Alternative regulatory policies, compliance and corporate governance quality

2019 ◽  
Vol 15 (1) ◽  
pp. 42-60 ◽  
Author(s):  
Ujkan Bajra ◽  
Simon Čadež
Keyword(s):  
Corporate Governance ◽  
Fixed Effects ◽  
Relative Effect ◽  
Company Law ◽  
Content Type ◽  
Regulatory Policies ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
The Relationship ◽  
Over Time

Purpose The purpose of this paper is to examine empirically the evolution of corporate compliance with the eighth Company Law Directive (CLD) over time, the relationship between the degree of compliance with the eighth CLD and corporate governance quality (CGQ), and the relative effect of compliance with the eighth CLD and Sarbanes–Oxley Act (SOX) on CGQ. Design/methodology/approach The hypotheses are tested on a sample of EU firms that are cross listed in the EU and the USA and, thus, subject to both EU and US legislation, using fixed effects panel regression analysis. Findings The authors find that compliance levels with the eighth CLD are increasing over time, yet they vary considerably across constituent provisions. The authors also find that higher compliance is positively related to CGQ, although the effect size is higher for compliance with the eighth CLD than for compliance with SOX. Originality/value This study is original from many perspectives. Unlike most prior studies, which rely on binary variables to represent the constructs appraised in this study, novel and advanced measures of compliance and CGQ are constructed. Next, this study examines EU firms that have received very little research interest compared to US firms. Third, in an innovative approach, the authors appraise the relationship between the degree of compliance and CGQ longitudinally at both the aggregate and the constituent provision levels.

CEO ability and regulatory review risk

2019 ◽  
Vol 34 (5) ◽  
pp. 575-605 ◽  
Author(s):  
Reza Hesarzadeh ◽  
Ameneh Bazrafshan
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Agency Conflicts ◽  
Regulatory Review ◽  
Content Type ◽  
Workload Compression ◽  
Governance Quality ◽  
Low Levels ◽  
Corporate Governance Quality ◽  
The Relationship

Purpose Chief executive officer (CEO) ability may have an effect on various corporate reporting decisions, and consequently, the CEO ability is subject to scrutiny by regulatory reviewers. However, theoretical literature provides mixed evidence on how the CEO ability affects the regulatory review risk. Thus, this study aims to empirically examine the effect of CEO ability on regulatory review risk. Design/methodology/approach To measure CEO ability, this study uses the CEO ability-score developed by Demerjian et al. (2012). Further, to measure regulatory review risk, the study uses the probability of receiving a comment letter from the Securities and Exchange Organization of Iran. Findings This study finds that the relationship between CEO ability and regulatory review risk is generally negative and statistically significant but not economically significant, i.e. the relationship is very small. In this regard, the study shows that the relationship is negative and also statistically and economically significant for firms with low levels of agency conflicts and high levels of corporate governance quality; and is positive and also statistically and economically significant for firms with high levels of agency conflicts and low levels of corporate governance quality. In addition, while the study finds no evidence that the regulatory reviewers’ workload compression influences the general relationship between CEO ability and regulatory review risk, it documents that low (high) regulatory reviewers’ workload compression weakens (strengthens) both the relationships stated above. Originality/value Collectively, the results suggest that the agency conflicts/corporate governance quality and regulatory reviewers’ workload compression are important factors in the analysis of the relationship between the CEO ability and regulatory review risk. The results offer insights into the opposing theoretical viewpoints about the relationship between CEO ability and regulatory review risk. Thus, the results will be of interest to boards of directors and other stakeholders involved in the regulatory review process.

scholarly journals Investment opportunities, corporate governance quality, and firm performance in the UAE

