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1 – 10 of 383Gabriele D’Alauro, Alberto Quagli and Mario Nicoliello
This paper aims to analyze the direct and indirect effects of investor protection on forced CEO turnover.
Abstract
Purpose
This paper aims to analyze the direct and indirect effects of investor protection on forced CEO turnover.
Design/methodology/approach
The authors investigate 5,175 firm-year observations from 16 European countries over 2012–2018, collect data on four national investor protection indicators, identify 196 forced CEO turnovers and use multiple logistic regression models.
Findings
The results show that a reduction in the degree of investor protection significantly increases the probability of a forced change of the company’s CEO. Furthermore, when the degree of investor protection increases, directors are attributed a lower degree of responsibility in the event of a decline in earnings performance. Therefore, the relation between a decrease in profitability and a forced change of CEO is reduced.
Research limitations/implications
The research is focused on countries belonging to the European Economic Area and most of the investor protection indicators are derived from surveys. Concerning policy implications, the findings suggest that regulators should focus on the effective enforcement of investor protection mechanisms.
Social implications
The results confirm that characteristics at the country level have an impact on corporate decisions, highlighting the importance of increasing the degree of investor protection as a means of mitigating agency conflicts and improving stewardship.
Originality/value
To the best of the authors’ knowledge, this study explores a relatively underinvestigated topic as it uses investor protection indicators to jointly evaluate both direct and indirect effects on forced changes of CEO through cross-national research.
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Nguyen Huu Thien, Jawad Asif, Qian Long Kweh and Irene Wei Kiong Ting
This study analyses the effects of firm efficiency on firm performance and how controlling shareholders moderate the link between the two variables.
Abstract
Purpose
This study analyses the effects of firm efficiency on firm performance and how controlling shareholders moderate the link between the two variables.
Design/methodology/approach
This study employs data envelopment analysis to estimate firm efficiency and the panel regression method to assess the hypothesised relationships among 1,295 firm-year observations of publicly listed firms in Malaysia from 2015 to 2019.
Findings
The results indicate that firm efficiency (technical efficiency, pure technical efficiency and scale efficiency) has mixed relationships with firm performance (return on assets, market-to-book ratio and operating cash flows), all of which are being moderated by controlling shareholdings.
Practical implications
This study highlights the importance of assessing firm efficiency as the key success factor for improving firm performance. Industrial managers should manage efficiently their resources or operating costs in achieving their corporate financial goals. Moreover, this study notes the presence of controlling shareholders, who can be either self-interested or company goal aligned.
Originality/value
This study suggests becoming efficient in transforming inputs into outputs is a prerequisite before investigating accrual-based and cash-based firm performance measures, and the presence of controlling shareholders matters in these regards.
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Faraj Salman Alfawareh, Mahmoud Al-Kofahi, Edie Erman Che Johari and Ooi Chai-Aun
This paper aims to examine the connection between digital payments, ownership structure, and bank performance in Jordan, as well as investigate the moderating role of the…
Abstract
Purpose
This paper aims to examine the connection between digital payments, ownership structure, and bank performance in Jordan, as well as investigate the moderating role of the independent director in the said relationship.
Design/methodology/approach
The study uses data from 12 Amman stock exchange-listed commercial banks, covering the period from 2010 to 2023. This paper employs econometric analysis of panel data, including ordinary least squares (OLS) regression as the primary approach, as well as the generalised method of moments, the two-stage least square (2SLS), and the dynamic model to deal with causality and endogeneity issues in the proposed equations. This ensures that the results are valid.
Findings
The results indicate that digital payments and ownership structure have a significant positive connection with bank performance. Additionally, the independent director variable appears to play a substantial and positive moderating role in the link between ownership structure (e.g. institutional ownership) and bank performance. These results strengthen and support the claims of agency theory and the information systems success model.
Practical implications
Overall, this research helps stakeholders, bankers, managers, investors, customers, and policymakers, identify the influence of digital payment and ownership structure on bank performance in developing economies such as that of Jordan.
