scholarly journals How does internal governance affect banks’ financial stability? Empirical evidence from Egypt

2021 ◽  
Author(s):  
Mohamed Marie ◽  
Hany Kamel ◽  
Israa Elbendary
Keyword(s):  
Financial Stability ◽  
Audit Committee ◽  
Independent Directors ◽  
Board Members ◽  
Board Independence ◽  
Decision Making Process ◽  
Internal Governance ◽  
Internal Governance Mechanisms ◽  
High Level ◽  
Share Information

AbstractThis paper investigates whether internal governance mechanisms were associated with the financial stability of Egyptian banks over the period 2010–2019. To this end, a GMM regression analysis was employed using 252 firm-year observations. The results, in general, indicate that the level of banks’ financial stability is positively associated with board size, board meetings, and board gender. In contrast, the results show that board education and the ownership of shares by directors are negatively associated with banks’ financial stability. More interestingly, our results demonstrate that higher financial stability is significantly associated with lower board independence, the presence of CEO duality, and fewer audit committee meetings. These striking results can be attributed to the argument that the presence of independent directors on the board may reduce the CEO’s willingness to share information with board members, causing a high level of uncertainty in the decision-making process, which ultimately leads to a reduction in the financial stability of their bank.

scholarly journals Do the Characteristics of Independent Directors and Supervisory Board Members Matter in China?

2016 ◽  
Vol 2 (3) ◽  
pp. 27 ◽  
Author(s):  
Hongmei Xu ◽  
Jiang Lin
Keyword(s):  
Decision Making ◽  
Firm Performance ◽  
Supervisory Board ◽  
Clear Relationship ◽  
Independent Directors ◽  
Board Members ◽  
Decision Making Process ◽  
Listed Firms ◽  
Empirical Results

This paper investigates and compares the characteristics of independent directors and supervisory board members in Chinese listed firms. The occupational backgrounds of independent directors and supervisory board members in listed firms are very different. Besides, different firms have different preferences in employing independent directors and supervisory board members according to their demands. Moreover, the empirical results show that characteristics of independent directors and supervisory board members have no clear relationship with firm performance. No matter their professional backgrounds or age, the independent directors and supervisory board members do not have the authority to affect the decision making process of management. Thus they cannot really contribute to firm performance.

Board independence and private information-based trading: evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jiunn-Shyan Khong ◽  
Chee-Wooi Hooy ◽  
Chun-Teck Lye
Keyword(s):  
Panel Data ◽  
Private Information ◽  
Audit Committee ◽  
Dynamic Panel Data ◽  
Independent Directors ◽  
Board Independence ◽  
Disclosure Quality ◽  
Board Diversity ◽  
Content Type ◽  
The Relationship

PurposeThis study investigates the effect of board independence on private information-based trading (PIBT) events. This study also examines the interaction effects of firm's disclosure quality and the statutory and demographic roles of independent directors and board diversity attributes, respectively, on the relationship between board independence and PIBT.Design/methodology/approachThis study uses panel data of 811 non-financial public listed companies in Bursa Malaysia for the sample period 2009–2017. The dynamic general method of moments (DGMM) is used for the dynamic panel data estimation and to address the potential endogeneity problem.FindingsThe results show that board independence has a negative effect on PIBT and the effect could be strengthened by firm's disclosure quality, women independent directors and board gender diversity, but attenuated by CEO duality. The overall result suggests that apart from independent audit committee, the statutory and demographic attributes of independent directors and board diversity, and firm's disclosure quality are complementary to board independence in preventing persistent PIBT.Originality/valueThis study augments the existing corporate governance and information-based trading literature from the perspectives of firm's disclosure quality, and the statutory and demographic roles of independent directors and board diversity attributes, by examining their effects on the relationship between board independence and PIBT.

