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This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA) region using both a two-stage approach and simultaneous equation system to address the potential problem of estimation bias introduced by estimating the ALL and LLP separately. The paper also tests three competing hypotheses: the earnings management hypothesis, the capital management hypothesis, and the signaling hypothesis.

The authors adopt a simultaneous equation and three-stage approaches to test whether MENA banks jointly determine LLP and ALL and the determinants of the two accounts. The sample consists of all available electronic data for 75 banks (451 bank-year observations) in nine MENA countries over the period 2000-2008.

Evidence suggests that the two accounts are jointly determined. The results support the earnings management hypothesis – meaning that MENA banks have engaged in year-to-year income smoothing. The authors also find that LLP and ALL provide signals about future earnings.

The authors acknowledge that the LLP account is only one of many accounts on the income statement that could be used for signaling or to manage earnings, and that the ALL is one of several accounts that could be used for signaling, earnings or capital management. Future studies could examine other accruals for their role in managing earnings, signaling and capital.

The results indicate that bank managers use LLP and ALL accounts to manage earnings management, policy makers may want to limit the ability of banks to manipulate earnings.

Prior research on the loan loss accounting practices has been based on single equation models of the determinants of LLP and ALL. An issue that has not been adequately addressed in this literature is that ALL and LLP may be interrelated and jointly determined by banks. If the two accounts are not independent of each other, failure to include one when estimating the other may lead to an omitted variable problem, while including both in the same equation induces a potential simultaneity bias. The study is the first empirical work examining whether ALL and LLP are jointly determined by banks. By jointly estimating LLP and ALL, the study permits an assessment of the magnitude of the potential error from adopting ordinary least squares estimation of a single equation model.

Multinational structure has been linked to operational flexibilities that can improve corporate adaptability and a knowledge‐based view suggests that multinational resource diversity can facilitate responsive opportunities. The enhanced maneuverability from this can reduce earnings volatility and hence the corporate performance risk. But, the internationalization process may also require irreversible investments that increase corporate exposures and leave the risk implications of multinational enterprize somewhat ambiguous. Hence, the purpose of the paper is to present an empirical study of the implied relationships between the degree of multinationality and various risk measures including downside risk, upside potential, and performance risk.

The paper provides a brief literature review, develops hypotheses, and tests them in two‐stage least square regressions on archival data to control for pre‐selection biases.

The analyses indicate that multinationality is associated with lower downside risk as well as higher upside potential and leads to reduced performance risk. The study finds no trace of diminishing effects from higher degrees of multinationality.

The empirical study uses a sample of large US‐based corporations, which could affect the generalizability of results. However, this is consistent with other studies and eases comparability of findings.

The findings add to the ongoing debate about the risk effects of a multinational corporate structure and confirms that a diverse multinational presence is associated with positive risk outcomes.

The paper complements a limited number of studies with equivocal results and adopts alternative risk outcome measures. The study extends the industry scope by introducing a comprehensive sample of firms operating in different manufacturing and service businesses.

In this paper, the authors investigate whether an independent and gender-diverse compensation committee strengthens the relationship between top managers' pay and firm performance in Chinese companies. The authors also investigate whether the independent compensation committee composed of all male directors is effective in designing the optimal contract for executives.

The authors use data from A-share listed companies on the Shenzhen and Shanghai stock exchanges from 2005 to 2015. As a baseline methodology, the authors use pooled ordinary least square (OLS) regression to draw inferences. In addition, cluster OLS regression, two-stage least square regression, the two-stage Heckman test and the propensity score matching method are also used to control for endogeneity issues.

The authors find evidence that an independent or gender-diverse compensation committee strengthens the link between top managers' pay and firm performance; that the presence of a woman on the compensation committee enhances the positive influence of committee independence on this relationship; that a compensation committee's independence or gender diversity is more effective in designing top managers' compensation in legal-person-controlled firms than they are in state-controlled firms; that gender diversity on the compensation committee is negatively associated with top managers' total pay; and that an independent compensation committee pays top managers more.

The study results highlight the role of an independent compensation committee in designing optimal contracts for top managers. The authors provide empirical evidence that a woman on the compensation committee strengthens its objectivity in determining top managers' compensation. The study finding supports regulatory bodies' recommendations regarding independent and women directors.

The study findings contribute to the recent debate about gender equality around the globe. Given the discrimination against women, many regulatory bodies mandate a quota for women on corporate boards. The study findings support the regulatory bodies' recommendations by highlighting the economic benefit of having women in top management positions.

This study contributes to literature by investigating the largely overlooked questions of whether having a gender-diverse or independent compensation committee strengthens the relationship between top managers' pay and firm performance; whether an independent compensation committee is more efficient in setting executives' pay when it is gender-diverse; and whether the effect of independent directors and female directors on top managers' compensation varies based on the firm's ownership structure. Overall, the main contribution of the study is that the authors provide robust empirical evidence in support of the managerial power axiom.

