The relationship between corporate governance and financial performance of small corporations in Australia

This paper examines a widely explored but yet to be confirmed relationship between two latent constructs - corporate governance and financial performance of small corporations in Australia. Prior studies have either focused on larger organisations or isolated corporate governance mechanisms in small firms. However, few have examined how corporate governance mechanisms, as a bundle, relate to small corporations. This study fills this gap by empirically analysing the aforementioned relationship using Structural Equation Modelling (SEM). Based on 387 responses from small corporations, the results show that corporate governance bundles measured by the extant literature, has a negative impact on the financial performance of small corporations. The result calls for a stakeholder approach to the governance needs of small corporations.

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Corporate governance and performance of medium-sized firms in Nigeria: does sustainability initiative matter?

Corporate Governance ◽

10.1108/cg-09-2019-0291 ◽

2020 ◽

Vol 20 (3) ◽

pp. 401-427

Author(s):

Babatunji Samuel Adedeji ◽

Tze San Ong ◽

Md Uzir Hossain Uzir ◽

Abu Bakar Abdul Hamid

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Financial Reporting ◽

Structural Equation ◽

Negative Impact ◽

Positive Impact ◽

Mediating Effect ◽

Content Type ◽

And Performance ◽

The Relationship

Purpose The non-existence of the corporate governance (CG) concept for practices by non-financial medium-sized firms (MSFs) in Nigeria informed. This study aims to determine whether CG practices influence firms’ performance and whether sustainability initiative (SI) mediates the relationship between CG and MSFs’ performance in Nigeria. Design/methodology/approach A total of 300 firms were selected on convenience sampling basis from South Western Nigeria using a structured questionnaire. The authors used Statistical Package for Social Sciences for exploratory data analysis and hypotheses were tested using covariance-based structural equation modelling. Findings The results show that CG has a significant positive effect on performance [financial performance (FNP) and non-financial performance (NFP)] and SI. SI has a mixed impact on performance, e.g. a significant positive impact on NFP but insignificant negative impact on FNP. Similarly, SI has a combined mediating effect in the relationship between CG and performance, e.g. fully mediates CG → NFP and does not mediate CG → FNP. Firms are to invest in social and environmental initiatives substantially. CG codes will complement the International Financial Reporting Standards for MSFs. Research limitations/implications This study supports the assumptions of theories (institutional, stakeholder and agency) as the basis for the usage of multiple approaches to determine the outcome of hypotheses, especially in developing climes. Practical implications The study contributes to CG and performance literature by examining the mediating effects of SI. The paper also shows the necessity to emphasise NFP aspect. Policymakers should evolve CG codes to encourage stakeholders to believe more in the corporate existence of MSFs for strengthening capital-base and quality personnel engagement. Originality/value To the best of the authors’ knowledge, this is one of the first empirical attempts showing the evidence on the relationship between CG and NFP in Nigeria.

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The financial impacts of board mechanisms on performance: The case of listed Moroccan banks

International Journal of Financial, Accounting, and Management ◽

10.35912/ijfam.v3i2.536 ◽

2021 ◽

Vol 3 (2) ◽

pp. 93-113

Author(s):

Issam El Idrissi ◽

◽

Youssef Alami ◽

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Fixed Effects ◽

Audit Committee ◽

Negative Impact ◽

Governance Mechanisms ◽

Return On Equity ◽

Corporate Governance Mechanisms ◽

Governance Practices ◽

The Impact

Abstract Purpose: The present study examines the impact of corporate governance mechanisms on listed Moroccan banks' financial performance. Research methodology: This study investigates the relationship between listed banks' governance mechanisms and financial performance in the CSE for six years between 2014-2019. This study employs three performance measures, return on assets, return on equity, and Tobin's Q, to determine bank performance. This research uses the GMM EGLS approach to analyze data. In the first phase of this empirical research, we did use OLS, Fixed Effects, and Radom Effects regressions to show their inefficiency. Results: Our results portray that most board mechanisms have a negative impact on financial performance. In comparison, the audit committee and nomination & remuneration committee have a positive effect on financial performance. Limitations: Many qualitative and quantitative factors could influence financial performance and not only the used variables in this paper. Contribution: This research shows that the dynamic connection between corporate governance and financial performance is robust in the Moroccan banking context. Also, our study has important implications for establishing good corporate governance practices in emerging economies.

