scholarly journals Is the use of financial accounting fit for purpose? An exploration of the theoretical foundations, framework and practicalities

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Thereza Raquel Sales de Aguiar
Keyword(s):  
Corporate Governance ◽  
Secondary Data ◽  
Theoretical Background ◽  
Financial Accounting ◽  
Business And Society ◽  
Content Type ◽  
Inappropriate Use ◽  
Accounting Scandals ◽  
The Impact ◽  
Theoretical Foundations

Purpose The purpose of this paper is to explore issues related to the use of financial accounting and reporting by discussing three interrelated areas: the theoretical foundations, the framework and practicalities. The paper also discusses participatory and pluralistic approaches to accounting and corporate governance as alternatives to address some of these issues. Design/methodology/approach This is a narrative research based on deductive thematic analysis of secondary data. This study provides a general overview of the existing literature of the limits of the use of financial accounting and its impact on business and society. Findings In terms of the theoretical foundations, this paper contrasts financial accounting explained by agency theory and a dialogic accounting approach. The findings of this study emphasise the need to establish an accounting framework for the interests of the many (not the few) in conjunction and simultaneously with a participatory and pluralistic approach to corporate governance. Finally, this paper explores accounting for carbon emissions and recent financial accounting scandals to analyse the impact of the inappropriate use of financial accounting and reporting in business and society. Originality/value This paper provides an overview of the limits of the use of financial accounting by exploring its theoretical background, framework and practicalities. The paper also discusses the need for new accounting and corporate governance frameworks that allow a pluralistic and participatory approach to the decision-making of companies.

Financial accounting scandals and the reform of corporate governance in the United States and in Italy

2017 ◽  
Vol 17 (1) ◽  
pp. 77-88 ◽  
Author(s):  
Daniel P. Sorensen ◽  
Scott E. Miller
Keyword(s):  
United States ◽  
Corporate Governance ◽  
Financial Reporting ◽  
The United States ◽  
Class Action ◽  
Financial Accounting ◽  
Private Enforcement ◽  
Content Type ◽  
Accounting Scandals ◽  
The Usa

Purpose In the 1990s and beginning of the next decade, a series of financial accounting scandals occurred in the United States (USA or US) and in several other countries of the world. The USA and Italy (among others) responded with legislation to reform financial reporting and corporate governance in these jurisdictions. This paper aims to compare the regulatory response of Italy to that of the USA. Design/methodology/approach This paper includes a review of relevant literature and evaluation of the actions of the regulatory authorities. Findings In the case of the financial reporting crises, the rapid response put the USA into the role of the “first mover” with the European Union (EU) reacting to US initiatives and eventually converging to a large degree with the provisions of the US legislation. Italy has adopted many of the same regulatory reforms as the USA and has added some reforms that are directed to the specific needs to Italy. Research limitations/implications In conjunction with legislative initiatives like Sarbanes-Oxley, private enforcement mechanisms, such as shareholder class action suits in the USA, play an important role in discouraging and punishing financial accounting fraud. Practical implications In the absence of significant reforms of the Italian private enforcement system, corporate governance abuses and the potential for accounting scandals may still be persistent. As a whole, cooperative efforts continue between the USA and the EU. Such efforts are needed more and more, as companies become increasingly globalized. Originality/value This paper provides comparison and evaluation of corporate governance reform efforts in the USA and Italy.

scholarly journals Audit committee attributes and firm performance: evidence from Malaysian finance companies