Previous empirical studies on the nature of the relationship between ownership and corporate value have produced mixed results. Meanwhile, effective management of knowledge‐based intellectual capital has become a key factor to corporate success, both in firm performance and corporate value. Thus, this paper aims to reexamine the link among ownership, proxies for intellectual capital and corporate value in the emerging Taiwan market.

Using two‐stage least square estimation of panel data in a simultaneous equations framework, the authors focus on: What is the interdependent impact of ownership on corporate value through the mediating role of intellectual capital (IC)? Does ownership directly or indirectly (i.e. via IC) influence corporate value? Does it persist across industries?

The empirical results suggest that the relationship between ownership and corporate value mainly depends on industry characteristics and the nature of proxies for intellectual capital in the emerging Taiwanese market. Further, the impacts of ownership on corporate value in more traditional industries are even stronger, that is, there exists the direct impact of ownership mechanism on corporate value. Notably, for the high‐tech firms, ownership can indirectly affect corporate value through the moderating role of intellectual capital.

The implication reminds managers and investors not merely focusing on ownership mechanisms as the main value‐creation information, but a thorough review of IC should be made in order to avoid making incorrect decisions. The limitations suggest areas for further research. For instance, it is important to extend the role of intellectual capital (i.e. to employ other variables to proxy for IC) in exploring the interdependent impact of ownership on corporate value.

The paper potentially adds to ongoing research by extending the importance of the concept of IC in assessing the interdependent impact of ownership on corporate value.

This paper aims to investigate the question concerning whether gender diversity in the boardroom matters to lenders or not?

To answer this question, the authors use the data from 2009 to 2015 of all A-share listed companies on the Shanghai and Shenzhen stock exchanges. The authors use ordinary least squares regression and firm fixed effect regression to draw our inferences. To check and control the issue of endogeneity the authors use one-year lagged gender diversity regression, two-stage least squares regression, propensity score matching method and Heckman two-stage regression.

The results suggest that the presence of female directors on the board reduces managerial opportunistic behavior and information asymmetry and, consequently, creditors’ perceptions about the probability of loan default and the cost of debt. The authors find that lenders charge 4 per cent less from borrowers that have at least one female board member than they do from borrowers with no female board members. The authors also find that the board structure (i.e. gender diversity) of government-owned firms also matters to lenders, as government-owned firms that have gender-diverse boards have a lower cost of debt (i.e. 5 per cent lower interest rate).

The findings have implications for individual borrowers and for regulators. For example, borrowers can get debt financing at lower rates by altering their boards’ composition (i.e. through gender diversity). From the regulatory perspective, the results support recent legislative initiatives around the world regarding female directors’ representation on boards.

This paper makes several contributions. First, beyond the recent studies on boardroom gender, the authors investigate the relationship between gender diversity in the boardroom and the cost of debt. Second, the authors extend the literature on the association between government ownership and cost of debt by first time providing evidence that the board composition (e.g. gender diversity) of government-owned firms also matters to the lenders. The other contributions are discussed in the introduction section.

The aim of this paper is to study whether adoption of sustainability policies by firms makes their stock market performance resilient to the downside risk during the crisis period.

The paper empirically examines the relationship between environmental, social and governance (ESG) and stock market performance for Indian companies that have consistently been a part of Refinitiv Eikon ESG database. Further, the study examines whether there exist significant differences in stock market performance of high ESG and low ESG-compliant firms during crisis period. The sample was made up of 70 Indian firms studied over the period 2016–2019 defined as “normal period” as well as for the declared COVID-19 crisis period, i.e. January–March 2020, and full year 2020. The authors used multivariate panel data regression, robust least square multivariate regression, pooled OLS model and two-stage least square regression method.

The study extends the existing literature by investigating the impact of ESG performance on market value of firms during the crisis period. Based on the stakeholder and “flight to safety” theory, the authors hypothesized that ESG would have significant positive effect on the stock market performance during crisis period; however, the results provide robust evidence that in a well-specified model capturing the effect of accounting-based measures of performance, Size, Growth, Risk and Dividend yield, ESG had no explanatory power over the stock market performance of ESG-compliant firms during crisis period. Furthermore, no significant difference in stock market performance indicators between high and low ESG-compliant firms was observed during the crisis period of 1Q2020 as well as for full year 2020. On contrary, the study finds dividend yield to be statistically significant in determining stock market performance of Indian firms during crisis period. The study extends the existing literature by coining the term, “ESG irrelevance” during crisis period.

The main limitation of this study is its limited sample size because there are very few Indian firms that have secured consistent ESG rating. The study focuses on consistently rated firms to avoid the impact of “greenwashing”. Further, the study is focused on India, which limits the generalizability of our findings to other emerging countries.

To the best of our knowledge, this is among the first few studies that examines sustainability and stock market performance of Indian firms during COVID-19-led crisis period. Our findings highlight no significant difference between stock market performance of high ESG firms and low ESG firms indicating that investors who wish to create wealth by investing in ESG-compliant stocks in India can do so without worrying about the companies’ ESG rating scores.

