Ioannis Tampakoudis, Nikolaos Kiosses, Konstantinos Petridis
Purpose The purpose of this study is to evaluate the performance of mutual funds during the COVID-19 pandemic with environmental, social and governance (ESG) criteria. The main research question is whether mutual fund performance differs with respect to the level of the mutual fund’s ESG score. Design/methodology/approach The data set contains global fund data, and mutual fund performance is analyzed using two types of data envelopment analysis (DEA) models: the DEA portfolio index (DPEI) and the range direction measure (RDM) DEA. Propensity score matching and logistic regression are also applied. Findings The results reveal that: nonequity mutual funds present significantly higher performance compared to the performance of equity mutual funds; mutual funds with high ESG scores are associated with significantly higher performance compared to those with low to medium ESG scores; funds with high ESG scores experience higher performance irrespective of their type; and efficiency scores derived from the RDM DEA are significantly higher than those derived from the DPEI model. Research limitations/implications Investors, fund managers and market participants can benefit from the findings of this study and improve their investment decision-making process, including more sustainable funds in their portfolios. Regulators and policymakers should further promote or even require the inclusion of more sustainable investments in the financial products offered by institutional investors. The main limitation of the study is related to data availability regarding the ESG score of mutual funds. Originality/value To the best of the authors’ knowledge, this is the first study that provides robust evidence in support of a positive association between ESG scores and mutual fund performance during the pandemic-induced crisis applying a DEA methodology.
{"title":"The impact of mutual funds’ ESG scores on their financial performance during the COVID-19 pandemic. A data envelopment analysis","authors":"Ioannis Tampakoudis, Nikolaos Kiosses, Konstantinos Petridis","doi":"10.1108/cg-12-2022-0491","DOIUrl":"https://doi.org/10.1108/cg-12-2022-0491","url":null,"abstract":"Purpose The purpose of this study is to evaluate the performance of mutual funds during the COVID-19 pandemic with environmental, social and governance (ESG) criteria. The main research question is whether mutual fund performance differs with respect to the level of the mutual fund’s ESG score. Design/methodology/approach The data set contains global fund data, and mutual fund performance is analyzed using two types of data envelopment analysis (DEA) models: the DEA portfolio index (DPEI) and the range direction measure (RDM) DEA. Propensity score matching and logistic regression are also applied. Findings The results reveal that: nonequity mutual funds present significantly higher performance compared to the performance of equity mutual funds; mutual funds with high ESG scores are associated with significantly higher performance compared to those with low to medium ESG scores; funds with high ESG scores experience higher performance irrespective of their type; and efficiency scores derived from the RDM DEA are significantly higher than those derived from the DPEI model. Research limitations/implications Investors, fund managers and market participants can benefit from the findings of this study and improve their investment decision-making process, including more sustainable funds in their portfolios. Regulators and policymakers should further promote or even require the inclusion of more sustainable investments in the financial products offered by institutional investors. The main limitation of the study is related to data availability regarding the ESG score of mutual funds. Originality/value To the best of the authors’ knowledge, this is the first study that provides robust evidence in support of a positive association between ESG scores and mutual fund performance during the pandemic-induced crisis applying a DEA methodology.","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-04-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135239048","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose Based on the agency and resource dependence theories, this study aims to investigate whether nomination committee (NC) characteristics could serve as key attributes for reducing environmental, social and governance (ESG) disputes and whether NC composition affects the appointment of ESG-friendly directors to the board. Design/methodology/approach This study focuses on a sample of 30 global systemically important banks from 2015 to 2021. The authors estimate panel data models with fixed effects, clustering heteroskedastic standard errors at the bank level to account for the serial correlation of the dependent variables for each bank. Findings Banks’ exposure to ESG controversies can be reduced when NC members have specific skills, in particular when at least one member of this committee also belongs to the sustainability committee and is a foreign director. Moreover, banks’ ESG disputes decrease when the NC members are younger, while the share of independent NC members has a negative impact. Finally, a positive influence of NC composition and its members’ features as well as the appointment of ESG-friendly directors on the board is found. Originality/value The findings are particularly useful during periods such as the current one, when there is growing attention to both banks’ corporate governance, the subcommittees’ role and functioning and social and environmental issues. This study shows that the NC is important in reducing the likelihood of banks incurring ESG disputes and in appointing more ESG-friendly directors. NC effective functioning and its members’ qualities serve as a key attribute for fulfilling objective assessment and improving board effectiveness.
