The Impact of Corporate Social Responsibility on Regulatory Comment Letters: Evidence from Iran

Securities commissions regularly review corporate reports, and if the review reveals a possible deficiency— such as a potential accounting error— or requires further clarifications, they send the company a comment letter (CL), including a request for providing written responses and relative additional information. Current study aims to examine whether and how corporate social responsibility (CSR) affects CLs. This empirical study is based on a sample of 437 Iranian firm year observations from 2011 to 2017. Results show that firms with more CSR are less likely to receive CL, that more CSR does not influence the association of managerial misbehavior and CLs, and that the negative association between CSR and CLs is stronger among firms facing higher environmental information asymmetry and firms having higher corporate governance quality. Collectively, this paper contributes to the literature by providing new evidence on the beneficial effect of CSR in the context of CLs. Las comisiones de valores revisan periódicamente los informes de las empresas, y si la revisión revela una posible deficiencia -como un posible error contable- o se requiere más aclaraciones, envían a la empresa una carta de comentarios (CL), que incluye una solicitud de respuesta por escrito y la relativa información adicional. El presente estudio pretende examinar si la Responsabilidad Social de las Empresas (RSE) afecta a las cartas de comentarios y cómo lo hace. Este estudio empírico se basa en una muestra de 437 observaciones anuales de empresas iraníes desde 2011 hasta 2017. Los resultados muestran que las empresas con más RSC tienen menos probabilidades de recibir CL y que más RSC no influye en la asociación entre mal comportamiento de los directivos y CL. También se pone de manifiesto que la asociación negativa entre RSC y CL es más fuerte entre las empresas que enfrentan una mayor asimetría de información ambiental y las empresas que tienen una mayor calidad de gobierno corporativo. En conjunto, este trabajo contribuye a la literatura aportando nuevas pruebas sobre el efecto beneficioso de la RSC en el contexto de las CL.

The impact of the corporate governance quality on the dividend policy of companies in the BRICS countries

The article presents the results of a study aimed at determining the nature of the influence of the quality of corporate governance on the dividend policy pursued by companies in the BRICS countries. This relationship is determined based on empirical research on a sample of 122 large public corporations of the BRICS countries (based on 610 observations) for the period from 2015 to 2019. The study uses Tobit, random effects, fixed effects, and OLS. The results of this study show that the quality of corporate governance significantly negatively correlates with dividend payments of companies. This means that companies in the BRICS countries adhere to the dividend substitution model (proposed by La Porta), or, in other words, compensate for the poor quality of corporate governance with high dividend payments. Taking into account the results of the study, in the final part of the article, the main methods of improving the quality of corporate governance are proposed, which can contribute to increasing the value of companies in the BRICS countries.

Corporate Governance, CEO Compensation and Accounting Conservatism

Purpose:This study examines the moderating impact of corporate governance quality on the relation between CEO bonus compensation and accounting conservatism.

The Relationship between Governance Quality and the Cost of Equity Capital in Italian Listed Firms: An Update

This paper investigates the relationship between corporate governance quality and the cost of equity capital, intended as the discount rate the market applies to a firm’s expected future cash flows to evaluate the current share price. Using data from the Italian listed corporations in 2018, this paper combines several attributes like board independence, board size, the existence of the internal audit, and CEO duality incorporated in a corporate governance quality index. Our results do not provide evidence of a statistically significant relationship between the corporate governance score and the firm’s equity capital cost. A possible explanation is that in recent years a greater homogeneity, and a generalized increase in corporate governance quality standards, has been observed in the Italian framework with worse companies that closed the gap with those with higher performances. Hence, lower variability in the corporate governance index results in a not significant effect of a composite index on reducing the cost of equity capital.

Role of International Trade Competitive Advantage and Corporate Governance Quality in Predicting Equity Returns: Static and Conditional Model Proposals for an Emerging Market

This paper aims to develop some static and conditional (dynamic) models to predict portfolio returns in the Borsa Istanbul (BIST) that are calibrated to combine the capital asset-pricing model (CAPM) and corporate governance quality. In our conditional model proposals, both the traditional CAPM (beta) coefficient and model constant are allowed to vary on a binary basis with any degradation or improvement in the country’s international trade competitiveness, and meanwhile a new variable is added to the models to represent the portfolio’s sensitivity to excess returns on the governance portfolio (BIST Governance) over the market. Some robust and Bayesian linear models have been derived using the monthly capital gains between December 2009 and December 2019 of four leading index portfolios. A crude measure is then introduced that we think can be used in assessing governance quality of portfolios. This is called governance quality score (GQS). Our robust regression findings suggest both superiority of conditional models assuming varying beta coefficients over static model proposals and significant impact of corporate governance quality on portfolio returns. The Bayesian model proposals, however, exhibited robust findings that favor the static model with fixed beta estimates and were lacking in supporting significance of corporate governance quality.

