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Corporate Governance and Its Impact on Accounting and Finance
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Corporate Governance and Its Impact on Accounting and Finance

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Business and Entrepreneurship".

Deadline for manuscript submissions: closed (30 June 2021) | Viewed by 53859

Special Issue Editor

Prof. Dr. Khaled Hussainey

E-Mail Website
Guest Editor
Bangor Business School, Bangor University, Hen Goleg, College Rd, Bangor LL57 2DG, UK
Interests: corporate narrative reporting; international financial reporting standards (IFRS); Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI); extensible business reporting language (XBRL); market-based accounting research; auditing; corporate governance; earnings management; corporate investment efficiency; corporate finance; Islamic accounting and finance
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

In this Special Issue, we are interested in bringing together rigorous manuscripts that advance corporate governance research. We invite manuscripts featuring original research that complements our understanding of the impact of corporate governance mechanisms on accounting and financial reporting practices and corporate financing decisions.

We call for manuscripts that deal with all aspects related to the impact of corporate governance mechanisms and governance reforms on the compliance with accounting standards, the quality and quantity of corporate voluntary disclosure, profit warning, earnings management, and readability of the annual report. We also call for manuscripts that focus on the impact of corporate governance on the stock market, capital structure, dividend policy, cash holdings, and investment efficiency.

We are interested in conceptual, theoretical, methodological, empirical, and systematic review studies.

Prof. Dr. Khaled Hussainey
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Corporate governance
  • Accounting standards
  • Voluntary disclosure
  • Disclosure readability
  • Corporate finance

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Published Papers (10 papers)