{"title":"Nomination committee characteristics and exposure to environmental, social and governance (ESG) controversies: evidence from European global systemically important banks","authors":"Antonia Patrizia Iannuzzi, Stefano Dell’Atti, Elisabetta D’Apolito, Simona Galletta","doi":"10.1108/cg-03-2022-0119","DOIUrl":"https://doi.org/10.1108/cg-03-2022-0119","url":null,"abstract":"\u0000Purpose\u0000Based on the agency and resource dependence theories, this study aims to investigate whether nomination committee (NC) characteristics could serve as key attributes for reducing environmental, social and governance (ESG) disputes and whether NC composition affects the appointment of ESG-friendly directors to the board.\u0000\u0000\u0000Design/methodology/approach\u0000This study focuses on a sample of 30 global systemically important banks from 2015 to 2021. The authors estimate panel data models with fixed effects, clustering heteroskedastic standard errors at the bank level to account for the serial correlation of the dependent variables for each bank.\u0000\u0000\u0000Findings\u0000Banks’ exposure to ESG controversies can be reduced when NC members have specific skills, in particular when at least one member of this committee also belongs to the sustainability committee and is a foreign director. Moreover, banks’ ESG disputes decrease when the NC members are younger, while the share of independent NC members has a negative impact. Finally, a positive influence of NC composition and its members’ features as well as the appointment of ESG-friendly directors on the board is found.\u0000\u0000\u0000Originality/value\u0000The findings are particularly useful during periods such as the current one, when there is growing attention to both banks’ corporate governance, the subcommittees’ role and functioning and social and environmental issues. This study shows that the NC is important in reducing the likelihood of banks incurring ESG disputes and in appointing more ESG-friendly directors. NC effective functioning and its members’ qualities serve as a key attribute for fulfilling objective assessment and improving board effectiveness.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78107198","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose The purpose of this study is to examine the impact of corporate social responsibility (CSR) expenditure and business responsibility report (BRR) on a firm’s financial performance. Additionally, the study explores whether CSR expenditure and firm performance are related linearly or otherwise. The study also assesses the influence of mandating CSR expenditure on a firm’s performance. Design/methodology/approach The study is set in India and uses a nine-year data set from 165 companies listed on the Bombay Stock Exchange. Data compilation and analysis are done by using content analysis and panel data regressions. Findings The main findings of the study are that the effect of CSR expenditure on firm performance in India is non-linear and can be characterized as parabolic for investigated firms. While some performance indicators suggest a U-shaped relationship, others show an inverted U-type pattern, making a definitive conclusion elusive in either direction. BRR scores themselves have a positive impact on firm performance. Mandatory CSR expenditure affects the financial performance negatively, but the market performance improves in general. Originality/value The study provides new insights on the relationship between CSR expenditure, BRR scores and firm performance from India, which is not only a notable emerging market but also has other gripping characteristics. It has a prolific history of philanthropy, and yet, it is the first country in the world to mandate CSR expenditure in recent times. The equation between reported economic progress and general quality of life remains intriguing, and yet the number of studies on the effects of CSR expenditure on firm performance are no match to the volume of ongoing and completed works in more developed markets. This study attempts to trim the gap and provide some useful insights for managers, policymakers and stakeholders, apart from prompting further research.
