research proposal on corporate governance and firm performance

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Journal of Financial Reporting and Accounting

ISSN : 1985-2517

Article publication date: 3 August 2021

Issue publication date: 12 December 2022

This study aims to assess the effect of director board and audit committee attributes and ownership structure on firm performance. In general, resource dependency and agency theories have underlined the superior performance of firms equipped with stronger Corporate Governance (CG) versus those of deficient governance. Concurrently, the study delineated the provisions of ownership structure provision, specifically foreign ownership and institutional ownerships, thus describing the component denoting the structural significance in explicating firm performance.

Design/methodology/approach

The current study implemented an empirical approach involving the construction of extensive CG measures thus, subjected to 81 non-financial firms listed on the Amman Stock Exchange spanning the period of 2014–2018.

The current study identified the positive and significant relationship between the board of directors and audit committee characteristics with the firm performance measures tested, namely, return on equity (ROE) and Tobin’s Q. In terms of ownership structure, both foreign and institutional ownerships yielded a significant and positive relationship with ROE. Meanwhile, Tobin’s Q led to an insignificant and negative relationship between both ownership types and firm performance measures.

Practical implications

The analytical outcomes substantiate the possibility of enhanced performance shown by growing global firms because of the implementation of CG mechanisms, specifically because of the practices resulting in minimised agency costs.

Originality/value

The current study offers novel evidence detailing the impact of CG effectiveness towards performance and its implementation in emerging markets following the minimal amount of scholarly efforts on the topic. It is a timely contribution towards the current understanding of the relationship linking governance and performance for the purpose of ensuring the adoption and imposition of a strong corporate governance code by the government.

• Corporate governance
• Board effectiveness
• Agency theory
• Resource dependency theory
• Audit committee effectiveness

Acknowledgements

The authors acknowledge the helpful comments of anonymous reviewers.

Alodat, A.Y. , Salleh, Z. , Hashim, H.A. and Sulong, F. (2022), "Corporate governance and firm performance: empirical evidence from Jordan", Journal of Financial Reporting and Accounting , Vol. 20 No. 5, pp. 866-896. https://doi.org/10.1108/JFRA-12-2020-0361

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Corporate governance and firm performance : the case of UK

Student thesis : Doctoral Thesis

File : application/pdf, 5.64 MB

Type : Thesis

• DOI: 10.47672/ajf.1809
• Corpus ID: 270505271

Impact of Corporate Governance Mechanisms on Firm Performance in Uganda

• Papi Mwanga
• Published in American journal of finance 1 March 2024
• Business, Economics

16 References

Corporate governance and firm performance in nigeria.

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Corporate Governance and Equity Prices

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All change please? Governance reform proposals round-up

Those immersed in corporate governance are used to a shifting legal and regulatory regime. At times, it can feel like we are constantly adapting to the plethora of changes or proposals announced, consulted on, and - in what can seem like a minority of cases - actually introduced. Following a period of relative stability in the corporate governance sphere, significant changes impacting multiple aspects of the corporate governance landscape have been advanced over the past 12 months as part of three long-trailed reform programmes:

• a new UK Corporate Governance Code (Code), following the workstreams to strengthen audit, corporate reporting and corporate governance in the UK;
• the transformation of Companies House, through the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which also makes significant changes to the company administration regime; and
• an overhaul of the UK listing regime, flowing from the recommendations of the Hill Review.

A common thread running through these reforms is a desire to improve the attractiveness of the UK as a place to do business, in particular for existing and prospective listed companies. Hannah Whitney Associate, London

Against the backdrop of ever more vocal criticism that the UK is an increasingly unappealing place for companies not least due to the burden of regulation, the government and regulators appear to be heeding these growing calls to address some of the challenges facing UK companies in a globalised world.

So what do the reforms involve, and will they achieve their aims?

Update of the UK Corporate Governance Code

In terms of changes to the Code, in many respects, it is more a matter of what the Financial Reporting Council (FRC) has not done than what it has.

In its consultation published in May 2023, the FRC proposed substantial changes to the Code to both implement a number of the audit and governance reform measures outlined by the government in its May 2022 Restoring trust in audit and corporate governance consultation response [1] and carry out a general update of the Code since its last review in 2018.

In terms of the audit and governance reform measures advocated by the government, the FRC's consultation duly reflected the government's proposed secondary legislation published in July 2023 and would have required companies to publish an audit and assurance policy, a resilience statement and a material fraud statement amongst other things.

However, the government's abrupt U-turn on these regulations in October 2023 necessitated a rethink by the FRC. As did the fact that the November 2023 King's Speech did not include an audit, corporate reporting and governance bill, which amongst other things would have created the Audit, Reporting and Governance Authority (ARGA), the successor regulator to the FRC.

