Journal articles on the topic 'Financial Fraud. Corporate Governance. Agency Theory'
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Magnanelli, Barbara Sveva, Luca Pirolo, and Luigi Nasta. "Preventing financial statement frauds through better corporate governance." Corporate Ownership and Control 14, no. 3 (2017): 271–85. http://dx.doi.org/10.22495/cocv14i3c2art1.
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Acting within the agency theory theoretical framework, the paper focuses on the role of the corporate governance as a system to monitor and predict the fraud occurrence and magnitude. Specifically, the study examines the impact of the quality of the corporate governance of the firms, for which a fraud was detected, on the fraud occurrence and magnitude. We posit that fraudulent behaviours, by those who can take advantage of information asymmetry and gain personal benefits from them, can occur when strong agency problems emerge and a weak governance exists. Thus, the financial statement fraud can be seen as the result of high agency problems and high conflicts of interests not solved by the company. Starting from a sample of 101 listed companies, for which a fraud was detected, using a principal component analysis, we develop a corporate governance index, which measures the quality of the governance system of the firms. To test the hypothesis, we run a multinomial logistic regression on a cross-sectional analysis, controlling the results with a matched sample of firms that did not experienced any fraud. Empirical evidences seem to confirm the existence of a negative relationship between the quality of the corporate governance system of a firm and both the financial statement fraud occurrence and magnitude, indicating the governance system of the firm as a fraud deterrent for any amount of financial statement fraud. These findings are even stronger for firms characterized by the presence of a blockholder. This study contributes to the governance literature by focusing on the corporate governance quality and its impact on financial statement frauds. Moreover, the analysis suggests that a good level of governance can help companies to mitigate the agency problems and to detect fraudulent behaviours, thus our empirical evidence can guide regulators in developing regulations to avoid the fraud occurrence.
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Shi, Wei, Brian L. Connelly, and Robert E. Hoskisson. "External corporate governance and financial fraud: cognitive evaluation theory insights on agency theory prescriptions." Strategic Management Journal 38, no. 6 (October 27, 2016): 1268–86. http://dx.doi.org/10.1002/smj.2560.
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Suhartono, Sugi. "ANALISIS PENGARUH FRAUD DIAMOND DAN GOOD CORPORATE GOVERNANCE DALAM MENDETEKSI KEMUNGKINAN TERJADINYA FRAUDULENT FINANCIAL STATEMENT." Jurnal Bina Akuntansi 7, no. 2 (July 3, 2020): 175–207. http://dx.doi.org/10.52859/jba.v7i2.93.
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In the financial statements there is a possibility of misstatements in the presentation of company’s financial statements relating to errors or fraud made or caused by managers in the company. Misrepresentation in financial statements causes a decrease in the level of trust of users of financial statements and can harm stakeholders. The theories underlying this research include agency theory, fraud diamond, and good corporate governance. The research sample consisted of 46 manufacturing companies listed on the Stock Exchange in the period 2015-2017. Sampling is done by purposive sampling method. Hypothesis testing uses analysis of descriptive statistics, pooling test, independent sample t-test and logistic regression analysis. The results of this study indicate that financial stability, nature of industry, rationalization, and capability have a positive effect on the possibility of fraudulent financial statements. Whereas female on board has a negative effect on the possibility of fraudulent financial statements. But external pressure, personal financial need, effective monitoring and independent board of commissioners are not proven to have effect on the possibility of fraudulent financial statements.
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Flayyih, Hakeem Hammood, and Wided Khiari. "An empirical study to detect agency problems in listed corporations: The emerging market study." Journal of Governance and Regulation 12, no. 1, special issue (2023): 208–17. http://dx.doi.org/10.22495/jgrv12i1siart1.
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The aim of this paper is to shed the light on the concepts of agency theory by measuring one of the problems that arise from it, which is represented by earnings management (EM) practices. The research problem is demonstrated by the failure of some Iraqi banks and their subsequent placement under the supervision of the Central Bank of Iraq, which was attributed, in part, to the inadequacy of the agency model in protecting stakeholders in shareholding institutions, as well as EM, pushed professional institutions to adopt the corporate governance model as a method to regulate the problem of accounting information asymmetry between the parties to the agency. We are using the Beneish M-score model and the financial analysis equations in the Beneish model for bank data for both the income statement and the financial position to do so. The sample includes 30 Iraqi banks listed on the Iraq Stock Exchange from 2014 to 2017, with the goal of inferring agency problems through EM practices. The results show that there are problems for the agency in the research sample banks throughout the research periods, and the percentages of those problems vary from one year to another. Apart from detecting agency problems, the art of financial ratios that have been used can be useful for auditors in conducting financial analyses, and thus they can be used as tools to detect fraud, given those agency problems resulting from profit manipulation are only aspects of fraud in the financial statements.
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Al Matari, Ebrahim Mohammed, and Mahfoudh Hussein Mgammal. "The moderating effect of internal audit on the relationship between corporate governance mechanisms and corporate performance among Saudi Arabia listed companies." Contaduría y Administración 64, no. 4 (April 30, 2019): 143. http://dx.doi.org/10.22201/fca.24488410e.2020.2316.
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<p>This study primarily aimed to assess the internal audit function’s ability to detect and self-report fraud. The paper investigated the moderating role of internal audit on the relationship between corporate governance mechanisms and corporate performance (ROA) and the direct effect of corporate governance characteristics and internal audit characteristics on corporate governance of firms listed in the stock market of Saudi Arabia. one hundred and eighty-eight observations obtained from forty-seven Saudi financial firms were used in this study for the years 2014-2017. The study used the FGLS regression to test the variables relationships and to test the moderating effects of internal auditor on the corporate governance characteristics and corporate performance. The obtained empirical results supported a significant positive relationship between non-executive board, audit committee size, audit committee independence and internal audit profession, and corporate performance. Negative significant findings were also observed between the board size, internal audit size and internal audit education, and corporate performance. As for the moderating effects, the results supported a significant moderating role of internal audit size on the size of the board and its relationship with corporate performance. This study extends past studies dedicated to testing the agency theory and resource dependence theory as underpinning theories in examining the relationship between corporate governance and corporate performance. The study is expected to contribute to conceptual and theoretical studies by highlighting issues concerning corporate governance practice in Saudi listed firms. The study focused on the internal audit committee characteristics, corporate governance characteristics and the corporate governance best practices that practitioners can utilized when it comes to the role of internal audit committee.</p>
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Febby and Sugi Suhartono. "DETERMINAN PEMILIHAN KANTOR AKUNTAN PUBLIK (KAP)." Jurnal Akuntansi 9, no. 2 (August 15, 2020): 1–16. http://dx.doi.org/10.46806/ja.v9i2.758.
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Abstract
In the process of maximizing the value of the company, a conflict of interest between the manager and the shareholders often arises, which is often called an agency problem. This happens because managers prioritize the opposite interests, ownership does not like the personal interests of managers because what managers do will add costs to the company so that it will cause a decrease in corporate profits. Therefore, companies need a corporate monitoring function through external auditors that are used by company managers to reduce agency problems that arise in the company and reduce fraud in the presentation of the company's financial statements. Therefore, this study discusses the factors that can influence the decisions of public accounting firms such as institutional share ownership, managerial stock ownership, largest shareholding, company size, independent commissioners and leverage. The sample in this study consisted of 135 manufacturing companies. Sampling was done by purposive sampling method. The analytical method used is logistic regression analysis using SPSS 20. The conclusion from the results of the analysis in this study is that the largest shareholding has a positive interest in the selection of a public accounting firm.
Keywords: Selection of Public Accounting Firm, Independent Commissioner, Institutional Ownership, Managerial Ownership, Largest Share Ownership, Company Size, Leverage.
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Astuti, Sri, Marita Marita, and Sucahyo Heriningsih. "Analysis Factor Triggers Fraud And Corporate Governance On Indications of Fraudulent Financial Reporting Using the Pentagon Fraud Theory Approach." Eksis: Jurnal Riset Ekonomi dan Bisnis 14, no. 1 (September 30, 2019): 47–54. http://dx.doi.org/10.26533/eksis.v14i1.448.
