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The purpose of this paper is to examine the Shariah governance mechanisms of takaful insurance and their impact on its financial performance.
Abstract
Purpose
The purpose of this paper is to examine the Shariah governance mechanisms of takaful insurance and their impact on its financial performance.
Design/methodology/approach
The effect of Shariah governance mechanisms on financial performance is analyzed over 2012–2018 on a sample of 11 takaful listed insurances in the Middle East region. Using multiple regression models, four hypotheses addressing Shariah governance mechanisms are tested.
Findings
The findings generally reveal that Shariah governance has an impact on the financial performance of takaful insurance. The Shariah Supervisory Board (SSB) size, the members’ reputation and their qualifications are the main determinants of financial performance for listed takaful insurance.
Research limitations/implications
This paper includes two main limitations that may affect the accuracy of the finding. First, the results are restricted to the Middle East region and may not be generalized to other regions. Second, the sample is dominated by UAE, i.e. 4 takaful insurances out of 11.
Practical implications
Both Shariah governance and regular governance have an impact on the financial performance of takaful insurance. Yet, the effect of Shariah governance is more robust. To improve its financial performance, takaful insurance should expand the size of the SSB, hiring reputable scholars and recruit doctors in Islamic economics.
Originality/value
This research studies takaful insurance, unlike the majority of other works that have focused on Islamic banks.
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Sara Sofia Gomes Mariano, Javad Izadi and Maurice Pratt
The purpose of this study is to investigate the impact of corporate governance structures on the likelihood of financial distress in UK listed companies. The paper examines the…
Abstract
Purpose
The purpose of this study is to investigate the impact of corporate governance structures on the likelihood of financial distress in UK listed companies. The paper examines the impact of borrowing and corporate governance structures on financial distress likelihood in UK companies.
Design/methodology/approach
The study uses a quantitative approach with financial, governance and borrowing measures and data from 270 firm-observations between 2010 and 2018. The study analyses the impact of borrowing and corporate governance structures to indicate financial distress likelihood in British companies. Corporate governance variables such as ownership concentration, independence indicators, chief executive officer duality, director remuneration and corporate loans are considered, as well as the UK Corporate Governance Code.
Findings
The results indicate that companies with low ownership concentration and a low degree of independence are more likely to incur financial distress. Larger boards and better director remuneration can reduce financial distress likelihood and the existence of corporate loans can increase this likelihood. Empirical consideration of corporate borrowing is a new contribution to the literature.
Originality/value
Variables are highlighted and aggregated that have not otherwise been studied together; the UK Corporate Governance Code’s main ideas are empirically supported; the study is useful for defining corporate governance structure strategies.
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Muhammad Iqmal Hisham Kamaruddin, Sofiah Md Auzair, Mohd Mohid Rahmat and Nurul Aini Muhamed
The purpose of this study is to examine the role of financial governance practices in influencing both financial management and Islamic work ethic practices to affect Islamic…
Abstract
Purpose
The purpose of this study is to examine the role of financial governance practices in influencing both financial management and Islamic work ethic practices to affect Islamic social enterprises (ISEs) accountability.
Design/methodology/approach
Questionnaires were administered to financial officers of 102 Malaysian ISEs. Data was analysed using Smart-PLS to examine the relationships between financial management, Islamic work ethic, financial governance and accountability.
Findings
Results of this study indicate direct relationship only exist between Islamic work ethic and accountability. The relationship between financial management and accountability are indirect through financial governance. Hence, the data proves that financial governance has a mediating role on both the relationships between financial management and Islamic work ethic with the accountability of the ISEs.
Research limitations/implications
The study has highlighted the greater role of financial management, Islamic work ethic and financial governance practices over accountability to achieve public trust, especially for Malaysian ISEs.
Practical implications
ISEs need to have good financial governance practices besides financial management and Islamic work ethic practices to achieve good accountability.
Originality/value
The study contributes to the field of management and social accounting by providing empirical evidence on the ISEs practices specifically on financial management, Islamic work ethic, financial governance and accountability. This framework thus presents amongst the first attempts in studying accountability issues in ISEs.
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Malcolm Prowle and Don Harradine
This research concerns the issue of financial governance within the UK NHS and aims to assess the effectiveness of existing financial governance arrangements in the main providers…
Abstract
Purpose
This research concerns the issue of financial governance within the UK NHS and aims to assess the effectiveness of existing financial governance arrangements in the main providers of health services in the UK. Also considered is the importance of good financial governance in a time of financial austerity.
