Impact of Ownership Type and Board Characteristics on the Pay–Performance Relationship: Evidence from India

2018 ◽  
Vol 11 (1) ◽  
pp. 1-34 ◽  
Author(s):  
Manika Kohli
Keyword(s):  
Internal Control ◽  
Corporate Performance ◽  
Institutional Environment ◽  
Control Mechanisms ◽  
Executive Pay ◽  
Ownership Type ◽  
The Board Of Directors ◽  
The Difference ◽  
Performance Based Pay ◽  
And Performance

The present research has been undertaken to study the role of ownership type and board mechanisms in moderating the executive pay-corporate performance linkage in the Indian context. A sample of 209 companies listed on the S&P BSE 500 Index has been studied over the period 2008–2009 to 2012–2013. Rigorous statistical analysis of the panel data highlights that some of the governance mechanisms are, in practice, instrumental in improving the relationship between pay and performance. Whereas efforts must, indeed, be channelled towards the better functioning of certain other internal control mechanisms. Specifically, of noteworthy consequence is the difference in the way the shareholders and the board of directors ameliorate the pay–performance relationship with respect to accounting vis-à-vis market-based corporate performance. Further, the weak monitoring role discharged by the institutional investors warrant immediate policy concern. The study brings forth important implications for practitioners and policy makers in designing corporate performance-based pay keeping in view the predominant influence exerted by the institutional environment of the emerging economy of India.

scholarly journals Does Corporate Financial Architecture Contribute to Sustainable Corporate Growth? The Evidence From Russian Companies

2014 ◽  
Vol 8 (4) ◽  
pp. 11-33 ◽  
Author(s):  
Ирина Васильевна Ивашковская ◽  
Анастасия Николаевна Степанова ◽  
Наталья Елисеева
Keyword(s):  
Internal Control ◽  
Structural Characteristics ◽  
Intrinsic Value ◽  
Integrated Approach ◽  
Sustainable Growth ◽  
Financial Architecture ◽  
Corporate Growth ◽  
The Board Of Directors ◽  
The Difference ◽  
The Impact

Авторы: Ирина Васильевна Ивашковская НИУ ВШЭ [email protected] Анастасия Николаевна Степанова НИУ ВШЭ Наталья Елисеева НИУ ВШЭ In this research the analysis of the impact of corporate financial architecture on company’s performance is conducted for a sample of large Russian companies. We focus on sustainable growth identified  thru the application of intrinsic value change criteria.  We employ integrated approach to understand the determinants of the sustainable growth based on key structural characteristics of a company. The financial architecture is represented by ownership structure (managerial ownership, foreign ownership and ownership concentration), corporate governance (the structure of the board of directors and internal control) and capital structure. We examine the difference in characteristics of growth sustainability of Russian companies representing three different types of financial architecture of more than 50 large Russian firms. Our results indicate that corporate financial architecture has a significant impact on the sustainable corporate growth in the Russian market. More importantly, we show that the nature of the influence depends on the type of financial architecture.

Incentive System Design in Creativity-Dependent Firms

2014 ◽  
Vol 89 (5) ◽  
pp. 1729-1750 ◽  
Author(s):  
Isabella Grabner
Keyword(s):  
Value Creation ◽  
Primary Source ◽  
Incentive System ◽  
Control Mechanisms ◽  
Incentive Systems ◽  
Subjective Evaluations ◽  
Performance Based Pay ◽  
And Performance ◽  
The Impact ◽  
Made In

ABSTRACT I empirically investigate the impact of an organization's creativity dependency on the design of its incentive system. In firms for which the primary source of value creation is the creativity of core employees, the designs of incentive systems are particularly challenging. The nature of creative work constrains the feasibility of extrinsic incentives, but at the same time creates a need for them. Accordingly, there is concern that the use of incentives renders people not creative enough, but a lack of incentives makes employees “too creative.” I argue that a solution to this dilemma is the acknowledgment that the decision to use performance-based pay is not made in isolation, but as part of a set of complementary choices. I theoretically argue and empirically show that subjective evaluations of non-task-related performance and performance-based pay are complements in a creativity-dependent setting. I further argue that the intense use of both control mechanisms is the incentive system that best accommodates the control requirements of creativity-dependent firms, and show that the likelihood of choosing this system increases with the creativity dependency.

