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Book part
Publication date: 15 August 2007

Abdul Hadi Zulkafli and Fazilah Abdul Samad

Corporate governance is regarded as a major issue during the post-financial crisis period in Asia. These countries have implemented corporate governance reforms to enhance…

Abstract

Corporate governance is regarded as a major issue during the post-financial crisis period in Asia. These countries have implemented corporate governance reforms to enhance the protection of shareholders and stakeholders interests. Such reforms have affected the conduct of business of all corporations in the region as it allows for greater monitoring especially by the shareholders. Unlike earlier studies which focused on non-financial firms, this study analyzes the corporate governance of listed banking firms in nine Asian emerging markets. Corporate governance mechanisms that serve to monitor the banking firms can be classified into Ownership Monitoring Mechanism, Internal Control Monitoring Mechanism, Regulatory Monitoring Mechanism, and Disclosure Monitoring Mechanism. This paper suggests that there are differences in the monitoring mechanisms of banking firms and non-bank firms.

Details

Issues in Corporate Governance and Finance
Type: Book
ISBN: 978-1-84950-461-4

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Article
Publication date: 11 November 2009

Ayse Olcay Costello and Thomas G. Costello

To better understand the relationship between the headquarters and subsidiaries of multinational corporations, we introduce and test a theoretical framework that builds on…

Abstract

To better understand the relationship between the headquarters and subsidiaries of multinational corporations, we introduce and test a theoretical framework that builds on and extends the positive agency theoretic corporate governance literature. Results indicate that there are three types of subsidiary bundles of corporate governance mechanisms that are used by multinational corporations. In addition, the following factors can help predict what type of subsidiary bundle a multinational corporation will use to align the interests of its headquarters with a particular subsidiary: the multinational corporation’s international strategy, its subsidiary’s importance, environmental uncertainty faced by its subsidiary, and its subsidiary’s age.

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Article
Publication date: 17 February 2021

Francisco Elder Escossio de Barros, Ruan Carlos dos Santos, Lidinei Eder Orso and Antonia Márcia Rodrigues Sousa

From the agency theory’s point of view, this paper aims to analyze corporate governance mechanisms about the characteristics of the companies quoted in the segments…

Abstract

Purpose

From the agency theory’s point of view, this paper aims to analyze corporate governance mechanisms about the characteristics of the companies quoted in the segments Bovespa Mais and Bovespa Mais 2 and their influence on the creation of value in preparation for the opening of the initial public offering (IPO).

Design/methodology/approach

A quantitative approach was adopted to achieve the proposed objective using the panel data with fixed effects and secondary data collected on the Comissão de Valores Mobiliários website, using statistical software Stata® 13.0 for statistical tests. The population comprises non-financial companies belonging to the Bovespa Mais and Bovespa Mais Level 2 groups, as the survey sample took into account the period of adhesion of the companies, totaled in 15 companies, which cover the period from 2008 to 2019. The selected variables correspond to the ownership structure’s characteristics, then the board’s composition and the fiscal council as the body responsible for supervising the administrators’ acts.

Findings

The main results indicate that the number of independent members on the board of directors and the supervisory board’s participation positively influence market performance. However, it also reveals that the concentration of ownership brings fundraising for other companies’ acquisitions, risk reduction concerning information asymmetry between investing powers.

Research limitations/implications

The main results indicate that the number of independent members on the board of directors and the supervisory board’s participation positively influence market performance. Despite this, it also reveals that the concentration of ownership brings fundraising for other companies’ acquisitions, risk reduction concerning information asymmetry between investing powers.

Practical implications

This paper advances a comparative institutional perspective to explain capital market choice by firms making an IPO in a foreign market. This paper finds that internal governance characteristics (founder-chief executive officer, executive incentives and board independence) and external network characteristics (prestigious underwriters, degree of venture capitalist syndication and board interlocks) are significant predictors of foreign capital market choice by foreign IPO firms.

Social implications

While product market choices have been central to strategy formulation for firms in the past, financial markets’ integration makes capital markets an equally crucial strategic decision. This paper advances a comparative institutional perspective to explain capital market choice by firms making an IPO in a foreign market.

Originality/value

This situation generates value to shareholders and is perceived by the market and, ultimately, generates a direct relationship with the market performance of companies. While product market choices have been central to strategy formulation for firms in the past, financial markets’ integration makes capital markets an equally major strategic decision.

