International Journal of Business Governance and Ethics (20 papers in press)
Ethical Leadership and Employee Ethical Behavior: Exploring Dual-Mediation Paths of Ethical Climate and Organizational Justice: Empirical Study on Iraqi Organizations
by Hussam Al Halbusi, Mohd Nazari Ismail, Safiah Binti Omar
Abstract: Due to ethical lapses of leaders, interest in ethical leadership has grown, raising important questions about the responsibility of leaders in ensuring moral and ethical conduct. Research conducted on ethical leadership failed to investigate the active role that the characteristics of ethical climate and organisational justice have an increasing or decreasing influence on the ethical leadership in the organisations outcomes of employees ethical behaviour. Thus, this study examined the dual-mediations of work ethical climate and organisational justice on the relation of ethical leadership and ethical behaviour of employees. A total of 620 full-time employees from five Iraqi provinces working at 33 Iraqi organisations in the field of manufacturing, retailing, medical, insurance, information technology, legal, finance, and telecommunication responded to the questionnaire survey. Structural equation modelling (SEM) was used to test the model and data analysis was carried out using structural equation modelling-partial least square (SEM-PLS). The results revealed that there is a significant relationship between ethical leadership behaviour and the ethical behaviour of employees. Primarily, the study also found that ethical climate and organisational justice play a very significant mediating role between ethical leadership and employees ethical behaviour.
Keywords: ethical leadership; ethical climate; organisational justice; employees’ ethical behaviour.
Mediation Effect of Reputation on the Stakeholders Centric CSR and Financial Performance Relationship
by Neha Kumar, Parul Kumar, Devesh Nigam
Abstract: This paper aims to investigate the relation between stakeholder led CSR, reputation and the financial performance. The stakeholders considered in the research were employees, environment, community, customers and investors. The reputation of the company has been taken as the mediator to analyse the change in CSR and financial performance relationship. A questionnaire was designed having 30 items enumerating the seven constructs. The structured equation modelling has been used to analyse the conceptual model of the impact of CSR on reputation and then on financial performance. The results concluded that all the stakeholders were significant in influencing the CSR decision making, with employees and investors being the most significant ones. It was also concluded that CSR positively impacts the reputation and reputation fully mediates the relationship between CSR and financial performance. Thus, major implication of the study is that managers can adopt the stakeholders centric CSR activities so as generate the positive reputation which in turn would positively impact the companys sales revenue and profit.
Keywords: company’s act; corporate social responsibility; CSR; employees; women director; structured equation modelling; investors.
Virtue ethics in buyer-supplier relationships: a South African study
by Mercy Mpinganjira, Mornay Roberts-Lombard, Göran Svensson
Abstract: The purpose of this study is to test a measurement model of an organisational virtuousness construct in buyer-supplier relationships. In a nationwide survey, quantitative data was gathered from 250 large companies in South Africa. The data was analysed using structural equation modelling. The findings provide some support for the proposed measurement model. The research model indicates satisfactory goodness-of-fit measures for the model and satisfactory levels of construct reliability. The study provides a framework of constructs important for building and/or evaluating virtuous organisations in the context of business-to-business buyer-supplier relationships. This study contributes to theory on ethics and relationship marketing by presenting the first empirically tested measurement model of the organisational virtuousness construct in Africa.
Keywords: business-to-business relationship; ethics; organisational virtuousness; relationship marketing; South Africa.
Can new corruption legislation drive guanxi out of business? Western and Chinese multinational managers perceptions
by Lyubov Berweger, Dieu Hack-Polay, Mahfuzur Rahman
Abstract: The study examined executives attitude to and perception of guanxi and the ethical ramifications of guanxi practices in relation to Western values and ethics. The research involved semi-structured interviews with 12 high level Western and Chinese multinational executives. A contribution of the paper is to highlight that, though it challenges some deeply rooted Western stances on ethical values, guanxi remains a necessary passport to access Chinese business. The executives believe that the tenacity of guanxi is associated with the ongoing strength of Chinese culture and economy. Thus, while some Western executives may feel uneasy about guanxi in modern business, their Chinese counterparts do not perceive guanxi as contravening ethics. The managerial implications for organisations centre on the need to assess guanxi as social capital. The research contributes to fill empirical gaps related to using guanxi as social capital to enhance international business.
