gilgel Gibe series, and Genale Dawa. The research highlights how weak management practices, insufficient oversight, and centralized decision-making, resulting in contribute to inflated costs, project delays, and compromised construction quality. A comprehensive understanding of these issues is crucial for addressing the challenges that impede Ethiopia’s infrastructure development. Methods A qualitative research approach was employed, integrating both primary and secondary data sources. The study utilized four theoretical frameworks—Principal-Agent Theory, Rent-Seeking Theory, Institutional Theory, and Neo-Patrimonialism—to analyze the structural and behavioral factors enabling corruption in Ethiopia’s dam construction projects. Results The study found that corruption is largely driven by weak management practices, insufficient oversight, and centralized decision-making. These factors contribute to inflated project costs, significant delays, and compromised construction quality. The lack of transparency and inadequate monitoring exacerbate these issues, leading to inefficient resource use and undermining the projects’ intended benefits. Economic impacts include increased public debt and strained financial resources. Socially, corruption erodes public trust and adversely affects the communities involved. The findings also highlight how information asymmetry and misaligned incentives contribute to corruption, with weak governance structures and informal networks further exacerbating the problem. These issues lead to cost overruns, increased debt, and diminished public confidence, which negatively impacts development outcomes. Conclusions While corruption in Ethiopia’s dam construction projects poses significant challenges, it is not insurmountable. Strengthening legal and regulatory frameworks, enhancing institutional capacity, promoting community participation, and leveraging international cooperation are crucial for mitigating these risks. Recommendations include implementing e-procurement systems, establishing independent oversight bodies, and promoting transparency to ensure these mega projects achieve their intended economic and social benefits.

Over-hedging in the shadow of weaker litigation threat

Using the staggered adoption of universal demand (UD) laws by U.S. states over the period 1997–2010 as a quasi-natural experiment, we examine the impacts of weakened shareholder litigation rights on corporate financial risk management. We find that firms facing reduced litigation threats post-UD law adoption engage in more currency hedging, coupled with decreases in firm value. The increase in risk management is particularly pronounced for firms with higher pre-existing litigation risk, weaker governance structures, and greater managerial entrenchment. Our evidence suggests that diminished shareholder litigation threat incentivizes managers to over-hedge to protect their own interests rather than maximize shareholder value.

Board Diversity and Earnings Quality of Listed Deposit Money Banks in Nigeria

Investors’ confidence in the financial reporting process has been hampered because of unethical accounting practices and earnings management and this could be as a result of weak governance structures. The main objective of this study therefore was to examine the effect of board diversity on earnings quality of deposit money banks listed on the floor of the Nigerian Exchange Group from 2014-2023. The independent variable of the study was proxied by board age diversity, board experience diversity and board financial expertise, while the dependent variable was proxied by discretionary loan loss provision. The research design adopted for this study was ex post facto because secondary data were used. The sample size of this study was 10 deposit money banks purposively selected. Ordinary least square regression was used to analyze the data used and statistical software package employed was E-view version 10. The findings of the study revealed that board age diversity has a non-significant negative effect on the discretionary loan loss provisions; experience diversity and board financial expertise have significant negative effect on discretionary loan loss provisions of listed deposit money banks in Nigeria. Thus, it was concluded that board diversity has significant influence on earnings quality of listed deposit money banks in Nigeria. Therefore, it was recommended that the management of deposit money banks should prioritize recruiting board members with robust financial background and expertise to enhance both their earnings quality and financial risk management strategies.

Navigating governance with sticks, carrots, and sermons: Paving paths for sustainable development goals through local spatial planning

AbstractThe 2030 Agenda underscores the vital role of local authorities and civil society in implementing sustainable development goals (SDGs). Aligning with this agenda, the EU's spatial development framework imparts normative values, emphasizing sustainable territorial development, participatory governance, and multi‐level cooperation. This framework serves as a potential facilitator for spatial planning to ensure policy coherence in SDG implementation. Despite its potential, mainstreaming the 2030 Agenda through spatial planning encounters challenges, particularly navigating unresolved tensions between global SDG formulation and local ownership. These challenges are accentuated in countries with conformative planning systems and weak governance structures, requiring a specific methodological approach. To address these complexities, this study investigates the opportunities for leveraging SDGs within the multi‐level governance arena of spatial planning. Employing mixed quantitative and qualitative data analysis methods in a local planning context, the research explores key concerns arising from regional, national, and EU spatial development policies. The study delves into their potential leverage capacity for guiding and funding SDGs within a specific local context. Results suggest that using different policy mechanisms, spatial planning can better address the holistic nature of the 2030 Agenda. Although not all SDGs can be leveraged, a substantial part can be addressed whenever a broader multi‐level governance perspective is considered within local planning contexts.

