Multiple directorships and earnings quality: Does investor protection matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saleh Abd Alhadi ◽  
Rosmila Senik ◽  
Jalila Johari ◽  
Ridzwana Mohd Said ◽  
Hairul Suhaimi Nahar
Keyword(s):  
Earnings Quality ◽  
Investor Protection ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Corporate Boards ◽  
Content Type ◽  
Multiple Directorships ◽  
External Governance ◽  
Moments Estimators

Purpose This study aims to investigate whether higher earnings quality is related to the existence of multiple directorships among corporate boards and whether this relationship varies with the quality of investor protection. Design/methodology/approach This paper used a dynamic panel data modelling on the sample of 2,090 firm-year observations over the period from 2007 to 2016 in Malaysia. The generalized method of moments estimators were used to deal with endogeneity and other econometric problems. Findings This study finds that the accumulation of several outside directorships is negatively associated with the firm's earnings quality, as measured by the magnitude of discretionary accruals. More importantly, the findings provide evidence that multiple directors are more efficient in improving earnings quality in healthy investor protection environment. Practical implications The appointment of directors should be based on market-based and not on a relationship (i.e. financial and industry professionals). Originality/value The results highlight the importance of interaction between internal and external governance mechanisms to improve the firm's financial performance, investment and market efficiency. High-quality investor protection and law enforcement are significant for enhancing the monitoring role of multiple directorships in improving earnings quality.

The influence of board social capital on corporate social responsibility reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nuria Reguera-Alvarado ◽  
Francisco Bravo-Urquiza
Keyword(s):  
Social Capital ◽  
Resource Dependence ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Dynamic Panel Data ◽  
Content Type ◽  
Csr Reporting ◽  
Multiple Directorships ◽  
The Impact ◽  
Board Social Capital

PurposeThe main objective of this paper is to analyze the influence of multiple directorships, as a critical component of board social capital, on CSR reporting. This study also explores the moderating effect of certain board attributes on multiple directorships.Design/methodology/approachThe authors’ sample is composed of Spanish listed firms in the Madrid Stock Exchange for the period 2011–2017. A dynamic panel data model based on the Generalized Method of Moments (GMMs) is employed.FindingsRelying on a resource dependence view, the authors’ results highlight an ambiguously positive association between multiple directorships and the level of CSR reporting. In particular, this relationship is positively moderated by both board size and gender diversity.Research limitations/implicationsThese findings contribute to academic debates concerning the value of board members intellectual capital. In particular, the authors emphasize the importance of board social capital, as well as the need to consider the context in which directors make decisions.Practical implicationsThis evidence may prove helpful to firms when configuring the board of directors, and for regulators and professionals when refining their legislations and recommendations.Originality/valueTo the best of the authors' knowledge, this is the first study that empirically analyzes the impact of an important element of board social capital, such as multiple directorships, on CSR reporting, which has become crucial in financial markets.

Gender diversity, financial expertise and its effects on accounting quality

2017 ◽  
Vol 55 (2) ◽  
pp. 347-382 ◽  
Author(s):  
Isabel-Maria García-Sánchez ◽  
Jennifer Martínez-Ferrero ◽  
Emma García-Meca
Keyword(s):  
Earnings Quality ◽  
Investor Protection ◽  
Gender Diversity ◽  
Accounting Conservatism ◽  
Accounting Quality ◽  
Content Type ◽  
Board Characteristics ◽  
Financial Expertise

Purpose The purpose of this paper is to analyze whether gender diversity on board and financial expertise on audit committee affect accounting conservatism in banking sector. Additionally, the authors focus on the effects of board characteristics on bank earnings quality and examine their effects on earnings persistence. Design/methodology/approach The authors use a large sample of 159 banks from nine different countries from the period 2004-2010. The authors study whether the differences in the timeliness of earnings to bad news and earnings quality across governance structures of banks are driven by differences across investor protection and bank regulation levels in banks. Findings The findings confirm the monitoring role of both female and financial experts, noting a positive effect of them on accounting conservatism and earnings quality in banks. According to the institutional characteristics, the results suggest the complementary role of banking regulation and investor protection levels in these effects, noting that in contexts of higher regulatory and greater investor protection environments, gender diversity and financial expertise on boards have more influence on the conservatism and earnings quality of banks. Originality/value The authors contribute to both the accounting quality literature and the corporate governance literature by identifying board characteristics that are associated with higher conservatism and quality of earnings in banks around the world. In addition, this study also contributes to the ethics literature by highlighting the benefits of gender diversity and financial expertise in upholding the integrity of financial reporting. Moreover, this paper adds to prior literature about board of directors and accounting quality by identifying additional complementary factors – bank regulation and investor protection – and by focusing on a specific industry, the banking industry.

