Meta-frontier and measures of efficiency emphasising optimal corporate governance risk across countries

Abstract

Purpose This paper aims to investigate the internal and external determinants of firms’ efficiency and develop optimal corporate governance risk benchmarks for the manufacturing sector across different countries. Design/methodology/approach Corporate governance risk data were acquired from Institutional Shareholder Services Europe SA. Data on firms’ efficiency and for explanatory and control variables were taken from the DataStream database. The generalised directional distance function data envelopment analysis (GDDF-DEA) model and its stochastic extension provided corporate efficiency measures and optimal corporate governance benchmarks. The authors used ordinary least squares multiple regression analysis with wild bootstrapping to test the study hypotheses. Findings The authors found significant differences between firms’ optimal and actual efficiency input/output variables and corporate governance risks in the manufacturing sector across countries. Internal firm characteristics such as group affiliations, product market competition and insider ownership and external institutional factors such as the legal system, the rule of law, control of corruption, law enforcement and cultural values are vital determinants of firms’ efficiency. Practical implications This paper provides valuable guidance to enable corporate managers, regulators and policymakers to enhance firms’ efficiency and corporate governance practices. Originality/value This paper develops optimal corporate governance risk benchmarks and identifies the most critical internal and external factors affecting firms’ efficiency in the manufacturing sector in various countries. It also used a novel GDDF-DEA model, with the multi-parametric model for bias correction of efficiency estimator.

Bibliometric analysis on corporate governance topics published in the journal ofCorporate Governance: The International Journal of Business in Society

“…In the second group, studies have analyzed the impact of corporate governance on investors’ investment decisions, such as portfolio selection (Lassoued and Elmir, 2012), investors’ perceptions (Ebaid, 2013), private equity (Latini et al , 2014), market liquidity (Afrifa and Tauringana, 2015), takeover vulnerability (Chatjuthamard et al , 2021) and likelihood of financial distress (Udin et al , 2017). The third group focuses on the adjustment of corporate governance systems, such as the development of a new code (Shehata, 2015), corporate governance compliance (Albu and Gîrbină, 2015), financial crisis consequences (Orazalin and Mahmood, 2019), e-corporate governance effectiveness (Abdennadher and Cheffi, 2020), COVID-19 pandemic (Tan, 2021), blockchain technology (Singh et al , 2020) and optimal corporate governance (ElKelish and Zervopoulos, 2022). In the fourth group, studies have analyzed the associations between corporate governance and different agency relationships, such as agency conflicts (Tompkins and Hendershott, 2012), shareholder activism (Ghahramani, 2013), relationships with stakeholders (Wanyama et al , 2013), separation between control and management (Carlo, 2014), executive compensation (Pereira, 2015), agency costs (Garanina and Kaikova, 2016), blockholders’ voting power (Wang, 2016), managerial discretion (Haj Youssef and Teng, 2019), institutional power (El-Diftar et al , 2017) and workplace happiness (Ravina-Ripoll et al , 2021).…”

“…The third group focuses on the adjustment of corporate governance systems, such as the development of a new code (Shehata, 2015), corporate governance compliance (Albu and Gîrbină, 2015), financial crisis consequences (Orazalin and Mahmood, 2019), e-corporate governance effectiveness (Abdennadher and Cheffi, 2020), COVID-19 pandemic (Tan, 2021), blockchain technology (Singh et al , 2020) and optimal corporate governance (ElKelish and Zervopoulos, 2022).…”

MNEs’ corporate governance disclosure: a strategic response to corrupt environments

“…Corruption reduces the efficiency and enforcement of good governance practices because the arbitrary management of institutions for private gains reduces the effectiveness of regulations and encourages fraud (ElKelish and Zervopoulos, 2022). In developing countries characterized by high rates of corruption (Luiz and Stewart, 2014; Peyton and Belasen, 2012), the lack of enforcement of good corporate governance practices increases investors' perception of risk (e.g.…”

Myths and ceremonies among the corporate governance institutions: introducing the concept of corporate governance culture

“…Organisational culture will thus be analysed in four dimensions, which are taken from the work of Hofstede and Hofstede (2005): power distance; uncertainty avoidance, connected with long-term vs short-term orientation; individualism vs collectivism[4]. It is worth noting that ElKelish and Zervopoulos (2022) also used Hofstede and Hofstede’s (2005) dimensions to describe invisible-external institutional cultural values that affect firm efficiency.…”