Amtek Auto – financing under distress

2021 ◽  
Vol 11 (4) ◽  
pp. 1-42
Author(s):  
Raghupathy M.B.
Keyword(s):  
Corporate Finance ◽  
Financial Distress ◽  
Capacity Utilization ◽  
Bankruptcy Law ◽  
Fixed Costs ◽  
Z Score ◽  
Content Type ◽  
Quality Issue ◽  
Academic Level ◽  
The Impact

Learning outcomes The primary teaching objective is to discuss the capital raising efforts of a firm under financial distress. It also provides supporting data to calculate cost of capital, DuPont/modified DuPont values and Altman’s Z-Score that can appropriately be incorporated into the discussion. Case-B provides information and data of the company’s recent performance and to changes in bankruptcy law in India. Overall, this case study provides ample scope to discuss, understand and provide the solution to the following key corporate finance themes as follows: 1. Analyzing accounting statements and examine potential earnings quality issue. 2. Predicting default and bankruptcy using qualitative analysis, financial ratios, traditional and modified DuPont models and Altman’s Z score model. 3. Examining the capital raising efforts of a distressed firm, which has already defaulted on borrowings. 4. To explore the impact of changes in regulation on the turnaround efforts of the firm as well as on the promoters of the firm. Case overview/synopsis Since 2005, Amtek Auto moved at a breathtaking speed with the goal of reaching $10bn in sales, from the current level of about $1.2bn. The group had acquired more than a dozen companies spending about Rs.5,000cr. ($850m) during this period primarily through borrowed funds. However, the market and business expansion was not happening as expected. The company’s capacity utilization was just about 40% (approx.) during much of this period. The mounting fixed costs of operation and debt servicing grew to the level of unsustainability, led the firm to default on its borrowing. Now the company had to quickly recapitalize itself to run its operations and retain the premier position in auto component industry. The company and its promoters were considering various methods of debt restructuring, asset sale and further equity infusion. Complexity academic level Introductory and elective level corporate finance. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.

The impact of corporate social responsibility on financial distress: evidence from developing economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Farooq ◽  
Amna Noor
Keyword(s):  
Corporate Social Responsibility ◽  
Financial Distress ◽  
Z Score ◽  
Socially Responsible ◽  
Content Type ◽  
Financial Firms ◽  
Responsible Behavior ◽  
Corporate Social ◽  
The Impact ◽  
Practical Implications

Purpose This study aims to explore the role of corporate social responsibility (CSR) on the likelihood of financial distress for a sample of 139 Pakistan Stock Exchange (PSX) listed firms throughout 2008–2019. Design/methodology/approach The dynamic generalized method of moments (GMM) estimator is used to examine the impact of CSR on financial distress. The investment in CSR is measured through a multidimensional financial approach which comprises the sum of the contribution made by the company in the form of charitable donation, employees’ welfare and research and development, while the Altman Z-score is used as an indicator of financial distress. The higher the Z-score, the lower will be the probability of financial distress. Findings The authors find a significant positive impact of CSR on financial distress in GMM model. This finding is consistent with the shareholder view and over-investment hypothesis of CSR as management makes an investment in CSR to get personal benefits, which resultantly leads the firm toward financial distress state. Further, this positive relationship remains present for firms having strong involvement in foreign business through exports. Research limitations/implications Like other studies, the present study is not free from limitations. First, financial firms are skipped from the sample, although literature witnesses a lot of studies highlight the financial firms’ commitment to achieving CSR goals. Second, financial distress occurs in different stages, and this study fails to establish a linkage between CSR engagement at different stages of financial distress. In the future, researchers can make valuable addition by covering these missing links in present studies. Practical implications Findings suggest several practical implications. For policymakers, they should encourage firms to adopt more socially responsible behavior as it not only prevents them from distress but also comes with better investment behavior, minimize bankruptcies and make economies more strong and stable. Second, results suggest corporate managers emphasize socially responsible behavior as its benefits are beyond the “societal benefits” as it lessens financial distress through lower cost of debt, lesser financial constraints and reduced cost of information asymmetry, and it minimizes the cost of capital. Lastly, investors make risk premium assessments related to future earnings by determining the likelihood of financial distress in the future. Originality/value The study extends the body of existing literature on CSR and the likelihood of financial distress in Pakistan, which is according to the best knowledge of the authors, not yet studied before. The results suggest that policymakers may pay special attention to the quality of CSR while predicting corporate financial distress.

