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This study aims to examine how board gender diversity and foreign directors influence the sector-wise corporate philanthropic giving (donation) of Islamic banks in Bangladesh.
Abstract
Purpose
This study aims to examine how board gender diversity and foreign directors influence the sector-wise corporate philanthropic giving (donation) of Islamic banks in Bangladesh.
Design/methodology/approach
Unbalanced panel data were extracted from the annual reports of Islamic banks in Bangladesh over 11 years, from 2010 to 2020.
Findings
The findings indicate that gender diversity significantly improves corporate philanthropic giving for the education sector but insignificantly influences corporate philanthropic giving for health and humanitarian and disaster relief sectors. In contrast, the results show that foreign directors significantly and positively affect the banks' corporate philanthropic giving for the three sectors.
Research limitations/implications
This paper used only secondary data extracted from the annual reports of Islamic banks in Bangladesh between 2010 and 2020. Besides, only three sectors of corporate social responsibility activities were considered. Hence, the findings could not be generalized, as the study used only data from one country.
Practical implications
The findings can be useful to policymakers and regulators to provide policies and regulations that ensure the appointment of women and foreign directors to boards that can competently promote Islamic banks' charitable donations.
Social implications
Inducing Islamic banks to provide corporate donations for activities related to education, health and humanitarian and disaster relief can contribute directly to achieving sustainable development goals (SDGs) like SDG-3 (good health and well-being) and SDG-4 (quality education) and impliedly support attaining some indicators of SDG-1 (no poverty), SDG-2 (zero hunger) and SDG-10 (reduced inequality).
Originality/value
This study contributes to the literature by investigating how board gender diversity and foreign directors influence sector-wise corporate donations for the education, health and human and disaster relief sectors instead of aggregate donations studies concentrated by previous studies.
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Najib H. S. Farhan and Faozi A. Almaqtari
This research aims to examine the impact of RPTs and board of directors' characteristics on the market value of Indian listed banks. Further, this study evaluates the moderation…
Abstract
Purpose
This research aims to examine the impact of RPTs and board of directors' characteristics on the market value of Indian listed banks. Further, this study evaluates the moderation effect of board composition on the association between RPTs banks’ market value.
Design/methodology/approach
The sample size consists of 38 banks listed on Bombay stock exchange. The current study is based on secondary data for ten years from 2010 to 2019. Generalized Method of Moment (GMM) was used for estimating the results.
Findings
Subsidiary transactions, board of directors' size, composition, diligence, promoters, remuneration and banks' size and leverage have a significant impact on the market value of Indian listed banks. Further, board of directors' composition positively moderates the association between RPTs and banks value measured by Tobin's. Furthermore, corporate governance characteristics have a significant impact on RPTs measured by total RPTs and all subsidiary transactions.
Research limitations/implications
This research is limited only to listed banks whose data are available in the ProwessIQ database, which makes it difficult to generalize the findings on other unlisted banks. This research helps policymakers, investors and creditors to categorize RPTs into different groups to identify the harmful and beneficial once to the bank. The findings suggest that policymakers, investors and creditors should not consider all key personal transactions as harmful transactions; instead, the policymakers, investors and creditors should consider all subsidiary transactions as harmful in the absence of independent directors.
Originality/value
The present study contributes to the existing literature on RPTs by evaluating the interaction effect of board composition on the association between related party transactions and banks' value. Further, this research focuses on the financing industry; Indian banks, which has not been sufficiently researched in comparison to the non-financing industries.
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Virasty Fitri and Dodik Siswantoro
This study aims to provide empirical evidence on the role of corporate governance mechanisms in reducing earnings-management practices in Islamic banks in Asia.
Abstract
Purpose
This study aims to provide empirical evidence on the role of corporate governance mechanisms in reducing earnings-management practices in Islamic banks in Asia.
Design/methodology/approach
This study used 28 Islamic banks in Asia, which were listed on the stock exchange from 2013–2017. The research method used quantitative regression with data on the characteristics of Islamic banks taken from the websites of each bank. This study used discretionary loan loss provision as a proxy for measuring earnings management.
Findings
The results show that only the audit committee size has a significantly negative effect on earnings management. An independent audit committee has a negative, but not significant, effect. The difference expectation signs cannot be interpreted further.
Research limitations/implications
Only a few components of corporate governance were tested in this study. Therefore, it is expected that future studies will include more components.
Practical implications
In general, the components of corporate governance that include the characteristics of the board of directors and the audit committee have a varied effect on reducing the earnings-management practices in Islamic banks, except audit committee size. In practice, audit committee size should have an important role in earning management reduces.
Originality/value
This may be the first paper that studies the effect of corporate governance on earnings management in Islamic banks in Asia.
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Giuliana Birindelli, Helen Chiappini and Marco Savioli
This study aims to examine the relationship between female directors and bank risk. In particular, whether such a relationship varies across sound or unsound banks and with or…
Abstract
Purpose
This study aims to examine the relationship between female directors and bank risk. In particular, whether such a relationship varies across sound or unsound banks and with or without a critical mass of female directors is tested.