Originality/value
This investigation offers a unique understanding by illuminating how digital payment and ownership structure affect bank performance in a developing country such as Jordan. Additionally, it opens avenues for future research to delve into this literature domain in North African and Middle Eastern nations, with a particular focus on Jordan. This investigation is among the initial explorations in Jordan that aim to elucidate these relationships. On the theoretical level, it adds to the agency theory and IS model. It provides new insights into the dynamics of industry banking in developing nations (i.e. Jordan).
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Emeka Steve Emengini, Shedrach Chinwuba Moguluwa, Johnson Emberga Aernan and Jude Chidiebere Anago
This paper aims to examine the impact of ownership structure on the accounting-based performance of listed Nigerian deposit money banks (DMBs) on Nigerian Exchange Group (NGX…
Abstract
Purpose
This paper aims to examine the impact of ownership structure on the accounting-based performance of listed Nigerian deposit money banks (DMBs) on Nigerian Exchange Group (NGX) from 2011 to 2020.
Design/methodology/approach
The study adopts ex post facto research design, using initially “the panel fixed and random effects regression analysis and Hausman specification test and thereafter, the IV Generalised method of moments (GMM) to check for endogeneity issues and strengthen the robustness of the results.
Findings
The one lagged value result reveals that ownership structure of DMBs in Nigeria has cumulative significant impact to influence corporate financial performance of the banks in the future. Overall, CEO, board/managerial, family, government and foreign ownership structures in DMBs in Nigeria do not have significant influence on accounting-based corporate financial performance of the banks. However, the study reveals that board/managerial ownership could significantly improve market value/growth of DMBs in Nigeria.
Practical implications
Policy makers, investors (both local and foreign), academics, corporate governance administrators, and the government could apply the study's findings to the management of banking operations in Nigeria.
Originality/value
The paper highlights the impact of five ownership structures on the accounting-based performance of DMBs in Nigeria from 2011 to 2020, providing valuable insights into the influence of stockholding categories on corporate financial performance, which is a shift from extant literatures with limited insights.
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Tariq H. Ismail, Mohamed Samy El-Deeb and Raghda H. Abd El–Hafiezz
This study examines the correlation between ownership structure (OS) and financial reporting integrity (FRI), with emphasis on the impact of earnings quality (EQ) in the Egyptian…
Abstract
Purpose
This study examines the correlation between ownership structure (OS) and financial reporting integrity (FRI), with emphasis on the impact of earnings quality (EQ) in the Egyptian context.
Design/methodology/approach
The study uses data from 472 firm-year observations of Egyptian publicly listed companies between 2014 and 2021 and carried out descriptive statistics, correlation tests, multiple regression analysis and two-stage least squares (2SLS) to test the hypotheses.
Findings
The results revealed that blockholders and institutional ownership significantly enhance reporting integrity through effective oversight and monitoring. The findings underscore the vital role of concentrated OS in overseeing reporting practices and mitigating managerial opportunism, thereby improving the transparency and reliability of financial disclosures in Egypt.
Practical implications
The findings enrich the literature on corporate governance and financial reporting quality and have important implications for policymakers, regulators and corporate stakeholders.
Originality/value
This work contributes valuable insights on how OS and EQ can bolster FRI, offering crucial information for combating financial crises and facilitating smooth business operations in Egypt.
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This paper aims to examine how a firm’s exposure to economic policy uncertainty affects the auditors’ perceptions of financial reporting risk. Firms that are more sensitive to…
Abstract
Purpose
This paper aims to examine how a firm’s exposure to economic policy uncertainty affects the auditors’ perceptions of financial reporting risk. Firms that are more sensitive to policy uncertainty are predicted to engage in more earnings management because these firms are more likely to experience greater uncertainty in future operations. Audit fees will reflect this reporting risk. On the other hand, auditors might feel more fee pressure from policy-sensitive firms because firms are more inclined to reduce spending in the face of uncertainty and subsequently charge lower fees.
Design/methodology/approach
The author tests my hypothesis using U.S. data on audit fees and client characteristics of public companies between the years 2001 and 2021. The author estimates a standard audit fee model based on the audit fee literature (Hay et al., 2006) while also including the two policy sensitivity measures. This study uses panel data methods that allow time-series analyses, providing a powerful setting to test dynamic audit fee adjustment to improve the understanding of the audit market.
