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Deepali Kalia, Debarati Basu and Sayantan Kundu
The study explores extant knowledge on the nature of the relationship between internal and external corporate governance mechanisms, particularly board characteristics and…
The study explores extant knowledge on the nature of the relationship between internal and external corporate governance mechanisms, particularly board characteristics and audit quality, respectively, while also investigating how the relationship varies across geographies.
The extant knowledge is synthesized using a meta-analysis, which is conducted using a sample of 56 empirical studies from publications of varying grades. The studies span over 25 years (1996–2021) and cover 147 empirical samples (343,787 firm-year observations) across more than 20 countries. The dependent variable is audit fees, and the independent variable captures 12 different measures of board characteristics.
Overall, the results reveal a positive association between board characteristics and audit fees, indicating complementarity between governance mechanisms. Effect size analysis shows board characteristics, like size and independence, are positively associated with audit fees. However, heterogeneity is noted for some characteristics, and further analysis by geography (developed vs emerging countries) explains the heterogeneity.
This study helps multiple stakeholders like firms, shareholders, boards, regulators and policymakers in designing and strengthening governance frameworks.
Both governance and auditing literature benefit from identifying specific board characteristics that drive audit quality consistently across different institutional settings and samples. Heterogeneity analysis helps improve the understanding of contradictions documented in prior literature.
This meta-analysis is the first to explore the interplay between internal and external corporate governance mechanisms, with a focus on board characteristics and audit quality. The study provides valuable insights on how different governance mechanisms influence each other while highlighting, for the first time, how the interaction between governance mechanisms varies by a country's level of development.
Deepali Kalia and Divya Aggarwal
This paper aims to investigate the effect of total and each individual component of environmental, social and governance score (ESG) on financial performance (FP) of…
This paper aims to investigate the effect of total and each individual component of environmental, social and governance score (ESG) on financial performance (FP) of healthcare companies.
Data for 468 health-care firms for the business year 2020 is sourced from Thomson Reuters to obtain ESG data. Correlation and multivariate regression analysis are done to investigate the relation between ESG activities and firm performance. The analysis has been done on overall data and subsample data to examine the relation across developing vs developed markets.
The results of the study suggest that relation between ESG score and FP cannot be generalized. The results show that performing ESG activities positively impact firm performance of healthcare companies in developed economies; however, this relationship would be negative or insignificant in the case of developing economies.
The results of this study have implications for both practitioners and policymakers. The authors suggest the specific setups in which the relationship between ESG activities and firm performance will be negative or insignificant. These results are beneficial to policymakers who seek to increase the active participation of firms in ESG activities.
To the best of the authors’ knowledge, this study is the first to explore the relationship of ESG score on FP through the lens of country-level development variables for health-care sector companies.