Design/methodology/approach
Using a sample of 215 listed banks from 40 countries over the period 2008–2016, this study carries out panel data analyses and tests all the model specifications on four different measures of risk (common equity ratio, leverage, NPLs ratio and price volatility).
Findings
The findings show that increasing the number of female directors does not reduce bank risk when banks are unsound. When banks are sound, female directors have a significant and positive role in reducing risk, only until reaching a critical mass of women.
Practical implications
This study provides useful corporate governance indications for policymakers and practitioners. Advantages of gender diversity on boards are recognized especially in sound banks, but increasing the number of women directors beyond the critical mass may not lead to lower risk. In fact, ethical or legal pressures aimed at increasing gender diversity on boards (i.e. soft or hard gender quotas) may cause undesired effects on bank risk, especially if female directors are not chosen on merit and skills. Moreover, gender-balanced boards, namely, with a “dual critical mass,” seem to assure more effective decision-making processes.
Originality/value
This study provides empirical evidence on female board members and risk minimization, differentiating between sound or unsound banks. Furthermore, this study contributes to the literature on the critical mass of women on the board of directors by testing this theory for these two categories of banks.
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Md. Harun Ur Rashid and Syed Zabid Hossain
This study aims to investigate the moderating effect of independent directors on the relationship between politicians on the board and corporate social responsibility disclosure…
Abstract
Purpose
This study aims to investigate the moderating effect of independent directors on the relationship between politicians on the board and corporate social responsibility disclosure (CSRD).
Design/methodology/approach
The ordinary least square has been used to analyze the CSRD data collected from the annual reports of all 30 listed banks of Bangladesh covering six years period ranging from 2013–2018. Further, the study has applied the generalized method of moments to prove the robustness of the model across the endogeneity issue.
Findings
The study found a positive relationship between board independence and CSRD that indicates board independence enhances the CSRD to a great extent. On the contrary, the inclusion of politicians on the board has shown a negative impact on CSRD that implies the higher the presence of political members on the board of a bank, the lower the involvement of the bank in CSR activities. However, board independence positively and significantly moderates the politician directors on the CSRD. The findings imply that if the independent directors are empowered, they play the role of whistleblowers that, in turn, mitigates the negative role of politician directors to CSRD.
Research limitations/implications
The study suggests the banks’ management, and regulatory bodies formulate sound policies so that the banks are forced to include more independent directors with enough power and at the same time, reduce the politician directors on the board.
Originality/value
The study extends debate on the political CSR and CSRD through validating the role of board independence.
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Neila Boulila Taktak and Ibtissem Mbarki
The purpose of this paper is to examine the impact of board characteristics and external audit quality on earnings management among major Tunisian banks over the period 2003-2007…
Abstract
Purpose
The purpose of this paper is to examine the impact of board characteristics and external audit quality on earnings management among major Tunisian banks over the period 2003-2007.
Design/methodology/approach
Multivariate regressions are employed to test the effect of board structure and external audit quality on discretionary provisions as a proxy for earnings management.
Findings
Results indicate that among the characteristics of the board, CEO duality is associated with higher levels of discretionary provisions. However, the presence of directors affiliated to the largest shareholder tends to constrain earnings management practices. The results reveal also that a co-audit belonging to the BIG 4 provides incentives to manage earnings while the capacity of the external auditor to disclose reservations impacts negatively the manager's discretion.
Practical implications
First, it is not desirable to appoint a co-audit both belonging to the BIG 4. Second, the presence of affiliated directors reduces the discretionary practices except in cases where directors are affiliated to families. In this case, banks should strengthen the presence of independent directors. Finally, the delineation of the leeway left in the Tunisian accounting standards would provide more transparent financial information.
Originality/value
This study contributes to the literature on governance and its impact on earnings management among Tunisian banks by introducing two variables that have not been tested before which are affiliated directors and co-audit. The paper will be of value to banks willing to comply with the Governance Good Practice Guide adopted recently in Tunisia.
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John Byrd, Elizabeth S. Cooperman and Glenn A. Wolfe
The purpose of this paper is to examine how board tenure affects the compensation of CEOs using a sample of 93 publicly traded US banks.
Abstract
Purpose
The purpose of this paper is to examine how board tenure affects the compensation of CEOs using a sample of 93 publicly traded US banks.
Design/methodology/approach
The paper proposes a CEO allegiance hypothesis whereby long‐term relationships with executives and other directors will shift allegiance from shareholders to executives vs a more traditional expertise hypothesis that predicts superior monitoring of executives by directors with longer tenure. A generalized least squares regression methodology is used to examine the relationship between CEO compensation and outside director tenure.
Findings
For the full sample, board tenure variables were found to be insignificant. However, when examining a subsample of firms with CEO tenure of greater than six years or more, the relationship between CEO pay and the median tenure of outside directors becomes positive, supporting a CEO allegiance hypothesis.
Research limitations/implications
On a caveat, since this study relies on data for large bank holding companies over a short period of time, further research is needed to determine if the results carry over to a broader sample of firms and across time.
Practical implications
The results suggest that the independence of outside directors may be compromised when they serve for longer tenure periods together with the same CEO; an important consideration for better corporate governance.
