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1 – 10 of over 1000This paper aims to review 68 archival studies on the impact of audit committees (ACs) on firms’ consequences [(non)financial reporting, performance and audit quality] in European…
Abstract
Purpose
This paper aims to review 68 archival studies on the impact of audit committees (ACs) on firms’ consequences [(non)financial reporting, performance and audit quality] in European firms.
Design/methodology/approach
Applying a stakeholder agency-theoretical framework, the author differentiates between three categories of AC variables: presence; composition; and resources, incentives and diligence.
Findings
The author finds that AC composition, (non)financial reporting and audit quality are dominant in the literature review. Other inputs or outputs are either too low in amount or yielded heterogeneous results, hindering clear tendencies. However, there are indications that financial expertise is positively related to financial reporting and audit quality, in line with agency theory and European regulatory assumptions.
Research limitations/implications
In the discussion of potential future research, the author emphasizes, among others, the need for the recognition of innovative and sustainable AC variables, inclusion of moderator and especially mediator variables and reaction to endogeneity concerns by advanced regression models.
Practical implications
As the European Commission currently discusses extended regulations on AC duties and composition, this literature review highlights the huge impact of financial expertise on financial reporting and audit quality. In view of the increased monitoring duties of sustainability reporting, both business practices and regulatory bodies should increase the sustainability expertise of ACs.
Originality/value
This analysis makes useful contributions to prior research by focusing on attributes of AC and their impact on firms’ outputs in the European capital market, based on a differentiation between mandatory one-tier/two-tier systems and the choice model. The findings support the promotion of European evidence-based regulations, such as the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.
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Mohamed A.K. Basuony, Ehab K.A. Mohamed and Khaled Samaha
The purpose of this paper is to investigate the impact of board structure on voluntary corporate disclosure via social media among the top 150 companies listed on the London Stock…
Abstract
Purpose
The purpose of this paper is to investigate the impact of board structure on voluntary corporate disclosure via social media among the top 150 companies listed on the London Stock Exchange.
Design/methodology/approach
A disclosure index comprising of a set of items that encompass two facets of disclosure, namely corporate disclosure via social networks and social media sites, is developed and used. Binary logistic regression is used to test the research hypotheses.
Findings
The results of this study reveal the underlying relations between board composition and control variables as the determining factors of corporate disclosure, i.e. board size, board activism, board independence and board diversity (gender and ethnicity). The gender of the board can affect the corporate disclosure via a social network. The results of this study indicate that an increase in the number of female in the board members leads to higher corporate disclosure using social network. Moreover, firm size has a positive effect on corporate disclosure indicating that large firms tend to disclose more information on their websites and social networks.
Practical implications
The paper provides new insights into the role played by the non-executive female directors in monitoring and controlling managerial processes related to corporate disclosure using social media.
Originality/value
To the best of the authors’ knowledge, this is the first paper that examines the role of board structure in monitoring and controlling management decisions and managerial processes in the area of corporate disclosure via social media.
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Phuong-Dung Thi Nguyen and Cheng-Yu Lee
Corporate governance scholars have long been interested in understanding the impact of former chief executive officers (CEOs) who do not fully leave office but rather remain as…
Abstract
Purpose
Corporate governance scholars have long been interested in understanding the impact of former chief executive officers (CEOs) who do not fully leave office but rather remain as board members. Departing from the inconclusive findings of retaining Janus-faced predecessor CEOs on boards, this study revisits the concept of retaining predecessor CEOs on boards (RPCB) and its influence on successors and firm performance under certain conditions.
Design/methodology/approach
The study analyzes a sample of 461 Taiwanese firms from 2015 to 2019, adopting the ordinary least squares regression method to examine the correlation between RPCB and firm performance. It specifically analyzes the moderating effects of the complexity of firms' internal and external environments in this context.
Findings
The empirical results show that there is no direct relationship between RPCB and post-succession performance, indicating that this association is shaped by contextual factors. Indeed, the influence of predecessors is more pronounced in situations of high internal and external complexities such that the value of RPCB is situation specific.
Originality/value
This study is the first to generate the resource-based view theory to recognize that the relationship between predecessors on boards and financial consequences is moderated by contextual factors. The authors are the first to extend extant research by considering internal and external complexity in the context of succession and RPCB. In such situations, successors' need for regular mentoring is heightened and the benefits of prior CEO knowledge and resources are more substantial.
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Saeed Rabea Baatwah, Zalailah Salleh and Jenny Stewart
The purpose of this paper is to investigate whether the characteristics of the audit committee (AC) chair affect audit report timeliness. In particular, the direct association…
Abstract
Purpose
The purpose of this paper is to investigate whether the characteristics of the audit committee (AC) chair affect audit report timeliness. In particular, the direct association between AC chair accounting expertise and audit report delay, and the moderating effect of other characteristics of AC chair on this association are examined.