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This study examines the correlation between fraud triggering factors using the Pentagon fraud theory approach and the role of corporate governance on the indication that companies conduct financial statement fraud. The trigger factors for fraud in the Pentagon fraud theory are pressure, opportunity, rationalization, competence and arrogance. The fraud studied in this study is financial report fraud. The financial statements are prepared and accounted for by management. The population in this study are all banking companies listed on the Stock Exchange in 2015-2018. Observation data consisting of 92 companies. The analysis tool used is correlation analysis. Based on the results of testing, the variable that correlates significantly with the indication of the company committing fraud is pressure and corporate governance. Financial statements are a measure of management's performance, so there is pressure from management to deliver their performance information properly. Good corporate governance (GCG) is one of the pillars of the market economic system, closely related to trust in both the companies that implement it and the business climate in a country. Governance mechanisms describe the organizational culture that builds employee ethics and motivates them to uphold ethical values. Inefficiencies in corporate governance will raise the risk of financial report fraud.
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Yuvin, Vicky, and Partogian Sormin. "PENGARUH FRAUD PENTAGON DAN CORPORATE GOVERNANCE TERHADAP FINANCIAL STATEMENT FRAUD BENEISH MODEL." Jurnal Kontemporer Akuntansi 2, no. 1 (March 23, 2022): 41. http://dx.doi.org/10.24912/jka.v2i1.18124.
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This study aims to obtain evidence related to the effect of fraud pentagon theory and corporate governance on financial statement fraud. This study is conducted by selecting a sample of a manufacturing company which is listed on the Indonesia Stock Exchange in year 2014 – 2018. The samples obtained are 450 data. The independent variable in this study is the fraud pentagon which are consist of pressure, opportunity, rationalization, competence, arrogance also corporate governance variables. This study uses multiple linear regression analysis and is processed by using IBM SPSS 22 software. The result of this study partially indicates that pressure, opportunity, rationalization, arrogance and corporate governance variables have no positive effect on financial statement fraud. While the competence variabel has a positive effect on financial statement fraud.
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Lidyah, Rika. "Islamic Corporate Governance, Islamicityfinancial Performance Index And Fraudat Islamic Bank." Jurnal Akuntansi 22, no. 3 (November 7, 2018): 437. http://dx.doi.org/10.24912/ja.v22i3.398.
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This research empirically tested the factors of fraud occurrence in sharia banks based on fraud triangle theory, which is motivation, opportunity and rationalization must be fulfilled for the occurrence of fraud. This research develops indicators as a proxy of motivation, opportunity and rationalization. Factors tested in this research is the Islamic Corporate Governance to fraud with the Islamicity Financial Performance Index as a mediator in sharia banks 2012-2016.This research using quantitative method with secondary data. Data are obtained from annual reports published by Islamic banks. The test is done by path analysis and processed using SPSS. The result of research shows that Islamic Corporate Governance has no effect to Islamicity Performance Index, Islamic Income Ratio, Profit Sharing Ratio and Islamic Investment Ratio (Islamicity Financial Performance Index) influence to Fraud, Islamic Corporate Governance has no effect to Fraud, and Islamic Income Ratio, Profit Sharing Ratio and Islamic Investment Ratio (Islamicity Financial Performance Index) does not mediate the influence of Islamic Corporate Governance to Fraud on Islamic Bank or it can be said that there is no mediation. This research shows that factors based on fraud triangle are effective for use in explaining fraud.
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Haque, Faizul, and Thankom G. Arun. "Corporate governance and financial performance: an emerging economy perspective." Investment Management and Financial Innovations 13, no. 3 (September 23, 2016): 228–36. http://dx.doi.org/10.21511/imfi.13(3-1).2016.09.
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This paper investigates the influence of firm-level corporate governance on financial performance of the listed firms in Bangladesh. Agency theory suggests that better corporate governance reduces expropriation costs, which, in turn, enhances investors’ confidence in the firm’s future cash flow and growth prospects, leading to higher firm valuation. Likewise, a decrease in private benefits is likely to cause an improved operating performance. This paper uses a questionnaire survey-based corporate governance index (CGI), comprising of the three dimensions – shareholder rights, independence and responsibilities of the board and management, and financial reporting and disclosures. The study results partly confirm the prediction of the agency theory, with a statistically significant positive relationship between a firm’s corporate governance quality and its valuation, even though the relationship between firm level corporate governance and operating performance seems inconclusive. Keywords: corporate governance index, agency theory, financial performance, Bangladesh. JEL Classification: G32, G34, G38, O16
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Hernandez, José R. "Good Value from Shared Values: A fraud and risk perspective." Maandblad Voor Accountancy en Bedrijfseconomie 85, no. 11 (November 1, 2011): 573–82. http://dx.doi.org/10.5117/mab.85.12871.
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Corporate scandals in the last decade have led to renewed focus by auditors and regulators on fraud, risk assessments, and governance reforms. Hernandez (2007) documents auditor perceived associations between risk indications or concerns on dimensions of management ethics and compensation, performance, governance and fraud across auditor risk assessments performed during the continuance stage of an audit at a ‘Big Four’ firm (from 2002 to 2004). Running three separate sets of ordinal regressions, this study notes that assessed risk of fraud, perceived corporate performance risks, and corporate governance risks are independently associated with each other, as well as positively affected by management ethics and integrity concerns perceived by auditors and the pressure and balance of financial and non-financial goal-setting targets in management compensation contracts. This suggests that managers and entities focused by ethics, values, and sustainable goals (lower integrity concerns, less profits pressure) may present themselves with lower audit risk and benefit investors, reducing contracting and agency risks, which may be by simultaneously associated with fraud, governance, and overall entity performance risks. I extend this result into a theoretical model where the entity and its customers, suppliers, regulators, and other stakeholders (‘Five Forces’) share corporate values, lowering audit (and entity contracting) risks, resulting in higher entity value
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Vargas-Hernández, José G., and María Elizabeth Teodoro Cruz. "Corporate governance and agency theory: Megacable case." Corporate Governance and Sustainability Review 2, no. 1 (2018): 59–69. http://dx.doi.org/10.22495/cgsrv2i1p5.
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The objective of this research is to determine the importance of the implementation of a corporate governance system in the Mexican company Megacable in its development, from the review of the theoretical and empirical literature. Therefore, a descriptive and explanatory study was carried out that describes the concepts related to the aforementioned elements. and financial reports of two periods are analyzed, as well as the main attributes that explain the success of the company. Among the main results obtained are that the Megacable group is the cable operator; Mexico’s largest internet and telephony in terms of subscribers, its structure as a controlling company that is managed through a series of subsidiaries and controlling companies and smaller operating companies in the same sector. It can be concluded that implementing efficient corporate governance among small and medium enterprises will have a clearer way of how to implement and execute the plans and best practices that will allow them to be leaders in their sector.
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Agustini, Merry, and Jamaludin Iskak. "FAKTOR-FAKTOR YANG MEMPENGARUHI FRAUDULENT FINANCIAL STATEMENT: STUDI PENDEKATAN FRAUD PENTAGON THEORY." Jurnal Kontemporer Akuntansi 1, no. 2 (November 19, 2021): 105. http://dx.doi.org/10.24912/jka.v1i2.15094.
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Semakin maraknya kasus fraudulent financial statement membuat penelitian dengan topik ini menjadi penting untuk menganalisis penyebab dan alasan terjadinya fraudulent financial statement. Penelitian ini bertujuan untuk menganalisis pengaruh dari fraud pentagon yang terdiri dari tekanan, kesempatan, rasionalisasi, kemampuan dan arogansi terhadap Fraudulent Financial Statement dengan Corporate Governance sebagai variabel pemoderasi. Metode penelitian yang digunakan dalam penelitian ini adalah analisis regresi berganda menggunakan alat uji Eviews 9.0. Populasi penelitian adalah perusahaan mannufaktur sektor barang konsumsi yang terdaftar di Bursa Efek Indonesia periode 2014-2018 dengan total sampel 130 perusahaan. Penelitian ini menunjukkan bahwa tekanan, kesempatan, kemampuan dan arogansi tidak berpengaruh signifikan terhadap fraudulent financial statement sedangkan rasionalisasi berpengaruh positif dan signifikan terhadap fraudulent financial statement. Corporate governance dalam penelitian ini juga tidak memperlemah pengaruh dari fraud pentagon terhadap fraudulent financial statement.
