The Effects of Corporate Governance on CEO Compensation

2019 ◽  
Vol 27 (2) ◽  
pp. 165-191
Author(s):  
Myoung Gi Lee ◽  
Jin San Kim
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Internal Control ◽  
Labor Union ◽  
Market Competition ◽  
Poor Performance ◽  
Control Mechanisms ◽  
Governance Mechanisms ◽  
Top Executives ◽  
Corporate Governance Mechanisms

The purpose of this study is to find the effects of corporate governance on executive compensation using the sample of Korean manufacturing firms listed on the Korea Exchange (KRX) from 2005 to 2012. In order to do that, this study extends empirical models of Core et al. (1999), Fahlenbrach (2009), Giroud and Mueller (2011), and finds the following results. First, internal corporate governance negatively affects executive compensation, implying that a good corporate governance can prevent outrageous compensation to top executives with poor performance. On the other hand, the interactions between internal and external corporate governance mechanisms have mixed results. While the first interaction has little impact on executive compensation, the second interaction among three different mechanisms has a positive and statistically significant impact. These results imply that while internal corporate governance and product market competition works against executive compensation, labor union may be in the same boat with managers in terms of compensation. Unlike most previous studies based on one-dimensional approach, this study investigates interactions among various corporate governance mechanisms. Overall results have a few important economic and social implications. Because internal corporate governance works as an effective mechanism, policymakers should find ways to make internal control mechanisms as independent as possible.

scholarly journals Voluntary Corporate Governance Disclosure (VCGR) Versi Investor dan Determinan VCGR di Indonesia

2012 ◽  
Vol 2 (2) ◽  
Author(s):  
Anyta, Siti Mutmainah
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Public Access ◽  
Annual Reports ◽  
Control Mechanisms ◽  
Governance Mechanisms ◽  
Public Companies ◽  
Corporate Governance Mechanisms ◽  
Governance Disclosure

The purposes of this research are (1) to know the importance level of voluntary corporate governance disclosure (VCGD) in investor version and (2) to know the factual VCGD which is done by public companies in Indonesia and (3) to test determinants of VCGD existence in annual reports of public companies in Indonesia. The determinant of VCGD is a set of corporate governance mechanisms i.e. ownership structure and control mechanisms of the organ of the company, including (1) the concentration of ownership, (2) institutional ownership, (3) the percentage of tradable shares, (4) the proportion of independent commissioners, and (5) the independence of the audit committee. To know the rate of VCGD’s importance, the questionaires was distributed to investors by email. The mean score was used to indicate the importance level of each VCGD’s item in investors version. Based on this result then the relative disclosure index was calculated. A total of 74 annual reports of companies which was chosen by purposive sampling method. To test the determinants of level of VCGD, regression analysis was used. The results show that: (1)The capability and integrity of board of director and public access of companies’ information are the two most important items based on investor ’s opinions; (2) As a whole, public companies in Indonesia have higher level of VCGD then China’s which has shown by Yuen, et al. (2009); (3) The percentage of tradable shares (public ownership) is the only independent variable that has a positive and significant, while the other independent variables show no significant effect. This study provides empirical evidence for policy makers and regulators of Indonesia to improve the corporate governance mechanisms and transparency of public companies. These findings also contribute to improving the understanding of disclosure behavior among companies listed in Indonesia Stock Exchange (BEI).

The effect of corporate governance and firm-specific characteristics on the incidence of financial restatement

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suhaily Hasnan ◽  
Mardhiahtul Huda Mohd Razali ◽  
Alfiatul Rohmah Mohamed Hussain
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Executive Compensation ◽  
Significant Relationship ◽  
Audit Quality ◽  
Governance Mechanisms ◽  
Content Type ◽  
Financial Restatement ◽  
Corporate Governance Mechanisms ◽  
Firm Leverage

Purpose This paper aims to examine the effects of corporate governance and firm-specific characteristics on the incidence of financial restatement among Malaysian public listed firms. Design/methodology/approach The elements of corporate governance consist of board size, board independence, multiple directorships, audit committee expertise, external audit quality and executive compensation. Meanwhile, the firm-specific characteristics consist of firm age, firm performance, firm leverage and firm liquidity. The agency theory has been used to guide the study. This study used a matched-pair sample that consisted of a sample of 49 restatement firms and 98 non-restatement firms between the years 2011 and 2016. Univariate (t-test and Pearson correlation) and multivariate (logistic regression) statistical techniques were used to test the hypotheses. Findings The results show that there is a negative and significant relationship between executive compensation and firm performance, and the incidence of financial restatement. In addition, there is a positive and significant relationship between firm leverage and the incidence of financial restatement. However, the other corporate governance and firm-specific characteristic variables included in the study were found to be insignificant with the incidence of financial restatement. This paper provides evidence that some form of corporate governance mechanisms and firm-specific characteristics, particularly executive compensation, firm performance and firm leverage, may influence the direction and magnitude of the incidence of financial restatement. The findings indicate that optimal executive incentives may align management interests with those of shareholders. In addition, greater performance and lower leverage levels minimise firms’ financial pressure and debt covenant violation risk, which may reduce the management tendency to misstate the financial statement, and consequently, minimise the likelihood of financial restatement. Originality/value The main value of this paper is the effect of corporate governance and firm-specific characteristics on the likelihood of financial restatement in Malaysia. The findings of this study provide useful insights for regulators to improve and reconsider the current regulations on corporate governance mechanisms.

scholarly journals Determinants Of Ethical Climate In The Firm: The Role Of Governance Control Systems And Environmental Uncertainty

