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Article
Publication date: 6 February 2024

Yan Zhang

Much prior work involving director incentives and corporate behaviour has been focussing on their absolute dollar value or the intrinsic value and generated mixed findings…

Abstract

Purpose

Much prior work involving director incentives and corporate behaviour has been focussing on their absolute dollar value or the intrinsic value and generated mixed findings. Comparison theories, however, suggest that the relative value of an incentive may be the main drive for individual performance. This study attempts to investigate the role of director relative pay in promoting the board’s intervention with unrelated diversification decisions.

Design/methodology/approach

The analysis uses data from firms operating in more than one segment during the period from 1999 to 2019. Data were obtained from WRDS databases. Ordinary least squares (OLS) regression analysis and the two-stage system generalized method of moments (GMM) were run to test the hypotheses. To test the robustness of the findings, alternative proxies for the key independent variables were used in separate analyses.

Findings

The results support the hypothesis that unrelated diversification negatively impact firm performance, while higher director relative pay will help reduce unrelated business diversification. The absolute director pay, however, has no significant impact on corporate strategic choices. The results also highlight the moderating effect of director overcompensation. Director overcompensation will cancel out the impact of relative director pay on unrelated diversification.

Originality/value

This study takes a fresh theoretical perspective by framing the investigation using the dimensional comparison theory to address the single untended comparison framework in the director pay structure – the intra-individual framework. It is the first to investigate the role of director relative pay in corporate strategic choices. The findings support the contention that the relative value of the incentive is an important indicator of the effectiveness of the pay.

Details

Management Decision, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 23 November 2023

Iman Harymawan, Melinda Cahyaning Ratri and Eka Sari Ayuningtyas

This study aims to investigate the correlation between a CEO's business background and the readability of financial statement footnotes in Indonesia.

Abstract

Purpose

This study aims to investigate the correlation between a CEO's business background and the readability of financial statement footnotes in Indonesia.

Design/methodology/approach

This study utilizes a sample period spanning from 2010 to 2018 and employs various statistical tests, including Propensity Score Matching (PSM), Coarsened Exact Matching (CEM) and the Heckman Model, to demonstrate that it can address issues of causality and endogeneity without introducing bias.

Findings

As a result, the findings of this study indicate a statistically significant negative relationship between CEOs with busy schedules and the readability of financial statement footnotes. This suggests that companies led by busy CEOs are more likely to have financial statement footnotes that are easier to read.

Research limitations/implications

These findings hold significance for clarifying research related to the challenges of contextual analysis in financial statement footnotes, which are distributed by companies on a sentence-by-sentence basis.

Practical implications

The practical implications of the findings pertain to actionable steps that management can undertake and also offer regulators opportunities to monitor the potential for standard setting.

Originality/value

Based on the results presented, the authors are optimistic that the findings will pave the way for broader research on the impact of a busy CEO, encompassing not only financial aspects but also non-financial dimensions. The growing popularity of readability is driven by the proliferation of textual reports that pose challenges in analysis and raise numerous inquiries.

Details

Asian Review of Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 2 November 2023

Yeut Hong Tham

This study comprehensively reviews the global literature on busy boards and audit committees.

Abstract

Purpose

This study comprehensively reviews the global literature on busy boards and audit committees.

Design/methodology/approach

Six eight articles on busy boards and audit committees from prominent accounting journals are reviewed and analyzed under the “reputation” and “busyness” premise.

Findings

Most studies advocating the “reputation” hypothesis have the consensus that busy directors have their benefits (knowledge spillovers), particularly regarding sharing their in-depth knowledge, experiences and expertise. This phenomenon is pronounced for younger and IPO firms, which have high advising and financing needs. From the “busyness” perspective, busy directors are too overboard in carrying out their duty effectively and responsibly.

Practical implications

This study identifies future research avenues on busy boards/audit committees and suggests that policymakers and regulators should limit the number of board appointments.

Originality/value

This is the first study to extensively amalgamate research on busy directors and audit committees. It reveals the various proxies used to measure the busyness of board and audit committee members and the consequences of busyness.

