Determinants of voluntary formation of risk management committees

2014 ◽  
Vol 29 (7) ◽  
pp. 649-671 ◽  
Author(s):  
Nkoko Blessy Sekome ◽  
Tesfaye Taddesse Lemma
Keyword(s):  
South Africa ◽  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Emerging Economy ◽  
Board Structure ◽  
Content Type ◽  
Listed Firms ◽  
Practical Implications

Purpose – The aim of this paper is to examine the nexus between firm-specific attributes and a company’s decision to setup a separate risk management committee (RMC) as a sub-committee of the board within the context of an emerging economy, South Africa. Design/methodology/approach – The authors analyse data extracted from audited annual financial reports of 181 non-financial firms listed on the Johannesburg Securities Exchange (JSE) by using logistic regression technique. Findings – The results show a strong positive relationship between the existence of a separate RMC and board independence, board size, firm size and industry type. However, the authors fail to find support for the hypotheses that independent board chairman, auditor reputation, reporting risk and financial leverage have an influence on a firm’s decision to establish RMC as a separately standing committee in the board structure. The findings signify the role of costs associated with information asymmetry, agency, upkeep of a standalone RMC, damage to the reputation of directors and industry-specific idiosyncrasies on a firm’s decision to form a separate RMC. Research limitations/implications – As in most empirical studies, this study focuses on listed firms. Nonetheless, future studies that focus on non-listed firms could add additional insights to the literature. Investigating the role of firm-specific governance attributes other than those considered in the present study (e.g. gender of directors, ownership structure, etc.) could further enhance the understanding of antecedents of risk-management practices. Practical implications – The findings have practical implications for the investment community in assessing the quality of risk management practices of companies listed on the JSE. Furthermore, the results provide insights that are potentially useful to the King Committee and other corporate governance regulators in South Africa in their effort to improve corporate governance practices. Originality/value – The present study focuses on firms drawn from an emerging economy which has profound economic, institutional, political and cultural differences compared to advanced economies, which have received a disproportionately higher share of attention in prior studies. Thus, the study contributes additional insights to the literature on corporate risk management from the perspective of an emerging economy.

Board structure in listed firms: evidence from an emerging economy

2014 ◽  
Vol 14 (3) ◽  
pp. 382-394 ◽  
Author(s):  
Beyza Oba ◽  
Elvin Tigrel ◽  
Pinar Sener
Keyword(s):  
Corporate Governance ◽  
Boards Of Directors ◽  
Good Governance ◽  
National Level ◽  
Institutional Context ◽  
Emerging Economy ◽  
Board Structure ◽  
Content Type ◽  
Listed Firms ◽  
Governance Practices

Purpose – This paper aims to understand the determinants of board structure of listed firms at institutional, industry and firm levels within an emerging economy. At the institutional level, the paper explores laws, managerial culture and the role of state in instituting and endorsing corporate governance practices. At the firm level, ownership patterns (family and non-family), experience in the capital markets, age and size of the firms are studied to find out the relation between these variables and the board structure. Design/methodology/approach – The research domain of the study is listed firms operating on the Istanbul Stock Exchange. The data for the study are collected at two phases; at the first phase, compliance reports, annual reports, articles of association and annual shareholders’ meeting reports of each firm in the sample are analyzed. At the second stage, secondary data are used for understanding the dynamics of Turkish institutional context. Findings – The results of this study reveal that boards of directors of listed Turkish firms comply with the governance practices instituted by state agencies, except on issues as independent members and committees that will influence the majority owners’ control domain and private benefits. Originality/value – This paper draws attention on institutional context and argues that “good governance” instruments developed for Anglo-Saxon stock market-controlled business systems provide limited explanation for an emerging economy that is characterized by close cooperation between the state, family-owned businesses and financial markets. The study offers insight to policy makers at a national level, interested in developing corporate governance principles regarding boards of directors of listed firms.

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.

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.

Role of discretionary earning management in corporate governance-value and corporate governance-risk relationships

2020 ◽  
Vol 20 (4) ◽  
pp. 561-581 ◽  
Author(s):  
Affaf Asghar ◽  
Seemab Sajjad ◽  
Aamer Shahzad ◽  
Bolaji Tunde Matemilola
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Panel Data ◽  
Firm Value ◽  
Emerging Economy ◽  
Earning Management ◽  
Firm Risk ◽  
Content Type ◽  
Single Study