Keywords: guanxi; HRM; business negotiation; ethics; Chinese market; social capital.
Investigating the mediating role of advertisement morality for organisational values and ethics towards television advertisements: the path analysis modelling method
by Nitin Zaware, Avinash Pawar, Sarika Zaware, Radha Louis
Abstract: Today, even in the digital era, television advertisements are becoming more intensive and play a crucial role in the sale of products and services. Advertisement is the process of communicating the influencing message to potential customers. This paper analyses the mediating role of advertisement morality with the variables of organisational values, socially responsible approach, customer feelings, customer commitments and customer recommendations in the Indian business environment. The primary data was composed utilising a structured questionnaire from samples of 445 respondents and deliberated the analysis with the framework of the study, assessment of normality, path analysis and mediation analysis for the study. The outcome of this paper signifies the association of importance of advertisement morality, ethical advertising and customer intentions as well as advertisement morality and gender. This study can help the organisations to design the policies, good internal codes and strategies of advertisements for the success of the business.
Keywords: ethics in advertisement; advertisement morality; television advertisement; media communication management; brand commitment; socially responsible consumer; organisational values; moral consumerism; Indian advertisements; customer feelings; customer commitment; customer recommendations.
Board independence tenure and real earnings management: accretive share buyback activities in Malaysia
by Abdulsalam Alquhaif, Bakr Al-Gamrh, Rohaida Abdul Latif, Sitraselvi Chandren
Abstract: This study examines the impact of tenure in independent directors and audit committees on accretive share buybacks for real earnings management. Taking a sample of 601 non-financial firms listed on Bursa Malaysia from 2010 to 2015, we use a tobit model to test our hypotheses, where real earnings management is proxied by accretive share buyback. We find a significant effect of the tenure of outside directors on accretive share buyback. Firms with long-serving independent board directors are more likely to undertake real earnings management through accretive share buyback. Evidence is also found that firms with audit committees including long-serving members are more likely to engage in share buyback to maximise reported
earnings per share (EPS) for earnings management. Finally, a high percentage of independent directors on audit committees restrain managers from utilising accretive share buyback to manage reported EPS.
Keywords: corporate governance; real earnings management; accretive share buyback; independent directors’ tenure; audit committee; Malaysia; earnings per share; EPS; board tenure.
Non-performing loans and bank corporate governance: conceptual framework and literature review
by Ameni Tarchouna, Bilel Jarraya, Abdelfatteh Bouri
Abstract: This paper aims to accurately distinguish non-performing loans (NPLs) notion from some related concepts and provides the theoretical background and empirical literature review of these loans. This displays bank efficiency studies which consider bad loans and reports previous researches on NPLs determinants. Banks efficiency studies have empirically proven the direct effect of bad loans on banks production process. Researches on NPLs factors have shown that these loans are affected by both macroeconomic and bank-specific determinants. Moreover, loan quality can be influenced by bank corporate governance (CG). But, this remains implicitly studied though the apparent failures and weaknesses in CG. Thus, we cite the few studies which examine the influence of CG on bank loan quality. To do so, we state the CG theories and discuss the special features distinguishing banks from
non-financial institutions. This review represents an historical record for researchers who aim to examine NPLs topic in the future.
Keywords: non-performing loans; bank efficiency; corporate governance; global financial crisis.