2020 ◽  
Vol 10 (2) ◽  
pp. 261-276 ◽  
Author(s):  
Bakr Al-Gamrh ◽  
Ku Nor Izah Ku Ismail ◽  
Tanveer Ahsan ◽  
Abdulsalam Alquhaif
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Fixed Effects ◽  
Negative Influence ◽  
Content Type ◽  
Corporate Governance Code ◽  
Investment Opportunities ◽  
Governance Practices ◽  
Governance Quality ◽  
Corporate Governance Quality

PurposeThis paper examines the influence of investment opportunities on firm performance and evaluates corporate governance practices in the United Arab Emirates (UAE) to determine whether corporate governance quality moderates that influence.Design/methodology/approachA fixed-effects regression was employed to examine the influence of investment opportunities on firm performance and the role of corporate governance quality as a moderator for all listed firms on the Abu Dhabi Stock Exchange (ADX) and the Dubai Financial Market (DFM). We examined 501 firm-year observations for the period when the corporate governance code in the UAE was coming into force, from 2008 to 2012.FindingsThe regression results indicate that investment opportunities have a negative influence on firm performance. The corporate governance index used here shows that the level of corporate governance practiced in the UAE is weak. We also find that strong corporate governance ameliorates the negative influence of investment opportunities, which supports our hypotheses. The sub-indices of corporate governance that matter the most for moderating investment opportunities are board functioning and ethics.Practical implicationsThe results of this paper reflect the need to examine corporate governance in the context of the external environment represented by investment opportunities in our study. The findings could raise awareness of the importance of strong corporate governance practices, not only to directly improve firm performance but also through its influence on external variables. Legislators, regulators and other interested parties could use these results to examine practices in the UAE following the implementation of the corporate governance code.Originality/valueThis study contributes to the literature by evaluating the role that corporate governance quality and its components could play in firm performance and indirectly moderating other external factors (such as investment opportunities).

How firms' performance mediates the relationship between corporate governance quality and earnings quality?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammed Adel Elzahaby
Keyword(s):  
Corporate Governance ◽  
Analytical Model ◽  
Performance Measures ◽  
Earnings Quality ◽  
Direct Path ◽  
Content Type ◽  
Indirect Path ◽  
Governance Quality ◽  
Financial Performance Measures ◽  
Corporate Governance Quality

PurposeThe purpose of this study is to propose an analytical model that investigates both a direct path between corporate governance quality and earnings quality and an indirect path, in which firms' performance is a mediating variable that is influenced by corporate governance quality and that, in turn, influences earnings quality.Design/methodology/approachThe study employs a structural equation modelling (SEM), to a sample of Egyptian listed firms during 2011–2017, to test the proposed analytical model and to determine the relative importance of both the direct and indirect paths.FindingsThe findings show a statistically significant evidence of both a direct path from corporate governance quality to earnings quality, and an indirect path that is mediated by firms' performance, suggesting that both corporate governance quality and performance have a complementary effect on earnings quality. However, the weight of the evidence favouring the direct path is more important in case of accounting-based performance measures; and the weight of the evidence favouring the indirect path is more important in case of market-based performance measures.Research limitations/implicationsThe current study has some limitations. First, the study focuses specifically on one proxy for measuring earnings quality which is the absolute value of discretionary accruals. Other proxies of earnings quality could be examined in future research, such as income smoothing, earnings persistence and timely loss recognition. Another limitation is that only financial performance measures were examined, namely, return on assets, return on equity, price-to-earnings ratio and market-to-book value. Notwithstanding, non-financial performance measures could be investigated in future studies, such as balanced scorecard (BSC). Furthermore, considering cultural, political and legislative differences among countries, the results may not be generalised outside the scope of the current sample (i.e. Egyptian listed firms).Practical implicationsThe implications of the findings for both theory and practice are discussed.Originality/valueThis study is distinguished by validating an analytical model that has been overlooked by prior studies. Moreover, it provides a new constructed index for measuring corporate governance quality. Furthermore, it uses a new sophisticated statistical technique, which is SEM, for testing the proposed model.

