scholarly journals Corporate governance and Islamic banks’ products and services disclosure

2018 ◽  
Vol 31 (1) ◽  
pp. 75-89 ◽  
Author(s):  
Rihab Grassa ◽  
Raida Chakroun ◽  
Khaled Hussainey
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Policy Implications ◽  
Annual Reports ◽  
Islamic Banks ◽  
Governance Mechanisms ◽  
Board Size ◽  
Content Type ◽  
Long Period ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the determinants of Islamic banks (IBs) product and services disclosure (PSD). Design/methodology/approach A computer-based content analysis is run upon the annual reports for a sample of 78 IBs operating in 11 countries from 2004 to 2012 to find the number of product and services statements. The levels and trends of PSD are identified. A regression analysis to identify the factors affecting PSD in IBs is also used. Findings The findings suggest that there has been a significant improvement of PSD over time. The results show a positive association between PSD and Shariah board size, board size, chief executive officer (CEO) tenure, duality in position, blockholders and investment account holders. However, they show a negative association between PSD and institutional ownership. In addition, it appears that board independence does not affect significantly banks’ PSD. It is also found that the bank performance, bank age, leverage, listing, adoption of international financial reporting standards, adoption of Accounting and Auditing Organization for Islamic Financial Institutions and country transparency index have a positive effect on the PSD. Originality/value This study offers an original contribution to corporate disclosure literature by being the first to develop and investigate PSD for a large sample of IBs during a long period of time. It links P&S with bank corporate governance characteristics. The findings have many important policy implications. More specifically, this paper encourages regulators in the studied countries to improve corporate governance mechanisms in their Islamic banking systems through the optimization of ownership structure, CEO’s characteristics and the board’s characteristics, to promote PSD. Moreover, the findings support the theoretical predictions of the generalized agency theory. This study’s empirical evidence enhances the understanding of the corporate social responsibility disclosure environment in general and the PSD environment in particular for IBs. This study is the first one that measures PSD in the annual reports for a large cross-countries sample of IBs during a long period of time. It is also the first one that links PSD with IBs corporate governance mechanisms.

Do manufacturing firms in Bangladesh engage in earnings management to avoid losses? Further evidence using the governance elements as monitors

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bishnu Kumar Adhikary ◽  
Ranjan Kumar Mitra ◽  
Mohammad Rajon Meah
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Manufacturing Firms ◽  
Policy Implications ◽  
Governance Mechanisms ◽  
Management Behavior ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose This study aims to investigate the earnings management practices of the listed manufacturing firms in Bangladesh and assess the impact of corporate governance mechanisms on such earnings management behavior. Design/methodology/approach The study applies the real earnings management (REM) model developed by Dechow et al. (1998) and implemented by Roychowdhury (2006) and modified Jones model (1991) for the proxy of accrual-based earnings management (AEM). It uses a pooled ordinary least square regression model corrected with robust standard errors for empirical analysis. Findings The study finds that firms with small positive earnings per share are engaged in AEM to avoid losses. Also, firm managers craft discretionary expenses to manage real earnings. For governance factors, the institutional shareholders tend to play a significant role in limiting both REM and AEM embedded in generally accepted accounting principles or International Financial Reporting Standards. Also, factors such as foreign ownership and board size significantly restrict REM, whereas director ownership encourages the same. The paper does not reveal any significant monitoring role for other governance factors in curbing either REM or AEM practices by Bangladeshi firms. Research limitations/implications The paper studies the monitoring role of governance mechanisms on listed manufacturing firms’ earnings management. A study of separating the listed firms into family and non-family ones could be interesting for future research. Practical implications The paper unveils earning management techniques used by firms in Bangladesh and provides critical policy implications to the corporate governance mechanisms that effectively limit earnings management practice. Social implications The social significance is to aware constituents of financial reporting about the earnings management behavior by firms in emerging economies. Originality/value The study adds to evidence that the manufacturing firms in Bangladesh adopt both REM and AEM techniques to avoid losses. Simultaneously, the paper highlights some critical governance factors that can restrict misleading earnings management behavior by firms in an emerging economy to assist in policymaking.

