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1 – 10 of 451
Article
Publication date: 1 May 2020

Simone Pizzi, Andrea Venturelli and Fabio Caputo

The purpose of this paper is to evaluate the effectiveness of the comply-or-explain principle in the Italian context. In particular, the analysis will evaluate, which factor…

Abstract

Purpose

The purpose of this paper is to evaluate the effectiveness of the comply-or-explain principle in the Italian context. In particular, the analysis will evaluate, which factor impact on firms' voluntary adoption of this tool to adequate their non-financial reports to the legal requirements of Directive 95/2014/EU.

Design/methodology/approach

The methodology consists of two different levels of analysis. The first part is statistical descriptive, and it consists of a rhetorical analysis on the justifications provided by the firms about their omissions to comply with Directive 95/2014/EU. The second part is inferential and its aim is to evaluate, which factors impact on comply-or-explains adoption.

Findings

The findings reveal how the comply-or-explain application in Italy has been characterized by several criticisms. The result highlight how the justifications adopted by the firms is influenced by their sector of activity and omission's type. Moreover, the analysis suggests how the sector of activity and the level of adherence to global reporting initiative influenced the average number of omissions.

Research limitations/implications

The limitations of the research are represented by the focuses on a single country and by the short period of analysis. In this sense, future research could be addressed to the analysis of countries different from Italy. Moreover, accounting scholars could provide further contributions to the political debate through the evolution of the “comply-or-explainprinciple’s strategies over the years.

Practical implications

The practical implications connected to the present research are twofold. The first one is represented by the possibility for policymakers to increase the degree of attention about the use of comply-or-explain as legitimization's tool. The second one is represented by the possibility for practitioners to identify a new reporting framework.

Social implications

The social implications are represented by the possibility for stakeholders to evaluate the reliability's degree of the disclosure produced by Italian public interest entities after the implementation of Directive 95/2014/EU.

Originality/value

Despite the growing attention paid by academics regard Directive 95/2014/EU, this is the first attempt to analyze the comply-or-explain from a rhetorical perspective.

Details

Sustainability Accounting, Management and Policy Journal, vol. 12 no. 1
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 13 March 2018

Luigi Lepore, Sabrina Pisano, Assunta Di Vaio and Federico Alvino

The purpose of this paper is twofold: first, to assess the degree of disclosure about compliance with corporate governance code and the explanations provided by Italian firms and…

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Abstract

Purpose

The purpose of this paper is twofold: first, to assess the degree of disclosure about compliance with corporate governance code and the explanations provided by Italian firms and second, to analyze the relationships between this disclosure and different variables of ownership structure.

Design/methodology/approach

The sample was composed of 75 non-financial companies listed in Italy in 2016. Content analysis of the corporate governance statement and ordinary least squares (OLS) multiple regression models were used to test the hypotheses.

Findings

Companies tended to comply with the corporate governance code and to disclose this information, but when they decided to not comply, they did not provide adequate explanations. Findings revealed a negative relation between ownership concentration and the disclosure analyzed. Results also highlight that a more equal distribution of shares among larger shareholders is beneficial for disclosure. Moreover, the presence of a dominant financial shareholder at a high level of ownership concentration creates inefficiency of the degree of adherence to the comply-or-explain principle.

Originality/value

This study examines in depth the underexplored issue of “explanation” and exceeds the issue of ownership concentration, which has already been examined extensively, raising the issues of counterweight power and shareholders’ identities, which remain underexplored. In this way, results presented contribute to explaining some causes of the diverse findings that research has found about the relationship between ownership concentration and voluntary disclosure, demonstrating the importance of counterweight power and largest shareholder’s identity. Consequently, when self-regulating initiatives are designed and implemented, legislators, regulators and managers should not ignore the characteristics of the firms’ ownership structure.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 5
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 5 May 2015

Michail Nerantzidis

This paper provides evidence regarding the efficacy of the “comply or explain” approach in Greece and has three objectives: to improve our knowledge of the concept of this…

1792

Abstract

Purpose

This paper provides evidence regarding the efficacy of the “comply or explain” approach in Greece and has three objectives: to improve our knowledge of the concept of this accountability mechanism, to elevate auditors’ potential role in the control of corporate governance (CG) statements and to contribute to the discussion about the reform of this principle; a prolonged dialogue that has been started by European Commission in the light of the recent financial crisis.