2014 ◽  
Vol 18 (4) ◽  
pp. 241
Author(s):  
John J. Williams ◽  
Alfred E. Seaman
Keyword(s):  
Corporate Governance ◽  
Ethical Climate ◽  
Empirical Studies ◽  
Environmental Uncertainty ◽  
Control Mechanisms ◽  
Governance Mechanisms ◽  
Ethical Climates ◽  
Corporate Governance Mechanisms ◽  
Organizational Ethical Climate ◽  
Perceived Environmental Uncertainty

Corporate governance mechanisms essentially reside in the control structure/systems of most organizations and provide, theoretically at least, a conduit to support a better organizational ethical climate. This linkage, however, has seldom been portrayed this way in the literature and, correspondingly, there are virtually no empirical studies to offer increased understanding, especially with respect to the professional accountant in practice. Accordingly, this paper empirically assesses the governance mechanisms sanctioned by the International Federation of Accountants (2009) as determinants of an organizations ethical climate based on evidence from a Canadian sample of CFOs/controllers. The ethics/leadership literature relating to ethical climate provides the theoretical underpinnings while organizational contingency theory supports examining the moderating effects of perceived environmental uncertainty (PEU). Increases in corporate governance control mechanisms are found to positively influence ethical climate. A significant relationship persists under both low and high levels of PEU but, as expected, it is much stronger when the level of PEU is low which raises concerns about how to embrace a stronger ethical climate when uncertainty is high. This paper contributes to the governance and ethics literature by providing empirical evidence that normative directives on evaluating and improving governance in organizations from global accounting authorities, such as the IFAC, are effective in shaping firms ethical climates in practice.

scholarly journals Corporate Governance And Earnings Management: A Survey Of Literature

2013 ◽  
Vol 29 (2) ◽  
pp. 391 ◽  
Author(s):  
Chi-keung Man ◽  
Brossa Wong
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Internal Control ◽  
Audit Committee ◽  
Institutional Environment ◽  
Diagnostic System ◽  
Legal Protection ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms

Corporate governance can reduce or even eliminate the extent of earnings management. Normally, an institutional environment that provides better legal protection can control managers self-interest to a certain extent. Takeover force can exert market pressure on managers to do the best for shareholders. Prior studies have investigated different corporate governance mechanisms that can have negative relationships with earnings management. Board independence can enhance certain monitoring behaviors in managers, including the misappropriation of assets. Female directors can develop trust leadership, which requires managers to share information, and are more likely to be risk-averse to frauds and opportunistic earnings management. An audit committee can oversee the internal control for financial reporting and the quality of financial information. Directors with financial expertise can provide incremental control effects on earnings management, especially in firms with weak corporate governance. This paper contributes to corporate governance by providing detailed reviews of different corporate governance mechanisms, reviewing the latest findings on classification shifting, and summarizing earnings management measures, including a new diagnostic system. In the future, this new diagnostic system may be investigated in different contexts.

The relation between corporate governance mechanisms, executive compensation and audit fees

2018 ◽  
Vol 41 (8) ◽  
pp. 939-967 ◽  
Author(s):  
Mahdi Salehi ◽  
Hossein Tarighi ◽  
Samaneh Safdari
Keyword(s):  
Corporate Governance ◽  
Executive Compensation ◽  
Emerging Market ◽  
Positive Association ◽  
Audit Fees ◽  
Stock Option ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Board Ownership

Purpose This paper aims to investigate the effects of some corporate governance mechanisms and executive compensation on audit fees in an emerging market. Design/methodology/approach The study population consists of 540 observations and 90 listed companies on the Tehran Stock Exchange during the years 2009-2014. The statistical model used in this study is a multivariate regression model; besides, the statistical technique used to test the hypotheses proposed in this research is panel data. Findings The changes in the value of a CEO’s own firm stock option portfolio, in thousands of rials (Iran’s currency), for a 0.01 change in stock return volatility and stock price are defined as Vega and Delta, respectively. The results demonstrated that there is a positive association between audit fees and delta, but not Vega; this means that a fee premium is linked to CEO Delta incentives. The findings show that Iranian companies pay more audit fees when they give managers more rewards. In addition, the results show that there is not a significant relationship between fees resulting from audit risk and Delta and Vega incentives of the board. Inconsistent with agency theory, the authors found that the independence of board members did not have any effect on audit fees. As a final point, the outcomes of the paper demonstrate that managers who invest in companies under their own management do not have any impact on the amount of audit fee. To put it another way, there is not any significant connection between the board ownership and audit fees. Practical implications This is one of the most important studies that simultaneously surveys the impacts of corporate governance mechanisms and executive compensation in the Iranian audit market. The results of this study will reveal more than the role of corporate governance mechanisms for society and users of financial statements because as tools on the CEO actions, they always have to pay attention to the implementation of corporate principles in the economic entity’ operation. Originality/value The present study has examined the relationship between two cases of corporate governance mechanisms named the board independence and the board ownership with audit fees in a country where, to the authors’ knowledge as in most other developing markets, such a relationship has not been a subject of empirical research. Moreover, the use of a two-dimensional measure of executive compensation, namely, Delta and Vega incentives, primarily considering research undertaken in an emerging market, as a valuable contribution may be observed.

Do corporate governance mechanisms and internal control systems matter in reducing mortality rates?

2019 ◽  
Vol 34 (2) ◽  
pp. 744-760 ◽  
Author(s):  
Stephen Owusu Afriyie ◽  
Yusheng Kong ◽  
Patrick Obeng Danso ◽  
Abdul‐Aziz Ibn Musah ◽  
Michael Owusu Akomeah
Keyword(s):  
Corporate Governance ◽  
Control Systems ◽  
Internal Control ◽  
Mortality Rates ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms
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