scholarly journals Contemporary financial reporting and intangible resources: Implications for corporate governance

2019 ◽  
Vol 3 (1) ◽  
pp. 39-47 ◽  
Author(s):  
Hugh Grove ◽  
Mac Clouse
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Brand Names ◽  
Share Price ◽  
Short Term ◽  
Wall Street ◽  
Intangible Resources ◽  
Corporate Executives ◽  
Global Brand

The key question of this paper is what are the implications for corporate governance from the emergence of contemporary financial reporting and intangible resources? Going beyond traditional financial reporting, Boards of Directors and corporate executives should investigate the intangible resources of contemporary financial reporting. What intangible resources are causing the huge price to earnings (PE) ratio gap and the huge market to book (M/B) ratio gap for their companies? Possibly such gaps are driven by global brand names, global licensing, customer loyalty, product quality, and product innovation. Unfortunately, the short-term focus upon traditional financial reporting by both Wall Street and corporate executives to “make the numbers”, i.e. short-term (quarterly), predicted numbers, has damaged firms’ competitiveness. Such damages include postponing or cutting expenditures on emerging technologies, advertising, research and development, employee training, and maintenance expenses. Research has shown that such earnings management techniques are relatively futile efforts since a consensus earnings miss by a company generally produces an insignificant 1.5% to 2% share price drop. Boards of Directors should inform corporate executives accordingly. To offer solutions to these issues and implications for corporate governance, this paper is divided into the following sections: the emergence of contemporary financial reporting; asset value migration: the power of intangibles; top five future business value drivers: all intangibles; forward looking measures for intangible resources; market gaps: “old economy” versus “new economy” companies; global brands and global licensing; hidden intangible values made visible; international perspectives on contemporary financial reporting; and conclusions.

scholarly journals The influence of the newspaper media on the corporate governance practices of Irish listed PLCs

2010 ◽  
Vol 7 (3) ◽  
pp. 259-274
Author(s):  
Louise Gorman ◽  
Theo Lynn ◽  
Mark Mulgrew
Keyword(s):  
Corporate Governance ◽  
News Media ◽  
Media Coverage ◽  
Boards Of Directors ◽  
Newspaper Coverage ◽  
Share Price ◽  
Shareholder Protection ◽  
Governance Practices ◽  
Company Directors ◽  
Newspaper Articles

While a great deal of research has focused on the factors driving adoption of codes of best practice in corporate governance, only recently has the influence of the news media been considered. Corporate governance literature has largely converged upon internal monitoring and shareholder activist strategies as methods of shareholder protection following the decline of the market for corporate control. Commentators and activists alike have generally neglected the opportunity for an independent party, which watches over the management of companies, to guard shareholders’ interests. Ireland is just one country where the value of media coverage of corporate governance violations to: (i) shareholders, (ii) policymakers and (iii) company directors has not been assessed. This paper investigates the reaction of these groups to newspaper coverage of corporate governance violations so as to determine the influence of the newspaper media on the corporate governance practices of public limited companies (plcs) listed on the Irish Stock Exchange. Using newspaper articles, media activity was analysed and measured in 15 instances of corporate governance violations and the relationships between this activity and the actions and behaviours of investors, policymakers and company directors as indicated by stock market data8, government reports9 and newspaper articles respectively were examined. Evidence from this study suggests that the Irish newspaper media influences (i) the boards of directors of Irish listed plcs, in that subsequent newspaper articles report reformatory measures taken by the boards in the vast majority of companies in the sample; (ii) the government authorities who are responsible for the legislative and regulatory infrastructure in which they operate, with statistical evidence of increases in government attention to corporate governance issues following increased newspaper coverage of theses issues and (iii) the investing decisions of investors in Irish listed plcs, with statistical verification of a relationship between movements in share price and volumes of newspaper articles relating to corporate governance violations by listed companies.