Against this backdrop, no doubt reading the prevailing mood music and in a welcome move, the FRC rowed back on many of its original proposals. Instead, the FRC focused primarily on streamlining certain aspects of the Code and reducing duplication – changes which were overwhelmingly supported in the consultation process.

The main substantive change to the Code is that it is more prescriptive in relation to how the board should report on their annual review of the effectiveness of the company's material internal controls (see the box below for details of the disclosures required). Having listened to the feedback received about the burden its original proposals would impose and to support "UK economic growth and competitiveness", the FRC scaled back the requirements in relation to internal control disclosures, describing the changes as "a targeted and proportionate Code revision". Whilst this is not a UK version of the US Sarbanes-Oxley regime, these changes will require companies to consider the robustness of their risk management and internal controls frameworks and in particular what level of additional information and assurance boards might need now that they are required to provide a formal declaration of effectiveness.

In light of the government's audit and governance reform agenda, in May 2023 the FRC also published a minimum standard for audit committees (Standard), which covers areas such as the external audit tender process (which the audit committee should lead), the oversight of the external auditor and the disclosures to be included in the annual report on the work of the audit committee. Companies will need to consider the Standard carefully, especially when initiating an audit tender process and when reporting on compliance with the Standard in the annual report and accounts.

The FRC has also replaced the list of specific diversity characteristics that boards should look at when appointing directors and developing succession plans, with a more generic provision to "promote diversity, inclusion and equal opportunity". The accompanying Code guidance indicates that the FRC wants to leave it to boards to decide which aspects of diversity are important in the context of their business and its needs.

Noting that the Code has the advantage of operating on a flexible, "comply or explain" basis, it will be interesting to see whether the approach of giving more leeway to companies to decide what is material and relevant to their business will be adopted in other areas of governance and reporting.

The transformation of Companies House from letterbox to regulator

Despite being created over 180 years ago, Companies House had a limited range of powers compared to other UK regulators and had come to be regarded as a passive recipient of information. With the ECCTA, it is expected that it will become a much more active gatekeeper of the register of companies in the UK, aiding confidence in the UK business environment and helping UK companies take advantage of technological improvements in company administration. Whilst ultimately this may help create a more stable and certain business environment, in the short to medium term, a number of changes introduced by the ECCTA will require a degree of preparatory work for companies and increase the administrative burden on them if new internal processes need to be put in place – the new identity verification requirements for directors, those filing information with Companies House and certain others, in particular.

Time will tell how the ECCTA is implemented in practice and whether the reforms prove to be a particular pain point for companies. This will be an area to monitor carefully. Isobel Hoyle Professional Support Lawyer, London

The proof of whether Companies House will live up to these expectations will be in the implementation of the ECCTA: will Companies House use its new powers to make it easier to do business? Will it be able to move to a more efficient and streamlined electronic filing system to reduce administrative burdens on companies in future? Will it act promptly to stamp out the use of UK corporate structures which camouflage illegal activities? Initial signs have been encouraging, with indications that Companies House is proactively reacting where there are concerns about information submitted for the public register and Companies House stating that it wants to make the identity verification process very efficient and easy to understand so as not to create a burden for legitimate businesses. Time will tell how the ECCTA is implemented in practice and whether the reforms prove to be a particular pain point for companies. This will be an area to monitor carefully.

The radical reset of the UK Listing Rules

The most significant reform of the UK listing regime since the current regime was created in 2005 is expected to come into effect later this summer. The genesis for the overhaul was the Hill Review of the UK listing regime, published in March 2021, which was undertaken to analyse, and put forward plans to tackle, the underperformance of UK equities and the continued (even widening) valuation gap between UK and foreign listed companies.

Whilst a number of the reasons for underperformance of the UK markets are realistically outside of the control of the UK government and its regulators, the Hill Review identified a number of measures which could be implemented to improve the attractiveness of the UK listed company environment. For its part, the FCA is clearly aware of the scale of the challenges facing UK plc and the new UK Listing Rules go further than some were predicting in scaling back aspects of the listing regime that were seen as uncompetitive. In particular, replacing the need for shareholder approval for significant/Class 1 transactions with a disclosure obligation should enable UK listed companies to compete more effectively against global competitors in M&A activities. However, for most governance processionals, the status quo is maintained in terms of governance and reporting-related continuing obligations.

For its part the FCA is clearly aware of the scale of the challenges facing UK plc and the new UK Listing Rules go further than some were predicting in scaling back aspects of the listing regime that were seen as uncompetitive. Gareth Sykes Partner, London

It remains to be seen whether the move from a more rules-based regime to a more disclosure-based one will in practice result in any significant reduction in the work involved in preparing disclosures for significant/Class 1 transactions or the scope of comfort boards seek from advisers on large transactions. UK listed companies also face a high ongoing reporting burden, which, as noted above, is proposed to remain largely the same under the new UK Listing Rules. It is a shame that the FCA did not take the opportunity as part of the overhaul to rationalise the periodic reporting requirements placed on listed companies, given the number of applicable disclosure regimes covering similar territory.