Misappropriation in the Nigerian Oil and Gas Sector: Strategies for the Accountant General of the Federation

The study addressed the “Misappropriation in the Nigerian Oil and Gas Sector.” The paper employed a theoretical and content analysis approach, conducting an extensive review of literature from online journals and databases of standard-setting bodies such as the Auditing Standards Board and the Association of Certified Chartered Accountants (ACCA). Drawing from the Fraud Triangle Theory, the paper highlighted the three primary factors-opportunity, pressure, and rationalization-that motivate individuals to engage in fraudulent activities. The findings underscored the role of weak governance structures, political interference, and institutional deficiencies as key drivers of misappropriation and corruption within the Nigerian oil and gas sector. Moreover, the literature reviews revealed strategies to combat corruption, including strengthening regulatory frameworks, leveraging technology, and promoting a culture of integrity and ethical leadership. Effective measures to address misappropriation in the Nigerian oil and gas sector require comprehensive reforms, collaborative efforts between stakeholders, and rigorous enforcement and monitoring of policies. As the Accountant General of the Federation, it is recommended to prioritize accountability, transparency, and good governance through regular independent audits, establishment of a specialized anti-corruption unit, adoption of international accounting standards, implementation of whistleblower protection mechanisms, and ongoing capacity building and training programs for finance professionals and public officials involved in managing finances within the sector.

The beguiling behaviour of narcissistic CEOs: Evidence from repurchase announcements

AbstractWe study whether Chief Executive Officer (CEO) narcissism affects a firm's share repurchase announcements and their implementations. Using signature characteristics as a measure of narcissism, we find that US firms with narcissist CEOs are more likely to make repurchase announcements and announce higher repurchase dollar amounts. However, these firms are less likely to follow through. Actual repurchases by these firms are less frequent, and they use a smaller amount of cash for share buyback because they have a higher cashflow sensitivity of cash. Narcissist CEOs’ repurchase announcements are less driven by market timing and have a lower announcement effect compared to those by other CEOs. The higher rate and amount of repurchase announcements are more pronounced in poorly governed firms with narcissistic CEOs. These results are robust to various specifications including a difference‐in‐difference set‐up using CEOs’ exogenous turnover, controlling for other CEO traits and using an alternative measure of narcissism based on pronoun usage in CEO communications. Collectively, the results presented in this study demonstrate that narcissist CEOs play a critical role in the intensity of share repurchase announcements and their executions, particularly for firms with weaker governance structures.

Assessing the performance of a participatory governance transformation in small-scale fisheries: A case study from Uruguay

The crisis in small-scale fisheries (SSFs) is worsened by weak governance structures, requiring urgent transformation. Participatory arrangements like co-management offer potential to enhance resilience in these social-ecological systems. However, the performance of collaborative governance modes must be evaluated to support institutional learning, refine governance structures, and ensure the legitimacy of transformative changes. In Uruguay, Local Fishery Councils (LFCs) were institutionalized a decade ago to involve fishers in managing and governing SSFs. This study assesses the LFC for the yellow clam SSF using three approaches: analysis of LFC meeting minutes, compilation of stakeholder perceptions, and analysis of social networks. The study found a decline in session frequency due to limited resources caused by the termination of an externally funded project. Performance indicators from the minutes identified recurring concerns on assessment, governance, and management, and issues related to monitoring, control, and surveillance. The influence of markets and the impact of red tides on fisheries performance were also brought up. Stakeholders perceived successful management solutions achieved through collaborative efforts, supporting co-management and resource recovery progress. However, social network analysis revealed communication patterns marked by core-periphery structure, showing partial disconnection and reluctance of the coastal marine authority to engage in inter-institutional collaboration. Despite challenges from climate change and markets, the LFC played a crucial role in co-creating solutions, empowering fishers with new skills and knowledge. Findings stress the importance of collaborative governance in promoting sustainable management and supporting institutional learning for transformative change in SSFs.

