Financial distress and non‐executive director compensation: Evidence from state‐owned enterprises in South Africa post King III

Emuron, Abraham Simon Otim; Tian, Yuan

doi:10.1111/1467-8268.12430

Cited by 2 publications

(3 citation statements)

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“…Inside directors (executive directors) are responsible for managing the companies (management) (Mustapha and Che Ahmad, 2011), while non-executive directors (NEDs) or outside directors serve on behalf of the companies' shareholders. The latter should perform an effective monitoring function to expand their reputations as experts in taking the right monitoring decision (Chen et al, 2020;Emuron and Yixiang, 2020;Fama and Jensen, 1983;Peasnell et al, 2005). Researchers have extensively studied the effect of executive directors' remuneration and EM, some suggesting that executive directors' and CEOs' compensations are associated with higher EM (Park, 2019;Zhou et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…Habbash and Alghamdi, 2015). However, NEDs operate to handle the relationship between shareholders (principals) and agents (management), and NEDs remuneration could boost the quality of monitoring and limit managers' opportunism (Emuron and Yixiang, 2020;Tosi et al, 1997). Thus, investing in outside directors would expect to lead to more effective governance monitoring and advising (Bugeja et al, 2017), which ultimately results in high financial reporting quality.…”

Section: Introductionmentioning

confidence: 99%

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Investment in outside governance monitoring and real earnings management: evidence from an emerging market

Ghaleb

Kamardin

Hashed

2021

JAEE

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PurposeThe main aim of this study is to examine the effect of investment in outside governance monitoring (IOGM), through non-executive directors' remuneration (NEDR) and external audit fees (AFEE), on real earnings management (REM) in an emerging market in the Southeast Asia region, Malaysia.Design/methodology/approachThe data comprises 1,056 observations from manufacturing companies listed on Bursa Malaysia for the four-year period, 2013 to 2016. The study tests IOGM individually and aggregately with REM. Feasible generalized least squares (FGLS) regression is used to test the hypotheses.FindingsThe results show that NEDR is negatively and significantly associated with REM. Likewise, AFEE is significantly associated with lower REM. Aggregate IOGM significantly mitigates REM. Additional tests conducted show consistent findings.Research limitations/implicationsThis evidence supports agency theory and signaling theory, that a high level of investment in governance monitoring signals a high demand for monitoring and fewer agency problems. It justifies more investment in outside scrutiny and monitoring to limit the existence of managers' opportunistic behavior in concentrated markets. This study relies on an aggregate measure of REM and focuses on manufacturing companies in Malaysia; thus, the results may not be the same using other measurements and samples.Originality/valueThe study, to the best of the researchers' knowledge, is the first to document evidence in an emerging market suggesting that higher NEDR and AFEE are individually and aggregately associated with lower REM. Policymakers, shareholders and researchers may consider investment in these two mechanisms as a proxy of high-quality monitoring that mitigates REM.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Investment in outside governance monitoring and real earnings management: evidence from an emerging market

Ghaleb

Kamardin

Hashed

2021

JAEE

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“…The research from Mollah et al (2021) on the supervision ability of independent directors showed that the greater the difference of independent directors, the more effective their supervision were. Emuron and Tian (2020) found that when the board of directors had members who serve in financial institutions, it was often more unlikely for companies to get into financial distress. Because they cannot only benefit the company through professional knowledge, skills, etc., but also gain potential financing advantages through their personal network.…”

Section: Literature Reviewmentioning

confidence: 99%

Finding the key to the black box of board diversity and firm performance: A mediating effect analysis of technological innovation

Yao

2022

Front. Psychol.

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A growing body of research has focused on the relationship between board diversity and firm performance. A series of empirical literatures have also examined a significant positive correlation between the two. But these results only demonstrate the relationship between the input of ‘diversity’ and the output of ‘firm performance’. Such research is more of a black box because board diversity must act on certain strategies or decisions to affect firm performance. Some scholars try theoretical analysis with the purpose of opening the black box. In order to verify the relevant theoretical analysis results, this study uses the mediating effect analysis model in the field of psychology, through multiple regression, impulse analysis, variance decomposition and other methods, to thus empirically test the mediating effect of technological innovation in the process of board diversification promoting corporate performance. We found that board diversity can improve firm performance by enhancing the level of technological innovation. Among them, technological innovation has played a complete mediating role in the diversity of board members’ functional and occupational background, and played a partial mediating role in the diversification of directors’ part-time jobs. Technological innovation is a key indicator bridging board diversity and firm performance. This study can explore and explain the inner workings of the significant relationship between board diversity and firm performance, and link research findings on similar phenomena. The research results may make the existing board governance theories more systematic, expand the extension of theoretical research, and provide some empirical research references for academics and practitioners.

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Financial distress and non‐executive director compensation: Evidence from state‐owned enterprises in South Africa post King III

Cited by 2 publications

References 51 publications

Investment in outside governance monitoring and real earnings management: evidence from an emerging market

Investment in outside governance monitoring and real earnings management: evidence from an emerging market

Finding the key to the black box of board diversity and firm performance: A mediating effect analysis of technological innovation

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