Findings
The results suggest that audit fee is higher for policy-sensitive firms than for policy-neutral firms. These results are robust to various proxies of policy sensitivity and various specifications designed to mitigate the endogeneity concerns. The study provides assurance that on average, auditor pricing reflects client risk adequately, mitigating the concern that auditors give in to fee pressure and compromise audit quality as a result.
Research limitations/implications
While the findings from this study should be of value to regulators and academics seeking to understand audit activities amid escalating macroeconomic uncertainty, when interpreting these results, several limitations must be considered. The study does not examine how external auditors evaluate risks tied to policy uncertainty. A comprehensive understanding of how and why external auditors respond to heightened policy uncertainty faced by firms could be better achieved through interviews with external auditors and audit committee members. In addition, while this study posits that auditors adjust their approach in response to changes in policy uncertainty, largely due to potential shifts in the risks of material misstatement, there might be additional factors at play that warrant higher audit fees post a change in policy uncertainty. For instance, specific policy changes may give rise to new risks or modify existing ones, thereby precipitating increased scrutiny of records and procedures as company directors’ demand. These aspects offer potential avenues for future research.
Practical implications
This study underscores the significant role of policy sensitivity in determining audit fees and audit quality. Policy-sensitive firms present unique complexities and potential risks that require additional effort and vigilance from auditors. Auditors must develop a specialized understanding of sectors prone to policy fluctuations to navigate these unique challenges effectively. In addition, the role of professional standards boards and regulators in establishing guidelines for auditing policy-sensitive firms cannot be understated. Such guidelines could lead to more consistent audit practices and improved audit quality. Finally, by recognizing and effectively responding to the policy sensitivity of client firms, audit firms can mitigate their own risks, strengthen public trust and enhance the reliability of financial reports.
Originality/value
First, this study adds to an emerging stream of auditing literature that focuses on how audit fees interact with a firm’s external environment by providing evidence of an unexplored implication, a firm-specific policy sensitivity. Second, my main construct, policy sensitivity, provides two distinct advantages over other variables used in prior studies that explore the relationship between audit fees and external firm environments. Third, this study answers the calls for research by De Villiers et al. (2013, p. 3), who identified the cost behavior of audit fees, especially over time, as an area not well understood.
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Brian Lam, Lina Z. Li, Byron Y. Song and Li Yao
This study aims to investigate the influence of social capital on firms’ business strategies, focusing on Miles and Snow (1978) dichotomy between “prospector” and “defender”…
Abstract
Purpose
This study aims to investigate the influence of social capital on firms’ business strategies, focusing on Miles and Snow (1978) dichotomy between “prospector” and “defender” strategies.
Design/methodology/approach
The authors perform multivariate regression analyses using a sample of US firms spanning the period from 1995 to 2021. The authors use a two-stage least squares model to alleviate endogeneity concerns and perform several cross-sectional tests and path analyses.
Findings
The authors find a significant and positive association between social capital and defender-type business strategies. Results from cross-sectional analyses reveal that this relationship is more pronounced in highly competitive product markets and among firms led by highly qualified CEOs. In addition, the authors find that CEO compensation mediates the effect of social capital on business strategy. Overall, the results suggest that low social capital regions foster prospector strategies due to managers’ self-maximizing incentives. Finally, the authors find that business strategy acts as a mediating factor, connecting social capital to firms’ financial reporting outcomes.
Social implications
In light of recent public concerns over declining social capital in major economies and the growing globalization and multiculturism in societies, the findings are of interest to policymakers and the wider society by highlighting the far-reaching implications of social capital on businesses and the capital market.
Originality/value
To the best of the authors’ knowledge, this study documents the first empirical evidence on the association between a society’s social capital and firms’ business strategies. The study contributes to the research on the determinants of a firm’s business strategy and extends the literature on the relationship between social capital and firm behavior.
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Lu Yang, Meng Ye, Hongdi Wang and Weisheng Lu
This study explores the influence of female executives on the misalignment between corporate ESG commitments and practices, a phenomenon known as ESG decoupling. It also enhances…
Abstract
Purpose
This study explores the influence of female executives on the misalignment between corporate ESG commitments and practices, a phenomenon known as ESG decoupling. It also enhances the understanding of female power on affecting ESG decoupling under different ownership settings.
