The correlation between corporate governance and market value: regime or signal?

2015 ◽  
Vol 5 (1) ◽  
pp. 19-33 ◽  
Author(s):  
Chang Li ◽  
Wei Zheng ◽  
Philip Chang ◽  
Shanmin Li
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Corporate Performance ◽  
Market Value ◽  
Content Type ◽  
Econometric Methodology ◽  
And Performance ◽  
Negative Factors ◽  
Practical Implications ◽  
Negative Signal

Purpose – As literatures argue that managers’ personalities will affect both corporate governance structures and corporate performance, the correlation between them is a mixed result. The purpose of this paper is to separate different routes leading to the mixed correlation, and name the separated routes as regime effect and signal effect. Design/methodology/approach – By theoretical analysis, the authors list three routes leading to the correlation between corporate governance and corporate performance. Routes 1 and 2 show that governance can directly and indirectly change the performance; while route 3 shows that both the governance and performance are results of managers’ personalities, and the governance has no influence onto the performance, which means the correlation led by route 3 is fake. By design a new econometric methodology, this paper separates the mixed correlation between corporate governance and performance, and names the correlation led by routes 1 and 2 as the regime effect and the correlation led by route 3 as signal effect. Findings – By an empirical research on Chinese listed corporates, the authors find that the correlations between Chinese listed corporates’ market value and main corporate governance factors can be separated into regime effects and signal effects; and the authors also find that some factors (Share of Institutional Investors, Share of Real Controller and the Squared, Dummy of Identical CEO and Chairman, Ownership Concentration) only show regime effects, some factors (Separating Extent of Ownership and Controlling Right, Dummy of Provincial State-Owned Firms) only show signal effects, and some factors (Dummy of Republic State-Owned Firms, Scale of Board) show both. What’s more, the authors find out an interesting result that the state-owning has no negative regime effect on China SOEs’ performance but very significantly negative signal effect; in this paper, the authors suggest that this means the key negative factors of Chinese SOEs is not state-owning ownership structure but the managers’ corruption. Practical implications – As only the factors with regime effects can directly and indirectly affect corporates’ performance and the factors with signal effects show that there’re some managers’ personalities affecting both the governance and performance, the separation method in this paper can help shareholders knowing which governance factors will be helpful to improve the performance and which others will show managers’ hard-working or corruption intention. Originality/value – Separate the regime effect and the signal effect from the correlation between corporate governance and performance.

Corporate governance mechanisms and corporate performance of firms in Nigeria and Ghana

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Martha Coleman ◽  
Mengyun Wu
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Financial Distress ◽  
Corporate Performance ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Content Type ◽  
Structure Index ◽  
The Impact ◽  
The Relationship

PurposeThis study investigates the impact of corporate governance (CG) mechanisms with inclusion of compliance and diligence index on corporate performance (CP) of firms in Nigeria and Ghana. It further examines the moderating effect of financial distress on the relationship between CG and CP.Design/methodology/approachThe study used panel data of 102 nonfinancial listed firms of Nigeria and Ghana stock exchange for the period 2012–2016 with total observation of 510. The study first used OLS in estimating the influence of CG mechanisms on CP. Due to multicollinearity in the independent variables, ridge regression was employed.FindingsIt was revealed that ownership structure index and board compliance and diligence index, board size, board disclosure, ownership structure, shareholders' right and board compliance and diligence index had positive influence on ROA and ROE. Growth of Tobin's Q depends on board procedure and board compliance and diligence index. Also, financial distress (ZFS) negatively moderates the relationship between board structure index, board disclosure index, board procedure index, shareholders' right and performance (ROA and ROE) but negatively moderates between ownership structure index and Tobin's Q.Practical implicationsThis study provides interesting findings to policymakers in full implementation of CG codes as stated by OCED (2015) by West African firms with greater emphasis on compliance and diligence index since it positively influences all CP measures.Originality/valueThe study provides evidence of the importance of the introduction of the new index: compliance and diligence, which looks at disclosure of CSR activities. This has been overlooked by most researchers especially in Africa in assessing quality CG mechanisms.

scholarly journals Political ties and corporate performance: why efficiency matters?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rabia Najaf ◽  
Khakan Najaf
Keyword(s):  
Political Theory ◽  
Design Methodology ◽  
Corporate Performance ◽  
Political Connections ◽  
Stewardship Theory ◽  
Content Type ◽  
Political Ties ◽  
And Performance ◽  
Practical Implications

