Guidance for Practical Corporate Governance: PhICS Model

Editorial – Toward a Global Theory of Corporate Governance

PurposeThe purpose of this study is to investigate simultaneous relations between corporate governance (CG) practice and cash flow right, cash flow leverage (the divergence between control right and cash flow right of controlling shareholders). The two ownership measures reflect alignment and expropriation incentives of controlling shareholders. This study also examines the effect of multiple large shareholders (MLSs) on CG practice.Design/methodology/approachThe study uses publicly listed companies (PLCs) excluding those from the Indonesian finance sector during 2011-2013 as the samples of the study. Two-stages least squares regression models were used to test the simultaneous relations between CG practice and ownership structure variables. The study develops a CG instrument to measure CG practice based on ASEAN CG Scorecard, that comprehensively covers OECD CG principles and that can be used for panel data.FindingsCG practice has a positive influence on cash flow right and has a marginally negative impact on cash flow leverage, while cash flow right and cash flow leverage have a marginally negative impact on CG practice. Further, the existence of large MLS complements CG practice, but as the control right of the second largest shareholders becomes closer to the largest shareholder, the complement relation becomes less important. State- or foreign-controlled PLCs practice better CG than other PLCs.Research limitations/implicationsStudies on CG/ownership structure need to treat CG and ownership structure as endogenous variables in their research design. In addition, the level of rule of law in a country should be taken into account when examining the relation between CG and ownership structure. The interrelation among CG, ownership structure, capital structure and firm performance has been studied in the context of dispersed ownership structure and strong rule of law. Thus, future study needs to examine the interrelation among these four concepts in countries with high concentrated ownership and weak rule of law.Practical implicationsTo minimize the risk of expropriation, investors in the capital market need to select shares of PLCs that practice CG suitable for the ownership structure of PLCs, have high ownership by the largest shareholder and have no divergence between control and ownership right, and or have MLSs. PLCs may need to choose the level of CG mechanism in the context of their ownership structure and consider the benefits and costs implementing them.Social implicationsThe study supports the “one size does not fit all” perspective on CG and, thus, it supports the recently enacted financial service authority (FSA) rule requiring PLCs to follow the “comply or explain” rule on the CG code for PLCs. The FSA needs to enforce the compliance of PLCs with CG rules and encourage PLCs to implement CG in substance, not just in form. To strengthen the positive impact of good CG practice in attracting investments in capital market, the regulator needs to improve investor protection rules and ensure strong rule of law.Originality/valueThe study is the first to examine the simultaneous relation between CG practice and both cash flow right and cash flow leverage of the largest shareholder. It is also the first that investigates the impact of MLS on CG practice. It explores the complement and substitution relation between the two concepts in reducing agency costs. In term of research design, the study develops a CG instrument that is based on OECD CG principles, that can be used for panel data and that uses public information.

Corporate Governance in Chinese Companies Going Global

Thomas Kuhn and Corporate Governance Research

Corporate governance is a mechanism that ensures transparency, accountability, and efficiency in corporate entities, thereby fostering investor confidence and economic growth. This study examines the implementation of corporate governance practices among companies listed on the Lusaka Securities Exchange (LuSE). Despite regulatory frameworks designed to promote good governance, many listed companies in Zambia face challenges in fully implementing these practices. Issues such as weak board oversight, inadequate transparency, and resistance to governance reforms continue to persist. The study aimed to assess the extent of corporate governance implementation, its impact on investor confidence, and the barriers companies face in adopting best governance practices. A mixed-method research approach was employed, with questionnaires administered and interviews conducted with corporate executives, governance experts, and employees of selected listed companies. The collected data was analysed using descriptive statistics and statistical inference via the Statistical Package for the Social Sciences (SPSS V.23). Purposive sampling was utilised in this research. Yamane’s formula was used to determine a sample size of 114, but only 97 questionnaires were completed. The designated study population was 160. Thematic analysis was used to interpret the qualitative data. Key findings indicated that corporate governance practices were being implemented by the listed companies. The study also revealed that corporate governance increased investor confidence through transparency and the disclosure of information by companies. However, it was found that implementation varies across organisations due to factors such as regulatory constraints, lack of expertise, and resource limitations. The results also showed a strong positive perception of the effectiveness of governance structures: 77.3% rated corporate governance practices as highly effective, with a mean score of 3.75 (SD = 0.48). Regarding the transparency of financial reporting, 75.3% of respondents considered disclosures to be very transparent, indicating a high level of information integrity. Importantly, 68% of respondents confirmed that corporate governance significantly increased investor confidence, with only 2.1% remaining uncertain. These findings were supported by financial ratio analysis of award-winning LuSE companies, which demonstrated improved liquidity and profitability indicators, with returns on capital employed averaging 5–14%, confirming the link between governance and financial performance. The research adds to the growing body of knowledge on corporate governance in emerging markets and offers insights for policymakers and corporate leaders seeking to improve governance standards. The study concludes that corporate governance is broadly implemented and positively associated with improved firm performance and increased investor confidence among LuSE-listed companies. It recommends ongoing regulatory oversight, board training programmes, and stakeholder collaboration to strengthen governance practices, ensuring consistency across all listed entities. Enhancing governance frameworks will be crucial in maintaining investor trust and boosting Zambia’s competitiveness as an emerging market.