Does board independence moderate the relationship between environmental disclosure quality and performance? Evidence from static and dynamic panel data

2019 ◽  
Vol 19 (3) ◽  
pp. 580-610 ◽  
Author(s):  
Mohammad Alipour ◽  
Mehrdad Ghanbari ◽  
Babak Jamshidinavid ◽  
Aliasghar Taherabadi
Keyword(s):  
Firm Performance ◽  
Panel Data ◽  
Dynamic Panel Data ◽  
Board Independence ◽  
Corporate Boards ◽  
Disclosure Quality ◽  
Environmental Disclosure ◽  
Dynamic Panel ◽  
Content Type

PurposeThis study aims to link environmental disclosure quality (EDQ) to firm performance and examine the moderating role of board independence in this relationship.Design/methodology/approachDrawing on agency theory and stakeholder theory, the authors developed and tested hypotheses using original survey data from 720 firm-year observations collected from 120 Iranian companies over six years between 2011 and 2016. In this paper, they conducted static and dynamic panel data analysis.FindingsAfter correcting for endogeneity bias, the results showed that there is a significant positive relationship between EDQ and firm performance. The results also showed that board independence significantly reinforces the positive effect of EDQ on performance, and firms with more independent board members are involved environmental disclosure for improved performance. This is consistent with agency theory, which posits that a more independent board of directors can better monitor the CEO and reduce incentives for pursuing personal interests, which in turn improves performance. The results are robust after performing sensitivity tests.Research limitations/implicationsThis paper takes the perspective of corporate governance to empirically examine the effect of EDQ on firm performance. This study makes a contribution to the literature by showing that board independence moderates the effects of EDQ on firm performance.Practical implicationsThe evidence supports the emphasis that recent policy statements have put on increasing the number of independent directors on corporate boards. This study offers insights to policymakers interested in enhancing the monitoring role of corporate boards.Originality/valueThe study adds value to the understanding of the effect of the EDQ on performance and how board independence influences this relationship, particularly in an emerging economy like Iran.

Ownership concentration and firm performance in Indian firms: does investor protection quality matter?

2018 ◽  
Vol 10 (1) ◽  
pp. 33-52 ◽  
Author(s):  
Nufazil Altaf ◽  
Farooq Ahamad Shah
Keyword(s):  
Firm Performance ◽  
Emerging Market ◽  
Investor Protection ◽  
Generalized Method Of Moments ◽  
Ordinary Least Squares ◽  
Ownership Concentration ◽  
Content Type ◽  
Dynamic Perspective ◽  
Moderating Role

Purpose The purpose of this paper is twofold: first, to investigate the relationship between ownership concentration and firm performance and, second, to determine the moderating role of investor protection quality on the ownership concentration-performance relationship from a dynamic perspective. Design/methodology/approach The study is based on secondary financial data of 236 Indian manufacturing firms obtained from CAPITALINE database, pertaining to a period of five years. This study uses ordinary least squares, fixed effects and two-step generalized method of moments (GMM) techniques to arrive at results. Findings Results of the study confirm the inverted U-shaped relationship between ownership concentration and firm performance and a significant positive effect of investor protection quality on firm performance. With regard to moderating role of investor protection quality on ownership concentration–performance relationship, results show that investor protection quality would significantly moderate the ownership concentration–performance relationship. Originality/value The study is a pioneer in proving that an inverted U-shaped relationship exists between ownership concentration and firm performance in an emerging market in general and India in particular. This study extends the corporate governance literature by examining ownership concentration–performance relationship in a dynamic perspective and in an unexplored market.