PurposeThe purpose of this paper is to examine and explain the complex interrelationships which influence the performance of politically connected firms to create value for their providers of finance and other stakeholders. In doing so, it examines the interrelationships between efficiency and delivering on corporate performance of a firm with political ties.Design/methodology/approachThe authors gathered the literature from the Scopus website. They reviewed the literature of 58 manuscripts about the efficiency and performance of politically connected firms.FindingsThe research finds that the better quality of efficiency of politically connected firms is positively related to the corporate performance of politically connected firms. The authors’ theoretical findings corroborate the political theory, agency theory, stakeholder theory, resource dependency theory and stewardship theory. These theories prove that political connections have an impact on firm performance as a politician reinforces the efficacy. To better understand the effect of political connections on solid performance due to efficiency, this study classifies various efficiencies and links them with political ties.Research limitations/implicationsSeveral avenues of research are suggested to examine further the interrelationships identified.Practical implicationsThe authors’ conceptual findings are valuable for institutional investors, policymakers and stakeholders. To sum up, all theoretical shreds of evidence prove that politically connected firms can enhance performance via efficiency.Originality/valueThe paper conceptualizes the efficiency and performance interrelationships of politically connected firms. The extant literature comparison allows an assessment of the extent to which different efficiency contexts lead to differences in performance.

The relationship between ownership structure and firm financial performance

2018 ◽  
Vol 25 (1) ◽  
pp. 319-333 ◽  
Author(s):  
Tariq Tawfeeq Yousif Alabdullah
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Emerging Economies ◽  
Ownership Structure ◽  
Foreign Ownership ◽  
Fiscal Year ◽  
Content Type ◽  
Firm Financial Performance ◽  
The Impact ◽  
Practical Implications

Purpose Previous studies that dealt with corporate governance have witnessed gradually significant growth that created some new trends. The purpose of this paper is to be involved in such trends through examining the link between ownership structure as one of the important corporate governance mechanisms and firm performance in Jordan as one of emerging economies. Design/methodology/approach The current study used the multiple regression method to analyze available data for non-financial firms listed in the Amman Stock Exchange for the fiscal year 2012. Findings The findings revealed that managerial ownership has a positive impact on performance. On the other hand, the findings surprisingly showed no evidence to support the impact of foreign ownership on performance. Moreover, there is a significant evidence to support the fact that company size has no impact on firm performance. The findings also revealed that industry type has no impact on firm performance. Practical implications The practical implications of the current study demonstrated that good corporate governance is imperative to all organizations and must be encouraged for the interest of all stakeholders. Unlike the majority of the previous studies, the current study unexpectedly found that foreign ownership is not significantly contributing to the firm performance. Thus, Jordanian Government and other related/responsible parties should formulate policies for the foreign investors. Originality/value Interestingly, from developed and developing countries perspective, the study is the first of its kind that exclusively chose the mechanisms of ownership structure in its relationship with firm performance represented by market share, where no previous study has tested foreign ownership in such relationship. In that, this study is the first study in emerging economies to investigate such a link. Such new insights on this relationship by current study provide helpful information that is of great value to the government, academics, policy makers, and other stakeholders.

scholarly journals Impact of ASX corporate governance guidelines on sustainability reporting

2019 ◽  
Vol 32 (4) ◽  
pp. 692-724
Author(s):  
Robert Czernkowski ◽  
Stephen Kean ◽  
Stephen Lim
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Sustainability Reporting ◽  
Ethical Considerations ◽  
Content Type ◽  
Sustainability Disclosure ◽  
And Performance ◽  
The Impact ◽  
Firm Responses ◽  
Practical Implications

Purpose This paper aims to examine the impact of the Australian Securities Exchange Corporate Governance recommendations on the breadth (amount of items covered) of (environmental and social) sustainability reporting by the firms in the Top 100, around the change from G3.1 to G4 disclosure regimes. Design/methodology/approach This paper undertakes comparisons of means and regression models to investigate the changes between disclosure scores of 98 listed entities from the 2013 G3.1 to the 2015 G4 disclosure regimes. Findings This paper finds that average disclosure levels did not change. Nonetheless, disclosure practices did vary by entity size and performance. Analysis of 2015 disclosures contingent on 2013 disclosure practice indicates that disclosure changes are consistent with a pattern of mean reversion. Practical implications Evidence that low disclosers increased disclosure and high disclosers reduced disclosers is consistent with the idea that sustainability disclosure is not so much driven by any ethical considerations, but rather by a desire to not be a disclosure outlier. Reliance on voluntary disclosure to achieve a socially desired level of disclosure is unlikely to bear fruit. Originality/value This paper contributes to the literature on sustainability by examining firm responses to change in disclosure regimes, and concluding that size and peer relativities drive the disclosure process.