{"title":"Social expenditure, business responsibility reporting score and firm performance: empirical evidence from India","authors":"Chandra Shekhar Bhatnagar, Dyal Bhatnagar, Pritpal Singh Bhullar","doi":"10.1108/cg-04-2022-0173","DOIUrl":"https://doi.org/10.1108/cg-04-2022-0173","url":null,"abstract":"\u0000Purpose\u0000The purpose of this study is to examine the impact of corporate social responsibility (CSR) expenditure and business responsibility report (BRR) on a firm’s financial performance. Additionally, the study explores whether CSR expenditure and firm performance are related linearly or otherwise. The study also assesses the influence of mandating CSR expenditure on a firm’s performance.\u0000\u0000\u0000Design/methodology/approach\u0000The study is set in India and uses a nine-year data set from 165 companies listed on the Bombay Stock Exchange. Data compilation and analysis are done by using content analysis and panel data regressions.\u0000\u0000\u0000Findings\u0000The main findings of the study are that the effect of CSR expenditure on firm performance in India is non-linear and can be characterized as parabolic for investigated firms. While some performance indicators suggest a U-shaped relationship, others show an inverted U-type pattern, making a definitive conclusion elusive in either direction. BRR scores themselves have a positive impact on firm performance. Mandatory CSR expenditure affects the financial performance negatively, but the market performance improves in general.\u0000\u0000\u0000Originality/value\u0000The study provides new insights on the relationship between CSR expenditure, BRR scores and firm performance from India, which is not only a notable emerging market but also has other gripping characteristics. It has a prolific history of philanthropy, and yet, it is the first country in the world to mandate CSR expenditure in recent times. The equation between reported economic progress and general quality of life remains intriguing, and yet the number of studies on the effects of CSR expenditure on firm performance are no match to the volume of ongoing and completed works in more developed markets. This study attempts to trim the gap and provide some useful insights for managers, policymakers and stakeholders, apart from prompting further research.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88275427","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose Taking advantage of a novel measure of innovative culture generated by advanced machine learning, this study aims to investigate how a culture of innovation is influenced by a crucial aspect of the board of directors, i.e. board size. The data on corporate culture of innovation are based on a textual analysis of earnings conference calls and represent a unique approach to capturing corporate culture. Design/methodology/approach In addition to the standard regression analysis, the authors also perform several sophisticated robustness checks, such as propensity score matching, entropy balancing, an instrumental-variable analysis, Oster’s (2019) method for testing coefficient stability, GMM dynamic panel data analysis and Lewbel’s (2012) heteroscedastic identification. Findings Corroborating the prediction of the resource dependence theory, the study results show that larger boards promote an innovative culture more effectively. A larger board with more directors provides the firm with additional resources, expertise and abilities, enabling it to develop an innovative culture more successfully. Originality/value This study is the first to examine the effect of board size on innovation using data on corporate culture generated by sophisticated computer algorithms. The authors advance the literature both in corporate governance and corporate innovation.
{"title":"Corporate culture, innovation and board size: recent evidence from machine learning and earnings conference calls","authors":"Pattanaporn Chatjuthamard, Pornsit Jiraporn","doi":"10.1108/cg-09-2022-0371","DOIUrl":"https://doi.org/10.1108/cg-09-2022-0371","url":null,"abstract":"Purpose Taking advantage of a novel measure of innovative culture generated by advanced machine learning, this study aims to investigate how a culture of innovation is influenced by a crucial aspect of the board of directors, i.e. board size. The data on corporate culture of innovation are based on a textual analysis of earnings conference calls and represent a unique approach to capturing corporate culture. Design/methodology/approach In addition to the standard regression analysis, the authors also perform several sophisticated robustness checks, such as propensity score matching, entropy balancing, an instrumental-variable analysis, Oster’s (2019) method for testing coefficient stability, GMM dynamic panel data analysis and Lewbel’s (2012) heteroscedastic identification. Findings Corroborating the prediction of the resource dependence theory, the study results show that larger boards promote an innovative culture more effectively. A larger board with more directors provides the firm with additional resources, expertise and abilities, enabling it to develop an innovative culture more successfully. Originality/value This study is the first to examine the effect of board size on innovation using data on corporate culture generated by sophisticated computer algorithms. The authors advance the literature both in corporate governance and corporate innovation.","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136170358","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. Manello, G. Falavigna, E. Isaia, Mariacristina Rossi
Purpose The recent literature on corporate governance and gender diversity underlines that those differences may go beyond a pure or direct effect on firms’ performance and in this vein, this study aims to investigate whether the presence of women in leading positions can affect the credit rating indicators. Design/methodology/approach The authors focus on Italian manufacturing firms, as well as small and medium firms (SMEs), that are often under-represented in previous studies, despite their importance in many economies. The authors extract data on directors and top managers as well as rating classes and credit score indicators, and using a fixed-effects model, the authors analyze the relationship between credit risk mitigation and the inclusion of women among top managers, consistently with the rising empirical literature focused on risk perceptions. Findings The authors find a significant negative relationship between female participation in top management and credit risk, with a greater impact associated with smaller firms, where the presence of a female top manager might make the difference. The results are robust to different model specifications and estimation strategies, and the authors find different magnitudes of the effects also according to the geographical location of the firm. Research limitations/implications Because of the chosen sample of manufacturing firms, the research results may lack generalizability. Therefore, researchers are encouraged to expand the study and test the approach elsewhere. Originality/value The authors add new and more robust empirical evidence of a negative relationship between female participation in the top management and credit risk by focusing on the entire population of Italian nonlisted manufacturing firms.