Design/methodology/approach

The approach taken is a content analysis of CG statements and Web sites of a non-probability sample of 144 Greek listed companies on the Athens Stock Exchange for the year 2011. Particularly, 52 variables were evaluated from an audit compliance perspective using a coding scheme. From this procedure, the level of compliance with Hellenic Federation of Enterprises (SEV) code, as well as the content of the explanations provided for non-compliance, were rated.

Findings

The results show that although the degree of compliance is low (the average governance rating is 35.27 per cent), the evaluation of explanations of non-compliance is even lower (from the 64.73 per cent of the non-compliance, the 40.95 per cent provides no explanation at all).

Research limitations/implications

The research limitations are associated with the content analysis methodology, as well as the reliability of CG statements.

Practical implications

This study indicates that companies on the one hand tend to avoid the compliance with these recommendation practices, raising questions regarding the effectiveness of the SEV code; while on the other, they are not in line with the spirit of the CG code, as they do not provide adequate explanations. These results assist practitioners and/or policy-makers in perceiving the efficacy of the “comply or explain” approach.

Originality/value

While there is a great body of research that has looked into the compliance with best practices, this study is different because it is the first one that rates not only the degree of the compliance with the code’s practices but also the content of the explanations provided for non-compliance. This is particularly interesting because it adds to the body of research by providing a new approach in measuring the quality of the “comply or explainprinciple in-depth.

Details

Managerial Auditing Journal, vol. 30 no. 4/5
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 26 April 2018

Georgios L. Thanasas, Georgia Kontogeorga and George Asterios Drogalas

In recent years, the principle of the “comply or explain” approach has become the trend in corporate governance statements that are not fully compliant with national codes. This…

Abstract

Purpose

In recent years, the principle of the “comply or explain” approach has become the trend in corporate governance statements that are not fully compliant with national codes. This is because managers of companies deviating from corporate governance codes try to be lawful, providing reasonable explanations; thus, they reach an impasse, copying explanations from other companies, in a mimetic behavior. The purpose of this study is to investigate whether companies listed in Greek Stock exchange tend to imitate one each other thus to be legitimate in terms of the “comply or explain: approach”.

Design/methodology/approach

This study focuses on the “comply or explain” approach in Greek listed companies, analyzing statements by 162 companies (80.2 per cent) listed on the Athens Stock Exchange (ASE), showing a total of 1,211 deviations from the national code. Therefore, the explanations were classified for analysis, grouping them into three main categories and investigating the degree of imitation.

Findings

In total, 96 companies deviating from the Code (56.3 per cent) provided explanations as to their legitimacy practices. Thus, the managers of these companies tried to explain their deviations from the national code in such a way that it could be considered that they tend to imitate each other, striving to be lawful.

Research limitations/implications

Owing to Greece’s ongoing economic crisis, many companies listed on the ASE in previous years have suspended the trading of their shares. An examination of previous years may have led to biased results, owing to the different samples of companies. Another limitation concerns the number of companies in the sample; although it covers almost 80 per cent of listed companies, the actual number of companies is not big enough.

Practical implications

This study tries to investigate whether Greek listed companies comply with or deviate from the National Corporate Governance Code. For that purpose, context analysis was performed on 80.2 per cent of these companies (162 out of 202 companies) for the calendar year 2017. Most companies tried to explain their deviations from the Code in such a way that it could be considered that they tend to imitate each other.

Social implications

Companies that deviate from the corporate governance code tend to imitate each other. This phenomenon occurs mainly in small companies, which, while striving to be lawful, even copy other companies’ phrases verbatim. This study reveals that managers of such companies care to provide an explanation for only deviations from the Code as a logical justification and not to capture the existing situation of their companies.

Originality/value

This study is the first to examine the mimetic behavior on corporate governance statements in Greece. Although the trend of imitation is a fact in developed economies, similar studies never took place on emerge economies. This study contributes to the literature by examining whether the trend of mimetic behavior exists in emerging economies as well.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 5
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 1 August 2016

Adel Elgharbawy and Magdy Abdel-Kader

This paper aims to investigate the possible trade-off between accountability and enterprise in the context of comply or explain governance. The issue was addressed through…

4510

Abstract

Purpose

This paper aims to investigate the possible trade-off between accountability and enterprise in the context of comply or explain governance. The issue was addressed through examining the effect of compliance with the corporate governance code (CGC) on corporate entrepreneurship (CE) and organisational performance.

Design/methodology/approach

Based on cross-sectional survey and content analysis of annual reports, the level of CE and compliance with the CGC were measured in the large and medium-listed companies in the UK during 2010. Partial least squares structural equation modelling (PLS-SEM) was used for data analysis.

