Corporate Governance and Accountability

Jones, Renee M.

doi:10.1002/9781118258439.ch28

Cited by 33 publications

(41 citation statements)

References 39 publications

(34 reference statements)

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“…3.3 Variables measurement 3.3.1 Corporate governance. Corporate governance is a complex in nature and works as a system of devices rather than as individual provisions (Larcker et al, 2007;Dey, 2008;Solomon, 2013). In the light of a shortage of empirical evidence linking these individual devices together, we apply PCA which synthesises corporate governance mechanisms into more homogenous factors/dimensions.…”

Section: Methodsmentioning

confidence: 99%

“…However, the cost of corporate governance depends on its quality (Solomon, 2013). For example, high-quality corporate governance systems (e.g.…”

Section: Agency Conflicts Corporate Governance Financial Performance ...mentioning

confidence: 99%

“…Second, this study looks into any potential interconnections amongst the corporate governance mechanisms rather than assuming that everything works in isolation [e.g. board independence and Chief Executive Officer (CEO) compensation], because doing so would cause measurement error and selection bias (Larcker et al, 2007;Dey, 2008;Solomon, 2013). Hence, this study utilises Principal Component Analysis (PCA) based on a unique dataset of 28 corporate mechanisms and considers all these mechanisms in its entirety as suggested by Larcker et al (2007).…”

Section: Introductionmentioning

confidence: 99%

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An empirical evaluation of the impact of agency conflicts on the association between corporate governance and firm financial performance

Kasbar

Tsitsianis

Triantafylli

et al. 2022

JAAR

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PurposeThe study aims to predict and understand the conditions under which the association between corporate governance and a company's financial performance is positive or meaningful by empirically accounting for agency conflicts. This study is motivated by the fact that the separation between ownership and control creates agency conflicts between company owners and managers. Therefore, strong corporate governance systems are expected to align the interests of conflicting parties whereby companies become more likely to improve their financial performance. However, previous research did not yield consistent results in this regard.Design/methodology/approachGiven the latent nature of corporate governance and agency conflicts, this study uses principal component and exploratory factor analyses to proxy for corporate governance and agency conflicts, respectively. Using dynamic panel data modelling, the authors estimate the change in the relationship between corporate governance and a company's financial performance as a function of the change in the level of agency conflict using data from the UK on 78 non-financial companies listed in the Financial Times Stock Exchange 100 (FTSE100) index between 1999 and 2014.FindingsThe corporate governance quality of companies is significantly differed. Moreover, companies operating at high levels of agency conflict outperform the companies' counterparts operating in low levels of agency conflict only when the former improves the corporate governance quality. This implies that financial performance improves by approximately 11% if companies improve corporate governance quality due to an increase in the level of agency conflicts.Research limitations/implicationsLack of data on ownership structure for the study period (1999–2014) was the main reason the authors excluded it from the analysis. Additionally, the lack of reliable and quantifiable corporate governance data on small-medium sized enterprises limits findings on large non-financial companies.Practical implicationsThe authors propose a framework/tool for the impact of the level of corporate governance compliance on financial performance conditional upon the level of agency conflicts whose importance has largely been neglected by the empirical literature. By providing the right “lens” to de-fragmentise the corporate governance mechanisms and estimate empirically the unobserved agency conflicts, researchers, practitioners and investors are able to get further insights on the composing elements of financial performance and evaluate it more objectively. Managers can allocate companies' resources more efficiently and thus improve financial performance. The auditors can get further background information when they compile their report on company's directors. The study's findings offer valuable suggestions for accounting and corporate governance regulators to further put forward and improve accounting standards so as to enhance existing regulations and internal mechanisms which, in turn, could decrease the scope for managerial opportunistic behaviour as the latter can be empirically estimated through our framework.Social implicationsThe findings point out the need for a revised framework accounting for the principal-agent (mis)alignment and the engrained information asymmetries. By acknowledging the level of corporate governance compliance and agency conflict, managers and shareholders should actively strive for the effectiveness of companies, the efficiency of the stock markets and the minimisation of the agency costs. Furthermore, policymakers can look into the development of a code of corporate governance to effectively regulate firms rather than enforcing rigid laws that may not be value relevant. With all these settings in place, the likelihood of corporate failures, corporate scandals as well as corporate violations with the ensuing penalties is set to be reduced. Hence, valuable resources, social capital and effort can be directed into more productive activities.Originality/valueThis study adds to the existing literature by offering empirical and explicit evidence on the dynamic association between corporate governance, agency conflicts and financial performance against a backdrop of high demand for strong corporate governance practices/codes. To the best of the authors' knowledge, there is no study that has yet empirically examined the moderating effect of the level of agency conflicts, given the level of corporate governance compliance on financial performance for listed and internationally aligned companies.

