Does sin matter in corporate governance issues in the United States

2018 ◽  
Vol 11 (3) ◽  
pp. 449-469
Author(s):  
Hanene Ezzine ◽  
Bernard Olivero
Keyword(s):  
Corporate Governance ◽  
Social Norms ◽  
Financial Incentives ◽  
Empirical Support ◽  
The United States ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Content Type ◽  
Governance Risk ◽  
Sin Stocks

PurposeThe authors provide evidence for the effects of social norms on corporate governance risk by studying “sin” stocks publicly traded companies involved in producing alcohol, firearms, biotechnology, gambling, military, nuclear power and tobacco. There is a societal norm against funding operations that promote vice and expropriation by controlling shareholders.Design/methodology/approachThe sample is representative of S&P 500 firms in 2014. The authors use Datastream to obtain a sample of sin stocks. The authors’ descriptive analysis is completed by four variations of the basic ordinary least squares regression model according to dependent variable corporate governance risk score.FindingsThe authors find that non-financial incentives alone do not explain corporate governance risk. The authors provide strong empirical support for an alignment of financial and non-financial incentives. The authors show that when sin firm’s current performance is good, suggesting that the market holds a positive belief in firm’s future profitability, managers will likely have more incentive to expropriate shareholders.Research limitations/implicationsBelonging of firm to a sin industry does not reflect the acceptance level of social norms. The evolution of social norms towards sin stocks overcomes the drawback of assuming a constant social norms level over time. Therefore, researchers are encouraged to use the changes in consumption of sin products as a proxy for the evolution of social norms and examine does sin matter in corporate governance issue in other countries.Practical implicationsWell-planned and well-managed philanthropy sin industries to creating education programmes for the disadvantaged to protecting the environment, in the name of corporate social responsibility has become a necessary ingredient in virtually every large corporation’s business plan.Originality/valueThis paper fulfils an identified need to study does sin matter issue in corporate governance issue.

Audit committee characteristics and the moderating effect of Malaysian code of corporate governance on IPO liquidity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amal Mohammed Al-Masawa ◽  
Rasidah Mohd-Rashid ◽  
Hamdan Amer Al-Jaifi ◽  
Shaker Dahan Al-Duais
Keyword(s):  
Corporate Governance ◽  
Initial Public Offerings ◽  
Audit Committee ◽  
Ordinary Least Squares ◽  
Moderating Effect ◽  
Least Squares Regression ◽  
Content Type ◽  
Code Of Corporate Governance ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the link between audit committee characteristics and the liquidity of initial public offerings (IPOs) in Malaysia, which is an emerging economy in Southeast Asia. Another purpose of this study is to examine the moderating effect of the revised Malaysian code of corporate governance (MCCG) on the link between audit committee characteristics and IPO liquidity. Design/methodology/approach The final sample consists of 304 Malaysian IPOs listed in 2002–2017. This study uses ordinary least squares regression method to analyse the data. To confirm this study’s findings, a hierarchical or four-stage regression analysis is used to compare the t-values of the main and moderate regression models. Findings The findings show that audit committee characteristics (size and director independence) have a positive and significant relationship with IPO liquidity. Also, the revised MCCG positively moderates the relationship between audit committee characteristics and IPO liquidity. Research limitations/implications This study’s findings indicate that companies with higher audit committee independence have a more effective monitoring mechanism that mitigates information asymmetry, thus reducing adverse selection issues during share trading. Practical implications Policymakers could use the results of this study in developing policies for IPO liquidity improvements. Additionally, the findings are useful for traders and investors in their investment decision-making. For companies, the findings highlight the crucial role of the audit committee as part of the control system that monitors corporate governance. Originality/value To the authors’ knowledge, this work is a pioneering study in the context of a developing country, specifically Malaysia that investigates the impact of audit committee characteristics on IPO liquidity. Previously, the link between corporate governance and IPO liquidity had not been investigated in Malaysia. This study also contributes to the IPO literature by providing empirical evidence regarding the moderating effect of the revised MCCG on the relationship between audit committee characteristics and IPO liquidity.

scholarly journals The impact of AAOIFI governance disclosure on Islamic banks performance

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tawida Elgattani ◽  
Khaled Hussainey
Keyword(s):  
Corporate Governance ◽  
Regression Model ◽  
Financial Institution ◽  
Ordinary Least Squares ◽  
Annual Reports ◽  
Islamic Banks ◽  
Least Squares Regression ◽  
Content Type ◽  
The Impact ◽  
Governance Disclosure

