Corporate governance and firm valuation

Brown, Lawrence D.; Caylor, Marcus L.

doi:10.1016/j.jaccpubpol.2006.05.005

Cited by 886 publications

(243 citation statements)

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“…All have contributed, as mentioned by Brown et al (2006), to encouraging the companies in the whole world to pursue to get strong corporate governance in their companies. Good corporate governance leads to better firm valuation and enhancing its performance, in that firms dealing with better practices of corporate governance should perform better than those having worse corporate governance practices (Simmons, 2004;Franck & Sundgren, 2012).…”

Section: Introductionmentioning

confidence: 99%

Corporate Governance Mechanisms and Jordanian Companies' Financial Performance

Alabdullah¹,

Yahya²,

Ramayah³

2014

ASS

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Previous studies in the literature review that dealt with corporate governance have recently witnessed significant growth that led to some new trends. The purpose of the current paper is to significantly contribute to such trends through investigating and analyzing the effect of corporate governance mechanisms on firm's financial performance for a sample consisting of industrial and service companies in Jordan. The current study examined cross sectional data through 109 companies (industrial and service companies). The study uses the annual reports for the fiscal year 2011 of the most active Jordanian companies in order to examine the predictions of corporate governance effects on financial performance. This cross sectional study tested all hypotheses of the study and used statistical software, SPSS 20, to analyze data. The findings indicated that board size has a negative association with firm financial performance. Furthermore, the empirical investigations for the current study revealed that the presence of independent directors in the board is not associated with financial performance. Likewise, the result showed that CEO duality has no impact on firm financial performance. From developed and developing countries' perspective, the current paper uniquely contributes to the literature that dealt with corporate governance and firm performance throughout introducing a market share variable as a measurement to represent firm's financial performance. In doing so, the paper is the first of its kind to provide new insights on the relationship between corporate governance and firm performance. It therefore provides a new indicator considered as extending for prior research in this discipline as, to the best of researcher's knowledge; no prior work has been done in both developed and developing economies including Jordan. The study provides empirical evidence to the academic, policy makers and all beneficiary parties of stakeholders in the Middle East, specifically Jordan.

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Section: Introductionmentioning

confidence: 99%

Corporate Governance Mechanisms and Jordanian Companies' Financial Performance

Alabdullah¹,

Yahya²,

Ramayah³

2014

ASS

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“…Also, based on the VIF results, it can be concluded that the model is free from multicollinearity problems. Prob (F-statistic) (.000) *Significant at α= 10% SRisk = The amount of capital financial institution i needs at time t amidst events of financial crisis; XBRLenv = a dummy variable where 0 represents company i operating prior mandatory XBRL adoption and 1 represents company i operating post mandatory XBRL adoption; Governance = index based on Gov-Score by Brown & Caylor, (2006); XBRL×GOV = an interaction variable between XBRLenv and Governance; Size = the natural logarithm of the total assets of company i at time t; Capital Ratio = the ratio of the amount of assets company i holds that are financed by equity at time t (total equity divided by total assets); Leverage Ratio = the ratio of the amount of equity company i holds that are financed by debt at time t (total liability divided by total equity); ROA = the performance of company i at time t (net income divided by total assets).…”

Section: Findings and Discussionmentioning

confidence: 99%

“…XBRL is a dummy variable, in which 0 represents a pre XBRL adoption period (2007)(2008) while 1 represents an XBRL reporting environment (2011)(2012). It is further interacted with Corporate Governance, which is measured using an index developed by Brown & Caylor (2006). The result proves that XBRL do not significantly impact systemic risk of financial institutions listed in NYSE.…”

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confidence: 87%

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An Analysis of XBRL Adoption Towards Systemic Risk of Financial Institutions Listed in NYSE

