scholarly journals Chinese CEO, Risk Taking and the Power of CEO: Empirical Evidence from Malaysian Family Firms

2021 ◽  
Vol 58 (1) ◽  
pp. 59-84
Author(s):  
Swee-Sim Foong ◽  
Jiunn-Shyan Khong ◽  
Boon-Leong Lim
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Risk Taking ◽  
Lower Risk ◽  
Family Firms ◽  
Independent Directors ◽  
Ceo Power ◽  
Structural Power ◽  
Expert Power

This paper examines the risk taking behaviour of Chinese CEO. Our analysis is based on a sample of 362 family firms in Malaysia over the 2009-2015 period using panel GMM methodology. Firstly, our results offer evidence that Chinese CEOs are risk taking. We then examine how CEO power, in the context of Finkelstein’s (1992) structural power, ownership power, expert power and prestige power, might drive risk taking of Chinese CEOs. The results are rather mixed where greater ownership power is likely to promote higher risk taking but greater expert power resulted in lower risk taking. We further show that corporate governance can mitigate risk taking of Chinese CEO in family firms. When the proportions of independent directors and foreign institutional shareholdings exceed the median thresholds of 40% and 5%, respectively, we find that CEO risk taking behaviour turns from positive to negative. Stronger evidence is found when we adjust the thresholds to the 75th percentile of 50% and 15%, respectively. The result is also robust with the use of leverage as a measure for CEO risk taking.

scholarly journals Do families shape corporate governance structures?

2009 ◽  
Vol 15 (3) ◽  
pp. 327-345 ◽  
Author(s):  
María Sacristán Navarro ◽  
Silvia Gómez Ansón
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Family Firms ◽  
Family Firm ◽  
Family Ownership ◽  
Governance Structures ◽  
Listed Firms ◽  
Board Committees ◽  
Spanish Family ◽  
Open Question

AbstractThis paper provides empirical evidence of family firm corporate governance structures, by examining a set of corporate governance characteristics of 132 non-financial Spanish listed firms. Results show that family firm boards present differential characteristics and that different patterns of family ownership configurations do not affect family firm corporate governance structures. We find that Spanish family firm boards are smaller than those in non-family firms. Family firm directors own a larger fraction of firm shares and have longer Chairman tenure than non-family firms, and family firms use fewer voluntary board committees – such as nomination and remuneration committees and executive committees. Besides, family firm boards and committees are biased towards insiders. Whether these differential characteristics affect other minority non-family shareholders negatively remains an open question.

scholarly journals CEO power and bank risk in the UAE

2020 ◽  
Vol 15 (3) ◽  
pp. 117-128
Author(s):  
Haileslasie Tadele ◽  
Baliira Kalyebara
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Global Financial Crisis ◽  
Bank Risk ◽  
Islamic Banks ◽  
Ceo Power ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Conventional Banks ◽  
The Relationship

The lessons from the 2008 global financial crisis show that excessive risk taking and governance failures contribute to the failure of several banks. As a result, the relationship between corporate governance mechanisms and risk taking has been the subject of many studies. However, extant studies report inconclusive results. Therefore, this study aims to investigate the relationship between CEO power and bank risk in the UAE using data over the period of 2015–2018 and a sample of 19 UAE banks. The study uses a Pearson pairwise correlation to analyze the relationship between CEO power and bank risk. In addition, a two-tailed t-test is used to examine the differences between conventional and Islamic banks in terms of CEO power and risk-taking. The results of the study show that CEO power measured using CEO duality and CEO tenure reduces risk. Furthermore, the paper indicates that larger boards and higher CEO ownership tend to increase risk. The study also reports that conventional banks have higher return variability, larger boards and powerful CEOs than Islamic banks. However, Islamic banks tend to have higher non-performing finances than conventional banks. The study provides important insights on the relationship between CEO power and bank risk and concurs with earlier studies. The findings can be of interest to policy makers and can be used as input data for the development of corporate governance mechanisms. Shareholders can also use the survey results as input when appointing a CEO for their banks.