Details

Corporate Governance: The International Journal of Business in Society, vol. 21 no. 5
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 23 February 2010

Constantinos Chalevas and Christos Tzovas

The purpose of this paper is to examine the effect of the mandatory adoption of corporate governance mechanisms on serious firm issues (earnings manipulation, management…

Abstract

Purpose

The purpose of this paper is to examine the effect of the mandatory adoption of corporate governance mechanisms on serious firm issues (earnings manipulation, management effectiveness and firm's financing).

Design/methodology/approach

Cross‐sectional analysis is employed to investigate the association between the corporate governance mechanisms that have been introduced by the L.3016/2002 and earnings manipulation, management effectiveness and firm's financing.

Findings

This study finds that the mandatory corporate governance mechanisms decrease firms' weighted average cost of capital, increase firm's financing and have no impact on firms' effectiveness and earnings manipulation.

Practical implications

This study provides insights regarding the extent to which the mechanisms of corporate governance provided by the L.3016/2002, improve the quality of financial statements prepared by Greek companies. The conclusions of the study are useful for the providers of equity and debt capital, the legislators and the shareholders.

Originality/value

The paper tests, empirically, the effect of the mandatory corporate governance mechanisms on earnings manipulation, management effectiveness and firm's financing.

Details

Managerial Finance, vol. 36 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 31 October 2019

Uchechukwu Nwoke

This paper aims to identify and analyze the neoliberal, Anglo-American corporate governance mechanisms which embed shareholder value in Nigeria, and assess how they…

Abstract

Purpose

This paper aims to identify and analyze the neoliberal, Anglo-American corporate governance mechanisms which embed shareholder value in Nigeria, and assess how they constitute major “practical barriers” to effective corporate social responsibility (CSR) in the country. While some of these mechanisms operate internally – performance-related pay (executive remuneration) – the use of non-executive directors – others operate externally – the markets for corporate control and the stock markets.

Design/methodology/approach

The paper adopts the doctrinal approach through a critical evaluation of concepts. Using existing literature in the subject area, it evaluates the nature of these mechanisms and argues that their operations amount to “practical barriers” to effective CSR in the country.

Findings

The paper finds that the existence of these mechanisms incentivizes corporate managers to maximize shareholder value and raise the share price of corporations as high as possible. It also leads to the financialization of corporate governance, rent seeking and the pursuit of short-term profits by corporations. In this context, within the Nigerian corporate governance framework, the existence and operations of these mechanisms amount to “practical barriers” to effective CSR.

Originality/value

The paper offers a fresh insight into the existence and operations of the neoliberal corporate governance mechanisms which embed shareholder value. By critically assessing the operations of these mechanisms in the Nigerian situation, it extends the body of knowledge in this area by showing how they amount to practical barriers to effective CSR in the country.

Details

International Journal of Law and Management, vol. 61 no. 5/6
Type: Research Article
ISSN: 1754-243X

Keywords

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Article
Publication date: 1 December 2007

Khaled Aljifri and Mohamed Moustafa

The main aim of this study is to investigate empirically the effect of some internal and external corporate governance mechanisms on the UAE firm performance (i.e.…

Abstract

The main aim of this study is to investigate empirically the effect of some internal and external corporate governance mechanisms on the UAE firm performance (i.e., Tobin’s q). Like many of the developing countries all over the world, the UAE has recently initiated the application of the international standards of corporate governance as a part of its merge with the global economy. This study utilizes a sample of 51 firms using the accounting and market data available for 2004. The sample firms are all listed in either the Dubai Financial Market or the Abu Dubai Securities Market. The cross‐sectional regression analysis is employed to test the hypotheses of the study. The results of this study show that the governmental ownership, the debt ratio (total debt/total assets), and the payout dividends ratio have a significant impact on the firm performance; whereas the institutional investors, the board size, the firm size (sales), and the audit type show a non‐significant impact. This study concludes that three of the corporate governance mechanisms in the UAE used in this study appear to be strong enough to affect the firm performance. However, the other four mechanisms are found to have a weak effect on the firm performance which could be a result of the significant absence of some aspects of corporate governance practices and lack of enforcement of rules.

Details

Journal of Economic and Administrative Sciences, vol. 23 no. 2
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 5 September 2018

Jonas Schäuble

The purpose of this paper is to investigate the impact of external and internal corporate governance mechanisms on agency costs.

Abstract

Purpose

The purpose of this paper is to investigate the impact of external and internal corporate governance mechanisms on agency costs.

