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Article
Publication date: 9 January 2024

Khairul Anuar Kamarudin, Nor Hazwani Hassan and Wan Adibah Wan Ismail

This study examines the non-linear effect of board independence on the investment efficiency of listed firms worldwide. This study further tests whether the COVID-19 pandemic…

Abstract

Purpose

This study examines the non-linear effect of board independence on the investment efficiency of listed firms worldwide. This study further tests whether the COVID-19 pandemic, industry competition and economic development influence the relationship between board independence and investment efficiency.

Design/methodology/approach

The data are retrieved from the Thomson Reuters (Refinitiv) database and include international data from 33 countries, comprising 21,363 firm-year observations. The authors' regression analyses include firm-specific variables as controls that may impact investment efficiency. The authors also perform various robustness tests including, alternative measures of investment efficiency, weighted least squares regression, quantile regression and endogeneity issues.

Findings

The results reveal a non-linear relationship between board independence and investment efficiency. Specifically, the relationship follows a U-shaped pattern, indicating that the negative impact of board independence on investment efficiency becomes positive after it reaches its optimal point, thus supporting optimal board structure theory. Interestingly, the authors find no significant evidence of board independence’s effect on investment efficiency during the pandemic. In contrast, the relationship between board independence and investment efficiency is significant only during the non-pandemic period. Furthermore, the authors discover evidence of a U-shaped relationship in both emerging and developed markets, as well as in industries with high and low competition.

Research limitations/implications

The authors' study discovers new evidence on the non-linear impact of board independence on investment efficiency, which has not been explored previously in existing research.

Practical implications

This study has practical implications for investors by emphasising the importance of corporate governance and the appointment of independent directors. Investors should consider the findings of this study when making decisions related to corporate governance, as they can impact a firm's investment efficiency.

Originality/value

Despite a considerable body of literature exploring the link between corporate governance and investment effectiveness, there is a dearth of research on the non-linear effects of board independence. Furthermore, the effects of the COVID-19 pandemic, industry competition and economic development remain unexplored.

Details

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

Keywords

Open Access
Article
Publication date: 20 March 2023

Sarah Chehade and David Procházka

The paper aims to provide empirical evidence of the impact of IFRS adoption on the value relevance of accounting information in the emerging market of Saudi Arabia.

2079

Abstract

Purpose

The paper aims to provide empirical evidence of the impact of IFRS adoption on the value relevance of accounting information in the emerging market of Saudi Arabia.

Design/methodology/approach

The sample consists of 98 non-financial listed firms operating in Saudi Arabia from 2014 to 2019, representing the years before and after IFRS adoption. The authors apply basic and extended price models to examine the value relevance of select accounting figures.

Findings

The authors findings provide evidence that accounting information is, generally, value relevant to the Saudi Arabian capital market. However, mixed results exist for particular accounting variables. Both earnings and cash flows are value-relevant in the period before and after IFRS adoption; equity is only relevant in the post-adoption period. Furthermore, IFRS adoption also increases the explanatory power of earnings. An increase in the value relevance of earnings and equity hurts the value relevance of cash flows. The effects are moderated by leverage and dividend policy.

Originality/value

The authors contribute to the ongoing discussion of the economic effects of IFRS adoption in emerging markets. The empirical findings show that initial concerns about IFRS adoption, as reflected by the negative coefficient within the regression analysis, are mitigated once the usefulness of the individual accounting variables published in financial statements is investigated.

Details

Journal of Accounting in Emerging Economies, vol. 14 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

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