The impact of corporate social responsibility on financial distress: empirical evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Farooq ◽  
Amna Noor ◽  
Shahzadah Fahad Qureshi
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Distress ◽  
Generalized Method Of Moments ◽  
Z Score ◽  
Content Type ◽  
Financial Firms ◽  
Corporate Social ◽  
The Impact

Purpose The present study aims to explore the role of corporate social responsibility (CSR) on the likelihood of financial distress for a sample of 139 Pakistan Stock Exchange (PSX) listed firms throughout 2008–2019. Design/methodology/approach Panel logistic regression (PLR) and the dynamic generalized method of moments (GMM) estimator are used to examine the impact of CSR on financial distress. The investment in CSR measures through a multidimensional financial approach which comprises the sum of the contribution made by the company in the form of charitable donation, employees’ welfare and research and development, whereas the Altman Z-score and ZM-Score are used as an indicator of financial distress. The higher the Z-score lower will be the probability of financial distress, whereas the higher ZM score shows a greater probability of financial distress risk. Findings The authors find a significant negative impact of CSR on financial distress in both PLR and GMM models. This finding is consistent with the stakeholder view of CSR, as an investment in CSR not only aligns the interest between shareholders and stakeholders but also mitigates the risk of financial distress as well. Research limitations/implications Like other studies, the present study is not free from limitations. First, financial firms skipped from the sample, although literature witnesses a lot of studies highlight the financial firms' commitment to achieving CSR goals. Second, financial distress occurs in different stages, the authors fail to establish linkage CSR engagements at different stages of CSR. In the future, researchers can make a valuable addition by covering these missing links in present studies. Practical implications The findings of this study provide more insight to corporate managers and investors about the association between the quality of investment in CSR and the degree of financial distress, concerning Pakistani firms. Furthermore, this study contributes to the existing literature by adding new evidence from developing countries such as Pakistan which are helpful for regulatory bodies and policymakers in the formulation of long-term CSR strategies to manage financial distress. Originality/value The study extends the body of existing literature on CSR and the likelihood of financial distress in Pakistan. The results suggest that policymakers may pay special attention to the quality of CSR while predicting corporate financial distress.

Corporate governance and financial distress: Asian emerging market perspective

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Noman Younas ◽  
Shahab UdDin ◽  
Tahira Awan ◽  
Muhammad Yar Khan
Keyword(s):  
Corporate Governance ◽  
Financial Distress ◽  
Positive Impact ◽  
Emerging Market ◽  
Random Effect Model ◽  
Listed Companies ◽  
Z Score ◽  
Content Type ◽  
Governance Practices ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of corporate governance index (PAKCGI) on firm financial distress for a sample of 152 non-financial firms listed at Pakistan Stock Exchange (PSX) over the period from 2003 to 2017. Design/methodology/approach To examine the impact of PAKCGI on financial distress (Altman Z-Score), random effect model is applied. The PAKCGI is a self-constructed index based on the five important factors of corporate governance practices, i.e. board of directors, audit committees, right of shareholders, disclosures and risk management. The binary coding approach is adopted for the construction of PAKCGI. Altman Z-Score model is used as a proxy for financial distress indicator. The absolute value of Altman Z-score has been taken as financial distress indicator. Findings The outcomes of the study indicate a positive impact of PAKCGI on risk of firms’ financial distress. The positive coefficient of PAKCGI implies that the good corporate practices work as catalyst to reduce risk of financial distress in Pakistan. A significant negative impact of block holders on financial distress suggests that the concentrated block ownership take monopolistic decision to protect their interests. It has also been observed that significant positive impact of institutional ownership on financial distress exists in the Pakistani listed firms. Furthermore, this study also reveals that significant negative association between board size, CEO duality and financial distress indicator. Research limitations/implications The findings may encourage the Pakistani listed companies to follow and implement good corporate governance practices, which would lead to increase the confidence of investors, regulators and stakeholders. Originality/value The current study extends the corporate governance literature by examining the relationship between the corporate governance attributes and the financial distress status of Pakistani listed companies. From the academic perspective, this paper adds to the knowledge concerning the association between corporate governance practices and risk of financial distress in emerging markets.

