Audit committee versus other governance mechanisms and the effect of investment opportunities: evidence from Palestine

2020 ◽  
Vol 20 (3) ◽  
pp. 527-544 ◽  
Author(s):  
Islam Abdeljawad ◽  
Ghassan A.I. Oweidat ◽  
Norman Mohd Saleh
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Audit Quality ◽  
Valuable Insight ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Investment Opportunities ◽  
The Relationship

Purpose This paper aims to explore how the presence of an audit committee is associated with other corporate governance mechanisms, i.e. board structure, ownership structure and quality of external audit. The present study evaluated whether the presence of the audit committee complements or substitutes other governance mechanisms in Palestinian companies. Moreover, the effect of investment opportunities on the relationship between the formation of the audit committee and the quality of the auditor was addressed. Design/methodology/approach The association between the formation of the audit committee and other governance variables was modelled as a binary logistic model. The sample comprising 44 firms listed on Palestine exchange for the period between 2013 and 2017, amounting to 220 firm-year observations. Findings Based on the investigation, the results have indicated that board independence, the distinction between the chairman and chief executive officer function, ownership concentration and audit quality enhance the chance of audit committee formation, implying complementary effect. Contrastingly, board size and board ownership serve as a substitute to audit committee formation. It has also been found that investment opportunities act as an effective moderating factor that strengthens the relationship between audit quality and the formation of the audit committee. Originality/value The study provides valuable insight into the interaction between multiple corporate governance mechanisms within the economy of Palestine where the external uncertainty is high and investment opportunities are constrained by the decisions of the occupying authority. The findings may help regulators and policymakers in Palestine alongside those of other countries with similar environmental features to revise and update their corporate governance codes to ensure that the best control can be achieved, subsequently attracting more foreign and domestic investments.

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

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

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

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

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

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

scholarly journals Does D&O insurance matter for stock price crash risk? Evidence from an Asian emerging market

2019 ◽  
Vol 3 (1) ◽  
pp. 34-46
Author(s):  
Ming-Te Lee ◽  
Kai-Ting Nien
Keyword(s):  
Corporate Governance ◽  
Stock Price ◽  
Emerging Market ◽  
Insurance Coverage ◽  
Crash Risk ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Relationship

Purpose The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&O insurance) and stock price crash risk in a major Asian emerging stock market. Design/methodology/approach This paper finds an endogenous relationship between D&O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&O insurance still has an effect on stock price crash risk. Findings The effect of D&O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk. Originality/value Emerging Asian markets suffer a dearth of research on the relationship of D&O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.

scholarly journals Corporate governance and risk disclosure quality: Tunisian evidence

2019 ◽  
Vol 9 (4) ◽  
pp. 567-602 ◽  
Author(s):  
Issal Haj Salem ◽  
Salma Damak Ayadi ◽  
Khaled Hussainey
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Annual Reports ◽  
Risk Disclosure ◽  
Disclosure Quality ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to investigate the potential influence of corporate governance mechanisms on risk disclosure quality in Tunisia. Design/methodology/approach The authors examine 152 annual reports of Tunisian non-financial-listed firms during 2008–2013, and use the manual content analysis method to measure the risk disclosure quality. Findings The authors find that the quality of risk disclosure in Tunisian companies is relatively low, and also find that the quality of risk disclosure is positively associated with institutional ownership, board independence, the presence of women on the board, the presence of family members on the board and the independence of audit committee. Managerial ownership has a negative effect on risk disclosure quality. Finally, the authors find that the revolution decreases the influence of concentration ownership, government ownership, family ownership and audit committee size on risk disclosure quality. Originality/value Using a comprehensive set of corporate governance mechanisms and a new measure for risk disclosure quality in Tunisia, the authors provide the first empirical evidence on the impact of corporate governance mechanisms on risk disclosure quality in a developing country. The study has theoretical and practical implications for both developed and developing countries.

scholarly journals Corporate governance and conglomerate diversification strategy – evidence from Vietnam

2018 ◽  
Vol 13 (6) ◽  
pp. 1578-1596 ◽  
Author(s):  
Thi Xuan Trang Nguyen
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Board Composition ◽  
Governance Mechanisms ◽  
Content Type ◽  
Unrelated Diversification ◽  
Corporate Governance Mechanisms ◽  
Control Devices ◽  
Interest Alignment ◽  
The Relationship

