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Journal articles on the topic 'Chief Risk Officer (CRO)'
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1
Scherbina, Tatiana, Olya Afanasieva, and Yulia Lapina. "Risk management, corporate governance and investment banking: The role of chief risk officer." Corporate Ownership and Control 10, no. 3 (2013): 313–30. http://dx.doi.org/10.22495/cocv10i3c2art5.
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This paper focuses on the defining the role of CRO in corporate governance and to show the interrelation between the way of CRO subordination and performance of investment bank. The sample consists of observations over a period of 2011 for 29 biggest investment banks (by amount of assets) implementing world-wide investment activity. The banks are originated in the USA (8), Eastern Europe (14), China (2), Japan (2), Canada (2), and Australia (1). With the aim to evaluate and compare financial performance of selected banks the construction of synthetic key performance indicator (SKPI) is worked out. The empirical analysis of risk management in the research is based on two different groups of factors, which could be used to evaluate the effectiveness of risk management in this sphere: analysis of CRO impact - Risk Management Committee factors and CRO factors, and Evaluation of Financial Performance. Results show that the CRO presence in investment banks effect positively on the financial performance.
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Vincent, Nishani Edirisinghe, Julia L. Higgs, and Robert E. Pinsker. "IT Governance and the Maturity of IT Risk Management Practices." Journal of Information Systems 31, no. 1 (December 1, 2015): 59–77. http://dx.doi.org/10.2308/isys-51365.
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ABSTRACT The Securities and Exchange Commission's enhanced disclosure rule on risk oversight, state laws requiring public disclosure of compromised customer information, and high-profile customer information breaches have caused Information Technology (IT) risk management practices to be a major concern for boards of directors and management. The Committee of Sponsoring Organizations of the Treadway Commission's (COSO) Enterprise Risk Management (ERM) framework emphasizes the importance of the board's oversight role while also bringing attention to the firm's reporting structure. Consequently, our study examines whether the maturity of IT risk management practices depends on Chief Information Officer (CIO) reporting structure and Chief Executive Officer (CEO)/Chairman duality. We develop a scale to measure strategic and operational maturity under the larger auspice of IT risk management and distribute a survey to high-level IT professionals. Our survey also captures the reporting structure of their firms. Consistent with our hypothesis, we find that the maturity of strategic IT risk management practices are higher when the CIO reports directly to the CEO. However, contrary to expectations, we do not find that operational risk management is more mature when the CIO reports to the Chief Financial Officer (CFO). Instead, operational risk management is higher when the CIO reports to the CEO. For public firms, the maturity of IT risk management practices are higher when the CEO is also the chairman of the board of directors. As C-level officers may have asymmetric access to the board, understanding reporting structures may inform firms, regulators, and interested stakeholders on how well IT risk is managed and factors that affect IT governance.
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Agnese, Paolo, and Paolo Capuano. "Risk Governance and Performance: Evidence From Eurozone’s Large Banks." International Journal of Financial Research 11, no. 5 (September 22, 2020): 28. http://dx.doi.org/10.5430/ijfr.v11n5p28.
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In this paper, by means of econometric models, we investigate the relationship between risk governance and performance of the Eurozone’s Global Systemically Important Banks (G-SIBs), over the period 2014-2018. The results of the quantitative analysis show that the choice to appoint a Chief Risk Officer (CRO) can be useful to shrink the bank risk-taking. Furthermore, we find that the importance attributed by the bank to the CRO – in terms of membership of the board of directors and in terms of remuneration – is positively correlated to both profitability and bank risk-taking. In addition, the analysis shows that the activity carried out by the Risk committee can be helpful to break down the risks.
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Rohaya, Mat Rahim Siti, and Fauziah Mahat. "Risk governance: Experience of Islamic banks." Risk Governance and Control: Financial Markets and Institutions 5, no. 2 (2015): 31–40. http://dx.doi.org/10.22495/rgcv5i2art4.
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Risk governance has evolved tremendously in the banking industry. Risk governance recommends the imperative roles of Chief Risk Officer (CRO) to oversee risk. This study explores risk governance influence over the Islamic banks performances. Multivariate analysis techniques measure simultaneously via Structural Equation Modelling (SEM). This study employed cross-sectional sample of 200 Islamic banks across 21 countries for the year 2014. To examine risk governance and Islamic banks performance, the study captures seventeen variables developed from risk management and corporate governance (ROA, ROE, Profit Margin, CRO, Shariah committee member, CEO, board size, remuneration meeting, credit rating, external audit, accounting standard, loan loss provision, capital adequacy ratio, total deposit ratio, GDP, central bank lending rate and inflation). The simulation result reveals, risk governance act as mediating variables towards Islamic banks performance. This study has practical and significance contribution for Islamic banks to understand risk governance, aligning with the fundamental risk management and corporate governance.
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Haveroth, Juçara, Leonardo Bernardi Rohenkohl, and Marcia Zanievicz Da Silva. "Fatores pessoais que influenciam a remuneração do Chief Risk Officer contratados por instituições financeiras no Brasil." Revista Brasileira de Contabilidade 1, no. 237 (June 28, 2019): 44. http://dx.doi.org/10.17648/rbc-vol1n237-1864.
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O objetivo da pesquisa foi analisar fatores pessoais que influenciam o nível de remuneração de profissionais contratados para atuarem como Chief Risk Officer (CRO) em instituições financeiras brasileiras. Para isso, adotou-se uma abordagem quantitativa com recorte longitudinal de seis anos (2010 a 2015). Os dados são oriundos do Cadastro Geral de Empregados e Desempregados (Caged) e contemplaram 990 observações. A variável dependente foi o salário do CRO, conforme o registrado no Caged, e as variáveis independentes, denominadas “fatores pessoais”, foram: gênero, raça, grau de instrução, idade e localização geográfica. Para o desenvolvimento da análise, aplicou-se a estatística descritiva por meio de referências cruzadas; o teste Qui Quadrado, para a relação entre as variáveis; e a delimitação do perfil do profissional pelo teste de Análise de Homogeneidade através de Mínimos Quadrados Alternados (Homals). Quanto aos resultados, entre os fatores analisados, a raça é o único fator que não se relaciona com nenhum nível salarial, ou seja, ela não é determinante para a variabilidade salarial da amostra estudada. Conclui-se que o perfil do CRO Brasileiro que mais se relaciona com altos salários é o de um profissional do gênero masculino, localizado geograficamente na região Sudeste, com alto grau de instrução e com faixa etária entre 31 a 40 anos.
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Abdulmalik, Salau Olarinoye, Noor Afza Amran, and Ayoib Che-Ahmad. "Chief executive officer retirement and auditor’s risk assessment." Journal of Financial Reporting and Accounting 18, no. 2 (April 4, 2020): 343–61. http://dx.doi.org/10.1108/jfra-04-2019-0052.
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Purpose This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to socio-emotional wealth (SEW) varies among family businesses. Design/methodology/approach This study used a longitudinal sample of 2,063 non-financial family firm-year observations from 2005 to 2016 listed on the Bursa Malaysia. The study used the general method of moments (GMM), which controls for endogeneity concerns. Findings The results reveal that, without the moderating effect of CEO identity, the relationship between CEO career horizon and auditor’s risk assessment is positive, which suggests that the auditor’s risk perception of retiring CEOs is very high. However, the interaction of CEO identity reverses the relationship as evidenced by the negative and significant coefficient on the interacted terms. The finding suggests that the auditor’s perceived risk associated with CEO career horizon is lower in family firms with CEOs affiliated to family members or in which the CEO has an equity stake. Overall, the findings provide compelling evidence that the extent of the CEO’s attachment to the firm’s SEW affects the auditor’s client risk assessment. Practical implications The findings of the study serve as an enlightenment to policymakers such as Bursa Malaysia and Security Commission that within the family-controlled firms, differences still exist; therefore, there might be a need for future regulatory initiative to cater for the specific need of family-controlled firms. Originality/value The study contributes to prior literature by departing from the agency theory adopted in previous studies on auditor choice in family firms under the assumption that family firms are homogenous.