Design/methodology/approach
The primary research for this project was based on the use of a questionnaire to all finance directors in NHSTs in England supported by semi-structured interviews with: finance directors, non-executive directors, executive directors and senior finance staff.
Findings
Among the main findings of the study were: certain financial management systems were not prioritised in line with what is seen as good practice; existing financial management systems were not always seen as adequate for the achievement of good financial governance; there was sometimes a lack of understanding of financial issues by non-executive directors; and the complexity of the NHS funding process often resulted in opaqueness of the financial risks.
Research limitations/implications
The research is limited by the relatively small coverage of NHS trusts but this has been compensated for by a series of in-depth interviews with key stakeholders in the governance process.
Practical implications
Weaknesses in financial governance could result in further scandals which result in loss of life and poor patient care.
Originality/value
There are many papers on the issue of governance in the public sector in general and the NHS in particular. However, there is little published on the issue of financial governance in the NHS. Also of great value is the emphasis on strengthening financial governance in an era of austerity
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Huang Zhizhong, Zhang Juan, Shen Yanzhi and Xie Wenli
The purpose of this paper is to study the impact of corporate governance on financial restatements in China, with a view to providing reference to strengthen the corporate…
Abstract
Purpose
The purpose of this paper is to study the impact of corporate governance on financial restatements in China, with a view to providing reference to strengthen the corporate governance and improve the quality of financial information.
Design/methodology/approach
The authors investigate associations between financial restatements and corporate governance via a sample of 1,147 listed companies from the period of 2002 to 2006, which includes 880 annual accounting restatements by 465 companies. Logistic model is used to regress restatement dummy variable on not only the equity and board structure, but also the quality of independent auditors. The restatements in this paper are caused by performance‐related accounting errors.
Findings
It was found that accounting misstatements related to performance could be prevented or restrained by strong internal governance, such as a board of higher percentage of outside directors and an audit committee that could oversee the accounting and financial reporting process on behalf of all shareholders, and outside governance, such as a big stockholder and a strong outside auditor from the Big4 accounting firms. However, the matched test shows the effect of audit committee on controlling restatements is endogenous, which relies on the effects of other governance factors.
Originality/value
In China, studies on the impact of corporate governance on financial restatements are few and the existing empirical researches show the selected samples are small, which constitute small part of the revision of accounting errors. In this paper, the data are more accurate and comprehensive than previous research and matched sample method was used to alleviate the impact of endogeneity of some explanatory variables. So, the conclusions are more reliable than in the past.
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The need for robust governance standards in financial institutions requires no overemphasis. However, instances of governance failures have been a recurring global phenomenon…
Abstract
Purpose
The need for robust governance standards in financial institutions requires no overemphasis. However, instances of governance failures have been a recurring global phenomenon. This paper examines the key elements of governance in financial institutions, evaluates reasons for failures and suggests ways to strengthen governance and prevent such failures.
Design/methodology/approach
The author follows a descriptive design and a behavioural approach to understand the governance issues in financial institutions.
Findings
The author identifies key elements of governance, and the potential reasons for failures and highlights that the structure of boards, thrust on the adoption of best practices and regulatory guidelines are necessary but not sufficient to ensure failsafe governance standards. The author emphasises the need for recognition of behavioural factors and a focus on continuous monitoring and red flagging of the conduct of key stakeholders by the third and fourth lines of defence. An effective whistle-blower policy, a clear focus on organisational culture and the subjugation of individuals to the systems can improve the robustness of the governance standards in financial institutions.
Originality/value
To the best of the author's knowledge and belief, the observations and suggestions made in the paper are original. The paper contributes by offering a nuanced perspective for strengthening governance in financial institutions.
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Mohamed A. Ayadi, Nesrine Ayadi and Samir Trabelsi
This paper aims to analyze the effects of internal and external governance mechanisms on the performance and risk taking of banks from the Euro zone before and after the 2008…
Abstract
Purpose
This paper aims to analyze the effects of internal and external governance mechanisms on the performance and risk taking of banks from the Euro zone before and after the 2008 financial crisis.