Compensation of top brass, corporate governance and performance of the Indian family firms – an empirical study

2017 ◽  
Vol 13 (3) ◽  
pp. 529-551 ◽  
Author(s):  
Palanisamy Saravanan ◽  
Maram Srikanth ◽  
Suhas M. Avabruth
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Executive Compensation ◽  
Family Firms ◽  
Emerging Market ◽  
Content Type ◽  
Indian Family ◽  
The Family ◽  
And Performance ◽  
Practical Implications

Purpose The objective of this study is to understand the linkages among executive compensation, corporate governance and performance of the Indian family and non-family firms. Further, the study also analyzes the level of shareholding pattern of the Indian family firms on their performance and the executive compensation. Design/methodology/approach The authors have collected panel data of the companies listed on the National Stock Exchange of India Limited. The data set consists of 284 companies (both family and non-family) for the period 2005–2014. The authors have made use of a dynamic panel data model with generalized method of moments (GMM) estimation to formulate the hypotheses and used fixed-effects regression model to check the robustness of our findings. Findings The authors find support for the agency theory, stewardship theory and resource dependence theory in the paper. Specifically, variables related to executive compensation, corporate governance (board size, proportion of independent directors on board, chief executive officers duality and other directorships held by the executive directors outside the company), firm performance (Tobin’s Q), leverage and shareholding pattern of the family are significant in this study. Practical implications The study has practical implications for all stakeholders of the family and non-family firms, especially in the emerging market economies. It can be used as a reference guide by various other stakeholders of the family firms, viz., customers, educators, tax authorities, government and society. Originality/value The authors confirm that their research is original and provides valuable insights on the Indian family firms. The authors study cross-holding of directorships, inter alia, in the Indian family business groups. As most of the previous studies in the Indian context ignored this important aspect, this study is unique in nature.

Corporate governance and financial performance of banks in Ghana: the moderating role of ownership structure

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christopher Boachie
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Ownership Structure ◽  
Positive Impact ◽  
Chief Executive ◽  
Foreign Ownership ◽  
African Countries ◽  
Content Type ◽  
The Government ◽  
Practical Implications

PurposeThe purpose of this paper is to investigate the moderating effect of ownership on the links between corporate governance and financial performance in the context of Ghanaian banks.Design/methodology/approachThe current study used a sample of 23 banks and the multiple regression method to analyze a panel dataset of 414 from banks over an 18-year period.FindingsThe findings revealed that audit independence, chief executive officer (CEO) duality, non-executive directors and banks size have a positive impact on performance. The findings also revealed that foreign ownership has an interacting effect between corporate governance and profitability.Practical implicationsThe practical implications of the current study demonstrated that good corporate governance creates value and must be invigorated for the interest of all stakeholders. Foreign ownership has an interacting effect between corporate governance and performance. Policymakers should formulate policies for attracting foreign investors.Originality/valueInterestingly, this study is the first of its kind that exclusively chose ownership structure to interact between corporate governance and bank performance in Ghanaian perspective. Such new insights on this relationship provide useful information to the government, academics, policymakers and other stakeholders. The growing economies of African countries, and the inadequate governance–performance literature in African context, have created a demand to appreciate the governance parameters in these countries and its influence on firm's performance.

Does corporate governance affect the performance of Islamic banks? New insight into Islamic countries

2020 ◽  
Vol 20 (6) ◽  
pp. 1073-1090 ◽  
Author(s):  
Ejaz Aslam ◽  
Razali Haron
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Positive Impact ◽  
Islamic Banks ◽  
Governance Mechanism ◽  
Method Of Moment ◽  
Content Type ◽  
Return On Equity ◽  
Islamic Countries ◽  
And Performance

Purpose Corporate governance plays a significant role to overcome agency issues and develop the culture of transparency and openness. In this context, this paper aims to examine how corporate governance mechanisms affect the performance of Islamic banks (IBs). Design/methodology/approach Stepwise, two-step system generalize method of moment estimation technique is used in the analysis in which control variables are added into the model sequentially. This study used data on 129 IBs from 29 Islamic countries (Middle East, South Asia and Southeast Asia) during the period of 2008 to 2017. Findings The findings suggest that the audit committee (AUDC) and Shariah board (SB) have positive impact on the performance of IBs (return on assets and return on equity). However, board size and risk management committee have negative and significant effect on the performance of IBs. CEO duality and non-executive directors have mixed relationship with the performance of IBs. These results support the argument that IBs need to improve their financial performance through appropriate governance mechanism. Research limitations/implications The findings of the study added a new dimension to the governance research that could be a valuable source of knowledge for policymakers and regulators to improve the existing governance mechanism for better performance of IBs. Originality/value The study fills the gap in the literature by addressing the issue of corporate governance on performance of IBs across countries. Agency theory is discussed to explain the relationship between corporate governance mechanism and performance.

scholarly journals Stewardship theory: is board accountability necessary?

