Shareholder Activism, Institutional Shareholders and Agency Problems in Malaysia

2016 ◽  
Vol 4 (3) ◽  
pp. 30-36
Author(s):  
Maizatul Akmal Musa ◽  
Shahril Eashak Ismail
Keyword(s):  
Corporate Governance ◽  
Best Practice ◽  
Emerging Market ◽  
Corporate Sustainability ◽  
Agency Problems ◽  
Shareholder Activism ◽  
Governance Mechanism ◽  
Contributing Factors ◽  
Internal Governance ◽  
Institutional Shareholders

Objective - The aim of this paper is to study the effectiveness of institutional shareholder activism in controlling corporate behaviours in Malaysia. Methodology/Technique - this study is investigated by critical reviewing previously published articles. Findings - Earlier researchers have viewed poor corporate governance as one of the main contributing factors to a major corporate disaster. The best practice of corporate governance suggests that shareholders should actively be engaged and involved with the investee companies to provide check and balance to the governance mechanism. This is particularly crucial for companies with suspicions of poor internal governance. The engagements from shareholders, especially the institutional shareholders in critical areas will give impacts to the governance structures and practices of the companies involved. Institutional shareholders usually have the capability to perform interventions throughout the year, not only limited to annual general meetings. Novelty - This study proved that corporate governance provides a structure to facilitate performance and also to enhance corporate sustainability. Type of Paper - Conceptual Keywords: Shareholder activism; institutional shareholders; corporate governance; Emerging Market; Agency problems.

The Comparison on Corporate Governance between Temasek and State-Owned Companies in China

2014 ◽  
Vol 998-999 ◽  
pp. 1634-1637
Author(s):  
Xu Bei Zhang
Keyword(s):  
Corporate Governance ◽  
Control Method ◽  
Institutional Environment ◽  
Governance Structure ◽  
Governance Mechanism ◽  
Internal Governance ◽  
Professional Managers ◽  
Restraint Mechanism ◽  
Structure State ◽  
Corporate Governance Mechanism

This paper proceeds as follows. Corporate governance, broadly speaking, is a science which studies enterprise power arrangement. In the narrow sense, it belongs to the ownership of enterprises; it is a science which researches how to empower professional managers and to use regulatory authority to their performance of duties. The improvement of the efficiency of the state-controlled corporate governance depends on the choice of corporate governance mechanism. Constrained by the institutional environment, the corporate governance is also affected by the internal governance structure. State-owned enterprises still face great difficulties when they manager to make a clear boundary between the central enterprises and government, separate ownership and management completely, achieve a sound governance structure. Temasek has a high quality management mode. The company special board composition and the control method of the layered progressive and effective restraint mechanism play a key role. State-owned enterprises can learn from Temasek’s experience of corporate governance, and promote the reform of the governance structure, to stimulate the vitality of enterprises.

scholarly journals Corporate Governance Mechanism, Company Size Financial Performance and Sustainability Reporting

2018 ◽  
Vol 7 (4.34) ◽  
pp. 201
Author(s):  
Andhika Ligar Hardika ◽  
Daniel T. H. Manurung ◽  
Yati Mulyati
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Negative Influence ◽  
Company Size ◽  
Governance Mechanism ◽  
Sustainability Reports

The importance of sustainability reporting for companies to be able to know the role of the company in disclosing social responsibility and the implementation of corporate sustainability as a manifestation of corporate governance mechanisms, company size and financial performance. This study uses a stratified random sampling method for companies that have revealed sustainability reports and those that do not disclose sustainability reports. The research method uses logistic regression, with a sample of 13 non-financial companies listed on the Indonesia Stock Exchange. Based on the results obtained, it can be seen that the mechanism of corporate governance consisting of independent commissioner variables has a negative influence on sustainability reporting, institutional ownership variables have a positive influence on sustainability reporting, managerial ownership variables have a negative influence on sustainability reporting, audit committee variables have a negative effect on sustainability reporting, the variable size of the company gives a negative influence on sustainability reporting, and financial performance variables which are leverage variables have a negative influence on sustainability reporting.  

scholarly journals Monitoring intensity, investment inefficiency and institutional shareholders: Evidence from JSE listed companies in South Africa