2015 ◽  
Vol 23 (3) ◽  
pp. 206-231 ◽  
Author(s):  
Basiru Salisu Kallamu ◽  
Nur Ashikin Mohd Saat
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Secondary Data ◽  
Primary Data ◽  
Islamic Banking ◽  
Related Services ◽  
Content Type ◽  
Future Studies ◽  
Before And After ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of audit committee (AC) attributes on the performance of finance companies in Malaysia in both period before and after the Malaysian Code on Corporate Governance (MCCG) was issued in order to determine which of the AC attributes enhances performance of finance companies in Malaysia. Design/methodology/approach – The population of the study comprises firms listed under finance sector of the main market of Bursa Malaysia. The number of firms listed on the main market of Bursa Malaysia as at the time of data collection (2012) was 822, out of which 37 were finance firms. Since the number of finance companies listed on the main market was only 37, all companies were used as sample for this study. This comprises companies involved in commercial, investment and Islamic banking, insurance, Takaful and other finance-related services. The sample for the period prior to MCCG varies over the period of observation. The number of finance companies in 1992, 1993, 1994, 1995 and 1996 was 36, 40, 44, 47 and 54, respectively. The sample comprises companies in commercial banking, investment banking, Islamic banking, insurance, Takaful and other finance-related services. The sample comprises firms listed on the main board of Kuala Lumpur stock exchange as it was called before the name was changed to Bursa Malaysia. The companies listed under the Ace market are not included due to their small number and because they are subject to different listing requirements. The list of the finance companies for the period 2007-2011 is obtained from the web site of Bursa Malaysia while for the period 1992-1996, the list is obtained from Bursa Malaysia knowledge centre. The observation period for the study covers financial period from 2007 to 2011 which represents post MCCG period while period from 1992 to 1996 represents the period before MCCG. Findings – The findings suggests a significant positive relationship between independent AC members and profitability while dual membership of directors on audit and nomination committee is significant and negatively related with profitability. The result supports agency theory which suggests that independent directors provide effective monitoring of the management thereby enhancing profitability and reducing possibility for opportunistic behavior by the management and ultimately enhancing performance. In addition, the result indicates that there was significant improvement in corporate governance in finance companies after the MCCG was issued compared to the period before it was issued. Research limitations/implications – The study focussed only on finance companies listed on Bursa Malaysia. The attributes examined include independence, expertise, experience, executive membership and interlock of directors, future studies could examine other attributes such as internal process of the committee and personal characteristics of the directors. Furthermore, the study used secondary data future studies could use primary data or a combination of primary and secondary data. The study only examined the period before MCCG and after the code was issued, future study could examine the impact of the first and second revision and compare it with period after the first and second revision. Practical implications – The findings contribute to the literature and the understanding of the influence of AC attributes such as independence and experience of the directors on the committee by showing an association between director independence, expertise, experience and improved performance. Management and board of companies may use the findings to make appropriate choices about AC attributes and governance mechanisms to improve performance particularly with regards to independence, expertise, experience and interlock of the directors. Social implications – The study has provided policy makers with a better understanding of the various features a AC should have which could be incorporated in future policy formulation in order to safeguard investments of shareholders, protect the interest of various stakeholders and enhance the flow of capital and foreign direct investment into finance companies and the economy in general. Comparison of the result between the pre MCCG and post MCCG period shows an improvement in corporate governance in finance companies after the MCCG was issued. This implies that the initial issue of MCCG impacted positively on the governance of the finance companies. Originality/value – To best of the authors knowledge the study is the first to examine the attributes of AC in finance sector as a whole and to examine the impact in the period before and after the MCCG was issued.

Does corporate governance beget firm performance in Fortune Global 500 companies?

2016 ◽  
Vol 16 (4) ◽  
pp. 747-764 ◽  
Author(s):  
Muhammad Shaukat Malik ◽  
Durayya Debaj Makhdoom
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Data Collection ◽  
Inverse Relationship ◽  
Deductive Reasoning ◽  
Secondary Data ◽  
Annual Reports ◽  
Content Type ◽  
Governance Practices ◽  
The Impact

Purpose This paper aims to determine the impact of corporate governance practices on the financial outcomes of Fortune Global 500 Companies, thus covering impact of geographical differences (USA and non-USA) as well. Design/methodology/approach The study is a quantitative research based on a positivist paradigm using deductive reasoning and secondary data collection. Data collection has been done from secondary sources (annual reports, Edgar submissions and financial statistics from renowned financial databases such as yahoo.finance, Bloomberg, Ycharts statistics and Morningstar. Data were collected for 8 years (2005-2012). Findings The study found a strong positive relationship between corporate governance and firm performance. Smaller board sizes are found to generate better firm performance in Fortune Global 500 Companies. Frequency of board meetings have also been found to have inverse relationship with firm performance. The study supports board independence to improve transparency in board decision-making process. CEO compensation has been found to have inverse relationship with firm performance. The robustness of our results has been measured with the usage of three dependent variables, and we have found same results with varying significance level. Research limitations/implications Due to selection of globally broad sample set qualitative aspects of corporate governance could not be covered. Nevertheless, there is a need to go beyond the quantitative techniques (secondary data) of measuring corporate governance mechanisms. Practical implications The population set is unique combination of big players and global diversification. Hence, the corporate governance practices of these firms as understood from the results of this study can be bench-marked for emerging corporates of varying global context. Originality/value The research is original and unique as it significant and globally diverse population of Fortune Global 500 Companies over a period of 8 years for 11 variables of interest. Results are helpful in bench marking for the rest of market players.