Merton-type default risk and financial performance: the dynamic panel moderation of firm size

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Mushafiq ◽  
Syed Ahmad Sami ◽  
Muhammad Khalid Sohail ◽  
Muzammal Ilyas Sindhu
Keyword(s):  
Financial Performance ◽  
Firm Size ◽  
Default Risk ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Dynamic Panel ◽  
Content Type ◽  
Nonfinancial Firms ◽  
The Relationship

PurposeThe main purpose of this study is to evaluate the probability of default and examine the relationship between default risk and financial performance, with dynamic panel moderation of firm size.Design/methodology/approachThis study utilizes a total of 1,500 firm-year observations from 2013 to 2018 using dynamic panel data approach of generalized method of moments to test the relationship between default risk and financial performance with the moderation effect of the firm size.FindingsThis study establishes the findings that default risk significantly impacts the financial performance. The relationship between distance-to-default (DD) and financial performance is positive, which means the relationship of the independent and dependent variable is inverse. Moreover, this study finds that the firm size is a significant positive moderator between DD and financial performance.Practical implicationsThis study provides new and useful insight into the literature on the relationship between default risk and financial performance. The results of this study provide investors and businesses related to nonfinancial firms in the Pakistan Stock Exchange (PSX) with significant default risk's impact on performance. This study finds, on average, the default probability in KSE ALL indexed companies is 6.12%.Originality/valueThe evidence of the default risk and financial performance on samples of nonfinancial firms has been minimal; mainly, it has been limited to the banking sector. Moreover, the existing studies have only catered the direct effect of only. This study fills that gap and evaluates this relationship in nonfinancial firms. This study also helps in the evaluation of Merton model's performance in the nonfinancial firms.

Credit card payments: do cultural values matter? Evidence from the European Union

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Delia Cornea
Keyword(s):  
European Union ◽  
Cultural Values ◽  
Risk Taking ◽  
Credit Card ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Content Type ◽  
Consumption Behavior ◽  
Payment Instruments ◽  
Credit Card Usage

PurposeThis study analyzes how cultural and social values shape specific attitudes toward credit cards and indebtedness and consumption behavior.Design/methodology/approachThe study uses a panel dataset for a selection of European Union countries from 2003 to 2016. The relation between credit card use and social and cultural attitudes is constructed by controlling for past habits in payment behavior and cross-substitution with alternative payment instruments by employing a dynamic panel data analysis based on the system Generalized Method of Moments (GMM) estimator.FindingsThe total value of credit card payments positively correlated with values emphasizing risk-taking attitudes. When analyzing the propensity of using these instruments for larger purchases, the level of trust is the most relevant predictor. However, the results seemed region-specific with some variables correlating consumption behavior with credit card usage depending on the political and the economic background of the country. Moreover, risk-taking attitudes prevail when they are related to the extent to which countries rely on cash as a preferred payment instrument. Also, credit card usage is mainly explained by past habits and the economic context.Originality/valueThe model expands on previous credit card transaction research by including an additional set of cultural values able to account for the complex nature of payment instruments and their effects on indebtedness and consumption behavior.

Islamic banking and corporate investment efficiency: empirical evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Empirical Model ◽  
Generalized Method Of Moments ◽  
Corporate Investment ◽  
Investment Efficiency ◽  
Islamic Banks ◽  
Agency Conflicts ◽  
Content Type ◽  
Listed Firms ◽  
Lower Effect

PurposeThe purpose of this paper is to examine whether and how Islamic banks' financing affects corporate investment efficiency.Design/methodology/approachTo achieve the research purpose, an empirical model was constructed to describe the relationship between Islamic banks' financing and corporate investment efficiency. The empirical model was tested through generalized method of moments (GMM) estimation technique using a panel data of 163 Malaysian listed firms for the period 2007–2017.FindingsThis study provides evidence that Islamic banks' financing plays an important role in enhancing investment efficiency and that this positive effect comes mainly from non-PLS contracts. Moreover, the results show that the effect of Islamic banks' financing in preventing suboptimal investments is stronger in the financial crisis period. The results also reveal that the contribution of Islamic banks' financing in reducing suboptimal investments is more prominent when firms face over-investment problems.Research limitations/implicationsThis research contributes to the debate on the financial implications of Islamic banks' financing modes by exploring their effect on corporate investment efficiency.Practical implicationsFrom a managerial perspective, the research findings are beneficial to Islamic bank managers to the extent that they highlight the role of Islamic financial contracts in improving corporate investment efficiency. In addition, the lower effect of PLS contracts on investment efficiency implies that policymakers in Malaysia should multiply their efforts to further expand the PLS financing.Originality/valueThis paper offers some insights on the role of Islamic banks' financing in mitigating agency conflicts and reducing asymmetric information problems. It is the first attempt focusing on the role of Islamic financing in fostering corporate investment decisions.

scholarly journals Asymmetric targeting of corporate cash holdings and financial constraints in Pakistani firms

