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.

Corporate governance and performance of medium-sized firms in Nigeria: does sustainability initiative matter?

2020 ◽  
Vol 20 (3) ◽  
pp. 401-427
Author(s):  
Babatunji Samuel Adedeji ◽  
Tze San Ong ◽  
Md Uzir Hossain Uzir ◽  
Abu Bakar Abdul Hamid
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Financial Reporting ◽  
Structural Equation ◽  
Negative Impact ◽  
Positive Impact ◽  
Mediating Effect ◽  
Content Type ◽  
And Performance ◽  
The Relationship

Purpose The non-existence of the corporate governance (CG) concept for practices by non-financial medium-sized firms (MSFs) in Nigeria informed. This study aims to determine whether CG practices influence firms’ performance and whether sustainability initiative (SI) mediates the relationship between CG and MSFs’ performance in Nigeria. Design/methodology/approach A total of 300 firms were selected on convenience sampling basis from South Western Nigeria using a structured questionnaire. The authors used Statistical Package for Social Sciences for exploratory data analysis and hypotheses were tested using covariance-based structural equation modelling. Findings The results show that CG has a significant positive effect on performance [financial performance (FNP) and non-financial performance (NFP)] and SI. SI has a mixed impact on performance, e.g. a significant positive impact on NFP but insignificant negative impact on FNP. Similarly, SI has a combined mediating effect in the relationship between CG and performance, e.g. fully mediates CG → NFP and does not mediate CG → FNP. Firms are to invest in social and environmental initiatives substantially. CG codes will complement the International Financial Reporting Standards for MSFs. Research limitations/implications This study supports the assumptions of theories (institutional, stakeholder and agency) as the basis for the usage of multiple approaches to determine the outcome of hypotheses, especially in developing climes. Practical implications The study contributes to CG and performance literature by examining the mediating effects of SI. The paper also shows the necessity to emphasise NFP aspect. Policymakers should evolve CG codes to encourage stakeholders to believe more in the corporate existence of MSFs for strengthening capital-base and quality personnel engagement. Originality/value To the best of the authors’ knowledge, this is one of the first empirical attempts showing the evidence on the relationship between CG and NFP in Nigeria.

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.

Role of resource slack in rapid international expansion of restaurant companies

2019 ◽  
Vol 31 (1) ◽  
pp. 2-20
Author(s):  
Yue Vaughan ◽  
Yoon Koh
Keyword(s):  
Firm Value ◽  
Fixed Effects ◽  
Firm Growth ◽  
Negative Impact ◽  
Hierarchical Regression ◽  
International Expansion ◽  
Slack Resources ◽  
Content Type ◽  
The Relationship

PurposeThe purpose of this study is to investigate the relationship between rapid internationalization and firm value in US restaurant companies. This study also identified the moderating role of available slack, potential slack and recoverable slack on the relationship of rapid internationalization and the firm’s value.Design/methodology/approachA hierarchical regression analysis with panel fixed effects was used in this study. Samples were drawn from publicly traded US restaurant companies, and span from 1993 to 2016 with 264 firm-year observations was used for the study’s analysis.FindingsDrawing on Penrose’s seminal theory of firm-growth that a firm needs excess resources to grow and that the amount of slack resources directly influences a firm’s international growth, this study found that available slack alleviates the negative impact of rapid international expansion in achieving higher firm value.Originality/valueThis study is one of the few analyses that examined thespeedof rapid international expansion in the service context. In addition, this study contributes to existing literature by examining three different slack resources with regards to the speed of international expansion. The findings of this study shed light on restaurant companies whose financial resources are critical for value-adding international expansion.

Ownership concentration, ownership composition and the performance of the Kuwaiti listed non-financial firms

2015 ◽  
Vol 25 (1) ◽  
pp. 108-132 ◽  
Author(s):  
Mejbel Al-Saidi ◽  
Bader Al-Shammari
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Arab Countries ◽  
Ownership Concentration ◽  
Content Type ◽  
Financial Firms ◽  
Large Shareholders ◽  
Ownership Composition ◽  
The Relationship

