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Open Access
Article
Publication date: 27 March 2023

Giacomo Morri, Rachele Anconetani and Luciano Pistritto

Corporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can…

1483

Abstract

Purpose

Corporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can prevent issues and corporate scandals as the company ensures greater transparency and accountability. Accordingly, this paper aims to investigate the relationship between shareholder-oriented corporate governance mechanisms, value and performances in the real estate sector.

Design/methodology/approach

This paper investigates the relationship between corporate governance mechanisms, performance and value in a sample of 111 USA real estate firms. After collecting data from 2014 to 2018, this paper tests the research hypothesis using the linear fixed-effect model.

Findings

The results demonstrate a positive impact of shareholder-oriented corporate governance mechanisms on performance and value. In particular, firms with no chief executive officer (CEO) duality and staggered board mechanisms and recognizing excess variable compensation to the firms' executive have a significantly higher Tobin's Q, return on assets (ROA) and price-to-book performance.

Practical implications

The implications are twofold: on the one hand, this motivates shareholders to establish new corporate control mechanisms to maximize value, attract more capital and improve operating performance. On the other hand, this allows investors to direct the investors' resources toward real estate firms with effective corporate governance mechanisms that may return higher performance and value.

Originality/value

Focusing on the real estate industry, where governance is expected to have a lower impact due to solid regulation, especially in real estate investment trusts (REITs), the research allows the formulation of industry-specific inferences that may be generalized for the general market.

Details

Journal of Property Investment & Finance, vol. 41 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Open Access
Article
Publication date: 3 August 2022

Dermeval Martins Borges Júnior

This study aims to examine the relationship between corporate governance mechanisms and the capital structure of Latin American firms.

2818

Abstract

Purpose

This study aims to examine the relationship between corporate governance mechanisms and the capital structure of Latin American firms.

Design/methodology/approach

The sample included companies from Argentina, Brazil, Chile, Colombia, Mexico and Peru. The authors collected data from 201 non-financial companies between 2009 and 2018, totalizing 1,716 firm-year observations. The data were analyzed using descriptive statistics and linear regression models with panel data.

Findings

The main results indicated that chief executive officer duality, legal protection system and corporate social responsibility voluntary disclosure impact the firm's total debt ratio, corresponding to a positive effect for the first two variables and a negative for the last.

Originality/value

This study advances in two main ways. Firstly, due to the broad approach in which the authors addressed corporate governance, involving board composition, ownership structure, minority shareholders legal protection system and information disclosure. Secondly, by presenting empirical evidence about the effects of corporate governance on capital structure from an extensive sample of Latin American firms, the authors expect to contribute to the international debate on the capital structure due to the unique characteristics of Latin America in this regard.

Details

Journal of Capital Markets Studies, vol. 6 no. 2
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 31 May 2019

Myoung Gi Lee and Jin San Kim

The purpose of this study is to find the effects of corporate governance on executive compensation using the sample of Korean manufacturing firms listed on the Korea Exchange…

160

Abstract

The purpose of this study is to find the effects of corporate governance on executive compensation using the sample of Korean manufacturing firms listed on the Korea Exchange (KRX) from 2005 to 2012. In order to do that, this study extends empirical models of Core et al. (1999), Fahlenbrach (2009), Giroud and Mueller (2011), and finds the following results. First, internal corporate governance negatively affects executive compensation, implying that a good corporate governance can prevent outrageous compensation to top executives with poor performance. On the other hand, the interactions between internal and external corporate governance mechanisms have mixed results. While the first interaction has little impact on executive compensation, the second interaction among three different mechanisms has a positive and statistically significant impact. These results imply that while internal corporate governance and product market competition works against executive compensation, labor union may be in the same boat with managers in terms of compensation. Unlike most previous studies based on one-dimensional approach, this study investigates interactions among various corporate governance mechanisms. Overall results have a few important economic and social implications. Because internal corporate governance works as an effective mechanism, policymakers should find ways to make internal control mechanisms as independent as possible.