Purpose This study aims to investigate the impact of the accounting and auditing organisation for Islamic financial institution (AAOIFI) governance disclosure on the performance of Islamic banks (IBs). Design/methodology/approach The ordinary least squares regression model was used to test the impact of AAOIFI governance disclosure on the performance of 126 IBs from 8 countries that mandatorily adopt the AAOIFI standards for three years (2013–2015). In this regression model, return on asset (ROA) and return on equity (ROE) are the dependent variables, while AAOIFI governance disclosure is the independent variable. Corporate governance mechanisms, firm characteristics, year dummy and country dummy are used as control variables. Findings This paper found an insignificant relationship between AAOIFI governance disclosure and IBs performance. Research limitations/implications This study highlighted the implication that the current research may help IBs and encourage them to disclose more information in annual reports, especially those related to AAOIFI governance standards because following good corporate governance leads to good financial performance. The major limitation of the paper is that it is only focussed on two measurements of bank performance – ROA and ROE; it would be good to use other firm performance measures, such as profit margin. Originality/value This study provides new empirical evidence on the impact of AAOIFI governance disclosure on IBs performance.

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.

Meta-frontier and measures of efficiency emphasising optimal corporate governance risk across countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Walaa Wahid ElKelish ◽  
Panagiotis Zervopoulos
Keyword(s):  
Corporate Governance ◽  
Cultural Values ◽  
Manufacturing Sector ◽  
Market Competition ◽  
Ordinary Least Squares ◽  
Content Type ◽  
Factors Affecting ◽  
Dea Model ◽  
Efficiency Measures ◽  
Governance Risk

Purpose This paper aims to investigate the internal and external determinants of firms’ efficiency and develop optimal corporate governance risk benchmarks for the manufacturing sector across different countries. Design/methodology/approach Corporate governance risk data were acquired from Institutional Shareholder Services Europe SA. Data on firms’ efficiency and for explanatory and control variables were taken from the DataStream database. The generalised directional distance function data envelopment analysis (GDDF-DEA) model and its stochastic extension provided corporate efficiency measures and optimal corporate governance benchmarks. The authors used ordinary least squares multiple regression analysis with wild bootstrapping to test the study hypotheses. Findings The authors found significant differences between firms’ optimal and actual efficiency input/output variables and corporate governance risks in the manufacturing sector across countries. Internal firm characteristics such as group affiliations, product market competition and insider ownership and external institutional factors such as the legal system, the rule of law, control of corruption, law enforcement and cultural values are vital determinants of firms’ efficiency. Practical implications This paper provides valuable guidance to enable corporate managers, regulators and policymakers to enhance firms’ efficiency and corporate governance practices. Originality/value This paper develops optimal corporate governance risk benchmarks and identifies the most critical internal and external factors affecting firms’ efficiency in the manufacturing sector in various countries. It also used a novel GDDF-DEA model, with the multi-parametric model for bias correction of efficiency estimator.

Export behavior and corporate governance

2020 ◽  
Vol 30 (1) ◽  
pp. 43-76 ◽  
Author(s):  
Oliver Lukason ◽  
Tiia Vissak
Keyword(s):  
Corporate Governance ◽  
Ordinary Least Squares ◽  
Export Market ◽  
Board Members ◽  
Large Set ◽  
Least Squares Regression ◽  
Export Share ◽  
Holistic View ◽  
Content Type ◽  
Export Behavior

Purpose This paper aims to study how firms’ export behavior is associated with their corporate governance. Design/methodology/approach This study uses whole population data of Estonian small and medium-sized enterprises: 9,530 exporters and 73,619 non-exporters. Several theory-driven corporate governance variables and exporting variables (based on previous studies) are used. Binary logistic regression is applied to study how exporters’ corporate governance differs from that of non-exporters. Eight additional continuous dependent variables are used to portray exporters’ internationalization with ordinary least squares regression. The robustness of the obtained base results is checked for younger/older and smaller/larger firms. Findings Having female board members did not lead to a higher likelihood of export activities. Experience – tenure’s length, board members’ age and other board memberships – provided mixed results. Having a larger board was associated with a higher export propensity and larger exports but a lower export share. A larger share of a chief executive officer’s shareholding was associated with lower export propensity, exporting less overall and activities on a smaller number of markets. The presence of a majority owner was associated with larger export share and export turnover, but more focus on the main export market. Firm age and size affected the results. Originality/value Previous studies about the interconnection of corporate governance and exporting have relied on varied theoretical explanations and limited sets of variables. This paper provides an extensive insight by using corporate governance variables emergent from various theoretical explanations accompanied by a large set of dependent exporting variables. The latter enables obtaining a more holistic view of the interconnection between the two phenomena.