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Haislip, Jacob, Jee-Hae Lim, and Robert Pinsker. "The Impact of Executives’ IT Expertise on Reported Data Security Breaches." Information Systems Research 32, no. 2 (June 2021): 318–34. http://dx.doi.org/10.1287/isre.2020.0986.
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Data security breaches (DSBs) are increasing investor and regulator pressure on firms to improve their IT governance (ITG) in an effort to mitigate the related risk. We argue that DSB risk cannot be mitigated by one executive alone, but, rather, is a shared leadership responsibility of the top management team (TMT) (i.e., Chief Executive Officer [CEO], Chief Financial Officer [CFO], and Chief Information Officer [CIO]). Our results suggest that IT-savvy CEOs see technologies related to mitigating DSBs as a top-three most important type of digital methodology for their firm. Similarly, the results related to CFOs with IT expertise single out the critical investment in controls designed to prevent DSBs. Our strong findings for CIOs on the TMT add to the related guidance from COBIT 5 for information security and consistently suggest that they are the key executive for securing IT systems. Finally, our granular explanation of each executive’s DSB-related responsibility could potentially provide firms the start of a governance-led roadmap for compliance to the Securities and Exchange Commission’s and Justice Department’s cyber regulations.
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Karanja, Erastus. "Does the hiring of chief risk officers align with the COSO/ISO enterprise risk management frameworks?" International Journal of Accounting & Information Management 25, no. 3 (August 7, 2017): 274–95. http://dx.doi.org/10.1108/ijaim-04-2016-0037.
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Purpose There are two main industry-sanctioned enterprise risk management (ERM) models, that is, COSO 2004 and ISO 31000:2009, that firms refer to when implementing ERM programs. Taken together, the two ERM models specify that firms should implement ERM programs to meet a strategic need, improve operations and reporting or to comply with government regulations or industry best practices. In addition, the focus of ERM implementation should be either the subsidiary, business unit, division, firm/entity or global level. The purpose of this study is to investigate whether firms are aligning their ERM implementations with these tenets: strategy, operations, reporting, compliance and the level of implementation. Design/methodology/approach The proxy for ERM implementation is the hiring of a Chief Risk Officer (CRO). The research data come from a sample of 122 US firms that issued a press release following the hiring of a CRO between 2010 and 2014. The press releases were retrieved and aggregated through content analysis in LexisNexis Academic. Findings The results reveal that many ERM implementations are occurring at the firm/entity level, and with the exception of reporting, firms consider ERM to be a strategic firm resource capable of improving business operations and compliance initiatives. Originality/value There is a dearth of research studies specifically investigating whether ERM programs adopted by firms are aligned with the specification of COSO 2004 and ISO 31000:2009 frameworks. The apparent lack of a clear understanding of the alignment between the firm ERM programs and the industry’s ERM frameworks may limit the development and implementation of ERM and the eventual realization of the benefits associated with a successful ERM implementation.
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Mensah, Godson K., and Werner D. Gottwald. "Enterprise risk management: Factors associated with effective implementation." Risk Governance and Control: Financial Markets and Institutions 6, no. 4 (2016): 175–206. http://dx.doi.org/10.22495/rcgv6i4c1art9.
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Risk management is undergoing a great change, as organizations shift from the traditional and compartmental to an enterprise wide approach. Consequently, enterprise risk management (ERM) is gaining global attention among risk management professionals and academics. The demand for the adoption of ERM has led to several companies embracing it, yet its implementation has become challenging. Research shows that ERM approach emphasizes a holistic approach for assessing and evaluating the risks that an organization faces as against the “silo” approach of the traditional methods. The extant literature shows that through the reduction of the risk that an organization faces, ERM is capable of improving the performance and value. The study used a non-experimental correlational approach to explore the relationship between the presence of a chief risk officer (CRO) and an audit committee (AC), and the support of top management (TM) in relation to the implementation of ERM. A survey instrument was provided to self-identified risk-management professionals who are members of Survey Monkey Audience Service database. The target sample frame requested for analysis using a power of .95 was (n = 119). However, the final number analyzed was (n = 134). Frequencies and percentages were conducted on the demographic survey items and regression and correlational analyses were also performed. The study findings show that there was a significant relationship between the role of a CRO, the presence of an AC, and the support of TM and the level of ERM deployment. The study also found significant correlations between management support level and CRO, and AC. In addition, a much strong positive correlation was noted between the presence of a CRO and an AC.
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Erin, Olayinka, Omololu Bamigboye, and Jonah Arumona. "RISK GOVERNANCE AND FINANCIAL PERFORMANCE: AN EMPIRICAL ANALYSIS." Business: Theory and Practice 21, no. 2 (November 9, 2020): 758–68. http://dx.doi.org/10.3846/btp.2020.10850.
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This study examines the influence of risk governance on financial performance of 50 quoted firms in the Nigerian financial sector for the period of five years (2013–2017). Panel data was used to examine how the risk governance variables (Enterprise Risk Management_index, Chief Risk Officer_presence, Board Risk Committee_size, Board Risk Committee_activism, and Board Risk Committee_independence) affects financial performance (Return on Asset). The study reveals empirically that most of the risk governance variables (ERM_index, CRO_presence, BRC_activism, and BRC_independence) have a significant and positive impact on the performance of the firm with the exception of BRC_size which shows a negative association with the financial performance of the studied firms. The study empirically reveals that strong Chief Risk Officer (CRO) presence, effective board risk committee, and inclusion of independent directors in the risk committee will go far in serving as factors that would improve the performance of firms in today’s financial environment. This study made a lot of core findings that contribute to the emerging literatures on risk governance and risk management research.
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Amoozegar, Arash, Kuntara Pukthuanthong, and Thomas J. Walker. "On the role of the chief risk officer and the risk committee in insuring financial institutions against litigation." Managerial Finance 43, no. 1 (January 9, 2017): 19–43. http://dx.doi.org/10.1108/mf-05-2016-0127.
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Purpose In most financial institutions, chief risk officers (CROs) and their risk management (RM) staff fulfill a role in managing risk exposures, yet their lack of involvement in the governance has been cited as an influential factor that contributed to the financial crisis of 2007-2008. Various legislative and regulatory bodies have pressured financial firms to improve their risk governance structures to better weather potential future crises. Assuming that CROs and risk committees are given sufficient power to influence the corporate governance of financial institutions, can CROs and risk committees protect financial institutions from violating litigable securities law? Can they improve bank performance? The paper aims to discuss these issues. Design/methodology/approach The authors employ a principal component analysis to construct a single measure that captures various aspects of RM in a firm. The authors compare the risk governance characteristics of sued firms with their non-sued peers and consider one of the final outcomes of risky behavior: shareholder litigation. The authors compute ROA and buy-and-hold abnormal returns to capture operating and stock performance and examine whether risk governance improves bank performance by reducing litigation risk. Findings Proper risk governance reduces a firm’s litigation probability. The addition of the RM factor to models that have been previously proposed in the literature improves the accuracy of those models in identifying companies that are most susceptible to class action lawsuits. Better RM improves the financial and stock price performance of financial institutions. Research limitations/implications The data collection is laborious as the information about CRO governance has to be hand-collected from the 10-K report. A broader sample employing, e.g., non-US banks may provide additional insights into the relationship between RM practices, shareholder litigation, and bank performance. Practical implications The study shows that a bank’s RM functions play a critical role in improving bank and operating performance and in reducing shareholder litigation. Banks should emphasize the RM function. Originality/value This is the first study to examine the mechanism behind the positive association between RM and bank performance. The study shows that better RM improves overall bank performance by decreasing litigation risk.
