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Very little is known about the influences of corporate strategy and regulation on the risk of regulated firms. The current study addresses this gap by examining the relationship among the level of diversification, the regulatory environment, and risk levels of regulated electric utility companies. Results suggest that both the regulatory environment and level of diversification impact firm risk. Specifically, the regulatory environment in which a firm operates moderates the relationship between diversification and risk. Electric utilities operating in the least favorable regulatory environments benefited the most from diversification in terms of risk reduction, while electric utilities in the most favorable regulatory environments experienced increases in risk from diversification. These findings extend previous studies by showing how both the regulatory environment and corporate strategy impact the risk of regulated utilities.

This paper seeks to examine the potential for regulation to reduce information asymmetries between firm insiders and outside investors.

Extensive prior research has established that there are substantial effects of information asymmetry in seasoned equity offers (SEOs). The paper tests for a mitigating effect of regulation on such information asymmetries by examining differences in long‐run operating performance, changes in that performance, and announcement‐period stock returns between unregulated industrial firms and regulated utilities that issue seasoned equity. The authors also segment the samples by firm size, since smaller firms are likely to have greater asymmetries.

Consistent with regulated utility firms having lower levels of information asymmetry, they have superior changes in abnormal operating performance than industrial firms pre‐ to post‐issue and their announcement period returns are significantly less negative. These findings are most pronounced for the smallest firms, firms likely to have the greatest information asymmetries and where regulation could have its greatest effect.

The paper does not examine costs of regulation. Thus, future research could seek to measure the cost/benefit trade‐off of regulation in reducing information asymmetry. Also, future research could examine cross‐sectional differences between different industries and regulated utilities.

Regulation reduces information asymmetry. Thus, regulation or mandated disclosure may be appropriate in industries/markets where information asymmetry is severe.

This paper is the first to compare the operating performance of regulated and unregulated SEO firms.

This paper aims to examine the impact on executive compensation (both cash and in total) of regulation, size of sales and number of employees, and nature of the business in terms of new‐economy vs traditional.

This study uses the ExecuComp database as the information source. Regression analysis is used to test hypotheses that focus on firm size in terms of sales, market and accounting returns, and the number of firm employees. The sample consists of 455 US firms from 25 industries, and covers the period 1996‐2002.

Firm size and market‐based return are the most significant explanatory variables in affecting executive compensation. More limited support was found for accounting‐based returns, as was changes in the number of employees.

Findings of this study may be limited by the temporal context. Around the turn of this century may have been an unusual time in America's corporate history. The economic outlook of the late 1990s may be fundamentally different from the one facing firms now or in the future. Consequently, future research will be needed to determine to what extent these results can be generalized to periods of different economic prospects.

This study examines the impact of firms' operational characteristic on Chief Executive Officer (CEO) compensation.

This study aims to investigate whether country governance, regulated industry and firm-level characteristics, namely, ownership structure and firm size, are associated with the likelihood of firms having a politically connected board (PCB). This study also examines whether country governance and concentrated ownership moderates the association between institutional ownership and PCB.

This study uses cross-country analysis using 20 countries and hand-collected PCB data from 574 firms and 1,701 firm-year. This study performs logit regression analyses to examine hypotheses.

The results document that countries’ accountability, industry type and institutional ownership are associated with the likelihood of firms having a PCB. This study also finds that country governance, especially accountability, moderates the relationship between institutional ownership and PCBs. The results thus indicate the importance of country governance, especially accountability, in determining institutional investors’ political strategies.

This study provides several implications. First, firms tend to elect PCBs as a non-financial strategy because it arguably delivers additional resources and improves their performance, especially in countries with lower accountability and regulated industries. Meanwhile, investors and management must also hire PCBs cautiously because PCBs are closely related to agency issues. Agency issues reflect on the finding that institutional investors tend to avoid PCBs. However, the relationship between institutional investors and PCBs is closely related to the country-level context, especially accountability. This study also advises policymakers that country governance, especially accountability, is crucial in regulating the relationship between business and politics.

This study uses a relatively large number of new PCB and institutional ownership data collected manually from 20 countries. This study also examines several variables of country governance, such as accountability to PCB decisions that have not been tested before. This study examines the relationship between institutional ownership and PCB ownership decisions that were not examined before and uses a cross-country sample. In addition, to the best of the authors’ knowledge, this study is the first one that examines the role of state governance, especially accountability for the relationship between institutional ownership and PCBs.

The purpose of this paper is to explore the relationship between good corporate governance and dividend payment in the regulated insurance industry.