Details

Asian Review of Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 19 October 2023

Peter Nderitu Githaiga

The purpose of this study was to examine the moderating role of institutional ownership on the relationship between board gender diversity and earnings management (EM) among…

Abstract

Purpose

The purpose of this study was to examine the moderating role of institutional ownership on the relationship between board gender diversity and earnings management (EM) among listed firms in East African Community (EAC) partner states.

Design/methodology/approach

The study used a sample of 71 firms listed in the EAC partner states over 2011–2020. Data were handpicked from the individual firm's audited annual financial reports. Based on the results of the Hausman test, the study used the results of the fixed-effect regression model to test the hypotheses. To test the robustness of the results, the study employed an alternative measure of EM and two additional econometric techniques, including the pooled ordinary least squares (OLS) and the system generalized method of moments (GMM).

Findings

The empirical findings revealed that female directors improve the board's effectiveness in monitoring managerial roles. Specifically, the results showed a significantly negative relationship between the proportion of women in the corporate board and EM (as measured by discretionary accruals (DAs)). The findings further revealed an inverse relationship between the proportion of institutional ownership and EM. Finally, the results further demonstrated that institutional ownership enhances the role of board gender diversity in mitigating EM among listed firms in the EAC.

Practical implications

The findings of this study may be useful to managers, investors and regulators in assessing the role of institutional ownership and women's participation on corporate boards as a strategy for alleviating unethical manipulation of earnings.

Social implications

The findings of this study contribute to the growing concern on gender inequality, especially the marginalization of women from the paid labor force and decision-making. The findings highlight the importance of having more women in the corporate board since this may help in mitigating corporate fraud. Similarly, the findings highlight the importance of institutional ownership as a corporate governance (CG) tool.

Originality/value

Previous studies have reported mixed empirical results on whether board gender diversity mitigates EM. To the best of the author's knowledge, this is the first paper to fill the existing gap by exploring whether institutional ownership moderates the relationship between board gender diversity and EM among listed firms in the EAC.

Details

Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 7 September 2023

Muhammad Farooq, Qadri Al-Jabri, Muhammad Tahir Khan, Asad Afzal Humayon and Saif Ullah

This study aims to investigate the relationship between corporate governance characteristics and the financial performance of both Islamic and conventional banks in the context of…

Abstract

Purpose

This study aims to investigate the relationship between corporate governance characteristics and the financial performance of both Islamic and conventional banks in the context of an emerging market, i.e. Malaysia.

Design/methodology/approach

This study includes 300 bank-year observations from Islamic and conventional banks over the period 2010–2021. The dynamic panel model (generalized method of moments [GMM]) was considered the primary estimation model that solves simultaneity, endogeneity and omitted variable problems as most governance variables are endogenous by nature. Hence, static models are considered biased after conducting the DWH test of endogeneity, and considering dynamic panel GMM is valid proven by Sargan and Hensen and first-order (ARI) and second-order (ARII) tests.

Findings

Based on the regression results, the authors discovered that board size, female participation in the board and director remuneration have a significant positive impact on bank performance, whereas board meetings have a significant negative impact. Furthermore, the board governance structure of commercial banks is found to be more passive than that of Islamic banks.

Practical implications

The study’s findings added a new dimension to governance research, which could be a valuable source of knowledge for policymakers, investors and regulators looking to improve existing governance mechanisms for better performance of conventional and Islamic banks.

Originality/value

The goal of this study is to add to the existing literature by focusing on the impact of female board participation and other board governance mechanisms in both conventional and Islamic banks on bank performance.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 19 May 2023

Rohit Kumar Singh and Supran Kumar Sharma

The paper aims to craft a non-parametric composite value for the board quality of Indian banks where the weights can be assigned endogenously.

Abstract

Purpose

The paper aims to craft a non-parametric composite value for the board quality of Indian banks where the weights can be assigned endogenously.