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Kalelkar, Rachana, and Sarfraz Khan. "CEO Financial Background and Audit Pricing." Accounting Horizons 30, no. 3 (March 1, 2016): 325–39. http://dx.doi.org/10.2308/acch-51442.
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SYNOPSIS Accounting scholars theorize that audit price is a function of a client's audit and business risk. Existing research finds that the functional expertise of Chief Executive Officers (CEOs) in finance improves financial reporting quality (Matsunaga, Wang, and Yeung 2013), increases profitability, and reduces the likelihood of firm failure (Custodio and Metzger 2014). These factors suggest that auditors' engagement risk decreases when incumbent CEOs possess financial expertise, raising the likelihood that auditors will charge these firms lower fees. In this study, we examine whether CEOs' work experience in accounting- and finance-related jobs affects audit fees. Using a panel of U.S. firms between 2004 and 2013, we find that firms that have a financial expert CEO pay lower audit fees. Our results are robust to various specifications, including firm-fixed effect model and specifications that control for other CEO- and Chief Financial Officer (CFO)-specific and audit committee characteristics. Our findings thus add to the literature on the advantages and disadvantages of a functional background of top managers and how this background can create value for a firm through savings in audit fees.
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Álvarez-Pérez, María Dolores, Edelmira Neira Fontela, and Carmen Castro Casal. "Control and risk of CEO compensation." Corporate Ownership and Control 6, no. 2 (2008): 372–81. http://dx.doi.org/10.22495/cocv6i2c3p4.
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This study analyses the influence of various characteristics of the Board of Directors on the control and risk of the compensation of the Chief Executive Officer (CEO). It also examines the effect on these variables of some of the CEO personal characteristics and of various contingencies of the firm. The results reveal that control of the CEO compensation is determined fundamentally by the CEO participation in the capital of the firm, while the level of risk of the CEO compensation package is higher when the firm is diversified and implements a proactive competitive strategy.
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Nguyen, Vinh Huy, Carolina Gomez, Suchi Mishra, and Ali M. Parhizgari. "CEO vs. COO: shareholder perceptions of M&A announcements based on insider trades." Managerial Finance 47, no. 9 (March 30, 2021): 1253–69. http://dx.doi.org/10.1108/mf-07-2020-0369.
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PurposeWe examine how the net share purchases of top executives of acquiring firms, specifically the Chief Executive Officer (CEO) and the Chief Operating Officer (COO), can impact shareholder perceptions of a merger and acquisition (M&A) around the announcement time.Design/methodology/approachRegression tests using the post-announcement cumulative returns as the dependent variables, and CEO and COO net purchases as independent test controlling for the net purchases of all other insiders, COO and CEO ownership, exercised options, unexercised exercisable options, merger type, pre-announcement firm size, past performance, industry growth, industry instability, year and industry fixed effects. The regression tests are used for various sub-samples (i.e. non-contemporaneous events, duality, operational complexity, economic conditions).FindingsWe find that overall shareholders value the COO's net purchases before the announcement but not those of the CEOs. If the COO is also the CEO, then executive buy-ins appear to have a negative reaction from the shareholders. When the firm has many business segments or when the announcement is made in an economic recession, the COO's net purchases do not have a positive influence on the shareholders.Originality/valueWe are the first to provide evidence that investors pay attention to the COO around M&A announcements. In the age of celebrity CEOs, who can instantaneously change the stock price with one press release, having another executive that can shape the opinion of investors can diversify the agency risk.
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Cain, Matthew D., and Stephen B. McKeon. "CEO Personal Risk-Taking and Corporate Policies." Journal of Financial and Quantitative Analysis 51, no. 1 (February 2016): 139–64. http://dx.doi.org/10.1017/s0022109016000041.
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AbstractThis study analyzes the relation between chief executive officer (CEO) personal risk-taking, corporate risk-taking, and total firm risk. We find evidence that CEOs who possess private pilot licenses (our proxy for personal risk-taking) are associated with riskier firms. Firms led by pilot CEOs have higher equity return volatility, beyond the amount explained by compensation components that financially reward risk-taking. We trace the source of the elevated firm risk to specific corporate policies, including leverage and acquisition activity. Our results suggest that nonpecuniary risk preferences revealed outside the scope of the firm have implications for project selection and various corporate policies.
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Lin, Chen, Micah S. Officer, and Beibei Shen. "Managerial Risk-Taking Incentives and Merger Decisions." Journal of Financial and Quantitative Analysis 53, no. 2 (February 26, 2018): 643–80. http://dx.doi.org/10.1017/s0022109017001260.
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We provide evidence concerning the effect of managerial risk-taking incentives on merger and acquisition (M&A) decisions and outcomes for different types of mergers: vertical, horizontal, and diversifying. Using chief executive officer (CEO) relative inside leverage to proxy for the incentives of risk-averse managers, we find that CEOs with higher inside leverage are more likely to engage in vertical mergers, and those mergers generate lower announcement returns for shareholders. This effect of CEO relative inside leverage on returns for shareholders in vertical acquisitions is more pronounced when the acquirer has a higher degree of informational opacity, weak governance, and excess cash.
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Mardessi, Sana Masmoudi, and Sonda Daoud Ben Arab. "Determinants of ERM implementation: the case of Tunisian companies." Journal of Financial Reporting and Accounting 16, no. 3 (September 3, 2018): 443–63. http://dx.doi.org/10.1108/jfra-05-2017-0044.
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Purpose Enterprise risk management (ERM) has become an important subject of increasing interest among companies throughout the world. It is gaining global attention among risk management professionals and academics. However, little is known about the extent of ERM implementation in the Tunisian context. More importantly, there are limited studies in literature that examine the determinants of this implementation. The purpose of this study is threefold, to propose an index to measure the level of ERM implementation, to examine the level of ERM implementation in Tunisian companies and to propose a conceptual framework for the determinants of this implementation. From the review of literature, several factors are found to be determinants of ERM implementation. Such factors are the presence of a Chief Risk Officer, the appointment of an internal auditor, the type of industry and the firm size. Design/methodology/approach To further understand the relation between ERM implementation and its determinants, a questionnaire survey was conducted in 2016 and administrated to 80 companies. Respondents were CRO and more often internal auditors or financial directors. Other data were collected from annual reports and notes to the financial statements. Along with this, the ordinal regression was applied to test the dependence between ERM implementation and its determinants. Findings Based on the data gathered, Tunisian companies have shown an increasing interest in risk management in the post-revolution context; however, an integrated approach of ERM implementation is still at an early stage. Descriptive statistics suggest that ERM is essentially developed in financial institutions, especially in banks and some large companies operating in non- financial industries. With regard to the multivariate regression results, the level of ERM implementation is positively related to the presence of a Chief Risk Officer, internal auditor, the type of industry and the firm size. Originality/value This study attempts to contribute to the risk management literature in two ways. Conceptually, this study proposes an ERM index to assess the level of ERM implementation. Empirically, it provides some empirical evidence that highlights factors which determine the level of ERM implementation. Therefore, this study will extend the scope of literature by providing novel empirical evidence by exploring the Tunisian context.
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Sarkar, Arkodipta, Krishnamurthy Subramanian, and Prasanna Tantri. "Effects of CEO Turnover in Banks: Evidence Using Exogenous Turnovers in Indian Banks." Journal of Financial and Quantitative Analysis 54, no. 1 (November 5, 2018): 183–214. http://dx.doi.org/10.1017/s002210901800056x.
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We examine the effects of chief executive officer (CEO) turnover in banks. Incoming bank CEOs face problems of information asymmetry because banks’ operations are opaque and bank risk can change dramatically in a short time. These CEOs may therefore change bank policies to manage their personal risks. Since CEO turnover is usually endogenous, we utilize a setting in which CEO turnover is based solely on retirement age and is thus exogenous to bank performance. Consistent with our thesis, incoming CEOs increase provisioning for future delinquencies and shrink lending. Bank stock prices decline following these changes. Politically motivated lending or ever-greening cannot explain our results.