Corporate governance and IFSB standard-4: evidence from Islamic banks in Bangladesh

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Harun Ur Rashid ◽  
Ruma Khanam ◽  
Md. Hafij Ullah
Keyword(s):  
Corporate Governance ◽  
Content Analysis ◽  
Financial Services ◽  
Secondary Data ◽  
Positive Influence ◽  
Least Square ◽  
Annual Reports ◽  
Islamic Banks ◽  
Content Type ◽  
The Impact

Purpose This paper aims to examine the compliance status of Islamic banks in Bangladesh with Shari’ah-based accounting standards named Islamic Financial Services Board (IFSB) standard-4 and its association with corporate governance. Design/methodology/approach The six years of secondary data, including the annual reports of 2013–2018, were collected from the websites of all the seven listed Islamic banks, i.e. 100% of the population available during the period of study. The study used a content analysis approach for systematically categorizing and analysing the contents disclosed in the annual report. A total compliance score based on 133 reporting items of IFSB standard-4 were considered for content analysis. Furthermore, this study applied the ordinary least square to investigate the impact of corporate governance on IFSB standard-4. Findings This study found that the level of compliance with the IFSB standard by the Islamic banks in Bangladesh is poor, as the overall compliance status is 44.83%. Further, this study observed a significant and positive influence of the Shari’ah supervisory committee, the board size, accounting experts on the board, foreign ownership and institutional ownership on the level of compliance with IFSB standard-4. On the other hand, this study found a negative effect of directors’ ownership on the level of compliance with IFSB standard-4. Practical implications This study provides the management of Islamic banks an insight into developing their governance characteristics to comply with Islamic accounting and reporting standards. Moreover, this study expects to facilitate the management of Islamic banks in designing their accounting and reporting outlines to enhance the level of compliance with the IFSB standards. Originality/value This pioneering study on IFSB standards opens an avenue to the researchers exploring the accounting and reporting status of Islamic banks considering the requirements of the IFSB standards.

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

2020 ◽  
Vol 20 (5) ◽  
pp. 939-964
Author(s):  
Mohammad A.A Zaid ◽  
Man Wang ◽  
Sara T.F. Abuhijleh ◽  
Ayman Issa ◽  
Mohammed W.A. Saleh ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Business Environment ◽  
Board Structure ◽  
Content Type ◽  
Financing Decisions ◽  
The Impact

Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

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 impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI

2018 ◽  
Vol 19 (5) ◽  
pp. 935-964 ◽  
Author(s):  
Neha Smriti ◽  
Niladri Das
Keyword(s):  
Firm Performance ◽  
Intellectual Capital ◽  
Value Creation ◽  
Generalized Method Of Moments ◽  
Value Added ◽  
Secondary Data ◽  
Share Price ◽  
Content Type ◽  
Listed Firms ◽  
The Impact

Purpose The purpose of this paper is to examine the effect of intellectual capital (IC) on financial performance (FP) for Indian companies listed on the Centre for Monitoring Indian Economy Overall Share Price Index (COSPI). Design/methodology/approach Hypotheses were developed according to theories and literature review. Secondary data were collected from Indian companies listed on the COSPI between 2001 and 2016, and the value-added intellectual coefficient (VAIC) of Pulic (2000) was used to measure IC and its components. A dynamic system generalized method of moments (SGMM) estimator was employed to identify the variables that significantly contribute to firm performance. Findings Indian listed firms appear to be performing well and efficiently utilizing their IC. Overall, human capital had a major impact on firm productivity during the study period. Furthermore, the empirical analysis showed that structural capital efficiency and capital employed efficiency were equally important contributors to firm’s sales growth and market value. The growing importance of the contribution of IC to value creation was consistently reflected in the FP of these Indian companies. Practical implications This study has robust theoretical grounds and employs a validated methodology. The present study extends knowledge of IC among academicians and managers and highlights its contribution to value creation. The findings may help stakeholders and policymakers in developing countries properly reallocate intellectual resources. Originality/value This study is the first study to evaluate IC and its relationship with traditional measures of firm performance among Indian listed firms using dynamic SGMM and VAIC models.

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.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

Board structure changes after accounting fraud: the case of Schneider Electric

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Benedicte Millet-Reyes ◽  
Nancy Uddin
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Multinational Corporation ◽  
Business Case ◽  
Annual Reports ◽  
Board Structure ◽  
Control Mechanisms ◽  
Accounting Fraud ◽  
Content Type ◽  
The Impact

Theoretical basis The impact of corporate governance on internal controls and quality of financial disclosures. Research methodology Analysis of a real financial fraud event for a non-US multinational corporation. The case relies on accessing and analyzing annual reports for the firm, both before and after the fraud. Additional information on industry governance characteristics are provided in the case itself so that students can compare the firm to the industry. Case overview/synopsis This business case is centered on the analysis of Schneider Electric, a French multinational corporation, which had to restate their financial statements in 2011 because of accounting fraud. Following this event, Schneider undertook major changes in their board structure to improve internal control mechanisms. This pedagogical business case familiarizes students with international differences in ownership and board structure and emphasizes potential corporate governance changes after financial statement fraud. Complexity academic level Managerial finance, corporate finance, international finance, auditing. This case is more appropriate for upper-level undergraduate and graduate courses.

Sign in / Sign up

Export Citation Format

Share Document