The effect of industry nuances on the relationship between corporate governance and financial performance: Evidence from South African listed companies

Tshipa, Jonty; Brümmer, Leon M.; Wolmarans, H.P.; Toit, Elda du

doi:10.4102/sajems.v21i1.1964

Cited by 8 publications

(16 citation statements)

References 72 publications

(84 reference statements)

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“…Although there has been an increasing interest in responsible corporate policies and practices in emerging markets, limited ESG research has been conducted in South Africa. Local researchers have mainly focused on corporate social responsibility (CSR) and corporate governance (Jordaan, De Klerk & De Villiers 2018;Mans-Kemp, Erasmus & Viviers 2017;Marcia, Maroun & Callaghan 2015;Tshipa et al 2018). The key motivation for firms to engage in CSR, however, is to improve society.…”

Section: Introductionmentioning

confidence: 99%

The link between environmental, social and corporate governance disclosure and the cost of capital in South Africa

Johnson

2020

Journal of Economic and Financial Sciences

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Orientation: Ignoring environmental, social and corporate governance (ESG) aspects exposes firms to risks that diminish value, shrink returns and even lead to failure. Firms considering ESG aspects are perceived as less risky by capital providers. Such capital suppliers accept lower returns and lending rates when providing capital to firms with superior ESG practices and disclosure.Research purpose: To investigate the link between ESG disclosure and the cost of capital.Motivation for the study: Although there has been a growing interest in responsible corporate practices in emerging markets, limited research on ESG has been conducted in South Africa.Research approach/design and method: A positivistic paradigm was employed. A sample of 68 firms from six Johannesburg Stock Exchange sectors over the period 2011–2018 (478 firm-year observations) was examined using panel regression analyses.Main findings: A significant negative relationship was observed between composite ESG disclosure scores and weighted average cost of capital (WACC) for both consumer goods and consumer services sectors. In addition, a significant positive regression coefficient was obtained between composite ESG disclosure scores and WACC for firms from the industrials sector.Practical/managerial implications: A growing number of capital providers consider a firm’s ESG practices and disclosures which could offer a firm the opportunity to raise additional sources of capital.Contribution/value-add: Local firms that had improved ESG disclosure seemed to benefit from a lower overall WACC and cost of debt. Equity capital providers, however, seem to perceive increased ESG disclosure as additional risk and require a higher return from such firms in South Africa.

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Section: Introductionmentioning

confidence: 99%

The link between environmental, social and corporate governance disclosure and the cost of capital in South Africa

Johnson

2020

Journal of Economic and Financial Sciences

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“…Li 2016;Orlitzky et al 2003;Roberts & Whited 2013) and the social disclosure patterns across different industries and the institutional micro-and macro-settings (e.g. Garcia-Sanchez et al 2016, Tshipa et al 2018, due to associated costs and benefits with diverse industry features. The SA context makes an interesting case to examine voluntary social disclosures, specifically due to its long history of racial segregation, termed apartheid, which resulted in many social disadvantages to the majority of the SA population (Southall 2004).…”

Section: Theoretical Background Prior Research and Hypothesesmentioning

confidence: 99%

“…De Klerk and De Villiers (2012), using a modified Ohlson model, found that corporate responsibility reporting is significantly positively related to market value. Horn, De Klerk and De Villiers (2018) using survey data by KPMG International on CSR contend that social disclosure has a positive but weak effect on future profits. The advent of socially responsible behaviour, linked to international standardisation, through sustainability reports, ultimately seeks to ensure the long-term sustainability and survival of organisations, while maximising shareholder value and FP.…”

Section: Theoretical Background Prior Research and Hypothesesmentioning

confidence: 99%

“…Therefore, towards re-aligning the principal agency conflicts is the promotion of good CG. Prior researchers have argued that CSR disclosure may have a limiting effect on firm value (Horn et al 2018; and that because of this possibility, the associated benefits of CSR disclosure for firms are largely dependent on good CG (Aguilera et al 2008). Therefore, the existence of good CG, in particular BIND, could avert corporate irresponsibility.…”