Teacher-principal race and teacher satisfaction over time, region

2017 ◽  
Vol 55 (6) ◽  
pp. 624-639
Author(s):  
Samantha L. Viano ◽  
Seth B. Hunter
Keyword(s):  
Job Satisfaction ◽  
Fixed Effects ◽  
White Teachers ◽  
Ordinary Least Squares ◽  
Teacher Job Satisfaction ◽  
Southern Region ◽  
Content Type ◽  
Black Principals ◽  
The Relationship ◽  
Over Time

Purpose The purpose of this paper is to replicate prior findings on teacher-principal race congruence and teacher job satisfaction and extend the literature by investigating trends over time and if the relationship between race congruence and teacher job satisfaction differs by principal race and region. Design/methodology/approach The study sample comes from four waves of cross-sectional data, the nationally representative Schools and Staffing Survey, administered between 2000 and 2012. The analysis is conducted using ordinary least squares and school-year fixed effects with a comprehensive set of covariates. Findings The relationship between race congruence and teacher job satisfaction is attenuating over time and is likely explained by the lower job satisfaction of white teachers who work for black principals. Some evidence indicates teacher-principal race congruence has greater salience in the Southern region of the country. Find evidence that teachers with race-congruent principals report more workplace support than their non-race congruent colleagues. Research limitations/implications Future studies should investigate why racial congruence has more salience in the Southern region of the country and for white teachers who work with black principals. At the same time, results indicate that teacher-principal race congruence might no longer be a determinant of teacher job satisfaction, although further studies should continue investigating this relationship. Originality/value Findings on the changing nature of the relationship between principal-teacher race congruence and teacher job satisfaction over time as well as the differing nature of race congruence in the Southern region of the country are both novel findings in the literature.

How to deal with policy uncertainty to attain sustainable growth: the role of corporate governance

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tanveer Ahsan ◽  
Sultan Sikandar Mirza ◽  
Bakr Al-Gamrh ◽  
Chai Bin-Feng ◽  
Zia-Ur-Rehman Rao
Keyword(s):  
Corporate Governance ◽  
Fixed Effects ◽  
Negative Impact ◽  
Sustainable Growth ◽  
Policy Uncertainty ◽  
Chinese Firms ◽  
Content Type ◽  
Financial Firms ◽  
Concentrated Ownership ◽  
The Relationship

Purpose The purpose of this study is to investigate the moderating impact of corporate governance (CG) on the relationship between economic policy uncertainty (EPU) and the sustainable growth (SG) of Chinese firms. Design/methodology/approach The study collects data of 975 Chinese non-financial listed firms for the period from 2010 to 2017. The study measures SG using a comprehensive index based on nine financial indicators and applies industry and year fixed effects regression to investigate the direct and moderating impact of CG on the relationship between EPU and SG of Chinese firms. Findings The results of the study explain that EPU negatively affects SG, while concentrated ownership, board independence and board gender diversity (BGD) positively contribute to the SG of the Chinese firms. The results also explain that concentrated ownership and BGD reduce the negative impact of EPU on the SG of the Chinese firms. Research limitations/implications The study considers only non-financial firms; therefore, the results of this study cannot be generalized for financial firms. Future research can be carried out while considering financial firms as a unit of analysis. Practical implications The investigation of the negative impact of policy uncertainty on SG is essential for the government and policymakers to devise policies to reduce uncertainty. The investigation of the moderating effect of CG enriches the literature on corporates’ response to policy uncertainty. It provides valuable insights for corporates regarding CG mechanisms to attain SG. Originality/value To the best of the authors’ knowledge, this is the first study that investigates the moderating impact of CG on the SG of Chinese firms using an index-based measurement of SG.