scholarly journals Organization Features and Profitability: Implications for a Sample of Emerging Countries

2021 ◽  
Vol 5 (2) ◽  
pp. 43
Author(s):  
Tariq Tawfeeq Yousif Alabdullah ◽  
Essia Ries Ahmed ◽  
Ramyar Rzgar Ahmed
Keyword(s):  
Internal Control ◽  
Emerging Countries ◽  
Current Work ◽  
Annual Reports ◽  
Control Mechanisms ◽  
Cross Sectional ◽  
Inconsistent Result ◽  
Board Of Director ◽  
The Board Of Directors ◽  
Sectional Analysis

A huge number of prior works has tested the link between control mechanisms and organization profitability. Several methods are used by such works to enhance the notion that there is an inconsistent result in the link between the board feature and organization profitability.  However, there is unpredictability of this link shown by the prior works. Thus, the current work aims at testing the board features as internal control mechanisms represented by the size of both organization and the board of directors in their impact on organization profitability in the non-financial companies in Jordan, which was selected from a sample of Emerging Countries. Data were collected from the annual reports for 65 organizations for the year 2019 from the website of ASE via utilizing a cross-sectional analysis study. After testing the hypothesis of the current work, the findings revealed that the size of the board of director has a significant impact on the organization profitability of nonfinancial companies in Jordan. However, this work showed that organization size has an insignificant impact on organization profitability. The current work might help policymakers in Emerging Countries in general, and Jordanian non-financial sector in particular, deliberate policies related to using robust control mechanisms to enhance directors' commitment toward utilizing internal control mechanisms for the ultimate aim in promoting organization profitability

scholarly journals Managerial turnover and performance in outside boards: Ownership makes the difference

2019 ◽  
Vol 13 (3) ◽  
pp. 2-27
Author(s):  
Esteban Lafuente ◽  
Miguel Angel García-Cestona
Keyword(s):  
Emerging Economies ◽  
Positive Impact ◽  
Legal Framework ◽  
Control Mechanisms ◽  
Governance Mechanisms ◽  
Managerial Turnover ◽  
Future Performance ◽  
The Difference ◽  
And Performance ◽  
The Relationship

We examine the relationship between CEO, board and Chairman turnovers and future performance in banks with fully outside boards. Using a rich dataset on executive turnovers from Costa Rica, we find that ownership moderates the effect that control mechanisms have on performance. Our results indicate that executive turnovers followed by the appointment of outside executives (CEO and Chairman) have a positive impact on performance. On the contrary, large board replacements create organisational costs and these negatively affect performance. These results mainly hold for shareholder-oriented banks where managers and owners are more likely to be aligned. Finally, these results underline the importance of examining the effectiveness of governance mechanisms in emerging economies. More detailed information about ownership, legal framework and executive replacements can make a difference when it comes to evaluate the effectiveness of governance mechanisms.

scholarly journals Research on The Influence of Enterprise Control Right Allocation on The Effectiveness of Internal Control-Based on The Regulatory Role of Institutional Environment

2021 ◽  
Vol 275 ◽  
pp. 01070
Author(s):  
Bin Xia ◽  
Kaili Dong
Keyword(s):  
Board Of Directors ◽  
Internal Control ◽  
Institutional Environment ◽  
Test System ◽  
Analysis Method ◽  
The Board Of Directors ◽  
Control Right ◽  
Control Configuration ◽  
Influence Degree

In order to examine the influence degree of the enterprise control configuration of the internal control construction, this paper takes 2013-2018 a-share companies of Shanghai and Shenzhen two city as the research sample, using the methods of regression analysis method, from the three shareholders, the board of directors and managers control configuration level, to study the influence degree of the effectiveness of internal control, then to test system with regional marketization environment on the influence of the adjustment. The results show that the most effective allocation mode of internal control is as follows: at the shareholder level, the allocation mode is characterized by high equity balance and state-owned shares; at the level of the board of directors, it is manifested as the holding level of the high board of directors. At the level of managers, it shows the level of high managers’ shareholding. This study has a good reference to improve the governance of listed companies.