The association between disclosure of forward-looking information and corporate governance mechanisms

2014 ◽  
Vol 29 (7) ◽  
pp. 578-595 ◽  
Author(s):  
Basil Al-Najjar ◽  
Suzan Abed
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Annual Reports ◽  
Governance Mechanisms ◽  
Cross Sectional ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Computerized Content Analysis ◽  
Forward Looking

Purpose – This paper aims to witness the importance of corporate governance mechanisms and investigates the relationship between the quality of disclosure of forward-looking information in the narrative sections of annual reports and the governance mechanisms for non-financial UK companies. Design/methodology/approach – Computerized content analysis using QSR NVivo 8 is used to measure the extent of forward-looking information in the narratives of the annual reports for 238 companies listed in the London Stock Exchange. Cross-sectional regression analysis is used to examine the impact of the corporate governance mechanisms on forward-looking information. Findings – The results show that board size and the independence of the audit committee are associated with the level of voluntary disclosure of forward-looking information. Research limitations/implication – One limitation of this study is that in controls for the effect of the financial crisis period, by selecting a representative year for a five-year period, 2006. The authors argument in using this year is based on the fact that the main variables of interest do not vary significantly with time, the cross-sectional analysis of the selected period will provide a fair view of the last five year-period. Practical implications – The authors report the importance of some governance practices in the UK, such as the role of the board members as well as the importance of audit committee independence. Originality/value – This paper contributes to the literature by using computerized content analysis to examine the relation between corporate governance mechanism and disclosure quality of forward-looking information using sample of companies before financial crisis period. The authors also examine governance mechanisms that are under-researched in the field of forward-looking disclosure.

scholarly journals The effects of corporate governance mechanisms on the financial leverage–profitability relation

2019 ◽  
Vol 43 (4) ◽  
pp. 387-409
Author(s):  
Hanh Song Thi Pham ◽  
Duy Thanh Nguyen
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Emerging Market ◽  
State Ownership ◽  
Board Independence ◽  
Financial Leverage ◽  
Governance Mechanisms ◽  
Board Size ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose This paper aims to investigate the moderating effects of corporate governance mechanisms on the financial leverage–profitability relation in emerging market firms. Design/methodology/approach The paper examines the impacts by estimating the empirical model in which a firm’s accounting profitability is a dependent variable, while financial leverage, board size, board independence, CEO duality, CEO ownership, state ownership and the interaction variables are predictors. The paper uses the panel data set of 295 listed firms in Vietnam in the period 2011-2015 and two key econometric methods for panel data, namely, the two-stage least square instrumental variable and general moments method. Findings The paper finds the evidence for the significant and positive effect of board size, board independence and state ownership on the financial leverage–profitability relation. The effect of CEO duality on the financial leverage–profitability relation tends to be negative, and the impact CEO ownership inclines to be positive, although both of them are statistically insignificant. The results are consistent across different estimation methods. Originality/value This paper is the first investigating the moderating effect of various corporate governance mechanisms on the financial leverage–profitability relationship in emerging market firms.

The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region

2016 ◽  
Vol 7 (4) ◽  
pp. 318-348 ◽  
Author(s):  
Hounaida Mersni ◽  
Hakim Ben Othman
Keyword(s):  
Corporate Governance ◽  
Middle East ◽  
Earnings Management ◽  
Audit Committee ◽  
Islamic Banks ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to examine whether corporate governance mechanisms affect the reporting of loan loss provisions by managers in Islamic banks in the Middle East region. Design/methodology/approach This empirical study uses balanced panel data from 20 Islamic banks, from seven Middle East countries for the period 2007 to 2011. The regression model is estimated using random effects specifications. Findings The empirical results show that discretionary loan loss provisions (DLLP) are negatively related to board size and the existence of an audit committee. Results also report a positive relationship between sharia board size and DLLP. This indicates that small sharia supervisory boards are more effective than larger ones, which could be due to the higher costs and negative effects of large groups on decision-making. Results also highlight that the existence of scholars with accounting knowledge sitting on the sharia board reduces discretionary behavior. Additional results provide evidence that an external sharia audit committee is also found to reduce discretion in Islamic banks. The conclusions are found to be robust to endogeneity issues and potentially omitted variables. Practical implications The findings are potentially useful for regulators and shareholders. Regulators could use the findings to focus on corporate governance mechanisms that restrain earnings management practices in Islamic banks and implement regulations to strengthen them. Additionally, this study gives shareholders further insight which enables them to better monitor the actions of managers and thus increase their control over their investments. Originality/value This study provides two contributions to the literature on Islamic banking. First, to the authors’ knowledge, this study is only the second piece of research focused on the impact of corporate governance on earnings management in Islamic banks. Second, the authors have examined the effect of some new corporate governance mechanisms that have not been studied previously in the research literature.

Ownership structure and audit committee effectiveness: evidence from top GCC capitalized firms

2019 ◽  
Vol 12 (3) ◽  
pp. 407-425 ◽  
Author(s):  
Mahfoudh Abdulkarem Al-Musali ◽  
Mohammed Helmi Qeshta ◽  
Mohamed Ali Al-Attafi ◽  
Abood Mohammad Al-Ebel
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Ordinary Least Squares ◽  
Annual Reports ◽  
Least Squares Regression ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Relationship ◽  
Ownership Types