Design/methodology/approach

The author uses data from German firms that were listed in the regulated market of the Frankfurt Stock exchange during 2006-2011. Agency costs were measured using stochastic frontier analysis, a relatively new approach to estimate agency costs. The regression analysis is applied to test the model.

Findings

The results indicate that an industry specialized audit firm, the presence of a large audit firm, abnormal audit fees, management ownership and variable management compensation are significantly negatively associated with the level of a firms’ agency costs. In contrast, this seems not to be true for the existence of an audit committee for which the results of the paper document a non-significant association.

Originality/value

The paper contributes to the existing literature in several ways. First, the research design is to the best of the authors’ knowledge the first that investigates the influence of different corporate governance mechanisms on the level of agency costs. Second, previous studies are mainly focused on the US audit market. This focus on the US audit market leaves uncertainties regarding the direction and magnitude of the empirical relationship in the European and German environmental context. Finally, the paper provides initial empirical evidence for a sample of German IFRS listed companies (IFRS – International Financial Reporting Standards).

Details

Corporate Governance: The International Journal of Business in Society, vol. 19 no. 1
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 24 August 2017

Hamdan Amer Al-Jaifi, Ahmed Hussein Al-rassas and Adel Ali AL-Qadasi

The purpose of this paper is to examine the impact of corporate governance strength on stock market liquidity in an emerging country, namely, Malaysia, by constructing a…

Abstract

Purpose

The purpose of this paper is to examine the impact of corporate governance strength on stock market liquidity in an emerging country, namely, Malaysia, by constructing a corporate governance score that captures both internal monitoring mechanisms (board of directors’ characteristics, audit committee’s characteristics and internal audit function) and external monitoring mechanism (audit quality).

Design/methodology/approach

The study uses a sample of 2,020 yearly firm observations in Bursa Malaysia over the period 2009-2012. The ordinary least square regression and several estimation methods such as two-stage least squares using instrumental variables (IV-2SLS) and dynamic GMM are employed.

Findings

This study finds a significant positive association between corporate governance effectiveness and stock market liquidity. The finding is robust to alternative liquidity measurements, to alternative estimation methods, and to endogeneity bias.

Research limitations/implications

This result implies that the firms with effective monitoring mechanisms mitigate information asymmetry which leads to less adverse selection problems among traders.

Practical implications

This study provides implications for regulators to help design regulations that enhance stock market liquidity. This study could also help investors and traders to formulate their trading decisions, and enables firms to know the importance of strengthening the corporate governance monitoring mechanisms.

Originality/value

This study constructs a corporate governance effectiveness measure by combining both internal and external monitoring mechanisms. These mechanisms have not been constructed together in one score in the corporate governance literature and the impact of internal audit function, as an internal monitoring mechanism on liquidity, has yet to be examined.

Details

International Journal of Managerial Finance, vol. 13 no. 5
Type: Research Article
ISSN: 1743-9132

Keywords

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Article
Publication date: 11 November 2019

María Sacristán-Navarro and Laura Cabeza-García

The purpose of this paper is to describe internal corporate governance mechanisms in family firms as well as conflicts that may arise among shareholders and family members…

Abstract

Purpose

The purpose of this paper is to describe internal corporate governance mechanisms in family firms as well as conflicts that may arise among shareholders and family members in the absence of specific corporate governance mechanisms.

Design/methodology/approach

After presenting theoretical concepts, the authors study the case of Spanish family firm El Corte Inglés to understand some of the corporate governance difficulties the company has experienced over the past few years.

Findings

This case illustrates how corporate governance problems can arise because the right mechanisms have not been used, leading to conflicts among family members, valuation problems and power struggles.

Practical implications

There is a need for family firms to employ suitable corporate governance mechanisms as governance complexity increases.

Originality/value

This study aims to contribute to the understanding of corporate governance problems among family members and their possible solutions.

Details

Journal of Family Business Management, vol. 10 no. 2
Type: Research Article
ISSN: 2043-6238

Keywords

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Article
Publication date: 15 August 2017

Yousef Hassan, Rafiq Hijazi and Kamal Naser

The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies…

Abstract

Purpose

The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies.

Design/methodology/approach

Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability.

Findings

While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations.

Research limitations/implications

The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system.

Originality/value

To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

Details

Managerial Auditing Journal, vol. 32 no. 7
Type: Research Article
ISSN: 0268-6902

Keywords

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