{"title":"Female top managers and credit risk: evidence from Italian firms","authors":"A. Manello, G. Falavigna, E. Isaia, Mariacristina Rossi","doi":"10.1108/cg-03-2022-0092","DOIUrl":"https://doi.org/10.1108/cg-03-2022-0092","url":null,"abstract":"\u0000Purpose\u0000The recent literature on corporate governance and gender diversity underlines that those differences may go beyond a pure or direct effect on firms’ performance and in this vein, this study aims to investigate whether the presence of women in leading positions can affect the credit rating indicators.\u0000\u0000\u0000Design/methodology/approach\u0000The authors focus on Italian manufacturing firms, as well as small and medium firms (SMEs), that are often under-represented in previous studies, despite their importance in many economies. The authors extract data on directors and top managers as well as rating classes and credit score indicators, and using a fixed-effects model, the authors analyze the relationship between credit risk mitigation and the inclusion of women among top managers, consistently with the rising empirical literature focused on risk perceptions.\u0000\u0000\u0000Findings\u0000The authors find a significant negative relationship between female participation in top management and credit risk, with a greater impact associated with smaller firms, where the presence of a female top manager might make the difference. The results are robust to different model specifications and estimation strategies, and the authors find different magnitudes of the effects also according to the geographical location of the firm.\u0000\u0000\u0000Research limitations/implications\u0000Because of the chosen sample of manufacturing firms, the research results may lack generalizability. Therefore, researchers are encouraged to expand the study and test the approach elsewhere.\u0000\u0000\u0000Originality/value\u0000The authors add new and more robust empirical evidence of a negative relationship between female participation in the top management and credit risk by focusing on the entire population of Italian nonlisted manufacturing firms.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78871474","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose This study aims to examine the moderating effect of intellectual capital (IC) in the relationship between board characteristics and firm performance of non-financial firms listed on the Pakistan Stock Exchange (PSX) from 2010 to 2019. Design/methodology/approach The modified value-added intellectual capital (MVAIC) was used to assess the efficiency of sample firms’ IC, which is a modified version of Pulic’s (2000) model VAIC that includes an additional component, rational capital efficiency. Board size, independence, board meetings, chief executive officier duality and board gender diversity are all measures of board characteristics. Firm performance is measured through return on assets, return on equity and earnings per share. The Hausman test was used to select the best model for the study. Findings Based on the regression results, the board’s gender diversity and duality have a significant inverse relationship with profitability. In terms of the impact of board characteristics on IC, it is discovered that board independence and diversity are significantly inversely related to IC. Furthermore, IC is significantly related to profitability by all means. In terms of the moderating effect of IC, the findings show that IC significantly moderates the negative relationship between duality and profitability, as well as board gender diversity and profitability. Practical implications This study made some policy recommendations to policymakers. Duality should be avoided in PSX firms because it is significantly inversely related to profitability and IC. Second, female board participation should be subjective. Third, because the findings indicate that Pakistani firms lack true board independence, the Securities and Exchange Commission of Pakistan should take additional steps to ensure that the board is truly independent. Originality/value To the best of the authors’ knowledge, this is the first study of its kind to study the moderating effect of IC between corporate governance and firm performance.
