Understanding decoupling in response to corporate governance reform pressures

2015 ◽  
Vol 23 (4) ◽  
pp. 369-382 ◽  
Author(s):  
Mario Krenn
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Good Governance ◽  
Regulatory Change ◽  
Compliance Monitoring ◽  
Governance Reform ◽  
Firm Level ◽  
Content Type ◽  
Good Corporate Governance ◽  
Actual Use

Purpose – The purpose of this article is to explain under what circumstances firm-level adoption of codes of good corporate governance will more likely be superficial rather than substantive in nature. The article contains lessons for any agency or country that attempts to implement deep and lasting changes in corporate governance via codes of good corporate governance. Design/methodology/approach – The article reviews the literature on compliance with codes of good corporate governance and develops a conceptual model to explain why some firms that have formally adopted a code of good governance decouple this policy from its actual use. Findings – Decoupling in response to the issuance of codes of good corporate governance will be more attractive to firms and also more sustainable under the following conditions: firms’ compliance costs are relatively high firms’ costs of outright and visible non-compliance are relatively high and outsiders’ compliance monitoring costs are relatively high. Originality/value – The article contributes to the debate on compliance and convergence and provides policymakers with a conceptual framework for assessing the likelihood of successful regulatory change in corporate governance.

An assessment of corporate governance reforms in Italy based on a comparative analysis of earnings management

2014 ◽  
Vol 14 (3) ◽  
pp. 407-423 ◽  
Author(s):  
Domenico Campa ◽  
Ray Donnelly
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Good Governance ◽  
Firm Level ◽  
Content Type ◽  
Good Corporate Governance ◽  
The Uk ◽  
The Impact ◽  
Corporate Governance Reforms ◽  
Governance Reforms

Purpose – The purpose of this paper is to evaluate the impact of corporate governance reforms in Italy. Design/methodology/approach – The authors argue that the effectiveness of corporate governance can best be assessed with reference to the choices made by management or controlling shareholders. They use the curtailment of earnings management as a desirable and measureable outcome of good corporate governance to assess Italy’s progress since the 1990s. The UK is used as a reference point because it is a European Union (EU) economy of comparable size and there is evidence that its firms managed earnings to a much lesser extent than their counterparts in Italy in the 1990s. A matched sample of UK and Italian firms was used for the empirical analysis. Findings – It was found that in contrast to the situation in the 1990s, firms in Italy do not manage earnings to a greater extent than their UK counterparts after the corporate governance reforms. In addition, firm-level governance has a greater effect on earnings management in Italy than in the UK. The authors attribute this to firm-level governance compensating for deficiencies in national institutions. Research limitations/implications – The restriction of earnings management is just one positive consequence of good governance. Other positive outcomes require to be studied to form a complete picture of the impact of governance reforms in Italy. Originality/value – This paper is the first to use an outcome-driven approach to evaluate the impact of governance reforms.

Corporate governance: the inputs to outcomes evolution

2020 ◽  
Vol 11 (2) ◽  
pp. 161-166
Author(s):  
Linda de Beer
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Good Governance ◽  
Historical Narrative ◽  
Effective Control ◽  
Ethical Culture ◽  
Special Issue ◽  
Fourth Edition ◽  
Content Type ◽  
Clear Shift

Purpose The purpose of this study is to demonstrate that there was a clear shift from the First King Report in 1994, which advocated an input approach to corporate governance, to the Fourth King Report in 2016 that proposed an outcomes-based approach to corporate governance. It will be demonstrated that there was a gradual shift from an “apply-or-explain” approach in the earlier editions of the King Reports, to an “apply-an-explain” approach in the fourth edition of the King Report. Design/methodology/approach Historical narrative and analysis. Findings The fourth King Report, published in 2016, encapsulates an evolution in corporate governance thinking where four good governance outcomes – ethical culture, good performance, effective control and legitimacy – are placed at the forefront of measuring governance, with governance principles and practices following from these outcomes. Originality/value This study is part of a special issue that looks at the contribution of the King Reports to governance globally.

Does corporate governance matter for stock returns volatility in the Brazilian context?

2019 ◽  
Vol 19 (6) ◽  
pp. 1236-1252
Author(s):  
Guilherme Cardoso ◽  
Dannie Delanoy Carr ◽  
Pablo Rogers
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Stock Returns ◽  
Term Structure ◽  
Good Governance ◽  
Corporate Boards ◽  
Content Type ◽  
Error Measures ◽  
Good Corporate Governance ◽  
Governance Practices

