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Open Access
Article
Publication date: 4 May 2022

Premananda Sethi, Tarak Nath Sahu and Sudarshan Maity

This study aims to examine the influence of corporate governance variables on firm performance and also to find out whether the corporate governance mechanism is capable of…

1740

Abstract

Purpose

This study aims to examine the influence of corporate governance variables on firm performance and also to find out whether the corporate governance mechanism is capable of mitigating the vertical agency crisis. Here the researcher uses corporate governance mechanisms such as board meeting frequency, board independence, percentage of non-executive directors, percentage of woman directors on board and the board size to measure the firm performance and, at the same time, tries to mitigate the agency crisis, which is measured through return on asset and asset turnover ratio.

Design/methodology/approach

The present study considers period from 2009 to 2020 with data corresponding to a panel of 271 non-financial firms listed in 500 NSE index, India. The study introduces a panel regression model to analyze the data collected from the sample firms.

Findings

The study detects a positive as well as a statistically significant relationship between board size and vertical agency cost. The study also observes a negative relationship between board independence and agency cost. Further, the study finds a positive relationship between corporate governance variables and firm performance, though it is non-significant.

Originality/value

As the study progresses, the study detects a negative relationship between non-executive directors and agency costs. This study tries to give policy prescription to the corporate policymaker regarding various measures to be taken by the firm for the improvement of firm performance and reduction of owner and manager conflict inside the company. The study fills the literature gap by revealing a significant relationship between corporate governance, vertical agency crisis and firm performance.

Details

Asian Journal of Economics and Banking, vol. 7 no. 1
Type: Research Article
ISSN: 2615-9821

Keywords

Open Access
Article
Publication date: 19 July 2019

Krishna Prasad, K. Sankaran and Nandan Prabhu

The purpose of this paper is to examine the empirical relationship between gray directors (non-executive non-independent directors) and executive compensation among companies…

3684

Abstract

Purpose

The purpose of this paper is to examine the empirical relationship between gray directors (non-executive non-independent directors) and executive compensation among companies listed in India’s National Stock Exchange (NSE). The paper also examines the possible interplay of relationships between controlling shareholder duality (controlling shareholder being the CEO), ownership category and executive compensation.

Design/methodology/approach

A sample of 438 firms listed in the NSE of India was studied using data spanning five financial years, 2012–2013 to 2016–2017.

Findings

Empirical evidence suggests that there is a positive association between the proportion of gray directors on the board and executive compensation. The sensitivity of executive compensation to gray directors is found to be higher among family controlled firms. This research has also found that CEOs who belong to controlling shareholder groups received higher pay than professional CEOs. The authors conjecture that these results suggest cronyism and may contribute to lower levels of corporate governance practices in the country.

Research limitations/implications

The hybrid board structure, which India has adopted with the desire to bring the best of Anglo Saxon and Japanese board philosophies, has paradoxically led to self-serving boards. Exploration of alternative thinking to bring about changes in the regulatory framework is, therefore, necessary.

Originality/value

Serious problems are identified with the philosophy behind board composition mandated by Listing Requirements for Indian firms with empirical evidence showing how the existing rules generate cronyism and unfairness to minority shareholders.

Details

European Journal of Management and Business Economics, vol. 28 no. 3
Type: Research Article
ISSN: 2444-8494

Keywords

Open Access
Article
Publication date: 21 September 2018

Hairul Azlan Annuar

The purpose of this paper is to investigate the role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), other than the control role…

1432

Abstract

Purpose

The purpose of this paper is to investigate the role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), other than the control role prescribed by agency theory and reformatory documents such as the Malaysian Code of Corporate Governance.

Design/methodology/approach

A qualitative research design, consisting of face-to-face interviews with 27 company directors of Malaysian-owned PLCs, was instigated.

Findings

The interviews revealed that INEDs do more than just monitor their executive counterparts. Apart from the control role, INEDs of Malaysian companies provide a conduit for mitigating uncertainties in the environment and perform invaluable services to the host companies.