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Kallamu, Basiru Salisu, and Nur Ashikin Mohd Saat. "Corporate strategy, corporate governance and performance of financial institutions in Malaysia." Corporate Ownership and Control 12, no. 1 (2014): 386–98. http://dx.doi.org/10.22495/cocv12i1c4p1.
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We examine the impact of corporate strategy and corporate governance on the performance of finance companies in Malaysia using data from 406 firm-year observations. The results indicate that diversification influence accounting returns negatively while separate risk management committee (RMC) influence market valuation of finance companies positively both in the period after the Asian financial crisis which also is the period after the Malaysian Code on Corporate Governance (MCCG) was issued. Finally, the results indicate significant difference between the period before and after the Asian financial crisis and MCCG in terms of diversification and corporate governance in the finance companies. The results support agency theory which suggests that diversification may create further agency problem between the management and the shareholders
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Din, Muhammad, Munawarah Munawarah, Imam Ghozali, Tarmizi Achmad, and Fikry Karim. "Governance of financial management and regulation-based fiscal accountability." Journal of Governance and Regulation 11, no. 2 (2022): 116–23. http://dx.doi.org/10.22495/jgrv11i2art10.
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This study aims to analyze financial accountability based on the regulation as a moderating effect of fiscal decentralization on fraud rates in local government financial management. Regulatory accountability consists of financial reporting accountability, accountability of the government internal control system, accountability compliance with legislation and accountability follow-up to audit results. This research is an empirical research with a purposive sampling technique in collecting data. The data used in this study is secondary data with a sample of 412 regency and city governments in Indonesia, during 2011–2014. Data processing used WarpPLS statistic software. The results show empirical evidence that fiscal decentralization has a positive effect on fraud rates in regional financial management. Accountability, financial reporting and accountability compliance with legislation are empirically proven as moderating the effects of fiscal decentralization on fraud rates in regional financial management. In addition, the results of this study also show that the low level of accountability of the internal control system and accountability does not continue the results of the examination so it cannot moderate the effect of fiscal decentralization on fraud rates in regional financial management. The results of this study have implications for strengthening agency theory, institutional theory, economic regulation theory and fraud triangle theory. The results of this study also have practical implications for the role of accountability through the formulation of regulations related to sanctions and rewards for local governments to carry out good governance through increasing their financial accountability. In addition, the regional government is expected to pay attention to audit recommendations so that it can reduce fraud rates in regional financial management.
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Yarram, Subba Reddy, and Brian Dollery. "Corporate governance and financial policies." Managerial Finance 41, no. 3 (March 9, 2015): 267–85. http://dx.doi.org/10.1108/mf-03-2014-0086.
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Purpose – The purpose of this paper is to examine the influence of board structure on dividend policy of Australian corporate firms. It also considers the traditional explanations of corporate dividend choice, such as agency cost theory, signalling hypothesis, the life cycle hypothesis along with tax-based explanations of dividend policy. Design/methodology/approach – The final sample consists of 413 non-financial firms that are part of the All Ordinaries Index. The causal analysis was undertaken in three stages. In the first stage, the authors analyse the likelihood of paying dividends. And classify all firms as either dividend payers or non-payers. The authors then model this binary variable as a function of different sets of variables. In the second stage, the authors analyse the factors determining the magnitude of dividend payout by those firms that have paid a dividend. In contrast, stage three employs all firms – those which did not pay any dividend and those firms which paid a dividend. Findings – For the study period 2004-2009, this study finds that board independence has a significant positive influence on the dividend payout of Australian firms. This finding is consistent with the “outcome” model of La Porta et al. (2000). This study also finds that size has a significant positive influence on the dividend payout of Australian firms thus providing support for the agency cost view of dividend policy. Similarly, this study also finds support for the signalling hypothesis and the life cycle theory given the significant positive influence of profitability and the significant negative influence of current losses and growth opportunities on the dividend policy of Australian firms. Research limitations/implications – The findings of the study are robust with to alternative measures of variables employed and are not influenced by the global financial crisis. However, this study did not consider the possible endogenous and multiple relationships between dividends, debt, profitability, cash holdings and governance structures given the limited study period considered. Practical implications – This study finds that board independence has a significant positive influence on the dividend behaviour of Australian firms. This suggests that dividends and independent directors play complementary governance roles. While dividends provide the monitoring and disciplinary roles, independent directors act as catalysts for enhancing effective board functioning. These findings have implications for corporate governance policies and the payout policies. Originality/value – Though the governance role of dividends has long been recognized in the literature (Easterbrook, 1984; Jensen, 1986), very few studies analyse the influence of board characteristics on the decision to pay dividends in Australia. Given the distinct Australian setting where the tax imputation system allows companies to pay franked dividends to domestic investors, this study provides evidence on the interaction of corporate and dividend policies. This study finds that dividend polices are influenced by percentage franking of dividends. This study also finds that board independence has a significant positive influence on the dividend policy of Australian firms.
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Ahmad, Syed Muhammad Hassan Gillani, Suresh Ramakrishnan, Hamad Raza, and Humara Ahmad. "Review of Corporate Governance Practices and Financial Distress Prediction." International Journal of Engineering & Technology 7, no. 4.28 (November 30, 2018): 30. http://dx.doi.org/10.14419/ijet.v7i4.28.22385.
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Good corporate governance practices play an import role in increasing the firm value. Based on the agency theory related to corporate governance, if an agent (management) does not protect interest of principal (shareholders) then, agency cost is occurred and this creates a bad impact on the corporate performance. Therefore, it is necessary to address weak corporate governance practices in early stages otherwise firms can go in financial distress and eventually become bankrupt. The objective of this current study is to conduct a nonsystematic review of literature on theories and models related to corporate governance and financial distress. In the light of thorough review of literature, it is found that corporate governance variables (i.e. ownership concentration, board size, board composition, CEO duality, level of independence of board from management and managerial ownership) are good predictors for predicting financial distress. Moreover, it is also found that these corporate governance variables were not only used separately for predicting financial distress but also used along with others variables (firm level and country level) for the purpose of enhancing quality of financial distress models.
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Tuấn, Nguyễn Văn. "Mainstream theories of corporate governance and the corporate governance – firm performance relationship." Science & Technology Development Journal - Economics - Law and Management 5, no. 3 (May 29, 2021): first. http://dx.doi.org/10.32508/stdjelm.v5i3.781.
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This paper reviews the mainstream theories of corporate governance and the relationship between corporate governance structures and firm financial performance. We show that the four predominant theories often employed to study the corporate governance – firm performance relationship are agency theory, stewardship theory, resource dependence theory, and institutional theory. In spite of being an overwhelmingly predominant theoretical approach in corporate governance studies, agency theory has recently been criticized for not fully reflect corporate governance practices in various institutional contexts. It is, therefore, necessary to re-examine the traditional agency framework to understand the corporate governance – firm performance relationship in various institutional environments. There are also calls for the application of a multi-theoretical approach to capture the complex nature of the corporate governance – firm performance relationship. It is also clear from our review that the effect of corporate governance on firm performance is inconclusive as empirical findings concerning this relationship are mixed in different analysis contexts. It is argued that such inconclusive findings of the corporate governance – firm performance relationship may be caused by the national institution differences and the imperfection of estimation techniques. Several recent studies in corporate governance support the view that the implementation of corporate governance mechanisms in a country is influenced by its institutional environment. For this reason, the effectiveness of corporate governance mechanisms also varies from country to country, or in other words, it is country-specific. This suggests that future research focusing on cross-national comparative contexts may provide more insight or in-depth information on the corporate governance – firm performance relationship. We also suggest that the potential mediating impacts of institutional characteristics on the corporate governance – firm performance relationship should be taken into consideration when conducting cross-country comparative corporate governance studies.
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Safieddine, Assem. "Islamic Financial Institutions and Corporate Governance: New Insights for Agency Theory." Corporate Governance: An International Review 17, no. 2 (March 2009): 142–58. http://dx.doi.org/10.1111/j.1467-8683.2009.00729.x.