Section: Moderating Role Of Non-executive Directors On Voluntary Social Performance Disclosure and Firm Profitability Nexusmentioning

confidence: 99%

“…We rely on extant literature (e.g. Arora & Dharwadkar 2011;Tshipa et al 2018;Waddock & Graves 1997) to select our control variables. These are firm size, firm age, capital expenditure, leadership structure, operating profit, presence of a CSR committee and leverage.…”

Section: Control Variablesmentioning

confidence: 99%

See 2 more Smart Citations

Voluntary social performance disclosure and firm profitability of South African listed firms: Examining the complementary role of board independence and managerial ownership

Sampong

Song

Amoako

et al. 2021

SAJEMS

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Background: There is growing literature promoting corporate governance mechanisms as important elements that could mitigate the inconclusive findings within the corporate social performance and firm profitability research. A key theoretical assumption within the extant literature that provides support for this proposition is that corporate social performance and firm profitability are organisational outcomes in the presence of good corporate governance.Aim: Firstly, the aim is to re-investigate voluntary social performance disclosure (SPD) and long-term profitability association from the perspective of international standards, using the Global Reporting Initiative G3.1 guidelines. Secondly, to examine the joint moderating effect of board independence and managerial ownership (MO) on the voluntary SPD and profitability nexus.Setting: The South Africa institutional setting, where recent corporate governance regimes require firms to voluntarily make corporate governance related disclosures on both shareholder-and stakeholder-related information is used as the study context.Method: Utilising manually extracted data of listed firms, over the period 2010 to 2015, the generalised least square regression and seemingly unrelated regression (with a 1-year lag as the main independent variable) are used to examine the stated hypotheses.Results: We found a positive association between voluntary SPD and long-term profitability. We also found that the presence of non-executive directors positively moderates the association between voluntary SPD and long-term profitability. Thirdly, the proportion of MO significantly positively moderates the association between voluntary SPD and long-term profitability. Lastly, the complementary role of the presence of non-executive directors and the proportion of MO significantly positively moderates the association between voluntary SPD and long-term profitability.Conclusion: This study finds support for scholarly theoretical arguments that organisational outcomes are largely possible in the presence of good corporate governance, which has a long-term implication for firms’ shareholder wealth maximisation. This study contributes to the ongoing research examining the notion of substitutive versus complementary effects of governance mechanisms, and a growing research literature on corporate social responsibility (CSR) disclosure from the perspective of international standardisation. This study therefore makes far-reaching contributions to the corporate governance and social responsibility literature in an African context.

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Recasting trust and distrust in the boardroom

Mthombeni

Chizema

2022

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Purpose This study aims to analyse trust and distrust as specific board processes between the board chair and chief executive officer (CEO) aimed at reducing corporate governance (CG) risk partially mitigated by regnant CG mechanisms. This study incorporates the nascent literature that posits trust and distrust as two separate constructs that co-exist simultaneously to recasts them in the CG domain. Design/methodology/approach This paper analysed data from 20 in-depth interviews conducted with board representatives at four financial services firms in The Netherlands, South Africa and Zimbabwe. Findings This paper found that the foundational bases of the chair–CEO relationship determine how trust and distrust are apportioned between them, which impacts board dynamics. This paper also confirmed that the constructs of trust and distrust are separate thus do not sit at opposite ends of a single continuum. Finally, this paper found that high levels of task-based distrust (as opposed to mistrust) are necessary during periods of organisational distress and more effective if there are also high levels of relational trust between the parties. Originality/value This paper empirically examines the relationship between trust and distrust in CEO–chair dyadic relationships in multiple companies across multiple countries. This paper also introduces the concept of tempered trust, which is defined as interpersonal trust tempered by task-based distrust, recasting the traditional characterisation of trust and distrust in the CG domain, thereby making a useful contribution to the literature on board dynamics.

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The effect of industry nuances on the relationship between corporate governance and financial performance: Evidence from South African listed companies

Cited by 8 publications

References 72 publications

The link between environmental, social and corporate governance disclosure and the cost of capital in South Africa

The link between environmental, social and corporate governance disclosure and the cost of capital in South Africa

Voluntary social performance disclosure and firm profitability of South African listed firms: Examining the complementary role of board independence and managerial ownership

Recasting trust and distrust in the boardroom

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