Findings

The results suggest no conflict between compliance with the CGC and CE in the UK, which can be attributed to the flexibility of the “comply or explain” approach. This implies that no trade-off between accountability and enterprise in the context of comply or explain governance.

Practical implications

The study provides evidence in support of the regulatory governance framework in the UK and the comply or explain approach at large. This evidence contributes to the debate on the rules-based or principles-based governance, which may affect future CG regulations. It can also guide the directors to achieve the balance between their conformance and performance roles.

Originality/value

The study bridges the gap between CG and CE disciplines through developing a theoretical model that integrate contingency and agency theories lenses. Adopting a holistic approach provides insights into the relationships between CG and CE, rather than investigating the effect of each of these practices separately on organisational performance.

Details

Corporate Governance, vol. 16 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

Book part
Publication date: 17 April 2018

Juliette Senn

The objective of this chapter is to analyse the impact of France’s ‘Grenelle 2’ law of 2010, which applies to environmental accounting disclosures (EADs). More specifically, it…

Abstract

Purpose

The objective of this chapter is to analyse the impact of France’s ‘Grenelle 2’ law of 2010, which applies to environmental accounting disclosures (EADs). More specifically, it seeks to observe whether the ‘Anglo-Saxon’ ‘comply or explain’ model, transposed into the French regulatory framework, influences the disclosure strategies of firms that are listed on a regulated market.

Methodology/approach

Drawing on the theoretical framework of legitimacy and the concept of normativity, an empirical study is conducted on a sample of 96 French firms listed on the SBF index between 2009 and 2014. The effect of regulation is assessed by a content analysis of EAD in annual reports, examining changes in disclosure practices and the contents of disclosures.

Findings

The main results show that explanations for the absence of EAD showed a significant increase after the introduction of the law. We also observe that the new rules had no effect on the number of firms making EADs, although the quality of the disclosures declined. Finally, the results also concern practices of non-disclosure without any accompanying explanation.

Research limitations

The limitations of this study relate to the choices underlying the classifications and observations made during the content analysis.

Practical implications

This study has social relevance in that it supplies information for assessing the transposition of European directives into French law.

Originality/value

This study extends research concerning environmental disclosures by examining a recent accounting object. It also continues the debate on normativity, with its analysis of disclosures subject to a changing regulatory framework.

Details

Sustainability Accounting
Type: Book
ISBN: 978-1-78754-889-3

Keywords

Article
Publication date: 7 May 2010

Cynthia Clark Williams and Elies Seguí‐Mas

The purpose of this paper is to examine the underlying differences in European Union (EU) country approaches to corporate governance and business ethics given the conformity…

2123

Abstract

Purpose

The purpose of this paper is to examine the underlying differences in European Union (EU) country approaches to corporate governance and business ethics given the conformity imposed by the EU's recent standardization directives.

Design/methodology/approach

The authors conducted a multivariate statistical analysis, involving a two‐stage procedure where hierarchical and non‐hierarchical methods are used in tandem, using data from the 27 EU countries and 38 factors from the economic freedom of the world (EFW) index. This method is suitable for structured statistical data and allows for identification of groups that share similar characteristics – in this case among 38 criteria.

Findings

Despite the call for standardization by the EU's Transparency Directive, countries within the EU are adapting their governance and ethics practices, according to their own technical, cultural, and political process, creating unintended changes to the directive, especially in the implementation phase. The paper finds that in countries representative of four different clusters derived from the 27 countries making up the EU, specifically Sweden, Spain, Bulgaria, and Greece, have chosen to significantly adapt their ethics and governance protections to their specific context. While these alterations may serve to inhibit the goals envisioned by the convergence and standardization of the EU's directives, they may also present some improvements as well.

Research limitations/implications

The paper provides empirical support for the comparative governance perspective at the cross‐cultural level for differences in the implementation practices of governance and business ethics across a representative set of four clusters within the 27 EU countries. This paper suggests new avenues of future research for institutional perspectives of corporate governance by suggesting that surface level conformity is only part of the story masking important underlying differences.

Practical implications

The paper offers insights for policy makers interested in enhancing the efficacy of corporate governance regimes across diverse regions such as the EU such that allowing for localization may come at the expense of standardization and comparison, foreign investment, job creation and other intended benefits of such policy initiatives but may also create opportunities for improvements to governance models.