scholarly journals Comparative Studies between UK-Listed and Japan-Listed Banks

2021 ◽  
pp. 1-37
Author(s):  
Ka Wai Mak ◽  
Ebbe Rogge
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Risk Taking ◽  
Comparative Studies ◽  
External Control ◽  
Managerial Ownership ◽  
Control Mechanisms ◽  
Increase Risk ◽  
The Difference ◽  
The Uk

Abstract This paper studies (i) the effects of external directors and managerial ownership, and (ii) the effects of shareholder monitoring, on risk-taking at banks. The former is part of the internal control mechanisms, the latter of external control. It also examines the difference between control mechanisms in the UK and in Japan. It shows that shareholder supremacy is likely to weaken corporate governance at banks. In particular, it finds that: (i) the substituted effects between internal and external controls differ between countries, or that the substituted effects of governance mechanisms may not exist; (ii) an internal corporate governance approach to shareholder supremacy increases risk-taking at banks; and (iii) foreign shareholders are likely to increase risk-taking at banks.

scholarly journals Effective board management and good corporate performance in nigerian public liability companies

2020 ◽  
Vol 11 (1) ◽  
pp. 110
Author(s):  
John Nkeobuna Nnah Ugoani
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Internal Control ◽  
Corporate Performance ◽  
Bank Failures ◽  
Exploratory Research ◽  
Design Data ◽  
Corporate Fraud ◽  
Good Corporate Governance ◽  
The Board Of Directors

The need for effective board management and good corporate performance lies at the heart of good corporate governance theory because as the agency theory contends the managers’ interest and the interest of shareholders are not almost always the same. Good corporate performance is the basis of the business as reflected through enhanced shareholder value measured by return on investment, return on assets or return on equity. Effective board management necessary for good corporate performance requires significant dose of emotional intelligence competencies such as integrity, transparency and loyalty. Such will ensure that the board of directors exercises internal control through effective monitoring roles aimed at protecting shareholders’ interest as contemplated by the principles of good corporate governance. Ninety seven individuals participated in the study conducted through the exploratory research design. Data were analyzed through descriptive and regression statistical techniques and it was found that effective board management has significant positive correlation with good corporate performance. There is need for more understanding in this area, therefore further study could examine the relationship between corporate fraud and incessant bank failures in Nigeria despite various regulatory interventions. Consequent on the result of this study, it was suggested that the appointment of members of the board of directors of public liability companies in Nigeria must not be done without consideration to relevant experience.

A Modification of the Payne-Jones Method of Identifying Abnormal Differences in WISC-R Performance and Verbal IQ's

1996 ◽  
Vol 12 (1) ◽  
pp. 27-32 ◽  
Author(s):  
Louis M. Hsu
Keyword(s):  
Full Scale ◽  
True Score ◽  
Verbal Iq ◽  
Score Difference ◽  
The Difference ◽  
And Performance

The difference (D) between a person's Verbal IQ (VIQ) and Performance IQ (PIQ) has for some time been considered clinically meaningful ( Kaufman, 1976 , 1979 ; Matarazzo, 1990 , 1991 ; Matarazzo & Herman, 1985 ; Sattler, 1982 ; Wechsler, 1984 ). Particularly useful is information about the degree to which a difference (D) between scores is “abnormal” (i.e., deviant in a standardization group) as opposed to simply “reliable” (i.e., indicative of a true score difference) ( Mittenberg, Thompson, & Schwartz, 1991 ; Silverstein, 1981 ; Payne & Jones, 1957 ). Payne and Jones (1957) proposed a formula to identify “abnormal” differences, which has been used extensively in the literature, and which has generally yielded good approximations to empirically determined “abnormal” differences ( Silverstein, 1985 ; Matarazzo & Herman, 1985 ). However applications of this formula have not taken into account the dependence (demonstrated by Kaufman, 1976 , 1979 , and Matarazzo & Herman, 1985 ) of Ds on Full Scale IQs (FSIQs). This has led to overestimation of “abnormality” of Ds of high FSIQ children, and underestimation of “abnormality” of Ds of low FSIQ children. This article presents a formula for identification of abnormal WISC-R Ds, which overcomes these problems, by explicitly taking into account the dependence of Ds on FSIQs.

