Exploring how independent directors view CSR inequality using a quasi-natural experiment

2020 ◽  
Vol 20 (6) ◽  
pp. 1159-1172 ◽  
Author(s):  
Viput Ongsakul ◽  
Napatsorn Jiraporn ◽  
Pornsit Jiraporn
Keyword(s):  
Natural Experiment ◽  
Causal Effect ◽  
Principal Component ◽  
Independent Directors ◽  
Board Independence ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Sarbanes Oxley ◽  
The Difference ◽  
Corporate Social

Purpose The purpose of this paper is to explore corporate social responsibility (CSR) inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced CSR policy. To determine if CSR inequality is beneficial or harmful, this paper investigates how independent directors view CSR inequality, using an exogenous regulatory shock introduced by the passage of the Sarbanes–Oxley Act. Design/methodology/approach To draw causality, this study relies on a quasi-natural experiment based on an exogenous regulatory shock that forced certain firms to raise board independence. This approach is significantly less vulnerable to endogeneity and is much more likely to show a causal effect. The results using propensity score matching, principal component analysis and instrumental-variable analysis are confirmed. Findings The difference-in-difference estimates show that independent directors view CSR inequality unfavorably. Specifically, board independence diminishes CSR inequality by approximately 34%-43%. Because the empirical strategy is based on a quasi-natural experiment, the results are more likely to show causality. The results also imply that CSR inequality is a crucially important aspect of CSR. Originality/value Although a substantial volume of research has examined CSR, one vital aspect of CSR has been largely unexplored. Filling this void in the literature, the CSR inequality is investigated. The study is the first to explore how independent directors view CSR inequality using a quasi-natural experiment.

Does board independence influence asset redeployability? Evidence from a quasi-natural experiment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chaiyuth Padungsaksawasdi ◽  
Sirimon Treepongkaruna ◽  
Pornsit Jiraporn ◽  
Ali Uyar
Keyword(s):  
Natural Experiment ◽  
Board Independence ◽  
Board Governance ◽  
Difference In Difference ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Managerial Myopia ◽  
The Difference ◽  
Coefficient Stability ◽  
Variable Analysis

Purpose Exploiting an exogenous regulatory shock and a novel measure of asset redeployability, this paper aims to explore the effect of independent directors on asset redeployability. In particular, the authors use an innovative measure of asset redeployability recently developed by Kim and Kung (2016). This novel index has been rapidly adopted in recent literature. Design/methodology/approach Relying on a quasi-natural experiment, the authors execute a difference-in-difference analysis based on an exogenous regulatory shock to board independence. To mitigate endogeneity and demonstrate causation, the authors also perform propensity score matching, instrumental-variable analysis and Oster’s (2019) approach for testing coefficient stability. Findings The difference-in-difference estimates show that firms forced to raise board independence have significantly fewer redeployable assets after the shock than those not required to change board composition. This is consistent with the managerial myopia hypothesis. Subject to more intense monitoring, managers behave more myopically, focusing more on assets that are currently useful to the firm and less on redeployability in the future. Originality/value The study makes key contributions to the literature. First, the study is the first to examine the effect of board governance on asset redeployability. Second, the authors exploit an innovative index of asset redeployability that has been recently constructed in the literature. Third, by using a natural experiment, the results are much more likely to reflect causality than merely an association.

Does board independence substitute for external audit quality? Evidence from an exogenous regulatory shock

2017 ◽  
Vol 43 (1) ◽  
pp. 27-41 ◽  
Author(s):  
Pornsit Jiraporn ◽  
Pandej Chintrakarn ◽  
Shenghui Tong ◽  
Sirimon Treepongkaruna
Keyword(s):  
Natural Experiment ◽  
Audit Quality ◽  
Causal Effect ◽  
Board Independence ◽  
Difference In Difference ◽  
External Audit ◽  
Effective Governance ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Quality Evidence

Exploiting the passage of the Sarbanes–Oxley Act (SOX) as an exogenous regulatory shock, we investigate whether board independence substitutes for external audit quality. Based on over 14,000 observations across 18 years, our difference-in-difference estimates show that firms forced to raise board independence are far less likely to employ a Big 4 auditor. In particular, board independence lowers the propensity to use a Big 4 auditor by approximately 38%. Firms with stronger board independence enjoy more effective governance and therefore do not need as much external audit quality as those with less effective governance do. Based on a natural experiment, our empirical strategy is far less vulnerable to endogeneity and is thus considerably more likely to show a causal effect, rather than merely an association.