Institutional investor preferences

2019 ◽  
Vol 42 (5) ◽  
pp. 641-659 ◽  
Author(s):  
Hamdan Amer Al-Jaifi ◽  
Ahmed Hussien Al-Rassas ◽  
Adel Al-Qadasi
Keyword(s):  
Institutional Investors ◽  
Audit Committee ◽  
Internal Audit ◽  
Institutional Ownership ◽  
Governance Mechanisms ◽  
Internal Governance ◽  
Content Type ◽  
Internal Audit Function ◽  
Internal Governance Mechanisms ◽  
Emerging Country

Purpose This study aims to examine the institutional investors’ preferences for internal governance mechanisms (internal audit function and audit committee effectiveness) in an emerging country like Malaysia. Design/methodology/approach A sample of 2,020 yearly firm observations in Bursa Malaysia over the period 2009-2012 is used. The two-stage least squares using instrumental variables (IV-2SLS) analysis is used to examine the relationships. To corroborate the findings of this study, a regression based on a one-year lag of the independent variables is used. Furthermore, ordinary least square regression and Generalized Method of Moments using instrumental variables (IV-GMM) are used. Findings Positive associations are found between the internal audit function and audit committee effectiveness and the institutional ownership. Research limitations/implications These findings imply that institutional investors gravitate to firms that have high investment in internal audit function and effective audit committee. These findings are consistent with the conjecture that institutional investors try to minimize monitoring and exit costs and meet their fiduciary responsibility by investing in better internal audit firms. Practical implications This study offers insights to policymakers interested in enhancing internal governance mechanisms to attract institutional investors. Originality/value Limited empirical studies have examined the relation between internal governance mechanisms (internal audit function and audit committee effectiveness) and institutional ownership. This study adds to the existing literature on the importance of internal governance mechanisms by documenting an association between internal audit function and audit committee effectiveness and institutional ownership in an emerging country like Malaysia.

scholarly journals Emerging policies and the effectiveness of corporate governance mechanisms on earning quality

2020 ◽  
Vol 9 (3) ◽  
pp. 157-164
Author(s):  
Mohammed Mahdi Obaid ◽  
Muneer Rajab Amrah
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Gulf Cooperation Council ◽  
Independent Directors ◽  
Board Independence ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Earning Quality ◽  
The Relationship

Current study review extant empirical researches on the relationship between CG and EQ. However, the scope of the reviewed studies was shown to vary, most studies on CG and EQ are specific in focus, with different studies focusing on specific aspects or measures of CG. This study evaluates the role of emerging policies and the effectiveness of corporate governance mechanisms on earning quality within a conceptual framework for the Gulf cooperation council. This study concludes that the majority of companies with big board size, higher board independence, and more frequent meetings have improved EQ. Also, the result indicates companies with big audit committee size, a larger number of independent directors, more audit committee meetings and more experts tend to have an increase in EQ. Finally, this review emerged as a framework suitable for assessing the level of EQ disclosed and the relationship between CG and EQ base on GCC policies.

scholarly journals Substitution effects of internal governance mechanisms: evidence from Switzerland

2008 ◽  
Vol 5 (3) ◽  
pp. 212-219
Author(s):  
Sabina Nielsen ◽  
Simon Peck ◽  
Winfried Ruigrok
Keyword(s):  
Negative Relationship ◽  
Ownership Concentration ◽  
Substitution Effects ◽  
Board Independence ◽  
Governance Mechanisms ◽  
Governance System ◽  
Internal Governance ◽  
Internal Governance Mechanisms ◽  
Board Monitoring ◽  
High Degree

This paper explores the substitution effects among three governance mechanisms, board monitoring potential, incentives and ownership structure, in a sample of 176 publicly listed companies in Switzerland, a country characterised by bank-centred governance system and high degree of ownership concentration. Our results suggest that whereas ownership concentration per se does not substitute for monitoring by the board, shareholdings held by board and top management and presence of a shareholder on the board act as substitutes for board independence. Moreover, we found that substitution effects differ with the identity of the largest shareholder. Firms owned by financial institutions exhibit a negative relationship between board independence and shareholder representation on board, whereas in family controlled firms board and managerial ownership is the main substitute for board monitoring.