Advancing COP26 climate goals: Leveraging energy innovation, governance readiness, and socio-economic factors for enhanced climate resilience and sustainability

Climate change adaptation and mitigation remain critical to achieving sustainable development while reducing climate vulnerability, particularly among climate-exposed and sensitive regions. Yet, achieving a balance between climate-resilience pathways, high economic productivity, high human development, and energy efficiency appears complex, leading to potential trade-offs. Here, we examine the overarching effect of the diversified energy portfolio, socio-economic drivers, and governance adaptation readiness on Climate change vulnerability across 212 economies. Contrary to the poor conventional panel techniques reported in the existing literature, we employ novel machine learning and dynamic panel estimation techniques that control for chaos, nonlinearity, mutual coupling, and heterogeneity in dynamic systems. The convergent cross-mapping causality technique reveals mutual coupling effects between energy portfolio, governance readiness, socio-economic drivers, and climate change vulnerability. The rapidly increasing population and increasing demand for resources under the business-as-usual society and economic structure that normalizes unsustainable development pathways due to weak governance structures create ineffective climate-resilient policies that lead to unabated emissions with consequences on climate change. The effect of social and governance readiness leads the transformation process to attain sustainable development. Thus, high social and governance readiness spurs climate resilience through climate change adaptation and mitigation to achieve sustainable development. Alternative (renewables) and nuclear energy have displacement effects on fossil fuels, yet, the magnitude of displacement is not large enough to replace future fossil fuel consumption. Conversely, a low-carbon future is still attainable by replacing the fossil energy portfolio with more natural gas and carbon-abatement technologies. Our study demonstrates that energy innovations are useful climate-resilience pathways that lessen climate change vulnerability.

The Influence of Political Systems on Climate Change Policy Implementation in Africa

Climate change presents significant challenges to Africa, exacerbating existing difficulties such as poverty, food security, and insufficient infrastructure. This study aims to explore the influence of political systems on climate change policy implementation in African countries. A systematic literature review approach was employed to gather and analyze relevant studies from academic journals, reports, and policy documents. The synthesis of the findings indicates that political systems, including democratic, authoritarian, and decentralized systems, play a crucial role in determining the success of climate change policy implementation across the continent. Key challenges such as corruption, political instability, weak governance structures, and lack of financial resources hinder effective policy implementation. However, opportunities exist for improving policy implementation, such as regional cooperation, international support, and integrating climate change into national development plans. The study recommends strengthening democratic processes, enhancing regional and international cooperation, addressing corruption and strengthening governance structures, integrating climate change considerations into national development plans, and enhancing capacity at the local level. These recommendations aim to facilitate a united global endeavor to address the intricate challenges of climate change in Africa.

The Impact of Ethics on the Audit Quality of Firms in Sub-Sahara Africa

Sub-Saharan Africa (SSA) is a region characterised by unique challenges related to weak governance structures, inadequate regulatory frameworks, and limited resources. These challenges pose significant risks to audit quality, as they can compromise the independence, objectivity, and professional judgment of auditors. Moreover, the ethical values of the region can also have a significant impact on audit quality, as they shape the behaviour and attitudes of auditors and the firms they audit. The aim of this study was to investigate the impact of ethics on audit quality among firms in SSA. The study uses a sample of 323 firms from 12 sub-Saharan African countries, covering the period from 2012 to 2021. The research design is quantitative, employing a panel data approach and regression analysis. The econometric model used to estimate the impact of ethics on audit quality was based on variables such as audit quality, ethical values, tenure, audit size, auditor reputation, firm size, return on assets, ownership structure and board independence. The data was collected from the World Economic Forum, Bloomberg Database and other sources. Regression results demonstrated a negative and insignificant impact of ethical values on audit quality. However, the tenure of auditors had a positive impact on audit quality. The results of this study suggest the importance of promoting ethical behaboiur and strengthening ethial standards in auditing profession in SSA.