PurposeThe primary objectives of this paper are to: develop a multi‐attribute pattern of the corporate governance model in Thai state‐owned enterprises; assess the relative importance of different corporate governance practices; and provide detailed information of each corporate governance practice.Design/methodology/approachQualitative and quantitative approaches were used. A case study was conducted to gather information on specific corporate governance behaviors in Thai state‐owned enterprises. Then a questionnaire was developed and tested in 38 Thai state‐owned enterprises. Factor analysis was conducted to examine a common framework of corporate governance practices.FindingsThis research demonstrated the multi‐attribute nature of the corporate governance model in Thai state‐owned enterprises. According to this model, the most important corporate governance practice is strategic human resource management, followed by information technology, board of directors, risk management, internal control, and internal audit sequentially. Additionally, this study brings out insights into corporate governance practices that represent the specific characteristics of Thai state‐owned enterprises.Research limitations/implicationsThis study is limited by the fact that the sample represents only Thai state‐owned enterprises. Further studies should be conducted to better understand the complexity of the multi‐attribute nature of the corporate governance model in state‐owned enterprises in developing countries.Practical implicationsPolicy makers can utilize the multi‐attribute nature of the corporate governance model as a guideline for the further development of corporate governance practices in other state‐owned enterprises.Originality/valueThis study demonstrated the multi‐attribute nature of the corporate governance model in state‐owned enterprises in developing countries such as Thailand. This research confirms the broad principles of corporate governance as well as providing detailed information on corporate governance practices from a new perspective.

Purpose This paper aims to investigate the effects of different sets of corporate governance (CG) practices on bank performance before, during and after the financial crisis. The study proposes some policy measures for improved CG practices to protect banks from the detrimental effects of future financial crises and economic meltdowns in the context of emerging markets such as Kazakhstan. Design/methodology/approach The study analyses data from all commercial banks listed in Kazakhstan Stock Exchange for the pre-economic crisis, during the crisis and after the economic crisis periods. The study uses the panel regression model to control unobserved time-constant heterogeneity. Findings The study found that better CG practices led to better operating performance of the banks after the financial crisis periods. The changes in CG codes, board structures, disclosure requirements and board members’ competencies over time had a significant influence on CG practices and subsequently improved operating performance of the banks. Originality/value This is one of the first studies to examine the effects of CG practices on bank performance in central Asian transition economies, which are still heavily influenced by Soviet heritage and legacy.

In spite of growing interest in Saudi corporate governance systems, there is little literature on the evolution of Saudi corporate governance. This study helps close this gap by investigating and compiling corporate governance development in Saudi Arabia. After providing background information for Saudi Arabia and its corporate governance model, we touch on the Saudi legal system and key external institutions that helped shape its corporate governance. We examine the specific contributions of the accounting and auditing professions, and the roles of the National Anti-Corruption Commission and the Saudi Stock Exchange. We describe key reforms implemented to develop the Saudi economy and evaluate their importance in facilitating change in corporate governance practices. This study contributes as an initial point of reference for future studies on Saudi Arabia, and serves as a one stop resource for both academics and practitioners, while specifically benefitting foreign and domestic investors considering investments in Saudi Arabia.