Likely Effects of Stock Exchange Governance Proposals and Sarbanes-Oxley on Corporate Boards and Financial Reporting

2003 ◽  
Vol 17 (4) ◽  
pp. 343-355 ◽  
Author(s):  
April Klein
Keyword(s):  
New York ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Stock Exchange ◽  
Historical Context ◽  
Audit Committees ◽  
Corporate Boards ◽  
Sarbanes Oxley ◽  
Nominating Committees

One of the primary aims of the Sarbanes-Oxley Act of 2002, the New York Stock Exchange, and the NASDAQ corporate governance proposals is to improve the reporting systems for publicly traded companies. Many of the exchange proposals redefine the composition and duties of firms' boards of directors and their compensation and nominating committees. Sarbanes-Oxley places new duties on audit committees and provides oversight and restraints on public accounting companies. This paper describes many of the exchange proposals and puts them in their historical context. I also present the likely effects of the new corporate governance proposals on future boards of directors and assess their impact on the financial reporting system.

Board and audit committee effectiveness in the post-ASX Corporate Governance Principles and Recommendations era

2017 ◽  
Vol 43 (10) ◽  
pp. 1137-1151 ◽  
Author(s):  
Maryam Safari
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Audit Committee ◽  
Management Practices ◽  
Reporting Quality ◽  
Audit Committees ◽  
Content Type ◽  
Aggregate Effect

Purpose The purpose of this paper is to contribute to the corporate governance literature by examining the aggregate effect of board and audit committee characteristics on earnings management practices, particularly in the period following the introduction of the second edition of the Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations. Design/methodology/approach This paper begins by embarking on an extensive review of extant empirical research on boards of directors and audit committees. Then, the paper reports on the use of a quantitative analysis approach to specify the relationship between board and audit committee characteristics (introduced by the ASX Corporate Governance Council) and the level of absolute discretionary accruals as a proxy for earnings management. Findings The findings suggest that greater compliance with board and audit committee principles is linked to lower earnings management, indicating that deliberate structuring of boards and audit committees is an effective approach for enhancing a firm’s financial reporting quality and providing support for the efficacy of the second edition of principles and recommendations related to boards and audit committees suggested by the ASX Corporate Governance Council. Practical implications This study significantly extends the literature and has notable implications for financial reporting regulators, as the findings regarding the monitoring role of boards and audit committees should be beneficial for future revisions of corporate governance principles and recommendations. Originality/value This study focuses on the aggregate effect of board characteristics recommended by the Australian Corporate Governance Council on earnings management practices, and the results support the effectiveness of the board and audit committee characteristics recommended by the ASX Corporate Governance Council. New directions for future improvements to the principles and recommendations are identified.

scholarly journals The role of risk management in corporate governance: Guidelines and applications

2017 ◽  
Vol 7 (4-1) ◽  
pp. 92-99
Author(s):  
Hugh Grove ◽  
Maclyn Clouse
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Boards Of Directors ◽  
Private Equity ◽  
Limited Liability ◽  
Cash Flows ◽  
Financial Statement ◽  
Coverage Ratio

Risk management should be a key concern of board members to enhance corporate governance in any organization. Eleven key numbers, ratios, and models were advocated in this paper for risk management analyses, including an analysis of their variability with graphs. They are applied to Kaisa, a Chinese property developer, located in Shenzhen but incorporated with limited liability in the Cayman Islands. The importance of such risk management analyses was demonstrated in this paper as Kaisa destroyed $12.9 billion in four different types of investments: $2.2 billion in stock market value, $0.3 billion in private equity investments, $2.5 billion in global bonds, and $7.9 billion in Chinese short-term and long-term debt. Thus, the use of key financial statement metrics, including fraud models and ratios, has been shown here to provide enhanced corporate governance with risk management guidelines and applications. Boards of Directors need to pay attention to key financial statement metrics, which have been shown to work over and over again, as with Kaisa in this paper. These key metrics usually start with operating cash flows which then may indicate problems with debt service (the fixed charge coverage ratio) which then may lead to bankruptcy predictions by the Altman bankruptcy model. To cover up such survival problems, companies often resort to earnings management and even fraudulent financial reporting which are typically red flagged by the quality of earnings, the quality of revenues, the new fraud model and the old fraud model.

