Risk management in corporate law and corporate governance

2011 ◽  
pp. 215-242 ◽  
Author(s):  
Christoph Van der Elst
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Corporate Law

The Impact of Shariah Governance and Corporate Governance on the Risk Management Practices: Evidence from Local and Foreign Islamic Banks in Malaysia

2018 ◽  
Vol 15 (2) ◽  
pp. 1-20
Author(s):  
Sabri Embi ◽  
Zurina Shafii
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Principal Component ◽  
T Test ◽  
The Body ◽  
Primary Data ◽  
Islamic Banks ◽  
Shariah Governance ◽  
The Impact

The purpose of this study is to examine the impact of Shariah governance and corporate governance (CG) on the risk management practices (RMPs) of local Islamic banks and foreign Islamic banks operating in Malaysia. The Shariah governance comprises the Shariah review (SR) and Shariah audit (SA) variables. The study also evaluates the level of RMPs, CG, SR, and SA between these two type of banks. With the aid of SPSS version 20, the items for RMPs, CG, SR, and SA were subjected to principal component analysis (PCA). From the PCA, one component or factor was extracted each for the CG, SR, and RMPs while another two factors were extracted for the SA. Primary data was collected using a self-administered survey questionnaire. The questionnaire covers four aspects ; CG, SR, SA, and RMPs. The data received from the 300 usable questionnaires were subjected to correlation and regression analyses as well as an independent t-test. The result of correlation analysis shows that all the four variables have large positive correlations with each other indicating a strong and significant relationship between them. From the regression analysis undertaken, CG, SR, and SA together explained 52.3 percent of the RMPs and CG emerged as the most influential variable that impacts the RMPs. The independent t-test carried out shows that there were significant differences in the CG and SA between the local and foreign Islamic banks. However, there were no significant differences between the two types of the bank in relation to SR and RMPs. The study has contributed to the body of knowledge and is beneficial to academicians, industry players, regulators, and other stakeholders.

Do disclosure and transparency affect bank’s financial performance?

2019 ◽  
Vol 19 (6) ◽  
pp. 1344-1361
Author(s):  
Isaiah Oino
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Performance ◽  
Financial Institutions ◽  
Content Type ◽  
Loan Portfolios ◽  
Cent Level ◽  
Transparency And Disclosure ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of transparency and disclosure on the financial performance of financial institutions. The emphasis is on assessing transparency and disclosure; auditing and compliance; risk management as indicators of corporate governance; and understanding how these parameters affect bank profitability, liquidity and the quality of loan portfolios. Design/methodology/approach A sample of 20 financial institutions was selected, with ten respondents from each, yielding a total sample size of 200. Principal component analysis (PCA), with inbuilt ability to check for composite reliability, was used to obtain composite indices for the corporate governance indicators as well as the indicators of financial performance, based on a set of questions framed for each institution. Findings The analysis demonstrates that greater disclosure and transparency, improved auditing and compliance and better risk management positively affect the financial performance of financial institutions. In terms of significance, the results show that as the level of disclosure and transparency in managerial affairs increases, the performance of financial institutions – as measured in terms of the quality of loan portfolios, liquidity and profitability – increases by 0.3046, with the effect being statistically significant at the 1 per cent level. Furthermore, as the level of auditing and the degree of compliance with banking regulations increases, the financial performance of banks improves by 0.3309. Research limitations/implications This paper did not consider time series because corporate governance does not change periodically. Practical implications This paper demonstrates the importance of disclosure and transparency in managerial affairs because the performance of financial institutions, as measured in terms of loan portfolios, liquidity and profitability, increases by 0.4 when transparency and disclosure improve, with this effect being statistically significant at the 1 per cent level. Originality/value The use of primary data in assessing the impact of corporate governance on financial performance, instead of secondary data, is the primary novelty of this study. Moreover, PCA is used to assess the weight of the various parameters.

The effect of the adoption of an alternative corporate governance system on firms’ performances

2016 ◽  
Vol 35 (4) ◽  
pp. 517-529 ◽  
Author(s):  
Carlo Bellavite Pellegrini ◽  
Bruno S. Sergi ◽  
Emiliano Sironi
Keyword(s):  
Corporate Governance ◽  
Propensity Score ◽  
Performance Outcomes ◽  
Corporate Law ◽  
Law Reform ◽  
Governance System ◽  
Content Type ◽  
Alternative System ◽  
The Impact ◽  
Board System

Purpose – Alternative corporate governance systems (CGSs) have attracted a significant bulk of research recently. While the connection between the adoption of an alternative system (one tier board or two tier board system) and firms’ performances has not been fully analysed yet, the purpose of this paper is to analyse whether companies which have turned into an alternative board system have eventually improved their performance over time. Design/methodology/approach – Using a sample of more than 15,000 Italian unlisted joint stock companies, the authors compare performance outcomes in 2009 of firms adopting alternative systems with performances of firms that maintained the system in force before the 2003 Corporate Law Reform (defined as “traditional”). Because of the choice of an alternative system (one tier or two tier board) instead of a traditional one is not random, the authors reduce selection bias implementing matching methods and comparing firms that are close in terms of propensity score measured in 2003 (the year before the new CGSs have been introduced by a corporate law reform). Findings – The authors do not find evidence of a significant improvement of performances in 2009 concerning those firms that have adopted a one tier or two tier board systems with respect to those which maintained a traditional one. Originality/value – The novelty of the study concerns the application of propensity score matching for the evaluation of the impact of the change of the CGS that is possible in presence of two conditions that are all verified in our setting: first, to have a country where corporate law allows for choosing among different systems; in this case Italy is a good laboratory, because it allows for the choice among three different systems; and second, to have the opportunity to evaluate the effect of the change in light of a relatively recent “pre-treatment” condition; this is made possible by the fact that before the 2003 Reform of corporate law all the companies had a traditional system.

