Corporate governance and the variability of stock returns

2014 ◽  
Vol 10 (4) ◽  
pp. 494-510 ◽  
Author(s):  
Hardjo Koerniadi ◽  
Chandrasekhar Krishnamurti ◽  
Alireza Tourani-Rad
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Stock Option ◽  
Data Availability ◽  
Firm Level ◽  
Policy Makers ◽  
Content Type ◽  
Governance Quality ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to analyze the impact of firm-level corporate governance practices on the riskiness of a firm's stock returns. Design/methodology/approach – The authors constructed an index of governance quality incorporating best practices stipulated by regulators. The authors employed regression analysis. Findings – The empirical evidence, using an index of corporate governance, shows that well-governed New Zealand firms experience lower levels of risk, ceteris paribus. In particular, the results indicate that corporate governance aspects such as board composition, shareholder rights, and disclosure practices are associated with lower levels of risk. Research limitations/implications – A limitation of the study is that the corporate governance index constructed is somewhat arbitrary and due to limitation of data availability the authors may have excluded some factors such as share trading policy of directors and policies regarding provision of non-auditing services by auditors. The research supports the view that institutional context could have an impact on governance outcomes. The work has three implications for managers, investors, and policy makers. First, the results imply that well-governed firms have lower idiosyncratic risk and that this reduction is most likely due to the reduction in agency costs and information risk. Second, in the absence of features like an active corporate control market and stock option based managerial compensation, managers have little incentives to take on risky projects that increase firm value. Third, the results suggest that the managers of well-governed firms are not more risk averse with respect to investment decisions compared to poorly governed firms. Practical implications – The work has practical implications for managers, investors, and policy makers. Well-governed firms face lower variability in stock returns compared to poorly governed firms. Firms that have independent boards that protect its shareholders’ rights and disclose its governance-related policies experience lower firm-level risk, other things being equal. Originality/value – This study is the first one to examine the impact of a composite measure of corporate governance quality on stock return variability in a non-US setting. The results suggest that firms can use specific corporate governance provisions to mitigate firm-level risk. The findings of the paper are therefore relevant and useful to corporate managers, investors, and policy makers.

Does location in a science park really matter for firms’ intellectual capital performance?

2014 ◽  
Vol 15 (4) ◽  
pp. 497-515 ◽  
Author(s):  
Francesco Schiavone ◽  
Antonio Meles ◽  
Vincenzo Verdoliva ◽  
Manlio Del Giudice
Keyword(s):  
Intellectual Capital ◽  
Firm Characteristics ◽  
Science Park ◽  
Firm Level ◽  
Policy Makers ◽  
Science System ◽  
Content Type ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to investigate the effect of being located in a science park (SP) on the level of a firm's intellectual capital (IC) performance. Design/methodology/approach – Using a sample of 183 Italian firms (i.e. 61 tenant and 122 non-tenant firms), and through the GLS technique, the authors regress the firms’ IC performance across various explicative variables including a dummy that discriminates tenant and non-tenant firms. Findings – Consistently with expectations, the results show that the location of a firm in a SP leads to improved IC performance. Moreover, the authors find that some other firm characteristics, such as size, age, and leverage, are important predictors of its IC-based performance. Research limitations/implications – The sample is small and the impact on performance might be biased by factors related to the regional context (e.g. level of industrialization, quality of education, and science system). Practical implications – Implications for policy makers: support the growth of firms in SPs especially in those industries full of firms with scarce performance in IC. Implications for SP managers: they could “sell” (in terms of marketing) to both entrepreneurs to attract and policy makers this result. Implications for institutional investors: they should look at SPs with greater interest to find high-quality firms and improve their screening activity. Originality/value – This paper aims to extend literature about factors explaining the level of a firm's IC performance and the current understanding of the impact of SPs at firm level.

