Emerald | Corporate Governance | Table of Contents

Governance without boards: the Quakers

literatinetwork@emeraldinsight.com (Sivakumar Velayutham) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – Boards are a central feature in any discussion of corporate governance. Following the adoption of corporate governance principles in the public sector and the non-profit sector, boards have become a central feature of these entities too. The purpose of this paper is to explore the impact of the adoption of the Charities Act 2006 on the governance structure of the Quakers and on its organisational life. Design/methodology/approach – The paper adopts an ethnographic approach, using a case study of the Quakers to show the effects of the Charities Act 2006 on the governance structure of a religious charity. Findings – It is argued that the Quakers have had to transform a governance structure developed to support their beliefs and practices focussed on socializing forms of accountability to one emphasising individualizing forms of accountability. Originality/value – This study highlights the lack of debate on the adoption of corporate governance structures to non-profit entities through a case study. The findings also show that the Charities Act 2006 has an impact on charities beyond financial accountability.

The effect of governance on performance of commercial banks in Kenya: a panel study

literatinetwork@emeraldinsight.com (Esman Morekwa Nyamongo, Kebede Temesgen) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – The purpose of this paper is to investigate the effect of corporate governance on the performance of 37 commercial banks in Kenya over the period 2005-2009. Design/methodology/approach – The paper uses two measures of performance, i.e. return on assets (ROA) and return on equity (ROE), and the dependent variables and three measures of governance – namely the board size, independent directors, and CEO duality – as the key independent variables. The study follows a panel econometrics technique to investigate the relationship between governance variables and bank performance. Findings – The main findings are as follows: a large board size tends to impact performance negatively; the existence of independent board directors tends to enhance the performance of the banks; and there is no evidence that CEO duality or otherwise has impact on the performance of commercial banks in Kenya. Practical implications – The study therefore recommends that for commercial banks in Kenya to register high performance they need to check the size of their board of directors and also increase the number of independent directors. Originality/value – To the authors' best knowledge, this is the first study on Kenya that has used advanced panel data techniques.

The leading spirits and beer companies and corporate social responsibility

literatinetwork@emeraldinsight.com (Peter Jones, David Hillier, Daphne Comfort) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – The purpose of this paper is to provide an exploratory general review of both the corporate social responsibility (CSR) agendas being publicly reported by the world's leading spirits and beer producers and the nature of their reporting CSR processes, and then to offer some wider reflections on the ways these producers are addressing and pursuing CSR strategies. Design/methodology/approach – The paper begins with a short discussion of the characteristics of CSR, then draws its empirical material from the most recent CSR reports posted on the websites of the world's top five spirits and top five beer producers. Findings – The findings reveal that the leading spirits and beer producers are moving towards integrating CSR into their core business, and while they particularly emphasise their commitment to foster responsible drinking, they also address a wide range of impacts within the marketplace, the communities in which they operate, the environment and the workplace. Although the leading producers generally adopt a very positive approach in their CSR reports, independent external assessment of the reporting process is very limited. More generally, the paper offers some critical reflections on the CSR agendas currently being pursued by the leading spirits and beer producers. Originality/value – The paper provides an accessible review of, and some reflections on, the CSR agendas being pursued by some of the world's leading spirits and beer producers, and as such it will interest academics in business and management and hospitality departments, a range of people working in management positions within the drinks industry, and those professionals who work with the industry.

Corporate governance and investors' perceptions of earnings quality: Egyptian perspective

literatinetwork@emeraldinsight.com (Ibrahim El-Sayed Ebaid) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – The purpose of this paper is to test whether corporate governance mechanisms promoted by the Egypt Code of Corporate Governance are effective in enhancing investors' perceptions of earnings quality. Design/methodology/approach – The study uses a 2×2 experimental design with a strong level of corporate governance versus a weak level of corporate governance to explore the relation between corporate governance practices and the perceived quality of reported earnings. Findings – The findings of the study reveal that strong corporate governance is associated with higher perceptions of earnings quality than weak corporate governance. These results suggest that the voluntary adoption of the Egypt Code of Corporate Governance by Egyptian firms enhances the investors' perceptions of the quality of the financial reporting process. Research limitations/implications – The results of the study should be considered by regulators in Egypt with regard to the Egypt Code of Corporate Governance, which was issued in October 2005. However, owing to the relatively small sample size, these findings should be interpreted with caution. Originality/value – This study contributes to the limited body of research on the impact of corporate governance on investors' perceptions of earnings quality by examining this impact in Egypt, where corporate governance is still not mandatory.