Purpose Corporate governance (CG) is an ongoing interesting topic getting the attention of market participant, business regulators and researchers in today’s business environment. The purpose of this study is to analyze the moderating role of earnings management on CG-value and CG-risk relationship in the emerging economy of Pakistan. Design/methodology/approach A panel data analysis is used in this study. A panel data of 71 non-financial listed companies of Pakistan for the 2008-2017 period is considered for this study. Secondary data is collected from the annual reports of non-financial firms listed on PSX. Seven econometric equations are developed to test the research hypothesis. Findings The results reveal that CG significantly enhances the firm value and performance measures. Moreover, CG mitigates the practices of earning management and eliminates the risk that develops opportunistic behavior among managers to commit frauds. Practical implications The results of this study suggest that the board of directors (BODs) should intensify their governance role and ensure that the executives perform their duties to maximize the wealth of the shareholders and not engage in any misrepresentation of accounts that may lower the company position and decrease the firm value. Moreover, the managers should be informed about their accountability and acknowledged that at the end of the year, they would be audited by an expert’s auditors for their responsibilities. Concerning regulatory bodies, regulatory authorities should ensure that there must be at least one independent member on the board. The better-governed system reduces both agency conflicts and enhances firm value. Originality/value A number of studies have already been undertaken by multiple investigators to build connection among CG with firm performance, but there is not even a single study in the literature that considers CG, firm value, firm Risk and discretionary earning management as a whole in one model to generalize its results in the emerging economy of Pakistan. A fundamental element of current analyzation process addresses that this is the very first graft of study conducted in Pakistan having combination of four variables together in one revision. There is minimal work that focuses on moderating effects of earning management on the CG-value and CG-risk relationships. This study uses two standard measures of firm performance (i.e. ROA and Tobin’s Q), one proxy of earning management (DEM) and three attributes of CG (board size, audit quality and ownership structure). Previously, researchers have not investigated a model that combines variables (CG as independent and Firm performance and Firm Risk as dependent along with DEM as moderator) in a single study.

scholarly journals Firms’ legitimation through corporate governance and its association with risk and return in Brazil

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kléber Formiga Miranda ◽  
Jefferson Ricardo do Amaral Melo ◽  
Orleans Silva Martins
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Management Practices ◽  
Stock Exchange ◽  
Risk And Return ◽  
Content Type ◽  
Risk Return ◽  
Governance Practices ◽  
Practical Implications ◽  
Different Levels

Purpose This study aims to examine the listing of firms at the highest corporate governance level of the Brazilian stock exchange (B3) as a means of legitimation and its relationship with risk and return on investment. Design/methodology/approach This paper analyzes 205 companies from 2010 to 2019, in which firms listed at the Novo Mercado level were compared with groups composed of other firms traded on B3. Findings The main results demonstrate that a listing at the supposedly higher level of corporate governance in Brazil does not indicate lower risk, a higher return or even a better risk-return ratio. Research limitations/implications The findings are restricted to this sample, representing the association identified between the analyzed phenomena and not a cause-effect relationship. Practical implications The highest level of corporate governance in Brazil brings together firms that present a higher risk (at least systematic) and lower returns (at least financial) because they seek to legitimize themselves in the market as firms committed to better management practices. Social implications These findings are useful to investors, the stock exchange, regulatory agents and the companies themselves to reflect on the purpose and usefulness of different levels of corporate governance in Brazil. Originality/value This study differs from the others that relate corporate governance to risk or return because it does not deal individually with corporate governance practices, but rather the phenomenon that is listed in a special governance level, created by the stock exchange, serving as a kind of seal legitimation.

scholarly journals Impact of corporate governance on financial disclosures: Evidence from India

2014 ◽  
Vol 12 (1) ◽  
pp. 874-889 ◽  
Author(s):  
Mehul Raithatha ◽  
Varadraj Bapat
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Board Independence ◽  
Board Structure ◽  
Board Size ◽  
Cross Sectional ◽  
Listed Firms ◽  
Disclosure Requirements ◽  
Financial Disclosures

The paper aims at identifying impact of corporate governance variables i.e. board structure (board size, board independence, board activity and board busyness) and ownership structure (foreign promoters holding, institutional shareholding and CEO duality) on financial disclosures made by the Indian firms. Using cross sectional data of 325 listed firms for the financial year 2009-10, we compute financial disclosure score (using 171 checklist points) based on disclosure requirements of accounting standards. We find average disclosure score of 73%, maximum and minimum being 100% and 46% respectively. Our finding support agency theory in terms of monitoring role of board since board size is found to be significant however we do not find any influence of board independence on the disclosures. The study also supports resource dependency theory in terms of outside directorship which might provide exposure to different corporate environment, brings diverse perspectives and knowledge to the directors and this in turn leads to improved disclosures. We also support the notion that having foreign promoter shareholding improves disclosures

Characteristics of statutory internal auditors and operating efficiency

2015 ◽  
Vol 30 (4/5) ◽  
pp. 456-481 ◽  
Author(s):  
Moon-Kyung Cho ◽  
Ho-Young Lee ◽  
Hyun-Young Park
Keyword(s):  
Internal Audit ◽  
Positive Association ◽  
Operating Efficiency ◽  
Full Time ◽  
Content Type ◽  
Internal Auditors ◽  
Listed Firms ◽  
Korean Market ◽  
Practical Implications