Capital structure and firm performance: the role of corporate governance
by Hussain Muhammad, Stefania Migliori, Sana Mohsni
Abstract: The purpose of this paper is to examine whether corporate governance has a mediating or moderating effect on the relationship between capital structure and firm performance. This study employs a quantitative method with a sample of 224 Italian non-financial listed firms from 20132017. Collected data were analysed using OLS and GMM estimations to test the research hypotheses and to assess the mediating and/or moderating effect of
corporate governance. Based on an integrated theoretical framework that draws insights from agency theory, pecking order theory, and trade-off theory, our results are threefold. First, we find that capital structure has a negative and significant impact on firm performance. Second, we show a significant association between corporate governance mechanisms and firm performance. Specifically, we find that board size has a negative effect on firm performance, while board independence and managerial ownership has a positive effect on firm performance. Finally, our results indicate that corporate governance mechanisms do not mediate, but instead moderate the association between
capital structure and firm performance. This study further suggests some important policy implications for both theory and practice.
Keywords: capital structure; debt ratio; corporate governance mechanisms; board size; board independence; managerial ownership; firm performance; return on assets; Tobin’s Q; mediation and moderation; Italian non-financial firms.
Enhancing employee's work ethics and social responsibility awareness in Chinese organisations: the roles of Confucian diligence tradition, western values and participative leadership
by Thi Hong Nhung Nguyen, Quey-Jen Yeh
Abstract: Work ethics and social responsibility (WESR) as corporates ethical decisions do not only highlight organisational values and commitments, but also portrait business relationships with all stakeholders. As a primary internal stakeholder, employees WESR awareness appears to be worthwhile in facilitating organisations ultimate success for employees job performance and well-beings. This paper engenders significant contributions with attempts to explore crucial enablers driving employee to perceive the importance of WESR policies embedded in modern Chinese business, where both traditional Confucianism and innovative Western values are co-exhibited. These organisational values integrated in a hybrid culture model, together with
different typical management leaderships (participative vs. power-distant) were
examined as main antecedences. Furthermore, to demonstrate the promising benefits of WESR in human resource, the positive link between WESR awareness and work performance efficacy was firstly evidenced, extended by its mediating effects in the research model. An empirical study was conducted from 213 Taiwanese employees, CB-SEM results supported all proposed hypotheses.
Keywords: Confucian diligence value; western innovative values; work ethics and corporate social responsibility; work performance efficacy; WPE; participative leadership; power-distant leadership; Chinese organisations.
Does internal and external governance reduce earnings management in family owned firms in Malaysia?
by Wan Masliza Wan Mohammad
Abstract: The purpose of this study is to investigate the effect internal and external governance have on corporate governance effectiveness in highly-condensed family ownership structures in Malaysia. The establishment of RMCCG (2007) focuses more on the roles of audit committee independence adopted from developed countries corporate governance standards. However, given the highly concentrated ownership structure in Malaysia, independence directors fiduciary roles may be comprised as family firms attempts to meet stakeholders expectation. The sample of this study is from 1,206 firm level observations between year 2004 to 2009 of firms listed in Bursa Malaysia. Our findings indicate that external governance as measured by stock market informativeness influences earnings management. Our research offers insights
into the importance of external governance factors such as stock market volatility and market efficiency in promoting good governance in Malaysian family firms.
Keywords: corporate governance; audit committee; stock market volatility; family ownership; earnings management; Malaysia.
A value-based leadership model grounded in history
by Sümeyye Kuşakcı, Senad Busatlic
Abstract: Value-based leadership as an umbrella term including authentic, ethical, spiritual leadership, etc. indicates leading by remaining faithful to beliefs and values. This study aims to reveal the relevance of Islamic administration tradition to modern value-based leadership studies. In line with this purpose, Kutadgu Bilig, the oldest monument of the Islamic Turkish literature, was qualitatively inquired. The research design was grounded theory and data was analysed by content analysis using MaxQDA software. Kutadgu Bilig describes an outstanding leader with 23 attributes classified under six categories. While the model combines traits, behaviours, and values, that third one is an indispensable condition of efficiency. Looking across centuries, this comparative analysis reveals that the model grounded in Kutadgu Bilig bears the stamp of ethical and servant leadership. However, it places a premium on the virtuousness of the ruler at the individual level and on the attributes of justice and benevolence at the administrative level.