Research limitations/implications

This research utilized interviews. Generalizations may be an issue when interviews are used as the method of inquiry. Also, the sample is not random as access to many of the interviewed directors depended on recommendations. In addition, respondents were consciously selected in order to obtain various board positions that include independent and non-independent directors.

Originality/value

There are limited studies using qualitative research design in investigating INEDs’ performing other roles apart from the control role of the board in developing countries. Many of previous studies and literature in this area of corporate governance were predominantly based upon experiences of western economies.

Details

Asian Journal of Accounting Research, vol. 3 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 24 May 2021

Pankaj Chaudhary

The author examines the role of board structure and institutional investors in dealing with the agency issues for the Indian firms by taking the data of NSE-500 nonfinancial firms…

3114

Abstract

Purpose

The author examines the role of board structure and institutional investors in dealing with the agency issues for the Indian firms by taking the data of NSE-500 nonfinancial firms for the period 2010–2019.

Design/methodology/approach

The author applies dynamic panel data methodology to deal with endogeneity concerns prevalent in corporate finance variables.

Findings

The agency view is consistent with the board size in the context of India. The author observed that the board size has a harmful effect on agency cost. A larger board size may create a coordination problem, or CEO may find it easy to thrust his or her decisions on board. The author also noticed that firms should have sizeable institutional ownership, particularly pressure-insensitive investors, in equity as they can reduce agency-related issues.

Originality/value

This study focuses on one of the largest emerging economies, i.e. India.

Details

Asian Journal of Accounting Research, vol. 7 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 8 November 2022

Nicholas Asare, Patricia Muah, George Frimpong and Ibrahim Ahmed Anyass

This study aims to examine the effects of board structures (BS) on the financial performance and stability of banks in Africa.

1607

Abstract

Purpose

This study aims to examine the effects of board structures (BS) on the financial performance and stability of banks in Africa.

Design/methodology/approach

Using annual data of 366 banks from 26 African countries from 2007 to 2015, the study estimates growths in financial performance using net interest margin and risk-adjusted return on assets; bank stability using z-scores; and BS using board size, board independence and board gender diversity. The system generalized method of moments and ordinary least squares panel-corrected standard error estimation strategies are used to estimate panel regressions.

Findings

The study concludes that board independence has a negative and significant relationship with financial stability but has diverse relationships with financial performance. Board size and board gender diversity have insignificant relationships with financial performance and stability.

Research limitations/implications

The study has relevant implications for practitioners, policymakers and the academic community. The findings provide evidence of the extent to which BS have been instituted to influence the financial profitability and stability of banks in Africa.

Originality/value

This study offers robust evidence on the role of BS in the performance and stability of banks; using a multidimensional conceptualization of the performance and stability of banks in 26 countries in Africa.

Details

Journal of Money and Business, vol. 3 no. 1
Type: Research Article
ISSN: 2634-2596

Keywords

Open Access
Article
Publication date: 11 December 2019

Syed Tauseef Ali, Zhen Yang, Zahid Sarwar and Farman Ali

In view of organizational inertia, with the occurrence of a major event, though resource rigidity minimizes, however simultaneously, it increases process rigidity, which creates…

8413

Abstract

Purpose

In view of organizational inertia, with the occurrence of a major event, though resource rigidity minimizes, however simultaneously, it increases process rigidity, which creates difficulties in motivating managers and dealing with the agency problem. Therefore, keeping in mind the high demand created by the China–Pakistan Economic Corridor and Naya Pakistan Housing Scheme in the cement sector of Pakistan, the purpose of this paper is to investigate the impact of corporate governance (CG) on the cost of equity (COE) in the cement sector, to deal with the problems surging during and after the completion of these projects and highlight further opportunities for the cement sector of Pakistan.

Design/methodology/approach

CG is a qualitative concept therefore, eight proxies have been used to measure it along with the two control variables. This study uses balance panel data of six years from 2012 to 2017, collected from 18 companies of the cement sector of Pakistan. Descriptive statistics have been used to describe the data, correlation matrix to see the nature of the relationship, and Pooled OLS as the estimation technique, while to analyze the data a statistical package 13 has been used. To measure the COE, the Capital Asset Pricing Model (CAPM) has been used.

