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Article
Publication date: 10 November 2023

Mikhail Gorshunov

The purpose of this research is to examine the impact of audit committee financial experts on the risk of financial corruption in public companies.

Abstract

Purpose

The purpose of this research is to examine the impact of audit committee financial experts on the risk of financial corruption in public companies.

Design/methodology/approach

A time-lagged, matched-pairs sample of 352 corporations was utilized to test the study's hypotheses (176 financially corrupt firms plus 176 compliant firms). To uncover financially corrupt firms, 2,895 Accounting and Auditing Enforcement Releases from the Securities and Exchange Commission were thoroughly evaluated.

Findings

The results show that financial experts on audit committees generally increased financial corruption. However, the impact was reversed when audit committees had three or more financial experts, showing that having at least three financial experts reduced financial corruption.

Originality/value

The study's findings call into question the long-held practice of appointing at least one financial expert to audit committees. This study offers a novel approach to improve corporate oversight and reduce financial corruption by having at least three financial experts on audit committees.

Details

Managerial Finance, vol. 50 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 19 February 2024

Adam W. Du Pon, Andrea M. Scheetz and Zhenyu “Mark” Zhang

This study aims to examine the determinants of Foreign Corrupt Practices Act (FCPA) violations and consequences of FCPA enforcements.

Abstract

Purpose

This study aims to examine the determinants of Foreign Corrupt Practices Act (FCPA) violations and consequences of FCPA enforcements.

Design/methodology/approach

This paper uses publicly available data from Compustat, I/B/E/S and Thomson Reuters databases, combined with Securities and Exchange Commission (SEC) and Department of Justice (DOJ) cases, to extract insights on FCPA violations and enforcements using econometric approaches.

Findings

The main determinants of FCPA violations appear to be firm size, multinational structure, country corruption and Sarbanes-Oxley Act control weaknesses. Traditional misreporting risks (F-score and M-score) do not predict FCPA violations. This study discovers significant differences between FCPA violations by motivation, as in, sale generation, rent extraction or cost evasion. Bribes motivated by sale generation or rent extraction are partially driven by the extent of the firm’s global operations, whereas bribes motivated by cost evasion relate to internal influences. This study also finds that enforcement is more salient for criminal violations (DOJ enforcement), compared to civil violations (SEC enforcement).

Research limitations/implications

This research provides new insights into the determinants of FCPA violations while underscoring the need for effective measures to combat bribery and promote ethical business practices. This research contributes to the ongoing efforts to curtail bribery, offering valuable insights into the characteristics of firms more likely to engage in bribery and contexts in which these activities occur. It provides critical implications for regulatory bodies, highlighting the differential responses of firms to varying types of enforcement, namely, criminal versus civil, as the authors observe greater decreases in internal control weaknesses following DOJ enforcement compared to SEC enforcement.

Practical implications

For enforcement agencies, the findings underscore the importance of rigorous criminal enforcement against FCPA violations, highlighting the improved control environments prompted by DOJ actions. Managers will find this research relevant, as it demonstrates that a firm’s entry into international markets substantially elevates the risk of its representatives engaging in bribery with foreign officials. In addition, the results are of interest to regulators, revealing that the underlying motivations driving a firm’s activities can significantly alter the factors to consider that might lead to an FCPA violation.

Originality/value

This paper is the original work of the authors and explores the determinants and consequences of FCPA violations and enforcement actions since 2002. To the best of the authors’ knowledge, it is the first to explore bribe determinants by their motive and documents industry-wide benefits arising from criminal enforcement.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 30 August 2023

Samuel Buertey, Ha Thanh Nguyen and Ephraim Kwashie Thompson

Post-Sarbanes Oxley Act (SOX), the audit committee has been empowered greatly to play a central role in the corporate governance of firms. Embedded in agency theory, this study…

Abstract

Purpose

Post-Sarbanes Oxley Act (SOX), the audit committee has been empowered greatly to play a central role in the corporate governance of firms. Embedded in agency theory, this study aims to examine the effect of the audit committee on the likelihood by firms to pay dividends.