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Khatib, Saleh F. A., Dewi Fariha Abdullah, Ali Shariff Kabara, Saddam A. Hazaea, and Tamil Selvi Rajoo. "Does Debts have any Impact on Governance Bundle and Agency Costs? Over-Governance Hypothesis." Technium Social Sciences Journal 9 (June 17, 2020): 384–96. http://dx.doi.org/10.47577/tssj.v9i1.1003.
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The purpose of this article is to extend the bundles of corporate governance theory and propose the role of corporate debt in determining the governance structure of a company. This research intended to answer some questions have been put forward by scholars to explain the inter-relationship between debt, corporate governance, and agency costs: (i) what exactly is the disciplinary role of debts? (ii) how is governance structure influenced by the debt level? and (iii) are extremely high debt ratios required? Previous works have looked at interrelations between debt, corporate governance, and agency costs in isolation result in inclusive findings. However, we argue that debt level is a key determinant of the effective governance structure that maintains agency costs at the optimal level. Based on the governance bundle theory, we contribute to the literature by introducing a new model (over-governance model) that suggests financial leverage as a critical contingency linking governance bundle and agency costs. Also, it provides a clear picture on the different type of agency costs. Our paper provides a theoretical framework to guide further studies and provide important implications for the board, corporate management, and regulators.
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Li, Songsong, Daquan Gao, and Xiaofeng Hui. "Corporate Governance, Agency Costs, and Corporate Sustainable Development: A Mediating Effect Analysis." Discrete Dynamics in Nature and Society 2021 (May 8, 2021): 1–15. http://dx.doi.org/10.1155/2021/5558175.
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The economy is an essential factor in constructing a resilient city, and listed companies play a vital role in the local economy. From the microbehavior of corporate governance, we examine the relationship among corporate governance, agency costs, and corporate sustainable development for a panel sample of 690 state-owned firms in China during 2015–2019. We found that agency costs mediate the relationship between board size, management compensation, debt ratio, dividend policy, and corporate sustainable development. Specifically, decreasing the board size can reduce agency costs and enhance the company’s sustainable development capabilities. The existing compensation system is to the disadvantage of the sustainable development of the company. Increasing the salaries of managers will increase agency costs and reduce the company’s ability to develop sustainably. Although increasing liabilities can reduce agency costs, increasing liabilities will increase financial risks. The bankruptcy costs caused by increasing liabilities are more significant than agency costs, which leads to a decline in the company’s ability to develop sustainably. The implementation of cash dividend policies will help reduce agency costs, thereby increasing their sustainable development capabilities. This also provides new ideas for the Modigliani–Miller (MM) theory and agency cost theory.
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Cheng, Ai-Fen, and Tao-Hsien Dolly King. "Corporate governance and financial contracting: bondholder takeover defenses in poison puts." Corporate Ownership and Control 7, no. 2 (2009): 9–20. http://dx.doi.org/10.22495/cocv7i2p1.
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Bondholder governance through the use of bond covenants and the interactions between shareholder and bondholder governance mechanisms has been recently highlighted in the corporate governance literature. In this paper, we study bondholder governance mechanisms through takeover-related bond covenants (i.e., poison puts), confirm with agency theory on the characteristics of firms that are more likely to use these covenants, and emphasize the importance of bondholder governance in the overall structure of corporate governance. We find that poison puts are often bundled with asset sale, payout, and financing restrictions, which is consistent with agency theory. We also find that high growth firms, large, profitable, low-leverage firms are more likely to use poison puts. In addition, our results on free cash flow, insider and institutional ownership provide support for agency explanation. Lastly, we find that poor bond market performance and good equity market performance are likely to motivate the incidence of poison put bond issuance. Volatility of interest rate and volatility of bond index returns motivate more issues of poison put debt. Finally, greater market term and default premiums promote the use of poison puts.
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Ali, Rizwan, Yanping Liu, and Gul Rukh Niazi. "Corporate Governance And Performance Of Peer Firms: A Cross-Lagged Analysis Of An Emerging Economy." Journal of Applied Business Research (JABR) 33, no. 3 (April 28, 2017): 547–64. http://dx.doi.org/10.19030/jabr.v33i3.9946.
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In this study, we examine the effects of corporate governance practices on financial performance of Pakistani listed firms. On the bases of agency theory, MM theorem, and theory of firm, we suggest that corporate governance effects firm performance directly as well as indirectly via mediation of capital structure and dividend policy. The model was tested using a cross-lagged analysis of 100 non-financial firms with the structural equation modeling (SEM). The study concludes that corporate governance improves financial performance by exploiting capital structure and dividend policy. The findings of this study, highlights the importance of corporate governance practices for peer firms to restructure their debt and dividend policies for the enhancement of their financial performance.
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Pramono Sari, Maylia, Kiswanto, Lintang Vernanda Rahmadani, Hera Khairunnisa, and Imang Dapit Pamungkas. "DETECTION FRAUDULENT FINANCIAL REPORTING AND CORPORATE GOVERNANCE MECHANISMS USING FRAUD DIAMOND THEORY OF THE PROPERTY AND CONSTRUCTION SECTORS IN INDONESIA." Humanities & Social Sciences Reviews 8, no. 3 (June 20, 2020): 1065–72. http://dx.doi.org/10.18510/hssr.2020.83109.
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Purpose of the study: This study aims to analyze the detection of the risk factors of fraudulent financial reporting and corporate governance mechanisms as moderating variables with fraud diamond theory of the property and construction sector in Indonesia. The risk factors of fraudulent financial reporting by financial targets, ineffective monitoring, auditor change, change of directors.
Methodology: The sample selection using purposive method sampling. The number of population in this study was 219. The samples of this study were 114 property and construction sector companies listed on the Indonesia Stock Exchange during 2016-2018. This study tests the hypothesis in multivariate analysis using logistic regression with IBM SPSS Statistics 25.
Main Findings: The results of this study the board of commissioners, independent commissioners, institutional ownership are able to moderate the relationship between financial targets on fraudulent financial reporting. The companies are able to optimize corporate governance mechanisms, especially the roles of the board of commissioners, independent commissioners, institutional ownership. So, that fraudulent financial reporting in the companies can decrease.
Implications of this study: The results of this study are expected to provide practical implications for companies listed on the Indonesia Stock Exchange, namely the need to strengthen the board of commissioners, independent commissioners, and institutional ownership to detect and prevent fraudulent financial reporting. The higher effectiveness of monitoring will be able to minimize the occurrence of fraudulent financial reporting.
Novelty/Originality of this study: This study uses fraud diamond theory to detect and tests the moderating variables of corporate governance mechanisms on the relationship between the determinant fraudulent financial reporting. The study uses a moderating variable that is corporate governance mechanisms which is proxy by the board of commissioners, independent commissioners, institutional ownership, and audit committee.
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Siswanto, Felicia, I. Wayan Alvin Kertanegara, Kevin Kevin, Rahayu Ningsih, and Carmel Meiden. "KAJIAN LITERATUR: PENGARUH TATA KELOLA PERUSAHAAN PADA PERFORMA KEUANGAN." El Muhasaba Jurnal Akuntansi 13, no. 1 (January 21, 2022): 47–60. http://dx.doi.org/10.18860/em.v13i1.14033.
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The purpose of the study was to identify the elements that affect corporate governance. Corporate governance is a picture of the relationship between parties that influences the direction of the company and financial performance. Basically, to find out how much influence corporate governance has on a company's financial performance requires the application of agency theory. This research uses a method of literature studies that studies and examines documents related to corporate governance especially about the influence of corporate governance on financial performance. The data used in this study is secondary data. The implementation of corporate governance should have a positive impact on the performance of the company, but in reality there are still many companies that have not implemented good corporate governance, because most companies only carry out government rules without deepening the role and function of corporate governance itself.
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Mohamed Zerban, Ayman, and Abdullah Mohammed Abdullateef Madani. "Corporate Governance and Board of Directors Responsibility in Appointing Senior Managers: A Case in Saudi Arabia." International Journal of Business and Management 13, no. 1 (December 18, 2017): 183. http://dx.doi.org/10.5539/ijbm.v13n1p183.