Corporate Tax Breaks and Executive Compensation

I analyze the effect of two corporate tax breaks, bonus depreciation and the Domestic Production Activities Deduction (DPAD), on executive compensation in publicly traded US firms. I find both tax breaks significantly increase executive compensation. For every dollar a firm benefits from the tax breaks, compensation of the firm’s top five highest-paid executives increases by $0.17 to $0.25. The tax breaks increase compensation primarily in firms with weaker governance structures, suggesting the compensation response is driven by executive rent extraction. (JEL D22, G34, H25, M12, M52)

State Legitimacy, Governance, and TTP's Enduring Terrorism

There is a divided opinion in the existing scholarship about the role of poor governance including socio-economic marginalization and political grievances and their causal link with the occurrence of terrorism. Some scholars argue that socioeconomic deprivation such as poverty and political exclusion are not related to terrorism, while others argue that they provide an enabling environment where terrorist organizations or terrorism thrives. This article argues that peoples' perceptions of socioeconomic grievances and political exclusion or marginalization play a significant role in allowing a terrorist organization to thrive and excel. The TTP has accelerated its terrorist campaign by taking advantage of the weak governance structure in the ex-FATA region and the government's inability to alleviate the suffering of the people due to poor socioeconomic conditions. The TTP highlighted the grievances of the people to enlist their support in fomenting terrorism in Pakistan.

Navigating conflict: a cross-sectional study of farmers and pastoralists conflicts in Kilosa, Tanzania

ABSTRACT The Kilosa area of Tanzania has been affected by conflicts between pastoralists and farmers, leading to interferences in daily economic activities in the district. To resolve this growing issue, a study was conducted to establish the underlying causes of conflict and provide alternative and sustainable solutions for resolving disputes in the area. The study employed qualitative methods to investigate the conflicts between farmers and pastoralists. The saturation method was used to draw a sample size of 115 respondents from five villages which were purposively sampled. In-depth interviews and focus groups were conducted with farmers, pastoralists, and governmental officials to gather complete accounts of the causes and effects of these conflicts. Also, a detailed literature review was undertaken to provide theoretical support from previous studies. Multi-stakeholder analysis was emphasised to ensure a complete understanding of the conflict dynamics from multiple perspectives. The study revealed the interrelated factors, which include resource competition, climate change, inadequate land tenure systems, weak governance structures, and poor resource management policies, that intensify conflicts between farmers and pastoralists. Therefore, the proposed conflict resolution mechanism includes proper land use plans, diversification of their economies, peace-building committees, embracing good governance, and frequency of police patrol in conflict-prone areas.

Fragmentation of the Middle East: social and economic aspects

The article aims to deepen the theoretical foundations of the fragmentation of the Middle Eastern countries in terms of socio-economic factors that have significantly influenced stability and development in the region. The authors highlight the consequences of fragmentation for various aspects of social life, including political stability, social cohesion, economic development, and human well-being. The article outlines potential strategies and interventions to address these challenges in order to contribute to a more inclusive and prosperous Middle East. The authors analyze the ethnic, religious, and cultural differences in the Middle East that have contributed to social fragmentation and led to tensions and conflicts that ultimately impede socio-economic development. Fragmentation is shown to have affected social cohesion and cultural identity in the region. Differences based on ethnicity, religion, and political preferences hinder social integration, leading to increased social tensions and potential conflicts. Political instability and governance problems, including weak governance structures and authoritarian regimes, are analyzed. The article reveals that political instability has contributed to fragmentation in the region due to the lack of inclusive governance systems and effective institutions, which hinders economic growth and social progress. The fragmentation of political stability and security in the Middle East is assessed. Internal conflicts, inter-confessional tensions, and the rise of non-state actors pose serious challenges to regional stability and cooperation. The authors show that the unequal distribution of wealth and resources, combined with high levels of poverty and unemployment, has increased social inequality and created economic fractures in the region. Limited regional cooperation, trade barriers, and political instability impede economic growth, preventing the creation of sustainable livelihoods and opportunities.