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Ning, Yixi. "What can the departing chief executive compensation structure tell us?" Corporate Ownership and Control 11, no. 1 (2013): 307–15. http://dx.doi.org/10.22495/cocv11i1c3art1.
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This paper examines the amount and structure of the pay package for the departing CEO in a company around CEO succession. I find that the characteristics of the departing CEO compensation can provide valuable information regarding the incoming changes in corporate governance around the succession. Specifically, when a departing CEO is entrenched with a “better” compensation package characterized with a greater amount of pay in cash and in total at a lower risk, the CEO, after his retirement, is more likely to remain on the board as a director or become the chairman of the board, persuade the board to pick an insider rather than an outsider to be his successor, and to promote the company’s current president and/or chief operating officer to be the incoming CEO. These findings are consistent with the management entrenchment theory that when a CEO is entrenched with a greater discretionary power and better personal benefits, he is more likely to use his managerial power to continue his influence on the company even after he retires from the CEO position.
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Daradkah, Demeh. "Chair-CEO age variation and insurance risk-taking behavior." Journal of Governance and Regulation 10, no. 1 (2021): 49–57. http://dx.doi.org/10.22495/jgrv10i1art6.
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Based on data of all listed insurance companies in Jordan over the period of 2008-2018, the study investigates the effect of chairman of the board of directors (chair) and chief executive officer (CEO) age variation on risk-taking behavior via different chair-CEO age variation proxies. Risk-taking behavior is measured by total risk, a proxy set up on the market’s risk perception. Thus, the study finds evidence that the chair-CEO age variation tends to decrease risk-taking practice in Jordan’s insurance companies, only if a generation gap exists. It doesn’t matter whether the chair or CEO is older. These results are consistent with Goergen, Limbach, and Scholz (2015) and Zhou, Kara, and Molyneux (2019). Different robustness tests (CEO-firm fixed effect, random effect, and dynamic panel estimation) confirm results. Overall, this study contributes to corporate governance literature; thus, enhancing the internal corporate governance mechanism is essential. Finally, it has a practical implication for stakeholders, policymakers, and researchers.
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Mohamed Yusof, Mohd Faiz, Nurhanani Romli, Mohammad Mahyuddin Khalid, Azri Bhari, and Mohd Ashrof Zaki Yaakob. "Fungsi Dan Tanggungjawab Kakitangan Bukan Syariah Dalam Pengurusan Risiko Syariah: Kajian Terhadap Praktis Syarikat Takaful di Malaysia (Functions And Responsibilities of Non-Shariah Staff In Shariah Risk Management: A Study of Malaysian Takaful Companies)." UMRAN - International Journal of Islamic and Civilizational Studies 6, no. 2 (June 25, 2019): 51–66. http://dx.doi.org/10.11113/umran2019.6n2.300.
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Basically, shariah risk management in the takaful industry is responsible to those specialize in shariah studies (fiqh and usul, fiqh muamalat) namely Shariah Committee (SC) of Takaful Operator and Internal Shariah Department of Takaful Operator. Nonetheless, non-shariah staff, other than SC and Internal Shariah Department of Takaful Operators, also play an important role in managing shariah risk exposures in the operations of Takaful Operator. According to section 29 (3) Islamic Financial Services Act 2013 (IFSA 2013) which states that the Chief Executive Officer and Officer including any of the staff of the Takaful Operator are responsible for ensuring shariah compliance in the operation of Islamic financial institutions. Therefore, this study will analyze a using qualitative approach by interviewing respondents who are involved with the operations of takaful companies in Malaysia. Primary data from the takaful industry is analyzed using coding, memo, inductive and deductive processes using the Computer Assisted Qualitative Data Analysis Atlas.ti 7. The purpose of this research is to identify the roles and responsibilities of non-shariah staff in managing the shariah risk exposures of the Takaful Company in Malaysia. The secondary objective is to analyse and suggest an improvement for competency non-shariah staff in strengthening the shariah risk management of the Takaful Operator. This study found that non-shariah staff, especially front-line staff who are the first party to identify when there are shariah risk exposures in the operations of Takaful Operators. Subsequently, the underwriting staff is the second party to identify if there is any shariah risk exposures in the application of a new takaful contract. Then, the roles and responsibilities of investment-linked personnel staff, risk management staff and also Chief Executive Officer (CEO) of the Takaful Operator who are the non-shariah staff that involved in shariah risk management.
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Islam, Md Shariful, Nusrat Farah, and Thomas F. Stafford. "Factors associated with security/cybersecurity audit by internal audit function." Managerial Auditing Journal 33, no. 4 (April 3, 2018): 377–409. http://dx.doi.org/10.1108/maj-07-2017-1595.
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Purpose The purpose of the study is to explore the factors associated with the extent of security/cybersecurity audit by the internal audit function (IAF) of the firm. Specifically, the authors focused on whether IAF/CAE (certified audit executive [CAE]) characteristics, board involvement related to governance, role of the audit committee (or equivalent) and the chief risk officer (CRO) and IAF tasked with enterprise risk management (ERM) are associated with the extent to which the firm engages in security/cybersecurity audit. Design/methodology/approach For analysis, the paper uses responses of 970 CAEs as compiled in the Common Body of Knowledge database (CBOK, 2015) developed by the Institute of Internal Auditors Research Foundation (IIARF). Findings The results of the study suggest that the extent of security/cybersecurity audit by IAF is significantly and positively associated with IAF competence related to governance, risk and control. Board support regarding governance is also significant and positive. However, the Audit Committee (AC) or equivalent and the CRO role are not significant across the regions studied. Comprehensive risk assessment done by IAF and IAF quality have a significant and positive effect on security/cybersecurity audit. Unexpectedly, CAEs with security certification and IAFs tasked with ERM do not have a significant effect on security/cybersecurity audit; however, other certifications such as CISA or CPA have a marginal or mixed effect on the extent of security/cybersecurity audit. Originality/value This study is the first to describe IAF involvement in security/cybersecurity audit. It provides insights into the specific IAF/CAE characteristics and corporate governance characteristics that can lead IAF to contribute significantly to security/cybersecurity audit. The findings add to the results of prior studies on the IAF involvement in different IT-related aspects such as IT audit and XBRL implementation and on the role of the board and the audit committee (or its equivalent) in ERM and the detection and correction of security breaches.
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Chen, Zhihong, Yuan Huang, and K. C. John Wei. "Executive Pay Disparity and the Cost of Equity Capital." Journal of Financial and Quantitative Analysis 48, no. 3 (June 2013): 849–85. http://dx.doi.org/10.1017/s0022109013000306.
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AbstractExecutive pay disparity, as measured by chief executive officer (CEO) pay slice (CPS), is positively associated with the implied cost of equity, even after controlling for other determinants of the cost of equity. The difference in the cost of equity can explain 43% of the difference in the valuation effect attributable to CPS reported by Bebchuk, Cremers, and Peyer (2011). Further analysis shows that the positive association is stronger when agency problems of free cash flow are more severe and when CEO succession planning is more important. Our evidence suggests that a large CPS is associated with CEO entrenchment and high succession risk.
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Barua, Abhijit, Lewis F. Davidson, Dasaratha V. Rama, and Sheela Thiruvadi. "CFO Gender and Accruals Quality." Accounting Horizons 24, no. 1 (March 1, 2010): 25–39. http://dx.doi.org/10.2308/acch.2010.24.1.25.
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SYNOPSIS: The authors examine the association between chief financial officer (hereafter, CFO) gender and the quality of accruals. Based on findings in prior research on gender differences in a variety of decision settings—risk-taking attitudes, financial judgments, and regulatory compliances—they hypothesize that firms with female CFOs will have higher quality of accruals. The empirical findings, based on a sample of 1,559 (1,222) firms in 2005 (2004), support this hypothesis. The study shows that companies with female CFOs have lower performance-matched absolute discretionary accruals and lower absolute accrual estimation errors, after controlling for other factors that prior research has shown to be associated with accruals.