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Corporate governance is a cornerstone in improving efficiency and creating confidence to attract investors. After collapses of giant companies, worldwide business community are trying to infuse a culture of honesty and integrity in business. Commitment of board of directors and willing of top management and employees to strength corporate governance is essential. Failure to compliance with corporate governance rules will increase operational risk and hence impacting interests of stakeholders.Saudi Arabian Monetary Agency (SAMA) which is the central bank in the Kingdom of Saudi Arabia with Capital Market Authority (CMA) are thriving continuously to strength corporate governance rules for banks and financial institutions. One of the circulars for banks and financial institutions is the requirements for appointments of senior positions in financial organizations with the objective of appointing persons who possess integrity, honesty, and good reputation. Companies should obtain written non-objection form for the appointment of senior managers and it is the responsibility of board of directors to ensure compliance with this regulation. In addition, SAMA issued several guidelines for anti-money laundering, rules for countering fraud and a code of professional ethics of staff. Recently, banks are required to form compliance unit to make sure banks prepare their financials according to International Financial Reporting Standards (IFRS).The aim of this paper is to highlight a case of corporate governance and board responsibilities in one of the financial institutions in Saudi Arabia. The case will be presented to show the mechanism followed by the financial institution and whether it is complied with rules in appointing senior managers and if not what corrective actions are done in order to strength corporate governance principles.
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Sa’diah, Wulan Maulidiss, and Mohamad Nur Utomo. "PERAN GOOD CORPORATE GOVERNANCE DALAM MEMINIMALISIR TERJADINYA FINANCIAL DISTRESS." BISMA: Jurnal Bisnis dan Manajemen 15, no. 1 (March 31, 2021): 36. http://dx.doi.org/10.19184/bisma.v15i1.21322.
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This study aims to determine the effect of managerial ownership, independent board of commissioners, board of directors, and audit committee on financial distress in banking companies listed on the Indonesia Stock Exchange from 2015 to 2019. This research used the purposive sampling method with a sample of 41 companies consisting of 205 observational data. Data were analyzed using logistic regression. The results showed that independent board of commissioners and board of directors had a significant and negative effect on financial distress. However, managerial ownership and audit committee did not have a significant effect on financial distress. This study supports the agency theory, which states that the monitoring role of the independent board of commissioners and the board of directors can minimize the occurrence of agency conflicts in a company.
Keywords: audit committee, board of directors, financial distress, independent board of commissioners, managerial ownership
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Mvunabandi, Jean Damascene, and Bomi Cyril Nomlala. "Factors Affecting Non-Government Organisations’ Financial Statement Fraud in South Africa: New Fraud Combined Theory Approach." Journal of Economics, Business, & Accountancy Ventura 25, no. 2 (November 29, 2022): 145. http://dx.doi.org/10.14414/jebav.v25i2.3092.
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This article aims to obtain empirical evidence about the relationship between New Fraud Combined Theory with non-government organizations’ financial statement fraud in South Africa. The population of this thesis research comprised 87 staff from 30 chosen Non-Government organizations (NGOs). The sample size of 87 was calculated using Raosft Software. A convenience sampling technique was used to select the study’s respondents. This article adopted quantitative and descriptive survey research. A Likert questionnaire was designed and used as the research instrument for generating data from respondents. Robustness analysis was entirely performed using descriptive statistics. The result of this research indicated that all variables have a significant association with fraudulent financial statements among NGOs in the eThekwini region, South Africa. This article contributes to the body of knowledge: the significant association between auditing and financial statement fraud mitigation accentuates the new fraud combined theory which belies that effective corporate governance will significantly curb financial statement fraud among NGOs in the eThekwini region and beyond.
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Madanoglu, Melih, and Ersem Karadag. "Corporate governance provisions and firm financial performance." International Journal of Contemporary Hospitality Management 28, no. 8 (August 8, 2016): 1805–22. http://dx.doi.org/10.1108/ijchm-09-2014-0470.
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Purpose Borrowing from arguments of agency theory, the present study aims to investigate the moderating effect of the deviation from optimal franchising on the relationship between corporate governance provisions and firm financial performance. Design/methodology/approach The sample consists of 35 publicly listed US restaurant firms for the 1990-2008 period. The study uses a hierarchical regression with cross-sectional time-series fixed effects. Findings The results show that the deviation from optimal franchising worsens the negative relationship between corporate governance provisions and firm performance. Research limitations/implications The availability of governance data restricts our sample to large publicly listed firms in the US restaurant industry, limiting the ability to generalize results for small and privately held restaurant firms. Practical implications Firm executives should not only pay attention to which corporate governance provisions they adopt but also strive to maintain an optimal level of franchising. Originality/value The key contribution of this study to governance literature is that this study demonstrates how the presence of multiple governance mechanisms influences firm performance.
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PAMUNGKAS, Imang Dapit, and St Dwiarso UTOMO. "Fraudulent Financial Reporting: An Application of Fraud Pentagon Theory to Association of Southeast Asian Nations Corporate Governance Scorecard." Journal of Advanced Research in Law and Economics 9, no. 5 (June 10, 2019): 1729. http://dx.doi.org/10.14505//jarle.v9.5(35).26.
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This study aims to detect and examine fraudulent financial reporting by applying fraud pentagon theory to all companies implementing the Association of Southeast Asian Nations (ASEAN) Corporate Governance Scorecard in Indonesia. This study has the following objectives: to examine and analyze the effect of financial stability, external pressure, financial target, nature of industry, audit opinion, change of directors, managerial ownership against fraudulent financial reporting.
In this research, we use correlation research type. The population of this sample is all sectors of companies listed on the Indonesia Stock Exchange. Using sampling technique in the form of Purposive Sampling Technique applying ASEAN Corporate Governance Scorecard in Indonesia with research period of 2012 to 2016, which produce 30 samples, multiple linear regression analysis using SPSS version 22.
The results of this study found that financial stability, managerial ownership has a negative and insignificant effect on fraudulent financial reporting. External pressure, nature of industry has a negative and significant effect on fraudulent financial reporting. Financial Target, Audit Opinion, Change of Directors has a positive and insignificant effect on Fraudulent Financial Reporting.
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Kristanti, Farida Titik, and Aldrin Herwany. "Corporate Governance, Financial Ratios, Political Risk and Financial Distress: A Survival Analysis." Accounting and Finance Review (AFR) Vol.2(2) Apr-Jun 2017 2, no. 2 (March 16, 2017): 26–34. http://dx.doi.org/10.35609/afr.2017.2.2(4).
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Objective - The objective of this study was to investigate the factors like corporate governance, financial ratios, and political risk and their impacts on company's survival. Methodology/Technique - Collecting data of Indonesian Stock Exchange from 2000 to 2014 and employing purposive random sampling, this research collects samples of 58 companies undergoing financial distress and 275 others which do not. Findings - The research eventually proves that agency theory and Asymmetric Information theory do occur in Indonesia. With Cox Proportional Hazard model, it then proves that all two models employed: independence commissioners, leverage, operating risk, size, return on asset and control of corruption, are variables which consistently affect financial distress of the company. Novelty - The study uses original data and gives supported suggestion for the researched issues. Type of Paper: Empirical Keywords: Financial Distress; Financial Ratios; Corporate Governance; Political Risk. JEL Classification: G01,G34, M48
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Mridula, Mridula, and Kuldeep Kumar. "Augmenting corporate governance through system dynamics." Corporate Ownership and Control 13, no. 1 (2015): 1063–10070. http://dx.doi.org/10.22495/cocv13i1c9p8.
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The paper aims to augment good corporate governance as a whole with the efficiency and effectiveness of system dynamics via a system dynamics model. The majority of study of corporate governance focus on financial issue, ownership, agency theory etc. rather than analyzing the relation of all aspects associated to corporate governance system as a whole. This study aims to address this gap by focusing on corporate governance in a holistic manner. The value is determined as two-fold: i) It is possible to understand the importance of system dynamics methodology; and ii) It can help the organization to quantify corporate governance for development of organization in holistic manner.
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Fontes-Filho, Joaquim Rubens, and Moisés Balassiano. "The problem of incentives in building corporate governance models." Corporate Ownership and Control 5, no. 2 (2008): 352–59. http://dx.doi.org/10.22495/cocv5i2c3p4.