2019 ◽  
Vol 26 (1) ◽  
pp. 76-97
Author(s):  
Ghulam Ayehsa Siddiqua ◽  
Ajid ur Rehman ◽  
Shahzad Hussain
Keyword(s):  
High Speed ◽  
Financial Constraints ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Optimal Level ◽  
Dynamic Panel Data ◽  
Asymmetric Adjustment ◽  
Content Type ◽  
Listed Firms ◽  
Target Firms

Purpose The purpose of this paper is to investigate the asymmetric adjustment of cash holdings in Pakistani firms for above and below target firms. Design/methodology/approach The study employs generalized method of moments (GMM) to investigate the adjustment of cash holdings. Findings The study found that the firms which hold cash above the optimal level of cash holdings have higher speed of adjustment than the firms which hold cash below the optimal level. Financially constrained (FC) firms also adjust their cash holdings faster than financially unconstrained (FUC) firms but high speed of downward adjustment does not remain persistent after financial constraints are controlled. Findings of this study reveal this asymmetric adjustment in above and below target firms and extend these results in FC and FUC Pakistani listed firms, respectively. Research limitations/implications The conclusion of this study has been derived under certain limitations. There is a vast space to extend this study in different dimensions. Firms operating in capital-intensive industries may provide different results for financial constraints because their policy designing would be quite different from other firms. Originality/value This study contributes to cash holdings research in Pakistan by exploring the adjustment behavior of cash holdings across Pakistani non-financial firms using econometric modeling. Downward adjustment rate is supposed to be higher than upward adjustment rate and this rate is tested using dynamic panel data model. Similarly, it is inferred that this relationship holds for above target firms even after including the financial constraints in the presented model.

scholarly journals Credit composition and income inequality in Vietnam: an empirical analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Le Quoc Hoi ◽  
Hương Lan Trần
Keyword(s):  
Income Inequality ◽  
Educational Level ◽  
Generalized Method Of Moments ◽  
Institutional Quality ◽  
Primary Data ◽  
Data Set ◽  
Content Type ◽  
Private Credit ◽  
The Impact

PurposeThis paper aims to examine the credit composition and income inequality reduction in Vietnam. In particular, the authors focus on the distinction between policy and commercial credits and investigate whether these two types of credit had adverse effects on income inequality. The authors also examine whether the impact of policy credit on income inequality is conditioned by the educational level and institutional quality.Design/methodology/approachThe authors use the primary data set, which contains a panel of 60 provinces collected from the General Statistics Office of Vietnam from 2002 to 2016. The authors employ the generalized method of moments to solve the endogenous problem.FindingsThe authors show that while commercial credit increases income inequality, policy credit contributes to reducing income inequality in Vietnam. In addition, we provide evidence that the institutional quality and educational level condition the impact of policy credit on income inequality. Based on the findings, the paper implies that it was not the size of the private credit but its composition that mattered in reducing income inequality, due to the asymmetric effects of different types of credit.Originality/valueThis is the first study that examines the links between the two components of credit and income inequality as well as constraints of the links. The authors argue that analyzing the separate effects of commercial and policy credits is more important for explaining the role of credit in income inequality than the size of total credit.

scholarly journals The Role of Urbanization Rate in the Relationship between Air Pollution and Health Expenditures: A Dynamic Panel Data Approach

2015 ◽  
Vol 53 ◽  
pp. 68-72 ◽  
Author(s):  
Maryam Fattahi
Keyword(s):  
Air Pollution ◽  
Generalized Method Of Moments ◽  
Health Expenditures ◽  
Dynamic Panel Data ◽  
Dynamic Panel ◽  
Public And Private ◽  
Urbanization Rate ◽  
The Impact ◽  
The Relationship

One of the available challenges in areas of health economics is identification of the effective factors on health expenditures. Air pollution plays important role in the public and private health expenditure but most studies have ignored the role of this category in explanation of health expenditures. On the other hand, the impact of air pollution on health expenditures is influenced by several factors. This study intends to investigate the effect of air pollution on public and private health expenditures and to identify the urbanization rate factor affecting the relationship between air pollution and public and private health expenditures. Scope of the present study is developing countries over period of 1995-2011. We used a dynamic panel and Generalized Method of Moments method. The empirical results indicate that air pollution has positive and significant effect on public and private health expenditures. Also, the results imply that urbanization rate affecting the relationship between air pollution and health expenditures that urbanization rate plays a reinforcing role.

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