Filed under

• United Kingdom
• Company & Commercial
• Herbert Smith Freehills LLP
• Corporate governance
• Corporate Governance Code 2018 (UK)
• Economic Crime and Corporate Transparency Act 2023 (UK)

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Literature review on gender diversity in top management teams of companies and its relationship with firm performance and audit quality

• Original Article
• Published: 19 June 2024

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• Maria Fátima Ribeiro Borges 1 ,
• Graça Maria do Carmo Azevedo 1 &
• Jonas Oliveira   ORCID: orcid.org/0000-0001-5374-1062 2  

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This paper aims to review the literature on gender diversity on top management teams and its impact on firm’s performance and audit quality. Over the period of 1997–2023 a total of 125 published articles were identified. Main findings reveal that literature on gender diversity continues to be contradictory, inconsistent and inconclusive regarding its impacts on firm’s performance and audit quality, highlighting the need to intensify research on this field to validate empirically those relationships. The literature review informs researchers on other audiences about the main characteristics of the literature on gender diversity and identifies several research gaps in the area.

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Borges, M.F.R., Azevedo, G.M.d.C. & Oliveira, J. Literature review on gender diversity in top management teams of companies and its relationship with firm performance and audit quality. Int J Discl Gov (2024). https://doi.org/10.1057/s41310-024-00248-1

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• KPMG survey of 50 ESG specialists in 10 countries and territories reveals sustainability increasingly embedded in wider corporate strategies
• Despite increasing maturity and focus on purpose-driven approaches, companies are having to adapt and flex to increasing ESG reporting requirements and an evolving regulatory landscape, and this has effects on their governance and organization
• Findings highlight that company structures have adapted to ESG, from the board level to the whole organization. The findings also suggest a growing need for group sustainability units to adapt to ESG’s increasing importance by taking a more strategic approach, working with other departments, and no longer trying to do everything connected with sustainability themselves. 

KPMG International global survey on ESG governance and organization

Bangkok, 21 June 2024 – ESG and broader sustainability strategy have made their way to the top of board agendas in 2024, despite business leaders facing a bulging inbox of issues and challenges, according to new research from KPMG International.

Chief Sustainability Officers* from some of the world’s largest companies were interviewed for KPMG’s global survey on ESG governance and organization, to gain a deeper understanding of how companies are structuring their set-up and teams for sustainability and responding to a wave of new regulation and increased stakeholder and investor pressure for transparency on ESG.

Almost all respondents reported high ambitions for ESG in their organizations, with half now viewing sustainability as a strategic issue that is embedded in core business operations.

With ESG covering a wide area of societal and governance issues, the challenge for many businesses can be deciding what to prioritize. For many respondents, decarbonization and the race to net zero was the topic most-often included in their corporate ESG strategy, with diversity, equality and inclusion and human rights in the value chain the next most-mentioned theme. 

Who leads on ESG?

With ESG recognized by boards as a key issue, there is evidence of companies finding their feet on who makes the decisions on future strategy and the structures needed to measure, implement, and report effectively.

About one-quarter of the organizations covered by KPMG’s research said they have a board level sustainability committee. A further fifth discuss it through committees that cover other topics, most commonly the audit committee. There was also evidence that ESG is a topic making its way into committees typically focused on management, innovation, remuneration and safety and culture.

The question now facing many business leaders is who should make the ultimate decision on ESG as it increasingly becomes embedded in the fabric and purpose of a company. The chief executive officer is responsible for sustainability in almost half of organizations surveyed, with a dedicated chief sustainability officer as the second most-popular option. The remaining respondents revealed a wide variety of roles taking charge of ESG – from head of supply chain and manufacturing to the chief risk officer. 

Responding to rising regulation with better resources and a focus on remuneration

Reporting on ESG has generally been a voluntary exercise, but some jurisdictions are in the process of making it compulsory, most significantly the European Union through its Corporate Sustainability Reporting Directive (CSRD). Nearly half of the organizations in this research plan to report in accordance with CSRD for their 2024 financial year, with nearly a fifth more planning to do so a year later.

Nearly three-quarters of organizations in this research have six or fewer full time equivalent staff working on non-financial reporting, and more than half have three or fewer. Just over half said they expect to see an increase in this number, with most of the rest expecting numbers to stay about the same.