Corporate governance risk and the agency problem

2018 ◽  
Vol 18 (2) ◽  
pp. 254-269 ◽  
Author(s):  
Walaa Wahid ElKelish
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Ordinary Least Squares ◽  
Capital Allocation ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Geographic Regions ◽  
Governance Risk ◽  
The Relationship

Purpose This study aims to investigate the relationship between corporate governance risk and agency costs across different countries. Design/methodology/approach Corporate governance risk indicators were obtained from the Institutional Shareholder Services Europe (S.A.) for 4,135 firms across 27 countries. Agency costs and other control variables were derived from companies’ annual financial reports using the DataStream database. Ordinary least squares multiple regression analysis model was used to test the study hypothesis. Findings Agency costs have a significant negative impact on corporate governance risk across countries. The extent of corporate governance mechanisms used, however, varies across geographic regions and industry types. The relationship between corporate governance risk and agency costs is more obvious in the non-financial than financial sector. These results were robust after several statistical checks. Practical implications The findings will help stakeholders, including corporate management, regulators and investors to improve corporate governance mechanisms and capital allocation decisions across countries. Originality/value Evidence is provided on the role of agency costs in corporate governance risk across geographic regions for financial and non-financial companies. The paper also overcomes common problems in corporate governance research such as construct validity, limited data and endogeneity.

Under- vs over-investment: hotel firms’ value around acquisitions

2017 ◽  
Vol 29 (8) ◽  
pp. 2050-2069 ◽  
Author(s):  
Tarik Dogru
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Financial Constraints ◽  
Organizational Structures ◽  
Ordinary Least Squares ◽  
Governance Mechanism ◽  
Least Squares Regression ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose The purpose of this study is to analyze the extent to which under- and over-investment problems affect hotel firms’ value around the time when acquisitions are announced. Design/methodology/approach Hotel firms are classified based on their financial constraints (under-investment), corporate governance mechanisms (over-investment) and organizational structures. Multivariate analyses are conducted utilizing the panel ordinary least squares regression to examine the effects of financial constraints, corporate governance mechanisms and organizational structures on acquisition returns. Findings The results show that financial constraints have a larger effect on the firm value compared to the effect of corporate governance. Also, acquisitions are viewed as over-investments in poorly governed, franchising and hotel-real estate investment trust (REIT) firms. Research limitations/implications The analyses are limited to gains from acquisitions in the hotel industry. Therefore, future studies may examine the effects of capital expenditures and cash holdings on hotel firm value. Practical implications Acquisitions could help financially constrained firms reduce informational asymmetries. Firms could expand through franchising when they are financially constrained. However, franchising firms should take restrictive actions to control managers from making acquisitions. The hotel-REIT organizational form does not seem to cause under-investment problems, and it functions as an additional corporate governance mechanism. Originality/value In addition to the C-corporation organizational structure, hotel firms extensively adopt REIT and expand through franchising, which might affect under- and over-investment problems. Nonetheless, little is known about whether capital investments create or reduce value for hotel firms. This study helps to explain how financial constraints, corporate governance mechanisms and organizational structures affect hotel firms’ value.

Environmental disclosure quality and risk: the moderating effect of corporate governance

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zabihollah Rezaee ◽  
Mohammad Alipour ◽  
Omid Faraji ◽  
Mehrdad Ghanbari ◽  
Babak Jamshidinavid
Keyword(s):  
Corporate Governance ◽  
Fixed Effects ◽  
Social Performance ◽  
Ordinary Least Squares ◽  
Least Squares Regression ◽  
Firm Risk ◽  
Disclosure Quality ◽  
Environmental Disclosure ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this article is to investigate the relationship between environmental disclosure quality (EDQ) and risk and to further examine whether corporate governance (CG) practices moderate this relationship. Design/methodology/approach This study uses a set of unique, hand collected data (from 2011 to 2016) to measure EDQ for a sample of 762 firm-years Iranian listed companies. Ordinary least squares regression analysis is performed in testing hypotheses after controlling for a variety of firm, industry and year effects. Moreover, several analyses are performed to establish the robustness of the findings. Findings The results indicate a negative association between EDQ and firm risk. While board independence moderates this relationship, other CG practices such as CEO duality and board size do not show any effects on the relationship between EDQ and risk. The results remain robust after performing sensitivity tests and under various specifications, including the fixed-effects panel data and Heckman two-stage regressions. Research limitations/implications Results are from a sample of firms from one country. Practical implications The results have implications for policymakers, legislators and corporate executives, as environmental initiatives are gaining more attention worldwide. Social implications Sustainability initiatives in the areas of environmental and social performance and disclosure are gaining global attention. This study addresses the link between firm risk and EDQ. Originality/value This study contributes to the literature by shedding light on the relationship between corporate risk-taking and EDQ in the context of a developing economy.