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Research

9 pages, 269 KiB  
Article
Do Board Characteristics Matter for Growth Firms? Evidence from China
by Qiuwei Li, Wei Zhou, Hui Zhou and Jiaxuan Chen
J. Risk Financial Manag. 2021, 14(8), 380; https://doi.org/10.3390/jrfm14080380 - 17 Aug 2021
Cited by 3 | Viewed by 2488
Abstract
Previous research on the effect of board characteristics mostly examines established firms. This raises the question of whether the findings from the board characteristics literature are applicable to rapidly growing enterprises, as their corporate governance landscape can be very different from that in [...] Read more.
Previous research on the effect of board characteristics mostly examines established firms. This raises the question of whether the findings from the board characteristics literature are applicable to rapidly growing enterprises, as their corporate governance landscape can be very different from that in large, mature companies. Our paper extends the corporate governance literature by investigating the performance implications of board characteristics in startups using a unique set of firms: 121 startups operating in the information technology industry listed on the Growth Enterprise Market (GEM) in China. Using a firm performance indicator constructed through the factor analysis method, we find significant correlations between firm performance and board size, age structure, board meeting frequency, and board ownership of shares. Our findings contribute to the corporate governance literature by shedding new light on the performance implications of board characteristics for startups operating in fast-paced industries. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
23 pages, 312 KiB  
Article
Does Governance Affect Compliance with IFRS 7?
by Amal Yamani, Khaled Hussainey and Khaldoon Albitar
J. Risk Financial Manag. 2021, 14(6), 239; https://doi.org/10.3390/jrfm14060239 - 28 May 2021
Cited by 8 | Viewed by 4137
Abstract
Although there has been considerable research on the impact of corporate governance on corporate voluntary disclosure, empirical evidence on how governance affects compliance with mandatory disclosure requirements is limited. We contribute to governance and disclosure literature by examining the impact of corporate governance [...] Read more.
Although there has been considerable research on the impact of corporate governance on corporate voluntary disclosure, empirical evidence on how governance affects compliance with mandatory disclosure requirements is limited. We contribute to governance and disclosure literature by examining the impact of corporate governance on compliance with IFRS 7 for the banking sector in Gulf Cooperation Council (GCC). We use a self-constructed disclosure index to measure compliance with IFRS 7. We use regression analyses to examine the impact of board characteristics, audit committee characteristics and ownership structure on compliance with IFRS 7. Using a sample of 335 bank-year observations for GCC listed banks over the period 2011–2017, we report evidence that corporate governance variables affect compliance with IFRS 7. However, the significance of these variables depends on the type of the regression model used. Our findings suggest that governance matters for mandatory disclosure requirements. So to improve the level of compliance, regulators, official authorities, and policymakers should intensify their efforts toward improving corporate governance codes, following up their implementation and enhancing the enforcement mechanisms. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
20 pages, 628 KiB  
Article
The Moderating Effect of Family Business Ownership on the Relationship between Short-Selling Mechanism and Firm Value for Listed Companies in China
by Wenzhen Mai and Nik Intan Norhan Binti Abdul Hamid
J. Risk Financial Manag. 2021, 14(6), 236; https://doi.org/10.3390/jrfm14060236 - 25 May 2021
Cited by 4 | Viewed by 3042
Abstract
This study demonstrates an investigation of the external corporate governance effect of short selling mechanisms on firm value in the Chinese context. The effect of family businesses is also examined as a moderator of the relationship between short-selling and firm value. Using panel [...] Read more.
This study demonstrates an investigation of the external corporate governance effect of short selling mechanisms on firm value in the Chinese context. The effect of family businesses is also examined as a moderator of the relationship between short-selling and firm value. Using panel data analysis of Chinese listed companies, this paper tests a total sample of 22,468 firm-year observations from the Shanghai and Shenzhen Stock Exchange from 2009 to 2019 by applying the PSM-DID method in order to mitigate self-selection and endogenous problems caused by the uniqueness of Chinese short selling mechanisms. The findings suggest that both deregulation and the propensity of short selling can improve the firm value. Our findings also established that family ownership weakens firm value with the availability of short-selling, which indicates that family businesses have long orientations and conduct better corporate governance practices than non-family business, as short-selling shows a weaker external governance effect on firm value creation by family businesses in China. A robust test of alternative measurements is conducted and validated. This study provides significant insights for policymakers to consider in order to further relax short-selling constraints, which can act as effective external governance for better firm value creation, especially for non-family businesses in developing countries. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
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27 pages, 554 KiB  
Article
Effects of R&D Investments and Market Signals on International Acquisitions: Evidence from IPO Firms
by Cheng-Wei Wu and Jeffrey J. Reuer
J. Risk Financial Manag. 2021, 14(5), 191; https://doi.org/10.3390/jrfm14050191 - 22 Apr 2021
Cited by 1 | Viewed by 2800
Abstract
We investigate how intangible assets in the form of R&D influence firms’ hazards of engaging in international acquisitions. On the one hand, previous research has noted that the tacit and redeployable nature of R&D investments may prompt firms to expand their operations overseas [...] Read more.
