International Journal of Business Governance and Ethics (18 papers in press)
What drives leader integrity?
by Mojgan Zarghamifard, Hasan Danaee Fard
Abstract: The inspiration for this research is determined by the fact that leader integrity may have countless effects on organisations and employee performance. The research gap has focused on the antecedents of leader integrity within Iranian public services. This qualitative study used rich data from in-depth interviews and followed a Glaserian grounded theory as its research method. Results have suggested that, different factors influence leader integrity that include: individual characteristics (altruistic mindset, authenticity, organisational-based self-esteem, personal values that confer integrity, Machiavellianism), moderating factors (organisational: organisational climate regarding integrity, human resources management, whistleblower activities, organisational transparency and politicisation of bureaucracy) and moderating factors (managerial: leader job characteristics, leadership ability, expectations of leader performance, and ethical role model). We discuss a potential
limitation of this study and implications for practice and directions for future
research of leader integrity.
Keywords: manager ethical leadership; organisation ethical culture; corporate ethics program; ROA; corporate governance reputation; firm performance; listed-firm; stock exchange of Thailand; moderated mediation; conditional indirect effect.
The Moderated Mediating Effect of Business Ethics towards Firm Performance
by Areerat Leelhaphunt, Sid Suntrayuth
Abstract: The objective of this study is to investigate the relationship among manager ethical leadership, organisation ethical culture, corporate ethics program and both firm performances: ROA and corporate governance reputation. By exploring the: 1) direct effect; 2) mediating effect; 3) moderated mediating effect or conditional indirect effect, that have influences on firm performances of 84 listed firms on the stock exchange of Thailand, which is represented by 785 participants. For analysis and comparison of the two-level factor structure of the conceptual model, each stage of effect is tested by PROCESS (model 1, 4, and 14), whereas an overall moderated mediating model is tested by structural equation model (SEM). It was found that the
relationship between manager ethical leadership and both firm performances through organisation ethical culture is positive when an organisation implements a strong ethics program. Furthermore, based on estimation, SEM uses maximum likelihood while PROCESS uses ordinary least square regression. It was also found that both estimators provide exactly regression weight, but the statistical inferential tests are slightly different. Thus, this study offers the alternative best-fit estimator for another moderated mediating model testing.
Keywords: manager ethical leadership; organisation ethical culture; corporate ethics program; ROA; corporate governance reputation; firm performance; listed-firm; stock exchange of Thailand; moderated mediation; conditional indirect effect.
Financial Indicators of Corporate Social Responsibility in Nigeria: A Binary Choice Analysis
by Pat Obi, Inalegwu Ode-Ichakpa
Abstract: Using multivariate binary choice models, this study investigates the effect of financial indicators on the practice of corporate social responsibility (CSR) in Nigeria. The indicators include return on equity, asset size, and revenue growth. Results of both linear probability and logistic models show that return on equity and asset size increase the likelihood of CSR practice. Sales growth has a negative effect. Compared to other metrics, firms with a large asset investment exhibit the highest likelihood of investing in CSR. Non-parametric tests confirm the positive linkage between CSR and asset size. These findings suggest that large firms, irrespective of their financial conditions, are more likely than other firms to invest in social initiatives. An implication for civil society might be to employ moral suasion to encourage financially strong firms, irrespective of size, to embrace CSR as an important means to boost their public image and long run performance.
Keywords: corporate social responsibility; CSR; financial performance; binary choice; logistic model; non-parametric tests; Nigeria.
Relationship between Organizational Virtue and Perceived Role of Ethics and Perception of Social Responsibility in Business: Testing a Mediation Model
by Noor Jehan, Summan Gull, Naseer Abbas Khan, Abrar Hussain
Abstract: Organisational ethics and organisational responsibility culture are interdependent, and therefore these ethics and responsibilities respond to internal or external stimuli. This study investigates the influence of virtue (OV) on the perceived role of ethics (PRE) and perception of social responsibility (PSR) and explores the association between OV and organisational efficacy (OE) in the banking sector. This study also examines the mediating effects of OE on the association between OV and PRE in business and the association between OV and PSR. A convenience sampling method is employed in the cross-sectional study of 322 employees and their supervisors in 83 branches of banks in the eastern provinces of China. Results showed that OV exerts a positive influence on OE, PSR, and PRE in business. Similarly, OE significantly mediates the association between OV and the association between OV and PSR in the banking sector. This work provides several implications and future research directions.
Keywords: organisational virtue; organisational efficacy; ethics in business; social responsibility.