scholarly journals CORPORATE GOVERNANCE AND FINANCIAL CONSTRAINTS IN FAMILY CONTROLLED FIRMS: EVIDENCE FROM MALAYSIA

2017 ◽  
Vol 17 (3) ◽  
Author(s):  
Ei-Yet Chu ◽  
Tian-So Lai ◽  
Saw-Imm Song
Keyword(s):  
Corporate Governance ◽  
Capital Markets ◽  
Financial Constraints ◽  
Family Firms ◽  
Independent Directors ◽  
Equity Financing ◽  
Ceo Duality ◽  
Investment Opportunities ◽  
Internal Capital ◽  
External Capital

The hypothesis of financial constraints suggests that firms will be denied profitable investment dueto inaccessible to external capital markets as debt and equity financing are no longer perfectsubstitutions after firms utilize internal capital. In view of reduced investments during globalfinancial crisis in 2008-2009, the study investigates 157 firms, whether they face the issues offinancial constraints in Malaysia. In general, non-family firms rely heavily on the external debtmarket while family controlled firms utilizing internal cash and reducing their dependence on debtmarket for their investments, confirming financial constraints in family firms. However, thepresence of CEO duality does not exaggerate the problem of financial constraints, but rather leadsfamily firms to become stagnant in their investments. Independent directors appear to beineffective in governing family firms in issuing finances for investment. Apparently, their presencein family firms reduces firms’ investment opportunities either through internal cash and externaldebt financing, which could reduce shareholders’ value in the long-term.Keywords: Investments; Financial Constraints; Corporate Governance; Duality; IndependentDirector; Family Controlled firms.

Powerful CEOs and earnings quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shin-Rong Shiah-Hou
Keyword(s):  
Earnings Quality ◽  
Composite Index ◽  
Information Environment ◽  
Ceo Power ◽  
Structural Power ◽  
Content Type ◽  
Earnings Response Coefficient ◽  
Expert Power ◽  
Earnings Response ◽  
Ceo Characteristics

PurposeThis study explores the effect of CEO power on earnings quality. If powerful CEOs make the information environment more opaque, they can easily conceal information to hide self-dealing behavior through earnings manipulation. Conversely, if powerful CEOs who are well-protected create a transparent information environment, they will provide better quality earnings.Design/methodology/approachThe author constructs a composite index for CEO power by combining seven CEO characteristics and employs two variables including discretionary accruals and earnings response coefficient as proxies for earnings quality.FindingsThe author’s main results show a significant negative relation between CEO power and the firm's earnings quality. In addition, CEOs with stronger structural power and expert power are more likely to generate lower earnings quality, while those with stronger ownership power are more likely to provide higher earnings quality.Originality/valueThe findings suggest that CEO power reduces the firm's earnings quality because CEOs with structural power or expert power may destroy governance monitoring mechanisms.

Corporate governance, firm performance, and business group affiliation: evidence from India

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Neeti Khetarpal Sanan ◽  
Dinesh Jaisinghani ◽  
Sangeeta Yadav
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Empirical Evidence ◽  
Emerging Economies ◽  
Chief Executive ◽  
Business Group ◽  
Independent Directors ◽  
Group Affiliation ◽  
Content Type ◽  
Business Group Affiliation

Purpose The purpose of this paper is to investigate whether, in emerging economies, the relationship between a firm’s corporate governance (CG) and its performance is associated with firm’s affiliation to a business group. Design/methodology/approach A total of 209 publicly listed firms in India during a 10-year period from 2007 to 2016 were studied, and the random effects model was employed for analysis. Findings Empirical evidence showed that board size and institutional shareholding positively impacted firm performance, whereas the proportion of independent directors negatively impacted performance. In group-affiliated firms in emerging economies, chief executive officer duality negatively impacted, whereas institutional shareholding positively impacted performance. These results are consistent with the principal–principal agency theory. The study found no discernible impact of proportion of independent directors on firm performance in group-affiliated firms. Originality/value In analyzing the governance–performance relationship and its association with business groups, this study extends current understanding by connecting business group research in emerging economies with CG and firm performance research. In examining firms from several industries over a long period of time after controlling for firm size, capital structure and spends on research and development and marketing, the results of this study offer rich empirical evidence that contributes to the extant literature on the nature of the governance–performance relationship.