Board independence and managerial authority

2018 ◽  
Vol 25 (3) ◽  
pp. 838-853 ◽  
Author(s):  
Mustafa Dah ◽  
Mohammad Jizi ◽  
Sadim Sbeity
Keyword(s):  
Positive Association ◽  
Managerial Compensation ◽  
Independent Directors ◽  
Board Independence ◽  
Board Structure ◽  
Corporate Boards ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Managerial Authority ◽  
Board Monitoring

Purpose The imposition of the Sarbanes Oxley (SOX) Act and the NYSE/NASDAQ regulations boosted the proportion of independent directors serving on corporate boards. For certain firms, increasing the number of independent directors may impose costs that exceed the benefits. The purpose of this paper is to examine the implications of increased independence following SOX, relative to the pre-SOX board independence benchmark, on managerial authority and entrenchment within the firm. Design/methodology/approach Data are collected from COMPUSTAT, ExecuComp, and RiskMetrics. Data are divided into two periods, pre-SOX (1996-2001) and post-SOX (2002-2006). The focus is on the sub-group of firms who were not complying with the board independence requirement prior to SOX and became compliant afterwards. Various regressions are employed to assess the implications of increased independence following SOX on managerial authority and entrenchment. Findings The appreciation in board independence post-SOX significantly inflates both managerial compensation and the likelihood of CEO duality. Also, there is a positive association between board independence and managerial entrenchment during both the pre- and post-SOX periods. Imposed board composition requirements diminished board monitoring efficiency and boosted the CEO dominance and control over the firm. Originality/value This research adds to the extant literature investigating the implications of SOX on internal monitoring and governance. The results are based on an off-equilibrium phenomenon in which companies were obliged to alter their endogenously determined board structure. Thus, regulations to improve governance could backfire as the CEO might abuse them to extract private benefits.

Silk Road Economic Belt strategy and industrial total-factor productivity

2019 ◽  
Vol 30 (1) ◽  
pp. 260-282 ◽  
Author(s):  
Jian Feng ◽  
Lingdi Zhao ◽  
Huanyu Jia ◽  
Shuangyu Shao
Keyword(s):  
Sustainable Development ◽  
Total Factor Productivity ◽  
Causal Effect ◽  
Silk Road ◽  
Factor Productivity ◽  
Positive Role ◽  
Content Type ◽  
Silk Road Economic Belt ◽  
The Difference

Purpose The purpose of this paper is to assess the effectiveness of the Silk Road Economic Belt (SREB) strategy and its role of industrial productivity in China. Design/methodology/approach To identify the causal effect of this strategy on industrial sustainable development, the authors first use the slacks-based measure model to calculate industries’ total-factor productivity (TFP) considered with CO2 emissions as undesirable output on the provincial level. Then, the authors use the PSM-DID method to identify the difference of TFPs between provinces and industries before and after the implementation of SREB strategy. Findings However, the authors find that there is no difference or even a relative decrease in TFPs of industries in target provinces after the implementation of the strategy, which reveals that the SREB strategy does not play a positive role of the industries’ sustainable development in years of 2014 and 2015. Originality/value The value of this result is to identify the short-term impact of SREB strategy and to seek for probable causes and appropriate solutions.

Does board independence constrain insider opportunism?

2020 ◽  
pp. 031289622094638
Author(s):  
Dewan Rahman ◽  
Robert Faff ◽  
Barry Oliver
Keyword(s):  
Research And Development ◽  
Insider Trading ◽  
Jel Classification ◽  
Independent Directors ◽  
Board Independence ◽  
Exogenous Shocks ◽  
Sarbanes Oxley ◽  
Trading Restrictions ◽  
The Impact ◽  
Identification Strategy

We examine whether insider opportunism is reduced by board independence. Using a sample of 18,194 firm-year observations over the period 1996–2016, we show that board independence constrains opportunistic insider trading. Our identification strategy uses the Sarbanes–Oxley Act of 2002 (SOX Act) and associated changes to the listing rules of NYSE/NASDAQ as a source of exogenous shocks in board independence. Our results are economically significant as insider opportunism declines by about 10.5%. We find that insider trading restrictions is the channel through which board independence reduces insider opportunism. Our additional analyses show that in competitive and R&D (research and development) intensive firms, the impact of board independence on opportunism is less pronounced. We also find that board independence constrains opportunism only in less complex firms. However, in co-opted boards, independent directors are less effective. Overall, we support the monitoring channel of board independence for reducing insider opportunism. JEL Classification: G14, G34, G40

scholarly journals Board and corporate social responsibility disclosure of multinational corporations

2019 ◽  
Vol 27 (1) ◽  
pp. 77-98 ◽  
Author(s):  
Hanh Thi Song Pham ◽  
Hien Thi Tran
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Multinational Corporations ◽  
Board Independence ◽  
Content Type ◽  
Csr Reporting ◽  
The One ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Impact

