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.

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.

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.

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.

CEO behavior and sustainability performance: the moderating role of corporate governance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amel Kouaib ◽  
Asma Bouzouitina ◽  
Anis Jarboui
Keyword(s):  
Corporate Governance ◽  
Real Estate ◽  
Corporate Sustainability ◽  
Least Square ◽  
Content Type ◽  
Sustainability Performance ◽  
Corporate Sustainability Performance ◽  
Good Corporate Governance ◽  
Governance Practices ◽  
The Impact

PurposeThis paper explores how the tension between a firm's CEO overconfidence feature and externally observable hubris attribute may determine the level of corporate sustainability performance. This work also contemplates the impact of the moderator “corporate governance practices.”Design/methodology/approachThis study uses a sample of 658 firm-year-observations using a sample of European real estate firms indexed on Stoxx Europe 600 Index from 2006 to 2019. To test the developed hypotheses, feasible generalized least square (FGLS) regression is applied.FindingsFindings suggest that a good corporate governance score strengthens the positive effect of the psychological bias (CEO overconfidence) on corporate sustainability performance while it fails to attenuate the negative effect of the cognitive bias (CEO hubris).Research limitations/implicationsThe research provides an overview of the impact of CEO personality traits on the corporate sustainability performance level in the European real estate sup-sector. As corporate governance can have a major impact to control these traits, the authors recommend European real estate companies to improve their corporate governance practices.Originality/valueThis study contributes to the existent literature this gap with two empirical novelties: (1) providing a novel insight into sustainability involvement using a sample of European real estate sup-sector and (2) investigating the moderating effect on the link between CEO psychological and cognitive biases and sustainability performance. This study provides empirical evidence that entrenchment problems arising from CEO hubris would not be mitigated by a good corporate governance practice.

Bank mergers and acquisitions in Greece: the financial crisis and its effect on shareholder wealth

2019 ◽  
Vol 16 (2) ◽  
pp. 273-296 ◽  
Author(s):  
Ioannis Tampakoudis ◽  
Michail Nerantzidis ◽  
Demetres Subeniotis ◽  
Apostolos Soutsas ◽  
Nikolaos Kiosses
Keyword(s):  
Financial Crisis ◽  
Mergers And Acquisitions ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Shareholder Wealth ◽  
Conclusive Evidence ◽  
Wealth Effects ◽  
Bank Mergers ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to investigate the wealth implications of bank mergers and acquisitions (M&As) in the unique Greek setting given the triple crisis phenomenon – banking, sovereign debt and economic crises – that prevailed after the global financial crisis. Design/methodology/approach The study examines bank M&As and bank transactions over the period from 1997 to 2018, as well as government-assisted M&As during the crisis. The wealth effects of bank M&As are assessed using both univariate and multivariate frameworks. Findings Findings show a neutral crisis effect on the valuation of M&As upon their announcement. However, the authors provide conclusive evidence that M&A completions are value-destroying events for acquiring banks during the crisis, far worse than in the pre-crisis period. Greek banks also fail to create value from government-assisted mergers. The results suggest that the financial stability and the prevention of further deepening of the Greek crisis with possible contagion effects were achieved at the expense of shareholders and taxpayers. Originality/value To the authors’ knowledge, this is the first study that examines the impact of the Greek triple crisis on the wealth effects of bank M&As and bank transactions. Also, the study provides first evidence with regard to the economic impact of government-assisted M&As in the European context.

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.

scholarly journals Antecedents of voluntary corporate governance disclosure: a post-2007/08 financial crisis evidence from the influential UK Combined Code

2016 ◽  
Vol 16 (3) ◽  
pp. 507-538 ◽  
Author(s):  
Mohamed H. Elmagrhi ◽  
Collins G. Ntim ◽  
Yan Wang
Keyword(s):  
Corporate Governance ◽  
Financial Crisis ◽  
Fixed Effects ◽  
Global Financial Crisis ◽  
Theoretical Perspective ◽  
Data Sets ◽  
Outside Directors ◽  
Content Type ◽  
Listed Firms ◽  
The Impact