Design/methodology/approach
To achieve the purpose of this study, the characteristics examined by this study are AC chair expertise, shareholding, tenure and multiple directorships. Furthermore, a sample of Malaysian companies during the period 2005–2011 and the fixed effects panel data method are utilized.
Findings
The results suggest that an AC chair with accounting expertise is associated with a reduction in audit delay. The reduction is more obvious when the chair holds shares in the company, but is weakened by longer tenure and multiple directorships. These results are robust after conducting several robust tests. Using mediating analysis, the authors also document that an AC chair with accounting expertise can enhance the timeliness of audit reports even when the quality of financial reporting is lower. The reported result is supported by additional analysis that finds that AC chairs with accounting expertise and AC chairs with accounting expertise and shareholding are significantly associated with shorter abnormal audit delay.
Originality/value
This study provides comprehensive analysis concerning the association between AC chair and audit report timeliness using a unique setting. It is among the limited evidence that reports the moderating effect of AC chair characteristics on the role of such chair on audit report timeliness.
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The purpose of this paper is to investigate the relationship between chair–chief executive officer (CEO) demographic dissimilarities and firm internationalization.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between chair–chief executive officer (CEO) demographic dissimilarities and firm internationalization.
Design/methodology/approach
The pooled ordinary least squares regression is used on a sample of listed firms in Malaysia from 2013 to 2017. This study considers three demographic dissimilarities between the chair and CEO, i.e. differences in age, educational background and nationality.
Findings
The results reveal that demographic dissimilarities between the chair and CEO, notably differences in nationality, may result in conflicting cognitive styles, which in turn may impede the firms’ ability to expand internationally, as compared to differences in age and educational background. The findings demonstrate the deleterious effects of demographic dissimilarity between these two individuals in the highest echelons on the firms’ internationalization strategy due to poor communication and lack of ability to cooperate when dissatisfaction and conflicts intensify between these corporate elites.
Originality/value
To the best of the author’s knowledge, this paper makes the first attempt to examine the influence of chair–CEO demographic dissimilarities on firm internationalization. Previous studies examining firms’ internationalization strategy, for the most part, restricted their scope to either the board members or top management team characteristics, but had largely overlooked the nexus between nonexecutive and executive directors through the chair and CEO. A focus on the demographic dissimilarities between the co-leaders of the firm is essential to improve the understanding of the collaboration and rivalry between them, which may affect board effectiveness and firm internationalization.
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Mengge Li and Jinxin Yang
As the primary decision makers, chief executive officers (CEOs) play pivotal roles in firm innovation. However, little is known regarding how CEOs influence the exploitation and…
Abstract
Purpose
As the primary decision makers, chief executive officers (CEOs) play pivotal roles in firm innovation. However, little is known regarding how CEOs influence the exploitation and exploration paradox. To advance theory and research, the purpose of this paper is to investigate the joint effects of CEO tenure and CEO–chair duality on a firm’s shifting emphasis between exploitative and exploratory innovation.
Design/methodology/approach
This paper takes the approach of a longitudinal sample of 81 US pharmaceutical firms.
Findings
As CEOs’ tenure advance, their firms’ percentage of exploitative innovation increases. Furthermore, non-duality (separation of board chair and CEO) further strengthens the positive relationship between CEO tenure and the percentage of exploitative innovation.
Research limitations/implications
This study integrates upper echelons theory and behavioral agency theory to juxtapose the effects of CEOs on technological innovation. This study extends knowledge of strategic leadership and innovation by showing that CEOs influence the balance between exploitative and exploratory innovation. Furthermore, this study also contributes to the corporate governance literature by demonstrating that monitoring vigilance could inhibit capable CEOs from pursuing more exploratory innovation.
Practical implications
Boards of directors should allow CEOs to have greater discretion over innovation, and vigilant monitoring and control may force CEOs to focus less on exploration.
Originality/value
This is one of the few studies that explicitly investigate how CEO influences a firm’s emphasis on exploitative innovation and exploratory innovation.
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Rachana Kalelkar and Emeka Nwaeze
The authors analyze the association between the functional background of the compensation committee chair and CEO compensation. The analysis is motivated by the continuing debate…
Abstract
Purpose
The authors analyze the association between the functional background of the compensation committee chair and CEO compensation. The analysis is motivated by the continuing debate about the reasonableness of executive pay patterns and the growing emphasis on the role of compensation committees.
Design/methodology/approach
The authors define three expert categories—accounting, finance, and generalist—and collect data on the compensation committee (CC) chairs of the S&P 500 firms from 2008 to 2018. The authors run an ordinary least square model and regress CEO total and cash compensation on the three expert categories.