The relationship between managerial entrenchment and accounting conservatism

2021 ◽  
Vol 19 (5) ◽  
pp. 612-631
Author(s):  
Mahdi Salehi ◽  
Ebrahim Ghanbari ◽  
Saleh Orfizadeh
Keyword(s):  
Corporate Governance ◽  
Fixed Effects ◽  
Balance Sheet ◽  
Accounting Conservatism ◽  
Content Type ◽  
Managerial Entrenchment ◽  
Conservative Accounting ◽  
Income Statement ◽  
Study Results ◽  
The Relationship

Purpose This study aims to assess the relationship between managerial entrenchment and accounting conservatism in Iran. Design/methodology/approach To test hypotheses, all listed companies on the Tehran Stock Exchange during 2013–2018 (six years) that qualified were selected. Given the defined limitations of the study, a total of 120 firms with 720 year-observations was selected. After collecting data and figures, they were analyzed using EViews software. Having presented the inferential model tests, the panel data with fixed effects model is chosen. Findings The study results indicate a positive and significant relationship between managerial entrenchment and unconditional conservatism presented in the income statement. Moreover, the authors find a meaningful relationship between managerial entrenchment and unconditional conservatism about the balance sheet. Practical implications Managers will be more aware of the positive consequences of employment optimal corporate governance such as conservative accounting. Such corporate governance is likely to serve their interest in the long run by providing positive signals to the equity owners and board of directors. Originality/value By assessing conservatism’s literature in Iran, we observe many studies on this concept. Still, no investigation is carried out on the relationship between conservatism in accounting and managerial entrenchment. The present study is innovative because it evaluates the relationship between managerial entrenchment and two types of conservatism, namely, balance sheet and income statement conservatism, which have never been investigated by prior studies, notably in emerging markets.

scholarly journals Corporate Governance Quality, Ownership Structure, Agency Costs and Firm Performance. Evidence from an Emerging Economy

2020 ◽  
Vol 13 (7) ◽  
pp. 154
Author(s):  
Haroon ur Rashid Khan ◽  
Waqas Bin Khidmat ◽  
Osama Al Hares ◽  
Naeem Muhammad ◽  
Kashif Saleem
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Ownership Structure ◽  
Agency Cost ◽  
State Ownership ◽  
Ownership Concentration ◽  
Listed Firms ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
The Relationship

The purpose of this paper is to investigate the effect of corporate governance quality and ownership structure on the relationship between the agency cost and firm performance. Both the fixed-effects model and a more robust dynamic panel generalized method of moment estimation are applied to Chinese A-listed firms for the years 2008 to 2016. The results show that the agency–performance relationship is positively moderated by (1) corporate governance quality, (2) ownership concentration, and (3) non-state ownership. State ownership has a negative effect on the agency–performance relationship. Various robust tests of an alternative measure of agency cost confirm our main conclusions. The analysis adds to the empirical literature on agency theory by providing useful insights into how corporate governance and ownership concentration can help mitigate agency–performance relationship. It also highlights the impact of ownership type on the relationship between agency cost and firm performance. Our study supports the literature that agency cost and firm performance are negatively related to the Chinese listed firms. The investors should keep in mind the proxies of agency cost while choosing a specific stock. Secondly; the abuse of managerial appropriation is higher in state-held firms as compared to non-state firms. Policymakers can use these results to devise the investor protection rules so that managerial appropriation can be minimized.

scholarly journals Macroeconomic uncertainty, corporate governance and corporate capital structure

2018 ◽  
Vol 14 (3) ◽  
pp. 301-321 ◽  
Author(s):  
Yee Peng Chow ◽  
Junaina Muhammad ◽  
A.N. Bany-Ariffin ◽  
Fan Fah Cheng
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Good Governance ◽  
Policy Makers ◽  
Content Type ◽  
Corporate Capital ◽  
Macroeconomic Uncertainty ◽  
Corporate Capital Structure ◽  
Governance Quality ◽  
The Relationship