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An Empirical Study on Corporate Governance and Islamic Bank Performance

International Journal of Finance & Banking Studies (2147-4486) ◽

10.20525/ijfbs.v5i4.478 ◽

2016 ◽

Vol 5 (4) ◽

pp. 01-09

Author(s):

Sarwar Uddin Ahmed ◽

Wali Ullah ◽

Samiul Parvez Ahmed ◽

Ashikur Rahman

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Time Series Data ◽

Stock Exchange ◽

Series Data ◽

Islamic Banks ◽

Governance Mechanisms ◽

Corporate Governance Mechanisms ◽

And Performance ◽

The Relationship

Corporate governance refers to the relationship present between the corporation and the stakeholders that determines and controls the strategic direction and performance of the corporation. Good corporate governance should provide adequate incentives for the board and management to pursue objectives that are in the interests of the company and shareholders, thereby encouraging firms to use resources more efficiently. However, the definition of accountability differs between conventional and Islamic Banks. Islam was made accountable not only to stakeholders, but also to Allah, the ultimate owner and authority. These powerful moral ethics help in promoting fair, just and honest business dealing. The aim of this study is to examine the relationship between corporate governance structures and the resultant financial performance of listed Islamic banks of Dhaka Stock Exchange (DSE) in Bangladesh. The panel time series data were collected for the time period of 6 years (2009-2014) from all the listed Islamic banks to run an Ordinary Least Squared (OLS) regression model to examine whether the existing corporate governance mechanisms as well as several other internal and external indicators are significant in influencing the financial performance. Preliminary findings suggest corporate governance mechanisms in Islamic banks are not quite as strong as they should be, hinting at possible market and management inefficiencies.

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The joint effect of board characteristics on financial performance

Review of Accounting and Finance ◽

10.1108/raf-03-2013-0029 ◽

2015 ◽

Vol 14 (1) ◽

pp. 20-40 ◽

Cited By ~ 16

Author(s):

Hayam Wahba

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Joint Effect ◽

Governance Mechanisms ◽

Content Type ◽

Board Characteristics ◽

Corporate Governance Mechanisms ◽

Leadership Structure ◽

Board Leadership Structure ◽

The Relationship

Purpose – This paper aims to investigate the joint effect of board characteristics on financial performance. Most of the existing literature implicitly assumes that the relationship between either board composition, or board leadership structure and financial performance is direct. Design/methodology/approach – The generalized least squares method was performed as a panel data analysis on a sample of 40 Egyptian listed firms during the period from 2008 to 2010. Findings – The results demonstrated that under board leadership structure that assigns the duties of the CEO and chairman to the same person, increasing the proportion of non-executive members to the total number of directors has a negative impact on firm financial performance. Practical implications – First, corporate governance structures do not operate in a vacuum, and therefore, corporate governance mechanisms must be considered and assessed altogether. Second, failure to understand the underlying interdependency among corporate governance mechanisms may result in arguments that blame some corporate governance designs for poor financial performance. Third, there is no single board governance mechanism that can be considered ideal, but there are combinations of these mechanisms that are preferred. Originality/value – The paper adds to the corporate governance literature by providing empirical evidence from the emerging market of Egypt. The evidence shows that the relationship between board characteristics and financial performance is not a monotonic relationship. Consequently, these findings imply that existing evidence explaining the relationship between board characteristics and financial performance needs to be interpreted with some caution.

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The relationship between corporate governance and financial performance

Journal of Family Business Management ◽

10.1108/jfbm-11-2017-0036 ◽

2019 ◽

Vol 9 (1) ◽

pp. 54-78 ◽

Cited By ~ 7

Author(s):

Zaid Saidat ◽

Mauricio Silva ◽

Claire Seaman

Keyword(s):