Does the second wave of COVID-19 undermine corporate immunity? International evidence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huy Viet Hoang ◽  
Cuong Nguyen ◽  
Khanh Hoang
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Fixed Effects ◽  
Management Strategies ◽  
The United States ◽  
Least Square ◽  
Content Type ◽  
The Impact ◽  
Second Wave ◽  
Practical Implications

PurposeThis study compares the impact of the COVID-19 pandemic on stock returns in the first two waves of infection across selected markets, given built-in corporate immunity before the global outbreak.Design/methodology/approachThe data are collected from listed firms in five markets that have experienced the second wave of COVID-19 contagion, namely the United States (US), Australia, China, Hong Kong and South Korea. The period of investigation in this study ranges from January 24 to August 28, 2020 to cover the first two COVID-19 waves in selected markets. The study estimates the research model by employing the ordinary least square method with fixed effects to control for the heterogeneity that may confound the empirical outcomes.FindingsThe analysis reveals that firms with larger size and more cash reserves before the COVID-19 outbreak have better stock performance under the first wave; however, these advantages impede stock resilience during the second wave. Corporate governance practices significantly influence stock returns only in the first wave as their effects fade when the second wave emerges. The results also suggest that in economies with greater power distance, although stock price depreciation was milder in the first wave, it is more intense when new cases again surge after the first wave was contained.Practical implicationsThis paper provides practical implications for corporate managers, policymakers and governments concerning crisis management strategies for COVID-19 and future pandemics.Originality/valueThis study is the first to evaluate built-in corporate immunity before the COVID-19 shock under successive contagious waves. Besides, this study accentuates the importance of cultural understanding in weathering the ongoing pandemic across different markets.

The chief financial officer (CFO) profile and R&D investment intensity: evidence from listed European companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Gianluca Ginesti ◽  
Rosanna Spanò ◽  
Luca Ferri ◽  
Adele Caldarelli
Keyword(s):  
Listed Companies ◽  
Master Of Business Administration ◽  
Chief Financial Officer ◽  
Corporate Investments ◽  
Firm Level ◽  
Content Type ◽  
Doctor Of Philosophy ◽  
The Impact ◽  
D Investment ◽  
Practical Implications

PurposeThis study aims to investigate whether the characteristics of the chief financial officer (CFO) have an impact on the intensity of the corporate research and development (R&D) investment.Design/methodology/approachBased on hand-collected data for the CFOs of a sample of the largest European listed companies for the period 2013–2016, this study uses regression analyses to test empirically the association of CFO education, CFO gender and CFO age with R&D investment intensity.FindingsThe presence of female CFOs, CFOs with a Master of Business Administration (MBA) or Doctor of Philosophy (PhD) degree and older CFOs is positively associated with the intensity of R&D investment.Research limitations/implicationsThis study relies on some observable characteristics of CFOs and focuses on large listed companies.Practical implicationsThe results of this study may help investors, stakeholders and practitioners to understand better which type of CFO characteristics are more likely to result in higher firm-level R&D investment intensity.Originality/valueThis study offers the first insights into the impact of CFOs, as the most prominent C-suite executives, on the level of corporate investments in R&D activity.

scholarly journals Impact of governance structures on environmental disclosures in the Middle East and Africa

2020 ◽  
Vol 20 (4) ◽  
pp. 739-763 ◽  
Author(s):  
Erhan Kilincarslan ◽  
Mohamed H. Elmagrhi ◽  
Zezeng Li
Keyword(s):  
Corporate Governance ◽  
Middle East ◽  
Gender Diversity ◽  
Governance Structures ◽  
Environmental Disclosure ◽  
Content Type ◽  
Environmental Disclosures ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