PurposeThe purpose of this paper is to examine how corporate governance moderates the relationship between macroeconomic uncertainty and corporate capital structure.Design/methodology/approachThis paper employs the two-step system generalized method of moments regression, considering a sample of 907 listed non-financial firms from seven Asia Pacific countries during the period 2004-2014.FindingsThis study finds that macroeconomic uncertainty has a significant negative impact on the capital structure decisions of firms. The results also reveal that the overall effect of macroeconomic uncertainty on capital structure among firms with better governance quality is significantly negative. The evidence suggests that corporate governance acts as an effective mechanism to curb the usage of leverage during times of high volatility. Further analysis shows that board independence, the separation between the roles of CEO and chairman of the board and blockholders’ ownership are effective governance mechanisms, whereas similar observations do not hold for board size and institutional ownership.Research limitations/implicationsThe findings of this study may be useful to policy makers to formulate appropriate policies to mitigate the adverse effects caused by macroeconomic uncertainty. This is important because macroeconomic uncertainty may have potential destabilizing effects on a country’s or region’s development by jeopardizing the firms’ ability to formulate sound investment, production and financing decisions. Additionally, the results suggest that good governance quality can act as a check and balance to ensure that firms use less leverage when they are facing volatility in the macroeconomic environment. These findings could help to reinforce the importance of good governance among policy makers of a country as well as managers of firms.Originality/valueThe authors make the first attempt to examine the moderating effect of corporate governance on the relationship between macroeconomic uncertainty and corporate capital structure.

scholarly journals Culture, corporate governance and analysts forecast in Malaysia

2015 ◽  
Vol 23 (3) ◽  
pp. 232-255 ◽  
Author(s):  
Effiezal Aswadi Abdul Wahab ◽  
Anwar Allah Pitchay ◽  
Ruhani Ali
Keyword(s):  
Corporate Governance ◽  
Cultural Values ◽  
Capital Market ◽  
Fixed Effects ◽  
Forecast Error ◽  
Least Square ◽  
Data Availability ◽  
Content Type ◽  
The Relationship ◽  
Estimate System

Purpose – The purpose of this paper is to examine the relationship between Bumiputra (in reference to Malay indigenous race) directors, a proxy for culture and analysts forecast. In addition, the study investigates whether corporate governance affects that relationship. Design/methodology/approach – The sample of this study is based on 664 firm-year observations from 193 firms during the 1999-2009 periods. The authors employ a panel least square regression with both period and industry fixed effects. The authors retrieved of analyst data from the Institutional Broker Estimate System (I/B/E/S) database while the authors hand collected the corporate governance variables. The remaining data were collected from Compustat Global. Findings – The authors find a positive relationship between the proxy of culture, Bumiputra directors and analysts forecast error suggesting that cultural values influences the level of information in the Malaysian capital market. Research limitations/implications – The research is dependent on the data availability from I/B/E/S database. Originality/value – The authors extend the work of Haniffa and Cooke (2002) in investigating how cultural values influence the capital market. In addition, this is the first study that investigates culture values and the analysts forecast.

scholarly journals Corporate governance quality, incentive factors and voluntary corporate governance disclosures in annual reports of Malaysian publicly listed companies

2012 ◽  
Vol 10 (1) ◽  
pp. 329-352
Author(s):  
Norziana Lokman ◽  
Julie Cotter ◽  
Joseph Mula
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Listed Companies ◽  
Annual Reports ◽  
Voluntary Disclosures ◽  
Comprehensive Index ◽  
Governance Quality ◽  
Quality Incentive ◽  
Corporate Governance Quality ◽  
The Relationship

This paper investigates the relationship between corporate governance quality and voluntary disclosure of corporate governance information for listed companies in Malaysia. The moderating impacts of incentive factors (capital market transactions and stock-based incentives) on this relationship are also examined. Corporate governance quality is measured using a comprehensive index. The empirical evidence of this study is broadly consistent with the notion that high corporate governance quality is positively related to a greater extent of voluntary disclosure. Stock-based compensation significantly influences the relationship between corporate governance quality and voluntary disclosures; however the other incentive factors examined do not appear to influence the relationship

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