Purpose This paper aims to investigate the effects of board model and board independence on corporate social responsibility (CSR) disclosure of multinational corporations (MNCs). Design/methodology/approach The authors developed an empirical model in which CSR disclosure is the dependent variable and board model (two-tier vs one-tier), board independence (a proportion of independent directors on a board) and the interaction variable of board model and board independence together with several variables conventionally used as control variables are independent variables. The authors collated the panel dataset of 244 Fortune World’s Most Admired (FWMA) corporations from 2005 to 2011 of which 117 MNCs use the one-tier board model, and 127 MNCs use the two-tier board model from 20 countries. They used the random-effect regression method to estimate the empirical models with the data they collated and also ran regressions on the alternative models for robustness check. Findings The authors found a significantly positive effect of a board model on CSR disclosure by MNCs. Two-tier MNCs tend to reveal more CSR information than one-tier MNCs. The results also confirm the significant moderating impact of board model on the effect of board independence on CSR disclosure. The effect of board independence on CSR disclosure in the two-tier board MNCs tends to be higher than that in the one-tier board MNCs. The results do not support the effect of board independence on CSR disclosure in general for all types of firms (one-tier and two-tier board). The impact of board independence on CSR disclosure is only significant in two-tier board MNCs and insignificant in one-tier board MNCs. Practical implications The authors advise the MNCs who wish to improve CSR reporting and transparency to consider the usage of two-tier board model and use a higher number of outside directors on board. They note that once a firm uses one-tier model, number of IDs on a board does not matter to the level of CSR disclosure. They advise regulators to enforce an application of two-tier board model to improve CSR reporting and transparency in MNCs. The authors also recommend regulators to continue mandating publicly traded companies to include more external members on their boards, especially for the two-tier board MNCs. Originality/value This paper is the first that investigates the role of board model on CSR disclosure of MNCs.

Corporate social responsibility disclosure and information asymmetry: does boardroom attributes matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amal Hamrouni ◽  
Mondher Bouattour ◽  
Nadia Ben Farhat Toumi ◽  
Rim Boussaada
Keyword(s):  
Information Asymmetry ◽  
Gender Diversity ◽  
Moderating Effect ◽  
Board Independence ◽  
Environmental Disclosure ◽  
Content Type ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Relationship ◽  
Social Disclosure

PurposeThe current study aims to investigate the relation between corporate social responsibility (CSR) and information asymmetry, as well as the moderating effect of board characteristics (gender diversity, size and independence) on this relationship.Design/methodology/approachThis paper uses a panel data regression analysis with the system generalized method of moments (SGMM) estimator of nonfinancial French firms included in the SBF 120 index. The environmental and social disclosure scores are collected from the Bloomberg database, while financial data are collected from the FactSet database.FindingsThe empirical results demonstrate that environmental disclosure has a positive impact on the level of information asymmetry, while social disclosure has no effect on the information environment. Gender diversity and board independence negatively impact the opacity index, while board size has a positive effect. The presence of women in board composition has a substitution effect on the relationship between environmental disclosure and information asymmetry. There is no moderating effect of board size on the association between CSR disclosure and information asymmetry. However, the proportion of independent female directors and board independence operates as substitutes to social disclosure on reducing information asymmetry.Research limitations/implicationsAlthough the models include the most common control variables used in the literature, they omit some variables. Second, the results should be interpreted with caution and should not be generalized to the entire stock market since the sample is based on large French companies.Practical implicationsThe results of this study may be of interest to managers, investors and French market authorities since France is characterized by highly developed laws and reforms in the area of CSR. In addition, the paper leads to a better understanding of how women on the board, in particular, independent female directors, affect the relationship between CSR disclosure and information asymmetry. This could be of interest to French authorities, which has encouraged the appointment of women through the adoption of the Copé–Zimmermann law.Originality/valueFirst, to the best of the authors' knowledge, this is the first study to explore the moderating effect of board characteristics on the relationship between CSR and information asymmetry. Second, unlike previous studies using individual proxies to measure information asymmetry, the authors favor the opacity index of Anderson et al. (2009). They calculate this index by including a fifth individual measure, namely, share price volatility. The opacity index better describes the information environment of companies than individual measures since it reflects the perceptions of investors and analysts together.