Design/methodology/approach
This study uses a quantitative research design to explore the impact mechanism of female executives’ proportion on corporate ESG decoupling under different ownership contexts based on a sample of 2,585 firm-year observations from publicly traded Chinese companies between 2011 and 2021.
Findings
Based on agency theory, upper echelons theory and gender socialization theory, our findings indicate that (1) female executives are significantly effective in reducing ESG decoupling, and (2) this effect is more pronounced in non-state-owned enterprises (non-SOEs) compared to state-owned enterprises (SOEs).
Originality/value
This study contributes original insights into the ESG decoupling literature by demonstrating the external influences of corporate governance structure, particularly in the context of China’s unique corporate ownership environment. It also provides strong social implications by highlighting the role of gender dynamics in corporate governance, corporate social responsibility (CSR) behaviors and ESG alignment.
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Samira Joudi, Gholamreza Mansourfar, Saeid Homayoun and Zabihollah Rezaee
Considering the standards developed by the Sustainability Accounting Standards Board (SASB), this study aims to examine whether the link between material sustainability and…
Abstract
Purpose
Considering the standards developed by the Sustainability Accounting Standards Board (SASB), this study aims to examine whether the link between material sustainability and financial performance depends on the extent to which the company is oriented toward stakeholders.
Design/methodology/approach
To test the predictions, 13,942 firm-year observations from 43 different countries are used, covering the period from 2010 to 2019. Using a hand-mapping approach to match the indicators suggested by the SASB with those of the ASSET4, the authors realize that there are 170 material sustainability indicators among 466 indicators of the ASSET4. The authors use three different methods to verify if the materiality matters, including the alphas obtained from the Fama and French factor models, comparing the average abnormal returns of the portfolios and the bootstrapped Cramer technique.
Findings
The findings show that companies investing in material sustainability activities perform better than those investing in immaterial activities. Also, consistent with the theoretical foundations, the authors find that the effect of investing in material sustainability activities is more pronounced in stakeholder-oriented countries than that in shareholder-oriented countries. The results are robust to a battery of sensitivity tests.
Research limitations/implications
Owing to COVID-19 in late 2019, data from 2020 to 2022 have not been used to obtain reliable results.
Practical implications
The results obtained in the current research provide valuable guidance for investors to make investments considering the degree of materiality of sustainability activities in different industries. It also helps managers to increase the company’s financial performance, make efficient decisions related to investment in sustainability activities and find investment strategies on the material sustainability issues in their industries.
Social implications
This study provides a clearer understanding of investment in sustainability activities in different industries by separating material and immaterial sustainability activities in stakeholder and shareholder-oriented countries, and the results obtained can change the perspective of investors and company managers regarding investing in such activities in different countries. Investing in more materiality sustainability activities than the immateriality dimension can be new opportunities for companies to achieve predetermined goals, help retain and attract business partners or be a source of innovation for new product lines or services. Internal morale and employee engagement may increase while increasing productivity and firm performance. This discussion opens the way for future research.
Originality/value
This study provides insight into the effect of investing in material and immaterial sustainability activities in different industries on the company’s performance in shareholder and stakeholder-oriented countries.
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Abstract
Purpose
This paper aims to investigate the impact of environmental risk on corporate governance through market reaction to bank loan announcements.
Design/methodology/approach
Using the establishment of environment court in China as a quasi-natural experiment, this paper adopt the difference-in-differences approach based on listed firms during 2003–2013 to explore the impact of environment court on corporate governance.
Findings
This paper find that the environment court would weaken the cumulative abnormal return of loan announcements. Then, this paper confirm that the potential reason is that environment court worsens the interest conflict between majority and minority shareholders. Further, cross-sectional analysis suggests that bank’s supervision, market competition and analyst coverage can alleviate the impact of environment court on corporate governance.
Practical implications
Environment courts intensify firms’ internal interest disputes, thus causing the decrease of corporate governance, which can be observed through the effect of bank loan announcements.
Social implications
This paper provide reference for environmental policy formulation and implementation, firms’ decision-makings and improving the banking regulatory system.
Originality/value
This paper makes a contribution to the studies about the impact of environment court on firms’ decision-making and investors’ reaction, the impact of external factors on corporate governance and bank loan announcements effect.
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