Group sustainability units take sole responsibility for ESG reporting at more than half of the organizations in this research. It is shared between several department at a further quarter with written responses suggesting that most involve both sustainability and finance with some also including communications. Most of the rest make finance and accounting solely responsible, except for one where a communications and government affairs department runs reporting with an ESG unit in the finance group responsible for data quality.

Just under half of the organizations in this research have ESG topics in their core corporate key performance indicators (KPIs), with more than a quarter more including them in management level performance reviews. Some respondents say that their organizations plan to increase such work, with one mentioning that they currently have a single indicator on carbon dioxide emissions intensity but plan to add more.

Almost half of organizations interviewed produce internal indicators on a quarterly basis and several use monthly reporting for some measures. Annual is the most common frequency for external reporting used by more than three-quarters of organizations, with the remaining respondents doing so quarterly.

ESG key performance indicators are used in calculating executive pay in a majority of the organizations in this research, with just over half using these for short-term incentives and two-fifths for long-term incentives. Just under half have between 16 and 25 percent of variable executive pay linked to ESG indicators.

Looking to the future of ESG

Sustainability professionals see their task becoming more and more a part of everyone’s job in the future. Some see the central function becoming smaller as individual business units take up work, while others believe that finance is likely to take over reporting on sustainability given its increasing importance. The result of these two trends is that group sustainability units need to become more strategic in outlook so they can provide oversight and guidance across the business and to the board. 

Businesses can start building robust and successful ESG governance by analyzing their existing sustainability efforts to understand the strengths and development areas and how they align with corporate and sustainability strategies. Additionally, businesses should gradually integrate sustainability work into relevant functions and business units. With gradual decentralization over time, businesses can allow the group sustainability unit to focus on its central strategic role to drive long-term commitment to sustainability goals.

Natthaphong Tantichattanon Head of ESG KPMG in Thailand

The full report can be accessed at:  https://kpmg.com/th/en/home/insights/2024/02/anchoring-esg-in-governance.html

Taking a strategic approach towards corporate governance, board-level responsibility and reporting

Anchoring ESG in governance

Notes to editors:

*KPMG surveyed 50 Chief Sustainability Officers or managers in an equivalent role in major companies across multiple countries, territories, and jurisdictions. The research was conducted between July 2023 and January 2024.

About KPMG International

KPMG is a global organization of independent professional services firms providing Audit, Tax, and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively.

KPMG firms operate in 143 countries and territories with more than 273,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients. For more details about our structure, please visit kpmg.com/governance.

About KPMG in Thailand

KPMG in Thailand, with more than 2,000 professionals offering Audit and Assurance, Legal, Tax, and Advisory services, is a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

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财务与会计学系学术讲座No.122

发布时间：2024-06-26 来源：葛涵 浏览次数： 10 次

题目： The Effect of Carbon Pricing on Firm Performance:  Worldwide Evidence 

时间： 2024 年 7 月 5 日（周五） 13:30-15:00

地点： 浙江大学紫金港校区管理学院 A423

主讲人： 段廷桦博士 ，  IESEG School of Management

主持人： 徐维东副教授，浙江大学管理学院

           Tinghua Duan is an Assistant Professor of Finance at IESEG School of Management, France. He received Ph.D. in Finance from University of Edinburgh and was a visiting scholar to NYU Stern School of Business. His research interests are Climate Finance, ESG and Corporate Governance. His works has been accepted to present in major finance conferences, such as the American Finance Association (AFA) Annual Meeting, the SFS Cavalcade North America Conference, the SFS Cavalcade Asia-Pacific Conference, the Financial Intermediation Research Society (FIRS) Conference, the ABFER Annual Conference and the China International Conference in Finance (CICF). His papers are published in Journal of Financial and Quantitative Analysis , Journal of Business Ethics  and many other leading journals in Finance and Business. His research papers have won Best Corporate Finance Paper Award at the 2023 FMA European Conference and Best Asset Pricing Paper Award at the 2021 Global Research Alliance for Sustainable Finance and Investment Conference.

      Despite the theoretical benefits of carbon pricing in combating climate change, many countries  seem reluctant to adopt such policies. To address these concerns, we utilize the staggered  enactment of carbon pricing initiatives across jurisdictions to evaluate their impacts on publicly  listed firms worldwide. We observe triadic effects. First, carbon pricing initiatives impose a  financial redistribution effect on firms, reducing the profitability of high-emission firms.  Second, high-emission firms receive a lower market valuation, which is driven mostly by the  cash flow channel as opposed to the discount rate channel. Lastly, high-emission firms also  reduce investments. Importantly, carbon pricing initiatives do not reduce aggregate  profitability, firm value, or investments in the policy-initiating country. Rather, they shift  profits and investments from high- to low-emission firms, implying a net gain in carbon  efficiency. Our results have significant normative implications.  

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