International Journal of Corporate Governance (6 papers in press)
Analysis of the Global Energy Industry, Climate Change and Financial Matters: The Need for Effective Corporate Governance
by Todd Broker, David Durr, L. Murphy Smith
Abstract: Energy companies provide critical economic resources for advanced societies. Yet, critics complain about climate change and excess profits. Regarding climate change, a plethora of research offers ample evidence, from scientific and policy experts, that climate change is not a significant problem, whether human-caused or otherwise. Richard Lindzen, the Alfred P. Sloan Professor of Meteorology at MIT from 1983 to 2013, called global warming proponents discredited alarmists. Financial analysis shows energy companies are less profitable than those in other industries. Findings of this study are meaningful to academic researchers and corporate leaders, particularly if concerned with corporate governance of energy companies. Energy company managers would do well to inform the public, government leaders, and policy makers about the unfair charges of environmental harm and excess profitability, and assert the positive contributions of energy companies to the world economy.
Keywords: Energy industry; economic performance; oil and gas firms; environment; climate change.
Discretionary Accruals and Ownership Structure: Empirical Study from Jordan
by ADEL ALMASARWAH
Abstract: The present research explores the relationship between ownership concentration and discretionary accruals, specific regard being paid to industrial organisations located within the country of Jordan. The most valuable and fundamental of ownerships types is recognised to wield a high influence on functional decisions, accounting transactions also being established with the most powerful discretionary accrual framework being identified in mind of distinguishing earnings management amongst Jordanian industrial organisations. Ownership structure is recognised as being one of the key elements in the evaluation and overseeing of the overall value and financial reporting (Brown et al., 2014) and, in the same vein, according to Lee (2007), ownership structure is determined in an effort to enhance operations and financial indicators effectiveness and efficiency across the accounting system. Furthermore, discretionary accrual is regarded as being a critical consideration within financial reportingparticularly when considering various past scandals, including those of WorldCom and Enron.
In the completion of quantitative analysis, a number of different models were utilised as measures of earnings management, including an amended Jones Model (Dechow, Sloan & Sweeney, 1995) and the Margin Model (put forward by by Peasnell, Pope & Young (2000)). Such elements were applied alongside ownership structure types and, in the examination of the various study variables, annual financial reports (detailed and documented by the Amman stock market throughout the period of 2006 to 2016).
Upon completion of analysis of the models highlighted above, this work establishes that the Margin Modelas presented by Peasnell, Pope & Young (2000)can be considered to be more valuable when it comes to describing earnings management within the Jordanian contextspecifically when contrasted with more widely adopted accruals models. It is additionally highlighted throughout the review of quantitative results that, when it comes to restricting earnings management over other forms of ownership structure, family ownership, foreign institutional ownership, local individual ownership, and managerial ownership of the organisation are critical. The results may prove to be valuable to the senior management and investors of industrial organisations and legislators operating within Jordan, particularly when considering the decisions made in relation to how monitoring mechanism quality can be improved whilst simultaneously restricting earning management frequency. The approach and assessment carried out in this work concerning standard accruals models could additionally provide a contribution to other scholars and academics in the field of earnings management in emerging countries.
Keywords: Discretionary Accrual; Jordanian Industrial Firms; Margin Model; Modified Jones Model; Ownership Structure; QDA.
Tax governance: The balance between tax regulatory requirements and societal expectations
by J. Christian Plesner Rossing, Thomas Riise Johansen, Thomas C. Pearson
Abstract: In October 2012, Starbucks UK branch became the subject of massive public criticism over alleged tax avoidance. Despite Starbucks arguing that its transfer pricing practices were in full compliance with regulation, public pressure led Starbucks to overpay its UK taxes on international transfer pricing beyond the regulatory requirements. This behavior contradicts the current literature in which international transfer pricing is portrayed as a tool for aggressive tax management or an exercise of regulatory compliance. It is further argued that boards and top management of multinational enterprises (MNEs) can no longer approach tax governance as a purely technical, regulation-driven discipline to be addressed only by accounting staff and tax consultants. Instead, its pivotal role in the social contract between an MNE and its stakeholders needs to be recognized.
Keywords: tax governance; international transfer pricing; tax avoidance; multinational enterprises; Starbucks; business ethics; legitimacy processes; corporate social responsibility.
DOES CORPORATE GOVERNANCE INDEX IMPACT ON ENVIRONMENTAL DISCLOSURE? EVIDENCE FROM INDIA
by G. Ezhilarasi
Abstract: The present paper empirically investigates the impact of corporate governance index on environmental disclosure of most polluting companies in India. The corporate governance index is measured by a checklist of items based on corporate governance code by Clause 49 of Listing Agreement by Securities and Exchange Board of India and the OECD principles on corporate governance. Environmental disclosure is measured by a checklist of items based on Global Reporting Initiative guidelines as well as environmental regulations prevailing in India. Disclosure scores are drawn individually by using content analysis of annual reports for a sample of 130 most polluting companies in India for a period of seven years i.e. from 2009-10 to 2015-16. By employing panel data regression model, the present study finds a positive and significant association between corporate governance index and environmental disclosure for the reason that good corporate governance reduces asymmetric information and maintains the credibility of voluntarily disclosed information in its annual reports. The result also describes that current environmental disclosure is significantly influenced by companies previous years corporate governance. Further, the result also shows that sub-indices of corporate governance namely disclosure index, board effectiveness, and its composition index, audit committee and its role index, and shareholders rights index are also positively associated with environmental disclosure of a company.
Keywords: Environmental Disclosure; Corporate Governance Index; Securities and Exchange Board of India; Most Polluting Industries; Annual Reports; Content Analysis and Global Reporting Initiative.
Ownership Identity and Cost of Debt in an Emerging Market: Pre- and Post-Crisis Analysis
by Imad Jabbouri, Maryem Naili, Chaimae Nouina
Abstract: This research investigates the relationship between ownership identity and cost of debt in the emerging market of Morocco spanning the period from 2004 to 2016. The study employs a panel data analysis and documents that the presence of institutional ownership is negatively related to cost of debt, whereas the presence of family ownership is positively related to cost of debt. Ownership identity reflects a given quality of governance mechanisms within the firm, which affects creditors confidence positively or negatively. This study pursues innovation by examining whether the value relevance of ownership identity changes as market conditions change. The results are more pronounced in the post-crisis period compared to the pre-crisis period. We argue that the incentives for insiders to expropriate increase during economic downturns. Mindful of the deterioration of corporate governance during economic slumps, the importance creditors attach to ownership identity, as an indicator of governance quality, increases during the post-crisis period.
Keywords: Ownership Identity; Cost of Debt; Corporate Governance; Agency Problems; Financial Crisis; Emerging Markets.
Impact of Blockholder Promoters on Debt Financing of Indian firms
by Anuja Sethiya, Thenmozhi M
Abstract: We examine the effect of blockholder promoters on financing decisions of Indian firms. A fixed effect panel analysis of 13,131 observations during the period 2001-2017, confirm that, greater the promoter ownership, less the preference for leverage. However, the impact of promoter ownership on financing decisions varies with the type of blockholders. We find that the moderating effect of state-owned and private-foreign blockholders with promoter ownership is negatively associated with leverage, while family-owned blockholders with promoter ownership is positively associated with leverage. The study finds that the significance of agency cost II varies with the identity of blockholder promoters.
Keywords: promoter ownership; leverage; blockholder; state-owned; private-Indian; family-owned; private-foreign; agency cost.