PurposeThe purpose of this study is to report on the level of audit committee (AC) effectiveness on the top capitalized firms in GCC countries and to empirically investigate the hypothesized influence of ownership types on the level of AC effectiveness.Design/methodology/approachThe empirical data were drawn from annual reports of 119 top listed firms in Gulf Co-operation Council (GCC) nations at the end of 2011. Ordinary least squares regression analysis was constructed to examine the relationships between ownership types and the level of AC effectiveness.FindingsThe findings revealed that family, government and institutional ownership, in addition to board independence, all have significant positive association with AC effectiveness, and they serve as a complement to AC effectiveness.Research limitations/implicationsThe findings of the study are important for policy makers and regulators as they could use them to understand the relationship between different corporate governance mechanisms and formulating best strategies that would help them to improve and adopt an optimal governance system constituted from interacting governance mechanisms.Originality/valueThis study is one of few that have examined the interaction between different corporate governance mechanisms. It provides insights about the relationship between AC effectiveness and other governance mechanisms in the GCC context.

Corporate governance and fraudulent financial reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vahab Rostami ◽  
Leyla Rezaei
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Valuable Insight ◽  
Fraudulent Financial Reporting ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Financial Expertise ◽  
The Impact

Purpose This study aims to trace the impact of corporate governance and its mechanisms in preventing companies from turning to fraudulent financial reporting. Design/methodology/approach For this purpose, using the systematic elimination pattern, the information of 187 listed companies on the Tehran Stock Exchange over six years from 2013 to 2019 were collected, and the hypotheses were examined using a linear regression model. To measure fraudulent financial reporting, the adjusted model of Beneish (1999) was used to evaluate corporate governance. Its mechanisms based on nine corporate governance mechanisms, including board independence, board remuneration, CEO financial expertise, expertise in CEO industry, board financial expertise, board industry expertise, board effort, CEO duality and managerial ownership, have been examined. These mechanisms are calculated as a combined index of corporate governance. Findings The findings indicate that robust corporate governance significantly reduces companies’ intention toward fraudulent financial reporting. In the same way, a negative and significant relationship was observed between each of the nine corporate governance mechanisms, except for board compensation and fraudulent financial reporting. Originality/value This study’s findings provide valuable insight into the importance of strengthening companies to prevent companies’ managers from engaging in fraudulent financial reporting activities. Hence, it is suggested that professional references bodies more seriously follow the rules to dictate to companies for using and empowering their corporate governance.

Corporate governance mechanisms and firm performance in a developing country

2020 ◽  
Vol 62 (2) ◽  
pp. 147-169 ◽  
Author(s):  
Albert Puni ◽  
Alex Anlesinya
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Financial Performance ◽  
Governance Mechanisms ◽  
Board Size ◽  
Ceo Duality ◽  
Content Type ◽  
Board Committees ◽  
Discourse Practices ◽  
Corporate Governance Mechanisms

Purpose The purpose of this study is to examine the influence of corporate governance mechanisms recommended by the Securities and Exchange Commission (SEC) of Ghana on firm performance as measured by accounting-based ratios (return on assets, return on equity and earning per share) as well as market-based measure (Tobin’s Q) among listed Ghanaian companies from 2006 to 2018. These mechanisms are: board composition (board size, inside directors and outside directors), board committees (audit, remuneration and nomination), chief executive officer (CEO) duality/separation, board meetings and shareholder concentration. Design/methodology/approach The study used panel regression analysis of data from 38 listed firms in Ghana from 2006 to 2018 to test how each corporate governance variable initiated by the SEC of Ghana contributed to firm performance. Data were extracted from the annual reports of listed companies. Findings The study found that the presence of both insiders and outsiders on the corporate board improved financial performance. Similarly, board size, frequency of board meetings and shareholder concentration/ownership structure generally had a positive impact on financial performance. However, the presence of board committees generally had a negative impact on financial performance while CEO duality had no impact on financial performance. Practical implications The study contributes to the understanding of how good corporate governance practices affect firm performance for both academics and particularly Ghanaian policymakers. Originality/value This study provided new findings to bridge the gaps in the general corporate governance literature relative to the lack of consensus on financial impacts of corporate governance mechanisms. The finding contributes to knowledge by providing new and original evidence that some current corporate governance mechanisms are not effective in minimizing the agency problem in a developing setting. Furthermore, the authors anticipate that the outcomes of this research, which so far is the most comprehensive study in the Ghanaian context in terms of the coverage of corporate governance mechanisms specified by the SEC of Ghana, can significantly shape corporate governance discourse, practices and policies in Ghana, particularly and in other developing countries generally to improve financial performance and corporate sustainability.