Purpose – This paper aims to investigate the relationship between ownership structure (ownership concentration and ownership composition) and firm performance in Kuwaiti non-financial firms. To this end, it examines the relationship between firm performance and ownership concentration to determine whether the impact of this relationship is conditional on the nature of the large shareholders. Design/methodology/approach – First, the relationship between ownership concentration and firm performance was tested using ordinary least squares regressions on 618 observations (103 listed firms) from 2005 to 2010; next, the ownership compositions were classified as institutional, government and individuals (families) and their impact on firm performance examined. Findings – The overall concentration ownership by large shareholders showed no impact on firm performance. However, when the type of shareholders was introduced, only the government and individuals (families) ownership categories influenced firm performance. Therefore, certain types of shareholders are better at monitoring, and not all concentration by large shareholders is beneficial to Kuwaiti firms. Research limitations/implications – This study examined only one important aspect of the corporate governance mechanisms, namely, ownership concentration. Thus, further study may include other mechanisms such as board variables, role of debt and shareholders rights in examining the firm performance. This study is limited to the Kuwaiti environment, and thus, next step can be very useful in case of comparing ownership concentration in the Gulf Cooperation Council (Kuwait, Bahrain, Qatar, Oman, United Arab Emirates and Saudi Arabia) or across different Arab countries. Practical implications – The results of this study have important implications for the regulators in Kuwait in their efforts to increase the efficiency of the rapidly developing capital markets and in protecting investors and keeping confidence in the economy. They may mandate a corporate governance code to protect minority shareholders. Investors may use the findings to understand Kuwaiti companies. Such findings may assist them to diversify their investment portfolios. Originality/value – This paper extends literature review by investigating the role of large shareholders in the context of a developing country that is characterized by high level of ownership concentration and weak legal protection for investors as well as the absence of code that organized the corporate governance practices.

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.

Ownership structure, corporate governance and investment efficiency of Chinese listed firms

2017 ◽  
Vol 29 (3) ◽  
pp. 266-282 ◽  
Author(s):  
Naiwei Chen ◽  
Hao-Chang Sung ◽  
Jingjing Yang
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Fixed Effects ◽  
Negative Impact ◽  
Private Firms ◽  
Investment Efficiency ◽  
Governance Mechanisms ◽  
Content Type ◽  
Listed Firms ◽  
New Perspective

Purpose This paper aims to examine whether and how ownership structure and corporate governance have bearings on the investment efficiency of Chinese listed firms. Design/methodology/approach The authors measure the investment efficiency by following the work of Richardson (2006) and classify listed firms into two categories: state-owned enterprises (SOEs) and private firms. OLS regressions with both industry and year fixed effects are used to investigate the effect of ownership structure and governance mechanisms on the listed firms’ investment efficiency. Findings The authors find that ownership concentration has a negative impact on investment efficiency, and this effect is more pronounced in SOEs than in private firms. In addition, adoption of incentive-based compensation helps improve investment efficiency. Compared with other types of institutional investors, mutual funds are more likely to exert a positive effect on the investment efficiency of investee companies. Originality/value This paper examines the monitoring effect of governance mechanisms in China from a new perspective, which is the investment efficiency. Furthermore, previous studies provide minimal evidence indicating any effect of incentive-based compensation on firm performance in China. This study provides empirical evidence on this effect by using incentive-based compensation (whether CEOs have been granted stock options) as an explanatory variable in the regression models.

The impact of corporate governance on intellectual capitals efficiency in Iran

2020 ◽  
Vol 13 (4) ◽  
pp. 749-766 ◽  
Author(s):  
Mahmoud Lari Dashtbayaz ◽  
Mahdi Salehi ◽  
Alieyh Mirzaei ◽  
Hamideh Nazaridavaji
Keyword(s):  
Corporate Governance ◽  
Human Capital ◽  
Audit Committee ◽  
Negative Impact ◽  
Stock Exchange ◽  
Value Added ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to evaluate the impact of corporate governance on intellectual capital (IC) in companies listed on the Tehran stock exchange. Design/methodology/approach In this paper, the board features (size, independence and CEO duality) and the characteristics of the audit committee (financial expertise, independence and size) are considered to measure the factors of corporate governance. The IC is also divided into communicative, human, structural and value-added IC. Research data are gathered using a sample of 132 companies during 2013-2016. Research hypotheses are analyzed using panel data and logistic regression models. Findings The findings indicate that while the board’s independence, financial expertise and the size of the audit committee are negatively related to the communicative capital, the relationship between audit committee independence and communicative capital is positive and significant. Further, the authors observe that there is a positive relationship between board independence and human capital, a negative and significant link between audit committee size and human capital. By the way, the results reveal that audit committee independence and audit committee size have, respectively positive and negative impact on structural capital. Originality/value The results of the current study may give more insight into the relationship between corporate governance and managerial capital in developing nations.