Details

Journal of Derivatives and Quantitative Studies, vol. 27 no. 2
Type: Research Article
ISSN: 2713-6647

Keywords

Open Access
Article
Publication date: 1 September 2021

Federica Doni, Antonio Corvino and Silvio Bianchi Martini

Lately, sustainability issues are increasingly affecting all sectors, even if oil and gas industry is highly required to improve its social performance because of the societal…

6844

Abstract

Purpose

Lately, sustainability issues are increasingly affecting all sectors, even if oil and gas industry is highly required to improve its social performance because of the societal pressure to environmental protection and social welfare. Sustainability concerns and corporate governance features and practices are more and more connected because sustainability has been perceived as a crucial topic by owners and managers. In this perspective, the empirical analysis aims to explore whether and to what extent, sustainability-oriented corporate governance model is linked with social performance.

Design/methodology/approach

By adopting a multi-theoretical framework that includes the legitimacy theory, the stakeholder theory and the resource-based view theory, this analysis used a sample of 42 large European-listed companies belonging to the oil and gas industry. The authors run fixed effects regression models by using a dependent variable, i.e. the social score, available in ASSET4 Thomson Reuters, and some independent variables focused on sustainable corporate governance models, stakeholder engagement, firm profitability, market value and corporate risk level.

Findings

Drawing upon the investigation of a moderating effect, findings display that stakeholder engagement is positively associated with corporate social performance and it can be considered an important internal driver able to shape a corporate culture and most likely to address corporate social responsibility issues.

Research limitations/implications

This study confirms the need to develop an organizational and holistic approach to corporate governance practices by analyzing internal and external governance mechanisms. From the managerial perspective, managers should opt for a sustainable corporate governance model, as it is positively correlated with corporate social performance.

Originality/value

There is an urgent need to investigate sustainability issues and their potential association with firm internal mechanisms, particularly in the oil and gas industry. This paper can extend the current body of knowledge by pointing out a positive relationship between stakeholder engagement and firm social performance.

Open Access
Article
Publication date: 22 June 2023

Sulochana Dissanayake, Roshan Ajward and Dilini Dissanayake

This study examines whether managers adopt corporate social responsibility (CSR) disclosures to suppress earnings management practices and whether corporate governance mechanisms

1631

Abstract

Purpose

This study examines whether managers adopt corporate social responsibility (CSR) disclosures to suppress earnings management practices and whether corporate governance mechanisms could limit such practices.

Design/methodology/approach

A quantitative approach was followed, in which secondary data from listed firms from 2014 to 2019 were gathered. Descriptive statistics and inferential techniques were performed, which included correlation, ordered logistic regression and 2SLS panel regression analyses.

Findings

The findings indicate that firms use CSR disclosure to conceal managers' opportunistic behaviour via earnings management as an entrenchment strategy and that corporate governance mechanisms could significantly constrain such behaviour.

Research limitations/implications

This study goes beyond the conventional agency theory by incorporating additional theoretical perspectives from stakeholder and legitimacy theories, resulting in a multi-theoretical perspective in conceptualizing the study.

Practical implications

The findings are expected to have significant policy implications, especially in limiting the opportunistic use of CSR disclosures and reducing earnings management practices to safeguard stakeholders' interests and ensure the sustainability of business entities.

Originality/value

The levels of CSR and board governance practices are captured using comprehensive indices. Moreover, earnings management was operationalized using both accrual-based and real earnings management proxies. Furthermore, while addressing an empirical dearth noted, the findings provide significant policy implications for limiting managers' opportunistic and unethical use of CSR disclosures with corporate governance mechanisms.