scholarly journals Corporate governance for trillion dollar opportunities

2017 ◽  
Vol 13 (3) ◽  
pp. 19-27 ◽  
Author(s):  
Hugh Grove ◽  
Maclyn Clouse
Keyword(s):  
Artificial Intelligence ◽  
Corporate Governance ◽  
Big Data ◽  
Boards Of Directors ◽  
Industry 4.0 ◽  
The Internet ◽  
Technological Changes ◽  
Corporate Executives ◽  
Challenges And Opportunities ◽  
The Internet Of Things

Boards of Directors will have to play a key role in the technological survival and development of companies by asking corporate executives about their plans and strategies for these emerging technological changes and challenges. Key challenges and opportunities discussed in this paper, with corresponding corporate governance implications, included Big Data, Artificial Intelligence (AI) with Industry 4.0, AI with the Internet of Things (IoT), Deep Learning, and Neural Networks. Survival should not be the goal, but it may be the necessary first step for today’s companies. Potential winners seizing these trillion dollar opportunities will be company executives and Boards of Directors who can incorporate these technological changes into specific new business models, strategies, and practices. While the awareness on boards regarding risks originating from disruptive innovation, cyber threats and privacy risks has been increasing, Boards of Directors must equally be able to challenge executives and identify opportunities and threats for their companies. This shift for companies is not only about digital technology but also cultural. How can people be managed when digital, virtual ways of working are increasing? What do robotics and Big Data analysis mean for managing people? One way to accelerate the digital learning process has been advocated: the use of digital apprentices for boards. For example, Board Apprentice, a non-profit organization, has already placed digital apprentices on boards for a year-long period (which helps to educate both apprentices and boards) in five different countries. Additional plans and strategies are needed in this age of digitalization and lifelong learning. For example, cybersecurity risks are magnified by all these new technology trends, such as Big Data, AI, Industry 4.0, and IoT. Accordingly, the main findings of this paper are analysing the challenges and opportunities for corporate executives, Boards of Directors, and related corporate governance concerning the driving force of Big Data, Artificial Intelligence with Industry 4.0, Artificial Intelligence with the Internet of Things, Deep Learning, and Neural Networks.

Corporate governance efficiency and internet financial reporting quality

2014 ◽  
Vol 13 (1) ◽  
pp. 43-64 ◽  
Author(s):  
Laurent Botti ◽  
Sabri Boubaker ◽  
Amal Hamrouni ◽  
Bernardin Solonandrasana
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Web Sites ◽  
Boards Of Directors ◽  
Reporting Quality ◽  
Efficiency Frontier ◽  
Content Type ◽  
Listed Firms ◽  
Empirical Results ◽  
Top Executives

Purpose – This paper aims to shed some light on the role of boards of directors in improving internet financial reporting (IFR) quality. Design/methodology/approach – The empirical study uses a data envelopment analysis (DEA) approach on a sample of 32 French firms belonging to the CAC40 index as of December 2007. Findings – The empirical results show that 28 percent of the sample firms are located on the efficiency frontier for all IFR components. These firms' boards of directors and their committees seem to act as effective monitors of top executives, which improves the quality of the firm's disclosure policy through, inter alia, an increase in the level of IFR. Under efficient board control, firms develop user-friendly and readily accessible web sites disclosing the information required by various stakeholders. Additional empirical results show that 46.9 percent of the sample firms lie outside the efficiency frontier for all IFR measures, suggesting inefficiencies in the composition, structure, and/or functioning of their boards of directors. The inefficient monitoring and oversight of top executives by the board allowed for lower levels of IFR quality for nearly half of the CAC40 firms in 2007. Research limitations/implications – The study uses only CAC40 companies, which are relatively large and financially healthier than the average French firms, exhibiting diffuse ownership structures, with heavy foreign shareholding, and investing more in communications. This may limit the generalizability of the results to other French listed firms. Originality/value – The paper extends the literature on corporate governance and voluntary corporate disclosure by investigating the association between board characteristics and IFR quality. It examines the relative performance of the board directors in improving IFR policy.