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Kumar, Praveen, and Ramon Rabinovitch. "CEO Entrenchment and Corporate Hedging: Evidence from the Oil and Gas Industry." Journal of Financial and Quantitative Analysis 48, no. 3 (June 2013): 887–917. http://dx.doi.org/10.1017/s0022109013000276.
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AbstractUsing a unique data set with detailed information on the derivative positions of upstream oil and gas firms during 1996–2008, we find that hedging intensity is positively related to factors that amplify chief executive officer (CEO) entrenchment and free cash flow agency costs. There is also robust evidence that hedging is motivated by the reduction of financial distress and borrowing costs, and that it is influenced by both intrinsic cash flow risk and temporary spikes in commodity price volatility. We present a comprehensive perspective on the determinants of corporate hedging, and the results are consistent with the predictions of the risk management and agency costs literatures.
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Phan, Hieu V. "Inside Debt and Mergers and Acquisitions." Journal of Financial and Quantitative Analysis 49, no. 5-6 (December 2014): 1365–401. http://dx.doi.org/10.1017/s0022109014000593.
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AbstractI empirically investigate the relation between chief executive officer (CEO) inside debt holdings and mergers and acquisitions (M&As), and find evidence consistent with the agency theory’s prediction of a negative relation between CEO inside debt holdings and corporate risk taking. Further analysis shows that CEO inside debt holdings are positively correlated with M&A announcement abnormal bond returns and long-term operating performance, but negatively correlated with M&A announcement abnormal stock returns. Finally, I find evidence that acquirers restructure the postmerger composition of CEO compensation that mirrors their capital structure in order to alleviate incentives for wealth transfer from shareholders to bondholders or vice versa.
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Intintoli, Vincent J., Matthew Serfling, and Sarah Shaikh. "CEO Turnovers and Disruptions in Customer–Supplier Relationships." Journal of Financial and Quantitative Analysis 52, no. 6 (December 2017): 2565–610. http://dx.doi.org/10.1017/s0022109017000965.
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Events that disrupt customer–supplier relationships pose a source of risk for suppliers that depend on a customer for a large portion of their revenues. We identify the replacement of a customer’s chief executive officer (CEO) as a disruptive event that results in suppliers losing substantial sales. These losses are greater when an incumbent customer CEO is more likely to be entrenched and stem largely from the successor divesting assets. Finally, we document that losses in sales following a customer CEO turnover lead to declines in a supplier’s financial performance and that suppliers experience negative abnormal stock returns to announcements of customer CEO departures.
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Shi, Juehui, Winston T. Lin, and Ngoc Cindy Pham. "The Relationships Among Managerial Discretion, Firm Performance, And Chief Executive Officer Compensation: A Simultaneous Equations System Approach." American Business Review 24, no. 1 (May 18, 2021): 114–40. http://dx.doi.org/10.37625/abr.24.1.114-140.
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Prior executive compensation studies overlooked the endogeneity of firm performance and the simultaneity of managerial discretion, firm performance, and CEO pay. To overcome these two shortcomings, we propose a novel simultaneous equations system model to investigate the cause-and-effect relationships among research & development (R&D), advertising, firm performance, and CEO compensation, which are jointly affected by CEO’s tenure, age, ownership, firm size, risk, and industry. Although the feedback loops are positive between firm performance and CEO pay and between advertising and firm performance, the feedback loop is negative between R&D and firm performance. Firm size has a direct and indirect effect on R&D, advertising, firm performance, and CEO pay. Large firm size may entice CEOs to invest excessively in R&D, leading to poor performance and low pay. Our study implies that the positive relationship between firm performance and CEO pay depends upon the appropriateness of the strategic choices that CEOs make.
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Mishra, Suchismita, Bakhtear Talukdar, and Arun Upadhyay. "CFO appointment and debt-equity choice." Managerial Finance 46, no. 2 (May 17, 2019): 179–96. http://dx.doi.org/10.1108/mf-10-2018-0484.
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Purpose There is some evidence that firms appoint internal candidates to exploit their unique firm specific knowledge and that the type of appointments may have signaling value to the market. However, these studies are limited to chief executive officer appointments whereas other top executives could also play an important role in corporate decision making. The purpose of this paper is to focus on the chief financial officer (CFO) appointments and firm’s debt-equity choice. Design/methodology/approach The authors employ a multiple regression framework. To control for potential endogeneity, the authors use an instrumental variable approach with both two-stage least squares and generalized method of moments estimators. Findings The authors find that firms with internal CFO hires issue more equity than firms that hire from the external labor market. The authors also find that internal CFOs significantly reduce information asymmetry (IA), which may lower market risk and the cost of financing through equity issues. Furthermore, consistent with the value maximizing role of reduced IA the authors find that this effect is concentrated in value firms. In firms with higher IA this preference for equity by the internal CFO may be weaker as even internal CFOs will prefer debt financing for its disciplining role and to reduce IA. A subsample analysis with growth firms shows this diminishing impact on the financing choice of an internal CFO. Originality/value This study provides important information about the influence the CFO has on a firm’s capital structure decisions.
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Faleye, Olubunmi, Tunde Kovacs, and Anand Venkateswaran. "Do Better-Connected CEOs Innovate More?" Journal of Financial and Quantitative Analysis 49, no. 5-6 (December 2014): 1201–25. http://dx.doi.org/10.1017/s0022109014000714.
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AbstractWe present evidence suggesting that chief executive officer (CEO) connections facilitate investments in corporate innovation. We find that firms with better-connected CEOs invest more in research and development and receive more and higher quality patents. Further tests suggest that this effect stems from two characteristics of personal networks that alleviate CEO risk aversion in investment decisions. First, personal connections increase the CEO’s access to relevant network information, which encourages innovation by helping to identify, evaluate, and exploit innovative ideas. Second, personal connections provide the CEO with labor market insurance that facilitates investments in risky innovation by mitigating the career concerns inherent in such investments.
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Njagi, Caroline, and Dr Amos Njuguna. "Evaluation of the Level of Enterprise Risk Management Adoption and Maturity of Insurance Companies in Kenya." International Journal of Finance and Accounting 1, no. 2 (February 7, 2017): 1. http://dx.doi.org/10.47604/ijfa.266.
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Purpose: The purpose of this study was to evaluate the extent to which insurance companies in Kenya have adopted ERM process, and then to assess the maturity, challenges and strategies in the implementation of this process.Materials and methods: The research design adopted for the study is descriptive research. The researcher conducted a survey on the 49 insurance companies of Kenya to encapsulate the factors that are relevant in articulating the extent of adoption of ERM and the level of maturity. A sample of 196 respondents was selected from a population of 245 respondents. The study used quantitative and qualitative methods of data analysis. Statistical Package for Social Sciences (SPSS) version 20 program was used for analysis. The results were presented using tables and pie charts. Similarly, qualitative data was summarized and categorized according to common themes and presentedin continuous prose form.Results: The study concluded that organizational related challenges hindered implementation of ERM programs. Results revealed that inadequate application of the risk management framework, ambiguity in roles and responsibilities in risk management, complexities in risk measurement, lack of embodiment of ERM in organizational culture, difficulty in risk quantification, linking risk information to strategic decision making, ensuring that all decisions remain within the organization’s risk tolerance, proactively identifying current and emerging risks, cost and budgetary constraints, misalignment of the risk and business operating models, risk management not seen as a priority by top management and inadequate information to make risk-based decisions hindered implementation of ERM frameworks among insurance firms in Kenya. The findings imply that organization related challenges have a significant effect on ERM implementation.Recommendations: The study recommends that there should be better organizational strategies to help improve implementation of ERM programs. It was found that building a strong risk culture, engaging consultants, building a dedicated ERM function, committed board of directors and top management, developing risk appetite statement, appointment of a Chief Risk Officer (CRO) and availing ERM budgets improved the implementation of ERM programs. Key words: enterprise risk management, adoption, maturity
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Adams, Mike, Stefan Hoejmose, and Zafeira Kastrinaki. "Corporate Philanthropy and Risk Management: An Investigation of Reinsurance and Charitable Giving in Insurance Firms." Business Ethics Quarterly 27, no. 1 (December 7, 2016): 1–37. http://dx.doi.org/10.1017/beq.2016.54.