Purpose This study aims to investigate the impact of corporate governance structures on environmental disclosure practices in the Middle East and Africa (MEA). Design/methodology/approach The research model uses a panel data set of 121 publicly listed (non-financial and non-utility) firms from 11 MEA countries over the period 2010-2017, uses alternative dependent variables and regression techniques and is applied to various sub-groups to improve robustness. Findings The empirical results strongly indicate that MEA firms with high governance disclosures tend to have better environmental disclosure practices. The board characteristics of gender diversity, size, CEO/chairperson duality and audit committee size impact positively on MEA firms’ voluntary environmental disclosures, whereas board independence has a negative influence. Research limitations/implications This study advances research on the relationship between corporate governance structures and environmental disclosure practices in MEA countries, but is limited to firms for which data are available from Bloomberg. Practical implications The results have important practical implications for MEA policymakers and regulators. The positive impact of board gender diversity on firms’ environmental disclosures, policy reforms should aim to increase female directors. MEA corporations aiming to be more environmentally friendly should recruit women to top managerial positions. Originality/value This is thought to be the first study to provide insights from the efficiency and legitimation perspectives of neo-institutional theory to explain the relationship between MEA firms’ internal governance structures and environmental disclosures.

The impact of telecommunication revenue on economic growth: evidence from Ghana

2014 ◽  
Vol 5 (2) ◽  
pp. 195-208 ◽  
Author(s):  
Francis Atsu ◽  
Charles Agyei ◽  
William Phanuel Darbi ◽  
Sussana Adjei-Mensah
Keyword(s):  
Economic Growth ◽  
Unit Root Test ◽  
Policy Makers ◽  
Correction Model ◽  
Content Type ◽  
Long Run ◽  
Telecommunication Infrastructure ◽  
Augmented Dickey Fuller ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to investigate the long-run impact of telecommunications revenue and telecommunications investment on economic growth of Ghana for the time horizon 1976-2007. Design/methodology/approach – The paper uses the Augmented Dickey Fuller and Phillips Perron unit root test to explore the stationarity property of the variables and the Engle-Granger residual-based test of cointegration to model an appropriate restricted error correction model. Findings – The outcome of the analysis produced mixed results. Telecommunications revenue does not contribute significantly whilst telecommunications investment does. Practical implications – Policy makers will have to deal with a conundrum; while designing targeted policies that will attract more telecommunication investment in order to maximize the corresponding revenues and the economic growth it brings in its wake, they must at the same time find ways and resources to grow the economy to a point or threshold where revenue from telecommunications can have the much needed impact on their economies. Originality/value – The study is one of the first that has investigated the line of causality between telecommunication revenue and economic growth unlike previous research that mainly focused on the impact of telecommunication infrastructure on economic development.

The impact of corporate governance code on earnings management in listed non-financial firms

2017 ◽  
Vol 7 (4) ◽  
pp. 428-444 ◽  
Author(s):  
Erick Rading Outa ◽  
Paul Eisenberg ◽  
Peterson K. Ozili
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Design Methodology ◽  
Explanatory Variable ◽  
Content Type ◽  
Listed Firms ◽  
Financial Firms ◽  
New Institutions ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to examine whether voluntary corporate governance (CG) code issued in 2002 constrain earnings management (EM) among listed non-finance companies in Kenya. Design/methodology/approach Using a panel data of 338-firm year’s observations between 2005 and 2014, the authors test the hypothesis that CG constrains EM in non-finance firms listed in Kenya. The authors regress discretionary accruals (DA) against a developed Corporate Governance Index (CGI). Findings The overall results show that DA is not significantly related to CG suggesting the voluntary CG code does not deter EM in non-finance companies in Kenya. Practical implications Evidence of income decreasing\increasing accruals implies EM still exists among the listed firms. This suggests that policymakers may need to consider radical actions including alternative or new CG approaches and new institutions to improve the effectiveness of CG. Originality/value This study extends existing studies by including composite CG as possible explanatory variable for constraining EM. The authors contribute to the debate by demonstrating that the voluntary CG code in Kenya is not effective in constraining DA and therefore the current initiatives by the regulator to change the current CG code are appropriately directed.

scholarly journals The effect of Islamic values on voluntary corporate governance disclosure

