Relationship Between Free Cash Flows and Corporate Governance Levels in the Light of Agency Theory

This research analyzes the relationship between free cash flows (FCFs) and the different levels of Corporate Governance present in the Brazilian stock market. To this end, the sample was composed of 212 Brazilian publicly traded companies listed on Brasil, Bolsa, Balcão [B]³, in the period from 2010 to 2018. The methodology consisted of estimating a regression for panel data, using the random effects model, estimating by generalized least square (GLS) and assuming adjustments for autocorrelation and robust standard errors for heteroscedasticity. The results found, for the sample studied, suggest that Corporate Governance levels are positively related to the FCFs. In synergy, when compared to the Traditional level of [B]³, companies listed on the Novo Mercado and Level 2 levels tend to present higher FCF values. In addition, the larger the size of the companies and the higher their return on equity, the higher their FCFs tend to be, just as companies in stages of maturity tend to present lower FCF values. The relevance of this research is based on analyzing, in a stock market subject to imperfections, factors that may affect decisions about the level of cash maintenance of companies, more specifically by evaluating how Corporate Governance mechanisms relate to the theory of FCFs, in a context of potential conflict of interest.

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Corporate governance mechanisms for publicly-traded companies

Corporate Ownership and Control ◽

10.22495/cocv5i4c2p4 ◽

2008 ◽

Vol 5 (4) ◽

pp. 309-314 ◽

Cited By ~ 2

Author(s):

Sean M. Hennessey

Keyword(s):

Corporate Governance ◽

Board Of Directors ◽

Best Interests ◽

Minimal Cost ◽

Publicly Traded ◽

Senior Managers ◽

Compensation Plans ◽

Publicly Traded Companies ◽

Corporate Governance Mechanisms ◽

The Board Of Directors

The resolution of conflicts between shareholders and managers, at minimal cost, is the goal of corporate governance. This paper discusses four mechanisms, two internal, two external, that attempt to ensure managers act in the best interests of shareholders: 1) the board of directors, 2) management compensation plans, 3) the market, and 4) takeovers. Theoretically, these four forms of corporate governance should ensure management maximizes shareholder value. But, agency costs are real for shareholders. In practice each the mechanisms may be severely limited in their ability to protect shareholders. The best protection is an independent, credible board of directors. Without good boards, shareholders are left to the mercy of the agents. In such cases, it is very difficult, and expensive, to discipline the senior managers of a publicly-traded company

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Corporate Governance and Firm Performance: A Study of High Agency Costs of Free Cash Flow Firms

JOURNAL OF SOCIAL SCIENCE RESEARCH ◽

10.24297/jssr.v12i2.7533 ◽

2018 ◽

Vol 12 (2) ◽

pp. 2724-2731

Author(s):

Dan Lin ◽

Lu Lin

Keyword(s):

Corporate Governance ◽

Firm Performance ◽

Cash Flow ◽

Agency Costs ◽

Composite Index ◽

Cash Flows ◽

Free Cash Flow ◽

Return On Equity ◽

Free Cash Flow Hypothesis ◽

Free Cash Flows

Excessive free cash flows can lead to high agency problems as retaining free cash flow reduces the ability of capital market to monitor managers. Managers are also likely to waste the free cash flow on value-decreasing investments. Based on the free cash flow hypothesis, this study examines the relationship between corporate governance and firm performance of a sample of high agency costs of free cash flow firms, which is defined as firms that have high free cash flow and low investment opportunities. The sample firms are extracted from firms listed on the S&P/TSX composite index between 2009 and 2012. Using corporate governance scores provided by The Globe and Mail, this study finds that better corporate governance is associated with better firm performance, measured by return on equity. The results highlight the importance of corporate governance in protecting shareholders’ interests.