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ABSTRACT:Drawing a framework from strategic stakeholder theory and using 1999 to 2010 panel data from the United Kingdom’s (UK) non-life insurance industry, we examine the effect of reinsurance on the decisions to donate to charities, and the amount given. We find that reinsurance substitutes for charitable giving as it optimizes the interests of multiple stakeholders. We further note that corporate giving is directly related to the size and age of insurers, proportion of female directorships and insider ownership, but generally inhibited by chief executive officer (CEO) bonus plans, dominant shareholders, and financial experts on the board. Interestingly, when reinsurance interacts with board-level variables we find that the donations decision is positively related to CEO bonus plans, and negatively linked with inside ownership and the proportion of female board members. Our research results could have important implications for stakeholders.
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Chen, Shi, Jyh-Horng Lin, Wenyu Yao, and Fu-Wei Huang. "CEO Overconfidence and Shadow-Banking Life Insurer Performance Under Government Purchases of Distressed Assets." Risks 7, no. 1 (March 5, 2019): 28. http://dx.doi.org/10.3390/risks7010028.
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In this paper, we develop a contingent claim model to evaluate the equity, default risk, and efficiency gain/loss from managerial overconfidence of a shadow-banking life insurer under the purchases of distressed assets by the government. Our paper focuses on managerial overconfidence where the chief executive officer (CEO) overestimates the returns on investment. The investment market faced by the life insurer is imperfectly competitive, and investment is core to the provision of profit-sharing life insurance policies. We show that CEO overconfidence raises the default risk in the life insurer’s equity returns, thereby adversely affecting the financial stability. Either shadow-banking involvement or government bailout attenuates the unfavorable effect. There is an efficiency gain from CEO overconfidence to investment. Government bailout helps to reduce the life insurer’s default risk, but simultaneously reduce the efficiency gain from CEO overconfidence. Our results contribute to the managerial overconfidence literature linking insurer shadow-banking involvement and government bailout in particular during a financial crisis.
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Mo, Park, and Kim. "The Role of Institutional Investors in the Sustainable CEO Compensation Structure." Sustainability 11, no. 19 (October 3, 2019): 5485. http://dx.doi.org/10.3390/su11195485.
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Chief executive officer (CEO) retirement pension plans are known as sustainable compensation because they induce managers to make more sustainable and long-term-oriented corporate decisions. We focused on the role of institutional investors in awarding CEO pension plans. Long-term and short-term institutional investors are expected to increase and decrease the CEO pension plan, respectively, wherein the former is aimed at persuading the manager to focus more on the firm’s long-term performance and the latter is aimed at making the CEO assume more risk. We empirically tested our hypothesis and found significantly negative (positive) relationship between short-term (long-term) institutional ownership and CEO pension plans, which is consistent with our hypothesis. Our results suggest the institutional ownership horizon’s differing impact on managers’ sustainable compensation structure.
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Baužytė, Inga. "EMPIRICAL INVESTIGATION IN CEOCOMPENSATION ACROSS CONTINENTAL EUROPE AND UNITED KINGDOM." Ekonomika 89, no. 3 (January 1, 2010): 138–54. http://dx.doi.org/10.15388/ekon.2010.0.970.
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The article presents a detailed investigation of the top management / Chief Executive Officer (CEO) remuneration package and reveals why this is important to the economy. The goal of this paper is to examine the CEO pay (salary + bonus), wealth delta, cumulative value of options held and total compensation throughout Continental Europe and the United Kingdom across a number of various sectors during years 2005 and 2006. Attention is turned to the pre-crisis data analysis which might instigate the argument that CEO compensation was one of the main reasons which lead management to the excess risk taking and reckless decision making. Therefore, it might be concluded that the relationship between risk and executive remuneration can be more subtle and complex than it has been thought. The paper applies the multiple regression model supported by research hypothesis postulation tested by the correlation method and T-test approach.
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Hesarzadeh, Reza, and Ameneh Bazrafshan. "CEO ability and regulatory review risk." Managerial Auditing Journal 34, no. 5 (May 7, 2019): 575–605. http://dx.doi.org/10.1108/maj-08-2018-1958.
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Purpose Chief executive officer (CEO) ability may have an effect on various corporate reporting decisions, and consequently, the CEO ability is subject to scrutiny by regulatory reviewers. However, theoretical literature provides mixed evidence on how the CEO ability affects the regulatory review risk. Thus, this study aims to empirically examine the effect of CEO ability on regulatory review risk. Design/methodology/approach To measure CEO ability, this study uses the CEO ability-score developed by Demerjian et al. (2012). Further, to measure regulatory review risk, the study uses the probability of receiving a comment letter from the Securities and Exchange Organization of Iran. Findings This study finds that the relationship between CEO ability and regulatory review risk is generally negative and statistically significant but not economically significant, i.e. the relationship is very small. In this regard, the study shows that the relationship is negative and also statistically and economically significant for firms with low levels of agency conflicts and high levels of corporate governance quality; and is positive and also statistically and economically significant for firms with high levels of agency conflicts and low levels of corporate governance quality. In addition, while the study finds no evidence that the regulatory reviewers’ workload compression influences the general relationship between CEO ability and regulatory review risk, it documents that low (high) regulatory reviewers’ workload compression weakens (strengthens) both the relationships stated above. Originality/value Collectively, the results suggest that the agency conflicts/corporate governance quality and regulatory reviewers’ workload compression are important factors in the analysis of the relationship between the CEO ability and regulatory review risk. The results offer insights into the opposing theoretical viewpoints about the relationship between CEO ability and regulatory review risk. Thus, the results will be of interest to boards of directors and other stakeholders involved in the regulatory review process.
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Tran, Cong-Duc, Minh-Tuan Phung, Fu-Ju Yang, and Yi-Hsien Wang. "The Role of Gender Diversity in Downside Risk: Empirical Evidence from Vietnamese Listed Firms." Mathematics 8, no. 6 (June 8, 2020): 933. http://dx.doi.org/10.3390/math8060933.
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Corporate governance has been marked as an important component of the fast-growing pace of the Vietnam economy recently. Aligning with the concern that gender plays a critical role in corporate management, this study aims to reveal the entire benefits of the appearance of women on board to reduce downside risk in the frontier countries. By using a unique dataset from Vietnamese listed firms and appropriate econometric methods, we present tight results that the presentation of women at firm management level is more likely to lessen the downside risk. In particular, female non-senior reduces all risk attributes, whereas the presence of women in executive board decrease firm risk only. Furthermore, the decreasing of individual and systemic risk are additionally driven by female Chief Executive Officer (CEO) and chairman. We found strong evidence that female leadership may decrease risk-taking in the low-risk firms at all managerial levels but not in the case of a female CEO. In summary, by examining data from specific frontier areas such as Vietnam, we confirm that the role of female leadership in terms of reducing the downside risk depend on their power managerial levels and the firm-risk behavior.
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Bian, Chao, Christopher Gan, Zhaohua Li, and Baiding Hu. "CEO pay-risk sensitivity, firm policies, and 2009 Australian tax reforms." International Journal of Managerial Finance 14, no. 1 (February 5, 2018): 54–77. http://dx.doi.org/10.1108/ijmf-05-2016-0103.
