International Journal of Corporate Governance (9 papers in press)
Board Sub-committees and Earnings Quality
by Nigar Sultana, Steven F. Cahan, Frank Zhang
Abstract: The purpose of this study is to examine whether an overlap between compensation and audit committee memberships in firms affects earnings quality. We use a sample of 625 firm-year observations comprising data collected from Australian publicly listed firms between 2004 and 2010. Four measures of earnings quality are utilised to test our hypothesis. We find that firms with compensation and audit committee overlap exhibit higher earnings quality. Such sub-committee overlap is also more effective when overlapped members are independent and financial experts. Additional findings also indicate that female overlapped members are effective in reducing extreme earnings management. Findings have clear practical and regulatory implications in terms of the efficacy of sub-committee overlap.
Keywords: Sub-committee overlap; earnings quality; audit committee; compensation committee.
Board Diversity, Corporate Governance Quality and Excess CEO Pay: Evidence from South Africa
by Billy Kobina Enos, Ernest Gyapong
Abstract: Using a hand-collected data of 185 South African firms, this study examines the effect of board gender and ethnic diversity on excess CEO pay. We document that both board gender and ethnic diversity impact negatively on excess CEO pay. We find that gender and ethnicity have no effect on excess CEO pay in better governed firms. Our results suggest that female CEOs are associated with lower compensation but ethnic minority CEOs are not. We demonstrate that the pay-gaps faced by female CEOs are inconspicuous in better-governed firms. In contrast, ethnic minority CEOs do not face pay-gaps irrespective of the level of corporate governance quality. Our results are robust to various forms of endogeneity and alternative estimations.
Keywords: Board Diversity; Excess CEO pay; Agency theory.
Dissemination of Corporate Information via Social Media and Networks in Africa
by Ehab Mohamed, Mohamed Basuony, Mostaq M. Hussain
Abstract: This paper reports on the extent of online corporate disclosure practices among 315 companies listed in twelve African stock markets. The paper examines the impact of board composition and ownership structure as well as other control variables on the level of online information dissemination by top African corporations. The paper uses a disclosure index comprising of a comprehensive set of items that fully capture the extent of online information disclosure via all facets of disclosure, namely companies websites, social networks and media sites. OLS regression is used to test the hypotheses. The results reveal the underlying relations among board composition, ownership structure and control variables as the determining factors of online corporate disclosure. The results show that corporate disclosure via companies own websites is significantly influenced by board size, board independence, director ownership and profitability. Meanwhile, corporate disclosure via social networks and media sites is significantly associated with board independence, board diversity, CEO duality, and foreign ownership. Moreover, this study finds that Facebook is the dominant platform used for corporate disclosure closely followed by twitter. Although non- financial disclosure via social networks is adopted by most of the companies in the African countries, financial disclosure is adopted by only South Africa and Tunisia. Therefore, regulators and other governmental agencies need to be prepared for this imminent development. To the best of our knowledge, this is the first paper that investigates the effect of board composition and ownership structure on corporate disclosure via social media and network in the African continent.
Keywords: corporate governance; online corporate disclosure; social media; social network; board composition; Africa.
The Effect of Governance Attributes on Corporate Dividend Payouts Policy: Evidence from Jordan
by Amneh Alkurdi, Yasean Tahat, Hamzah Al-mawali
Abstract: We investigate the effect of some Corporate Governance (CG) variables (including the Board size, independency, separation and managerial ownership) on corporate dividend payouts; using a sample of 72 Jordanian listed companies for the period of 2007-2013. Firms annual reports were thoroughly reviewed for data collection and a regression analysis was used to carry out the empirical investigation. The findings indicate that CG attributes examined have a strong impact on corporate dividend decisions. In particular, the board size, independency and separation variables have had significant associations with dividend payouts variable indicating that the composition of CG matters when determining on dividends and this may help mitigating the conflicts between stockholders and managers interest. The results also indicate that managerial ownership showed no significant influence on dividends policy suggesting that managers do not exploit the power of their position to compromise dividends. Finally, the findings illustrate that firm size and profitability have had statistically positive associations with dividend payouts, while this was not the case for firm leverage and growth. The current study provides some insights for stakeholders (especially policy makers and stockholders) in emerging economies along with suggestions for future research.
Keywords: Corporate Governance; Dividends Payouts Policy; Jordan.