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PENGARUH MEKANISME CORPORATE GOVERNANCE DAN UKURAN PERUSAHAAN TERHADAP KINERJA KEUANGAN (Survei Pada Perusahaan Manufaktur yang terdaftar di BEI )

Jurnal Aplikasi Akuntansi ◽

10.29303/jaa.v2i2.16 ◽

2018 ◽

Vol 2 (2) ◽

pp. 010-031

Author(s):

Animah Animah ◽

Lukman Effendy ◽

Alamsyah M. Thahir ◽

Erna Widiastuty

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Firm Size ◽

Sampling Technique ◽

Partial Least Square ◽

Least Square ◽

Governance Mechanism ◽

Governance Mechanisms ◽

Corporate Governance Mechanisms ◽

Corporate Governance Mechanism

The purpose of this research is to examine the effect of corporate governance mechanisms, firm size of financial performance. The Population of this research is the company manufacturing in BEI. The sampling technique used is purposive sampling. The analytical tool used is using partial least square program. The independent variables in this research are corporate governance mechanism, firm size while the dependent variable is the performance of the financial. The result of the research shows that firm size influence to financial performance, while other variables such as corporate governance mechanisms have no effect negative to financial performance.

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Corporate governance and corporate investment: an exploratory research in the Brazilian publicly traded companies listed in Bovespa

Corporate Ownership and Control ◽

10.22495/cocv9i1c5art4 ◽

2011 ◽

Vol 9 (1) ◽

pp. 545-557

Author(s):

Nádia Sousa ◽

Flávia Zóboli Dalmácio

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Market Value ◽

Institutional Investor ◽

Capital Cost ◽

Exploratory Research ◽

Statistical Relation ◽

Publicly Traded ◽

Publicly Traded Companies ◽

Governance Practices

This paper aims to study the influence of Corporate Governance practices in the institutional decision to invest. It was developed a Governance Index (iGov), a descending rank was prepared and a test was applied to check if the companies in the first 25% of this rank have the highest number of institutional investors among their biggest investors than the companies of the last 25%. For the validation of IGov it was tested if the companies with the best marks present highest Returns, lowest Capital Cost, highest Market Value, and highest Competiveness within the sector, lowest Beta, highest EVA® and lowest Share concentration. It has been proved that the best Corporate Governance practices do not have any statistical relation with the presence of more Institutional Investor.

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CORPORATE GOVERNANCE DAN MANAJEMEN LABA RIIL PERBANKAN ISLAM INDONESIA DAN MALAYSIA

JMM UNRAM - MASTER OF MANAGEMENT JOURNAL ◽

10.29303/jmm.v7i4.344 ◽

2018 ◽

Vol 7 (4) ◽

Author(s):