We investigate how intangible assets in the form of R&D influence firms’ hazards of engaging in international acquisitions. On the one hand, previous research has noted that the tacit and redeployable nature of R&D investments may prompt firms to expand their operations overseas and create value from international acquisitions. On the other hand, it is difficult for other firms to evaluate the quality and prospects of an acquirer’s intangible resources, thereby hampering its ability to finance and execute international M&A deals. In the context of international acquisitions undertaken by firms just completing their initial public offerings (IPOs), we argue and find that the IPO firm’s engagement in post-IPO international acquisition activity is generally negatively related to its R&D intensity. This effect contrasts previous arguments on the internalization advantages possessed by R&D-intensive firms. We also argue that firms able to convey their resources and prospects through such signals as previous international alliances and foreign sales can mitigate information problems presented by their intangibles, and thus carry out and benefit from cross-border acquisitions. We therefore identify an unexamined tradeoff that R&D investments present in the international M&A context and discuss how international signals can facilitate cross-border transactions subject to various market frictions. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
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13 pages, 303 KiB  
Article
Determinants of Corporate Environment, Social and Governance (ESG) Reporting among Asian Firms
by Rashidah Abdul Rahman and Maha Faisal Alsayegh
J. Risk Financial Manag. 2021, 14(4), 167; https://doi.org/10.3390/jrfm14040167 - 8 Apr 2021
Cited by 62 | Viewed by 15985
Abstract
Departing from previous studies, which have mostly focused on Western countries, our work investigates the determinants of the corporate environment, social and governance (ESG) reporting among Asian firms. Examining Asian public listed firms from 2005 to 2017, our cross-sectional model results indicate that [...] Read more.
Departing from previous studies, which have mostly focused on Western countries, our work investigates the determinants of the corporate environment, social and governance (ESG) reporting among Asian firms. Examining Asian public listed firms from 2005 to 2017, our cross-sectional model results indicate that firm characteristics (economic performance, profitability, leverage and size) are found to disclose additional ESG information. The outcome is consistent with the legitimacy theory, which posits that firms provide higher ESG reporting to legitimize and justify the firm’s continuous existence. The findings are important for firms, stakeholders and policymakers. While firms may formulate ways to improve ESG reporting to compete in the international market, the stakeholders may pressure firms to disclose more information on ESG and policymakers to designalegal framework on ESG that suits firms in Asia. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
33 pages, 1049 KiB  
Article
The Role of Institutional Investors in Improving Board of Director Attributes around the World
by Badar Alshabibi
J. Risk Financial Manag. 2021, 14(4), 166; https://doi.org/10.3390/jrfm14040166 - 6 Apr 2021
Cited by 11 | Viewed by 4978
Abstract
This paper investigates the role of institutional investors in the improvement of corporate governance for the companies in which they invest (investee companies) using evidence about the attributes of boards of directors across 15 countries. Furthermore, this paper examines the extent to which [...] Read more.
This paper investigates the role of institutional investors in the improvement of corporate governance for the companies in which they invest (investee companies) using evidence about the attributes of boards of directors across 15 countries. Furthermore, this paper examines the extent to which the activism of institutional investors is determined by the institutional environment, to include various economic conditions (pre-crisis, crisis and post-crisis), legal systems and ownership structures. Drawing from the agency theory and institutional theory, the results show that foreign institutional investors are the main promoters of board governance structures across the globe. This study also provides evidence that institutional investors promote the independence of a board and its audit and compensation sub-committees (but excluding its nomination committee). The study also demonstrates that institutional investors reduce board entrenchment, though it presents no evidence that institutional investors reduce board busyness. The results also suggest that institutional investors behave differently when operating within different economic conditions (pre-crisis, crisis and post-crisis), legal systems and ownership structures. This paper contributes to the growing literature on shareholder activism and comparative corporate governance mechanisms. The findings suggest that the activism of institutional investors is contingent on the institutional settings, to include economic conditions, legal systems and ownership structures. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
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33 pages, 913 KiB  
Article
Managers’ Investment Decisions: Incentives and Economic Consequences Arising from Leases
by Tim V. Eaton, Craig Nichols, James Wahlen and Matthew Wieland
J. Risk Financial Manag. 2021, 14(4), 165; https://doi.org/10.3390/jrfm14040165 - 6 Apr 2021
Cited by 1 | Viewed by 3055
Abstract
What incentives do managers face that might give rise to inefficient investments in leases? If managers make inefficient investments in leases, what economic consequences arise for those managers and their firms? We develop a model of expected investments in leased assets and use [...] Read more.