Purpose – The purpose of this paper is to examine the effect of the characteristics of statutory internal auditors on operating efficiency. Design/methodology/approach – This study investigates three characteristics pertaining to statutory internal auditors, namely, compensation, activity and expertise, based on 1,340 firm observations from 2009 to 2010 using publicly available disclosure data for Korean listed firms. Findings – The authors find no evidence that statutory internal auditors’ compensation is positively associated with operating efficiency. This implies that compensation data on statutory internal auditors in Korea may not directly reflect their competence and ability to enhance operating efficiency. On the other hand, the authors find evidence for a positive association between full-time status for statutory internal auditors and operating efficiency and a positive association between the attendance at board meetings for statutory internal auditors and operating efficiency. The results also show a decrease in operating efficiency when statutory internal auditors are newly appointed. Finally, expertise of statutory internal auditors in financial or legal matters provides no advantage in terms of operating efficiency. Practical implications – This study contributes to the extant literature on internal audit by examining the advisory role of statutory internal auditors and its effect on operating efficiency, which is one of the objectives established by the Committee of Sponsoring Organizations of the Treadway Commission. Originality/value – While most prior research on internal audit depends on survey data from statutory internal auditors or experimental data based on a limited sample of firms, this study is based on a large sample of publicly available data of the Korean market.

Why share expertise? A closer look at the quality of motivation to share or withhold knowledge

2016 ◽  
Vol 20 (2) ◽  
pp. 181-198 ◽  
Author(s):  
Minna Stenius ◽  
Nelli Hankonen ◽  
Niklas Ravaja ◽  
Ari Haukkala
Keyword(s):  
Structural Equation ◽  
Extrinsic Motivation ◽  
Management Practices ◽  
Self Determination Theory ◽  
Equation Modeling ◽  
Content Type ◽  
Supportive Management ◽  
Practical Implications

Purpose The purpose of this study is to investigate the role of motivation for knowledge sharing (KS) by assessing how four qualitatively different motivation types, as per self-determination theory (SDT), predict KS, its quality and its undesirable counterpart, knowledge withholding. Design/methodology/approach The study was carried out as a survey (n = 200) in an expert organization. The analyses were conducted using structural equation modeling. Findings Autonomous type of extrinsic motivation (identified motivation) was the strongest predictor of KS (in work meetings) and its quality, whereas the other motivation types (intrinsic, introjected and external) had no independent contribution to variance in KS. Knowledge withholding was negatively associated with identified and positively with external KS motivation. Research limitations/implications Single organization limits the generalizability of the results. Future studies should further investigate the role of identified motivation for various KS behaviors. Practical implications The findings suggest that autonomy-supportive management practices known to facilitate self-determined behavior can improve KS. Fostering external motivation by incentivizing KS may be both ineffective and have undesirable consequences. Originality/value Few prior studies investigate KS motivation beyond external and intrinsic motivation or apply SDT to KS using SDT-based scales. This study distinguishes between four different motivation types and is the first to investigate their differential impact on KS and its quality. It is also the first to demonstrate the importance of identified motivation for KS. It further elucidates how the quality of KS motivation is reflected in knowledge withholding, an overall underinvestigated behavior.

scholarly journals Corporate Governance and Risk Management: A Study of Board Structure in Indonesian and Singapore Companies

2021 ◽  
Vol 4 (3) ◽  
Author(s):  
Muhammad Muhammad ◽  
Dwi Narullia
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Quantitative Information ◽  
Board Structure ◽  
Risk Disclosure ◽  
Corporate Risk Management ◽  
Analysis Technique ◽  
Research Population ◽  
Corporate Risk

This study aims to determine the effect of the board structure on business risk management. One indicator that can show the implementation of risk management is risk disclosure by the company. This study uses a quantitative approach with the research population being companies in Indonesia and Singapore included in the ASEAN Stars 2015 – 2018. Furthermore, this study uses a regression analysis technique to examine the effect of the board structure on corporate risk management. The results of this study indicate that although the structure of the board of companies included in ASEAN STARS in Indonesia and Singapore has differences, the results of the analysis of the two are not much different. This study shows that an independent board of commissioners and the frequency of meetings have a significant effect on the company's risk management. Otherwise, the composition of the female board of commissioners is proven not to affect the risk management. Overall, the results also show an increase in corporate governance activities and an increase in risk management activities. The results of this study can be used as input for potential investors to evaluate quantitative information, and other qualitative information such as the role of the board of commissioners and risk disclosure can be useful in decision making.

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