White-collar money laundering through opportunistic earnings management: fair value accounting practices of failed finance companies in Sri Lanka

PurposeThe purpose of this paper is to discuss how the failed finance companies in Sri Lanka used fair value accounting practices as an opportunistic earnings management practice to launder money under weak corporate governance structures.Design/methodology/approachThis paper uses a qualitative design under the philosophy of interpretivism. The case study research strategy is used inductively to investigate how fair value accounting had been used for money laundering.FindingsThe dishonest intention of major shareholders and board of directors had forced failed companies to misuse fair value accounting to manipulate performance and use them for personal benefits which were detrimental to the depositors and stability of the companies. The weak corporate governance structures which were developed because of regulatory forbearance were influential for manipulations. The concentrated ownership had reduced agency conflicts between shareholders and managers because major shareholders were the members of the board of directors. The appointed committees were not effective because of an inadequate number of independent directors with sufficient expertise. The reduced agency conflict between shareholders and managers has exaggerated the agency conflict with depositors. Therefore, it is recommended to dilute ownership concentration to establish good corporate governance structures and make stable institutions.Research limitations/implicationsThis study does not discuss the dishonest fair value accounting practices of all licensed finance companies because of the sensitivity of the matter for surviving companies.Originality/valueThis paper is an original work of the authors which discusses how fair value accounting practices had been used to launder money in failed finance companies in Sri Lanka as an emerging market context.

Follow the money: Does the financial sector intermediate natural resource windfalls?

Why is the financial sector underdeveloped in resource-rich economies? Using a large panel dataset, we find slower growth in both financial sector deposits and private sector lending in countries that experience an unexpected natural resource windfall as measured by shocks to exogenous world prices. This effect is driven by countries with repressed financial systems and weak governance structures. The smaller role for the financial sector is accompanied by a stronger role of governments in channeling financial capital into the economy. The lack of private financial intermediation of natural resource windfalls hampers the development of the financial sector, which we interpret as evidence for a resource curse in financial development.

Resource mobilisation, institution and inclusive growth in Africa: Evidence from spatial analysis

AbstractThis study accommodates spatial effects in the nexus between tax resource mobilisation (TRM) institutions and inclusive growth using panel data from 48 African countries. By adopting the spatial Durbin‐fixed effect model, the study shows that spatial dependence and interaction matter when modelling TRM, institutions and inclusive growth relationships. It is also explicit that various disaggregated and aggregated tax components have not played significant roles in increasing inclusive growth in Africa, except property tax. The result suggests the need to harness the role of property tax for revenue generation in stimulating inclusive growth in view of its growth benefits over its distortions. Further evidence shows that all individual proxies of African institutions dampen inclusive growth. These results also pinpoint the weak governance structures that constitute huge constraints on the participatory tendencies of economic growth and reflect the institutional exclusiveness inherent in Africa. Regarding the interactive effects of institutions and TRM on inclusive growth, findings further reveal that existing institutions in Africa weaken the tax administration structures in propelling TRM to actualize inclusive growth. The study informs policy implications.

Assessing local perceptions of deforestation, forest restoration, and the role of agroecology for agroecosystem restoration in northern Malawi

AbstractDeforestation drives climate change and reinforces food insecurity in forest‐dependent communities. What drives deforestation varies by location and is shaped by livelihood systems. But how locals perceive restoration is crucial for developing restoration policies. Evidence suggests that applying sustainable farming strategies can potentially restore forests and sustain livelihoods. Applying a broad‐based conceptualization of deforestation and restoration in policymaking, however, results in missed opportunities for addressing deforestation and restoration. Here, we explore the drivers of deforestation, the perceptions of restoration, and the challenges to restoration among smallholder farmers in northern Malawi and examine how agroecology can contribute to restoring degraded agroecosystems. Participants report agricultural land expansion, charcoal production, climate change, burnt brick production, and government subsidies as the major drivers of deforestation. We observed that although perceptions of forest restoration reflect farmers' traditional ecological knowledge (TEK) to include reclamation of degraded farmlands, reconstruction of native tree species, and replacement of felled trees on farmlands, there are challenges including splitting families to gain access to more subsidized fertilizers and food aid, embedded cultural practices, growing demand for charcoal in cities, and weak ecosystem governance structures that hinder the effectiveness of restoration efforts. We, however, do find that agroecological intensification can increase yield from smaller farmlands and allow for larger and longer‐lasting fallows of spare lands which regenerate forests. Key overarching implications of these findings include the need to integrate livelihoods more explicitly into restoration plans, accounting for TEK in restoration policies in forest‐dependent communities and encouraging the adoption of agroecology.