2021 ◽  
Vol 18 (3) ◽  
pp. 1-15
Author(s):  
Oloyede Obagbuwa ◽  
Farai Kwenda ◽  
Gbenga Wilfred Akinola
Keyword(s):  
South Africa ◽  
Stock Exchange ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Investment Decisions ◽  
Governance Mechanism ◽  
Johannesburg Stock Exchange ◽  
Corporate Decisions ◽  
Corporate Governance Mechanism ◽  
Institutional Shareholders

This study investigates how variation in monitoring intensity affects the efficiency of firms’ investment decisions in an emerging market in South Africa. The study hypothesis argues that the distraction of institutional shareholders has a statistically significant positive effect on corporate investment inefficiency. Using a more robust Generalized Method of Moments (Sys GMM) estimation approach to analyze data collected for firms listed at the Johannesburg Stock Exchange (JSE) for the period 2004–2019, the results showed that the distraction of institutional shareholders has a positive and statistically significant impact on investment inefficiency. That is, when the attention of institutional shareholders is shifted, the intensity of their monitoring drops, and the executive is involved in investment decisions that are not profitable. This insight has an implication for stakeholders and the value-creating corporate governance mechanism. The study concludes that institutional shareholders must always sustain their monitoring intensity to ensure that corporate decisions are consistent with the firm’s value.

scholarly journals THE EFFECT OF INTERNAL GOVERNANCE ON CORPORATE FINANCIAL CRIME OF COMPANIES IN MALAYSIA

2020 ◽  
Vol 2 (2) ◽  
pp. 53-64
Author(s):  
Wan Nailah Abdullah ◽  
Roshima Said ◽  
Kiymet Caliyurt
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Financial Crime ◽  
Managerial Ownership ◽  
Governance Mechanism ◽  
Internal Governance ◽  
Web Based ◽  
Corporate Governance Mechanism ◽  
Risk Committee ◽  
Risk Management Committee

This empirical study proposes to examine one of the main areas in corporate governance i.e., the internal governance factors and their relationship with corporate financial crime and to find out whether their effectiveness as a corporate governance mechanism is still relevant in the prevention of corporate financial crime. The internal governance factors tested in the study are audit diligence, audit size, employee shares option scheme, managerial ownership and stand-alone risk management committee. The research was carried out by using a web-based data collection for corporate financial crime cases. The findings indicate a significant relationship between the existences of a stand-alone risk committee with corporate financial crime incidences. The result of the study serves as an empirical indicator for a firm’s consideration in deciding on the implementation of a stand-alone risk committee from its audit committee. Both the descriptive and correlation analyses produced by this paper provide new insights into the extent of corporate financial crime, as well as the empirical evidence of the effectiveness of having a stand-alone risk committee.

scholarly journals AccountAbility’s AA1000AP standard: a framework for integrating sustainability into organisations

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Bilal Farooq ◽  
Rashid Zaman ◽  
Muhammad Nadeem
Keyword(s):  
Corporate Governance ◽  
New Zealand ◽  
Stakeholder Engagement ◽  
Best Practice ◽  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Structured Interviews ◽  
Senior Managers ◽  
Content Type ◽  
Sustainability Initiatives

Purpose This study aims to evaluate corporate sustainability integration by evaluating corporate practices against the sustainability principles of inclusivity, materiality, responsiveness and impact outlined in AccountAbility’s AA1000 Accountability Principles (AA1000AP) standard. Design/methodology/approach Data comprise 12 semi-structured interviews with senior managers of listed New Zealand companies. Findings are evaluated against AccountAbility’s principles of inclusivity, materiality, responsiveness and impact, which are based on a normative view of stakeholder theory. Findings In terms of inclusivity, stakeholder engagement is primarily monologic and is directed more towards traditional stakeholder groups. However, social media, which is gaining popularity, has the potential to facilitate greater dialogic stakeholder engagement. While most companies undertake a materiality assessment (with varying degrees of rigour) to support sustainability reporting, only some use it to drive planning and decision-making. Companies demonstrate responsiveness to stakeholder concerns through corporate governance and sustainability initiatives. Companies are monitoring and measuring their impact on stakeholders using sustainability key performance indicators (KPIs). However, measuring traditional metrics is easier than measuring areas such as the community. In rare instances, the executive’s remuneration is linked to these sustainability KPIs. Practical implications The study findings offer useful examples of the integration of sustainability into corporate processes and systems. Practitioners may find the insights useful in understanding how sustainability is currently being integrated into corporate practices by best practice New Zealand companies. Regulators may consider incorporating AA1000AP into their corporate governance guidelines. Finally, academics may find the study useful for teaching business and accounting courses and to guide the next generation of business managers. Originality/value First, the study brings together four streams of research on how sustainability reports are prepared (inclusivity, materiality, responsiveness and impact) in a single study. Second, the findings offer novel insights by evaluating corporate sustainability against the requirements of a standard that has received little academic attention.