scholarly journals Post-implementation analysis: dependence and trust in VMI context

2018 ◽  
Vol 48 (7) ◽  
pp. 724-740 ◽  
Author(s):  
Mehmet G. Yalcin ◽  
Koray Özpolat ◽  
Dara G. Schniederjans
Keyword(s):  
Inventory Management ◽  
Empirical Support ◽  
Ordinary Least Squares ◽  
Two Dimensions ◽  
Third Party ◽  
Least Squares Regression ◽  
Cross Sectional ◽  
Content Type ◽  
Relational Factors ◽  
Analytical Approaches

Purpose More than two decades long technological improvements in information sharing have not yet ensured a flawless execution of vendor managed inventory (VMI) and left interested parties wondering about the reasons of poor results. Although VMI is a collaborative tool, the relational factors in a VMI setting have not received enough attention due to challenges in obtaining relational buyer-supplier data in addition to extant focus on analytical approaches. The purpose of this paper is to investigate post-implementation relational factors in order to extract relevant insights. Design/methodology/approach Accounting for the duration of the VMI relationship, the authors focus on two dimensions of VMI often ignored post-implementation: dependence of the buyer on the VMI-supplier and trust of the buyer in the VMI-supplier. Cross-sectional data were collected using a survey collected from distributors mostly in auto and electrical supply industries, which have their inventories managed by manufacturers through VMI arrangements. The sample was obtained from a leading third-party VMI-platform service provider that serves thousands of distributor-manufacturer locations with billions of dollars in sales orders. Multiple ordinary least squares regression has been used to test the hypotheses. Findings This paper provides empirical support that in the post-implementation stage, longer VMI relationships are associated with higher distributor dependence on the manufacturer. In addition, too much dependence could actually hurt the distributor’s trust in the manufacturer. Practical implications The authors propose that distributors maintain some of the purchasing and inventory management skills in house to limit their dependencies on the manufacturers. Manufacturers should also invest in trust-building activities, such as regular communications with distributors. Originality/value This is the first study providing empirical evidence on the positive association between length of VMI relationship and buyer dependence on the supplier, and curvilinear dependence-trust link in a post-implementation VMI context.

The relationship between ownership structure, capital structure and corporate governance practices

2014 ◽  
Vol 10 (4) ◽  
pp. 511-536 ◽  
Author(s):  
Krishna Reddy ◽  
Stuart Locke
Keyword(s):  
Corporate Governance ◽  
New Zealand ◽  
Capital Structure ◽  
Ownership Structure ◽  
Agency Costs ◽  
Ordinary Least Squares ◽  
Agency Cost ◽  
Least Squares Regression ◽  
Content Type ◽  
Governance Practices

Purpose – The purpose of this paper is to investigate the nature of corporate governance practised by co-operatives and mutual societies in New Zealand and whether there is any relationship between co-operatives’ ownership structure, capital structure and agency costs. The study also explores whether the capital structure and the ownership structure changed during the period 2005-2011. Design/methodology/approach – Panel data for the period 2005-2011 are analysed using ordinary least squares regression and the Tobit model regression. The authors have used operating expense to sales, asset utilisation and ROA as the dependent variables. Findings – The findings indicate that an increase in independent directors, board member experience and size (measured by total annual sales) reduces agency costs in co-operatives and mutuals in New Zealand. Also, borrowing from members rather than banks reduces agency cost and increases profitability in co-operatives and mutuals. Research limitations/implications – Caution should be exercised when generalising the findings of the study as it is restricted to New Zealand environment and the sample size used is relatively small. Practical implications – This study offers insights for policy makers internationally who are interested in adopting similar corporate governance practices in their own countries. Within New Zealand, the corporate governance debate associated with co-operatives and mutual societies will be better informed as a direct consequence of this research. Originality/value – This is the first study that extends the research undertaken by Ang et al. (2000) and Singh and Davidson (2003) to the cooperative and mutual business model in New Zealand.

Sign in / Sign up

Export Citation Format

Share Document