Attitudes toward business ethics: Empirical investigation on different moral philosophies among business students in Vietnam
by Dina Clark, Thomas Tanner, Loan N.T. Pham, Wai Kwan Lau, Lam D. Nguyen
Abstract: The purpose of this study is to investigate the attitudes toward business ethics of Vietnamese business students based on the five moral philosophies including Machiavellianism, Moral objectivism, legalism, ethical relativism and social Darwinism. Using the 30-item attitudes towards business ethics questionnaire (ATBEQ) developed by Neumann and Reichel (1987) based on the work of Stevens (1979), the authors examined the attitudes toward business ethics of 282 business students at a public university in Ho Chi Minh City in Vietnam. It appeared that there was a significant difference between all five philosophies except legalism. Legalism was found only significantly different from moral objectivism. The respondents scored highest for moral objectivism, followed by ethical relativism, social Darwinism, legalism and Machiavellianism. We found a significant difference between male and female business students for Machiavellianism and ethical relativism, and a partially
significant difference for legalism. Finally, we found that code of ethics only made a significant difference for only Machiavellianism and social Darwinism
Keywords: attitudes; business ethics; business students; code of ethics; gender; moral philosophies; Vietnam.
Ownership Structure and Cost of Equity Capital: Tunisian evidence
by Mejda Dakhlaoui, Gana Marjene
Abstract: This paper aims to examine the effect of ownership structure on the cost of equity capital in the Tunisian context. Using panel data, the study provides evidence for a negative relationship between ownership concentration and cost of equity capital. However, most ownership composition variables validate the entrenchment effect. Results show an inverted U-shaped relationship between institutional ownership, foreign ownership and cost of equity capital. However, a U-shaped relationship is found between state ownership and the dependent variable. To alleviate endogeneity concerns and establish that the results are robust, the authors re-estimated the regressions using a dynamic approach. It supports the entrenchment effect of ownership
concentration. A U-shaped relationship between this variable and the cost of equity capital is confirmed. However, a concave relationship is found when considering ownership composition variables. As for family ownership, the results from static and dynamic approaches are convergent and in favour of entrenchment effects.
Keywords: corporate governance; ownership structure; cost of equity capital; nonlinear effects; dynamic panel GMM estimator.
Influence of intra- and inter-organizational relationships on CSR and their impact on a hospitals financial performance
by Janthorn Sinthupundaja, Navee Chiadamrong, Youji Kohda, Suttipong Thajchayapong
Abstract: The purpose of this study is to investigate the causal combinations of intra and inter-organisational relationships on corporate social responsibility (CSR) and their impact on hospitals financial performance based on the knowledge-based view (KBV) and relational view (RV). The KBV provides a useful avenue to understand the RV in terms of knowledge acquired from a hospitals network of stakeholders. The KBV and RV contribute to the analysis of CSR by offering important insights into valuable knowledge acquisition from a wide range of stakeholders. Based on hospitals listed in the SET, our findings from fsQCA shows that a hospitals CSR engagement and financial
performance does not necessarily depend on the presence or absence of any particular condition. This study contributes to the healthcare management and CSR literature by using the knowledge-based and relational theories as a theoretical lens to study the intra and inter-hospital relationships and the critical role of CSR practices.
Keywords: relational view; corporate social responsibility; CSR; hospital financial performance; Stock Exchange of Thailand; SET; resource-based view; RBV.
How Corporate Governance affect Firm Value and profitability? Evidence from Saudi Financial and Non-Financial Listed Firms
by Ali Gerged, Ahmed Agwili
Abstract: This paper investigates the possible effects of corporate governance (CG) mechanisms on the firm market and accounting value (FV) in Saudi Arabia after the 2011 CG reforms using a sample of 300 annual reports of financial and non-financial companies listed on Tadawul from 2012 to 2016. Our results are suggestive of heterogeneous effects of CG mechanisms on firm value and profitability in that they might have either encouraged or discouraged FV in Saudi Arabia. This means that, averagely, better-governed firms tend to achieve better market value, but not necessarily a better accounting value. Our findings indicate that implementing a voluntary comply-or-explain CG regime in Saudi Arabia has, so far, a limited impact on FV. This implies that developing other enforcement mechanisms for CG provisions, such as
appending good CG practices to listing rules for companies to comply with, might lead to better financial results for those well-governed companies in Saudi Arabia. Despite the limitations, it is hoped that our study can inspire further examinations in this research area.
Keywords: corporate governance; firm value; panel data; profitability; Saudi Arabia; Tadawul.
Board Characteristics, Board Leadership Style, CEO Compensation and Firm Performance
by Mohd Sarim
Abstract: The study is dedicated to researching the aspects of good governance in terms of board characteristics, board leadership style and CEO compensation; and testing their relationship with the financial performance of Indian firms. Using panel data, the regression results are generated as the main effect of corporate governance variables on financial performance and also as an interaction effect using CEO duality dummy variable. The study found that the boards of the Indian firms are not truly independent, neither in terms of the number of independent directors on the board nor in terms of independence from management. The board leadership style of vesting more power to a single person has weakened the corporate governance system and has created
various agency issues. Therefore, the study does not support the stewardship theory view of appointing the CEO as the chairman and urged a balance of power among key personnel of an organisation.