A modification of Rozeff's transaction cost/agency cost trade‐off model was estimated on a sample of 55 firms in the insurance industry. Data cover a five‐year period ending in 2006.

Consistent with an agency view of dividends functioning to reduce the need for firm monitoring, it was found that there is no relationship between good corporate governance and dividend policy in a regulated industry. In other words, regulation appears to supplant the need for most corporate governance mechanisms and dividend distribution to provide information.

One data point used in this study, the corporate governance quotient (CGQ), is a relatively new metric created in 2001. Therefore limited use of this variable has appeared in previous research. Additional work is needed to fully evaluate the effectiveness of CGQ as a true measure of corporate governance.

Regulated firms in the insurance industry do not need to be subjected to the external monitoring forced by high dividend payments. Regulators perform that function instead.

This study is the first to evaluate the impact of good corporate governance on regulated firms’ dividend policy.

This study examines the market reaction when announcements of large dividend increases are made by more versus less rate‐regulated firms in the same industry. The insurance industry was chosen because property/liability insurers are rate‐regulated more than life/health insurers. The abnormal returns are positive and significant for all insurers but smaller than those found in previous cross‐sectional studies. Abnormal returns for the less rate‐regulated life/health insurers during the dividend increase announcement period are significantly greater than those of the more rate‐regulated property/liability insurers.

In this study, we examine the relationship between political connections of private firms and the initial public offering process. Using registration statement information, we create a unique database of politically connected IPO firms. We find that political connections are substitutes to high-quality underwriters and big four auditors. Politically connected firms manage earnings more highly upward than non-connected firms prior to the public offering. Politically connected firms also exhibit less underpricing than non-connected firms. Finally, politically connected IPO firms have superior post-IPO returns relative to non-connected IPO firms.

The new audit regulation for disclosure of key audit matters (KAMs) in financial reporting has been introduced in both developed and developing countries. This study investigates the influence of three distinctive sets of variables, namely industry features, firm characteristics and auditor attributes, on the extent, pattern and level of disclosure of KAMs by companies listed in Bangladesh, an emerging economy.

The study uses qualitative and quantitative research approaches to investigate the pattern of disclosure of KAMs and their determinants. With a sample of 447 firm-year observations from companies listed on the Dhaka Stock Exchange over 2018–2020, the study reveals industry-level, firm-level and auditor-specific characteristics that affect KAMs' communication in the new audit reporting model.

The findings suggest that significant differences exist between firms in the number and types of KAMs reported and the extent of their disclosure. The study findings also observed variations both within and across different industry sectors. Highly regulated firms disclose a greater number of KAMs, while environmentally sensitive firms are found to provide a greater detail of the issues presented as KAMs. Further, both firm size and age positively impact the number of KAMs disclosed and the extent of the disclosure provided. Big-4-affiliated auditors do not issue a significantly higher number of KAMs but deliver extensive details to their KAMs description, compared to non-Big-4 auditors. In addition, while auditors, in general, tend to issue boilerplate KAMs, Big-4 associates are found to disclose more new KAMs. However, audit fees and auditor rotation do not influence KAMs disclosure.

This study is based on two years of publicly available data. However, future studies could consider in-depth interviews to explore the motivation behind KAMs' disclosure in Bangladesh and other developing countries with similar cultural and contextual values.

These findings have substantial policy considerations for improving firms' audit quality and, thus, their financial reporting quality, with implications for national and international standard-setters, regulators and other stakeholders.

This study is one of the earliest endeavours to investigate KAMs in a context of an emerging country, such as Bangladesh, which adopted KAMs' disclosure in 2018.

Recent studies have shown that the level of insider holdings and firm value are related in a nonlinear manner. Other studies find that the level of debt in a firm's capital structure declines with increases in its growth options. The principal‐agent relationship maintains that an increase in the equity stake of insiders reduces the agency costs of issuing debt. Extension of this premise suggests, however, that the agency costs of debt rise with extremely high levels of insider holdings as insiders consume perquisites to the detriment of outside stakeholders, revealing a nonlinear relation attributable to agency costs. We examine the relation between debt financing and insider holdings for 1894 firms at the end of 1989. In keeping with the hypothesized relation, the cross‐sectional regressions of leverage on insider holdings reveal significant nonlinearities. Leverage first rises with insider holdings and then declines. The positive relation between leverage and insider holdings returns as inside ownership approaches 100 percent. These results hold for two different measures of leverage and after controlling for industry differences in leverage, tax shields, firm size, growth options, and earnings or return volatility. The results also hold when regulated firms are excluded from the analysis.