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The attempt to align interests of executives with those of shareholders has been addressed in the corporate governance context from a predominantly economic outlook based on the agency theory. The models that combine monitoring and control systems in association with financial incentive mechanisms, such as profit and income sharing, stock options, bonds and other benefits, consider an individual to be individualist, opportunist and self-interested, diverging from the assumptions of other theories and contemporary ideas in the area of human resources management. Based on the criticism related to the agency theory, particularly when drawing up incentive schemes, this article aims to look at alternative theories to build corporate governance practices that include considerations on extrinsic and intrinsic motivation of agents.
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Oliveira, Jonas, Rogério Serrasqueiro, and Sara Nunes Mota. "Determinants of risk reporting by Portuguese and Spanish non-finance companies." European Business Review 30, no. 3 (May 14, 2018): 311–39. http://dx.doi.org/10.1108/ebr-04-2017-0076.
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Purpose This paper aims to assess the risk reporting practices extent to which firm’s and corporate governance characteristics explain risk-related disclosures (RRD) motivations across two European Latin countries (Portugal and Spain). Moreover, drawn on elements of agency, legitimacy, resources-based perspectives and institutional theory, this study also intends to assess whether the influence of corporate governance mechanisms on risk reporting is mediated by strategic/institutional legitimacy interests. Design/methodology/approach From a sample of 60 non-finance Portuguese and Spanish companies with securities traded on the Euronext Lisbon stock exchange market and on the Madrid stock exchange market, respectively, at December, 2011, the Corporate Governance reports and the “risk/risk management” sections of the Management reports included on consolidated annual reports for 2011 were manually content analysed, according to prior literature. Further, multiple linear regressions were used to assess the potential relationships between corporate governance mechanisms and risk reporting. The paper’s theoretical framework draws on elements of agency, legitimacy, resources-based perspectives and institutional theory. To understand the risk reporting practices of Portuguese and Spanish non-finance listed companies, the paper conducts a content analysis of 60 consolidated annual reports for 2011. Findings Results indicate that visible companies, operating in a country with a weaker legal environment, and during periods of financial distress disclose more discretionary RRD, basically to contextualize their negative outcomes. Some corporate governance mechanisms were crucial to improve risk information. Originality/value The paper goes beyond prior literature work and assesses whether the theoretical framework grounded on agency, legitimacy, resources-based perspective and institutional theory is suitable in explaining RRD in an under-researched setting (European Latin countries, such as Portugal and Spain, with low agency costs and different corporate governance models). Moreover, the analysis embraces a wider and homogeneous range of internal and external corporate governance mechanisms and uses a period in which both countries were severely affected by a sovereign debt crisis with negative impacts on company’s liquidity and financial risks. A research setting like this has not been studied hitherto.
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Clarke, Thomas. "Dangerous frontiers in corporate governance." Journal of Management & Organization 20, no. 3 (May 2014): 268–86. http://dx.doi.org/10.1017/jmo.2014.37.
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AbstractThe historical evolution of corporate governance is considered, highlighting the different eras of governance, the dominant theoretical and practical paradigms, the reformulation of paradigms and counter paradigms. Two alternative and sharply contrasting theorizations, one collective and collaborative (the work of Berle and Means), the other individualistic and contractual (agency theory and shareholder value) are focused upon. The explanatory potential of Blair and Stout's team production theory is elaborated, and its conception of the complexity of business enterprise, with a mediating hierarch (the board of directors) securing a balance between the interests of different stakeholders. The potential for reform of corporate purpose, corporate governance and directors’ duties is examined with reference to the UK Modern Company Law Review. The impact of the intensification of the financialization of corporations is analysed, with the increased emphasis upon short-termism. The origins of the global financial crisis in shareholder value orientations and the continuing reverberations of the crisis are explored. Finally, the imperative of the advance of sustainable enterprise is argued, and the critical changes necessitated in corporate purpose and directors’ duties.
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Ochego, Evans Machero, Job Omagwa, and Stephen Muathe. "Corporate Governance, Financial Performance and Firm Value;." International Journal of Finance & Banking Studies (2147-4486) 8, no. 4 (December 24, 2019): 41–48. http://dx.doi.org/10.20525/ijfbs.v8i4.608.
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Firm value is dependent on corporate which leads to increased value. High valued firms attract more investors. Towards firm value protection, minimum capital requirements were raised by the Central Bank of Kenya from 250 million to 1 billion shillings on commercial banks to cushion bank shareholders value. Despite the increased oversight and regulatory efforts on corporate governance to protect and enhance firm value, some commercial banks have recorded low firm value. Hence, this study sought to investigate the mediating effect of financial performance on the relationship between corporate governance and firm value of commercial banks in Kenya. The study was anchored on Agency Theory. Explanatory research design was adopted. Target population was forty four Kenyan commercial banks, where a census was conducted. Secondary data was collected from published financial statements and bank websites for the period 2009 to 2018. STATA version 13.0 was used for data analysis. Descriptive and inferential statistics specifically panel regression was used in data analysis. The study findings established that there is a statistically significant effect between financial performance and firm value of commercial banks in Kenya. Therefore, the study concluded that firms with good financial performance have high firm value. And as such, these calls for the management of the commercial banks improve financial performance which will go a long way in improving firm value. There is also need for Central bank of Kenya, Capital Markets Authority and Nairobi Securities Exchange to emphasis on corporate governance and short term goals to enable achievement of long term goals .
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Sule, Inu Imoudu, and Henry Emife Monye-Emina. "THE MODERATING EFFECT OF INSTITUTIONAL QUALITY ON CORPORATE GOVERNANCE AND FINANCIAL STATEMENT FRAUD IN AN EMERGING ECONOMY." Oradea Journal of Business and Economics 7, no. 2 (September 2022): 49–62. http://dx.doi.org/10.47535/1991ojbe156.
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The study examines corporate governance and financial statement fraud: the moderating role of institutional quality. The study adopted the ex-post facto research design and a sample of 75 non-financial firms listed on the Nigerian Exchange Group (NGX) was used for the study. The binary regression technique was adopted. The results reveal that, board size has shown a positive effect on Financial Statement Fraud. Board independence is negative both in the response and selection equations. Foreign Ownership is negative both in the response and selection equation and significant, and Finally, the study recommends that listed firms may need to cut down their board sizes. Although there is still no consensus on what an optimal board size should be, the study is of the opinion that firms with board sizes above the industry average should look at bringing down their board sizes and also corporate boards should increase their board independence levels by bringing in more non-executive directors. On the part of foreign ownership presence in boards, they are indeed diverse in line with the resource-based view theory and this study confirms their effectiveness in constraining financial statement fraud. Hence it is recommended that companies should seek and maintain some level of foreign ownership presence in their boards.
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Rooly, M. S. A. Riyad. "Impact of Board Diversity on Agency Costs in the Context of Agency Theory Approach: Evidence From Listed Companies in Sri Lanka." Indian Journal of Corporate Governance 14, no. 2 (October 6, 2021): 133–53. http://dx.doi.org/10.1177/09746862211045758.
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Effective corporate governance leads the way towards aligning the interest between managers and shareholders. Effectiveness of practicing the corporate governance of companies in Sri Lanka is debatable topic due to the variation between standard and actual practices. This study aims to examine the influence of board diversity on agency costs of companies listed in Sri Lanka as proposed by agency theory. The sample of this research consists of all companies listed in Sri Lanka, exclusive of bank and financial institutions which are practicing unique governance practices issued by Central Bank of Sri Lanka. The final sample consists of 180 companies during the period from 2013 to 2019. This study deployed panel regression analysis to test the relationship formulated in the hypotheses by using the EViews 9 software. The results showed that the board diversity-related variables such as separate leadership structure and presence of non-executive director on companies’ board are appeared to have significant influence on agency costs. Meanwhile, board size does not have direct impact on agency costs. The findings of this study regarding board diversity and agency costs have important managerial implications, that these findings are unlikely to the prediction of agency theory and best practices. Agency theory is not applicable to these companies, since the exiting corporate governance practices increase agency costs. The potential benefits of this study led to re-think the board of directors of the companies, managers, shareholder and the policymakers to re-organise the implementation of best practices.