Findings

Regression results suggest that block ownership, insider ownership and the board size are insignificant, while CEO tenure is negatively and significantly associated with the COE. Non-executive directors, independence and CEO duality are insignificant; however, diversity is positively and significantly associated with the COE. Moreover, the mean value of the COE is 8.22 percent for the cement sector, while the coefficient of determination of the model under study is 74 percent.

Research limitations/implications

This paper is based on the data from the cement sector of Pakistan only. Therefore, this is the reason that these results cannot be generalized on the whole economy of Pakistan.

Practical implications

This study helps in finding out the COE value specific to the cement sector, which will help this sector to evaluate the capital budgeting decision more precisely and accurately than before. Moreover, the association of diversity as positive, while independence as negative with the COE highlights a room for improvement in the implementation of CG codes by SECP. This study also helps to mitigate the impact of inertia, the after-effects of high demand, and managing the agency problem in the cement sector.

Originality/value

This is the first study using CG data collected just after the revised promulgation of CG codes in 2012, along with a wide range of eight proxies measuring CG and its impact on the COE in the cement sector.

Details

Asian Journal of Accounting Research, vol. 4 no. 2
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 12 November 2019

José Ignacio Conde-Ruiz, Manu García and Manuel Yáñez

The purpose of this paper is to analyze the functioning of a non-sanction “soft” gender quota policy structure (a simple recommendation), using the case of Spain. In the first…

1655

Abstract

Purpose

The purpose of this paper is to analyze the functioning of a non-sanction “soft” gender quota policy structure (a simple recommendation), using the case of Spain. In the first part of the paper, the authors have reported the dismal improvement regarding the increase of female percentage presence in the companies’ boards of members.

Design/methodology/approach

The authors provide a detailed sectorial analysis and a classification of board members by type (executive, proprietary, independent and other external). In the second part, the authors exploit the fact that since 2013, the stock-listed companies are legally obliged to respond to a series of questions on gender diversity issues in their annual reports. Using this requirement, the authors perform an analysis using text processing techniques. The authors find that “self-plagiarism” is common in the responses – i.e. they copy responses from previous years – as well as “plagiarism” – i.e. they copy responses from other companies in previous years.

Findings

The insufficient progress in respect to the goals of the Law of Equality of 2007 (enacted by Spanish authorities) and the lack of interest that can be inferred from the companies’ responses included in their annual reports lead the authors to consider the necessity of changing the law on the corporate policies gender quotas in Spain.

Originality/value

It is the first study that realizes this type of analysis for Spain.

Details

Applied Economic Analysis, vol. 28 no. 82
Type: Research Article
ISSN: 2632-7627

Keywords

Open Access
Article
Publication date: 14 October 2022

Abdulhadi Abdulrahim Tashkandi

This study aims to analyze the impact of Shariah supervision and corporate governance (CG) variables on the performance of Islamic banks (IBs) in Gulf Cooperation Council (GCC…

2345

Abstract

Purpose

This study aims to analyze the impact of Shariah supervision and corporate governance (CG) variables on the performance of Islamic banks (IBs) in Gulf Cooperation Council (GCC) countries.

Design/methodology/approach

A dynamic panel regression model is used to analyze bank performance’s persistence and the results are estimated using the generalized method of moments estimator. The sample includes 27 full-fledged IBs in 6 GCC countries from 2005 to 2020.

Findings

The results reveal that Shariah supervision and CG-related variables are significant in determining IBs' performance. Furthermore, the results show that bank size, capital adequacy ratio, economic growth and inflation are significant and positive determinants of IBs’ financial performance.

Practical implications

This study is conducted to fill a gap in the literature regarding the effect of Shariah supervision on IBs’ performance, recommending the implementation of CG guidelines in IBs to improve their current practices.

Originality/value

Despite existing studies on the relationship between Shariah governance and performance, this study contributes to the Shariah governance and Islamic banking literature in GCC, which is the most important region of the Islamic financial industry. In addition, it provides additional insight into the fundamental role of Shariah supervision in IBs.