2017 ◽  
Vol 59 (6) ◽  
pp. 1292-1314 ◽  
Author(s):  
Andrew Keay
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Design Methodology ◽  
Agency Problems ◽  
Stewardship Theory ◽  
Content Type ◽  
General Terms ◽  
Practical Implications

Purpose The purpose of the paper is to demonstrate that notwithstanding the fact that stewardship theory embraces things like trust of directors, their professionalism, loyalty and willingness to be concerned for the interests of others, as well as rejecting the foundations of classic agency problems that are asserted by agency theory, board accountability is as relevant to stewardship theory as it is to agency theory. Design/methodology/approach The paper applies the theory underlying board accountability in corporate governance, which is so often applied both in the corporate governance literature and in practice with agency theory in mind, to stewardship theory. Findings While the idea of accountability of boards is generally associated with an explanation and conceptualisation of the role and behaviour of directors as agents within classic agency theory, the paper demonstrates that board accountability is a necessary part of board life even if the role of directors is explained and conceptualised in terms of stewardship theory. Practical implications The paper suggests some accountability mechanisms that might be employed in a stewardship approach. Originality/value While many authors have talked in general terms about board accountability and its importance, this is the first paper that has engaged in a substantial study that links board accountability directly with stewardship theory, and to establish that accountability is necessary.

Boards and governance of state-owned enterprises

2014 ◽  
Vol 14 (2) ◽  
pp. 238-251 ◽  
Author(s):  
Samuel Nana Yaw Simpson
Keyword(s):  
Corporate Governance ◽  
Public Sector ◽  
Boards Of Directors ◽  
Evaluation Criteria ◽  
Executive Directors ◽  
Middle Income ◽  
Content Type ◽  
And Performance ◽  
Legal Frameworks ◽  
State Enterprises

Purpose – This study aims to examine the structure, attributes, and performance of boards of directors of state-owned enterprises (SOEs) within the broader context of public sector governance. This is informed by the less attention given to the concept among public sector organizations despite efforts to make state enterprises more effective and efficient, especially in developing and middle income countries. Design/methodology/approach – Data was collected through questionnaires self-administered in 2010 to all 25 SOEs in Accra, Ghana, out of the 29 nationwide. Some key officials were interviewed and documentary evidence analyzed to achieve triangulation of data and results. Findings – Results show that state-owned enterprises have boards and comply with the minimal governance issues outlined the legal frameworks establishing them. However, they exhibit significant weaknesses in the areas of board performance evaluation, criteria for board appointment, the balance of executive directors and non-executive directors, and other board characteristics, indicating a departure from general practices. Practical implications – Findings suggest the need for a tailored corporate governance framework or code for state-owned enterprises in developing countries. Originality/value – Compared to the literature, this study provides insight on boards from the perspective of state enterprises in ensuring good corporate governance, particularly in the context of a middle income country (Ghana).

Understanding aviation operators’ variability in advanced systems

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maria Papanikou ◽  
Utku Kale ◽  
András Nagy ◽  
Konstantinos Stamoulis
Keyword(s):  
Human Performance ◽  
Situational Awareness ◽  
Air Traffic ◽  
Content Type ◽  
Homogeneous Groups ◽  
Professional Groups ◽  
Performance Shaping Factors ◽  
Generational Changes ◽  
And Performance ◽  
Practical Implications

Purpose This study aims to identify variability in aviation operators in order to gain greater understanding of the changes in aviation professional groups. Research has commonly addressed human factors and automation in broad categories according to a group’s function (e.g., pilots, air traffic controllers [ATCOs], engineers). Accordingly, pilots and Air Traffic Controls (ATCOs) have been treated as homogeneous groups with a set of characteristics. Currently, critical themes of human performance in light of systems’ developments place the emphasis on quality training for improved situational awareness (SA), decision-making and cognitive load. Design/methodology/approach As key solutions centre on the increased understanding and preparedness of operators through quality training, the authors deploy an iterative mixed methodology to reveal generational changes of pilots and ATCOs. In total, 46 participants were included in the qualitative instrument and 70 in the quantitative one. Preceding their triangulation, the qualitative data were analysed using NVivo and the quantitative analysis was aided through descriptive statistics. Findings The results show that there is a generational gap between old and new generations of operators. Although positive views on advanced systems are being expressed, concerns about cognitive capabilities in the new systems, training and skills gaps, workload and role implications are presented. Practical implications The practical implications of this study extend to different profiles of operators that collaborate either directly or indirectly and that are critical to aviation safety. Specific implications are targeted on automation complacency, bias and managing information load, and training aspects where quality training can be aided by better understanding the occupational transitions under advanced systems. Originality/value In this paper, the authors aimed to understand the changing nature of the operators’ profession within the advanced technological context, and the perceptions and performance-shaping factors of pilots and ATCOs to define the generational changes.

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