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Wan Fauzi, Wan Noor Asmuni, Marziana Madah Marzuki, Muhaniza Zainal Ariffin, and Nor Balkish Zakaria. "Fraud Diamond Factors, Risk Management Practices and the Likelihood of Fraud among Financially Distressed Companies Listed on the Malaysian Stock Exchange." Asia-Pacific Management Accounting Journal 17, no. 2 (August 31, 2022): 131–59. http://dx.doi.org/10.24191/apmaj.v17i2-05.
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Firms have tendencies to manipulate their financial statements when it is at risk of bankruptcy due to financial distress. Based on the Fraud Diamond Theory, there are four factors that motivate firms to perpetrate fraud, namely pressure, opportunity, rationalization and capability. Therefore, this study investigated the effect of these fraud diamond factors on the likelihood of fraudulent financial reporting among financially distressed firms in Malaysia. In addition, this study investigated whether the new amendment of code of corporate governance on risk management practices can mitigate the effect of these four factors on the likelihood of fraudulent financial reporting. Based on a sample of 53 financially distressed firms from 2014 until 2019, this study found that two fraud diamond factors which are pressure and capability significantly influenced firms’ financial distress and thus influenced the likelihood of fraud. The study found that risk management can reduce pressure and thus reduce the likelihood of fraud of financially distressed firms. Meanwhile, distressed firms change directors to replace with competent ones. Nevertheless, the study found that distressed firms may increase their risk disclosures to cover up their distress by changing directors. This study investigated the prevalence of fraud among distressed firms. Furthermore, it extends the literature of risk management among distressed firms. Keywords: fraud, fraud diamond, risk management, financial distress
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Raithatha, Mehul, and Varadraj Bapat. "Impact of corporate governance on financial disclosures: Evidence from India." Corporate Ownership and Control 12, no. 1 (2014): 874–89. http://dx.doi.org/10.22495/cocv12i1c9p10.
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The paper aims at identifying impact of corporate governance variables i.e. board structure (board size, board independence, board activity and board busyness) and ownership structure (foreign promoters holding, institutional shareholding and CEO duality) on financial disclosures made by the Indian firms. Using cross sectional data of 325 listed firms for the financial year 2009-10, we compute financial disclosure score (using 171 checklist points) based on disclosure requirements of accounting standards. We find average disclosure score of 73%, maximum and minimum being 100% and 46% respectively. Our finding support agency theory in terms of monitoring role of board since board size is found to be significant however we do not find any influence of board independence on the disclosures. The study also supports resource dependency theory in terms of outside directorship which might provide exposure to different corporate environment, brings diverse perspectives and knowledge to the directors and this in turn leads to improved disclosures. We also support the notion that having foreign promoter shareholding improves disclosures
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Süsi, Virgo, and Krista Jaakson. "Corporate governance and corporate social responsibility interface: a case study of private equity." Corporate Governance: The International Journal of Business in Society 20, no. 4 (May 6, 2020): 703–17. http://dx.doi.org/10.1108/cg-11-2019-0348.
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Purpose This paper aims to explore why private equity (PE) cares about corporate social responsibility (CSR) of its investees given their relatively short investment time-horizon and how it designs corporate governance (CG) bundle to achieve both financial and CSR goals of the private firms it invests in. Design/methodology/approach Case study design is applied to get deeper insights on the why and how questions posed. Analysis is based on triangulation of secondary data and in-depth interviews with both PE and their investee firms. Findings The authors find that long-term sustainability supported by CSR increases firm value. They also outline specific CG bundle that the PE uses to achieve both its financial and CSR goals. CG mechanisms appeared to reflect agency theory, but even more resource dependence theory. Practical implications The outlined CG bundle could be used as a template for all types of private firm owners to improve both financial and CSR performance of the firm. Originality/value The paper adds to fragmented area of CG and CSR interface. The authors specifically focus on several under-researched contexts of this interface: private small and medium size firms (SMEs), emerging markets and PE investors.
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Tang, Hua. "The Effect of ESG Performance on Corporate Innovation in China: The Mediating Role of Financial Constraints and Agency Cost." Sustainability 14, no. 7 (March 23, 2022): 3769. http://dx.doi.org/10.3390/su14073769.
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The effectiveness of environmental, social, and corporate governance (ESG) performance has been widely discussed and is often linked to corporate financial performance or firm value by academics and practitioners. However, a significant research gap remains unexplored; specifically, prior scholars have ignored path research about the effect of ESG performance on corporate innovation, and they have also ignored the impacts of the heterogeneity of stakeholders. Therefore, taking China’s A-share listed companies as an example, the research applied linear regressions with panel data, using the ESG rating of SynTao Green Finance Agency as a proxy variable of ESG performance. The results show that ESG performance significantly promotes the quantity and quality of corporate innovation and is mediated by alleviating the financial constraints and agency cost. Internal and external governance plays different roles; the higher institutional investors’ attention as an external governance form does not help enterprises improve the quantity and quality of corporate innovation; however, CEO duality as an internal governance form strengthens the effect of ESG performance on corporate innovation. This study provides scientific evidence for the effect and effect path of ESG performance on promoting proactive innovation based on sustainable development in China; furthermore, the study reveals the heterogeneity factors of ESG performance on the innovation effect under stakeholder theory.
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Putra, Defriko Gusma, Yodi Pratama, Indra Mulia Pratama, and Nisha Selvia. "Mediating Role of Corporate Governance on the Effect of Earnings Management and Financial Risk on Firm Value." JRAK: Jurnal Riset Akuntansi dan Komputerisasi Akuntansi 13, no. 2 (October 19, 2022): 1–19. http://dx.doi.org/10.33558/jrak.v13i2.4478.
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This study is to determine the effect of earnings management with discretionary accruals indicators and financial risk with debt to equity ratio (DER) indicators on firm value with price earning ratio (PER) indicators with corporate governance as a mediating variable with managerial ownership and institutional ownership indicators. The research method is quantitative with the object of research being the Property and Real Estate sub-sector companies listed on the Indonesia Stock Exchange (IDX) during 2015-2017 with all out observations of 87 information. The test results show that earnings management variables have a negative and significant effect on firm value. The financial risk variable has a negative and significant effect on firm value. The corporate governance variable has a positive and significant effect on firm value. The effect of earnings management on firm value has a negative effect on corporate governance as a mediating variable. This shows that corporate governance can reduce earnings management actions. The effect of financial risk on firm value has a negative effect by the company's administration as a mediating variable. This shows that corporate governance can reduce financial risk. The results of this study provide a theoretical contribution that supports agency theory and corporate governance, which in turn makes a practical contribution to the implementation of good corporate governance in companies.
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Supardi, Supardi, Sidiq Ashari, Yudi Santara Setyapurnama, and Djasmanuddin Djasmanuddin. "Praktik Real Earning Management, Corporate Governance dan Nilai Perusahaan: Bukti Pada Industri Manufaktur di Indonesia." E-Jurnal Akuntansi 32, no. 4 (February 2, 2022): 845. http://dx.doi.org/10.24843/eja.2022.v32.i04.p02.
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This study aims to examine the effect of real earnings management on firm value with corporate governance as a moderating variable. The data used in this study are manufacturing companies listed on the Indonesia Stock Exchange for the fiscal year ending December 31, 2015 to 2019. The data collection technique is purposive sampling and comes from secondary data both from the IDX and from the website of each company. The research hypotheses were tested using regression analysis. The results of the study prove that corporate governance can weaken the relationship between real earnings management and firm value. Meanwhile, the direct influence of earnings management on firm value was not found to have a negative relationship, but the results were positive. This research is expected to contribute to the development of theories related to earnings management behavior and corporate governance practices, namely agency theory. Other contributions can be used as input for investors in assessing the company, especially those related to the transparency of the company's financial reporting.
Keywords: Abnormal Cash Flow From Operations; Corporate Governance; Firm Value; Agency Theory.
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Shirur, Srinivas. "Tunneling vs Agency Effect: A Case Study of Enron and Satyam." Vikalpa: The Journal for Decision Makers 36, no. 3 (July 2011): 9–20. http://dx.doi.org/10.1177/0256090920110302.
