Corporate Governance against Systematic Risk during COVID-19 -- Empirical Findings Based on fs/QCA

Purpose The purpose of this paper is to examine the impact of corporate governance, investor sentiment and financial liberalization on downside systematic risk and the interplay of socio-political turbulence on this relationship through static and dynamic panel estimation models. Design/methodology/approach The evidence is based on a sample of 230 publicly listed non-financial firms from Pakistan Stock Exchange (PSX) over the period 2008–2018. Furthermore, this study analyzes the data through Blundell and Bond (1998) technique in the full sample as well sub-samples (big and small firms). Findings The authors document that corporate governance mechanism reduces the downside risk, whereas investor sentiment and financial liberalization increase the investors’ exposure toward downside risk. Particularly, the results provide some new insights that the socio-political turbulence as a moderator weakens the impact of corporate governance and strengthens the effect of investor sentiment and financial liberalization on downside risk. Consistent with prior studies, the analysis of sub-samples reveals some statistical variations in large and small-size sampled firms. Theoretically, the findings mainly support agency theory, noise trader theory and the Keynesians hypothesis. Originality/value Stock market volatility has become a prime area of concern for investors, policymakers and regulators in emerging economies. Primarily, the existence of market volatility is attributed to weak governance, irrational behavior of market participants, the liberation of financial policies and sociopolitical turbulence. Therefore, the present study provides simultaneous empirical evidence to determine whether corporate governance, investor sentiment and financial liberalization hinder or spur downside risk in an emerging economy. Furthermore, the work relates to a small number of studies that examine the role of socio-political turbulence as a moderator on the relationship of corporate governance, investor sentiment and financial liberalization with downside systematic risk.

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Does shareholder-oriented corporate governance reduce firm risk? Evidence from listed European companies

Journal of Applied Accounting Research ◽

10.1108/jaar-02-2017-0033 ◽

2018 ◽

Vol 19 (2) ◽

pp. 295-311 ◽

Cited By ~ 4

Author(s):

Leopold Djoutsa Wamba ◽

Eric Braune ◽

Lubica Hikkerova

Keyword(s):

Corporate Governance ◽

Board Of Directors ◽

Good Governance ◽

Systematic Risk ◽

Principal Component ◽

Firm Risk ◽

Content Type ◽

Synthetic Index ◽

The Board Of Directors ◽

The Impact

Purpose The purpose of this paper is to explore the impact of the mechanisms of corporate governance on the volatility of companies’ financial profitability. Design/methodology/approach For the period 2002-2014, the authors evaluate the relations linking various indices involved in corporate governance with the systematic risk supported by these companies for a sample of 355 firms domiciled in Europe. To empirically test these relationships, the authors calculated a synthetic index of corporate governance quality (QGI) based on the 53 items of assessment of the companies’ governance proposed by the database ASSET4. Following the method used by Boncori et al. (2016), the authors first reduced the number of dimensions of corporate governance by performing a principal component analysis of the sample, which resulted in the following five components: management’s shareholder commitment, shareholder rights, characteristics of the board of directors, transparency of the financial information and independence of the audit. Findings The results of the tests indicate that the synthetic index of governance that the authors have built is only significant at the 10 percent threshold. The impact of this variable on the systematic risk of the company is of the order of one-tenth of a point. The decomposition of this index into five variables shows that management’s commitment to shareholders and the effectiveness of the board of directors in carrying out its supervisory tasks are likely to reduce, but again to a limited extent, the risk borne by the company. Research limitations/implications This observation guides the future work in introducing variables that reflect the social responsibilities of the companies in the sample in order to distinguish the effects of social responsibility from those of purely shareholder-oriented governance on systematic risk. Practical implications This paper demonstrates the interest of good governance on the risk of firms and identifies certain characteristics upon which to act. Originality/value Although the relations between corporate governance mechanisms and profitability expectations have been the subject of numerous studies, few authors have examined the influence of governorship on the volatility of this profitability, particularly in Europe. To the best of the authors’ knowledge, the rare work on this topic relates to only a limited number of countries.

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Systematic Risk and Corporate Governance Risk - An Empirical Research of Chinese Listed Companies

2011 Fourth International Conference on Business Intelligence and Financial Engineering ◽

10.1109/bife.2011.114 ◽

2011 ◽

Author(s):

Li Feng ◽

Tongying Liang

Keyword(s):

Corporate Governance ◽

Empirical Research ◽

Systematic Risk ◽

Listed Companies ◽

Chinese Listed Companies ◽

Governance Risk

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Evaluation of systematic risk, corporate governance, and cash holdings: evidence from Indonesia

Economics of Development ◽

10.21511/ed.20(1).2021.04 ◽

2021 ◽

Vol 20 (1) ◽

pp. 35-45

Author(s):

Musdalifah Azis ◽

Michael Hadjaat ◽

Rositawati ◽

Dio Caisar Darma

Keyword(s):

Corporate Governance ◽

Regression Analysis ◽

Service Sector ◽

Stock Exchange ◽

Cash Holdings ◽

Systematic Risk ◽

Sampling Technique ◽

Financial Service ◽

The Other ◽

Probability Level

Profits that are calculated to finance unexpected cash need expedite management. This paper investigates the effect of corporate governance on cash holdings with systematic risk as a moderating variable. The population consists of companies from the property and real estate sectors listed on the Indonesia Stock Exchange (IDX) during 2012–2020. Through the purposive sampling technique, the sample obtained 41 companies as the study object. Data analysis is focused on panel data and its interpretation through the Moderated Regression Analysis (MRA). Hypothesis testing uses statistical terms at the 5% probability level. Important findings underline that corporate governance has a positive significant effect on cash holdings, while systematic risk has a negative insignificant effect. On the other hand, the moderation between corporate governance and cash holdings through systematic risk is positive significant. Systematic risk reflects the reliability of a stock; when the risk is higher, it tends to increase in cash flow situations, and investors prefer high-risk investments with the expectation of profit from returns. It is hoped that future contributions will serve as reference material for academics, government, and companies engaged in the financial service sector.

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