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Purpose The purpose of this paper is to examine the effects of chief executive officer (CEO) vega on firm policies in the Australian share market based on a panel data set drawn from the 137 Australian public firms for the period 2003-2012. Design/methodology/approach To allow mutual causation between our variables, the authors use the two-stage least squares estimation method, controlling for firm fixed effects. The authors use the difference-in-differences model to test whether the 2009 Australian tax reforms may discourage high-vega CEOs to take value-enhancing risks. Findings The authors find the evidence that vega induces CEOs to adopt the riskier financial policy in the Australian capital market. This evidence is further supported by the negative association between vega and firm conservative activities including cash and hedging policies. Further, the result shows that the 2009 tax reforms reduce the CEOs’ willingness to engage in risky financial policy. This finding implies that regulators may restore the 2009 reforms’ “deferred tax point” back to its pre-2009 form. Originality/value Based on the study’s results, firms should grant CEOs more out-of-the money options with a longer time to expiration to offset the 2009 tax reforms’ negative impact on the CEO’s incentive to take value-enhancing risks.
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Intintoli, Vincent J., and Kathleen M. Kahle. "Cash Holdings and CEO Turnover." Quarterly Journal of Finance 06, no. 04 (November 21, 2016): 1650022. http://dx.doi.org/10.1142/s2010139216500221.
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Chief Executive Officer (CEO) characteristics, such as the level of risk aversion, are known to affect corporate financial policies, and therefore are likely to impact corporate liquidity decisions. We examine changes in cash holdings around CEO turnover events, a period in which discrete changes in managerial preferences and abilities are likely to have the most dramatic effect on cash holdings. Our results suggest that cash holdings increase significantly following forced departures. The increase is persistent over the successor’s tenure and is robust to controls for the standard firm-level determinants of cash holdings and corporate governance characteristics. We find that higher cash holdings arise mainly through the management of net working capital, as opposed to asset sales or reductions in investment. This suggests that the changes are optimal for shareholders rather than an indication of serious agency problems. This conclusion is supported further by our finding that the marginal value of cash does not decrease following the turnover.
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Doron, Michael, C. Richard Baker, and Kiren Dosanjh Zucker. "Bookkeeper-Controller-CFO: The Rise of the Chief Financial and Chief Accounting Officer." Accounting Historians Journal 46, no. 2 (August 1, 2019): 1–8. http://dx.doi.org/10.2308/aahj-52538.
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ABSTRACT This paper traces the evolution of the chief accounting and chief financial officers from minor figures in corporate governance for most of the 20th century to senior management positions by the late 1970s. The paper begins with the testimony before Congress of Arthur Tucker during the debates over the legislation that would become the 1933 Securities Act. Tucker's testimony resulted in the controller or chief accounting officer being included among those persons specifically listed as potentially liable for fraudulent statements or omissions under Section 11 of the Act. The impact of Tucker's efforts, the evolution of the legal liability of financial and accounting officers over the next several decades, the increasing complexity of corporate finance and financial reporting that led to the establishment of the CFO as a position second only to the CEO, and the place of the accounting officer among senior management, are analyzed in the subsequent sections.
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Haider, Junaid, and Hong-Xing Fang. "CEO power, corporate risk taking and role of large shareholders." Journal of Financial Economic Policy 10, no. 1 (April 3, 2018): 55–72. http://dx.doi.org/10.1108/jfep-04-2017-0033.
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Purpose This paper aims to investigate whether a powerful chief executive officer (CEO) impacts corporate risk taking in the distinctive institutional and market setting of China? Second, in case such relationship exists, the paper further aims to investigate whether the presence of large shareholders affects it, and finally, whether this effect of large shareholders varies in state-owned enterprises (SOEs) and non-state-owned enterprises (NSOEs). Design/methodology/approach The authors have used a sample of 1,502 Chinese firms listed on Shanghai and Shenzhen stock exchanges. Sample period is 2008-2013. Besides conventional fixed-effect regression, dynamic panel data estimation (generalized method of moments) is applied to address the potential endogeneity. Findings The results show that CEO power is negatively related with corporate risk taking in two risk proxies, i.e. total risk and idiosyncratic risk. Second, the presence of large shareholders significantly affects this relationship, but does not change the primary negative relationship between CEO power and corporate risk taking. Finally, the results show that the relationship between CEO power and corporate risk taking is different in SOEs and NSOEs. The findings of this paper contend the organizational and behavioral theory viewpoint that individual decisions are more extreme. Practical implications This study provides useful implication for policymakers and suggests that while evaluating CEO’s performance, institutional and market settings should be considered. Originality/value This study provides new insights on the impact of CEO power on corporate risk taking under the two distinctive features in a developing country, i.e. presence of large shareholders and state-owned enterprises.
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Tsui, Judy S. L., Bikki Jaggi, and Ferdinand A. Gul. "CEO Domination, Growth Opportunities, and their Impact on Audit Fees." Journal of Accounting, Auditing & Finance 16, no. 3 (July 2001): 189–208. http://dx.doi.org/10.1177/0148558x0101600303.
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This study examines the relationship between a firm's internal monitoring mechanism and its impact on the audit fee. The first hypothesis investigates whether firms with independent corporate boards (chief executive officer and chairman being separate individuals) provide a more effective internal monitoring mechanism and are thus associated with lower control risk, resulting in lower audit effort and fees as compared to nonindependent, CEO-dominated boards. The second hypothesis examines whether the effectiveness of the internal monitoring mechanism provided by independent corporate boards is independent of the firms' growth opportunities. High-growth firms are by nature more difficult to monitor due to the existence of discretionary investments and measurement problems associated with future assets. Thus, the negative association between independent corporate boards and audit fees is expected to be affected by a firm's growth. Results using 650 observations from Hong Kong companies provide support for both hypotheses.
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Ben Zeineb, Ghada, and Sami Mensi. "Corporate governance, risk and efficiency: evidence from GCC Islamic banks." Managerial Finance 44, no. 5 (May 14, 2018): 551–69. http://dx.doi.org/10.1108/mf-05-2017-0186.
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Purpose The purpose of this paper is to determine the simultaneous effect of corporate governance (CG) of Gulf Cooperation Council (GCC) Islamic banks (IBs) on efficiency and risk. Design/methodology/approach The authors include Shariah supervisory board (SSB) size, Chief Executive Officer (CEO)-duality and ownership structure as CG variables. Efficiency and risk are measured using the data envelopment analysis (DEA)/stochastic frontier analysis (SFA) and Z-score, respectively. This paper also examines the risk-efficiency relationship. To test the hypotheses, the authors used seemingly unrelated regressions on a sample of 56 GCC IBs during the period 2004-2013. Findings The results indicate that implementing rigorous CG structures correlate with higher efficiency levels. Particularly, the authors show that the governance structure of IBs allows them to take higher risks to achieve a high efficiency level. In addition, results show that bank efficiency and risk are positively related. Practical implications This paper gives some insights to policy makers. It points out detail attention toward the importance of CG in IB that influences the efficiency level and risk-taking behavior. Thus, IB should improve governance procedures that can lead to higher efficiency and survival in a competitive environment and sustain financial crisis. Moreover, the economic conditions of a country are the main determinant of an IB’s efficiency and risk relationships. Originality/value The simultaneous effect of the CG of the GCC IBs on efficiency and risk is examined, taking into consideration different CG proxies, i.e., SSB size, CEO-duality and ownership structure, and different efficiency estimation techniques, i.e., SFA and DEA.
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Morrow, J. L. "Someone old or someone new? The effects of ceo change on corporate entrepreneurship." New England Journal of Entrepreneurship 5, no. 2 (March 1, 2002): 21–33. http://dx.doi.org/10.1108/neje-05-02-2002-b005.