scholarly journals The new Australian system of corporate governance: Board governance and company performance in a changing corporate governance environment

2019 ◽  
Vol 1 (2) ◽  
pp. 29-41
Author(s):  
Mark Rix
Keyword(s):  
Corporate Governance ◽  
Performance Indicators ◽  
First Century ◽  
Share Price ◽  
Company Performance ◽  
Board Governance ◽  
Short Term ◽  
Public Companies ◽  
Governance Environment ◽  
Board Performance

This paper investigates the changing duties and responsibilities of boards and directors of Australian public companies. The corporate governance environment in Australia is currently going through a period of significant transformation raising the question of whether in this fluid and shifting environment company and board performance can still be assessed largely on the basis of profit, share price and dividends generated over the short term. These almost certainly will continue for some time to be the key metrics of company and board performance and it is hard to see how it could be otherwise. Nevertheless, a growing chorus of influential stakeholders is calling for the introduction of a more balanced and comprehensive suite of performance indicators that better reflect the realities of corporate governance early in the Twenty-first Century. The paper examines how these stakeholders are reshaping corporate governance in Australia and also calling for a reconsideration of the way in which performance is assessed.

scholarly journals Fraudulent financial reporting detection: Corporate governance red flags

2007 ◽  
Vol 4 (4) ◽  
pp. 254-261 ◽  
Author(s):  
Hugh Grove ◽  
Tom Cook
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Control ◽  
Boards Of Directors ◽  
Code Of Ethics ◽  
Audit Committees ◽  
Business Strategies ◽  
Stock Exchanges ◽  
Fraudulent Financial Reporting ◽  
Sarbanes Oxley

The recent fraudulent financial reporting by Enron, Qwest, and other companies was facilitated by poor corporate governance. As shown in this paper, ten timeless factors of corporate governance helped detect such reporting. Weak corporate governance facilitated both classic and recent financial reporting frauds, particularly the following factors: all-powerful CEO, weak system of internal control, focus on short-term performance goals, weak or non-existent code of ethics, and questionable business strategies with opaque disclosures. These factors implied ineffective boards of directors and audit committees. New corporate governance guidelines for boards and audit committees by the U.S. stock exchanges and the Sarbanes-Oxley Act appear to have good potential for strengthening corporate governance to help prevent earnings manipulations and fraudulent financial reporting. These new regulations should continue to strengthen strong corporate governance and control systems, especially in relation to the ten timeless factors for fraudulent financial reporting. If corporate governance guidelines are not followed, then, these stock exchanges can delist the offending companies

scholarly journals The impact of corporate governance on the disclosure level in the interim financial reporting: An empirical study of Vietnamese commercial banks

2021 ◽  
Vol 16 (1) ◽  
pp. 27-35
Author(s):  
Tran Quoc Thinh ◽  
◽  
Dang Anh Tuan ◽  
Le Xuan Thuy ◽  
◽  
...  
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Commercial Banks ◽  
Boards Of Directors ◽  
Time Series Data ◽  
Ordinary Least Squares ◽  
Series Data ◽  
Business Decisions ◽  
Two Factors ◽  
The Impact

The disclosure level in the interim financial reporting is important to users when making business decisions. Useful information from interim financial reporting ensures timeliness and flexibility of business operations. Information disclosures that ensure completeness will enhance the quality of information for users. The paper aims to examine the factors of corporate governance that affect the disclosure level in interim financial reporting of Vietnamese commercial banks. To test the model, ordinary least squares (OLS) are used. For the data of this study, 286 samples of 30 commercial banks were studied and time series data were used for 10 years from 2010 to 2019. The results show that there are two factors that positively influence the disclosure level in interim financial reporting, such as the Board size and foreign Board members. Thus, the paper offers some policy recommendations for the Central bank of Vietnam and Boards of directors of commercial banks, as well as investors to improve disclosure in interim financial reporting.

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