Keywords: board characteristics; CEO duality; CEO compensation; financial performance; panel data.
Employing Big Data in Business Organization and Business Ethics
by Muhammad Anshari, Wardah Hakimah Sumardi
Abstract: An ethical issues and distrust are pervasive in big data era. The largest data leaks in the social medias history were the controversy of Facebook data breach to unauthorised parties. Big data are useful for business to analyse large sets of heterogeneous data effectively. Because big data is seemingly accessible does not make it ethical for business in converting them into profits without users concern. Big data needs ethical foundation that cannot be simplified just because data is accessible especially through social media. The objective of this study is to examine how the phenomenon of big data could affect the issues of ethics in business organisations. Then, it analyses the ethical challenges of big data in business for gain business value and competitive advantage. The study was a case study to analyse ethical challenges for organisation in deploying big data initiatives. This paper is
basically a case study analysis. Qualitative approach was used to carry out this research where secondary data was retrieved from various credible journals and articles that are relevant to the issue discussed.
Keywords: business ethics; digital economy; big data; ethical challenges Facebook; Alibaba.
Ethical Strategists in Scottish Football: The Role of Social Capital in Stakeholder Engagement
by Joshua McLeod, Andrews Adams, Katherine Sang
Abstract: Governance and leadership failings have been a common feature of Scottish football (McLeod, 2016). In response, many Scottish football clubs have adopted the approach of an ethical strategist meaning stakeholder engagement has become central to their strategies (Noland and Phillips, 2010). Such strategies are argued to necessitate sustainability (Mason and Simmons, 2012), but little is known about how they can be implemented effectively. The purpose of this paper is to address that gap and examine how social capital influences the effectiveness of stakeholder engagement-focused strategies in Scottish football. Using a multiple-case study approach, we make two contributions to the literature. First, we add to existing knowledge of how
ethical strategists can utilise social capital to achieve strategic success. Second,
we make a theoretical contribution to Nahapiet and Ghoshals (1998) three-dimensional model of social capital by showing how contextual factors influence the interaction process between dimensions.
Keywords: board of directors; football; social capital; stakeholder engagement; ethical strategists.
Impacts of Accountability, Integrity, and Internal Control on Organizational Value Creation: Evidence from Malaysian Government Linked Companies
by Jamaliah Said, Md. Mahmudul Alam, Nurazwani Binti Mat Radzi, Mohamad Hafiz Rosli
Abstract: Credible and well-functioning governance is crucial for the value creation of firms. Recently, private sectors have undergone substantial changes by focusing on good governance as a tool to enhance value, reputation, and image. The primary features of firms with good governance include greater emphasis on accountability practices, proper implementation of a corporate integrity system, and sound internal controls in place to avoid risk and to ensure policy and procedures that are complied. Government linked companies (GLCs) as the backbone of the Malaysian Government have been harshly
criticised for not being able to create value(s) despite receiving high priority in
the process of getting government projects. Therefore, this study aims to examine the role of good governance systems, which are reflected through accountability systems, corporate integrity systems, and internal control systems towards value creation of Malaysian GLCs. This study collected primary data based on a set of questionnaire survey among 100 GLCs in Malaysia. Based on the regression analysis, this study found that corporate integrity systems and internal control systems were vital elements in ensuring value creation in GLCs.
Keywords: value creation; accountability; integrity systems; internal control; government linked companies; GLCs; Malaysia.
Personality traits and individual performance: Test of the mediating role of motivation among top management.
by Javad Shahreki, Jaya Ganesan, Thanh-Thuy Nguyen
Abstract: Personality traits, considered as indicators of the employees performance and motivation which concentrated on intrinsic and extrinsic motivation (Mot), plays an important role in employee performance. This paper aims to investigate the relationships between the personality traits (conscientiousness, neuroticism, extraversion, openness to experience, and agreeableness) and the individual in-role and extra-role performance (IP). In addition, the motivation is being explored in terms of intrinsic and extrinsic of employees. To achieve these objectives, a data-set was collected by surveying 167 general managers (GMs) and general managers assistants (Asst. GMs) of five star hotels in Malaysia. The partial least squares-structural equation modelling (PLS-SEM) was used to examine the dataset and test the
hypotheses. The findings indicated a significant linkage among extraversion, conscientiousness, agreeableness, Mot and IP. On the other hand, Mot mediated the relationships among extraversion, conscientiousness, agreeableness and IP. The participants of the current study revealed a better individual in-role and extra-role performance through an appropriate implementation of personality traits practice.
Keywords: motivation; top management; personality traits; individual performance; hospitality industry.