Details

Asian Journal of Accounting Research, vol. 8 no. 4
Type: Research Article
ISSN: 2459-9700

Keywords

Open Access
Article
Publication date: 8 March 2022

Babarindé René Aderomou and McBride Nkhalamba

Establishing integrated reporting and thinking within mainstream business practice as the norm in the public and private sectors is fundamental. Corporate governance assessment in…

Abstract

Establishing integrated reporting and thinking within mainstream business practice as the norm in the public and private sectors is fundamental. Corporate governance assessment in the APRM Country Review Reports is not done in a way to enable more decision-useful reporting. This policy brief urges APRM's consultants to adopt a particular approach to frame corporate governance assessment. By adopting an inductive qualitative approach, retrieving academic articles and institutions' reports from the literature, this study develops a novel framework to ensure more reliability, completeness, consistency and comparability in the Country Review reporting. It is contended that such reporting can assist the APRM Country Review Missions in corporate governance assessment.

Details

Emerald Open Research, vol. 1 no. 13
Type: Research Article
ISSN: 2631-3952

Keywords

Open Access
Article
Publication date: 10 August 2022

Emilia Klepczarek

The purpose of this study is to provide the conditions for governance effectiveness and explain why the same rules often result in not the same norms.

1503

Abstract

Purpose

The purpose of this study is to provide the conditions for governance effectiveness and explain why the same rules often result in not the same norms.

Design/methodology/approach

The author proposes a “corporate governance culture” concept explaining the differences within corporate governance institutions and making it possible to measure their effectiveness. Based on a literature review that included 186 research studies published in the corporate governance field, the author found that most (160) concern structural numerical variables. Only 26 refer to behavioural and cultural issues, and they support the idea of an interdisciplinary approach to governance problems.

Findings

A significant contribution of this paper is that it proposes an integrative framework that operationalises psychological, sociological and philosophical issues that influence corporate governance mechanisms. The proposed concept can reanimate the debate about the need for tight governance regulations or leaving room for a loose governance regime.

Originality/value

The idea of “corporate governance culture” explains the divergences identified in studies on corporate governance mechanisms, pointing out behavioural and cultural issues as crucial aspects of governance bodies.

Details

Corporate Governance: The International Journal of Business in Society, vol. 23 no. 1
Type: Research Article
ISSN: 1472-0701

Keywords

Open Access
Article
Publication date: 20 March 2018

Hazem Ramadan Ismael and Clare Roberts

This study aims to identify the factors that lead non-financial companies listed in the UK to use an internal audit function (IAF) as a monitoring mechanism. Although the use of…

10184

Abstract

Purpose

This study aims to identify the factors that lead non-financial companies listed in the UK to use an internal audit function (IAF) as a monitoring mechanism. Although the use of an IAF in the UK is voluntary, no prior research has examined the drivers for using one.

Design/methodology/approach

Financial and non-financial data were collected from the annual reports of 332 UK non-financial companies listed on the London Stock Exchange (LSE) Main Market. Univariate tests and multivariate logistic regression tests were used to test the research hypotheses. A theoretical framework based on both agency theory and transaction cost economics (TCE) theory was used to explain the economic factors affecting the use of an IAF.

Findings

The study provides evidence that firm size, level of internal risks, agency problem between owners and managers and existence of an effective audit committee are associated with the existence of an IAF. Thus, the need to have strong internal control and risk management systems and to reduce both internal and external agency costs drives companies to have an IAF. These results suggest the importance of IAF as an internal corporate governance tool and the effectiveness of UK governance regulations in monitoring the effectiveness of internal control systems.

Practical implications

Given the importance of the IAF’s corporate governance role, the study provides some policy implications. Regulators should pay more attention to the issue of maintaining an IAF, especially by large companies, the relationship between the IAF and other governance parties, especially the audit committee, and the disclosure of more relevant information about the IAF’s characteristics and practices.

Originality/value

This is the first study to examine the factors affecting the existence of the IAF within the UK’s distinctive regulatory approach of “comply or disclose reasons”. Furthermore, it provides a theoretical framework that explains how both the agency theory and TCE theory can interpret the adoption of internal audit.