Corporate governance, foreign direct investment, and bank income smoothing in African countries

2019 ◽  
Vol 15 (4) ◽  
pp. 670-690 ◽  
Author(s):  
Inês Pinto ◽  
Cristina Gaio ◽  
Tiago Gonçalves
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Direct Investment ◽  
Managerial Discretion ◽  
Income Smoothing ◽  
Governance Mechanisms ◽  
African Countries ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to investigate the role of corporate governance mechanisms and foreign direct investment (FDI) to restrain or stimulate the use of loan loss provisions (LLPs) by managers to smooth earnings in African banks. Design/methodology/approach This study uses a sample of 112 listed and non-listed banks from 20 African countries, covering the period 2011–2017. Models are estimated using the pooled ordinary least squares regression, as well as Blundell and Bond (1998) system GMM. Findings The results suggest that bank managers use LLPs to reduce income volatility and that ownership concentration increases income smoothing. The findings also show that FDI plays a fundamental role to restrain managerial discretion in developing countries, increasing corporate governance practices in the host country. Practical implications These findings are relevant for banking regulators and supervisors in order to determine which corporate governance mechanisms can be used in developing countries to increase the quality of financial reporting. A policy model that promotes FDI boosts financial reporting transparency, contributing to greater financial markets development. Originality/value The authors extend the existing literature on the influence of corporate governance mechanisms in limiting managerial discretion by focusing on the role that foreign shareholders may have in disciplining banks financial reporting quality in countries with weak institutional quality.

Can corporate governance mechanisms reduce earnings-management practices in Islamic banks?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Virasty Fitri ◽  
Dodik Siswantoro
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Management Practices ◽  
Stock Exchange ◽  
Islamic Banks ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose This study aims to provide empirical evidence on the role of corporate governance mechanisms in reducing earnings-management practices in Islamic banks in Asia. Design/methodology/approach This study used 28 Islamic banks in Asia, which were listed on the stock exchange from 2013–2017. The research method used quantitative regression with data on the characteristics of Islamic banks taken from the websites of each bank. This study used discretionary loan loss provision as a proxy for measuring earnings management. Findings The results show that only the audit committee size has a significantly negative effect on earnings management. An independent audit committee has a negative, but not significant, effect. The difference expectation signs cannot be interpreted further. Research limitations/implications Only a few components of corporate governance were tested in this study. Therefore, it is expected that future studies will include more components. Practical implications In general, the components of corporate governance that include the characteristics of the board of directors and the audit committee have a varied effect on reducing the earnings-management practices in Islamic banks, except audit committee size. In practice, audit committee size should have an important role in earning management reduces. Originality/value This may be the first paper that studies the effect of corporate governance on earnings management in Islamic banks in Asia.

scholarly journals Determinants of risk reporting by Portuguese and Spanish non-finance companies

2018 ◽  
Vol 30 (3) ◽  
pp. 311-339 ◽  
Author(s):  
Jonas Oliveira ◽  
Rogério Serrasqueiro ◽  
Sara Nunes Mota
Keyword(s):  
Corporate Governance ◽  
Institutional Theory ◽  
Stock Exchange ◽  
Annual Reports ◽  
Governance Mechanisms ◽  
Content Type ◽  
Reporting Practices ◽  
Corporate Governance Mechanisms ◽  
Prior Literature ◽  
Risk Reporting

Purpose This paper aims to assess the risk reporting practices extent to which firm’s and corporate governance characteristics explain risk-related disclosures (RRD) motivations across two European Latin countries (Portugal and Spain). Moreover, drawn on elements of agency, legitimacy, resources-based perspectives and institutional theory, this study also intends to assess whether the influence of corporate governance mechanisms on risk reporting is mediated by strategic/institutional legitimacy interests. Design/methodology/approach From a sample of 60 non-finance Portuguese and Spanish companies with securities traded on the Euronext Lisbon stock exchange market and on the Madrid stock exchange market, respectively, at December, 2011, the Corporate Governance reports and the “risk/risk management” sections of the Management reports included on consolidated annual reports for 2011 were manually content analysed, according to prior literature. Further, multiple linear regressions were used to assess the potential relationships between corporate governance mechanisms and risk reporting. The paper’s theoretical framework draws on elements of agency, legitimacy, resources-based perspectives and institutional theory. To understand the risk reporting practices of Portuguese and Spanish non-finance listed companies, the paper conducts a content analysis of 60 consolidated annual reports for 2011. Findings Results indicate that visible companies, operating in a country with a weaker legal environment, and during periods of financial distress disclose more discretionary RRD, basically to contextualize their negative outcomes. Some corporate governance mechanisms were crucial to improve risk information. Originality/value The paper goes beyond prior literature work and assesses whether the theoretical framework grounded on agency, legitimacy, resources-based perspective and institutional theory is suitable in explaining RRD in an under-researched setting (European Latin countries, such as Portugal and Spain, with low agency costs and different corporate governance models). Moreover, the analysis embraces a wider and homogeneous range of internal and external corporate governance mechanisms and uses a period in which both countries were severely affected by a sovereign debt crisis with negative impacts on company’s liquidity and financial risks. A research setting like this has not been studied hitherto.

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