Purpose The purpose of this study is to investigate the level of compliance with, and disclosure of, good corporate governance (CG) practices among UK publicly listed firms and consequently ascertain whether board characteristics and ownership structure variables can explain observable differences in the extent of voluntary CG compliance and disclosure practices. Design/methodology/approach This study uses one of the largest data sets to-date on compliance and disclosure of CG practices from 2008 to 2013 containing 120 CG provisions drawn from the 2010 UK Combined Code relating to 100 UK listed firms to conduct multiple regression analyses of the determinants of voluntary CG disclosures. A number of additional estimations, including two stage least squares, fixed-effects and lagged structures, are conducted to address the potential endogeneity issue and test the robustness of the findings. Findings The results suggest that there is a substantial variation in the levels of compliance with, and disclosure of, good CG practices among the sampled UK firms. The authors also find that firms with larger board size, more independent outside directors and greater director diversity tend to disclose more CG information voluntarily, whereas the level of voluntary CG compliance and disclosure is insignificantly related to the existence of a separate CG committee and institutional ownership. Additionally, the results indicate that block ownership and managerial ownership negatively affect voluntary CG compliance and disclosure practices. The findings are fairly robust across a number of econometric models that sufficiently address various endogeneity problems and alternative CG indices. Overall, the findings are generally consistent with the predictions of neo-institutional theory. Originality/value This study extends, as well as contributes to, the extant CG literature by offering new evidence on compliance with, and disclosure of, good CG recommendations contained in the 2010 UK Combined Code following the 2007/2008 global financial crisis. This study also advances the existing literature by offering new insights from a neo-institutional theoretical perspective of the impact of board and ownership mechanisms on voluntary CG compliance and disclosure practices.

Money laundering and financial stability: does adverse publicity matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bahriye Basaran-Brooks
Keyword(s):  
Money Laundering ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Banking System ◽  
Public Confidence ◽  
Content Type ◽  
Reputational Risk ◽  
The Global Financial Crisis ◽  
The Impact

Purpose Already suffering reputational damage from the global financial crisis, banks face a further loss of trust due to their poor money laundering (ML) compliance practices. As confidence-driven institutions, the loss of reputation stemming from inadequate compliance with regulations and policies labels banks as facilitators of crime and destroys public trust both in the bank itself, peer banks and the wider banking system. Considering the links between financial stability and adverse publicity about banks, this paper aims to critically examine the implications of ML-specific bank information on financial stability. Design/methodology/approach This paper adopts a content analysis and a theoretical discussion by critically evaluating the role of bank compliance information on stability with references to recent case studies. Findings This paper establishes that availability of information regarding a bank involved in or facilitating ML might pose a threat to financial stability if bank counterparties cut their ties with the bank in question and when bank stakeholders show a strong and sudden negative reaction to adverse publicity. Though recent ML scandals have not caused immediate instability, general loss of confidence associated with reputational risk have had a destabilising effect on affected banks’ capital and liquidity. Originality/value There has been surprisingly little discussion to date on the impact of publicly available bank information on financial stability and public confidence within the ML compliance framework. This paper approaches the issue of publicly available banking compliance information solely through the prism of public confidence and reputational risk and its impact on macro-stability by examining recent ML scandals.

scholarly journals Corporate governance and voluntary risk and forward-looking disclosures

2018 ◽  
Vol 19 (4) ◽  
pp. 592-607 ◽  
Author(s):  
Mohammed M. Elgammal ◽  
Khaled Hussainey ◽  
Fatma Ahmed
Keyword(s):  
Corporate Governance ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Annual Reports ◽  
Board Size ◽  
Content Type ◽  
Board Characteristics ◽  
Panel Regressions ◽  
The Impact ◽  
Forward Looking

PurposeThe purpose of this paper is to examine the impact of corporate governance on risk and forward-looking disclosures in Qatar.Design/methodology/approachThe authors automatically measure levels of risk and forward-looking disclosures in the annual reports of Qatari firms for the period 2008–2014. The authors also use two ways clustered error pooled panel regressions to examine the determinants of these disclosures.FindingsThe authors find that firms with a higher percentage of foreign ownership disclose more forward-looking information; conversely, board size has a negative impact on the forward-looking disclosure. Financial firms tend to disclose less forward-looking information, however, they tend to disclose more forward-looking information after the 2008 global financial crisis. The authors also find negative relationships between the risk disclosure and both the number of non-executive members of the board of directors and duality role of the CEO.Research limitations/implicationsThe study uses the quantity of disclosure as a proxy for the quality of disclosure.Practical implicationsThe findings should help the users of corporate annual reports in Qatar to understand managerial incentives for reporting risk and forward-looking information. This should help regulators to set a proper set of disclosure rules. Moreover, this study increases our understanding of the behavior of international investors and the board characteristics (i.e. board size) in motivating risk and forward-looking disclosures in Qatari firms.Originality/valueThe authors provide the original empirical evidence on the impact of corporate ownership and board characteristics on risk and forward-looking disclosures for Qatari firms using two ways clustered error pooled panel regressions.

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