Details

Managerial Auditing Journal, vol. 33 no. 3
Type: Research Article
ISSN: 0268-6902

Keywords

Open Access
Article
Publication date: 15 July 2021

Giuseppe Nicolò, Giovanni Zampone, Giuseppe Sannino and Serena De Iorio

Recent regulatory changes in Europe have promoted non-financial reporting practices (e.g., Directive, 2014/95/EU) and gender diversity in decision-making positions. Special…

6213

Abstract

Purpose

Recent regulatory changes in Europe have promoted non-financial reporting practices (e.g., Directive, 2014/95/EU) and gender diversity in decision-making positions. Special attention is devoted to promoting the gender balance on corporate boards as a key mechanism to enhance corporate governance effectiveness and better address multiple stakeholders' needs. With this in mind, this study intends to examine the impact of boardroom gender diversity on Environmental Social Governance (ESG) disclosure practices in the European listed firms' context.

Design/methodology/approach

The study applies different panel data models on an extended sample of 1,392 firms from 21 European Union (EU) countries for six years (2014–2019).

Findings

Findings allow to spotlight the positive role exerted by the presence of women directors on the boards in enhancing ESG disclosure, both at the overall and specific (individual ESG scores) level.

Research limitations/implications

Policymakers and regulators might consider the study's evidence as a stimulus to continue in promoting strategic actions and reforms that foster gender equality and balance in corporate decision-making positions.

Practical implications

Creating a heterogeneous and diversified board of directors may support implementing a “sustainable corporate governance” recently claimed by the EC.

Originality/value

The study contributes to the literature by disentangling the links between gender diversity and ESG disclosure over a period that covers a long season of European regulations and measures that affected both non-financial reporting practices and the board of directors' composition. Accordingly, it can contribute to enhancing the practical and theoretical understanding of the pivotal role that gender diversity may exert in strengthening corporate governance and, in turn, corporate transparency and accountability behaviours about non-financial issues.

Details

Journal of Applied Accounting Research, vol. 23 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

Open Access
Article
Publication date: 23 May 2022

Wenjie Bi, Yujie Wang, Yi Xiang and Feida Zhang

In this paper the authors aim to argue that the existence of a strong corporate governance mechanism (a formal credibility-enhancing mechanism) and the presence of a more…

1260

Abstract

Purpose

In this paper the authors aim to argue that the existence of a strong corporate governance mechanism (a formal credibility-enhancing mechanism) and the presence of a more trustworthy-looking CEO (an informal credibility-enhancing mechanism) are substitutes.

Design/methodology/approach

By using machine-learning-based facial-feature-point detection technique, the authors construct a proprietary facial-trustworthiness database for a large-scale of CEOs in the US listed companies. First, the authors manually search for qualifying CEO image from websites and annual reports. Second, by following the neuroscience and psychology literature, the authors use the machine-learning-based face detector to identify the facial features in the CEO photos to calculate a rich and reliable set of facial-trustworthiness measures. The authors then construct a composite facial-trustworthiness index for each CEO. After obtaining accounting data, the authors’ final sample comprises 16,201 firm-year observations for 3,186 CEOs in the sample period of 2000-2018.

Findings

The results of the authors’ regression analyses show a negative association between board monitoring intensity and CEOs' facial trustworthiness, indicating that board directors may factor CEOs' facial trustworthiness into their monitoring decisions. Moreover, the authors find that these results are mainly driven by CEOs whose tenure is below the third quartile (i.e. eight years). The authors further find stronger results for externally hired CEOs than internally promoted CEOs. Finally, the authors’ results remain robust when using change models or subsample of CEO photos in recent years.

Originality/value

First, to the best of the authors’ knowledge, this is the first study that adopts a large sample to provide systematic evidence on the directors' use of facial trustworthiness. This study extends the literature by documenting the impacts of CEOs' individual characteristics on the board monitoring intensity. Second, the results of this study emphasized the important role of perceptions based on executives' facial appearance in firm valuation, executive compensation and audit fee, and by presenting empirical evidence that CEOs' facial trustworthiness affects board monitoring intensity. Third, this study responds to the call for research on personalized trust by Hsieh et al. (2020).

Details

China Accounting and Finance Review, vol. 24 no. 4
Type: Research Article
ISSN: 1029-807X

Keywords

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