2017 ◽  
Vol 8 (2) ◽  
pp. 182-202 ◽  
Author(s):  
Waleed M. Albassam ◽  
Collins G. Ntim
Keyword(s):  
Corporate Governance ◽  
Fixed Effects ◽  
Future Research ◽  
Government Ownership ◽  
Firm Level ◽  
Content Type ◽  
Listed Firms ◽  
Alternative Measures ◽  
Islamic Values ◽  
Practical Implications

Purpose The study aims to examine the effect of Islamic values on the extent of voluntary corporate governance (CG) disclosure. In addition, the authors investigate the effect of traditional ownership structure and CG mechanisms on the extent of voluntary CG disclosure. Design/methodology/approach The authors distinctively construct Islamic values and voluntary CG disclosure indices using a sample of 75 Saudi-listed firms over a seven-year period in conducting multivariate regressions of the effect of Islamic values on the extent of voluntary CG disclosure. The analyses are robust to controlling for firm-level characteristics, fixed-effects, endogeneities and alternative measures. Findings The authors find that corporations that depict greater commitment towards incorporating Islamic values into their operations through high Islamic values disclosure index score engage in higher voluntary CG disclosures than those that are not. Additionally, the authors find that audit firm size, board size, government ownership, institutional ownership and the presence of a CG committee are positively associated with the level of voluntary CG disclosure, whereas block ownership is negatively associated with the extent of voluntary CG disclosure. Practical implications The study has clear practical implications for future research, practice and broader society by demonstrating empirically that corporations that voluntarily incorporate Islamic values into their operations are more likely to be transparent about their CG practices and thereby providing new crucial insights on the effect of Islamic values on voluntary CG compliance and disclosure. Originality/value This is the first empirical attempt at explicitly examining the effect of Islamic values on the extent of voluntary CG disclosure. The authors also offer evidence on the effect of traditional CG and ownership structures on the extent of voluntary CG disclosure.

Corporate tax planning and corporate tax disclosure

2019 ◽  
Vol 28 (2) ◽  
pp. 327-364
Author(s):  
Mahfoudh Hussein Mgammal
Keyword(s):  
Positive Impact ◽  
Positive Influence ◽  
Tax Planning ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to examine the impact of corporate tax planning (TP) on tax disclosure (TD). Using tax expenses data set, with the detailed effective tax rate (ETR) by reconciling individual items of income and expenses. Design/methodology/approach A firm-level panel data set is used to analyse 286 non-financial listed companies on Bursa Malaysia that spans the period 2010-2012. Multivariate statistical analyses were run on the sample data. The empirical understanding of TD depends on public sources of data in the financial statement, characterized in the aggregated note of tax expenses. Fitting with Malaysian environment, the authors measured TD using modified ETR reconciling items. Findings Results show that TP, exhibit a robust positive influence on TD. This suggests that TP is related to lower corporate TD. In addition, companies with high TP attempt to mitigate the disclosure problem by increasing various TD. The authors further find significant positive impact between each of firm size and industry dummy, on TD. This means that company-specific characteristics are significant factors affecting corporate TD. Research limitations/implications This study contributes to the literature on the effect of TP on TD. It depends on both the signalling theory and the Scholes–Wolfson framework, which are the main theories concerned with TP and TD. Therefore, from a theoretical side, the authors add to the current theories by verifying that users are the party influenced whether positively or negatively, by the extent of TD or the extent of TP activities through Malaysian organizations. Practical implications The evidence found in this paper has important policy and practical implications for the authorities, researchers, decision makers and company managers. The findings can provide them some relevant insights on the importance of TP actions from companies’ perspective and contribute to the discussion of who verifies and deduces from TD directed by companies. Originality/value This paper originality is regarded as the first attempt to examine the impact of TP on TD in a developing country such as Malaysia. Malaysian setting is an interesting one to examine because Malaysia could be similar to other countries in Southeast Asia. Results contribute significant insights to the discussion about TD regarding, which parties are responsible for the verification of TD by firms, and which parties benefit from this disclosure. Findings suggest that companies face a trade-off between tax benefits and TD when selecting the type of their TP.