Design/methodology/approach

The study employed a non-parametric data envelopment analysis (DEA)-based novel extension known as the benefit of doubt approach. To measure the strength of the Indian bank corporate board in terms of board efficiency (BEF), the study used a mixed approach, i.e. first, the study calculates the percentile ranks of the five attributes that the study assumes are the characteristics of the strong board including board size, number of outside directors, frequency of meetings, non-duality leadership and board gender diversity. Thereafter, the study performs the benefit-to-doubt approach to finally measure the efficiency of the board.

Findings

The findings of the study establish that the methodological framework present in the study to measure the strength of the board in terms of BEF has been a much superior method over the other weighted and non-weighted linear average methods.

Practical implications

This methodology aids the shareholders, investors and regulatory bodies in rating the Indian banks based on their strength in terms of better monitoring boards and ensuring a smooth agent–owner relationship.

Originality/value

The benefit of doubt approach has been a unique and novel methodology to craft the composite value for any multidimensional phenomenon. One of the major benefits of using this approach is that it assigns the weights endogenously to each dimension and thereafter collectively determines the efficiency of such a phenomenon.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

Keywords

Article
Publication date: 15 February 2024

Xin Huang, Ting Tang, Yu Ning Luo and Ren Wang

This study aims to examine the impact of board characteristics on firm performance while also exploring the influential mechanisms that help Chinese listed companies establish…

Abstract

Purpose

This study aims to examine the impact of board characteristics on firm performance while also exploring the influential mechanisms that help Chinese listed companies establish effective boards of directors and strengthen their corporate governance mechanisms.

Design/methodology/approach

This paper uses machine learning methods to investigate the predictive ability of the board of directors' characteristics on firm performance based on the data from Chinese A-share listed companies on the Shanghai and Shenzhen stock exchanges in China during 2008–2021. This study further analyzes board characteristics with relatively strong predictive ability and their predictive models on firm performance.

Findings

The results show that nonlinear machine learning methods are more effective than traditional linear models in analyzing the impact of board characteristics on Chinese firm performance. Among the series characteristics of the board of directors, the contribution ratio in prediction from directors compensation, director shareholding ratio, the average age of directors and directors' educational level are significant, and these characteristics have a roughly nonlinear correlation to the prediction of firm performance; the improvement of the predictive ability of board characteristics on firm performance in state-owned enterprises in China performs better than that in private enterprises.

Practical implications

The findings of this study provide valuable suggestions for enriching the theory of board governance, strengthening board construction and optimizing the effectiveness of board governance. Furthermore, these impacts can serve as a valuable reference for board construction and selection, aiding in the rational selection of boards to establish an efficient and high-performing board of directors.

Originality/value

The study findings unequivocally demonstrate the superiority of nonlinear machine learning approaches over traditional linear models in examining the relationship between board characteristics and firm performance in China. Within the suite of board characteristics, director compensation, shareholding ratio, average age and educational level are particularly noteworthy, consistently demonstrating strong, nonlinear associations with firm performance. Within the suite of board characteristics, director compensation, shareholding ratio, average age and educational level are particularly noteworthy, consistently demonstrating strong, nonlinear associations with firm performance. The study reveals that the predictive performance of board attributes is generally more robust for state-owned enterprises in China in comparison to their counterparts in the private sector.

Details

Chinese Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1750-614X

Keywords

Article
Publication date: 6 February 2024

Ning Xu, Di Zhang, Yutong Li and Yingjie Bai

Green technology innovation is the organic combination of green development and innovation driven. It is also a powerful guarantee for shaping sustainable competitive advantages…

Abstract

Purpose

Green technology innovation is the organic combination of green development and innovation driven. It is also a powerful guarantee for shaping sustainable competitive advantages of manufacturing enterprises. To explore what kind of executive incentive contracts can truly stimulate green technology innovation, this study aims to distinguish the equity incentive and reputation incentive, upon their contractual elements characteristics and green governance effects, and then put forward suggestions for green technology innovation accordingly.