The Usefulness of Financial Accounting Information: Evidence from the Field

We examine how investment professionals assess the usefulness of financial accounting information depending on their information acquisition objectives and preparers’ earnings management incentives. We conduct a survey experiment based on face-to-face interviews with investment professionals and document two main results. First, we find that, compared with investment professionals assigned a firm valuation objective, those assigned a managerial performance evaluation objective assess accounting information as significantly less useful. Second, we find no systematic evidence that preparers’ earnings management incentives negatively affect investment professionals’ assessments of accounting information usefulness. To elucidate this second finding, we conduct a large-scale follow-up online experiment. Our results continue to offer no support for the effect of earnings management incentives on investment professionals’ assessments of accounting information usefulness, irrespective of preparers’ corporate governance quality. Instead, we find that poor corporate governance, by itself, reduces the usefulness of accounting information to investment professionals.

How firms' performance mediates the relationship between corporate governance quality and earnings quality?

PurposeThe purpose of this study is to propose an analytical model that investigates both a direct path between corporate governance quality and earnings quality and an indirect path, in which firms' performance is a mediating variable that is influenced by corporate governance quality and that, in turn, influences earnings quality.Design/methodology/approachThe study employs a structural equation modelling (SEM), to a sample of Egyptian listed firms during 2011–2017, to test the proposed analytical model and to determine the relative importance of both the direct and indirect paths.FindingsThe findings show a statistically significant evidence of both a direct path from corporate governance quality to earnings quality, and an indirect path that is mediated by firms' performance, suggesting that both corporate governance quality and performance have a complementary effect on earnings quality. However, the weight of the evidence favouring the direct path is more important in case of accounting-based performance measures; and the weight of the evidence favouring the indirect path is more important in case of market-based performance measures.Research limitations/implicationsThe current study has some limitations. First, the study focuses specifically on one proxy for measuring earnings quality which is the absolute value of discretionary accruals. Other proxies of earnings quality could be examined in future research, such as income smoothing, earnings persistence and timely loss recognition. Another limitation is that only financial performance measures were examined, namely, return on assets, return on equity, price-to-earnings ratio and market-to-book value. Notwithstanding, non-financial performance measures could be investigated in future studies, such as balanced scorecard (BSC). Furthermore, considering cultural, political and legislative differences among countries, the results may not be generalised outside the scope of the current sample (i.e. Egyptian listed firms).Practical implicationsThe implications of the findings for both theory and practice are discussed.Originality/valueThis study is distinguished by validating an analytical model that has been overlooked by prior studies. Moreover, it provides a new constructed index for measuring corporate governance quality. Furthermore, it uses a new sophisticated statistical technique, which is SEM, for testing the proposed model.

Pengungkapan Laporan Keuangan Sebagai Variabel Mediasi Pengaruh Kualitas Corporate Governance Terhadap Asimetri Informasi

The application of good corporate governance is a fundamental need for companies and other institutions to succeed in the long term, good governance will force companies to conduct sufficient financial statement disclosures so as to reduce information asymmetry for users of financial statements. This study aims to examine whether quality of corporate governance influences information asymmetry through disclosure of financial statements. The object of this study is a non-financial category compannies that has obtained a score related to the implementation of corporate governance by IICG which was published in SWA magazine as the Most Trusted Conpany from 2012 to 2018. The sample selection process uses purposive sampling. The results of sample selection were obtained by 52 companies The data analysis technique in this study uses path analysis. The test of the direct effect of quality of corporate governance on information asymmetry shows that corporate governance quality has a positive effect on information asymmetry, while the test results of the indirect effect of corporate governance quality on information asymmetry through financial statement disclosure show that disclosure of financial statements is not a mediating variable on the effect of corporate governance quality on information asymmetry, this is caused because almost all sample companies make disclosures of financial statements in a relatively the same amount but the CG score results change in each year.