Findings
The authors find that firms in which the CC chair has expertise in accounting, finance, and general business favor performance measures that are more aligned with accounting, finance, and general business, respectively. There is little evidence that CC chairs who are CEOs of other firms endorse more generous pay for the host CEO; the authors find some evidence that CC chairs tenure relative to the host CEO's is negatively associated with the level of the CEO's pay.
Research limitations/implications
This study suggests that firms and regulators should consider the background of the compensation committee chair to understand the variations in top executive.
Practical implications
Companies desiring to link executive compensation to particular areas of strategy must also consider matching the functional background of the compensation committee chair with the target strategy areas. From regulatory standpoint, requiring compensation committees to operate independent of inside directors can reduce attempts by inside directors to skim the process, but a failure to also consider the impact of compensation committees' discretion over the pay-setting process can distort the executives' pay-performance relation.
Originality/value
This is the first study to examine the effects of the functional background of the compensation committee chair on CEO compensation.
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Mujeeb Saif Mohsen Al-Absy, Ku Nor Izah Ku Ismail and Sitraselvi Chandren
The purpose of this paper is to examine the influence of the characteristics of audit committee chairman (ACC) (tenure, age, gender, ethnicity, accounting expertise and…
Abstract
Purpose
The purpose of this paper is to examine the influence of the characteristics of audit committee chairman (ACC) (tenure, age, gender, ethnicity, accounting expertise and directorship) on earnings management (EM) practices.
Design/methodology/approach
The Jones model and modified Jones model by Dechow et al. (1995) were used to determine the discretionary accruals (DA) of 288 Malaysian listed firms with lowest positive earnings for the years 2013‒2015.
Findings
The results of the ordinary least squares regression indicate that only tenure, gender and ethnicity of the ACC are associated with DA. A further test was conducted by dividing firms into two groups: firms whose boards are chaired by a family member and firms whose boards are chaired by a non-family member. The results reveal that it is possible for firms whose boards are chaired by family members to cause the corporate governance (CG) mechanisms, particularly the audit committee, to lose their effectiveness in overcoming the EM problem. In addition, robustness tests were conducted by using panel data regression, where the results were found to be similar to the original regression results.
Originality/value
This study alerts policymakers, firms and their stakeholders, as well as researchers, regarding the importance of having an independent board chairman, who has no relationship with any directors or major shareholders, as this may hinder the effectiveness of CG mechanisms in curbing EM, especially in emerging countries, such as Malaysia, where it is very difficult to stop members of the family from becoming board directors.
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The purpose of this study is to investigate the impact of board diversity on corporate social responsibility (CSR). The aim is twofold; does board diversity has any effect on CSR…
Abstract
Purpose
The purpose of this study is to investigate the impact of board diversity on corporate social responsibility (CSR). The aim is twofold; does board diversity has any effect on CSR, do structural and demographic differences between one-tier and two-tier board models may impact this effect?
Design/methodology/approach
This paper applies a panel generalized method of moments estimator to a sample of 2,544 non-financial listed firms from 42 countries over the period of 2013–2017.
Findings
The findings reveal that board diversity leads to effective CSR. By distinguishing between diversity among boards from diversity within boards, the results display the effects of the specific variables that make up the manner and latter’s constructs within unitary and two-tier board structures. Specifically, this paper reveals that tenure, ideology and educational level (gender and nationality) predominantly appear to drive a firm’s CSR within one (two)-tier boards settings. These results remain consistent when robustness tests are ruled.
Practical implications
The study provides managers, investors and policymakers with knowledge about how among and within board diversity attributes favor the decision-making process around CSR. The evidence is useful for companies in setting the criteria to identify directors who can support their strategic decisions. It benefits, moreover, academics in better understanding firms’ CSR determinants and practices under different corporate board models.
Social implications
Examining how different sets of board diversity affect firms’ CSR given divergences between one-tier and two-tier board structure is a useful and informative endeavor for all community actors.
Originality/value
Unlike prior studies that identify the limited scope of diversity, the study is the first to examine the effect of broader dimensions of board diversity on CSR under both one-tier and two-tier board settings. This paper provides a contribution to a greater understanding of the impacts underlying board models and different attributes of board diversity on CSR. This new understanding will help to improve predictions of different features of board diversity impacts on decision-making processes around organizational outcomes.
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Phillip T. Lamoreaux, Lubomir P. Litov and Landon M. Mauler
We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger…
Abstract
We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger and have more independent boards, higher institutional investor holdings, and an NYSE listing. Firms with greater anticipated benefits from monitoring also adopt an LID role, e.g., firms with dual CEO-Chairman, with more takeover defense mechanisms, and with higher cash holdings. Using an event study methodology, we find that investors respond positively to the adoption of an LID board role. Lastly, using instrumental variables to address endogeneity in the LID board role, we find that firms with an LID are more likely to terminate poorly performing CEOs. Taken as a whole, these results suggest that the LID board role enhances firm value and improves the quality of corporate governance.
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