Suwardi¹,

Tohang²

2017

AABFJ

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This research aims to test the impact of the mandatory adoption of XBRL towards the systemic risk of American financial institutions listed in New York Stock Exchange (NYSE) by utilizing 45 NYSE listed financial institutions for the time period of [2007][2008][2009][2010][2011][2012]. The measure of systemic risk is based on SRisk by Acharya et al. (2012) which is available in the NYU Stern V-Lab. XBRL is a dummy variable, in which 0 represents a pre XBRL adoption period (2007)(2008) while 1 represents an XBRL reporting environment (2011)(2012). It is further interacted with Corporate Governance, which is measured using an index developed by Brown & Caylor (2006). The result proves that XBRL do not significantly impact systemic risk of financial institutions listed in NYSE. The findings have been determined after having controlled firm size, capital ratio, leverage ratio and performance. KeywordsSystemic Risk, XBRL, Corporate Governance, Market Discipline, Financial Institution, Disclosure, NYSE, Risk Taking Cover Page FootnoteThis research focuses on the impact of XBRL towards systemic risk of financial institutions listed in NYSE. Apart from this, it will also test the impact of the adoption towards size, capital ratio, leverage and performance of the financial institutions. The sample includes all financial institutions listed in NYSE between the years of 2007-2012. The impact is determined by comparing the systemic risk of individual financial institutions pre and post the mandate of XBRL adoption in U.S. in 2009, in which the year 2009 and 2010 will be considered as transition periods due to the fact that XBRL is implemented through phased-in approach. Based on the data of 45 financial institutions, the findings will provide meaningful analysis and worthy discussions over the subject of XBRL. This research is expected to contribute to 1. Companies (Financial Institutions) Financial institutions that are committed towards improving their corporate governance, can utilize this research to have an idea regarding how XBRL can serve as the tool to improve their corporate governance while also mitigating risky behaviors (which in turn reduces systemic risk) in order to further maximize their shareholder values. 2. Investors This research has the potential to provide investors with new insights which can assist in their decision making particularly regarding financial institutions. They will be acquired with the knowledge that financial firms with XBRL in place will provide them with timely and accurate information, improving their decision making. XBRL enhances transparency of financial firms which means that investors will face less difficulty in analyzing the financial information and will be able to properly asses the risk associated in their investments. 3. Government (Regulatory Agencies) In understanding the impact of XBRL towards systemic risk in U.S. financial institutions, regulatory agencies all around the world that are facing similar problems can utilize the same tool in order to limit the ris...

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“…The second dominant approach to evaluating the quality of a firm's corporate governance is to construct an index comprising multiple dimensions of a firm's governance mechanisms (Baker & Anderson, 2010). The governance index computation methodology used in this study is based on the governance indices used in Gompers et al (2003), Bebchuk et al (2004), and Brown and Caylor (2006). The governance index used in the study covers four broad areas of corporate governance.…”

Section: Measurement Of Variablesmentioning

confidence: 99%

Corporate Governance and Firm Performance: Empirical Evidence from India

Bahadur

2016

J. Bus. Mgt. Res.

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The paper attempts to analyze inter-linkages between corporate governance, ownership structure, capital structure, and firm performance in India. The study employs a panel data of all CNX Nifty companies from 2008 to 2012. Using LSDV panel data models and 2SLS model the study reveals that that good corporate governance practices adopted by companies are positively related with financial performance. Board independence, number of board committees, and director remuneration are found to have positive relationship while larger board size, ownership by promoters, and financial leverage have negative relationship with performance. There is existence of bi-directional relationship between corporate governance and financial performance. Companies with sound financial performance are more likely to conform to corporate governance norms and standards and implement sound corporate governance system. In addition, the findings reveal that corporate governance practices adopted by the listed firms depend on their ownership structure. Ownership concentration is found to effect corporate governance negatively.

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Corporate governance and firm valuation

Cited by 886 publications

References 34 publications

Corporate Governance Mechanisms and Jordanian Companies' Financial Performance

Corporate Governance Mechanisms and Jordanian Companies' Financial Performance

An Analysis of XBRL Adoption Towards Systemic Risk of Financial Institutions Listed in NYSE

Corporate Governance and Firm Performance: Empirical Evidence from India

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