Corporate Governance ◽

Firm Performance ◽

Financial Performance ◽

Family Firms ◽

Corporate Performance ◽

Independent Directors ◽

Governance Mechanisms ◽

Content Type ◽

Corporate Governance Mechanisms ◽

The Relationship

PurposeThe purpose of this paper is to attempt to fill a research gap in the relationship between corporate governance mechanisms and financial performance of family and non-family firms’ by using a sample of non-financial firms listed on Amman Stock Exchange (ASE) for the period 2009–2015.Design/methodology/approachThis research employs a quantitative method using data that include corporate governance mechanisms, firm characteristics and financial ratios of a sample of Jordanian listed firms in the ASE over the period 2009–2015. The sample covers all companies that have been part of the ASE during the period including both family and non-family firms, part of total of 228 companies listed on the ASE as of 31 December 2015. The study used accounting-based measures such as return on asset (ROA) and market-based measures such as Tobin’sQas proxies for corporate financial performance.FindingsThe study found that board size both in term of Tobin’sQand ROA has a negative relationship with the performance of family firms. In non-family firms, there is no systematic relationship with corporate performance. There is a strong relationship between corporate performance and independent directors in non-family firms. In addition, the authors found some evidence for a relationship between performance and independent directors in family firms. Also, results indicated that ownership concentration has an insignificant correlation with corporate performance and in family firms has a negative and significant correlation with Tobin’sQ. There is a significant relationship between local investors’ ownership and corporate performance as measured by Tobin’sQin family and non-family firms.Originality/valueStudies concerned with the effect of corporate governance on firm performance remains comparatively under-researched in Middle East countries and Jordan in particular (Najib, 2007; Omet, 2004; Marashdeh, 2014). Moreover, studies investigating whether the practice of corporate governance has the same impact on family firm performance are still relatively less well known than those when ownership is distributed widely (non-family firms) (Jaggi, Leung and Gul, 2009; Prencipe and Bar-Yosef, 2011). This research is seeking to fill this current gap in Jordan, which is one of the developing countries with an emerging economics that are very poorly represented in the literature.

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The Effects of Financial Restatement and Corporate Governance Mechanisms on Firm Value

International Journal of Engineering and Advanced Technology - Regular Issue ◽

10.35940/ijeat.f1094.0986s319 ◽

2019 ◽

Vol 8 (6S3) ◽

pp. 513-523

Keyword(s):

Corporate Governance ◽

Firm Value ◽

Negative Impact ◽

Governance Mechanisms ◽

Moderating Variables ◽

Listed Firms ◽

Financial Restatement ◽

Corporate Governance Mechanisms ◽

Financial Restatements ◽

The Relationship

This study examines the relationship between financial restatement and firm value in Malaysian public listed firms. In addition, it assesses the moderating effects provided by corporate governance mechanisms on the relationship of financial restatements and firm value. The study covers the period 2009-2015 and involves 142 public listed companies in Bursa Malaysia with financial restatements. The findings reveal that financial restatements do adversely impact firm value and that financial restatements negatively and significantly affect firm value. In terms of moderating variables, we find that the interaction between financial restatement and family ownership is negatively associated with firm value. In addition, this study also finds that the interaction between financial restatement and institutional ownership is positively and significantly associated with firm value. In conclusion, in the Malaysian context, this study establishes that financial restatement has a negative impact on firm value

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The Effects of Financial Restatement and Corporate Governance Mechanisms on Firm Value

International Journal of Engineering and Advanced Technology - Regular Issue ◽

10.35940/ijeat.f1126.0986s319 ◽

2019 ◽

Vol 8 (6S3) ◽

pp. 683-692

Keyword(s):

Corporate Governance ◽

Firm Value ◽

Negative Impact ◽

Governance Mechanisms ◽

Moderating Variables ◽

Listed Firms ◽

Financial Restatement ◽

Corporate Governance Mechanisms ◽

Financial Restatements ◽

The Relationship

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The effect of financial and non-financial performance on investors’ reactions: The role of corporate governance mechanisms as moderating

International Journal of Research in Business and Social Science (2147-4478) ◽

10.20525/ijrbs.v10i8.1501 ◽

2022 ◽

Vol 10 (8) ◽

pp. 47-56

Author(s):

Intadaviqotul Minakh ◽

Erwin Saraswati ◽

Abdul Ghofar

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Boards Of Directors ◽

Audit Committee ◽

Institutional Ownership ◽

Audit Committees ◽

Governance Mechanisms ◽

Corporate Governance Mechanisms ◽

The Relationship

The purpose of this study is to examine the effect of financial and non-financial performance on investor reactions and the role of corporate governance mechanisms as moderating. The analysis technique used is the moderated regression analysis (MRA). The research population is manufacturing sector companies listed on the Indonesia Stock Exchange (IDX). Based on the purposive sampling method, 78 companies were selected as the samples (390 firm-year observations). The results of this study provide empirical evidence that the existence of financial and non-financial performance in a company can increase investor reactions. Institutional ownership plays a role in the relationship between financial performance and investor reactions. Meanwhile, independent commissioners, boards of directors, and audit committees have no role in the relationship between financial performance and investor reactions. And independent commissioners and institutional ownership can moderate the influence of non-financial performance on investor reactions. Meanwhile, the board of directors and audit committee cannot moderate the influence of non-financial performance on investor reactions.