Purpose This paper aims to examine the Brazilian stock market behavior and volatility term structure of two portfolios that, theoretically, the companies that comprise them have different degrees of idiosyncratic risk: one portfolio consists of firms with good corporate governance and the other comprises firms with poor corporate governance. Design/methodology/approach The sample comprises corporate firms listed in the Brazilian stock market during the period from January 2008 to December 2017. Generalized autoregressive conditional heteroskedasticity models were applied. Findings The results show that the portfolio of firms with good corporate governance practices presents fluctuations that are more often temporary and reactive, with trends’ persistence of shorter durations, when considering the punctual volatility of the parameters estimated. This opposed expectation that the portfolio comprised of companies with good governance practices are better protected from short-term movements. However, over time and with standard error measures in consideration, both portfolios’ volatilities behave in similar ways. These findings may be related to Brazilian market characteristics, such as ownership concentration, ineffective corporate boards and the ever-developing nature of the stock market in Brazil. Any one of these characteristics present challenges to effective enforcement of the corporate governance practices in the Brazilian context. Originality/value The findings are potentially to the interest of researchers and practitioners for several reasons. First, this paper contributes to the growing literature on the relationship between corporate governance and market volatility. Second, it informs that volatility in the Brazilian context is likely only partially, if at all, influenced by corporate governance practices. Third, longitudinally, both indices follow the same pattern and converge to the same place.

Corporate governance, the GFC and independent directors

2015 ◽  
Vol 30 (4/5) ◽  
pp. 324-346 ◽  
Author(s):  
Belinda Rachael Williams ◽  
Simone Bingham ◽  
Sonia Shimeld
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Global Financial Crisis ◽  
Good Governance ◽  
Board Composition ◽  
Content Type ◽  
Effective Governance ◽  
Analysis Techniques ◽  
The Global Financial Crisis ◽  
Made In

Purpose – The purpose of this study is to understand how board composition and independent non-executive director (INED) disclosures have changed in light of the global financial crisis (GFC) from an accountability perspective. Design/methodology/approach – Content analysis techniques were undertaken on a random sample of 75 publicly listed companies across two time periods, 2005 and 2010. Findings – The findings highlighted increased INED board membership and increased skill and experience disclosure across all board positions, with the most significant increase being the INED position. The results support the notion that firms are attempting to restore their accountability relationships post-GFC through more transparent mechanisms of governance. However, concerns are also raised in the way individual companies are meeting the ASX Corporate Governance independence requirements. Research limitations/implications – The results raise questions as to whether firms have implemented these changes to ensure effective governance and accountability responsibilities, or simply to give the appearance of good governance. Originality/value – Little attention has been given in the literature to the characteristics of INEDs and whether board changes have been made in the wake of corporate and financial crises. The findings from this study contribute to an understanding of board composition and disclosures pre- and post-GFC.

Does good corporate governance constrain cash flow manipulation? Evidence from India

2016 ◽  
Vol 42 (11) ◽  
pp. 1034-1053 ◽  
Author(s):  
Neerav Nagar ◽  
Mehul Raithatha
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Performance Indicator ◽  
Emerging Market ◽  
Cash Flows ◽  
Indian Government ◽  
Firm Level ◽  
Content Type ◽  
Good Corporate Governance ◽  
Flow Manipulation

Purpose The purpose of this paper is to examine whether firm-level corporate governance measures and regulatory reforms constrain manipulation of operating cash flows, an important firm performance indicator. Design/methodology/approach The sample comprises firms from an emerging market, India, with data from 2005 to 2011. The authors use the methodology given in the paper by Lee (2012) and multiple regressions. Findings The authors find that cash flow manipulation is likely to increase with an increase in the controlling ownership. Furthermore, board diligence and better audit fail to curb such manipulation. However, the authors do find that such manipulation has gone down in the recent years, and diligent boards constrain it, possibly due to the recent steps taken by the Indian Government for improving the corporate governance environment in India. Practical implications The findings can act as feedback for the regulators and policy makers. Potential investors and analysts may also benefit from the study, since they can be more vigilant about the firms’ cash flow manipulation practices and can demand better governance. Originality/value The findings suggest that good corporate governance makes managers substitute earnings management with cash flow manipulation.

Does good corporate governance enhance accruals quality during financial crises?

2016 ◽  
Vol 31 (4/5) ◽  
pp. 434-457 ◽  
Author(s):  
Husam Aldamen ◽  
Keith Duncan
Keyword(s):  
Corporate Governance ◽  
Financial Crises ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Good Governance ◽  
Seemingly Unrelated Regression ◽  
Content Type ◽  
Good Corporate Governance ◽  
Accruals Quality ◽  
The Impact