{"title":"Nexus between board characteristics, firm performance and intellectual capital: an emerging market evidence","authors":"M. Farooq, N. Ahmad","doi":"10.1108/cg-08-2022-0355","DOIUrl":"https://doi.org/10.1108/cg-08-2022-0355","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the moderating effect of intellectual capital (IC) in the relationship between board characteristics and firm performance of non-financial firms listed on the Pakistan Stock Exchange (PSX) from 2010 to 2019.\u0000\u0000\u0000Design/methodology/approach\u0000The modified value-added intellectual capital (MVAIC) was used to assess the efficiency of sample firms’ IC, which is a modified version of Pulic’s (2000) model VAIC that includes an additional component, rational capital efficiency. Board size, independence, board meetings, chief executive officier duality and board gender diversity are all measures of board characteristics. Firm performance is measured through return on assets, return on equity and earnings per share. The Hausman test was used to select the best model for the study.\u0000\u0000\u0000Findings\u0000Based on the regression results, the board’s gender diversity and duality have a significant inverse relationship with profitability. In terms of the impact of board characteristics on IC, it is discovered that board independence and diversity are significantly inversely related to IC. Furthermore, IC is significantly related to profitability by all means. In terms of the moderating effect of IC, the findings show that IC significantly moderates the negative relationship between duality and profitability, as well as board gender diversity and profitability.\u0000\u0000\u0000Practical implications\u0000This study made some policy recommendations to policymakers. Duality should be avoided in PSX firms because it is significantly inversely related to profitability and IC. Second, female board participation should be subjective. Third, because the findings indicate that Pakistani firms lack true board independence, the Securities and Exchange Commission of Pakistan should take additional steps to ensure that the board is truly independent.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study of its kind to study the moderating effect of IC between corporate governance and firm performance.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-03-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88067257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose Firm performance has become a thriving research field. However, a review of previous studies shows that the answers to several fundamental questions remain vague and require further investigation. Thus, the purpose of this study is twofold. The first is to determine the extent of the involvement of political connections (PCs) in Pakistani-listed companies, and the second is to examine the association between PCs and firm financial performance with director efficacy’s moderating role. Design/methodology/approach A data set of 221 non-financial companies listed on the Pakistan Stock Exchange for 10 years (2008–2017) was analysed using panel-corrected standard error regression. Additionally, the authors address endogeneity issue by using Hackman two-stage estimation and lagged variables regression. Findings The study found that PCs negatively affected the firm’s financial performance, and director efficacy as a moderator strengthened this relationship. The result is consistent with the political economy theory that argues that an unstable political system and a weak judicial system will strongly affect investors and their rights. Practical implications The impact of political influence on the corporate sector remains a concern for policymakers, regulators, investors, financial experts, auditors and academic researchers. This study’s findings are that an effective board of directors can strengthen the company’s best practices by controlling political connectedness to protect all the interested parties, particularly investors, and restore their confidence. Therefore, the results of this study can assist all stakeholders when a PCs exists to make the right decisions. Originality/value The study extends the literature in terms of theoretical contribution that uses an integrative approach to combine political economy theory, agency theory and resource dependence theory to address the moderating role of director efficacy with an association between PCs and firm financial performance. To the best of the authors’ knowledge, no extant research has investigated the association between PCs and firm financial performance using five aspects of PCs, along with moderator director efficacy.
{"title":"Political connections and financial performance: the moderating role of director efficacy","authors":"Murtaza Masud Niazi, Zaleha Othman, Sitraselvi Chandren","doi":"10.1108/cg-08-2020-0366","DOIUrl":"https://doi.org/10.1108/cg-08-2020-0366","url":null,"abstract":"\u0000Purpose\u0000Firm performance has become a thriving research field. However, a review of previous studies shows that the answers to several fundamental questions remain vague and require further investigation. Thus, the purpose of this study is twofold. The first is to determine the extent of the involvement of political connections (PCs) in Pakistani-listed companies, and the second is to examine the association between PCs and firm financial performance with director efficacy’s moderating role.\u0000\u0000\u0000Design/methodology/approach\u0000A data set of 221 non-financial companies listed on the Pakistan Stock Exchange for 10 years (2008–2017) was analysed using panel-corrected standard error regression. Additionally, the authors address endogeneity issue by using Hackman two-stage estimation and lagged variables regression.\u0000\u0000\u0000Findings\u0000The study found that PCs negatively affected the firm’s financial performance, and director efficacy as a moderator strengthened this relationship. The result is consistent with the political economy theory that argues that an unstable political system and a weak judicial system will strongly affect investors and their rights.\u0000\u0000\u0000Practical implications\u0000The impact of political influence on the corporate sector remains a concern for policymakers, regulators, investors, financial experts, auditors and academic researchers. This study’s findings are that an effective board of directors can strengthen the company’s best practices by controlling political connectedness to protect all the interested parties, particularly investors, and restore their confidence. Therefore, the results of this study can assist all stakeholders when a PCs exists to make the right decisions.\u0000\u0000\u0000Originality/value\u0000The study extends the literature in terms of theoretical contribution that uses an integrative approach to combine political economy theory, agency theory and resource dependence theory to address the moderating role of director efficacy with an association between PCs and firm financial performance. To the best of the authors’ knowledge, no extant research has investigated the association between PCs and firm financial performance using five aspects of PCs, along with moderator director efficacy.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89733731","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Charilaos Mertzanis, Haitham Nobanee, Mohamed A. K. Basuony, Ehab K. A. Mohamed