Mcdonald’s versus Vikram Bakshi

2021 ◽  
Vol 11 (4) ◽  
pp. 1-27
Author(s):  
Nitin Pangarkar ◽  
Neetu Yadav
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Service Industry ◽  
Executive Development ◽  
Content Type ◽  
Academic Level ◽  
Quick Service ◽  
Term Performance ◽  
The Impact

Learning outcomes The case illustrates the challenges of managing JVs in emerging markets. specifically, after going through the case, students should be able to: i.Analyze the contexts in which firms need to form JVs and evaluate this need in the context of emerging markets such as India; ii.Understand how multinational corporations can achieve success in emerging markets, specifically the role of strategic (broader than the product) adaptation in success; iii.Evaluate the impact of conflict between partners on the short-term and long-term performance of a JV; and iv.Create alternatives, evaluate each alternative’s pros and cons, and recommend appropriate decisions to address the situation after a JV unravels and the organization is faced with quality and other challenges. Case overview/synopsis McDonald’s, the global giant in the quick service industry, entered India in 1993 and formed two JVs in 1995 one with Vikram Bakshi (Connaught Plaza Restaurants Ltd or CPRL) to own and operate stores in the northern and eastern zones, and another with Amit Jatia (Hardcastle Restaurants Private Limited or HRPL) to own and operate stores in the western and southern zones. Over the next 12 years, both the JVs made steady progress by opening new stores while also achieving better store-level metrics. Though CPRL was ahead of HRPL in terms of the number of stores and total revenues earned in 2008, the year marked the beginning of a long-running dispute between the two partners in CPRL, Bakshi and McDonald’s. Over the next 11 years, Bakshi and McDonald’s tried to block each other, filed court cases against each other and also exchanged recriminations in media. The feud hurt the performance of CPRL, which fell behind HRPL in terms of growth and other metrics. On May 9, 2019, the feuding partners reached an out-of-court settlement under which McDonald’s would buy out Bakshi’s shares in CPRL, thus making CPRL a subsidiary. Robert Hunghanfoo, who had been appointed head of CPRL after Bakshi’s exit, announced a temporary shutdown of McDonald’s stores to take stock of the current situation. He had to make a number of critical decisions that would impact the company’s performance in the long-term. Complexity academic level MBA, Executive MBA and executive development programs. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 11: Strategy.

Journal influence in corporate research

2016 ◽  
Vol 42 (4) ◽  
pp. 376-389 ◽  
Author(s):  
Kenneth Borokhovich ◽  
Allissa Lee ◽  
Betty Simkins
Keyword(s):  
Social Sciences ◽  
Corporate Finance ◽  
Relative Influence ◽  
Impact Factors ◽  
Content Type ◽  
Journal Citation Reports ◽  
The Social ◽  
Total Influence ◽  
The Impact

Purpose – Studies of research influence commonly look at the overall field of finance. The purpose of this paper is to examine the sub-field of corporate finance at four different points in time to determine its evolution and range of influence, specifically focussing on the relative influence of seven leading journals. Design/methodology/approach – Not all articles appearing in the set of journals are in corporate finance. The authors examine each article published in the journals for four key periods and identify those that are corporate. The impact factors (IFs) published in the Journal Citation Reports (JCR) are for all articles appearing in a journal. The authors are interested only in the corporate articles, so the authors calculate separate corporate IFs based on the citations to the corporate articles using the JCR technique. Findings – The authors find a broad corporate research environment with influence that extends well beyond finance. The authors also find differences in the relative influence of the journals not only in their total influence, but in where the influence occurs outside finance and other business journals and even more broadly in the social sciences. Research limitations/implications – The exclusion of journals outside the seven selected may not uncover other areas where corporate finance articles impact research more broadly. Also, classification of articles is inherently subjective. Practical implications – The authors draw comparisons between journals and corporate finance topic areas; indicating the breadth and depth research in these areas attain. These results should prove beneficial to researchers in determining areas of influence for their work, consequently providing opportunities for additional exchanges of ideas resulting in better and more informed research in the overall social sciences. Further, our approach to analyzing journal influence could prove fruitful for additional research. Originality/value – The findings allow for a greater understanding of the influence of individual journals and their subsequent rankings by a number of different means. The authors propose that the means and measures employed here can lead to a greater understanding of how influential a journal really is. Further, the authors contend that the study provides comparisons of the scope and depth of influence for each journal in a way that could lead to new avenues of research.