Corporate Governance Practices and Firm Performance: Evidence from Top 100 Public Listed Companies in Malaysia

This paper investigates whether and to what extent corporate governance mechanisms affect the efficiency of State Owned Enterprises (SOEs) operating in transition economies. Furthermore, it examines the relationship between corporate governance practice and its impact on both wholly state run SOEs and majority state run SOEs. We employed a unique dataset of corporate governance ratings (related to quality of transparency, quality of board, and quality of strategic planning, implementation and control) of commercial Lithuanian SOEs relating to the period following the introduction of the corporate governance reforms in the years 2012-2013. In order to investigate our research hypotheses, we set-up a two stage empirical research strategy that combined a non-parametric efficiency estimator (i.e., Data Envelopment Analysis) with a bootstrapped truncated regression. We built two aggregate indexes of corporate governance ratings to represent one dimension of corporate governance quality. We then ran a battery of regressions using both the aggregated and the single corporate governance indexes as independent variables. First, the paper finds that the wholly state ownership model of SOEs is positively correlated to efficiency (i.e., wholly SOEs are more efficient than majority SOEs). Moreover, overall corporate governance practices are efficiency-enhancing; more specifically, board quality and strategic planning seem to be effective internal governance mechanisms in promoting overall organizational efficiency. Interestingly, we uncovered that there exists a relationship between concentration of ownership and corporate governance practices, but this mitigated efficiency enhancement in wholly state run SOEs compared to majority state run SOEs. This effect was driven by the lower quality of the board. Overall, our findings illustrate that corporate governance reforms have enhanced efficiency, but wholly SOEs require a better implementation in order to achieve full efficiency gains.

This paper investigates whether and to what extent corporate governance mechanisms affect the efficiency of State Owned Enterprises (SOEs) operating in transition economies. Furthermore, it examines the relationship between corporate governance practice and its impact on both wholly state run SOEs and majority state run SOEs. We employed a unique dataset of corporate governance ratings (related to quality of transparency, quality of board, and quality of strategic planning, implementation and control) of commercial Lithuanian SOEs relating to the period following the introduction of the corporate governance reforms in the years 2012-2013. In order to investigate our research hypotheses, we set up a two-stage empirical research strategy that combined a non-parametric efficiency estimator (i.e., Data Envelopment Analysis) with a bootstrapped truncated regression. We built two aggregate indexes of corporate governance ratings to represent one dimension of corporate governance quality. We then ran a battery of regressions using both the aggregated and the single corporate governance indexes as independent variables. First, the paper finds that the wholly state ownership model of SOEs is positively correlated to efficiency (i.e., wholly SOEs are more efficient than majority SOEs). Moreover, overall corporate governance practices are efficiency-enhancing; more specifically, board quality and strategic planning seem to be effective internal governance mechanisms in promoting overall organizational efficiency. Interestingly, we uncovered that there exists a relationship between concentration of ownership and corporate governance practices, but this mitigated efficiency enhancement in wholly state run SOEs compared to majority state run SOEs. This effect was driven by the lower quality of the board. Overall, our findings illustrate that corporate governance reforms have enhanced efficiency, but wholly SOEs require a better implementation in order to achieve full efficiency gains.