Keywords: Kutadgu Bilig; Yusuf Khass Hajib; leadership; ethical leadership; value-based leadership; grounded theory.
Personal business ethics in global business: a cross-cultural study between France and the US
by Lam D. Nguyen, Jet Mboga, Wai Kwan Lau, Loan N.T. Pham, Thomas Tanner
Abstract: This study examines the personal business ethics perceptions of students in France and in the US by using Clark and Clarks (1966) personal business ethics scores (PBES) scale. By analysing the ethical perception of 464 business students using two-way ANOVA statistical method on country, gender, business law courses, and ethics training, this study found some significant results. French students in this sample appeared to have lower PBES scores than their US counterparts. In addition, respondents PBES scores were significantly different based on business law courses. Students who took business law courses had a higher PBES scores than those who did not. Moreover, students who had ethics training experience scored marginally higher than those who did not. Gender, however, was not a significant factor.
Keywords: business law courses; ethics training; France; gender; personal business ethics scores; PBES; the USA.
The effect of corporate governance on managers job performance
by Bassem E. Maamari, Georges T. Doumet
Abstract: This article aims and seeks to develop a comprehensive idea about corporate governance and its impact on the managers job performance inside corporations. While many previous studies attempted to discover the importance of this relation from the perspective of productivity and positive outcomes of corporations, they all took CG as an independent construct in itself. This study takes into account the effect of corporate social responsibility, enterprise risk management, and board of directors composition, as basic subsets of corporate governance, on managerial job performance, and the impact of these three combined on the relationship between corporate governance and managerial job performance. The context of this study is the active and established corporations in the Lebanese market, which have more
than 30 years of age. The results show that CG does affect the managers performance through its different sub-sets, to varying extents.
Keywords: corporate governance; corporate social responsibility; CSR; risk management; job performance; managers; telecomm; board of directors; BoD.
Its the most ethical job I have ever had: complaint handling and fair decision making in the financial industry
by Jane Williams, Christian Gill, Gavin McBurnie
Abstract: This exploratory study focuses on complaint handling in the financial industry to explore how complaint handling professionals interpret the requirement to treat customers fairly. Drawing on a small qualitative case study undertaken with a major UK financial institution, it is a novel attempt to integrate the literatures on ethical and fair decision making and apply them to the practice of complaint handling. Our contribution is to highlight: 1) the impact that institutional structures and processes play on the day to day practice of fair decision making; 2) how constructions of fairness vary between complaint handlers with some adopting an explicit ethical and moral focus; 3) the active role group support and dialogue plays in supporting individual complaint handlers fair decision making. Several practical implications arise from this in relation to how organisations can support fair decision making.
Keywords: fairness; fair decision making; ethical decision making; complaint handling; financial industry.
Impact of corporate social responsibility on financial performance of energy firms in India
by Akanksha Shukla, Geetika
Abstract: Corporate social responsibility (CSR) is the obligation of firms towards society in which they exist. The research studies the relationship between the expenditure made on social responsibility activities and the profitability of the energy firms, which are highly polluting in nature. The study also examines the mediating effect of disclosure of CSR activities on the relationship between the two. The study is based on secondary data collected from the annual reports of 38 energy firms listed on Bombay Stock Exchange for the time period from 20102011 to 20162017. The mediating effect is tested using Preacher and Hayes (2004) approach through process macro of SPSS. The study found a positive and significant relationship between expenditure made on social responsibility activities and financial performance of the firms. The research also demonstrate that the disclosure of CSR activities partially mediate the relationship.
Keywords: corporate social responsibility; CSR; CSR expenditure; mediation; CSR disclosure; energy firms; India.
Modelling managers' and subordinates' ethical behaviour on performance
by Halil Zaim, Lily Wisker, Atif Acikgoz
Abstract: The purpose of our study is to ascertain whether organisational team ethical standards (which eventually impact the organisational performance) are impacted by the managers' and subordinates' ethical behaviour separately. A field study was conducted based on data collected from managers and employees working in companies located in Istanbul. A structural equation modelling (SEM) analysis was performed to test our hypotheses. The study results show a strong relationship between managers' and subordinates' ethical behaviours and firm performance. Our study also found the reversed effects where employees' ethical behaviour influences organisational team ethical standards. Finally the results show that organisational team ethical standards partially mediate the relationship between managers' individual's ethical behaviours and firm performance.
