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International Journal of Corporate Governance (5 papers in press)
Firm Performance and Managerial Entrenchment: The Case of Tunisian Family Firms by Wael Aguir, Iness Aguir, Wafa Khlif Abstract: This study aims to verify empirically, in the case of a group of family firms in Tunisia, the effect of managerial entrenchment on firms performance. The results of the principal component regression show that the entrenchment concept is well explained by two dimensions: experience capitalization and skills belongings. Both of these dimensions positively affect firms performance, with the latter significantly so. The positive effect of experience capitalization is thwarted by the old managers' belonging to the same relational networks as the equity holders. Overall, we find support for our hypothesis that managerial entrenchment positively affects firm performance in the case of family firms. We also find that the relationship between entrenchment and performance seems to be non-linear. Keywords: Family firms; managerial entrenchment; firm performance; Tunisia.
Impact of International Financial Reporting Standard for Small and Medium?sized Enterprises on corporate governance
by Nesrine Sassi, Salma Damak- Ayadi Abstract: This research aimed to examine the relationship between the mandatory adoption of the International Financial Reporting Standard for Small and Medium-Sized Entities (IFRS for SMEs) and corporate governance by developing a Corporate Governance Index (CGI). The empirical analysis was based on a multivariate regression investigating SMEs in two countries that adopt the IFRS for SMEs, namely the Dominican Republic and El Salvador. Our findings show that the mandatory adoption of IFRS for SMEs has a positive and significant effect only on the CGI of Salvadoran SMEs. Our results contribute to providing standard setters and SME managers with a better understanding of the effect of the mandatory IFRS for SMEs application on the quality of governance. This study is among the first to build an index that measures the corporate governance quality in the context of SMEs and to analyze the association between the mandatory adoption of IFRS for SMEs and corporate governance in SMEs. Keywords: IFRS for SMEs; Corporate Governance index; SMEs; Mandatory adoption; Dominican Republic; El Salvador.
Does Corporate Social Responsibility Affect Financial Performance? Revisiting this Vexing Question Under ArellanoBond Framework by Habib Ur Rahman Abstract: This study examines the impact of Corporate Social Responsibility (CSR) on the financial performance of commercial banks of Pakistan under the regulatory environment of SECP Voluntary Guidelines 2013. Our framework of analysis is based on slack resource theory, good management theory, and stakeholders theory of CSR. The existing empirical literature on CSR might be subject to potential issues, including multicollinearity, profit persistence, and endogeneity. Therefore, we apply the Dynamic Panel Model under the Arellano-Bond framework to avoid the estimation issue and arrive at the unbiased and consistent estimates. The results of this empirical investigation reveal mixed evidence on this nexus. Community investment deteriorates the financial performance of the banking sector in Pakistan. Commercial banks switched their reporting and reporting disclosures due to some regulatory and operational changes in 2015. Considering this fact, we conduct a restricted analysis under the Arellano-Bond framework. The results of our restricted analysis reveal that product responsibility plays a positive and significant role in the financial performance of Pakistani banks under certain conditions. We could not find any other evidence of the positive impact of any other dimension of corporate social responsibility on the financial performance of the Pakistani banking sector. Keywords: Corporate social responsibility; financial performance; stock returns; product responsibility; community investment; work-life balance; bank size; return on assets; and return on equity.
Family ownership and R&D investment: the moderating role of institutional investors by Sami Gharbi, Hidaya Othmani Abstract: In this paper, we investigate the relationship between family ownership and R&D investments for a sample of French firms. We also examine whether institutional ownership has a moderating role on this relationship. First, we test the impact of institutional ownership concentration. Then, we consider the heterogeneous character of institutional investors and we divide them according to whether they have business relations with investee firms (pressure sensitive institutions such as banks and insurance companies) or not (pressure insensitive institutions such as pension funds, mutual funds and hedge funds). Our results show a significant negative influence of family ownership on R&D investments. Furthermore, institutional blockholders and pressure insensitive institutional investors positively moderate the relationship between R&D investment and family ownership. We contribute to the literature on the impact of principal-principal agency problems on corporate investment decisions. Our results point out that institutional ownership can mitigate the agency problems between majority and minority shareholders in firms with family ownership. Keywords: R&D investment; family ownership; institutional investors; agency theory; socioemotional wealth theory; institutional theory; Moderating effects.
Board Quality and Earnings Management: A System GMM Approach by Bala V. Balachandran, Chanchal Chatterjee, Ahindra Chakrabarti Abstract: This paper examines whether board quality influences earnings management behavior of firms in an emerging market set up, by using panel data of 1830 Indian private non-financial firms during 2012 to 2018. The study uses the Dynamic Panel Data model under System GMM, to examine this linkage. The paper contributes mainly by focusing on whether certain board quality parameters are effective in curbing earning management in an emerging market context. The outcomes are expected to be useful to the managers, investors, and other stakeholders including policymakers and regulators while framing appropriate corporate governance policies and regulations. Keywords: Corporate governance; Earnings management; Discretionary accruals; Board of directors; Emerging economies.