Purpose This study aims to analyze the impact of corporate governance on firms’ external financing decisions in the Middle East and North Africa (MENA) region. Design/methodology/approach The authors analyzed a unique set of panel data comprising 2,425 nonfinancial firms whose shares are traded on stock exchanges in countries in the MENA region. The authors fitted an ordinary least squares model to estimate the regression coefficients. The authors performed a sensitivity analysis using alternative measures of the critical variables and an endogeneity analysis using instrumental variable methods with plausible external instruments. Findings The results revealed that corporate governance characteristics of firms are strongly associated with their degree of leverage. They also showed that macrofinancial conditions, financial regulations, corporate governance enforcement and social conditions mitigate the impact of corporate governance on firms’ financing decisions. Research limitations/implications A larger sample size will further improve the results; however, this is difficult and depends on the extent to which increasing disclosure practices allow more corporate information to reach international databases. Practical implications This study provides new evidence on the role of corporate governance on firms’ financing decisions and documents the essential mitigating role of institutions, alerting managers to consider them. Originality/value This study is a novel attempt. Based on information from different data sources, this study explored the predictive power of corporate governance, ownership structures and other firm-specific characteristics in explaining corporate leverage in MENA countries. Overall, the analysis provides new evidence of the association between corporate governance and capital structure in the MENA region, highlighting the critical role of institutions.
{"title":"Enforcement, corporate governance, and financial decisions","authors":"Charilaos Mertzanis, Haitham Nobanee, Mohamed A. K. Basuony, Ehab K. A. Mohamed","doi":"10.1108/cg-11-2021-0435","DOIUrl":"https://doi.org/10.1108/cg-11-2021-0435","url":null,"abstract":"\u0000Purpose\u0000This study aims to analyze the impact of corporate governance on firms’ external financing decisions in the Middle East and North Africa (MENA) region.\u0000\u0000\u0000Design/methodology/approach\u0000The authors analyzed a unique set of panel data comprising 2,425 nonfinancial firms whose shares are traded on stock exchanges in countries in the MENA region. The authors fitted an ordinary least squares model to estimate the regression coefficients. The authors performed a sensitivity analysis using alternative measures of the critical variables and an endogeneity analysis using instrumental variable methods with plausible external instruments.\u0000\u0000\u0000Findings\u0000The results revealed that corporate governance characteristics of firms are strongly associated with their degree of leverage. They also showed that macrofinancial conditions, financial regulations, corporate governance enforcement and social conditions mitigate the impact of corporate governance on firms’ financing decisions.\u0000\u0000\u0000Research limitations/implications\u0000A larger sample size will further improve the results; however, this is difficult and depends on the extent to which increasing disclosure practices allow more corporate information to reach international databases.\u0000\u0000\u0000Practical implications\u0000This study provides new evidence on the role of corporate governance on firms’ financing decisions and documents the essential mitigating role of institutions, alerting managers to consider them.\u0000\u0000\u0000Originality/value\u0000This study is a novel attempt. Based on information from different data sources, this study explored the predictive power of corporate governance, ownership structures and other firm-specific characteristics in explaining corporate leverage in MENA countries. Overall, the analysis provides new evidence of the association between corporate governance and capital structure in the MENA region, highlighting the critical role of institutions.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80836972","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Athanasios P. Fassas, Michail Nerantzidis, Ioannis Tsakalos, Ioannis G. Asimakopoulos
Purpose This study aims to investigate the association between firm valuation and earnings quality in several European countries. Also, it examines if country-level governance and market development are important determinants of firm valuation. Design/methodology/approach Using a sample of 5,002 non-financial firms in 37 European countries over the years 2004 to 2019, the authors evaluate the research question using regression models. Findings The authors find a significant positive relationship between firm valuation and a multi-factor earnings quality measure based on four components (accruals, cash flows, operating efficiency and exclusions). The authors further show that stock market development is also a driver of firm value, while country-level governance is significant only in the case of a firm fixed effect model with time effects. The results are robust to alternative model specifications that control for endogeneity, sample heterogeneity and alternative proxies for firm valuation. Practical implications Policy makers and market participants could benefit from the findings, by exploiting the advantages of earnings quality in terms of high-ranking stocks whose earnings are backed by cash flows and other sustainable sources. Originality/value To the best of the authors’ knowledge, this study is the first to empirically test the relationship between earnings quality and firm value in the European setting during a period that incorporates the adoption of IFRS. This is quite interesting as it permits cross-border comparability in terms of financial reporting and provides deeper and more representative evidence.