Design/methodology/approach

This study establishes an evaluation model and uses empirical methods to test. Concretely, using data from A-share listed manufacturing companies for the period from 2007 to 2020, this study compares and analyzes the impact of equity and reputation incentive on green technology innovation and explores the relationship between internal green business behavior and external green in depth.

Findings

This study finds that reputation incentives focus on long-term and non-utilitarian orientation, which can promote green technology innovation in enterprises. While equity incentives, linked to performance indicators, have a inhibitory effect on green technology innovation. Internal and external institutional factors such as energy conservation measures, the “three wastes” management system, and environmental recognition play the regulatory role in the relationship between incentive contracts and green technology innovation.

Originality/value

Those findings validate and expand the efficient contracting hypothesis and the rent extraction hypothesis from the perspective of green technology innovation and provide useful implications for the design of green governance systems in manufacturing enterprises.

Details

Chinese Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1750-614X

Keywords

Article
Publication date: 14 July 2023

Ali I. El Saleh and Doureige J. Jurdi

Prior research shows that co-opted directors adversely impact many corporate outcomes, yet little is known about these directors' impact on CSR performance. The authors…

Abstract

Purpose

Prior research shows that co-opted directors adversely impact many corporate outcomes, yet little is known about these directors' impact on CSR performance. The authors investigate whether and how co-opted boards affect the firm's CSR score and component CSR scores.

Design/methodology/approach

The authors use panel regression models to investigate this study's research questions and address endogeneity concerns using the system generalized method of moments (system GMM) and a quasi-natural experiment.

Findings

The authors report new evidence showing that co-opted boards negatively impact CSR performance based on the CSR score. Results identify board characteristics that accentuate or moderate the effect of co-option on the CSR score and show that board independence, the presence of women on the board, and CEO duality positively and significantly impact the CSR score. These findings are robust across alternative measures of co-option and in the results of models addressing endogeneity concerns. An extended analysis utilizing CSR component scores reveals a significant negative impact of co-option on the environment component score using various measures of co-option and on employee relations, product quality, and human rights component scores using selected measures of co-option.

Practical implications

Findings have implications for board structuring and composition for firms aiming at improving their CSR score.

Originality/value

The study provides new evidence on the impact of co-opted boards on CSR performance. The results help inform stakeholders such as policymakers, executives and directors, shareholders, and capital market participants on how board composition affects socially responsible activities and performance and identify CSR component areas that require attention.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 4 July 2023

Robin Wakefield and Kirk Wakefield

Social media is replete with malicious and unempathetic rhetoric yet few studies explain why these emotions are publicly dispersed. The purpose of the study is to investigate how…

Abstract

Purpose

Social media is replete with malicious and unempathetic rhetoric yet few studies explain why these emotions are publicly dispersed. The purpose of the study is to investigate how the intergroup counter-empathic response called schadenfreude originates and how it prompts media consumption and engagement.

Design/methodology/approach

The study consists of two field surveys of 635 in-group members of two professional sports teams and 300 residents of California and Texas with political party affiliations. The analysis uses SEM quantitative methods.

Findings

Domain passion and group identification together determine the harmonious/obsessive tendencies of passion for an activity and explain the schadenfreude response toward the rival out-group. Group identification is a stronger driver of obsessive passion compared to harmonious passion. Schadenfreude directly influences the use of traditional media (TV, radio, domain websites), it triggers social media engagement (posting), and it accelerates harmonious passion's effects on social media posting.

Research limitations/implications

The study is limited by the groups used to evaluate the research model, sports, and politics.

Social implications

The more highly identified and passionate group members experience greater counter-empathy toward a rival. At extreme levels of group identification, obsessive passion increases at an increasing rate and may characterize extremism. Harboring feelings of schadenfreude toward the out-group prompts those with harmonious passion for an activity to more frequently engage on social media in unempathetic ways.

Originality/value

This study links the unempathetic, yet common emotion of schadenfreude with passion, intergroup dynamics, and media behavior.

Details

Internet Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1066-2243

Keywords

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