scholarly journals Examining the extent of and drivers for materiality assessment disclosures in sustainability reports

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Bilal Farooq ◽  
Rashid Zaman ◽  
Dania Sarraj ◽  
Fahad Khalid
Keyword(s):  
Sustainable Development ◽  
Corporate Governance ◽  
Best Practice ◽  
Corporate Sustainability ◽  
Reporting Quality ◽  
Sustainability Reporting ◽  
Corporate Accountability ◽  
Content Type ◽  
Sustainability Reports ◽  
Ordered Logic

Purpose This paper aims to evaluate the extent of materiality assessment disclosures in sustainability reports and their determinants. The study examines the disclosure practices of listed companies based in the member states of the Cooperation Council for the Arab States of the Gulf, colloquially referred to as the Gulf Cooperation Council (GCC). Design/methodology/approach First, the materiality assessment disclosures were scored through a content analysis of sustainability reports published by listed GCC companies during a five-year period from 2013 to 2017. Second, a fixed effect ordered logic regression was used to examine the determinants of materiality assessment disclosures. Findings While sustainability reporting rates improved across the sample period, a significant majority of listed GCC companies do not engage in sustainability reporting. The use of internationally recognised standards has also declined. While reporters provide more information on their materiality assessment, the number of sustainability reports that offer information on how the reporter identifies material issues has declined. These trends potentially indicate the existence of managerial capture. Materiality assessment disclosure scores are positively influenced by higher financial performance (Return on Assets), lower leverage and better corporate governance. However, company size and market-to-book ratio do not influence materiality assessment disclosures. Practical implications The findings may prove useful to managers responsible for preparing sustainability reports who can benefit from the examples of materiality assessment disclosures. An evaluation of the materiality assessment should be included in the scope of assurance engagements and practitioners can use the examples of best practice when evaluating sustainability reports. Stock exchanges may consider developing improved corporate governance guidelines as these will lead to materiality assessment disclosures. Social implications The findings may assist in improving sustainability reporting quality, through better materiality assessment disclosures. This will allow corporate stakeholders to evaluate the reporting entities underlying processes, which leads to transparency and corporate accountability. Improved corporate sustainability reporting supports the GCC commitment to implement the United Nations Sustainable Development Goals and transition to sustainable development. Originality/value This study addresses the call for greater research examining materiality within a sustainability reporting context. This is the first paper to examine sustainability reporting quality in the GCC region, focussing particularly on materiality assessment disclosures.

scholarly journals Does Sustainable Corporate Governance Enhance Accounting Practice? Evidence from the Korean Market

2020 ◽  
Vol 12 (7) ◽  
pp. 2585 ◽  
Author(s):  
Daeheon Choi ◽  
Paul Moon Sub Choi ◽  
Joung Hwa Choi ◽  
Chune Young Chung
Keyword(s):  
Corporate Governance ◽  
Value Relevance ◽  
Earnings Quality ◽  
Corporate Sustainability ◽  
Earnings Persistence ◽  
Governance Mechanism ◽  
Institutional Monitoring ◽  
Korean Market ◽  
The Impact ◽  
The Relationship

As corporate sustainability continues to improve and enhance the principles of good corporate governance, firms are exerting increasing efforts in terms of transparency and public disclosure. Transparency efforts provide information to the general public on the relationship between corporate governance and improved sustainability. The better informed shareholders are about the connection between corporate governance and sustainability, the more apparent the relationship will become over time. Prior studies assume that blockholders engage in active institutional monitoring by intervening directly in firms’ operations. In contrast, we argue that passive institutional monitoring is a more feasible governance mechanism in the Korean market owing to the market’s unique features (i.e., chaebols and pressure sensitivity). In particular, focusing on the blockholdings of the Korean National Pension Service (KNPS), we study the impact of passive monitoring on firms’ earnings quality, represented by earnings persistence, value relevance, and timeliness. The empirical evidence shows that KNPS blockholdings have a positive and significant impact on corporate earnings quality, indicating that passive blockholder monitoring is a more efficient channel for improving earnings quality in South Korea. Our results may be generalized to other emerging markets in which a few entities with concentrated economic power engender pressure-sensitive corporate landscapes for sustainability.