Effect of Financial Control Mechanisms on Performance of Income Generating Units in Selected Public Universities in Kenya

2019 ◽  
Vol 3 (V) ◽  
pp. 286-304
Author(s):  
Shadrack Musunkui Towett ◽  
Isaac Naibei ◽  
Williter Rop
Keyword(s):  
Risk Management ◽  
Internal Control ◽  
Public Universities ◽  
Management Strategies ◽  
Internal Audit ◽  
Simple Random Sampling ◽  
Target Population ◽  
Control Measures ◽  
Financial Control ◽  
Control Mechanisms

In an attempt to bridge the gap between the budgetary allocations and actual expenditures most universities have started income generating units with the aim of boosting their operational expenses. Whereas there is the potential of the use of Income Generating Units (IGUs) to generate additional funds, most universities still experience challenges in full implementation and realization of the revenue goal. This study therefore sought to determine the financial control mechanisms affecting performance of income generating units among selected public universities. The study sought to determine the effect of internal controls, credit policies, financial risk management and internal audit on performance of income generating units in selected universities. Targeted population was all the 290 employees in the IGU departments of selected public universities. The respondents were sampled using simple random sampling so as to enable equal representation of the target population without any biasness. Data collection was done using the questionnaire to ensure sufficient data was collected from the respondents. Descriptive statistics assisted in the determination of respondent’s views and opinions on every variable. Qualitative data was analysed using content analysis into meaningful, precise and comprehensive statements and presented in quotations. Data analysis was done using SPSS version 21 and data presented in form of figures and tables. The study ensured that all ethical considerations were considered by the study. The findings were that most employed Income Generating Units in Public Universities were Collection of rental fees, Evening and executive programs and Trainings of both short and long courses while the least was established to be Sales of memorabilia and books. All the financial control mechanism investigated namely internal audit, internal control measures, risk management strategies and credit policies had large extents of adoption in the selected universities. The results of the regression analysis showed that the financial control mechanisms investigated had a significant positive relationship on performance of the IGUs. Specifically, 47% of the variation of the performance of IGUs was established to be explained by the studied factors. The study concluded that the performance of the IGUs among the selected public universities was largely accounted for by the implemented financial control measures. Therefore effective financial control mechanisms is concluded to lead to better IGU performance whereas shortcomings in the financial control mechanisms is concluded to lead to diminished returns in the IGUs. The study recommended that the management in charge of the IGU department in the public universities to prioritize the formulation, implementation and monitoring of financial control mechanisms in the IGUs. To facilitate effective financial controls, the study recommended that the management especially those in the audit section to conduct regular checks and inspections on the IGUs. Additionally, frequent reforms were recommended to address the shortcomings experienced in integrating financial control measures in IGUs.

Internal Control Quality and Bank Risk-Taking and Performance

2020 ◽  
Author(s):  
Matthew Baugh ◽  
Matthew Ege ◽  
Christopher G. Yust
Keyword(s):  
Internal Control ◽  
Risk Taking ◽  
Downside Risk ◽  
Internal Controls ◽  
Bank Risk ◽  
Material Weakness ◽  
Control Quality ◽  
Interest Income ◽  
Upside Risk ◽  
And Performance

Using a sample of bank-years from 2005 to 2017, we examine the effect of internal control quality on future risk-taking and performance. We find that banks that disclose a material weakness in internal controls have higher risk-taking and worse performance in the future, including having a higher (lower) likelihood of experiencing large losses (gains). These findings suggest that weak controls increase (reduce) downside (upside) risk-taking or conversely that strong controls increase (reduce) upside (downside) risk-taking. Path analyses suggest that 22.3 to 43.7 percent of the effect of internal control quality on future performance is through risk-taking. Additionally, material weaknesses are negatively associated with total asset, loan, interest income, and non-interest income growth, suggesting that internal control quality affects both core and non-core activities of banks. Overall, results suggest that strong internal controls improve bank risk-taking, in part through asymmetrically reducing downside risk-taking while facilitating upside risk-taking, ultimately improving bank performance.

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