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Corporate governance and conglomerate diversification strategy – evidence from Vietnam

International Journal of Emerging Markets ◽

10.1108/ijoem-10-2016-0260 ◽

2018 ◽

Vol 13 (6) ◽

pp. 1578-1596 ◽

Cited By ~ 3

Author(s):

Thi Xuan Trang Nguyen

Keyword(s):

Corporate Governance ◽

Stock Exchange ◽

Board Composition ◽

Governance Mechanisms ◽

Content Type ◽

Unrelated Diversification ◽

Corporate Governance Mechanisms ◽

Control Devices ◽

Interest Alignment ◽

The Relationship

Purpose The purpose of this paper is to examine the impact of internal corporate governance mechanisms, including interest alignment and control devices, on the unrelated diversification level in Vietnam. Additionally, the moderation of free cash flow (FCF) on these relationships is also tested. Design/methodology/approach The study is based on a balanced panel data set of 70 listed companies in both stock markets, Ho Chi Minh Stock Exchange and Hanoi Stock Exchange, in Vietnam for the years 2007–2014, which gives 560 observations in total. Findings The results show that if executive ownership for CEOs is increased, then the extent of diversification is likely to be reduced. However, the link between unrelated diversification level and executive stock option, another interest alignment device, cannot be confirmed. Among three control devices (level of blockholder ownership, board composition and separation of CEO and chairman positions), the study finds a positive connection between diversification and blockholder ownership, and statistically insignificant relations between the conglomerate diversification level and board composition, or CEO duality. Additionally, this study discovers a negative link between diversification and state ownership, although there is no evidence to support the change to the effect of each internal corporate governance mechanism on the diversification level of a firm between high and low FCF. Practical implications The research can be a useful reference not only for investors and managers but also for policy makers in Vietnam. This study explores the relationship among corporate governance, diversification and firm value in Vietnam, where the topics related to effectiveness of corporate governance mechanisms to public companies has been increasingly attractive to researchers since the default of Vietnam Shipbuilding Industry Group (Vinashin) happened in 2010 and the Circular No. 121/2012/TT-BTC on 26 July 2012 of the Vietnamese Ministry of Finance was issued with regulations on corporate governance applicable to listed firms in this country. Originality/value This research, first, enriches current literature on the relationship between corporate governance and firm diversification. It can be considered as a contribution to the related topic with an example of Vietnam, a developing country in Asia. Second, the research continues to prove non-unification in results showing the relationship between corporate governance and conglomerate diversification among different nations. Third, it provides a potential input for future research works on the moderation of FCF to the effects of corporate governance on diversification.

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Do Multinational Companies Practice Good Corporate Governance? Empirical Evidence from Bangladesh

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v7i2.11843 ◽

2017 ◽

Vol 7 (2) ◽

pp. 96

Author(s):

G. M. Wali Ullah ◽

Sarwar Uddin Ahmed ◽

Samiul Parvez Ahmed ◽

Kazi Md. Jamshed

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Stock Returns ◽

Governance Structure ◽

Multinational Companies ◽

Governance Mechanisms ◽

Corporate Governance Structure ◽

Corporate Governance Mechanisms ◽

The Impact ◽

The Way

Corporate Governance refers to the way an organization is directed, administrated or controlled. It includes the set of rules and regulations that affect the manager's decision and contribute to the way company is perceived by the current and potential stakeholders. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation such as; boards, managers, shareholders and other stakeholders and spells out the rules and procedures and also decision-making assistance on corporate affairs. Corporate governance practices in Bangladesh are gradually being introduced in most companies and organizations (Du, 2006). However, Bangladesh has fallen behind its neighboring countries and global economy in corporate governance (Gillibrand, 2004). Corporate governance structure is mainly considered ambiguous. Specific governance structures or practices will not necessarily fit all companies at all times. Firms with strong corporate governance mechanisms are generally associated with better financial performance, higher firm valuation and higher stock returns. Unfortunately, investors in Bangladesh have a little information about how these corporate values affect the performance of the Multinational Companies (MNCs). This study aims to provide a quantitative contribution to the literature by examining the impact of corporate governance mechanisms on financial performance from the perspective of MNCs. A panel data based Ordinary Least Squared (OLS) regression model was used to measure the quantitative significance of various corporate governance related variables on MNC performance, as identified through a detailed literature review.

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