scholarly journals FINANCIAL CONDITION MODERATED THE EFFECTIVENESS OF AUDIT COMMITTEETOREDUCE EARNINGSMANAGEMENT

2015 ◽  
Vol 12 (2) ◽  
Author(s):  
Michella Maria Virgine Prayogo ◽  
Yie Ke Feliana ◽  
Aurelia Carina Christanti Sutanto
Keyword(s):  
Earnings Management ◽  
Financial Distress ◽  
Audit Committee ◽  
Stock Exchange ◽  
Score Test ◽  
Z Score ◽  
Financial Condition ◽  
Activity Frequency ◽  
Distressed Firms ◽  
The Impact

Some cases of financial fraud invite inquiries about the effectiveness of corporategovernance mechanism in financial distress companies. This study empiricallyexamines whether the financial distress moderate the impact of corporate governancemechanism to earnings management. The sample of this study is manufacturingcompanies listed at Indonesia Stock Exchange for period 2010 -2012. Discretionaryaccruals are used as a proxy for earnings management, while financially distressed andnon-distressed firms are identified based on Altman Z-score test. Corporate governancemechanism is measured by four characteristics of the audit committee, i.e. size (totalnumber of audit committee members), independence (audit committee composition),activity(frequency of audit committee meeting), and expertise (the number of auditcommittee have finance or accounting background).This study finds that (1) financialdistress does not moderate the impact of total members of audit committee to earningsmanagement; (2) financial distress does not moderate the impact of frequency of auditcommittee meeting to earnings management; (3) financial distress does not moderatethe impact of audit committee composition to earnings management; (4)financialdistress moderates the impact of audit committee finance/accounting knowledge toearnings management. These results suggestthat the effectiveness corporate governanceis low, and finance/accounting literacy of audit committee should be alert.Beberapa kasus manipulasi keuangan pada perusahaan yang mengalami kesulitankeuangan mengundang pertanyaan terkait efektifitas mekanisme tata kelola perusahaan.Penelitian ini secara empiris menguji apakah kondisi kesulitan keuangan dapatmemoderasi pengaruh mekanisme tata kelola perusahaan terhadap manajemen laba.Sampel dari penelitian ini adalah perusahaan sektor manufaktur yang terdaftar di BursaEfek Indonesia periode 2010-2012.Discretionary accruals digunakan sebagai proksiuntuk manajemen laba, sedangkan kondisi kesulitan keuangan diidentifikasimenggunakan uji Altman Z-score. Mekanisme tata kelola perusahaan diukur dengan 4karakteristik komite audit, yaitu ukuran (jumlah anggota komite audit), independensi(komposisi komite audit), aktivitas (frekuensi pertemuan komite audit), dan keahlian(jumlah anggota komite audit yang memiliki latar belakang keuangan atau akuntansi).Penelitian ini menemukan bahwa (1) kondisi kesulitan keuangan tidak memoderasipengaruh jumlah anggota komite audit terhadap manajemen laba; (2) kondisi kesulitankeuangan tidak memoderasi pengaruh frekuensi pertemuan komite audit terhadapmanajemen laba; (3) kondisi kesulitan keuangan tidak memoderasi pengaruh komposisikomite audit terhadap manajemen laba; (4) kondisi kesulitan keuangan memoderasi pengaruh jumlah anggota komite audit yang memiliki latar belakang keuangan atauakuntansi terhadap manajemen laba. Hasil ini menunjukkan bahwa efektifitas tatakelola perusahaan masih rendah dan anggota komite audit yang memiliki latar belakangkeuangan atau akuntansi harus mewaspadainya.