Design/methodology/approach

The study population is US firms in the Institutional Shareholder Services (ISS) database from 2007 to 2018. The authors apply the multivariate logit fixed-effect regression for the analyses after conducting the appropriate statistical tests.

Findings

From the results of the research model, the authors find that there is a positive relationship between the size and gender diversity of the audit committee and the propensity to pay dividends suggesting that a larger audit committee with substantial women representation improve the information environment in firms leading to higher dividend distribution. The extent of busyness of the audit committee impacts negatively on the propensity to pay dividends. The results are driven by high-performing firms and not driven by specific levels of firm size.

Research limitations/implications

The findings of the study give impetus to the audit committee as an important component of the corporate governance mechanism that advances the interest of stakeholders. Thus, efforts that seeks to promote the audit committee’s resourcefulness must be embraced by all stakeholders.

Originality/value

To the best of the authors’ knowledge, this study is the first to focus on audit committee and dividend payout policy of US firms post-SOX. The study demonstrates how the audit committee characteristics including its size, gender diversity and busyness affect dividend policy by mitigating information asymmetry problems.

Details

Corporate Governance: The International Journal of Business in Society, vol. 24 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 28 September 2023

Bhavna Mahadew

The purpose of this study is to provide for critical literature on the legal aspects of corporate governance and their application in Mauritius. The drawbacks of having the…

Abstract

Purpose

The purpose of this study is to provide for critical literature on the legal aspects of corporate governance and their application in Mauritius. The drawbacks of having the principles in the form of a non-binding code are discussed, and a case is made to consider their enshrinement in laws such as the Companies Act 2001 to render them legally enforceable for the good health of companies in Mauritius.

Design/methodology/approach

A doctrinal legal methodology has been adopted to assess the effectiveness of the principles of the 2016 Code of Corporate Governance of Mauritius. Legislations, legal texts, case law and regulations are used to conduct this assessment. In addition, a black-letter approach is taken while discussing the enshrinement of the principles in the Companies Act 2001 of Mauritius. The doctrinal methodology is further supported by a qualitative analysis of the principles of corporate governance based on existing legal literature, which emphasises their relevance and importance.

Findings

The principles of the 2016 Code of Corporate Governance are no doubt a progress over the former 2004 Code in various aspects, aligning the Code with the requirements of the OECD. However, there are still certain loopholes that have been highlighted. In addition, the extent to which these principles are reflected in the Companies Act, which is the primary legislation for companies, has been found to be lacking and inadequate.

Originality/value

This paper is, to the best of the author’s knowledge, the first legal literature concerning the Mauritian legal framework on corporate governance. This is relevant because the country has recently experienced corporate collapses, which could arguably have been avoided with the application of the principles of corporate governance. As such, the paper will present a case study that can be used as a reference for future research on the enforceability and justiciability of these principles.

Details

International Journal of Law and Management, vol. 66 no. 1
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 13 June 2023

Bita Mashayekhi, Ehsan Dolatzarei, Omid Faraji and Zabihollah Rezaee

This study aims to identify the intellectual structure of expanded audit reporting (EAR), offers a quantitative summation of prominent themes, contributors and knowledge gaps and…

Abstract

Purpose

This study aims to identify the intellectual structure of expanded audit reporting (EAR), offers a quantitative summation of prominent themes, contributors and knowledge gaps and provides suggestions for further research.

Design/methodology/approach

This research uses various bibliometric techniques, including co-word and co-citation analysis for EAR science mapping, based on 123 papers from Scopus Database between 1991 and 2022.

Findings

The results show EAR research is focused on Audit Quality; Auditor Liability and Litigation; Communicative Value and Readability; Audit Fees; and Disclosure. Regarding EAR research, Brasel et al. (2016), article is the most cited paper, Bédard J. is the most cited author, Laval University is the most influential university, The Accounting Review is the most cited journal and USA is the leading country. Furthermore, the results show that in common law countries, in which shareholder rights and litigation risk is high, topics such as disclosure quality and audit litigation have been addressed more; and in civil legal system countries, which usually favor stakeholders’ rights, topics of gender diversity or corporate governance have been more studied.