Purpose The purpose of this paper is to examine the impact of internal corporate governance mechanisms, including interest alignment and control devices, on the unrelated diversification level in Vietnam. Additionally, the moderation of free cash flow (FCF) on these relationships is also tested. Design/methodology/approach The study is based on a balanced panel data set of 70 listed companies in both stock markets, Ho Chi Minh Stock Exchange and Hanoi Stock Exchange, in Vietnam for the years 2007–2014, which gives 560 observations in total. Findings The results show that if executive ownership for CEOs is increased, then the extent of diversification is likely to be reduced. However, the link between unrelated diversification level and executive stock option, another interest alignment device, cannot be confirmed. Among three control devices (level of blockholder ownership, board composition and separation of CEO and chairman positions), the study finds a positive connection between diversification and blockholder ownership, and statistically insignificant relations between the conglomerate diversification level and board composition, or CEO duality. Additionally, this study discovers a negative link between diversification and state ownership, although there is no evidence to support the change to the effect of each internal corporate governance mechanism on the diversification level of a firm between high and low FCF. Practical implications The research can be a useful reference not only for investors and managers but also for policy makers in Vietnam. This study explores the relationship among corporate governance, diversification and firm value in Vietnam, where the topics related to effectiveness of corporate governance mechanisms to public companies has been increasingly attractive to researchers since the default of Vietnam Shipbuilding Industry Group (Vinashin) happened in 2010 and the Circular No. 121/2012/TT-BTC on 26 July 2012 of the Vietnamese Ministry of Finance was issued with regulations on corporate governance applicable to listed firms in this country. Originality/value This research, first, enriches current literature on the relationship between corporate governance and firm diversification. It can be considered as a contribution to the related topic with an example of Vietnam, a developing country in Asia. Second, the research continues to prove non-unification in results showing the relationship between corporate governance and conglomerate diversification among different nations. Third, it provides a potential input for future research works on the moderation of FCF to the effects of corporate governance on diversification.

Does audit committee substitute or complement other corporate governance mechanisms

2017 ◽  
Vol 32 (7) ◽  
pp. 658-681 ◽  
Author(s):  
Yousef Hassan ◽  
Rafiq Hijazi ◽  
Kamal Naser
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Audit Committee ◽  
Negative Relationship ◽  
Governance Mechanisms ◽  
Governance System ◽  
African Countries ◽  
Content Type ◽  
Board Characteristics ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies. Design/methodology/approach Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability. Findings While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations. Research limitations/implications The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system. Originality/value To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

scholarly journals Pengaruh Ukuran Perusahaan Dan Corporate Governance Terhadap Manajemen Laba Di Industri Perbankan Indonesia

2021 ◽  
Vol 9 (1) ◽  
pp. 111-120
Author(s):  
Karina Karina ◽  
Sutarti Sutarti
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Banking Sector ◽  
Audit Quality ◽  
Stock Exchange ◽  
Governance Mechanisms ◽  
Audit Firm ◽  
Corporate Governance Mechanisms ◽  
Size Firm

The purpose of this research is to provide empirical evidence of the affect of ownership concetration, firms size, and corporate governance mechanisms on earnings management. Ownership concetration was measure by the biggest stock of individual or organization, firms size was measure by natural logaritma of net assets, and corporate governance mechanisms were measure by three variabels (composition of board of commisioner, audit quality were measure by industry specialize audit firm, and composition of audit committee). Earnings management was measure by discretionary accruals use Modified Jones Method. The population of this research is 41 companies in the banking sector which were listed in Indonesian Stock Exchange (IDX). The research data were collected from banking companies financial statement for the period of 2016 to 2018. Based on purposive sampling method. The reseacrh hypotesis were tested using multiple regression analysis. The results of this research show that firm size, firm of commissioner and proportion of commissioner have significant relationships with earnings management. Next, variables composition of board of commissioner, ownership concetration and specialize audit firm have no significant relationship with earnings management. Keywords: ownership concetration, firms size, corporate governance, earnings management

The Impact of Corporate Governance Mechanisms on the Relationship Between Cash Holdings and Audit Fees in Egyptian Listed Companies

2019 ◽  
Vol 9 (2) ◽  
pp. 314
Author(s):  
Eman Abdel-Wanis
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Panel Data Analysis ◽  
Cash Holdings ◽  
Audit Fees ◽  
Governance Mechanisms ◽  
Listed Firms ◽  
Corporate Governance Mechanisms ◽  
The Impact ◽  
The Relationship

This paper explores the impact of corporate governance mechanisms on the nature of the relationship between cash holdings and audit fees, which helps provide an opportunity to identify whether these mechanisms enable to mitigate agency problems, and thus lower audit fees through a sample of 78 Egyptian listed firms in EGX 100 during the period 2014-2016 using panel data analysis. Results indicated that cash holding increases auditing fees. The board characteristics affect negatively on the relationship between cash holdings and audit fees. Also, ownership structure affects negatively on the relationship between cash holdings and audit fees. As well audit committee affects negatively on the relationship between cash holdings and audit fees. There results support the view that corporate governance mitigate on the relationship between cash holdings and audit fees.

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

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

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

Corporate governance and fraudulent financial reporting

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

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

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