Purpose The purpose of this study is to examine the efficacy of corporate governance systems in enhancing earnings quality during the recent global financial crisis (GFC). The literature provides insight into the corporate governance–accruals quality relationship during periods of relative financial stability. However, little is known about periods of unexpected financial shocks such as the GFC. Design/methodology/approach The sample consists of 340 companies (1,020 firm years) listed on the ASX during 2007-2009. Factor analysis is used to compute corporate governance factors. Seemingly unrelated regression (SUR) is used to test the impact of pre-GFC corporate governance on accruals quality during the GFC. Findings Consistent with prior research, the findings suggest that good corporate governance is positively related to accruals quality before the GFC. More importantly, the impact of good governance intensifies during the GFC, where the mitigating role of governance is arguably under pressure. Furthermore, during the GFC, good corporate governance also affects the level of asset impairment. Research limitations/implications The study provides empirical evidence that the relationship between good corporate governance practices and accruals quality is amplified during the GFC. The results support the efforts of market regulators to improve the governance of companies and make them stronger during financial crises. Originality/value The study is an important addition to corporate governance research because it tests governance dynamics in a unique crisis period and establishes that corporate governance structures are effective when most needed.

Corporate governance and social responsibility

2015 ◽  
Vol 57 (1) ◽  
pp. 38-52 ◽  
Author(s):  
Marty Stuebs ◽  
Li Sun
Keyword(s):  
Corporate Governance ◽  
Social Responsibility ◽  
Good Governance ◽  
Positive Association ◽  
Individual Investors ◽  
Governance Mechanisms ◽  
Content Type ◽  
Good Corporate Governance ◽  
Corporate Governance Mechanisms ◽  
Corporate Social

Purpose – This paper aims to draw on the stakeholder theory to examine the association between corporate governance and social responsibility. Design/methodology/approach – This paper hypothesized that corporate governance is positively associated with corporate social responsibility (CSR), and good corporate governance also leads to good social responsibility in the following year. Corporate governance was measured by using the corporate governance index provided by Brown and Caylor (2006, 2009). CSR data come from Kinder, Lydenberg and Domini (KLD), Inc. Findings – Regression analysis documents significant evidence to support a positive association between corporate governance and social responsibility. Evidence suggests that good governance leads to good CSR performance. Originality/value – The results should interest managers who engage in behavior leading to or maintaining strong corporate governance mechanisms, financial analysts who conduct research on corporate governance and firm performance and policymakers who design and implement guidelines on corporate governance mechanisms. Moreover, results of this study can increase individual investors’ confidence in investing in companies with stronger corporate governance.

The evolution of the monitoring board in Japan: how the board performs monitoring function in Japanese corporate governance

2019 ◽  
Vol 19 (5) ◽  
pp. 999-1014
Author(s):  
Kohei Miyamoto
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Stock Exchange ◽  
White Paper ◽  
Lifetime Employment ◽  
Content Type ◽  
Legal Reforms ◽  
Legal Evolution ◽  
Commercial Code ◽  
Governance Institutions

Purpose The purpose of this paper is to trace a legal evolution of the monitoring board and to reveal what brought the evolution and what is expected to emerge. The paper points to unique complementarities in Japanese corporate governance institutions and norms which will affect how the monitoring board performs its functions. Design/Methodology/Approach Analysis is based on texts on corporate governance legislations in Japan from the revision of Commercial Code in 1950 to the revision of Companies Act in 2014. Other sources include Tokyo Stock Exchange regulations, White Paper on Corporate Governance and other academic literatures on Japanese corporate governance. Findings Changes of non-legal institutions and norms in Japanese corporate governance necessitated legal reforms toward the monitoring board. Persisting institutions and norms, in particular lifetime employment, influences how the monitoring board performs its functions in Japan. Originality/Value This paper explains how the evolution of the monitoring board in Japan emerged and what will cause different expected functions of the monitoring board in Japan and other jurisdictions.

scholarly journals Stewardship theory: is board accountability necessary?

2017 ◽  
Vol 59 (6) ◽  
pp. 1292-1314 ◽  
Author(s):  
Andrew Keay
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Design Methodology ◽  
Agency Problems ◽  
Stewardship Theory ◽  
Content Type ◽  
General Terms ◽  
Practical Implications

Purpose The purpose of the paper is to demonstrate that notwithstanding the fact that stewardship theory embraces things like trust of directors, their professionalism, loyalty and willingness to be concerned for the interests of others, as well as rejecting the foundations of classic agency problems that are asserted by agency theory, board accountability is as relevant to stewardship theory as it is to agency theory. Design/methodology/approach The paper applies the theory underlying board accountability in corporate governance, which is so often applied both in the corporate governance literature and in practice with agency theory in mind, to stewardship theory. Findings While the idea of accountability of boards is generally associated with an explanation and conceptualisation of the role and behaviour of directors as agents within classic agency theory, the paper demonstrates that board accountability is a necessary part of board life even if the role of directors is explained and conceptualised in terms of stewardship theory. Practical implications The paper suggests some accountability mechanisms that might be employed in a stewardship approach. Originality/value While many authors have talked in general terms about board accountability and its importance, this is the first paper that has engaged in a substantial study that links board accountability directly with stewardship theory, and to establish that accountability is necessary.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

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