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Boards of directors often attempt to foster corporate entrepreneurship by replacing a firmʼs chief executive officer (CEO). Compelling theoretical arguments and anecdotal evidence suggest that when firm performance has suffered, a new CEO is best suited to lead the firmʼs creative endeavors. On the other hand, among firms that retain their existing CEO after a decline in performance, manipulating the CEOʼs compensation package is a common governance practice used by boards to encourage innovation. In these cases, some have argued that increasing the CEOʼs pay will encourage corporate entrepreneurship, because the CEO has been compensated for assuming additional risk. Counter to these propositions, this study develops theoretical arguments that a firmʼs existing CEO is better equipped to foster corporate entrepreneurship and that this probability increases when the CEOʼs cash compensation is decreased. Results from a sample of 100 single-product manufacturing firms suggest firms that retain their current CEO and decrease the CEOʼs cash compensation are most likely to engage in corporate entrepreneurship. Implications that this research has for corporate entrepreneurship, corporate governance, and firm performance are discussed.
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Yahya, Farzan, Ghulam Abbas, Ammar Ahmed, and Muhammad Sadiq Hashmi. "Restrictive and Supportive Mechanisms for Female Directors’ Risk-Averse Behavior: Evidence From South Asian Health Care Industry." SAGE Open 10, no. 4 (October 2020): 215824402096277. http://dx.doi.org/10.1177/2158244020962777.
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This article aims to understand the impact of gender diversity on a firm’s equity volatility along with the moderating effect of chief executive officer (CEO) pay–performance sensitivity, institutional activism, and corporate social responsibility (CSR) activities. The sample consists of 200 South Asian health care firms over the period 2010 to 2018. After confirming the prevalence of endogeneity, we rely on the results of system generalized method of moments (GMM) rather than any static model. The results show that a higher representation of women on the board can mitigate the firm’s equity volatility. The findings of the study also purport that CEOs with higher pay–performance sensitivity exploit female directors to take the excessive risk, whereas institutional investors support the risk-averse behavior of these directors. However, we find no statistical evidence that CSR activities moderate the relationship between gender diversity and firm’s equity volatility. Our results theoretically support both stakeholder and agency perspectives that South Asian capital markets should enhance the representation of women on board to mitigate agency conflicts and to improve long-term firm’s sustainability.
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Khan, Salman. "Chief Reputation Officer (CRO): Envisioning the Role." Corporate Reputation Review 22, no. 3 (February 5, 2019): 75–88. http://dx.doi.org/10.1057/s41299-019-00061-5.
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Lin, Jyh-Horng, Fu-Wei Huang, and Shi Chen. "Sunflower management and life insurance: modeling the CEO’s utility function." Review of Behavioral Finance 11, no. 3 (August 12, 2019): 309–23. http://dx.doi.org/10.1108/rbf-05-2018-0053.
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Purpose The purpose of this paper is to develop a theoretical framework to answer the following question: What are the consequences of sunflower behavior as well as spread behavior for how asset-liability management is administrated in a life insurance company? Design/methodology/approach This paper takes into account the following: the chief executive officer (CEO) of a life insurance company confirms the board of directors’ belief – the preference of the like of higher return relative to the dislike of higher risk; the authors call such behavior sunflower management; the life insurance policyholder is entitled to a guaranteed interest rate and a participation percentage of the company’s investment surplus; and the authors examine the optimal insurer interest margin, i.e., the spread between the loan rate and the guaranteed rate. Findings Sunflower management translates into lower utility for the CEO and makes the CEO more prudent to risk-taking at an increased insurer interest margin for the provision of life insurance contracts. The effect of the guaranteed rate on the margin is ambiguous and depends on the level of guarantee itself. An increase in the participation level decreases the CEO’s loan risk-taking at an increased margin. It is shown that a trend toward higher return like of the board’s belief produces a corresponding trend toward the CEO’s decreasing risk-taking when the return like is revealed strongly. The results indicate that sunflower management as such is an important determinant in ensuring a safe insurance system. Originality/value This is the first paper to construct a contingent claim model to evaluate the expected value of the CEO’s utility function defined in terms of the equity returns and the equity risks of a life insurance company. The model explicitly considers CEO sunflower behavior, CEO spread behavior and the limited liability of shareholders.
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Mohammadi, Shaban, Hadi Saeidi, and Nader Naghshbandi. "Investigating the impact of board characteristics on money laundering." Journal of Money Laundering Control 23, no. 4 (April 10, 2020): 751–67. http://dx.doi.org/10.1108/jmlc-12-2019-0101.
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Purpose The purpose of this study is to examine the effect of board characteristics on money laundering in Iranian listed companies. Design/methodology/approach This was a descriptive-correlational study, and in terms of purpose, it was an applied research. The statistical population of this study was all companies listed in Tehran Stock Exchange during the years 2012-2018. A sample of 150 companies was selected by screening method. Data analysis and hypothesis testing were performed using logistic regression and Eviews 10. Findings The results indicated that the board bonus and CEO duality (chief executive officer duality) had a significant effect on money laundering. CEO gender also had a significant effect on money laundering. Originality/value Sound management of risks related to money laundering by the board of directors is associated with stability, soundness and overall health of a country's financial system, which enables the integrity of the international financial system by meeting the Basel Committee goals, including strengthening the regulations, monitoring and improving current procedures, promoting financial stability and maintaining and enhancing a good corporate reputation; however, banks and other financial institutions are exposed to more serious risks, especially the reputation risk, operational risk, etc., if management does not play an effective role in the fight against money laundering. If management considers efficient and risk-driven policies and procedures in the fight against money laundering, then many problems and losses as well as many costs, including failure to collect receivables and to bring legal proceedings, can be prevented.
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Rompotis, Gerasimos G. "Board structure, firm performance and risk: Recent evidence from Greece." Corporate Board role duties and composition 16, no. 2 (2020): 35–46. http://dx.doi.org/10.22495/cbv16i2art3.
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This paper examines the relationship between the characteristics of the board and the performance and risk of a firm using data from forty-five Greek listed companies over the period 2015-2018. The analysis considers various alternative performance measures, both accounting-based and stock-based, as well as two measures for risk. The board characteristics considered are the size of the board, the number of female members on the board, the number of non-executive members on the board, and the duality regarding the roles of the chief executive officer (CEO) and the president of the board. As far as the board size is concerned, the results show no significant impact on performance. This finding is in line with past studies on Greek companies. On the contrary, the presence of women on the board seems to be negatively related to performance. The same seems to be the case for the non-executive members, especially when the stock returns are taken into consideration. Finally, when it comes to duality, the results indicate the occupation of the president and CEO roles by the same person exerts a positive impact on firm performance decreasing, at the same time, its risk. This study contributes to the literature in various ways. First, it uses the most recent data from the Greek market. Furthermore, from a political point of view, the study covers a very interesting period, given that during 2015-2018 Greece had for a first time a left-wing government, a factor that could possibly affect the conduction of business in Greece. In addition, the finding that the duality in the roles of CEO and president can lower the risk of a firm is a new finding. Finally, in general, the results confirm the conclusions of the previous studies on Greek companies about the poor impact of the board on firm performance.
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Doan, Trang, and Mai Iskandar-Datta. "Does Gender in the C-Suite Really Matter?" Journal of Accounting, Auditing & Finance 36, no. 1 (August 22, 2018): 81–107. http://dx.doi.org/10.1177/0148558x18793267.
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This study empirically tests the implications of five theories on the importance of gender in the C-suite, employing two different settings. Specifically, we examine the impact of gender of the Chief Financial Officer (CFO) on the stock price response at the appointment of the executive and on post-hiring firm performance. The results from both tests are in support of the notion that female executives are less overconfident, but not less risk-averse, than their male counterparts. Particularly, we find that investors respond relatively less (more) favorably to the appointment of female CFOs compared with that of male CFOs at firms characterized by high (low) uncertainty. Furthermore, the evidence also shows that female CFOs significantly improve operating performance at firms operating in low volatility settings. The enhanced firm performance can be attributed to reduction in costs and enhanced efficiency of working capital management. The findings are robust to a battery of robustness checks.