TINGKAT KESEHATAN BANK DENGAN PENDEKATAN METODE RGEC PADA BANK PEMBANGUNAN DAERAH DIY

2018 ◽  
Vol 13 (2) ◽  
pp. 117
Author(s):  
Edy Anan ◽  
Roni Albarqis
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Commercial Bank ◽  
Descriptive Analysis ◽  
Risk Profile ◽  
Good Corporate Governance ◽  
Analysis Technique ◽  
Circular Letter ◽  
Profitability Assessment ◽  
Bank Soundness

ABSTRACTThis study is aimed to determine the soundness of commercial bank at PT. Bank Pembangunan Daerah DIY during the years 2011 until 2015 based on RGEC method that consisted of risk profile, good corporate governance, earnings and capital. The method that used to collect data isnonparticipant observation by documenting. Descriptive analysis technique based on the Bank Indonesia Circular Letter No. 13/24/DPNP about Assessment of Commercial Bank Soundness. The results show that the soundness level of Bank Pembangunan Daerah DIY in 2011 until 2015 wasproved. NPL and LDR that measured Risk Profile factor prove a well executed risk management. Good Corporate Governance factor shows BPD DIY has applied corporate governance well. Earnings factor or profitability assessment consist of ROA and NIM has increased and this sign of theincreasing of total assets owned by BPD DIY that followed by increasing of profit gained by BPD DIY. Using the CAR indicator, the author proved that BPD DIY has good Capital factor, which is above Bank Indonesia provision that 8%. Conclution of the result showed that soundness level ofBank Pembangunan Daerah DIY in 2011 until 2015 overall was in the first place of composite ranked with a very healthy predicate and the total of composite score for each year is 93%, 93% , 97%, 97% and 97%.ABSTRAKPenelitian ini bertujuan untuk mengetahui tingkat kesehatan bank pada PT. Bank Pembangunan Daerah DIY selama tahun 2011 hingga 2015 berdasarkan metode RGEC yang terdiri dari risk profile, good corporate governance, earnings dan capital. Metode pengumpulan data yang digunakan adalah observasi nonpartisipan dengan cara dokumentasi. Teknik analisis deskriptif dengan berpedoman pada Surat Edaran Bank Indonesia No. 13/24/DPNP tentang Penilaian Tingkat Kesehatan Bank Umum. Hasil analisis menunjukkan bahwa tingkat kesehatan BPD DIY pada tahun 2011 sampai dengan 2015 secara keseluruhan dapat dikatakan bank yang sehat. Faktor Risk Profile yang dinilai melalui NPL dan LDR secara keseluruhan menggambarkan pengelolaan risiko yangtelah dilaksanakan dengan baik. Faktor Good Corporate Governance, BPD DIY sudah menerapkan tata kelola perusahaan dengan baik. Faktor Earnings atau rentabilitas yang penilaiannya terdiri dari ROA dan NIM mengalami kenaikan dan hal ini menandakan bertambahnya jumlah aset yang dimiliki BPD DIY diikuti dengan bertambahnya keuntungan yang didapat oleh BPD DIY. Dengan menggunakan indikator CAR, peneliti membuktikan bahwa BPD DIY memiliki faktor Capital yang baik, yaitu diatas ketentuan Bank Indonesia sebesar 8%. Kesimpulan hasil penelitian menunjukkan bahwa PT. Bank Pembangunan Daerah DIY pada tahun 2011 hingga 2015 secara keseluruhan berada pada peringkat komposit satu dengan predikat sangat sehat serta masing-masing total nilai komposit sebesar 93%, 93%, 97% , 97% dan 97%

Determinants of voluntary formation of risk management committees

2014 ◽  
Vol 29 (7) ◽  
pp. 649-671 ◽  
Author(s):  
Nkoko Blessy Sekome ◽  
Tesfaye Taddesse Lemma
Keyword(s):  
South Africa ◽  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Emerging Economy ◽  
Board Structure ◽  
Content Type ◽  
Listed Firms ◽  
Practical Implications

Purpose – The aim of this paper is to examine the nexus between firm-specific attributes and a company’s decision to setup a separate risk management committee (RMC) as a sub-committee of the board within the context of an emerging economy, South Africa. Design/methodology/approach – The authors analyse data extracted from audited annual financial reports of 181 non-financial firms listed on the Johannesburg Securities Exchange (JSE) by using logistic regression technique. Findings – The results show a strong positive relationship between the existence of a separate RMC and board independence, board size, firm size and industry type. However, the authors fail to find support for the hypotheses that independent board chairman, auditor reputation, reporting risk and financial leverage have an influence on a firm’s decision to establish RMC as a separately standing committee in the board structure. The findings signify the role of costs associated with information asymmetry, agency, upkeep of a standalone RMC, damage to the reputation of directors and industry-specific idiosyncrasies on a firm’s decision to form a separate RMC. Research limitations/implications – As in most empirical studies, this study focuses on listed firms. Nonetheless, future studies that focus on non-listed firms could add additional insights to the literature. Investigating the role of firm-specific governance attributes other than those considered in the present study (e.g. gender of directors, ownership structure, etc.) could further enhance the understanding of antecedents of risk-management practices. Practical implications – The findings have practical implications for the investment community in assessing the quality of risk management practices of companies listed on the JSE. Furthermore, the results provide insights that are potentially useful to the King Committee and other corporate governance regulators in South Africa in their effort to improve corporate governance practices. Originality/value – The present study focuses on firms drawn from an emerging economy which has profound economic, institutional, political and cultural differences compared to advanced economies, which have received a disproportionately higher share of attention in prior studies. Thus, the study contributes additional insights to the literature on corporate risk management from the perspective of an emerging economy.

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