Conflict management and resolution in family-owned businesses

2015 ◽  
Vol 5 (2) ◽  
pp. 140-156 ◽  
Author(s):  
Keanon Alderson
Keyword(s):  
Corporate Governance ◽  
Family Business ◽  
Family Firms ◽  
Original Research ◽  
Negative Effects ◽  
Policy Makers ◽  
Content Type ◽  
Governance Tools ◽  
Business Practitioners ◽  
Practical Implications

Purpose – The purpose of this paper is to review the literature concerning the negative effects of conflict among family businesses and to make practitioner focussed recommendations for the prevention, management, and resolution of conflict. This paper discusses the prevalence of conflict in family firms, differentiates the types of conflict present, and recommends proven approaches to prevent and manage the conflict, with a focus on corporate governance tools. Examples of well known companies are presented. Design/methodology/approach – A review was conducted of the literature concerning family business conflict and corporate governance. Findings – Conflict is a common problem in family firms that has significant consequences for the business and the family. Research has shown effective governance may reduce and manage conflict. Research limitations/implications – This was a literature review. As such it did not perform original research. Practical implications – This paper has practical implications for family business practitioners. The paper offers the negative aspects of conflict and recommends effective mechanisms such as governance tools to enable the prevention, management, and resolution of conflict. Social implications – Implications exist for practitioners and policy makers in order to reduce conflict and increase the viability of family firms. Originality/value – The scholarly literature has been reviewed and synthesized into distillation for family business owners.

scholarly journals The governance-performance relationship: evidence from Ghana

2016 ◽  
Vol 17 (3) ◽  
pp. 285-310 ◽  
Author(s):  
Andrews Owusu ◽  
Charlie Weir
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Fixed Effects ◽  
Developing Economies ◽  
Policy Makers ◽  
Content Type ◽  
Governance Index ◽  
Code Of Corporate Governance ◽  
The Impact ◽  
Post Code

Purpose The purpose of this paper is to investigate the impact corporate governance, measured by a governance index, on the performance of listed firms in a developing economy, Ghana. It also evaluates the effect of the introduction of a code of corporate governance on compliance rates across Ghanaian firms as well as assessing the impact of the code’s introduction on firm performance for the study period 2000-2009. Design/methodology/approach The paper develops a Ghanaian corporate governance index (GCGI) containing 33 provisions to measure corporate governance quality during the pre-code and the post-code sub-periods. The authors use a panel data analytical framework and fixed effects regressions to analyse the governance-performance relationships. Findings After controlling for endogeneity, the authors find a statistically significant and positive relationship between the GCGI and firm performance. The analysis shows evidence of a statistically significant increase in the degree of compliance with the Ghanaian Code from the pre-2003 sub-period to the post-2003 sub-period. The authors also find that the introduction of the code has led to improved firm performance. However, not all elements of corporate governance appear to have a significant effect on firm performance. Research limitations/implications One limitation of this study is the development of a corporate governance index. The binary coding used to construct the GCGI may not reflect the relative importance of the different corporate governance provisions. This means that all elements included in the index are given equal weighting. Future research may assign weights to each of the corporate governance provisions but this may have the disadvantage of making subjective judgements relative to the importance of each corporate governance provision recommended by the Ghanaian Code. Practical implications These results have important implications for both policy makers and companies. For policy makers, it is encouraging for the development of a code of corporate governance to regulate firms rather than enforcing rigid laws that may not be value relevant. For companies, the improvement in compliance with a code of corporate governance can provide a means of achieving improved performance. Originality/value This paper adds to the limited evidence on the governance-performance relationship in developing economies and in particular it analyses the role of a governance index. It is also the first paper to compare the pre- and the post-code governance index-performance relationship in an African or developing country.

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