New issue of the Corporate Ownership and Control journal
The editorial team of Virtus Interpress is happy to introduce the third issue of the journal Corporate Ownership & Control for the year 2024. This latest issue of the journal is composed of 16 papers which are mostly empirical and contribute new perspectives to the major issues of corporate governance, such as board of directors’ characteristics, capital structure, emerging technologies, AI, digital transformation, decision-making process, agency theory issues, stakeholders’ theory, audit and accountability, sustainability, institutional ownership, and firm performance. The papers analyze works published all around the world and data from numerous countries such as the United States, China, Italy, countries of the MENA region, Fiji, and other emerging economies.
The first study in this issue by Ellis Kofi Akwaa-Sekyi, Nancy Nuako, and Lord Kelvin Kofi Atisu examines the impact of corporate governance determinants on the capital structure of manufacturing firms listed on the Ghana Stock Exchange (GSE). Using a purposive sampling of 15 manufacturing firms, the authors collected secondary data for 14 years and employed a system generalized method of moments (GMM) approach to address endogeneity issues. The findings have implications for improved management performance and corporate governance policies that lead to value-relevant capital structure decisions. The study also provides empirical support for the idea that firms might benefit from reduced agency costs and lower cost of capital if they implement appropriate corporate governance mechanisms.
The paper by Yifei Xia, Chunxiao Xue, and Hanlin Yi studies the effect of board similarity on customer-supplier relationships using a sample of Chinese listed companies from 2007 to 2020. The research findings indicate that increased board similarity enhances cooperation between customers and suppliers. However, this effect is weakened by long distances, making trust-building challenging, and in highly marketized environments, where trust has less influence on business interactions. This study contributes to the existing literature on supply chain relationships, highlighting the role of effective governance mechanisms like board similarity in fostering inter-firm cooperation. Additionally, it offers practical insights for managers aiming to cultivate strategic partnerships and investors seeking a deeper understanding of supply chain dynamics.
Rana Albahsh and Mohammad F. Al-Anaswah provide an in-depth examination of the role artificial intelligence (AI) plays in revolutionizing bank auditing and quality control processes. The findings reveal AI’s pivotal roles in enhancing credit risk analysis, operational efficiency, fraud detection, cybersecurity, and bankruptcy prediction, through analyzing complex data, identifying patterns, and ensuring financial stability, which leads to streamlining operations, detecting fraudulent activities through advanced pattern recognition, boosting cybersecurity measures, and accurately forecasting bankruptcy risks, thereby offering a robust tool for risk management and decision-making in the banking sector.
Graziella Sicoli, Giovanni Bronzetti, Marcantonio Ruisi, and Maurizio Rija aim to verify whether disclosure on sustainability, for Italian listed companies in the period 2021–2022, is aligned with the SDGs and whether there is a relationship between the main performance indices and the level of disclosure. The study contributes to the theoretical development of the topic of sustainability disclosure and the SDGs. The developed positioning matrix is useful for managers and investors to better understand how each company positions itself in relation to SDG disclosure and which of the three sustainability areas is most reported.
The next research paper by Tarek Ibrahim Eldomiaty, Nourhan Eid, Nouran Tarek, Dina Youssri ElBatrik, and Mohamed Rashwan examines the significance and robustness of banks’ board characteristics and profitability. As far as the design of a board is examined in the literature using qualitative analysis, this paper adds a quantitative analysis to the board design that contributes significantly to bank profitability. The paper extends the related studies to develop a quantitative benchmark for the outperformance of bank profitability and board characteristics. The data used in this paper includes 113 rated banks in the Middle East and North Africa (MENA) region during the annual period 2013–2020.
Chia-Wei Chen and Yuwei Wang examine the relationship between firms’ directors and officers (D&O) liability insurance and firm performance during the COVID-19 pandemic in Taiwan. It has been found that while the COVID-19 pandemic has had a negative impact on firm performance, D&O insurance indeed significantly mitigates this negative impact. The main contribution of this article is that it provides valuable information for firms and investors by providing direct evidence that clearly shows the association between D&O insurance and firm performance during unexpected significant external shocks such as a pandemic.
The paper by Shirley Mo Ching Yeung and Kavan Chun Lau explores the elements of transformative business servant leadership for improving the attributes of professional service providers for transformation under COVID-19. Through this paper, the authors identified determinant factors related to committed organizations with happy transformative servant business leadership, proposing a model of the relationship between the factors. The research was conducted to interpret factors potentially related to committed organizations with happy transformative servant business leadership. The key factors for happy transformative servant business leadership are seldom studied for improving the organizational culture for management and employee relationships under post-COVID-19. With these findings, committed organizations shall re-think the ways of enhancing trust and relationship-building for happy transformative servant business leaders.
Milad Ebrahimi, Muhammad Mohiuddin, Elahe Hosseini, Slimane Ed-Dafali, and Syeda Sonia Parvin identify and discuss the factors influencing institutional investors’ herd behavior. It conducts a systematic review of the literature and bibliometric analysis of 82 papers from 1990 to 2023 using VOSviewer and CiteSpace software. The study serves as a valuable reference for managers and researchers, providing insights to help institutional investors understand and prevent detrimental herd behaviors in the market.