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Section: Methodsmentioning

confidence: 99%

“…However, the cost of corporate governance depends on its quality (Solomon, 2013). For example, high-quality corporate governance systems (e.g.…”

Section: Agency Conflicts Corporate Governance Financial Performance ...mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

An empirical evaluation of the impact of agency conflicts on the association between corporate governance and firm financial performance

Kasbar

Tsitsianis

Triantafylli

et al. 2022

JAAR

View full text Add to dashboard Cite

show abstract

“…3.2.2 Corporate governance and environmental, social and governance. According to agency theory, the presence of nonexecutive directors can provide an independent voice on the board to minimize potential conflicts of interest between the principal (shareholders) and the agent (senior management) and reduce the opportunistic behavior of senior executives (Solomon, 2010). Organizations are responsible for establishing a well-structured and accountable internal control system with a transparent flow of information and business operations (Jensen, 1993).…”

Section: Disparities In Esg Reportingmentioning

confidence: 99%

Disparities in ESG reporting by emerging Chinese enterprises: evidence from a global financial center

Ng¹,

Leung

et al. 2023

SAMPJ

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Purpose This study aims to examine the potential disparities in environmental, social and governance (ESG) reporting among emerging Chinese enterprises (ECEs). ECEs are subject to a set of internationally oriented ESG requirements imposed by the regulator of a global financial center that is exposed to diverse stakeholders. The authors also consider ECEs’ underlying institutional ownership, which exhibits influence over governance as a salient component of ESG. Design/methodology/approach This study is based on a random sample of 500 ECEs listed on the Stock Exchange of Hong Kong (SEHK) – the global financial center of China. ESG reporting is measured by using the key performance indicators of the SEHK’s ESG Reporting Guide. The data are collected from annual reports that contain ESG disclosures or standalone ESG/sustainability reports published during the 2018–2019 fiscal year. The authors adopt binary logistic regressions and Chi-square tests to test the proposed hypotheses. Findings The authors find that ECEs’ heterogeneous institutional ownership and the extent of overseas development are associated with their disclosures on climate change. ECEs with international institutional ownership are found to be a significant factor for reporting aligned with the United Nations sustainable development goals (SDGs), using external assurance and stakeholder engagement, rather than state-owned enterprises (SOEs) and private companies. The authors also document that the presence of independent nonexecutive directors (INEDs) is significantly associated with reporting on meeting the SDGs and its use of external assurance, while the presence of female directors is a significant factor influencing disclosure emphasis on energy-saving initiatives. Practical implications The authors provide an empirical study of ECEs beyond the focus on SOEs that are expected to produce comprehensive ESG reporting in addressing a broader international community of stakeholders apart from the regime of their home country. The authors document the pertinence of ECEs’ institutional ownership and governance diversity to ESG reporting. In particular, international stakeholders need to recognize such underlying differences among ECEs rather than viewing them as a homogeneous group. Social implications The authors suggest that policymakers and practitioners in Asian countries consider increasing the presence of INEDs and gender diversity on ECE boards to enhance ESG reporting, which reinforces the findings of prior international studies suggesting such governance practices. Originality/value This study contributes to the existing body of knowledge about ESG reporting by documenting the underlying heterogeneity within ECEs, which are subject to a set of internationally oriented standards, as evidenced by their disparities in ESG reporting.

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“…However, accountability is more than that. It is about having ownership over one's actions whether the consequences of those actions are good or bad (Jones, 2010). Thus, accountability does not reflect on deficiencies in organisations only, but leverages from accomplishments.…”

Section: Transparencymentioning

confidence: 99%

Diffusion of the Ethical Philosophy of Good Governance at the National Oil Company of South Africa

Albertus

2019

Indian Journal of Corporate Governance

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This article seeks to examine challenges affecting the ethical philosophy of senior management at South Africa’s national oil and gas company. South Africa’s economy has been downgraded to junk status due to mismanagement of public funds in public enterprises. Government parastatals have come under major scrutiny in recent years for transgressing the code of good conduct prescribed by the King Report. The article presents a conceptual exploration of corporate governance challenges and is underpinned by diffusion of responsibility and moral hypocrisy which has roots in social psychology. Social psychology can be used as an overlap for strategy and institutional concepts, which encourages new ways of addressing corporate responsibility. The research reveals the impact on state enterprises financial stability when senior management diffuses responsibility and is not prosecuted or held accountable under the constitutional Act 108 of 1996. The article highlights one of the many corporate responsibility transgressions by state-owned enterprises who should be responsible for building the economy rather than destroying public value.

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Corporate Governance and Accountability

Cited by 33 publications

References 39 publications

An empirical evaluation of the impact of agency conflicts on the association between corporate governance and firm financial performance

An empirical evaluation of the impact of agency conflicts on the association between corporate governance and firm financial performance

Disparities in ESG reporting by emerging Chinese enterprises: evidence from a global financial center

Diffusion of the Ethical Philosophy of Good Governance at the National Oil Company of South Africa

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