Does board independence moderate the effect of politician directors on CSR disclosure? Evidence from the publicly listed banks in Bangladesh

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Harun Ur Rashid ◽  
Syed Zabid Hossain
Keyword(s):  
Negative Impact ◽  
Generalized Method Of Moments ◽  
Least Square ◽  
Annual Reports ◽  
Independent Directors ◽  
Board Independence ◽  
Content Type ◽  
Political Csr ◽  
Csr Disclosure

Purpose This study aims to investigate the moderating effect of independent directors on the relationship between politicians on the board and corporate social responsibility disclosure (CSRD). Design/methodology/approach The ordinary least square has been used to analyze the CSRD data collected from the annual reports of all 30 listed banks of Bangladesh covering six years period ranging from 2013–2018. Further, the study has applied the generalized method of moments to prove the robustness of the model across the endogeneity issue. Findings The study found a positive relationship between board independence and CSRD that indicates board independence enhances the CSRD to a great extent. On the contrary, the inclusion of politicians on the board has shown a negative impact on CSRD that implies the higher the presence of political members on the board of a bank, the lower the involvement of the bank in CSR activities. However, board independence positively and significantly moderates the politician directors on the CSRD. The findings imply that if the independent directors are empowered, they play the role of whistleblowers that, in turn, mitigates the negative role of politician directors to CSRD. Research limitations/implications The study suggests the banks’ management, and regulatory bodies formulate sound policies so that the banks are forced to include more independent directors with enough power and at the same time, reduce the politician directors on the board. Originality/value The study extends debate on the political CSR and CSRD through validating the role of board independence.

Board independence and corporate social responsibility reporting: mediating role of stakeholder power

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Afzalur Rashid
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Ordinary Least Squares ◽  
Board Independence ◽  
Content Type ◽  
Reporting Practices ◽  
Csr Reporting ◽  
Corporate Social ◽  
Stakeholder Power

Purpose This study aims to examine the association between board independence and corporate social responsibility (CSR) reporting and the moderating role of stakeholder power on the association between board independence and CSR reporting. Design/methodology/approach Using a sample of 707 Bangladeshi firm-year observations, this study uses a content analysis technique to develop a 24-item of CSR reporting index. This study uses the ordinary least squares regression method to examine the relationship between board independence and CSR reporting. Findings The study finds that board independence does not influence CSR activities and relevant reporting in general. However, the non-influence of board independence and CSR reporting is offset by stakeholder power. Insider ownership, firm age, firm size, growth opportunities and market capitalisation have a positive influence on such reporting. Practical implications While this study suggests that stakeholders’ influence is an important factor in determining the firms’ incentives to disclose CSR information, this finding creates a new debate on the efficacy of independent directors and whether they are good monitors and are able to fulfil all the stakeholders’ expectations. Originality/value This study makes an important contribution to the literature on CSR practices by documenting that firms having powerful stakeholders induce the board and management to make more CSR reporting practices in the context of emerging economies.

scholarly journals Sustainability, responsibility and ethics: different concepts for a single path

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Riccardo Torelli
Keyword(s):  
Critical Discussion ◽  
Critical Approach ◽  
Environmental Reporting ◽  
Content Type ◽  
Basic Meaning ◽  
Deep Meaning ◽  
The Difference ◽  
Social And Environmental Reporting ◽  
Corporate Social ◽  
Single Path

Purpose The purpose of this paper is to analyse the concepts of sustainability, responsibility and ethics focussing on their links and differences, also to understand how companies move respectively in these field; to understand how companies sometimes move away from the basic and deep meaning of these concepts, landing in a merely utilitarian sphere of personal advantage where ethics, instead of being an irreplaceable and essential stronghold, is found to be a fiction or just an instrument. Design/methodology/approach The methodology used assumes a theoretical critical approach and, based on the vast literature on the items, is based on a conceptual analysis of the themes of sustainability, corporate social responsibility (CSR) and ethics and of the behaviour that companies can adopt in the three contexts. A critical approach to these issues and concepts can effectively help us to understand how companies are responding to external demands and to the challenges of responsibility and sustainability, which are becoming increasingly pressing. Findings Ethics, sustainability, CSR and social and environmental reporting are distinct constructs with different meanings but linked by important conceptual and operational relationships. Research limitations/implications The results of the research are the consequence of the application of a critical approach based on a theoretical analysis of the concepts under study. It would be interesting to support the results achieved with empirical research studies. Practical implications This conceptual path helps scholars and companies themselves to understand the difference between the three key concepts analysed. Only by understanding the basic meaning will it be possible to really make one’s own and pursue it in the correct way. Social implications Nowadays, the authors are overwhelmed by these three concepts which are used as synonyms and incorrectly. This leads to confusion and misunderstandings. Knowledge of the characteristics and differences between these concepts and their concrete applications is of great importance. Originality/value This study tries to provide a critical discussion of how the three concepts intersect and differentiate, leading to concrete results or results that have nothing to do with their meaning. There are no conceptual papers in the literature that deal with the three concepts and also analyse the implications on the real world.

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