Promprylad.Renovation: impact investing in emerging markets

2021 ◽  
Vol 11 (2) ◽  
pp. 1-16
Author(s):  
Yaryna Boychuk ◽  
Artem Kornetskyy ◽  
Liudmyla Kryzhanovska ◽  
Andrew Rozhdestvensky ◽  
Yaryna Stepanyuk
Keyword(s):  
Learning Outcomes ◽  
Theory Of Change ◽  
Financial Benefit ◽  
Impact Investing ◽  
Stanford Research Institute ◽  
Content Type ◽  
State Sector ◽  
Academic Level ◽  
The Impact

Learning outcomes The learning outcomes of this paper is as follows: to structure the impact investing phenomenon and distinguish it from traditional investing or philanthropy, including the motivation of investors in impact investing projects; to analyse stakeholders in impact investing projects according to four main categories; to structure the implementation model of the theory of change in the context of impact investing; to build managerial decisions concerning the development of impact investing projects in crisis situations. Case overview/synopsis The case describes the development path of the Promprylad.Renovation project from its concept to the critical moment at the end of 2018. Yuriy Fyliuk – the case protagonist, acts as the main ideologist and leader of the project, the essence of which is the establishment of an innovation centre on the area of the old Promprylad plant in Ivano-Frankivsk. Impact investing was selected as the main project development tool, as it allows for attracting investors who share the aspiration for positive change of the city and potential financial benefit. The project is implemented in several stages as follows: partner involvement (Insha Osvita, MitOst, Pact Ukraine and LvBS), vision finalisation and research (together with Stanford Research Institute, Zotov & Co, FORMA Architects, Moris Group, etc.), the launch of the pilot floor (attracting more than $683,000 from allocated grants and more than $590,000 of private investments). Open equity crowdfunding and the purchase of the entire plant, with its subsequent renovation, should be the next stage. As of 2017, agreements have been reached to pay fully for the purchase of the plant by the end of 2019. After a successful pilot and lengthy negotiations, it was agreed that $1,000,000 should be paid by the end of 2018 and $2,000,000 by the end of 2019 to complete the buyout. However, as of the end of 2018, martial law was proclaimed in Ukraine. Hence, considering the risks, a major US investor refuses to contribute. The main dilemma is either to find a suitable solution to complete the buyout of the plant or to stop the project. Complexity academic level This case can be used in the master’s programmes of business schools (MBA, Executive MBA, Entrepreneurship, etc.), as well as in training programmes for public and state sector managers. The case study will be particularly useful for mixed groups with representatives from different sectors of the economy. This case study might be taught in the following disciplines: social entrepreneurship, social investing, leadership and crisis management. The subject of impact investing allows recognition of the benefits of combined cross-sectoral efforts over joint projects. Supplementary materials Teaching notes are available for educators only. Subject code CSS 7: Management science.

Financial soundness of Islamic banks: does the structure of the board of directors matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Afef Khalil ◽  
Imen Ben Slimene
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Islamic Banks ◽  
Z Score ◽  
Data Set ◽  
Content Type ◽  
Additional Hypothesis ◽  
The Board Of Directors ◽  
Financial Soundness ◽  
The Impact