{"title":"Earnings quality and firm valuation: evidence from several European countries","authors":"Athanasios P. Fassas, Michail Nerantzidis, Ioannis Tsakalos, Ioannis G. Asimakopoulos","doi":"10.1108/cg-09-2022-0391","DOIUrl":"https://doi.org/10.1108/cg-09-2022-0391","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the association between firm valuation and earnings quality in several European countries. Also, it examines if country-level governance and market development are important determinants of firm valuation.\u0000\u0000\u0000Design/methodology/approach\u0000Using a sample of 5,002 non-financial firms in 37 European countries over the years 2004 to 2019, the authors evaluate the research question using regression models.\u0000\u0000\u0000Findings\u0000The authors find a significant positive relationship between firm valuation and a multi-factor earnings quality measure based on four components (accruals, cash flows, operating efficiency and exclusions). The authors further show that stock market development is also a driver of firm value, while country-level governance is significant only in the case of a firm fixed effect model with time effects. The results are robust to alternative model specifications that control for endogeneity, sample heterogeneity and alternative proxies for firm valuation.\u0000\u0000\u0000Practical implications\u0000Policy makers and market participants could benefit from the findings, by exploiting the advantages of earnings quality in terms of high-ranking stocks whose earnings are backed by cash flows and other sustainable sources.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this study is the first to empirically test the relationship between earnings quality and firm value in the European setting during a period that incorporates the adoption of IFRS. This is quite interesting as it permits cross-border comparability in terms of financial reporting and provides deeper and more representative evidence.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-03-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75273778","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose This study aims to investigate the association between corporate governance and financial transparency, using the moderating role of an Egyptian currency devaluation decision as a policy shock. Design/methodology/approach Data was collected for a sample of companies listed on the Egyptian stock exchange from 2014 to 2019. To control for time-invariant unobserved heterogeneity, the authors analyse panel data using an estimated generalised least squares regression model. Findings The findings underline the pitfalls of assuming that corporate governance mechanisms are effective regardless of circumstances and support the complementary roles of a number of theories in interpreting the empirical findings. Research limitations/implications This study is limited to non-financial companies and includes only corporate board and audit committee governance mechanisms. The study results have important implications for policymakers, international lending institutions, investors and accounting standards setters. It is of particular importance to policymakers in other less-developed countries with similar economic conditions. Originality/value To the best of the authors’ knowledge, this study is the first empirical attempt to provide evidence of the impact of a currency devaluation shock on the relationship between corporate governance and financial transparency within the Egyptian context as an example of a transitional economy. Hence, it provides a significant theoretical and empirical contribution to the literature.
{"title":"Corporate governance, financial transparency and currency devaluation shocks: evidence from Egypt","authors":"M. Hassaan, Wafaa Salah","doi":"10.1108/cg-09-2022-0386","DOIUrl":"https://doi.org/10.1108/cg-09-2022-0386","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the association between corporate governance and financial transparency, using the moderating role of an Egyptian currency devaluation decision as a policy shock.\u0000\u0000\u0000Design/methodology/approach\u0000Data was collected for a sample of companies listed on the Egyptian stock exchange from 2014 to 2019. To control for time-invariant unobserved heterogeneity, the authors analyse panel data using an estimated generalised least squares regression model.\u0000\u0000\u0000Findings\u0000The findings underline the pitfalls of assuming that corporate governance mechanisms are effective regardless of circumstances and support the complementary roles of a number of theories in interpreting the empirical findings.\u0000\u0000\u0000Research limitations/implications\u0000This study is limited to non-financial companies and includes only corporate board and audit committee governance mechanisms. The study results have important implications for policymakers, international lending institutions, investors and accounting standards setters. It is of particular importance to policymakers in other less-developed countries with similar economic conditions.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this study is the first empirical attempt to provide evidence of the impact of a currency devaluation shock on the relationship between corporate governance and financial transparency within the Egyptian context as an example of a transitional economy. Hence, it provides a significant theoretical and empirical contribution to the literature.\u0000","PeriodicalId":47880,"journal":{"name":"Corporate Governance-The International Journal of Business in Society","volume":null,"pages":null},"PeriodicalIF":5.6,"publicationDate":"2023-03-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90964144","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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