Ethical Code of Conduct State of Corporate Governance in India
by I. Sridhar
Abstract: In the wake of large scale corporate scandals and frauds like Enron, WorldCom and Volkswagen, a trend of aggressive legal mechanisms regulating the code of conduct of companies has been set in motion in several countries. In India, Clause 49 of Listing agreement provides for mandatory requirement of code of conduct for board of directors. The purpose of this paper is to analyze the need for a code of conduct in effective transparency of company policies thus, better corporate governance by making a comparative analysis between provisions given under Sarbanes Oxley Act (US) and Clause 49 of Listing Agreement in India relating to Code of Conduct. The implication of the study showcases the pros and cons as to the flexibility of code of conduct, measures to be taken to induce compliance with provisions of the code. It also suggests as to how regulatory bodies should deal with companies in event of non-compliance by companies.
Keywords: Corporate Governance; Ethics; Code of Conduct; Board of Directors; Senior Management.
Impact of Transformational Leadership and Corporate Governance on Business Performance
by Fikret Sozbilir, Salih Yesil
Abstract: Transformational leadership has important implications for individual motivation of employees that provide growing performance. Corporate governance is a framework concept that helps companies to meet the new conditions introduced by globalization. Companies are trying to be competitive through their business performance with leadership and corporate governance practices in business world. This study aims to determine the impact of transformational leadership and corporate governance on business performance. Research hypotheses were drawn from the related literatures and tested through the data collected from managers selected from top managers of 91 companies which are listed in the biggest company in Turkey. Data was analysed via Smart PLS program. The results reveal that transformational leadership has positive impact on corporate governance and corporate governance has positive impact on business performance. The findings obtained from this research provide the evidence that transformational leadership positively influences corporate governance and corporate governance improve business performance.
Keywords: Transformational leadership; corporate governance; business performance.
The Transformation of Ownership Structure and Changes in Principal-Principal Conflicts: Evidence from Corporate Governance Reforms in South Korea
by KwangWook Gang, Changyong Lee, Han-Gyun Woo
Abstract: Emerging economies are characterized by weak governance mechanisms, which can lead to principal-principal (PP) conflicts. The nature of PP conflicts may differ because governance mechanisms are transformed by corporate governance reforms. This study investigates how market reforms change the nature of PP conflicts and how such changes influence a firms technological diversification strategy. Using 4,952 firm/year observations for Korean manufacturing firms from 1993-2004, we find that the ownership concentration level decreases over time. Moreover, we find that as the difference between inside ownership and outside ownership increases, technological diversification accelerates prior to market reforms but diminishes after market reforms.
Keywords: corporate governance reform; principal-principal conflicts; technological diversification; Korean manufacturing firms.
IMPACT OF THE PRESENCE OF WOMEN ON PUBLIC SECTOR AND PRIVATE CORPORATIONS IN QUEBEC: WHAT MAY BE LEARNED FROM THE MULTIPLE DISCOURSES OF BOARD MEMBERS?
by Sophie Briere, Natalie Rinfret, Helene Lee-Gosselin, Maude Villeneuve
Abstract: This study presents a qualitative research conducted with boards of directors in large organisations from various sectors of the Quebec economy. From a critical perspective, this research documents elements related to the perceived impact of the presence of women on boards through the members discourse and the boards practices. The results show that the two types of discourse mentioned in the literature - competence and individual gendered - are present among board members. The results reveal the presence of a discourse on diversity distinct from the other two. Perceived as a catalyst for change, that discourse attaches importance to the significant impact of mixing men and women. However, in the respondents diversity discourse, few tangible changes in gender dynamic within boards are observed. This study highlights the relevance of examining the presence and impact of women on boards from a new angle with a perspective that goes beyond statistical data and multiple discourses.
Keywords: Women on board; governance; diversity; impact.
Corporate Governance and Systemic Risk of Tunisian Banks
by Aymen Mselmi, Boutheina Regaieg
Abstract: This paper studies the relationship between systemic risk measures and internal governance mechanisms of banking institutions and managers entrenchment level. Our study examines a sample of eleven Tunisian listed banks over the 2006 to 2013 period. The aim is to determine systemic banks, the main governance internal mechanisms and managers entrenchment level that contributed to attenuating or amplifying individual and overall systemic risk. The empirical results indicate that the internal governance mechanisms of banking institutions are positively associated with the long run marginal expected shortfall, and that the presence of a risk management committee has no effect on the level of systemic risk incurred by banks. However, the regression on the long run marginal expected shortfall and the firms percentage of financial sector shortfall reveals that the respect of the norms of governance of the banking institutions leads to the minimization of the individual contribution of the banks to the overall systemic risk of the Tunisian banking sector.
Keywords: Corporate Governance; entrenchment; financial performance; systemic risk.