Ownership structure, corporate governance and bank efficiency: an empirical analysis of panel data from the banking industry in Ghana

literatinetwork@emeraldinsight.com (Godfred A. Bokpin) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – The purpose of this paper is to document the effect of ownership structure and corporate governance on bank efficiency in the Ghanaian banking industry. Design/methodology/approach – The author applies both accounting data and efficiency measures from the period 1999-2007 via panel data analysis. Efficiency is measured by computing distances from the stochastic frontiers of estimated translog cost and profit functions. These efficiency measures are regressed on ownership and governance variables with dummy variables for bank types. Findings – The results show that foreign banks are more cost-efficient than domestic banks, but not necessarily more profit-efficient. Nevertheless, foreign banks are more profitable than domestic banks and enjoy better quality loans. Managerial ownership leads to the cost inefficiency of banks. Banks with inside ownership are unprofitable overall but maintain a high loan quality. Governance (a larger board size) strongly improves profit efficiency but slightly worsens banks' cost efficiency. Finally, the capital adequacy ratio and bank size are both significant predictors of bank efficiency in Ghana. Originality/value – Few, if any, studies have been carried out in the Ghanaian banking industry.

Do women in top management affect firm performance? Evidence from Indonesia

literatinetwork@emeraldinsight.com (Salim Darmadi) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – The purpose of this paper is to examine the relationship between gender diversity on the management board and the financial performance of Indonesian listed companies. Design/methodology/approach – Cross-sectional regression analysis was conducted based on a sample comprising 92.4 percent of public firms listed on the Indonesia Stock Exchange (IDX). The dependent variable was firm performance, measured by return on assets (ROA) and Tobin's q. The explanatory variable was gender diversity, proxied by the proportion of women, the presence of women, and a gender heterogeneity index. Findings – It was found that the representation of female top executives is negatively related to both ROA and Tobin's q, suggesting that female representation is not associated with an improved level of performance. From correlation analysis, the results also reveal that smaller firms, which tend to be family-controlled, are more likely to have a higher proportion of female members on management boards. This implies that large firms are “tougher” for women in terms of opportunities to hold seats on the board. Research limitations/implications – The data only cover one single financial year (2007); hence, the results may lack generalizability. Originality/value – Studies on the relationship between board gender diversity and financial performance have been conducted in the context of a few developed economies. This study contributes to the literature by examining such an issue in a developing economy that has a different environment from that of developed economies.

The ISO 26000 guidance on social responsibility international standard: what are the business governance implications?

literatinetwork@emeraldinsight.com (Thomas Hemphill) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – On November 1, 2010, the Geneva-based International Organization for Standardization (ISO) launched ISO 26000:2010, Guidance on Social Responsibility (hereafter ISO SR international standard), a document that integrates international expertise on the concept of the social responsibility of organizations in society. The purpose of this paper is to identify and critically analyze the reasons for and against business enterprises implementing the ISO 26000 SR international standard. Design/methodology/approach – This analysis identifies the following reasons for business enterprises to implement the ISO SR international standard: first, the positive image of ISO as a globally reputable and credible organization for establishing international technical standards; second, the development of an international consensus among stakeholders regarding the definition and objectives of social responsibility as it pertains to the economic, environmental, and social impacts of business enterprises on society and the natural environment; and third, as a holistic reference for a management team interested in integrating social responsibility principles into enterprise operations. Findings – From a general business governance perspective, the ISO 26000 SR international standard is handicapped by it being too broad in scope to be useful in the context of specific industries and sectors, too costly and time-consuming for many small and medium-sized enterprises to implement, and, unlike most other ISO international standards, it is not a certifiable management system – therefore leading to weaknesses in assessing its efficacy. Originality/value – This article provides a comprehensive and thorough analysis of the “strengths and weaknesses” of the recently published ISO 26000 SR international standard as a viable business governance document.

Accounting for good governance: the fair value challenge

literatinetwork@emeraldinsight.com (John Dixon, Yuliya Frolova) — Fri, 07 Jun 2013 00:00:00 +0100

Abstract

Purpose – The purpose of this paper is to describe and analyze the accounting standards reforms that have moved the accounting profession away from rules-based towards principles-based accounting practice and financial reporting, and to explore the implications for boards of directors of fair value estimates of the unknowable contaminating financial statements with financial misstatements. Design/methodology/approach – The paper critically reviews the internationally accepted accounting, auditing and financial reporting standards with respect to fair value accounting and relates them to directors' fiduciary duties – the duties of care, of oversight, and of obedience. Findings – The search for relevance in financial accounting raises daunting challenges for boards of directors tasked with fairly presenting the financial condition of a reporting business entity. Research limitations/implications – The accounting profession has long been epistemologically conservative, judging reliability to be more important than relevance in the compiling of financial statements. With the fair value reforms, relevance has achieved ascendency over reliability. This necessitates an increase in the need for more research in the epistemology and ethics of accounting. Practical implications – Boards of directors need to be well-informed about, and fully engaged with, the assessment of the level of risk of material misstatement associated with the fair value accounting estimates, and with the adequacy of the related mandatory explanatory disclosures. Originality/value – This paper's originality is grounded in its exploration of the epistemology of accounting in the light of the adoption of fair value conventions in the internationally accepted accounting, auditing and financial reporting standards and its drawing out of the implications this has for corporate governance.