In the next study, Nathan A. Bragaw, Vilmos F. Misangyi, and Michael K. Bednar examine whether the compensation that directors receive to serve on corporate boards has an inducing effect on the market for directors. More specifically, the authors examine whether director compensation is related to the human and social capital that directors bring to their boards. Our findings suggest that inducing effects operate in the market for directors and lend particular support to the importance of the resource provision function of boards.
The paper by Charles J. Tawk and Dory N. Daw studies the growing dynamics of digital transformation within the GCC’s human resources landscape. This transformation transcends conventional human resource (HR) practices, ushering in the rapid evolution of digital HCM. The thematic analysis results reveal two main strategies for HR/HC managers to employ digital transformation, categorized into primary themes and sub-themes. This study underlines the transformative impact of digital HCM in the GCC, while highlighting challenges such as resistance to change, digital skills gaps, and data security concerns, providing a comprehensive assessment of digital transformation efforts in the GCC, and offering insights into strategies and outcomes of digital HCM implementation in the region.
Hsin-Hui Chiu and Praveen Sinha examine the role of pre-IPO (pre-initial public offering) discretionary accruals in the valuation and underpricing of IPOs. The authors find that the underwriter offer price is unaffected while the market closing price is positively associated with the levels of pre-IPO discretionary accruals for issuers with aggressively reported earnings. They also find that this relative over-valuation of managed earnings by the markets explains a portion of the initial return that is not explained by other known determinants.
Vishwa Hamendra Prasad, Nileshni Lata Sharma, and Shoma Prakash examine how institutional norms determine attributes of internal audit (IA) practices. The authors employed qualitative and quantitative research approaches based on interview evidence, questionnaires, and archival sources. This study theorizes the development of IA practices from an institutional change perspective. The findings indicate that regulation-based institutional norms explain the adoption of IA and the function’s characteristics in Fijian organizations. This research contributes to understanding key drivers of institutional change that initiate new institutional norms that foster the development of IA by introducing and diffusing new audit practices as old ones deinstitutionalize.
In the study, Xian Chen uses the value of non-tax-deductible deferred compensation from the ExecuComp database as the measure of inside debt, leverage as the proxy for agency cost of debt, and examines the causal effect of changes in leverage on inside debt. Using phased increases in corporate income taxes in US states between 2006 and 2016 using difference-in-differences regression, the author identifies the causal effect of tax-motivated corporate leverage on the balance of deferred compensation.
Lijing Du and Jian Huang investigate how the interaction between managerial and creditor incentives affects corporate risk and policies. Using a sample of 16,513 firm-year observations from 2001 to 2014, the authors find that credit default swaps (CDS) trading leads to higher stock return volatility and leverage, yet lower cash flow volatility and capital expenditure. The results suggest that risk-averse managers balance risk-taking incentives and creditor incentives when making corporate decisions and, hence are less sensitive to tournament incentives due to their concerns about exacting empty creditors problems in CDS-referenced firms. This study contributes to the literature by providing initial insights into the interaction effects between managerial and creditor incentives.
This paper by Davood Askarany and Wenxuan Mao investigates the interplay of internal and external factors on corporate performance during the COVID-19 pandemic, utilising the resource-based view (RBV) and system theory frameworks. The study focuses on US-listed companies and examines financial flexibility, firm size, environmental, social, and governance (ESG) scores, corporate governance, macroeconomic conditions, and industry types. The research identifies a negative correlation between financial flexibility and corporate performance during the pandemic. Firms with higher cash reserves and lower debt experienced less decline in stock prices and revenue shortfall, indicating the importance of maintaining financial flexibility in times of crisis.
The final study in this issue sought to determine whether and how climate change vulnerability relates to an important business stakeholder, the financial analyst. Henry Kimani Mburu and Isaac Bonaparte hypothesize that climate change vulnerabilities reduce both analysts’ following and analysts’ forecast accuracy. Using data from the Center for Research in Security Prices (CRSP), Compustat, Audit Analytics, Institutional Shareholder Services (ISS), and London Stock Exchange Group (LSEG), the authors construct a sample of 3,754 firm-year observations comprising 1,269 unique firms for the years 2019–2022. They find that firms with high climate change vulnerability have significantly lower analyst coverage than those with low vulnerability. They also find that financial analyst forecasts are significantly less accurate for firms with higher vulnerability. However, this effect is only observable in industries classified as more exposed to the effects of climate change. This research makes important contributions to the existing literature by not only showing that ESG controversies score is an appropriate proxy for climate change vulnerability but also by adducing empirical evidence that climate change vulnerability affects how analysts react to and use company financial information.
The full issue of the journal is available at the following link .
We are grateful to all the scholars who have contributed to this issue, and we hope that you find this issue of the journal useful, informative and educational!