Originality/value
The study provides a unique examination of outside director independence from the perspective of board tenure and the long‐term relationships with executives and other directors that may result in allegiance shifts away from shareholders and towards managers.
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Bijan Bidabad and Mahshid Sherafati
This paper aims to discuss some of the operational Islamic banking features considered in ethical banking as the aspects of Rastin Banking. Ethical banking is a branch of “ethic…
Abstract
Purpose
This paper aims to discuss some of the operational Islamic banking features considered in ethical banking as the aspects of Rastin Banking. Ethical banking is a branch of “ethic economics” and a narrow expression of a number of Islamic banking aspects.
Design/methodology/approach
These features are often involved in the discussions under the topic of internal control and describe the operational characteristics of ethical banking within the framework of Rastin Banking.
Findings
This study refers to the principles of Rastin Banking, including operational, financial, economic, ethical, social, legal, international and organizational principles. Additionally, it takes into account some of the internal control systems.
Research limitations/implications
Converting ethical codes into executable laws and regulations needs sophistication, and the art of codification in this subject can be observed in the present paper.
Practical implications
As far as the ethical behaviour of the assessor and trustee is concerned, the necessities of honesty, belief, virtuosity, rectitude and compliance with moral values, as well as reward and punishment mechanisms, are operationally examined. Transparency, governance and disclosure of information are the other components. The methods of auditing, accounting, inspection and preservation of Rastin Banking achievements are amongst the other matters of concern.
Social implications
An assiduous attention to the operational details of each of the above-said discussions revealed that the Islamic banking components are capable of covering the topics and discussions beyond ethical banking.
Originality/value
This paper fulfils an identified need to solve the practical ethical problem in operational banking.
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Hicham Sbai and Slimane Ed-Dafali
This paper aims to examine the relationship between gender diversity and the risk profile of 141 listed banks from 14 emerging countries over the period of 2012–2020…
Abstract
Purpose
This paper aims to examine the relationship between gender diversity and the risk profile of 141 listed banks from 14 emerging countries over the period of 2012–2020. Specifically, this study investigates whether the relationship between gender diversity and banking risk varies between Islamic banks and conventional banks, both before and during the COVID-19 pandemic. The second aim is to investigate whether COVID-19 health crisis moderates the effect of gender diversity on banks’ risk-taking behavior within a dual banking system.
Design/methodology/approach
This study derives its theoretical foundation from both the token theory and the critical mass theory. Both fixed and random effects are combined to examine the relationship between gender diversity and bank risk-taking in emerging countries.
Findings
The results show that female presence on the board of directors reduces banks' financial risk. However, the presence of women continues to positively affect the capital adequacy ratio of large banks. The results also show that the presence of at least two female directors significantly reduces banking risk. The findings support the expectations of the token and critical mass theories. In addition, the presence of female board members, per se, does not influence the risk-taking behavior of Islamic banks. Finally, this study demonstrates that the moderating role of the COVID-19 health crisis is only more effective for large banks than for small ones. The analyses demonstrate good reliability and robustness of the findings of this study.
Practical implications
The study provides novel insights for policymakers and practitioners on how female directors impact banks’ risk-taking behavior in dual-banking countries. It also contributes to the debate on gender diversity and corporate governance literature, which can help in monitoring bank risk-taking and improving financial stability.
Originality/value
This study presents new evidence about the importance of board gender diversity for bank risk-taking in a dual banking system by considering the moderating influence of the COVID-19 pandemic. This study also contributes to the literature on bank risk-taking by applying two measures of gender diversity and a critical mass of women on boards.
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Isabel-Maria García-Sánchez, Jennifer Martínez-Ferrero and Emma García-Meca
The purpose of this paper is to analyze whether gender diversity on board and financial expertise on audit committee affect accounting conservatism in banking sector…
Abstract
Purpose
The purpose of this paper is to analyze whether gender diversity on board and financial expertise on audit committee affect accounting conservatism in banking sector. Additionally, the authors focus on the effects of board characteristics on bank earnings quality and examine their effects on earnings persistence.
Design/methodology/approach
The authors use a large sample of 159 banks from nine different countries from the period 2004-2010. The authors study whether the differences in the timeliness of earnings to bad news and earnings quality across governance structures of banks are driven by differences across investor protection and bank regulation levels in banks.
Findings
The findings confirm the monitoring role of both female and financial experts, noting a positive effect of them on accounting conservatism and earnings quality in banks. According to the institutional characteristics, the results suggest the complementary role of banking regulation and investor protection levels in these effects, noting that in contexts of higher regulatory and greater investor protection environments, gender diversity and financial expertise on boards have more influence on the conservatism and earnings quality of banks.
Originality/value
The authors contribute to both the accounting quality literature and the corporate governance literature by identifying board characteristics that are associated with higher conservatism and quality of earnings in banks around the world. In addition, this study also contributes to the ethics literature by highlighting the benefits of gender diversity and financial expertise in upholding the integrity of financial reporting. Moreover, this paper adds to prior literature about board of directors and accounting quality by identifying additional complementary factors – bank regulation and investor protection – and by focusing on a specific industry, the banking industry.
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