scholarly journals Board quality and the performance of Indonesian listed companies

2011 ◽  
Vol 7 (1) ◽  
pp. 57-65
Author(s):  
Shamharir Abidin ◽  
Nurwati A. Ahmad-Zaluki ◽  
Desi Ilona
Keyword(s):  
Financial Performance ◽  
Significant Influence ◽  
Audit Committee ◽  
Stock Exchange ◽  
Independent Directors ◽  
Board Independence ◽  
Detailed Knowledge ◽  
Company Performance ◽  
Multiple Directorships ◽  
Financial Expertise

This paper provides an analysis on the effect of board quality on company performance. Using a sample of 133 companies listed on the Jakarta Stock Exchange in the year 2007, this study specifically examines whether multiple directorships, director shareholding and board independence (i.e. proxies for board quality) can be associated with company financial performance. This study also investigates the effect of audit committee characteristics (as proxied by audit committee independence and financial expertise) on company performance, while controlling for the effects of leverage and size. With regard to board quality, the results indicate that only board independence is found to be associated with performance, though in the opposite direction. The direction of influence suggests that having too many independent directors (i.e. non-executive) might slow down the business as they might have a lack of detailed knowledge about the company’s business, and are more concerned about their gatekeeper role. As expected, leverage and size are found to have a significant influence on company performance.

scholarly journals Board characteristics and financial performance in the insurance industry: An international empirical survey

2021 ◽  
Vol 18 (3) ◽  
pp. 8-18
Author(s):  
Pasquale di Biase ◽  
Grazia Onorato
Keyword(s):  
Financial Performance ◽  
Boards Of Directors ◽  
Fair Value ◽  
Insurance Companies ◽  
Board Members ◽  
Board Independence ◽  
Internal Governance ◽  
Board Characteristics ◽  
Wide Range ◽  
The Impact

There are few studies in the literature on how the characteristics of boards of directors affect the performance of insurance companies. The purpose of this research is to investigate the characteristics of a company’s board that can have a significant impact on financial performance in the insurance sector. For this purpose, we performed a dynamic pooled regression model to test the impact of a wide range of board-specific factors. The survey has been conducted on an international sample of 119 listed insurance companies operating in the period 2009-2019. The sample includes companies from three geographical areas: North America, Europe and Asia. Our findings provide evidence that board structure and board independence are the most relevant governance factors, with a potentially positive impact on insurers’ market performance. These findings indirectly outline the opportunity for insurance companies to improve corporate fair value by strengthening internal governance models through effective board policies, an adequate qualification of board members and a well-balanced membership of the board. At the same time, there is still room for improvement as regards the level of board independence by strengthening internal governance policies in order to maintain an adequate number of independent and non-executive board members. The study upgrades the evidence arising from the existing literature by providing new elements to support a deeper understanding of the effects of insurance companies’ board characteristics on financial performance. Empirical results may also have important implications for both managers and policy makers.

scholarly journals Corporate Governance and Equity Prices: The Effect of Board of Directors and Audit Committee Independence

2018 ◽  
Vol 21 (2) ◽  
pp. 152-164
Author(s):  
Taher Hamza ◽  
Nada Mselmi
Keyword(s):  
Stock Returns ◽  
Audit Committee ◽  
Abnormal Returns ◽  
Jel Classification ◽  
Equity Returns ◽  
Audit Committees ◽  
Independent Directors ◽  
Board Independence ◽  
Equity Prices ◽  
Listed Firms

This paper investigates the effect of board and audit committee independence on firm market performance. Using a sample of French listed firms, we find a negative and significant relation between board independence and equity returns. This suggests that appointing more independent directors fails in enhancing firm stock returns. Furthermore, we show that firms with independent audit committees exhibit higher equity returns. We analyze three portfolios sorted by the percentage of independent directors on boards and audit committees using Carhart’s model and find that the portfolio of firms with low board independence and high audit committee independence exhibits the highest abnormal returns. JEL Classification: G34, G11