Practical implications

This research has practical implications for standard setters and regulators, who can identify important, overlooked and emerging issues and consider them in future policies and standards.

Originality/value

This paper contributes to the literature by providing a more objective and comprehensive status of the accounting research on EAR, identifying the gaps in the literature and proposing a direction for future research to continue the discussion on the value-relevance of EAR to achieve more transparency and less audit expectation gap.

Details

Meditari Accountancy Research, vol. 32 no. 2
Type: Research Article
ISSN: 2049-372X

Keywords

Content available
Book part
Publication date: 25 March 2024

Sophia Beckett Velez

Abstract

Details

Compliance and Financial Crime Risk in Banks
Type: Book
ISBN: 978-1-83549-042-6

Article
Publication date: 15 February 2024

Amon Bagonza, Chen Yan and Frederik Rech

This paper aims to examine whether the audit committee moderates the relationship between audit quality and market reactions.

Abstract

Purpose

This paper aims to examine whether the audit committee moderates the relationship between audit quality and market reactions.

Design/methodology/approach

Using fixed effects and the GMM model for robustness, the study used 472 publicly listed firms on South Africa’s Johannesburg stock exchange spanning a period of six years from 2014 to 2019.

Findings

Results obtained show that audit quality impacts market reactions through share price and adjusted market returns. And, that the audit committee moderates the relationship between audit quality and market reactions in South Africa’s publicly listed firms. An effective audit committee is expected to play a crucial role in overseeing the audit process, ensuring the independence of auditors and promoting transparency and accountability which in turn impacts asset prices.

Research limitations/implications

The study implies that governments and regulatory bodies in other developing economies could strengthen regulations about companies’ Acts, how firms regulate themselves and more so audit committees. Firms can also strive to make sure that audit committees are staffed with experts to promote higher audit quality and investor attention to get access to the much-alluded capital.

Originality/value

To the best of the authors’ knowledge, the study adds value by being the first to explore the subject matter of the importance of audit committees in defining audit quality and market reactions in publicly listed firms. The research adds to the body of knowledge on corporate governance and audit quality. It provides a case study specific to the South African context, contributing to the global literature on these topics.

Details

Journal of Accounting & Organizational Change, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1832-5912

Keywords

Abstract

Details

Compliance and Financial Crime Risk in Banks
Type: Book
ISBN: 978-1-83549-042-6

Article
Publication date: 2 February 2024

Pattanaporn Chatjuthamard, Pandej Chintrakarn, Pornsit Jiraporn, Weerapong Kitiwong and Sirithida Chaivisuttangkun

Exploiting a novel measure of hostile takeover exposure primarily based on the staggered adoption of state legislations, we explore a crucial, albeit largely overlooked, aspect of…

Abstract

Purpose

Exploiting a novel measure of hostile takeover exposure primarily based on the staggered adoption of state legislations, we explore a crucial, albeit largely overlooked, aspect of corporate social responsibility (CSR). In particular, we investigate CSR inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced, more lopsided, CSR policy.

Design/methodology/approach

In addition to the standard regression analysis, we perform several robustness checks including propensity score matching, entropy balancing and an instrumental-variable analysis.

Findings

Our results show that more takeover exposure exacerbates CSR inequality. Specifically, a rise in takeover vulnerability by one standard deviation results in an increase in CSR inequality by 4.53–5.40%. The findings support the managerial myopia hypothesis, where myopic managers promote some CSR activities that are useful to them in the short run more than others, leading to higher CSR inequality.

Originality/value

Our study is the first to exploit a unique measure of takeover vulnerability to investigate the impact of takeover threats on CSR inequality, which is an important aspect of CSR that is largely overlooked in the literature. We aptly fill this void in the literature.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Abstract

Details

Compliance and Financial Crime Risk in Banks
Type: Book
ISBN: 978-1-83549-042-6

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