The paper investigates the impact of chief executive officer (CEO) compensation on firm performance from a sample of 155 listed French companies on SBF 120, over 2009-2018. Findings suggest that an increase in CEO compensation seems to improve the accounting-based firm performance, nevertheless it hurts the firm stock market value. More pronounced results are reported when we control for sector compensation interactions. We argue that attractive compensation may improve the executive services in achieving shareholders' objectives, but investors seem to not appreciate a CEO compensation increase. Based on the agency theory, it might be argued that investors fear possible executive opportunistic behavior encouraging them to enjoy overcompensation.
The puzzling momentum strategies’ payoffs are defying the rational financial theory asserting the stocks returns’ unpredictability. Moreover, the momentum effect persist the main stocks returns’ anomaly escaping any risk-based explanation. The resilience of this phenomenon had favoured the development of behavioural financial field, which breaks with the investor’ full rationality hypothesis. This paper attempts to reconcile between the rational and behavioural financial theories, through the introduction of the progressive rationality concept. Especially, we argue that recognizing the temporary inappropriate investors’ reactions; can resolve the puzzling momentum anomaly. To fulfil our objective, first we correct the monthly returns inherent to 56 stocks listed on the Tunisian stocks market from January 1998 to December 2011, from the related serial autocorrelations involved by the investors’ over and under reactions. Then, we examine the 6/6 momentum strategy’ excess returns before and after the monthly returns serial autocorrelations’ corrections. The result show that the momentum strategy is still profitable but no longer puzzling, since the related excess return is henceforth fully captured by a β and a size effect..
Purpose Relying on the agency theory and the financial intermediation theory, the purpose of this paper is to examine to what extent risk governance would improve corporate governance and risk management effectiveness. The paper especially investigates the mediating role that would have the risk governance mechanisms in explaining both of the following relationships: the corporate governance–the banks’ performance, and the risk management–the banks’ performance. Design/methodology/approach This research uses the Baron and Kenny’s (1986) approach to investigate the mediating effect of risk governance; besides, the study refers to structural equation modeling in carrying out the appropriate panel regressions. The data collection was based largely on Bank scope Database, but some missing qualitative data were gathered manually from the banks’ annual reports available on the banks’ websites. Findings The study findings illustrate the significant role of risk governance mechanisms in improving both corporate governance and risk management’s effectiveness. Especially, this paper finds that risk governance is fully explaining the corporate governance–bank performance relationship, but risk governance would explain partially the risk management–bank performance relationship. Further, findings suggest that the internal corporate governance mechanisms seem to be more relevant than the external ones in improving the sample bank performance, and that risk management mechanisms seem to impede rather the sample bank performance. Practical implications The findings would make an important contribution to the current debate on the need to reinvent the optimal organization of the bank’s board and directorates and would allow readers to develop more cost-effective governance and risk-management thinking. Besides, the findings may help bank deciders and boards to rationalize costs and to focus only on the relevant corporate governance and risk management mechanisms. Finally, findings might illustrate to regulatory instance the importance of recommending risk governance in their coming corporate governance guidance. Social implications The global credit crisis of 2008 caused significant difficulties to financial institutions, so it would be worth enlightening practitioners and policymakers, even regulators, on the importance of considering the level of potential risk and risk monitoring as a key component in the decision-making process, to strengthen the stability and resilience of banks in an increasingly uncertain environment. Originality/value The issues raised in the paper are important in that Islamic banking is an integral part of the global banking and finance industry. This paper extends the knowledge of the potential importance of the new concept of risk governance with specific reference to Islamic banking industry peculiarities. It also provides a telling illustration of the need for the enhancements of the Basel Committee’s prudential requirements as well as the accounting and auditing organization for Islamic financial institutions and Islamic Financial Services Board set out especially regarding the consideration of risk in the strategic decision process.
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