Full textAbstract:
This is a comparative study of Enron and Satyam corporate frauds. An attempt has been made to arrive at some generalizations about the key reasons for the differences between agency and tunneling problems. Agency effect and tunneling phenomena focus on the divergence in the interests of managers, promoters, and minority shareholders, which are the key reasons for corporate fraud. There is a clear difference between the fraud committed due to tunneling and agency effect. The article highlights this feature through the case study of Enron and Satyam. The difference between tunneling and agency effect has important implications for corporate finance. Corporate finance is based on the assumptions of separation of ownership and management and also perpectual continuity of corporation. If these two assumptions are dropped, then many of the widely accepted theories may not hold. The article concludes that the legal framework, nature of financial system, and level of economic development are the key factors which determine the level of agency effect and tunneling problem. Solutions to corporate governance problems are quite different in India as compared to the US or Europe. Hence, it would be inappropriate to copy American legislations like Sarbanes Oxley Act in India. Effective prevention of destructive self-dealing activities is necessary for development of vibrant capital market, whereby small investors will be confident to invest in the Indian market, since they will perceive risk premium to be low. The key policy prescriptions are as follows: Effective delivery of justice is as important as enacting investor-friendly laws. Creation of subsidiary companies by the parent company and large financial transactions with banks should be viewed with suspicion. On the part of the shareholders, they should be suspicious of any self-dealing transactions. Since the time of Harshad Mehta, when stock brokers, promoters of the company, and bankers connived to cheat small investors, enforcement agencies view even large banking transactions with suspicion. Small investors and institutional investors should play a proactive role to seek information and reject any decisions which reduce their value of shares. Proactive participation of outside shareholders in the corporate affairs of the company, especially in the selection of board of directors and approval of resolutions, are the key remedies to prevent such cases. There should be an effective control of black money. Certain clues like promoters setting up too many subsidiaries, frequent changes and resignations in board of directors, consistent decrease in promoter stake or increasing liquidation of equity options, are clear signs of fraud taking place. Regulatory authorities should work on such clues and operate in such a way that there is least chance of regulatory arbitrage.
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Bayu Indrawan, Ida Bagus Made, and I. Wayan Pradnyanta Wirasedana. "Indikator Risk Based Bank Rating, Kinerja Keuangan dan Perusahaan Perbankan." E-Jurnal Akuntansi 31, no. 3 (March 25, 2021): 782. http://dx.doi.org/10.24843/eja.2021.v31.i03.p20.
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The research aims to prove empirically the influence of Non-Performing Loans, Loans to Deposit Ratio, Good Corporate Governance, Net Interest Margin, and Capital Adequacy Ratio on financial performance of banking companies listed on the IDX. Agency theory and Productive theory of credit are the theories used in this study. The study population is all Banking Companies listed on the Indonesia Stock Exchange (IDX) in 2014-2018 totaling 45 companies. The research sample of 30 companies with non-probability sampling method with purposive sampling technique. The data analysis technique used is multiple linear regression. The research results obtained by Non Performing Loans are considered negative, Loan to Deposit Ratio and Good Corporate Governance are not approved and are significant, Net Interest Margin and Capital Adequacy Ratio have positive and significant effect on financial performance.
Keywords: Non Performing Loan; Loan to Deposit Ratio; Good Corporate Governance; Net Interest Margin; Capital Adequacy Ratio; Financial Performance.
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Wellalage, Nirosha Hewa, and Stuart Locke. "Does CEO duality is really matter? Evidence from an emerging market." Corporate Ownership and Control 8, no. 4 (2011): 112–22. http://dx.doi.org/10.22495/cocv8i4p7.
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The relationship between board leadership, firm financial performance and agency costs is examined on behalf of a sample of multinational company subsidiaries (MNCs) and local public companies (LPCs) in Sri Lanka. Five years of data for 86 MNC subsidiaries and 113 LPCs, are collected and observations are analysed using a dynamic panel GMM estimation. This study provides empirical support for stewardship theory and contingency theory when firms are multinational subsidiaries. Moreover, findings support agency theory when firms are local public companies. Finally, this study indicates that there is no optimal board leadership structure. Hence, when companies commence their exploration of corporate governance practices, firms need to recognize that firm characteristics and contingency perspective boost the impact of board leadership structure on corporate financial performance.
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Ariyanto, Dodik, I. Made Gilang Jhuniantara, Ni Made Dwi Ratnadi, I. Gusti Ayu Made Asri Dwija Putri, and Ayu Aryista Dewi. "Detecting fraudulent financial statements in pharmaceutical companies: Fraud pentagon theory perspective." Accounting 7, no. 7 (2021): 1611–20. http://dx.doi.org/10.5267/j.ac.2021.5.009.
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A fraudulent financial statement is an issue that continues to be discussed as a form of deviation from corporate governance. Covid-19 pandemic has also demanded management to uphold the company's performance to have a good public image. Thus, the present study sets out to scrutinize the fraud pentagon theory on fraudulent financial statements. Each element is not able to be tested directly. However, there are proxies. The pressure element is proxied as a personal financial need. The opportunity is becoming the nature of industry. Each of the qualities of the external auditors as well as the change of directors propose rationalization and competence. The frequent number of CEO’s appearances in photos is a proxy of arrogance. The testing was carried out on the registered pharmaceutical companies of the Indonesian stock exchange in the span of the 2015-2019 period. The samples were selected by the means of sampling technique which is purposive. Data are scrutinized by the means of panel data regression. The analysis results show that the characteristics of the industry positively affects financial reports which are fraudulent. Changing top management positions such as directors can be an indication of financial reports which are fraudulent. The personal financial need variables, the caliber of external auditors and the quantity of CEO’s appearance in photos pose no effects on the fraudulent financial statements of the Indonesian's pharmaceutical companies.
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Rost, Katja. "Social embeddedness of corporate elites and uncertainty in financial markets." Corporate Board role duties and composition 10, no. 1 (2014): 18–38. http://dx.doi.org/10.22495/cbv10i1art2.
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In the last decade regulatory pressure includes appeals that corporate elites should reduce their multiple directorships to a minimum. The functionality of this governance mechanism is suggested by agency theory. The embeddedness view counter-argues that social relationships matter for the effectiveness of corporate governance. In particular for ill-structured tasks like stock price valuation social networks solve fundamental coordination problems in markets by reducing the risks of market exchange, by establishing a common base of recognition and by getting actions and blocking actions. For the Swiss banking sector this article shows that the social embeddedness of corporate elites reduces the volatility of stock prices. With respect to regulatory pressure against multiple directorships it recommends a more balanced view. While for investors and stakeholders certain amounts of stock price volatility are surly desirable, exorbitant fluctuations of stock prices – like in financial crises – are definitely not. Social embeddedness should therefore be considered by economic and financial theory: it does prevent the misspecification of regulatory proposals and incentive regimes.
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ABDULLAH, NURFATANAH. "The Impact Of Corporate Governance on The Financial Performance in Malaysia." UNIMAS Review of Accounting and Finance 5, no. 1 (November 5, 2021): 41–58. http://dx.doi.org/10.33736/uraf.3551.2021.
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The aim of this study is to investigate the relationship between corporate governance and firm financial performance in Malaysia. This study is mainly focusing on four sections of corporate governance which are board independent, board size, the frequency of audit committee meeting and firm size. The population of this study is Top 30 firms in Malaysia that are public listed in Bursa Malaysia while for the period, this study focusses on year 2016 to 2019 which is 4 years. This study uses Return on Assets (ROA) to measure the firm effectiveness and efficiency. As for statistical analysis, this study uses E-View to run all the test such as Breusch-Godfrey Serial Correlation LM Test, Hausman Test, Ordinary Least Squared (OLS) method, Autocorrelation, Multicollinearity and Normality Test. According to the results of the analysis, board independent has positive insignificant relationship with firm performances while board size and firm performances have negative and insignificant relationship. As for the frequency of audit committee meeting and firm size, the results display that both variables have negatively significant relationship with the performances of the firm. Apart from that this study use two theory which are Prospect Theory and Agency Theory.