M. Zubaedy Sy ◽

Nuryati Nuryati ◽

Surifah Surifah

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Audit Committee ◽

Stock Exchange ◽

Cash Flows ◽

Profit Sharing ◽

Least Square ◽

Real Earnings Management ◽

Annual Reports ◽

Islamic Banks

The main objective of this research is to create good corporate governance that is able to restrictopportunistic REM. The specific objectives of this study are 1) to provide evidence of difference inthe practices of CG and REM in Indonesian and Malaysian Islamic banks,and 2) to provide empirical evidence of the influence of CG on the REM of Indonesian and Malaysian Islamic banks. The study was conducted on Indonesian and Malaysian Islamic banks from 2011 to 2016by using purposive samplingmethod. The research data is secondary data in the form of annual reports and financial reports originating from the Indonesian Banking Directory, the Indonesia Stock Exchange and the Malaysia Stock Exchange. The analysis method used to test the differences between CG and real earnings management is the Man Whitney test whilethe method used to test the effect of CG on the REM of Islamic Banks in Indonesia and Malaysia is the multiple regression analysiswithordinary least square. The results show that the practices of corporate governance in Indonesia and Malaysia have their own strengths and weaknesses. CG mechanism of Indonesia and Malaysia shows lower level in some parts and higher level in other parts. Malaysia’s REM islower than Indonesia’sREM through operating cash flow, investment profit sharing, and discretionary costs. The experimental results show that CG generally does not affect real earnings management and only the independent audit committee who is able to restrictreal earnings management through operating cash flows. Riset ini menguji hubungan antara corporate governance (CG) dan manajemen laba berdasar aktivitas riil atau disebut real earnings management (REM) bank-bank Islam di Indonesia dan Malaysia. Tujuan jangka panjang riset ini adalah terciptanya good corporate governace yang mampu membatasi REM oportunistik. Target khusus penelitian ini adalah 1) memberi bukti empiris perbedaan praktik CG dan REM bank Islam Indonesia dan Malaysia. 2) memberi bukti empiris pengaruh CG terhadap REM bank Islam Indonesia dan Malaysia. Metode penelitian menggunakan metode ilmiah - kuantitatif, dengan membangun satu atau lebih hipotesis berdasarkan pada suatu struktur atau kerangka teori dan kemudian menguji hipotesis-hipotesis tersebut secara empiris. Penelitian dilakukan pada bank Islam Indonesia dan Malaysia periode waktu 2011 sampai 2016. Metode pengambilan sampel secara purposive sampling. Data penelitian merupakan data sekunder berupa annual report dan laporan keuangan yang berasal dari Directory Perbankan Indonesia, Bursa Efek Indonesia dan Bursa Efek Malaysia. Teknik analisis untuk menguji perbedaan CG dan manajemen laba riil adalah uji beda Man Whitney, sedangkan untuk menguji pengaruh CG terhadap REM Bank Islam Indonesia dan Malaysia menggunakan analisis regresi berganda ordinary least square. Hasil menunjukkan bahwa praktik corporate governance Negara Indonesia dan Malaysia, masing masing memiliki kelebihan dan kelemahan. Mekanisme CG ada yang lebih rendah, maupun lebih tinggi antara Negara Indonesia dengan Malaysia. REM Malaysia lebih rendah signifikan dari pada Indonesia, baik melalui arus kas operasi, bagi hasil investasi, maupun biaya diskresioner. Hasil uji menunjukkan bahwa pada umumnya mekanisme CG tidak berpengaruh terhadap manajemen laba riil. Hanya Independensi komite audit yang mampu menekan manajemen laba riil melalui arus kas operasi.Keywords:Corporate governance, real earnings management, Islamic banking.

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The impact of ownership type on the relationship between corporate governance and earnings management: An empirical study

Corporate Ownership and Control ◽

10.22495/cocv16i4art3 ◽

2019 ◽

Vol 16 (4) ◽

pp. 31-44

Author(s):

Ahmed Boghdady

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Cash Flows ◽

Real Earnings Management ◽

Ownership Type ◽

Moderation Effect ◽

Corporate Governance Mechanisms ◽

The Impact ◽

The Relationship ◽

Privately Owned

This study investigates the effect of ownership type on the relation between corporate governance and earnings management. While previous literature has mainly examined the relationship between corporate governance and both accrual and real earnings management, no study to date, to the researcher’s best knowledge, focused on the moderation effect of ownership type on this relationship. Three proxies for measuring accrual and real earnings management, namely discretionary accruals (DA), abnormal cash flows (ACFO), and abnormal discretionary expenses (ADISX) are employed. Three empirical models (i.e. DA, ACFO, and ADISX) are developed in which the earnings management proxies represent the dependent variables and are tested using a sample of non-financial companies containing state-owned and privately owned companies over the period from 2010 to 2017, with 1030 firm-year observations. The results show a positive relationship between ownership type and both accruals manipulation and sales manipulation. In general, the results suggest that the ownership type moderates the relationship between corporate governance and earnings management. The results suggest also that corporate governance mechanisms may not play an almost the same role in monitoring and mitigating real earnings management (REM) practices as they do for accrual earnings management (AEM) in Egypt. Moreover, no evidence is found supportive of the trade-off effect which means that managers in Egyptian firms use both types of earnings management jointly to reach the target levels of earnings