PurposeThis study aims to investigate the relationship between corporate governance (CG) and financial performance in the case of publicly listed companies in Vietnam for the period from 2019 to 2021. The topic is crucial in understanding how effective governance practices can influence the financial outcomes of companies. The study sheds light on the link between CG practice and firm financial performance. It also provides insights for policymakers and practitioners to improve CG practices.Design/methodology/approachDue to the potential dynamic endogeneity in CG research, this study uses the generalized system methods of moments to effectively address the endogeneity problem. Financial performance is measured by Tobin’s Q, return on equity (ROE) and return on assets (ROA). Based on organization for economic cooperation and development (OECD) standards, these indices were calculated to assess the influence of CG practices on corporate financial performance, namely, for accounting information (ROA and ROE) and market performance (Tobin’s Q and service à resglement différé (SRD) – stock price volatility) for the period 2019–2021. In addition, the study examines the relationship between changes in the CG index and changes in financial performance.FindingsThe study’s main objective is to determine the relationship between CG performance scores and financial performance. The study found a positive relationship between transparency disclosure and financial performance and a positive correlation between CG and company size. The COVID-19 pandemic caused a decrease in transparency and information index scores in 2021 compared to 2019 and 2020 due to delayed General Meetings of Shareholders. The study failed to find a relationship between shareholder rights index (“cg_rosh”) and board responsibility (“cg_reob”) and financial performance, concerning which the findings of this study differ from those of previous studies. Reasons are put forward for these anomalies.Originality/valuePolicymakers need to develop a set of criteria for assessing CG practices. They also need to promulgate specific regulations for mandatory and voluntary information disclosure and designate a competent authority to certify the transparency of company information. The study also suggests that companies should develop CG regulations and focus on regulations relating to the business culture or ethics, as well as implementing a system to ensure equal treatment among shareholders. The study found that good CG practices can positively contribute to a company’s financial performance, which is crucial for investors to evaluate the quality of CG practices for each listed company so that investment risks can be limited.

Governance plays a crucial role in most activities of socio-economic life. For any organizations, units, businesses or higher, a country, a community, the role of governance becomes more important than ever. For businesses, with globalization taking place and market becoming more competitive than ever, good Corporate Governance is now considered as a factor of success. Good corporate governance will help the company improve its ability to access to various sources of capital and operate more efficiently. However, in Vietnam particularly, Corporate Governance system still need to enhance and improve. Therefore, with the aim of surveying the current situation of Corporate Governance practices in Vietnam and giving the analysis of its impacts on businesses’ performance, this research is conducted from a sample of 60 listed-companies in both Construction and Food & Beverage industry for the time 2015, 2017 and 2018. By using the tool of ASEAN balanced scorecard to evaluate Vietnam Corporate Governance practices on 05 aspects: Rights of shareholders, Equitable treatment of shareholders, Roles of stakeholders, Disclosure and transparency and Board duties and responsibilities, the paper came to the low results of companies’ Corporate Governance practices in Vietnam. Based on this method, different relationships were found, one of which is the positive relationship between Corporate Governance Index and Tobin’s Q. Keywords: Asean Score Card, Corporate Governance Index, Performance DOI: 10.7176/RJFA/11-6-02 Publication date: March 31 st 2020

Since the Asian financial crisis in 1997, there has been renewed interest in corporate governance policies and practices. This study focuses on corporate governance practices in Malaysia, where the increasing incidence of fraud suggests a lack of adequate corporate governance systems in Malaysian listed companies. Using an unbalanced data set comprising 200 companies representing a total of 579 firm-year observations, this study examines the effects of internal corporate governance mechanisms on the occurrence of fraud. Specifically, it looks at the effects of board characteristics, ownership structure and quality of audit on the occurrence of fraud in Malaysian listed companies from 2007 to 2009. The findings indicate that the number of board meetings was positively associated with the occurrence of fraud, but both state and foreign ownership revealed a negative correlation, whereas factors including the number of independent directors, board size, CEO duality and the quality of audit had no observable effects.

The turning to the XXI century has been marked by reforms in corporate governance practices around the world. Whether due to shocks caused by the economic crisis in East Asia, Russia and Latin America, or by financial scandals in the United States and Europe, the fact is that the way of doing business has changed in terms of demands for greater corporate transparency and accountability, shifts in control of ownership, empowerment of new types of owners and so on. Consequently, countries and firms have adapted their corporate governance policies and practices to this new governance environment. In this chapter, we discuss the foundation of corporate governance, that is, corporate ownership. In particular, we explore the current patterns of the ownership structure of publicly listed firms in six emerging countries. To do so, we have collected firm ownership data for listed firms in Brazil, Chile, South Korea, Czech Republic, Hungary, and Poland during the first decade of the XXI century, and we compare our data with existing ownership research of these countries in the late 1990s. We conclude that although concentration of corporate shareholdings continues to be a common denominator among these emerging countries, the processes and structures controlling firms across countries is remarkably different. For instance, the privatization process in the 1990s, in spite of having different motivations and goals in Latin American and Eastern Europe shaped much of the corporate ownership transformations. Our chapter offers a comparative analysis of the corporate ownership changes in emerging markets.