Originality/value

The paper presents a unique cluster analysis based on the 38‐factors used in the EFW index. As such, the authors provide an alternative categorization of countries from previous research in an attempt to capture the current state of corporate governance and business ethics in four detailed case studies in order to move beyond comparisons of two countries which, to date, have dominated the governance research landscape.

Details

Journal of Global Responsibility, vol. 1 no. 1
Type: Research Article
ISSN: 2041-2568

Keywords

Article
Publication date: 9 November 2015

Mario Krenn

The purpose of this article is to explain under what circumstances firm-level adoption of codes of good corporate governance will more likely be superficial rather than…

1262

Abstract

Purpose

The purpose of this article is to explain under what circumstances firm-level adoption of codes of good corporate governance will more likely be superficial rather than substantive in nature. The article contains lessons for any agency or country that attempts to implement deep and lasting changes in corporate governance via codes of good corporate governance.

Design/methodology/approach

The article reviews the literature on compliance with codes of good corporate governance and develops a conceptual model to explain why some firms that have formally adopted a code of good governance decouple this policy from its actual use.

Findings

Decoupling in response to the issuance of codes of good corporate governance will be more attractive to firms and also more sustainable under the following conditions: firms’ compliance costs are relatively high firms’ costs of outright and visible non-compliance are relatively high and outsiders’ compliance monitoring costs are relatively high.

Originality/value

The article contributes to the debate on compliance and convergence and provides policymakers with a conceptual framework for assessing the likelihood of successful regulatory change in corporate governance.

Details

Journal of Financial Regulation and Compliance, vol. 23 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 5 June 2017

Michail Nerantzidis and Anastasios Tsamis

The purpose of this study is to review the prior empirical studies that investigate the corporate governance (CG) determinants and provide a synopsis, and explore the main factors…

1186

Abstract

Purpose

The purpose of this study is to review the prior empirical studies that investigate the corporate governance (CG) determinants and provide a synopsis, and explore the main factors that drive the level of CG disclosure in the Greek context.

Design/methodology/approach

The authors perform an extensive review of the relevant literature and identify 24 papers that use various potential factors. Afterwards, the authors construct two different GC indices to investigate these potentials, and the authors conduct multiple regression analysis to identify and explain these determinants.

Findings

The empirical analysis shows that large Greek listed firms are more likely to disclose more CG information in the CG statement. In addition, the analysis shows statistically significant association with performance-related variables (such as Tobin’s Q and liquidity) and CG-related variables (such as independent members, board meetings and women on board).

Research limitations/implications

The results of the study support theoretical arguments that Greek listed firms disclose CG information not only to fulfill task-related requirements but also to be perceived as social and legitimate.

Originality/value

To the best of the authors’ knowledge, this is the first study that provides a synopsis of the prior literature in CG determinants, while it goes one step further by using the majority of the potential factors that have been used so far. Moreover, this study uses a multi-theoretical framework to address theoretical development, an approach that generates an outline of fruitful directions for future research.

Details

Corporate Governance: The International Journal of Business in Society, vol. 17 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 10 July 2018

Konstantinos Vasilakopoulos, Christos Tzovas and Apostolos Ballas

This paper aims to investigate the impact that governance mechanisms have on European Union ‘banks income smoothing behavior.

Abstract

Purpose

This paper aims to investigate the impact that governance mechanisms have on European Union ‘banks income smoothing behavior.

Design methodology/approach

The authors examine the impact that corporate governance mechanisms included in European Commissions’ proposals regarding the improvement of corporate governance mechanisms (Green Paper) have upon European Union banks’ accounting policy decisions regarding the level of loan loss provisions (LLPs). In addition, the authors examine whether banks’ capital structure operates as an effective internal corporate governance practice. The authors investigate the association between certain corporate governance characteristics and the level of LLPs for a sample of 98 banks from 23 European Union countries for the period of 2010-2013, in the aftermath of the 2008 financial crisis. To test the hypotheses, a multivariate regression model is run. Similar to previous research, the authors use ordinary least squares analysis to test the results.

Findings

Empirical findings provide evidence that there is a positive association between LLPs and accounting income, implying the existence of an income-smoothing pattern of provisions. In addition, the results suggest that banks managers’ decision to smooth income may differ with regard to the board structure, the level of leverage and the provision of disclosure for remuneration for chief executive officer.

Originality/value

The findings of this study contribute to the existing literature concerning banks’ income smoothing behavior. These findings can be useful to regulators, as the authors provide some evidence regarding the effectiveness of the European Union corporate governance framework.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 5
Type: Research Article
ISSN: 1472-0701

Keywords

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