Keywords: business ethics; firm performance; manager's ethical behaviour; subordinates' ethical behaviour; organisational team ethical standards.
Settling debts in the supply chain: do prompt payment codes make a difference? A UK study
by Christopher J. Cowton, Leire San-Jose
Abstract: Trade credit has only recently been taken seriously by business ethicists, despite the common practice of slow payment of suppliers. In response, the UK has introduced a series of voluntary 'payment codes'. However, at the time to which our data relate, relatively few FTSE 100 companies had signed up. Furthermore, although signatories paid more quickly, the difference was not statistically significant. These two findings might appear to suggest that payment codes are ineffective. However, some companies claimed to be following a code which was defunct. Their payment speed was indistinguishable from non-signatories, but those that had signed the extant code paid significantly more quickly. Our findings not only suggest that a payment code might be effective but also show a result relevant to codes of ethics more generally - that there might be signs that a company is not taking a code seriously, which we identify with the notion of hypocrisy.
Keywords: codes of ethics; late payment; payment codes; prompt payment; supply chains; trade credit; trade creditors.
The moderating effect of personal values on the relationship between ethical leadership and whistleblowing intentions
by Albert Puni, Ibrahim Mohammed, John Bosco Damnyang
Abstract: This study aimed to investigate the relationship between ethical leadership and whistleblowing intentions by examining employees' personal values as a potential moderating variable on this relationship. Using explanatory and cross-sectional survey design, the study found a significant positive association between ethical leadership and whistleblowing intention. This positive association was found to be stronger when subordinates have a higher rather than lower level of personal values, confirming the usefulness of personal values as a new moderating variable which explains the mechanism or process by which ethical leadership can have a strong or weak influence on whistleblowing intention, especially in a power-distant cultural environment.
Keywords: unethical behaviour; speaking-up; moderated relationship; insurance industry; Ghana.
Internal corporate governance mechanisms and financial performance: evidence from the UK's top FTSE 100 listed companies
by Ibrahim Khalifa Elmghaamez, Eritobi Akintoye
Abstract: This paper examines the relationship between internal corporate governance mechanisms and the financial performance of the UK's top FTSE 100 firms listed on the London Stock Exchange. By using a sample of 59 firms from the top FTSE 100 firms over the period from 2013 to 2018, our findings demonstrated that the lower number of board size and independent directors on the board, the better financial performance of the UK's top FTSE 100 listed firms. However, our study revealed that better financial performance is positively correlated with greater proportion of women on boards. Additionally, we found that board meeting is insignificantly associated with the financial performance of listed firms. This study has important implications for policy makers in the UK to have more women on boards and to decrease board size and the number of independent directors to the optimal size, since there is no one size fits all firms.
Keywords: corporate governance mechanisms; financial performance; board size; board meeting; board independence; women on boards; UK.
The relationship between corporate governance and firm financial performance: an empirical investigation of an emerging market
by Qazi Awais Amin, Stuart Sean Farquhar
Abstract: We investigate whether the distinct nature of multinational firms (MNC) differently influence the governance-performance relationship compared to the local firms in Pakistan. We used a dynamic system GMM estimator that produces consistent and efficient estimation after controlling for dynamic endogeneity and simultaneity. Our results demonstrate that corporate governance (CG) has a significant positive impact on firm financial performance whilst CG practice of MNC firms is more effective than local firms in Pakistan. We observed two distinct financing behaviours, i.e., 'pro-active investment behaviour' of MNC firms and 'conservative investment behaviour' of local firms. We conclude that a well-established corporate culture, significant financial worth and firms' higher growth rate are key determinants of better CG practice.
Keywords: corporate governance; firm performance; endogeneity; system GMM.