Corporate social responsibility, innovation and firm value
by Shahbaz Sheikh
Abstract: This study argues that corporate social responsibility (CSR) and firm innovation have long-term orientation and CSR is positively related to innovation. It explicitly recognises the endogeneity of CSR and innovation and uses 2SLS instrumental variable regressions to estimate the impact of CSR on innovation. Using a sample of 841 large US companies and 3,246 firm year observations for the period 19952006, it finds that CSR is positively associated with firm performance in innovation measured by patents and citations. Results also show that CSR strengths (concerns) have positive
(negative) impact on innovation. Additional tests indicate that firm performance in innovation is positively related to industry adjusted Tobins Q, suggesting that innovation is one of the channels through which CSR increases firm value. Overall, the empirical results indicate that CSR is a long-term strategic investment and its impact on firm value should be measured through its impact on firm innovation which is a good indicator of long-term value.
Keywords: corporate social responsibility; CSR; innovation; patents; citations; firm value; agency theory; stakeholder theory.
Corporate Social Responsibility and cash holdings: Does board gender diversity matter?
by Siwar Nasr, Nadia Lakhal, Itidel Ben Saad
Abstract: This paper investigates the relationship between corporate social responsibility (CSR) and cash holdings and whether board gender diversity influences this relationship. We use a sample of French listed companies from 2010 to 2015. Based on the instrumental variable method and the quantile regression approach, we show that there is a positive relationship between CSR and cash holdings suggesting that agency costs embedded in CSR activities could be associated with large cash reserves. Hence, managers could opportunistically use these activities to extract rents by increasing their held cash. We further show that women appointed as board directors moderate the
relationship between CSR and cash holding which turns negative in case of board gender diversity. Board gender diversity is then considered as a good corporate governance device in French firms that is able to curtail the incentives of CEO to opportunistically use CSR activities at the expense of other stakeholders.
Keywords: CSR activities; cash holding; board gender diversity; governance; moderating effect.
Special Issue on: The Global Governance of Corporate Social Responsibility
The challenge is who rules the world: accounts and implications of transnational governance interactions
by Victoria Pagan
Abstract: Increased global interconnectivity has encouraged a prevalence of forums that seek to organise and facilitate action towards transnational governance. A body of work has examined such global forums and the theoretical contexts in which they operate but there is little which examines the dynamic interactions through these forums. This article explores the social, political and corporate struggles in the interactions through two global forums, the World Economic Forum (WEF) and the World Social Forum (WSF). These forums are pathways through which corporate, political and social actors
struggle to negotiate transnational governance as a mechanism for corporate responsibility. The article shows the lived experiences of those interacting to set goals and agendas for corporate responsibility and offers an analysis of how the agenda of transnational governance is negotiated, who is involved and the drivers and shapers of this interaction.
Keywords: corporate responsibility; multi-stakeholder interactions; global governance; global forums; transnational governance; World Economic Forum; WEF; World Social Forum; WSF.
The Chinese approach to CSR development: an analysis of CSR-government relationship in China
by Mengxing LU
Abstract: This paper probes into the Chinese approach to corporate social responsibility (CSR) governance by exploring the CSR-government relationship in the context of Chinese institutional background. Faced with the deteriorating environmental situation, the value of CSR in addressing environmental issues has been gradually recognised by both Chinese policymakers and business leaders. As a result, the recent decade witnessed
a surge in the number of CSR initiatives in Chinas policy framework, particularly in the field of environmental protection. To have a better understanding of the CSR development trajectory in China, this paper provides a theoretical analysis of the interpretation and implementation of CSR. By applying the prior academic insights into CSR-government relationships in the context of China, this paper explores the various roles that the Chinese Government could play and has already played in promoting CSR. In addition to the Chinese Government, this paper also addresses the roles of different stakeholders in this process, including state-owned enterprises
(SOEs), foreign multinational enterprises (MNEs), and non-governmental organisations (NGOs).
Keywords: CSR-government relationship; corporate social responsibility; CSR; China’s environmental situation; state-owned enterprises; SOEs.
Corporate Social Responsibility, Hydraulic Fracturing and Unregulated Space: Recognising Responsibility Without the Law
by John Pearson
Abstract: This paper considers the role of legal regulation in assessing the actions of firms in relation to CSR. Utilising recent legal developments surrounding the controversial practice of hydraulic fracturing (fracking) as an illustrative example of the issue, it questions whether judging CSR is possible in a legal vacuum. Having established the linkage between CSR and the law the piece moves to illustrate that instances of legal freedom question established conceptions of CSR and warrant a greater exploration of this connection. Whilst instances of this type are conceded as rare, they do question the extent to which, without law, the responsibility for actions can be demonstrated by firms and it is this which the paper highlights.
Keywords: corporate social responsibility; CSR; law; regulation; hydraulic fracturing.