Details

Journal of Business and Socio-economic Development, vol. 3 no. 3
Type: Research Article
ISSN: 2635-1374

Keywords

Open Access
Article
Publication date: 29 April 2021

Naznin Sultana Chaity and K.M. Zahidul Islam

The purpose of the study is to determine the relationship between bank efficiency in terms of corporate governance guidelines and the extent of practice of earnings management…

3787

Abstract

Purpose

The purpose of the study is to determine the relationship between bank efficiency in terms of corporate governance guidelines and the extent of practice of earnings management (EM).

Design/methodology/approach

Archival data of listed private commercial banks of Dhaka Stock Exchange over the period of 2007–2016 relating to corporate governance and earnings management are collected and analyzed using parametric and non-parametric methods (efficiency analysis) and applying panel regression analysis.

Findings

The same distribution pattern and have low degree of the correlation (0.248) among them. It is found that private commercial banks of Bangladesh, on average, display efficiency level of 80.84%. The average value of discretionary loan loss provision (i.e. measure of earnings management) is 0.4249 and this indicates the presence of earnings management. The relation between earnings management and efficiency score in both cases of two-step system generalized methods of moments (GMMs) and difference GMM are found to be negative. The negative coefficients (−0.7969 and −0.57) indicate that as the efficiency increases, the practice of earnings management by the private commercial bank reduces. By estimating efficiency based on corporate governance guidelines and detecting the existence of EM, the major contribution of the study is establishing the relationship between bank efficiency based on compliance with corporate governance guidelines and managerial practice of earnings management in Bangladesh. Empirical results of the study have also established the fact that the more efficient the management of the banks are, the less likely it will practice earnings management under the compliance of corporate governance guidelines in Bangladesh.

Research limitations/implications

This research study has some limitations. Only conventional banks are considered for the study, with the exception of Islamic banks. Comparison between conventional banks and Islamic banks could have been done.

Practical implications

Based on the literature study, the effectiveness of corporate governance aligns with decreasing agency conflict, protection of shareholders' interests and restrain management from self-serving activities (i.e. practice of earnings management). The empirical results of the study established these facts. Regulators should give more emphasis on effective implementation of good governance.

Originality/value

To the best of the authors' knowledge, this may be the first to empirically determine the relationship between efficiency estimation based on corporate governance and earnings management in case of listed commercial banks of Bangladesh.

Open Access
Article
Publication date: 22 June 2021

Pontus Wadström

This paper expands theory on strategists by investigating how non-executive strategy professionals in multi-business firms strategize. In focus is the strategizing of two groups…

1140

Abstract

Purpose

This paper expands theory on strategists by investigating how non-executive strategy professionals in multi-business firms strategize. In focus is the strategizing of two groups of non-executive strategy professionals: a corporate strategy team and eleven business strategists employed in each of the incorporated units.

Design/methodology/approach

A case study design was employed to explore privileged accessed data to gain first-hand in-depth qualities of strategists' work. The design was characterized by phenomenon driven immersed participatory insider research with retrospective reflection and theorizing. Data includes strategies, interview data, calendars, meeting minutes, workshop material and observational field notes.

Findings

Non-executive strategy professionals in multi-business firms are either employed at the corporate center or in the peripheral businesses. Based on this location and their individual experiences they assume an exclusive content or an inclusive process strategizing orientation. In practice, the groups strategize tightly together.

Research limitations/implications

Case studies are useful in explorative research providing thick descriptions. While empirically rich, the results of this study are limited by the context of one single case. Future research is encouraged to confirm, contradict and refine the results presented.

Practical implications

The insights from this study can help organizations regarding how to employ strategy professionals in multi-business firms.

Originality/value

This paper contributes to a recognized need to explore strategists' work. In contrary to the majority of existing research, focusing on senior management and/or strategy formulation, this paper highlighted non-executive strategy professionals' strategizing.

Details

Journal of Strategy and Management, vol. 15 no. 1
Type: Research Article
ISSN: 1755-425X

Keywords

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