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The Effect of Profitability and Financial Leverage on Cost of Debt Moderated Earnings Management

Jurnal Ekonomi ◽

10.24912/je.v26i1.716 ◽

2021 ◽

Vol 26 (1) ◽

pp. 35

Author(s):

Herman Ruslim, Renny Muspyta

Keyword(s):

Earnings Management ◽

Cost Of Debt ◽

Manufacturing Companies ◽

Financial Leverage ◽

Publicly Traded ◽

Return On Equity ◽

Publicly Traded Companies ◽

Negative Effect ◽

The Cost

This study aims to determine the effect of profitability and Financial Leverage on the Cost of Debt, and the role of Earnings Management as a moderating variable. In this study, profitability is measured by the ratio of return on equity, financial leverage is measured by the proxy debt ratio, earnings management as measured by discretionary accruals, and cost of debt is measured by the ratio of interest expense divided by the average total debt. The population in this study are publicly traded companies listed on the IDX, and the sample used is manufacturing companies listed on the IDX for the 2016-2019 period. Based on the purposive sampling method, the samples obtained were 69 manufacturing companies and 276 observations. The results showed that profitability has a negative effect on the cost of debt, while financial leverage has no effect on the cost of debt, earnings management cannot weaken the negative effect of profitability on the cost of debt and earnings management cannot weaken the negative effect of financial leverage on the cost of debt.

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6. Corporate governance—board structure and shareholder engagement

Company Law ◽

10.1093/he/9780198787709.003.0006 ◽

2018 ◽

Author(s):

Brenda Hannigan

Keyword(s):

Corporate Governance ◽

Board Structure ◽

Publicly Traded ◽

Publicly Traded Companies ◽

Board Committees ◽

Shareholder Engagement ◽

Good Corporate Governance ◽

Starting Point ◽

The Uk ◽

And Control

This chapter discusses corporate governance in publicly traded companies with widely dispersed shareholdings. Most shareholders are not involved in the management and control of a company's affairs. Thus, a separation usually develops between those who collectively own the company through their combined shareholdings (the shareholders) and those who manage it (the directors). Problems can arise from this separation of ownership and control as distance from the day-to-day running of the business makes it difficult for shareholders to restrain any managerial excesses. The starting point of good corporate governance is internal mechanisms (such as shareholders' rights and board structures). The discussions cover the UK corporate governance code, corporate governance requirement, board committees, and shareholder engagement.

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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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Executive compensation and board of directors’ disclosure in Canadian publicly-listed corporations

Corporate Ownership and Control ◽

10.22495/cocv10i3c1art3 ◽

2013 ◽

Vol 10 (3) ◽

pp. 188-199 ◽

Cited By ~ 5

Author(s):

Martin Spraggon ◽

Virginia Bodolica ◽

Tor Brodtkorb

Keyword(s):

Corporate Governance ◽

Executive Compensation ◽

Boards Of Directors ◽

Corporate Boards ◽

Publicly Traded ◽

Information Transparency ◽

Publicly Traded Companies ◽

Listed Firms ◽

Reporting Practices ◽

Governance Regime

This article contributes to the growing body of literature exploring the important role that information transparency plays in strengthening the national corporate governance regime. We review the 2007 amendments to the Canadian reporting legislation with the particular emphasis on sections pertaining to executive compensation and boards of directors. Taking into consideration the specificities of the „comply-or-explain‟ system in Canada, we seek to uncover the extent to which publicly-listed firms comply with these newly amended standards of corporate governance reporting. Based on a comparison of 403 proxy circulars issued in the post-amendment period, we identified important cross-firm variations in the type and format of disclosed information on executive compensation and corporate boards of directors. In order to address the problems that inter-organizational disclosure discrepancies generate for governance researchers and analysts, we provide several recommendations on how Canadian publicly-traded companies can improve their reporting practices

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