scholarly journals Underpricing and corporate governance－Evidence from Taiwan securities market

2007 ◽  
Vol 4 (2) ◽  
pp. 69-73 ◽  
Author(s):  
Tzong-Huei Lin
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Initial Public Offerings ◽  
Negative Relationship ◽  
Independent Directors ◽  
Governance Reform ◽  
Public Offerings ◽  
The Government ◽  
Using Data ◽  
Set Up

To enhance the corporate governance of listed firms, Taiwan prescribes that the initial public offerings (IPOs) after February 19, 2002, have to set up at least two independent directors and one independent supervisor who posses financial or accounting expertise. The corporate governance reform of Taiwan offers an opportunity to investigate the effect of corporate governance on IPOs market. Using data from Taiwan’s initial public offerings (IPOs), this study documents evidence that the magnitudes of under-pricings of IPOs after 2002 are significantly smaller than those of before. This shows that the corporate governance can reduce the investors’ uncertainty about the IPOs. The empirical evidence also indicates that the percentage of shares holdings owned by directors/supervisors is demonstrated to have negative relationship with the underpricing of the IPOs. This study contributes to the literature in the following ways. First, as Ritter and Welch (2002) suggest that future progress in the IPO underpricing literature will mainly come from agency conflict explanation, this study provides evidence about the effect of corporate governance on IPOs market. Second, as for the issue about the policy implication of the SFB 2002’ rules, this study provides the empirical evidence. Third, whether the government should prescribe the firms to set up independent directors? This study offers a direction for future discussion.

Corporate governance and risk-taking of Islamic banks: evidence from OIC countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ejaz Aslam ◽  
Razali Haron
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Audit Committee ◽  
Liquidity Risk ◽  
Bank Risk ◽  
Board Independence ◽  
Islamic Banks ◽  
Ceo Power ◽  
Content Type ◽  
Level Of Risk

Purpose This paper aims to investigate the impact of corporate governance and other related factors on the risk-taking of Islamic banks. Risk-taking is defined according to credit risk, liquidity risk and operational risk. Design/methodology/approach The study uses the two step system generalized method of moment (2SYS-GMM) estimation technique by using a panel data set of 129 Islamic banks (IBs) from 29 countries in the Middle East, South Asia and the Southeast Asia regions covering from 2008 to 2017. Governance variables incorporated include board size, board independence, chief executive officer (CEO) power, Shariah board and audit committee, as well as other control variables. Findings This study provides evidence that board size and Shariah board are positively and significantly related to credit and liquidity risk. Board independence and CEO power are negative and significantly associated with credit and liquidity risk, but the audit committee has a mixed relationship with bank risk. Male CEOs take more risk compared to the female and more board meeting has an inverse relationship with Islamic banks risk. Bank size, however, does not influence the level of risk in Islamic banks, but leverage has an inverse relationship with bank risk. Research limitations/implications The present study sheds light on the risk-taking behaviour of the board of IBs, particularly the board independence and CEO power reducing the level of risk in IBs thereby contributing to the agency theory. Therefore, regulators and policymakers can use the findings of this study to strengthen the internal corporate governance mechanism to protect IBs at a time of financial distress. Moreover, it increases the trust of the shareholders and stakeholders in the effectiveness of governance reforms that have been pursued to reap long-term benefits. Originality/value To the best of the knowledge, this research is preliminary in examining the board behaviour on risk-taking of IBs from four different regions. The results are robust and suggest that the board of directors mitigate the level of risk in IBs.

scholarly journals The relationship between corporate governance and financial performance

2019 ◽  
Vol 9 (1) ◽  
pp. 54-78 ◽  
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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