The effect of corporate governance on bank financial performance: evidence from the Arabian Peninsula

This paper investigates the effect of internal corporate governance mechanisms and control variables, such as bank size and bank age on bank financial performance. The sample of this study comprises of both conventional and Islamic banks operating in the seven Arabian Peninsula countries, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, and Yemen. Regression analysis (OLS) is used to test the effect of corporate governance mechanisms on bank financial performance. The results of this study reveal that there is a significant relationship between corporate governance and bank profitability. Board size, board activism, number of outside directors, and bank age significantly affect Tobin’s Q. Meanwhile, ROA and PM are affected by ownership concentration, audit committee, audit committee meetings, and the age & size of the bank. The results are consistent with previous literature that the correlation between corporate governance and firm performance is still not clearly established and that impact of corporate governance on bank financial performance in developing countries is still relatively limited.

Download Full-text

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.

Download Full-text

The effect of characteristics of audit committee and board on corporate profitability in Iran

Journal of Economic and Administrative Sciences ◽

10.1108/jeas-04-2017-0017 ◽

2018 ◽

Vol 34 (1) ◽

pp. 71-88 ◽

Cited By ~ 3

Author(s):

Mahdi Salehi ◽

Mohammad Tahervafaei ◽

Hossein Tarighi

Keyword(s):

Corporate Governance ◽

Audit Committee ◽

Stock Exchange ◽

Emerging Market ◽

Board Independence ◽

Outside Directors ◽

Governance Mechanisms ◽

Content Type ◽

Corporate Governance Mechanisms

Purpose The purpose of this paper is to evaluate the relationship between the characteristics of the audit committee and the board and profitability among the companies listed on the Tehran Stock Exchange (TSE) in Iran. Design/methodology/approach In this study, the companies listed on the TSE during the period from 2010 to 2015 are investigated. The Linear panel regression method is employed for this purpose. The independent variables of the study are composed of some corporate governance mechanisms including audit committee size, audit committee expertise, board size, board independence, chief executive officer (CEO) duality, and institutional ownership. Findings In spite of the fact that there does not exist any significant association between audit committee size and corporate financial performance, the results indicate that there is a positive and significant relationship between audit committee financial expertise and profitability. The authors found that the number of board members cannot affect corporate performance; moreover, duality of CEO role in Iranian companies does not affect company performance. However, the outcomes showed a positive and significant association between the proportion of outside directors on the board (board independence) and profitability at 99 percent confidence level. This implies that the role of non-executive directors in Iran is inconsistent with the stewardship theory. This is due to the fact that independent directors understand the status of business and market better than the board’s executive members. Finally, the results indicated that there is no significant association between institutional owners and Iranian companies’ performance. Practical implications The findings of this study will reveal more than ever the role of corporate governance mechanisms for society and users of financial statements because as tools on the CEO actions, they always have to pay attention to the implementation of corporate principles in the economic entity’ operation. Originality/value This is one of the most important studies that simultaneously examine the impacts of characteristics of the audit committee and the board on profitability in an emerging market, and the results of the study may give strength to Iranian as well other developing countries.

Download Full-text

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.

Download Full-text

Does audit committee substitute or complement other corporate governance mechanisms

Managerial Auditing Journal ◽

10.1108/maj-08-2016-1423 ◽

2017 ◽

Vol 32 (7) ◽

pp. 658-681 ◽

Cited By ~ 7

Author(s):

Yousef Hassan ◽

Rafiq Hijazi ◽

Kamal Naser

Keyword(s):

Corporate Governance ◽

Ownership Structure ◽

Audit Committee ◽

Negative Relationship ◽

Governance Mechanisms ◽

Governance System ◽

African Countries ◽

Content Type ◽

Board Characteristics ◽

Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies. Design/methodology/approach Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability. Findings While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations. Research limitations/implications The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system. Originality/value To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

Download Full-text

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.

Download Full-text

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.

Download Full-text

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

Journal of Business Systems Governance & Ethics ◽

10.15209/jbsge.v9i2.716 ◽

2014 ◽

Vol 9 (2) ◽

Cited By ~ 2

Author(s):

Yongqiang Li ◽

Anona Armstrong ◽

Andrew Clarke

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Structural Equation ◽

Small Firms ◽

Negative Impact ◽

Governance Mechanisms ◽

Latent Constructs ◽

Equation Modelling ◽

Corporate Governance Mechanisms ◽

The Relationship

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.