Purpose The purpose of this paper is to examine the Board of Directors’ characteristics and their impact on the financial soundness of Islamic banks. Design/methodology/approach Regression analysis is applied to test the impact of the Board of Directors’ characteristics on the financial soundness of Islamic banks, using a panel data set of 67 Islamic banks covering 20 countries from 2005 to 2018. The Z-score indicator is used to evaluate the Islamic banks’ soundness. To check the robustness of the results, this paper uses other dependent variables (CAMEL) than the Z-score. Findings The main results show that the presence of an independent non-executive director negatively impacts the financial soundness of Islamic banks, while the chief executive officer duality practice has a positive effect on it. Other characteristics of the Board of Directors do not significantly impact the financial soundness of Islamic banks (foreign director, institutional director, chairman with a Shari’ah degree, interlocked chairman and the Board of Directors’ size). Practical implications This study aims to fill the gaps in the literature that discuss the Board of Directors’ role in corporate governance and its impact on the financial soundness of Islamic banks. In other words, it shows the role played by the Board of Directors and improves the knowledge of the corporate governance-financial soundness relationship. Plus, managers, investors and regulators may gain evocative insights, particularly those looking to improve their Islamic banks’ soundness by restructuring their boards’ composition. Originality/value This study sheds new light on the literature on Islamic banking by clarifying the relationship between the Board of Directors and the financial soundness of Islamic banks. Contrary to previous research, this paper uses an additional hypothesis stating that a chairman with a Shari’ah degree (Fiqh Muamalt) has a positive impact on the financial soundness of Islamic banks.

Asian football: how corruption disrupted marketing value in the game’s largest fan market

2020 ◽  
Vol 16 (5) ◽  
pp. 585-614
Author(s):  
Muralee Das ◽  
Susan Myrden
Keyword(s):  
Organizational Behavior ◽  
Corporate Strategy ◽  
Personal Characteristics ◽  
Strong Impact ◽  
Strategic Decisions ◽  
Content Type ◽  
Governing Body ◽  
Upper Echelons Theory ◽  
Academic Level ◽  
The Impact

Theoretical basis This case is focused on the allegations of corrupt practices within the strategic leadership at the board level of an international sports organization – the Asian Football Confederation (AFC). The theoretical premise is that the practices and decisions of the AFC’s leadership will have a profound impact on the AFC’s performance. However, because the AFC is the continental governing body, the impact is theorized to be far larger, across an entire industry. In writing the case, the authors were guided by upper Echelons theory (UET) (Hambrick and Mason, 1984; Hambrick, 2007; Hambrick et al., 2015), which argues that an organization’s strategic direction is directly influenced by its leader’s values. The authors selected UET for the theoretical framework, as it considered a spectrum of factors from industry, leader characters (values), their choices and the results of their actions. Such a comprehensive theory aligned with the complexities of the AFC and its leadership. In constructing the case roadmap using UET, the authors first adopted an ethnographic methodology. This was motivated by the fact that one of the authors had been embedded for many years as part of the leadership team at the AFC. His career work notes based on direct interactions and observations of these leaders helped in two ways: to identify the complex set of personal characteristics of these leaders (i.e. background, their careers outside football and financial standing) as they originated from 47 different nationalities. UET refers to these as observable factors to better theorize the hidden intentions of their alleged corrupt behaviors. UET identifies this second set of non-observable factors as psychological factors. These two different sets of observations combined helped to theorize their drivers, intentions and strategic decisions (options). For the second methodology, the authors accessed archival, publicly available media news and reports to understand the consequences of their actions to the AFC and the Asian football industry. This completed the final parts of the UET framework (Yamak et al., 2014). Research methodology This case relied on information that was widely reported within international media, press announcements by various organizations, published decisions by tribunals and publicly available information on the AFC. All of the names and positions in this case are actual persons. Case overview/synopsis This case focuses on the role and influence of the AFC as the Asian football governing body. The AFC is a member of the world football governing body – FIFA. With a US$1bn budget, the AFC has a strong impact on the future of football among Asia’s three billion people. Unfortunately, the AFC has been unable to create the value in its sports events or properties that attracts fans and investors. Central to this problem is the issue of corruption and corruption allegations within the AFC, especially with regard to its leadership. This case, therefore, attempts to highlight the various issues, discusses the circumstances around these challenges and brings forth the complexities of leading a truly international organization across 47 countries. Such factors are then tied to the value of the organization’s products or services in the marketplace. Complexity academic level The case is written and designed for a graduate level (MBA) class or an upper level undergraduate class such as corporate strategy, leadership, international management, international marketing, contemporary issues in management, cross-cultural management, sports management and sports marketing. In general, the case will also be a good fit for courses that discuss leadership, organizational strategy, organizational structure, organizational ethics and organizational behavior.

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.

Sign in / Sign up

Export Citation Format

Share Document