Economic policy uncertainty, R&D expenditures and innovation outputs

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Reza Tajaddini ◽  
Hassan F. Gholipour
Keyword(s):  
Economic Policy ◽  
Fixed Effects ◽  
The United States ◽  
Policy Uncertainty ◽  
Economic Activities ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
The United Kingdom ◽  
Per Capita ◽  
The Relationship

PurposeThe purpose of this study is to examine the relationship between the news-based economic policy uncertainty (EPU), research and development (R&D) expenditures per capita and innovation outputs.Design/methodology/approachData from 1996 to 2015 for 19 countries (Australia, Brazil, Canada, Chile, China, France, Germany, India, Ireland, Italy, Japan, Netherlands, Russia, Singapore, South Korea, Spain, Sweden, the United Kingdom and the United States) are used. The authors apply country and year fixed-effects models for the estimations.FindingsThe study findings show that higher levels of EPU are positively associated with higher R&D expenditures per capita as well as innovation outputs (patent applications, patent grants and trademark applications).Practical implicationsThis study deepens our understanding on the policy uncertainty–economic activities nexus and expands the literature on uncertainty, which is still at an initial phase of development, leading to generate a variety of open research questions for further investigation and study (Bloom, 2014).Originality/valueThere has not been an empirical investigation on the links between EPU and R&D expenditures and innovation outputs across several countries. The authors address this gap in the literature.

Shareholder activism, earnings management and Market performance consequences: French case

2020 ◽  
Vol 62 (5) ◽  
pp. 395-415
Author(s):  
Souha Siala Bouaziz ◽  
Ines Ben Amar Fakhfakh ◽  
Anis Jarboui
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Management Practices ◽  
Negative Impact ◽  
Market Performance ◽  
Shareholder Activism ◽  
Future Research ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to investigate the impact of the relationship between shareholder activism and earnings management on the market performance of French companies. Design/methodology/approach This study used 385 firm-year observations drawn from a sample of French companies belonging to the SBF 120 index from 2008 to 2012. Data was collected from annual reports of sample companies. To measure earnings management, this study used the model of Raman and Shahrur (2008). The relationship between shareholder activism, earnings management and market performance using the panel data regression model was empirically examined. Findings The results prove that shareholder activism, as indicated by shareholder proposals, has no impact on market performance. However, the existence of shareholder activism affects the market performance positively. In fact, a minimum of proposals proves that shareholder activism plays an appropriate and effective role in creating value. Thus, several activists would resort to “a private activism” which could be the best and the least expensive form. This form of activism is called “behind the scenes.” Findings also show that earnings management has a negative impact on market performance. As a matter of fact, these findings allow to conclude that the firm performance decreases whenever managers undertake to earnings management. Also, earnings management behavior is mainly opportunistic. Finally, the relationship between shareholder activism and earnings management has no impact on market performance. This result reveals that shareholder activism proves to be an ineffective mechanism that does not alter the accounting choices, particularly in relation to earnings management. This result shows the inability of active shareholders to define and implement strategies across their proposals, namely, “the lack of monitoring competence.” Research limitations/implications It is important in future research to evaluate the impact of behind the scenes interventions on corporate governance. Also, this paper gives a larger dimension to the effect of shareholder activism on the market performance in the specific context of earnings management, thus justifying the need to expand this study using other methodologies to deepen and better understand this relationship in this context. Practical implications The paper's evidence contributes to an understanding of corporate governance. The finding of this study will help in monitoring and controlling fraudulent earnings management practices that effect on market performance. Further, this study is important to investors, academics and policymakers, as it demonstrates that governance reforms that encourage firms to adopt better governance practices that reduce the likelihood of earnings management. Originality/value To the best of the author’s knowledge, this paper pioneers in focusing on the impact of the shareholder activism and earnings management on the market performance because previous studies put more emphasis on pair-wise relations (Shareholder activism-earnings management, earnings management-market performance and shareholder activism-market performance). This study provides empirical evidence on the effectiveness of the relationship between shareholder activism and earnings management on market performance.

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.

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