Abstract:Research background: As companies evolve over time, so do their goals. In the past, the main goals of companies were profit and goals (as market share), are no longer relevant or effective. These goals are outdated, and companies have replaced them with goals that are consistent with the current changing times of competition. Worldwide, most large companies are using, or planning to use, a new approach called value-based management that focuses on value creation. Therefore, the main goal of companies using a v… Show more
“…Further challenges include raising adequate capital to continue operations, lack of financial means to purchase needed material, increased cost of procuring needed materials for operations, and inadequate access to loans and credit facilities (Tijani et al, 2021). In short, companies' ability to create value was heavily impaired (Mitan, Siekelova, Rusu, Rovnak, 2021).…”
Research background: Corporate governance plays an important role in companies’ financial performance and its true importance and relevance are revealed during an economic shock, such as the COVID-19 pandemic. In the past, research regarding corporate governance and financial variables focused solely on performance variables such as Tobin’s Q and ROA. This assessment completely ignores that corporate governance principles have a broader implication on financial variables than only performance.
Purpose: Our research aimed to determine whether companies with good corporate governance practices were more resilient during the COVID-19 pandemic, measured by the deterioration of various financial variables.
Research methodology: To achieve the aim, in the empirical part of the article, information on companies’ corporate governance and financial variables was collected, and based on them, correlation, regression and scatter plot analyses were conducted.
Results: Our correlation, regression, and scatter plot analyses revealed that on both group and individual company levels, companies with higher levels of corporate governance would have their financial variables deteriorate significantly more compared to companies with low levels of compliance.
Novelty: This is the first publication on the given topic. While few publications are assessing the impact of the pandemic on companies using corporate governance, none of these publications have focused on financial variables.
“…Further challenges include raising adequate capital to continue operations, lack of financial means to purchase needed material, increased cost of procuring needed materials for operations, and inadequate access to loans and credit facilities (Tijani et al, 2021). In short, companies' ability to create value was heavily impaired (Mitan, Siekelova, Rusu, Rovnak, 2021).…”
Research background: Corporate governance plays an important role in companies’ financial performance and its true importance and relevance are revealed during an economic shock, such as the COVID-19 pandemic. In the past, research regarding corporate governance and financial variables focused solely on performance variables such as Tobin’s Q and ROA. This assessment completely ignores that corporate governance principles have a broader implication on financial variables than only performance.
Purpose: Our research aimed to determine whether companies with good corporate governance practices were more resilient during the COVID-19 pandemic, measured by the deterioration of various financial variables.
Research methodology: To achieve the aim, in the empirical part of the article, information on companies’ corporate governance and financial variables was collected, and based on them, correlation, regression and scatter plot analyses were conducted.
Results: Our correlation, regression, and scatter plot analyses revealed that on both group and individual company levels, companies with higher levels of corporate governance would have their financial variables deteriorate significantly more compared to companies with low levels of compliance.
Novelty: This is the first publication on the given topic. While few publications are assessing the impact of the pandemic on companies using corporate governance, none of these publications have focused on financial variables.
“…However, the government should not only provide financial support but utilizes its public resources to provide a combined subsidy strategy to support enterprises’ long-term development. At last, regarding replication of this study in other countries, it is suspectable that the main conclusion will still hold worldwide but the exact mechanism of the CEO locality effect may differ across country samples ( Bulathsinhalage and Pathirawasam, 2017 ; Mitan et al, 2021 ; Valaskova et al, 2021a ). Other changes in the external conditions, such as emerging industries ( Kliestik et al, 2020 ; Durana et al, 2021b ; Lazaroiu et al, 2021 ; Valaskova et al, 2021c ), life cycles ( Durana et al, 2021a ), pandemic shocks ( Tijani et al, 2021 ), etc., may also strengthen or weaken the connection between local-province CEO identity and management myopia operations.…”
Managerial myopia occurs when executives value short-term benefits to the extent that firm long-run development will be obstructed. Recent studies have shown that the locality effect plays an important role in managerial myopia—local United States chief executive officers (CEOs) who work near their home states are less likely to behave myopically because of more effective monitoring and greater reputation concern. In an emerging market, government policies play a more important role in the strategic planning enterprises. A local CEO may have better understanding of local government’s policies thus makes less short-term decisions. This article adds to this literature by testing whether local-province CEOs in China, i.e., the CEO’s native place or birthplace is in the same province as her company’s headquarters, are also far-sighted. Using data on 470 publicly listed non-state-owned Chinese firms from 2014 to 2018, supportive evidence has been found that non-local-province CEOs in China tend to cut R&D expenses for beating analyst forecasts, reversing earnings decline, or pursuing higher returns. This article also confirms social capital as one mechanism of Chinese local-province CEOs behaving less myopically. This investigation also adds to the literature by revealing a new mechanism that CEO locality in China has a positive and direct bearing on how governments support corporate innovation.
“…In general, the literature suggests that corporate governance has a positive effect on stock liquidity, specifically that corporate governance and stock liquidity have a significant and positive relationship. These studies suggest that superior corporate governance improves stock liquidity [see, for example, (Mangena and Tauringana, 2007;Chung et al, 2010;Tang and Wang, 2011;Prasanna and Menon, 2012;Mitan et al, 2021;Arazpour and Fadaeinejad, 2014)]. Sosnowski (2022) Studied the persistence firm's earning reports in the process of IPO, and they found that there is higher persistence in the pre-IPO earnings as compared to the year of IPO earnings.…”
Section: Corporate Governance Financial Transparency and Stock Liquiditymentioning
The aim of this study is to empirically analyze the impact of corporate governance on stock liquidity and the moderating role of financial transparency, through the lens of information asymmetry and agency theory. The sample consists of non-financial firms listed on the Pakistan stock exchange during the 2009–2019 period. The study used an instrumental variable approach and new corporate governance index, developed with principal component analysis, to demonstrate a relationship between corporate governance and stock liquidity. The results show a significant, positive relationship between the corporate governance index and stock liquidity, suggesting that well governed firms have high liquidity. To the best of our knowledge, this is the first finance study to investigate the moderating impact of financial transparency on the relation between corporate governance and stock liquidity. The results show that financial transparency, as measured by multiple proxies, has a negative moderating impact on the relationship between corporate governance and stock liquidity, suggesting that corporate governance in Pakistan is weak. Together, the results suggest that Pakistani firms use financial transparency as a substitute for corporate governance to improve stock liquidity. The results are robust to a series of endogeneity checks using alternative proxies of stock liquidity.
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