Board characteristics, audit committee attributes and firm performance: empirical evidence from emerging economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rifat Fariha ◽  
Md. Mukarrom Hossain ◽  
Ratan Ghosh
Keyword(s):  
Significant Relationship ◽  
Commercial Banks ◽  
Audit Committee ◽  
Banking Sector ◽  
Independent Directors ◽  
Board Independence ◽  
Content Type ◽  
Board Characteristics ◽  
Management Quality

PurposeThis study is designed and directed to analyze the effect of board characteristics and audit committee attributes on the firm performance of publicly listed commercial banks of Bangladesh.Design/methodology/approachThirty publicly listed commercial banks of Dhaka Stock Exchange (DSE) have been taken as sample for this study. Data have been collected from annual reports between 2011 and 2017 of the assessed banks. Pooled OLS model has been used for running regression model of this study.FindingsBoard independence has a negative and significant relationship with ROA and Tobin's Q. However, Board Independence has a positive and significant relationship with Stock Return. On the other hand, Board Diversity has a negative and significant relationship with ROA and ROE, which implies inefficiency of diversified board members in the context of Bangladesh. Family duality has a positive and significant relationship with ROA and a negative and significant relationship with Stock return. Board Meeting has a positive and significant relationship with ROA. Audit Committee Size has a negative and significant relationship with Tobins' Q. Independence of audit committee chairman has a negative and significant relationship with Tobin's Q and Stock Returns. Presence of non-executive directors and number of audit meetings have no significant relationship with any of the predicted variables.Research limitations/implicationsAmong all variables of the board characteristics, role of independent directors and participation of female directors have conflicting results in this study. This has raised a question about the fair appointment independent directors and their objective view on the board. Female directors' role is not convincing in the context of Bangladesh as most of the commercial banks are family-owned. Policymakers can tighten and supervise the appointment of independent directors to ensure good governance in the banking sector. Moreover, role of audit committee and independence of audit committee chairman have generated conflicting results in terms of market-based performance measure.Originality/valueBanking sector of Bangladesh experiences huge corruption in the form of excessive NPLs and poor management quality which results in low profit for the firm. This study has explored the problems of management quality and flaws of audit committee which is hampering overall growth of banking industry. Improvement of independent directors' appointment and audit committee formation and reporting will certainly help banking industry of Bangladesh to improve overall performance.

scholarly journals On What Could Chinese Mining Enterprises Achieve High-Level Environmental Performance?—Based on the fsQCA Method

2021 ◽  
Vol 18 (14) ◽  
pp. 7290
Author(s):  
Zhengjie Gao ◽  
Dayi He ◽  
Shuaifang Niu
Keyword(s):  
Environmental Performance ◽  
Government Regulation ◽  
Resource Dependence ◽  
Mining Industry ◽  
Resource Dependence Theory ◽  
Public Attention ◽  
Internal Governance ◽  
Government Supervision ◽  
Countermeasures And Suggestions ◽  
High Level

Enterprise environmental performance has causal complexity. The purpose of this paper is to discover the possible combination of conditions for enterprises to achieve high environmental performance. Based on the resource dependence theory, stakeholder theory, and externality theory, this paper constructs the theoretical framework of enterprise environmental performance evaluation and applies the fsQCA method to study the major influencing factors and mechanism of the environmental performance of listed enterprises in the Chinese mining industry. Based on the data from 2016 to 2019, the results show that there are four configurations of multiple factors leading to high environmental performance. Based on these configurations, three possible paths, internally driven, internally–externally driven, and externally driven, are established to improve environmental performance. Further, we also find that, between profitability and government regulation and between enterprise size and board independence are interchangeable condition variables; public attention outweighs other factors for Chinese mining enterprises. Countermeasures and suggestions from perspectives of government supervision, public concern, and enterprise internal governance are proposed at the end the study.

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