scholarly journals Corporate Governance’s Role in the Risk-Return Paradox - New Evidence from Indian Firms

2021 ◽  
Vol 15 (3) ◽  
pp. 128-165
Author(s):  
Ranjan Dasgupta
Keyword(s):  
Corporate Governance ◽  
Reference Points ◽  
Return Level ◽  
Women Directors ◽  
Firm Level ◽  
High Performing ◽  
Risk Return ◽  
Aspiration Levels ◽  
Study Results ◽  
Standard Deviations

Prior empirical research emphasises ‘troubled’ firm context and ‘quality management’ perspective as reasons for a ‘paradoxical’ or negative risk-return association for firms. But, to the best of our knowledge, no studies examine the role of individual corporate governance mechanisms in influencing such a ‘paradox’. Therefore, the study investigates this issue by classifying 675 sample Indian firms over the period 2000-2017 into high performing and low performing firms in line with the strategic reference point theory and the behavioural theory. To fulfil study objectives, it uses four different firm-return measures and estimate firm-level risk with standard deviations of each return measures previous 5 years’ values on a rolling basis. In the univariate model, the study uses the notion of target (reference) return level under firm’s own and social aspiration levels in time-variant and market cycles contexts, and then compute Kendall’s correlations in between distance from such targets and their standard deviations. The study also carries out a multivariate regression model with necessary controls to further validate its univariate findings. The study results report significant influential role that board size and women directors’ presence play in both high and low performing firms’ ‘paradoxical’ risk-return association. On the contrary, board meetings, busy board and board tenure develops a risk-return ‘paradox’ for high performing firms only. These results hold true across my return measures, strategic reference points, market cycles and corporate governance regimes after controlling for firm- and industry-level heterogeneities under both univariate and multivariate analyses.

scholarly journals Corporate governance and financial performance: an emerging economy perspective

2016 ◽  
Vol 13 (3) ◽  
pp. 228-236 ◽  
Author(s):  
Faizul Haque ◽  
Thankom G. Arun
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Agency Theory ◽  
Financial Reporting ◽  
Operating Performance ◽  
Jel Classification ◽  
Three Dimensions ◽  
Firm Level ◽  
Study Results ◽  
Governance Index

This paper investigates the influence of firm-level corporate governance on financial performance of the listed firms in Bangladesh. Agency theory suggests that better corporate governance reduces expropriation costs, which, in turn, enhances investors’ confidence in the firm’s future cash flow and growth prospects, leading to higher firm valuation. Likewise, a decrease in private benefits is likely to cause an improved operating performance. This paper uses a questionnaire survey-based corporate governance index (CGI), comprising of the three dimensions – shareholder rights, independence and responsibilities of the board and management, and financial reporting and disclosures. The study results partly confirm the prediction of the agency theory, with a statistically significant positive relationship between a firm’s corporate governance quality and its valuation, even though the relationship between firm level corporate governance and operating performance seems inconclusive. Keywords: corporate governance index, agency theory, financial performance, Bangladesh. JEL Classification: G32, G34, G38, O16

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.

scholarly journals Corporate Governance, Economic Entrenchment, and Growth

2005 ◽  
Vol 43 (3) ◽  
pp. 655-720 ◽  
Author(s):  
Randall Morck ◽  
Daniel Wolfenzon ◽  
Bernard Yeung
Keyword(s):  
Corporate Governance ◽  
Capital Investment ◽  
Corporate Control ◽  
Political Influence ◽  
Institutional Development ◽  
The United States ◽  
Firm Level ◽  
Control Structures ◽  
Resource Misallocation ◽  
Property Rights Protection

Outside the United States and the United Kingdom, large corporations usually have controlling owners, who are usually very wealthy families. Pyramidal control structures, cross shareholding, and super-voting rights let such families control corporations without making a commensurate capital investment. In many countries, a few such families end up controlling considerable proportions of their countries' economies. Three points emerge. First, at the firm level, these ownership structures, because they vest dominant control rights with families who often have little real capital invested, permit a range of agency problems and hence resource misallocation. If a few families control large swaths of an economy, such corporate governance problems can attain macroeconomic importance—affecting rates of innovation, economywide resource allocation, and economic growth. If political influence depends on what one controls, rather than what one owns, the controlling owners of pyramids have greatly amplified political influence relative to their actual wealth. This influence can distort public policy regarding property rights protection, capital markets, and other institutions. We denote this phenomenon economic entrenchment, and posit a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one possible equilibrium. The literature suggests key determinants of economic entrenchment, but has many gaps where further work exploring the political economy importance of the distribution of corporate control is needed.

Does board gender diversity affect the transparency of corporate political disclosure?

2018 ◽  
Vol 26 (4) ◽  
pp. 444-463 ◽  
Author(s):  
D.G. DeBoskey ◽  
Yan Luo ◽  
Jeff Wang
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Gender Diversity ◽  
Political Activity ◽  
Political Contributions ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Ethics Research ◽  
Board Gender Diversity

Purpose The purpose of this paper is to examine the influence of board gender diversity on the transparency of corporate political disclosure (CPD). Design/methodology/approach Two empirical proxies, CPD transparency and policy transparency, are constructed from a data set jointly produced by the Center of Political Activity and the Carol and Lawrence Zicklin Center for Business Ethics Research. The CPD transparency score measures the level of transparency in voluntary corporate disclosure of the amount of political contributions and the identity of the recipients as well as the titles and names of the executives who authorize the political spending. The policy transparency score measures the level of transparency in the voluntary disclosure of the policies governing corporate political spending. Board gender diversity is measured by the percentage of women on the board of directors. Findings Higher proportions of female directors are associated with more transparent disclosure of political contributions after controlling for a set of corporate governance and firm-level variables. Originality/value This study is the first to examine whether and how gender-diversified boards enhance the transparency of CPD. It contributes to the literature by providing evidence that gender-diversified boards enhance corporate governance.

scholarly journals Corruption and corporate governance: a cross-national study

2008 ◽  
Vol 5 (3) ◽  
pp. 299-315
Author(s):  
David Ng ◽  
Kun Qian ◽  
Adam Dix
Keyword(s):  
Corporate Governance ◽  
Standard Deviation ◽  
Negative Impact ◽  
National Study ◽  
Firm Level ◽  
Standard Deviation Increase ◽  
Country Level ◽  
Governance Analysis ◽  
Significant Negative Impact ◽  
Cross National Study

This paper examines the importance of country-level corruption in explaining the variation of firm-level corporate governance. Analysis of firm-level corporate governance data and country level corruption data on over 400 companies in 26 countries confirms the hypothesis that corruption has a statistically significant negative impact on the quality of a firm’s corporate governance. One standard deviation increase in country-level corruption is associated with a 0.5 to 0.7 standard deviation decrease in firm-level corporate governance scores

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