What incentives do managers face that might give rise to inefficient investments in leases? If managers make inefficient investments in leases, what economic consequences arise for those managers and their firms? We develop a model of expected investments in leased assets and use the residuals from the model as proxies for inefficient investments. We find that, in contrast to investments in capital expenditures, leasing appears to be a mechanism through which managers can seemingly over-invest, even among firms with high quality financial reporting and negative free cash flows. Examining economic consequences, we predict and find that unexpected investments in leased assets trigger increasing future sales growth but declining future earnings growth for as long as three years ahead. We also find a negative relation with contemporaneous stock returns, suggesting investors view unexpected investments in leases as value destructive. Finally, despite negative returns consequences, we find that unexpected investments in leases are associated with higher CEO compensation driven primarily by future sales growth. Our study suggests that compensation contracts that reward growth may give managers’ incentives to drive sales growth with larger-than-expected investments in leased assets, which lead to slower future earnings growth and negative share price consequences for investors. Our results should inform managers and board members, investors, and researchers interested in investment efficiency, corporate governance, and leases. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
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21 pages, 344 KiB  
Article
ESG Reporting and Analysts’ Recommendations in GCC: The Moderation Role of Royal Family Directors
by Abdulsamad Alazzani, Wan Nordin Wan-Hussin, Michael Jones and Ahmed Al-hadi
J. Risk Financial Manag. 2021, 14(2), 72; https://doi.org/10.3390/jrfm14020072 - 7 Feb 2021
Cited by 31 | Viewed by 6575
Abstract
This study examines whether financial analysts consider or incorporate the environmental, social and governance disclosures (thereafter ESG) in their recommendations. We then test whether royal family directors affect this relation. Using a dataset from six Gulf Cooperation Council (GCC) countries, we find evidence [...] Read more.
This study examines whether financial analysts consider or incorporate the environmental, social and governance disclosures (thereafter ESG) in their recommendations. We then test whether royal family directors affect this relation. Using a dataset from six Gulf Cooperation Council (GCC) countries, we find evidence that analysts’ recommendations are influenced by ESG information. Further, we find the political connection negatively moderates the relationship between sell-side analysts’ recommendations and ESG. This suggests that financial analysts may assess the ESG disclosure in those firms with the political connection of royalty, in GCC countries, as superficial compliance rather than a genuine commitment. Our results are robust when subjected to endogeneity tests. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
16 pages, 349 KiB  
Article
Governance Vis-à-Vis Investment Efficiency: Substitutes or Complementary in Their Effects on Disclosure Practice
by Noha Elberry and Khaled Hussainey
J. Risk Financial Manag. 2021, 14(1), 33; https://doi.org/10.3390/jrfm14010033 - 12 Jan 2021
Cited by 4 | Viewed by 3119
Abstract
Prior studies provide evidence that both corporate governance and corporate investment efficiency affect corporate disclosure practice. In this paper, we examine their joint effect on disclosure. In particular, we examine whether corporate governance quality and corporate investment efficiency act as substitutes or complements [...] Read more.
Prior studies provide evidence that both corporate governance and corporate investment efficiency affect corporate disclosure practice. In this paper, we examine their joint effect on disclosure. In particular, we examine whether corporate governance quality and corporate investment efficiency act as substitutes or complements in their impact on narrative disclosure. We collect disclosure scores from Lancaster University’s Corporate Financial Information Environment (CFIE) website for a sample of non-financial UK companies for the period 2007–2014. We regress measures of corporate governance and corporate investment efficiency on two different proxies of disclosure practice (performance commentaries disclosure and the tone of narrative disclosure). Consistent with prior studies, we find that both governance and investment efficiency affect disclosure. We contribute to narrative disclosure studies in two crucial respects. First, we provide empirical evidence that governance and investment efficiency has a complementary effect on performance commentaries disclosure. Second, we contribute to the disclosure tone literature by providing empirical evidence that both governance and investment efficiency have a substitution effect on the tone of narrative disclosure. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
24 pages, 363 KiB  
Article
Reforms Protecting Minority Shareholders and Firm Performance: International Evidence
by Corina Burunciuc and Halit Gonenc
J. Risk Financial Manag. 2021, 14(1), 5; https://doi.org/10.3390/jrfm14010005 - 24 Dec 2020
Cited by 5 | Viewed by 4619
Abstract
This study investigates the effect of corporate governance reforms protecting minority shareholders on the firm value measured by Tobin’s Q. Using the difference-in-differences estimation and a large international sample from 65 countries for the period 2005–2018, the results show that the firm values [...] Read more.
This study investigates the effect of corporate governance reforms protecting minority shareholders on the firm value measured by Tobin’s Q. Using the difference-in-differences estimation and a large international sample from 65 countries for the period 2005–2018, the results show that the firm values increase more in the reform countries than non-reform countries relative to pre-reform levels. This positive effect changes for firms with high and low levels of debt. Moreover, the values after reforms increase more for firms located in civil countries and in countries with rule-based reform approaches and low debt enforcement because the reforms strengthening minority shareholder protection are more efficient in those countries. The evidence is robust to accounting-based performance as well. Full article
(This article belongs to the Special Issue Corporate Governance and Its Impact on Accounting and Finance)
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