How does the internal audit function make external auditors work more efficiently at the early stage of the COVID-19 pandemic? This study examines the relationship between internal audit function, audit report lag and audit fee at the early stage of the COVID-19 pandemic.

This study uses data from all public firms listed on the Indonesia Stock Exchange from 2018 to 2019 using the difference-in-difference test technique to answer the proposed hypothesis. In addition, this study also tested the issue of endogeneity using Coarsened Exact Matching (CEM) and Two-Stage Least Square (Heckman, 1979).

This study finds that, at the early stage of the COVID-19 pandemic, a good internal audit function significantly reduced audit report lag and audit fee. These findings indicate that good corporate governance implemented through an internal audit function during the COVID-19 pandemic can give assurance to prevent and mitigate the firm's risk so that external auditors can work more efficiently. Furthermore, this study also carries out an additional analysis by subsampling the high and low technological industries. Based on the robustness test, it is revealed that the results of this study are consistent.

This study contributes to the novelty of literature in auditing studies that highlights the audit process at the early stage of the COVID-19 pandemic

The purpose of this paper is to argue that strategic responsiveness is of paramount importance for effective risk management outcomes and to introduce an empirical study to demonstrate this.

Real options logic is adopted to explain how effective risk management capabilities improve performance and how innovation and financial slack enhance this effect. The propositions are examined across 896 companies using two‐stage least square regressions.

The study reveals that risk management effectiveness combines both the ability to exploit opportunities and avoid adverse economic impacts, and has a significant positive relationship to performance. This effect is moderated favorably by investment in innovation and lower financial leverage.

The analysis is based on a sample of large firms, which may affect the generalizability of results. Nonetheless, the study shows that effective risk management capabilities differentiate the firms and determine success and failure. It further underscores the importance of combined innovation policy and capital structure decisions as firms deal effectively with risk and uncertainty.

The findings indicate that corporate management must consider commitments for innovation and financial slack to enhance positive risk management effects. This result is in dire contrast to traditional beliefs that tighter resource management and higher financial leverage lead to better economies.

This is one of few studies to explicitly consider strategic responsiveness as instrumental for effective risk management outcomes while investigating the economic effects associated with the ability to combine generation of upside gains and downside loss avoidance.

This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors also investigate whether investor protection moderates the relationship between PMC and forecast attributes.

The sample covers 49,578 firm-year observations from 38 countries. This study uses an ordinary least squares regression, a Heckman two-stage regression and an instrumental two-stage least squares regression.

This study finds that PMC is associated with higher forecast accuracy and lower dispersion. The results also show that investor protection enhances the effect of PMC on forecast accuracy and dispersion. These findings imply that countries with strong investor protection have a better information environment, as exhibited by the stronger relationship between PMC and analysts’ forecast properties.

The findings highlight the importance of strong governance mechanisms in both the country and industry environments. Policymakers, including government agencies and financial regulators, can leverage these insights to formulate regulations that promote competition, ensure investor protection and facilitate informed investment decisions.

This study advances our understanding of how PMC affects analysts’ earnings forecast attributes. In addition, it pioneers evidence of the moderating role of investor protection in the relationship between PMC and forecast attributes.

This paper aims to analyze the relationship between public health spending and health outcome using time series data in Nigeria over the period 1980 to 2017, taking into account the role of governance by assessing how the quality of governance directly affects health status and indirectly as a mediator for the effectiveness of public health spending.

Using the Hausman statistical tests to check for the existence of endogeneity, the proper method for estimating the model for this study is the two-stage least square regression model. The two-stage least squares regression model addresses the problem of endogeneity using instrumental variables. The mediating role of governance on the effectiveness of public health spending on health was considered by an interaction of governance indicators with public health spending.

The results showed that public health spending had no significant effect on health outcome except when interacted with governance quality. The interaction of government health spending with governance effectiveness as well as that for control of corruption improved health by inducing a fall in maternal deaths, whereas government health expenditure interacted with rule of law raised maternal mortality. Public health spending interacted with regulatory quality improved life expectancy while that for political stability with public health spending induced a fall in life expectancy, poor maternal and infant health. Political stability and the control of corruption had direct influence on maternal health.

Given the predominance of public health spending in promoting access to health care and population health status for developing economies, the effectiveness of such spending should be top priority in policy makers’ agenda. This again is important because for developing economies, government revenue is generated from a small tax base due to their highly informal nature. To improve health status from public intervention in the health sector, there is indeed need for improvement in the overall state of governance in Nigeria.

This paper is one of the few country case studies which uses time series data to examine the role of governance on the efficacy of public health spending with extension of findings to maternal health and covering more measures of governance quality. The results fundamentally illuminate the importance of governance in fostering development in health and consequently enhancing economic development and growth.