scholarly journals Corporate governance and takeovers: Insights from past research and suggestions for future research

2009 ◽  
Vol 6 (3) ◽  
pp. 211-218
Author(s):  
Eduardo Costa ◽  
Ana Marques
Keyword(s):  
Corporate Governance ◽  
Past Research ◽  
Future Research ◽  
Managerial Ownership ◽  
Corporate Boards ◽  
Governance Mechanism ◽  
Internal Governance ◽  
Market For Corporate Control ◽  
Corporate Governance Mechanism ◽  
Cross National

This paper reviews the literature on the association between corporate governance and takeovers. It approaches takeovers as an effective external corporate governance mechanism. The main conclusions to be drawn is that although the mere threat of an active market for corporate control may be positively correlated with good internal governance, takeovers will always take place independently of good internal corporate governance by targets and that managerial ownership is crucial for a favorable shareholder outcome in a takeover event. We believe future research on corporate boards, cross-national takeovers and managers of bidding firms would be of great interest

scholarly journals Corporate Governance and Stock Price informativeness: Evidence from an Emerging Market

2020 ◽  
Vol 6 (2) ◽  
pp. 593-605
Author(s):  
Muhammad Shahid Rasheed ◽  
Shahzad Kouser
Keyword(s):  
Corporate Governance ◽  
Institutional Investors ◽  
Stock Price ◽  
Emerging Market ◽  
Investor Protection ◽  
Cash Flows ◽  
Governance Mechanism ◽  
Price Informativeness ◽  
Controlling Shareholders ◽  
Stock Price Informativeness

Emerging markets usually have weaker legal and governance environment. The weaker enforcement of investor protection laws leads to a poor information environment. Using data of all the listed non-financial firms from Pakistan stock exchange (PSX), we document the relationship between corporate governance variables and stock price informativeness. The results from two-stage least squares (2SLS) reveal that controlling shareholders in the form of block holding plays an effective role in improving informativeness. Due to the presence of these block ownership, the institutional investors remain largely short term investors and act passively. This behavior of institutional investors encourages managers to extract more cash flows leading to higher synchronicity. These findings suggest market regulators develop such a corporate governance mechanism that not only ensures investor protection but also advise firms to reduce information asymmetry by better disclosure and transparency. More specifically, in the Pakistani context, traditional corporate governance mechanisms through board room regulations may not improve informativeness, and regulators need to regulate the ownership regulations, including family ownership and controlling shareholders.

scholarly journals Enhancing Board Monitoring Tasks: The Effect of Minority-Elected Directors

2020 ◽  
Vol 15 (7) ◽  
pp. 85
Author(s):  
Sara De Masi ◽  
Andrea Zorzi
Keyword(s):  
Corporate Governance ◽  
Best Practice ◽  
Corporate Boards ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Controlling Shareholder ◽  
Agency Relationship ◽  
Management Behaviour ◽  
Board Monitoring ◽  
Board Directors

In companies with a controlling shareholder the agency relationship between controlling shareholders and minority shareholders poses significant issue. Managers may pursue, rather than the interests of the company as a whole, the interest of the controlling shareholder. When there is a controlling shareholder, independent directors may not prove sufficient to monitor the management behaviour, given that they are ultimately appointed by the same controlling shareholder whose possible opportunistic behaviour they are meant to constrain. Therefore, minority shareholders may be given appointment rights to the board: directors elected by minority shareholders may work as a corporate governance mechanism that fosters the board’s willingness and ability to monitor managers’ behaviour, on the assumption that managers are appointed by the controlling shareholder. This paper examines empirically whether having a minority-elected director on corporate boards increases the ability of the board to monitor management behaviour. Using a sample of the largest listed Italian companies in years 2008-2017, we find that minority-elected directors have a positive and statistically significant effect on board monitoring tasks. We also document that this effect is higher when they are elected by institutional investors. Our results have important implications for policy makers and, more generally, corporate governance best practice in all contexts in which companies have a concentrated ownership structure.

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