Design/methodology/approach
To avoid macroeconomic problems and shocks and because of data availability, the authors select some countries of the Euro zone, namely, France, Belgium, Germany and Finland, during the 2004-2009 period. These countries share similar macroeconomic environments (unemployment, inflation and economic growth rates). All the data relating to the banks are manually drawn from the supervising reports submitted to banks and are available on the banks’ websites and/or on that of the AMF website. The banks included in our sample are drawn from the list of European central banks on www.ecb.int
Findings
The empirical results show that banks undertake tradeoffs between different governance mechanisms to alleviate the intensity of the agency conflicts between the shareholders and managers. The findings also confirm that internal mechanisms and capital regulations are complementary and significantly impact bank performance.
Research limitations/implications
This analysis can be extended through studying the interaction between bondholders’ governance and shareholders’ governance and their impact on the 2008 financial crisis.
Practical implications
The changes in banking governance help banks find a useful and necessary way to avoid ill-considered risks that can cause a systemic risk. Therefore, some conditions should be met so that banking governance can contribute to the economic development.
Social implications
Culture and mentality of good banking governance must grow as much as possible through awareness-raising, training, promotion, recognition of performance, enhancing procedure transparency and stability of good banking governance and regulations, strengthening the national capacity to fight against corruption, and preventive mechanisms.
Originality/value
This paper complements previous studies, mainly those of Andres and Vallelado (2008) who examine the impact of the components of the board on banking performance and of Laeven and Levine (2009) who estimate the combined effect of regulatory and ownership structure on the risk-taking of each bank.
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The purpose of this paper is to explore financial governance as practiced by NGOs in Ghana and further examines the determinants of the financial governance structures of the…
Abstract
Purpose
The purpose of this paper is to explore financial governance as practiced by NGOs in Ghana and further examines the determinants of the financial governance structures of the NGOs. The study specifically investigates which organizational‐level characteristics exhibit any link whatsoever with governance as it relates to budget preparation, budget execution and internal controls and budget monitoring.
Design/methodology/approach
Using a questionnaire to conduct the survey, a cross‐sectional regression analysis was executed.
Findings
The findings of the study indicate that the most positively influential factor in explaining an NGO's adoption of a governance framework is its size. The other variables, organizational age and independence, are not significant across all three financial governance proxies and when they prove significant, the effect is negative.
Originality/value
The findings hold important policy implications and especially so for countries that attract significant funding via relatively small‐sized NGOs.
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The purpose of this article is to analyse Mexico’s money laundering governance with a focus on its 2007-2013 reform process. It provides a view of money laundering governance as a…
Abstract
Purpose
The purpose of this article is to analyse Mexico’s money laundering governance with a focus on its 2007-2013 reform process. It provides a view of money laundering governance as a politically contested policy area and a reflection on the reach and purpose of the international regime promoted by the Financial Action Task Force (FATF).
Design/methodology/approach
The analysis uses an actor-centred approach on governance structures relating groups of public and private actors with competing policy preferences.
Findings
Three ideal-typical groups of actors are identified. Of these, the Financial Integrity and Criminal Enforcement Groups were central proponents of prevention- and prosecution-based policies, respectively. While criminal enforcement was initially sidelined, its role was strengthened in Mexico since 2007. Despite early signs of success, diverging policy preferences between these groups continue to complicate money laundering governance in Mexico through a complex distribution of tasks between them.
Practical implications
To address wider crime fighting concerns, more emphasis should be put on the role of prosecutorial actors in money laundering governance. Beyond the domestic level, the results raise concerns about the increasing focus of the FATF on money laundering as a threat to financial integrity.
Originality/value
The article adds to a better understanding of money laundering governance in Mexico. Further, the presented systematisation of actors can inform the analyses of money laundering governance and underlying political tensions in other country cases. By focusing on organised crime and prosecution, the case deviates from the international trend to concentrate on issues of market integrity and prevention-orientated policies.
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This chapter examines corporate governance–related financial reporting issues in the context of globalization. Over the past few decades, the process of globalization has…
Abstract
This chapter examines corporate governance–related financial reporting issues in the context of globalization. Over the past few decades, the process of globalization has substantially altered the fields of corporate governance and accounting. More specifically, Anglo-American models of corporate governance and financial reporting have received increasing momentum in emerging economies, including China. However, a review of relevant studies suggests that there is limited research examining the implementation of Anglo-American concepts in various countries regardless of their growing acceptance. This monograph extends the existing literature by comprehensively investigating the adoption of internationally acceptable principles and standards in China, the largest transitional economy that has different institutional context from Anglo-American countries. In addition, the review has a number of implications for developing the theoretical framework, and determining the research methodology for the monograph.
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