Download Full-text

Pengaruh Ukuran Perusahaan Dan Corporate Governance Terhadap Manajemen Laba Di Industri Perbankan Indonesia

Jurnal Ilmiah Akuntansi Kesatuan ◽

10.37641/jiakes.v9i1.487 ◽

2021 ◽

Vol 9 (1) ◽

pp. 111-120

Author(s):

Karina Karina ◽

Sutarti Sutarti

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Audit Committee ◽

Banking Sector ◽

Audit Quality ◽

Stock Exchange ◽

Governance Mechanisms ◽

Audit Firm ◽

Corporate Governance Mechanisms ◽

Size Firm

The purpose of this research is to provide empirical evidence of the affect of ownership concetration, firms size, and corporate governance mechanisms on earnings management. Ownership concetration was measure by the biggest stock of individual or organization, firms size was measure by natural logaritma of net assets, and corporate governance mechanisms were measure by three variabels (composition of board of commisioner, audit quality were measure by industry specialize audit firm, and composition of audit committee). Earnings management was measure by discretionary accruals use Modified Jones Method. The population of this research is 41 companies in the banking sector which were listed in Indonesian Stock Exchange (IDX). The research data were collected from banking companies financial statement for the period of 2016 to 2018. Based on purposive sampling method. The reseacrh hypotesis were tested using multiple regression analysis. The results of this research show that firm size, firm of commissioner and proportion of commissioner have significant relationships with earnings management. Next, variables composition of board of commissioner, ownership concetration and specialize audit firm have no significant relationship with earnings management. Keywords: ownership concetration, firms size, corporate governance, earnings management

Download Full-text

Are Corporate Governance Mechanisms, Corporate Strategy, and Corporate Financial Characteristics Related to Earnings Management?

Summer - GATR Journal of Finance and Banking Review ◽

10.35609/jfbr.2020.5.2(2) ◽

2020 ◽

Vol 5 (2) ◽

pp. 48-57

Author(s):

Clarissa Tonay ◽

Paulina Sutrisno

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Cash Flow ◽

Audit Committee ◽

Corporate Strategy ◽

Governance Mechanisms ◽

Corporate Governance Mechanisms ◽

Operating Cash Flow ◽

Financial Characteristics ◽

Company Growth

Objective – This study aims to examine the effect of corporate governance and several factors of corporate financial characteristics on earnings management. Corporate governance mechanisms such as an independent board, board size, and audit committee size are expected to be able to limit the ability of management to carry out earnings management. Meanwhile, a company's financial characteristics such as corporate strategy, company age, operating cash flow, company growth, profitability, company size and leverage are predicted to affect earnings management. Methodology/Technique – Many previous studies have involved the examination of corporate governance mechanisms and corporate financial characteristics of earnings management however, the results of those studies give rise to inconsistencies. Hence, this study seeks to re-examine the existence of corporate governance mechanisms and corporate financial characteristics of earnings management. The sample in this research is non-financial companies listed on the Indonesian Stock Exchange between 2016 and 2018. Findings – This data in this study is analysed using statistical methods such as multiple regression linear. The results of this study indicate that one mechanism of corporate governance, the size of the audit committee, has a positive effect on earnings management, while the financial characteristics of companies such as company size and operating cash flow negatively affect earnings management. Novelty – Other corporate financial characteristics such as corporate strategy, company age, operating cash flow, and profitability have a positive effect on earnings management. Meanwhile, the other variables such as board size, leverage, and company growth do not have an influence on earnings management. Type of Paper: Empirical. JEL Classification: G3, G34, G39. Keywords: Earnings Management; Corporate Strategy; Audit Committee Size; Company Age; Operating Cash Flows. Reference to this paper should be made as follows: Tonay, C; Sutrisno, P. 2020. Are Corporate Governance Mechanisms, Corporate Strategy, and Corporate Financial Characteristics Related to Earnings Management? J. Fin. Bank. Review, 5 (2): 48 – 57 https://doi.org/10.35609/jfbr.2020.5.2(2)

Download Full-text

The Effect of Corporate Governance on Auditor-Client Realignments

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-10240 ◽

2012 ◽

Vol 31 (2) ◽

pp. 167-188 ◽

Cited By ~ 39

Author(s):

Cory A. Cassell ◽

Gary A. Giroux ◽

Linda A. Myers ◽

Thomas C. Omer

Keyword(s):

Corporate Governance ◽

Audit Committee ◽

Data Availability ◽

Governance Mechanisms ◽

Portfolio Decisions ◽

Audit Market ◽

Sarbanes Oxley ◽

Corporate Governance Mechanisms ◽

Audit Firms ◽

Governance Index

SUMMARY Events leading up to the implementation of the Sarbanes-Oxley Act of 2002 (SOX) increased the public's focus on corporate governance and increased regulatory scrutiny of corporate governance mechanisms. These events also contributed to a massive restructuring in the audit market that resulted in the transfer of a large number of clients from Big N to non-Big N audit firms. We extend prior research examining the determinants of auditor-client realignments by investigating the effect of corporate governance on downward (i.e., from Big N to non-Big N auditors) switching activity. We develop a corporate governance index comprised of governance characteristics that we expect auditors to find more desirable in their clients (specifically, board and audit committee independence, diligence, and expertise). The results suggest that Big N auditors consider client corporate governance mechanisms when making client portfolio decisions. Specifically, downward auditor-client realignments are more likely for clients that score lower on our corporate governance index. However, the influence of audit committee-related corporate governance components on downward auditor-client realignments decreased post-SOX. The reduced effect of audit committee-related corporate governance components is consistent with what would be expected if the audit committee-related rules imposed by SOX reduced the variation in audit committee quality across clients. Data Availability: The data used are publicly available from the sources cited in the text.

Download Full-text