The Relationship Between Governance Practices, Audit Quality and Earnings Management: UK Evidence

This thesis examines two empirical studies. Firstly, it examines the relationship between corporate governance characteristics (relating to the size, composition of independent members, financial expertise and meeting frequency of boards of directors and audit committee) and audit quality. Secondly, the study investigates the effectiveness of corporate governance characteristics and higher quality auditors in constraining earnings management. There are three proxies of audit quality employed: audit fees, non-audit fees and industry specialist auditors. Based on data obtained from the FTSE 350 between 2005 and 2008, the first empirical findings suggest that independent non-executive directors on board demand an additional and extensive audit effort from the auditor in order to certify their monitoring function, resulting in an increase in the audit fees and the perceived audit quality. The results also indicate a positive relationship between independent board and non-audit fees, suggesting that independent board support the view that the joint provision of audit and non-audit services does not necessarily compromise auditor independence, but rather that it broadens the auditors’ knowledge and improves audit judgement. The findings from the second empirical study suggest that higher quality auditors (which either charge higher audit fees or are industry specialist auditors) are likely to reduce earnings manipulation. However, no evidence suggests that NAS fees affect earnings management. In addition, the current study finds inconsistent results linking the corporate governance characteristics and opportunistic earnings. Overall, both findings are consistent with agency theory, which states that independent board and higher quality auditors are associated with effective monitoring, which in turn helps to improve the quality of financial reporting. The findings are of potential interest to policy makers, professionals and boards of directors, especially on issues relating to audit quality and the mandating of corporate governance practices

Corporate governance and shariah noncompliant risk in Islamic banks: Evidence from Southeast Asia

Purpose: This study investigates the relationship between corporate governance and shariah noncompliant risk (SNCR) that is unique for Islamic banks. The study examines the roles of shariah committee along with the board of directors in mitigating SNCR. Methodology: The paper empirically investigates the implications of characteristics of board of directors and shariah committee on the SNCR by using a sample of 29 full-fledge Islamic banks from Malaysia and Indonesia over the period 2007 to 2017. All data is hand collected from the Islamic banks' annual reports with the exception of country-level data collected from the World Bank database. Findings: The results show that banks with a smaller board size and higher proportion of independent board members are likely to have lower SNCR. The findings also indicate that the financial expertise and higher frequency of shariah committee meetings reduces the SNCR. Collectively, our analysis shows that banks with strong corporate governance environments reduce SNCR. Practical Implications: The findings of the study sheds light on the relationship between corporate go vernance practice, shariah committee characteristics and SNCR. The results can be used by different stakeholders such as policy makers, boards of directors and senior management of Islamic banks to mitigate SNCR. Originality/value: This study extends the literature on corporate governance and risk-taking by including additional dimensions of governance and risk type. The corporate governance mechanism at the board level is complemented by including the shariah committee characteristics and SNCR which is relevant to Islamic financial institutions is examined

Board of directors and small medium enterprise's firm growth with firm culture as moderating factor in Malaysia

This conceptual paper is based on a study that explores differences of board of directors’ attributes and SMEs firm growth based on firm culture types in Malaysia.The objectives are to explore a model for overall SMEs firm growth based on board of directors’ attributes, to examine the relationship between board entrepreneurial and guanxi in relations with SMEs firm growth.This paper also aims to identify differences of board of directors’ attributes and SMEs firm growth based on firm culture types.One of the most significant theoretical implications is the introduction of a conceptual model on SMEs firm growth, board of directors’ attributes and firm culture based on Malaysia context.From the practitioners’ perspectives, this paper suggests improvement of existing approaches to the governance of SMEs

Do Board Size and Independence Really Matter? An Empirical Study

Board of directors is considered as the most basic part of effective decision making in the firms. However, the large or small board sizes are continuously in debate and no conclusive decision has yet been achieved. Likewise, research on board independence also shows contrasting results. Some studies are in favour of board independence, others focus their attention on the firm specific knowledge of executive directors. The purpose of this study is to examine the relationship of board size and firm independence with the firm performance in a sample of 609 firms of Karachi stock exchange over the period 2005-2012. This study uses the partial least squares method to determine structural links between the variables under study. The findings of the study demonstrate the fact that board size is positively related to the productivity, but negatively related to the profitability of the firms. However, board independence is positively related to the profitability and negatively related to the productivity of the firms. Overall, board of directors with two characteristics of size and independence has negative relationship with the firm performance. Keywords: board size, board independence, partial least squares, firm performanc

Board Entrepreneurial Orientation, Board Guanxi and Firm Growth of Small Medium Enterprises in Malaysia

This conceptual paper is based on a study that predicts the overall Small Medium Enterprises firm growth based on board entrepreneurial orientation and board guanxi in Malaysia context. Previous studies on board of directors’ attributes’ tend to consider financial performance in its analysis only. The inclusion of the growth indicators including sales figures, employee number, introduction of new product and new market broaden the research scope to fill the previous research gap.This study also aims to examine the relationship between board entrepreneurial and guanxi in relations with SMEs firm growth. One of the most significant theoretical implications is the introduction of a conceptual model on SMEs firm growth, board entrepreneurial orientation and board guanxi based on Malaysia context. From the practitioners’ perspectives, this paper suggests improvement of existing approaches to the governance and growth of SMEs. There is a dearth of exploratory endeavors in the context of SMEs firm growth and board of directors’ attributes for developing nations. Thus, empirical study in this area merits critical attention Keywords: Board entrepreneurial orientation, board guanxi, SMEs firm growt

Mandatory Audit Firm and Audit Partner Rotation

Mandatory audit partner and audit firm rotation are important part of audit quality component. Some regulators and scholars believe that auditor rotation shows auditor’s independence in the audit context. In order to achieve high audit quality, most of the researchers agree on as a result of auditor rotation, the financial reporting and the audit quality will be enhanced owing to auditor’s independence. This study reviews the recent years with respect to audit partner rotation, the audit firm rotation and audit quality as well as recognizing overlook in the literature where future studies are needed to be done. Based on recent studies, both audit firm and audit partner rotation enhance and improve audit quality, as high audit quality increases the transparency of financial reporting. Keywords: Audit firm rotation, Audit partner rotation, Audit qualit

A critique: Corporate governance definition dilemma and the major causes for calls to improve corporate governance

This paper has two major objectives; the first objective is to shed light on the dilemma concerning the debate on corporate governance definition, whereas the second objective is to identify the major causes for calls to improve corporate governance. The last three decades has witnessed exponential increase in corporate governance awareness, corporate governance regulations, and a drive for improved corporate governance in addition to an interesting debate on the definition of corporate governance. Concerning the debate on the definition of corporate governance the extant literature revealed that there is significant disagreement among researchers on a single definition for corporate governance. On one extreme some corporate governance definitions are considered too narrow due to their limited focus on protection of shareholders’ wealth while disregarding the interest of other stakeholders. On the other some have been criticized for being too board as a result focusing on too many stakeholders without paying attention to the sole reason for the firm existence which is the maximization of shareholders wealth. The authors view corporate governance as a set of mechanisms aimed at mitigating the negative impact of agency conflict. This view focuses on resolving the main issue of corporate governance, which is the conflict of the interests between owners of the firm and executive management. Therefore the authors strongly argue that mitigating this conflict of interest is of special benefit to the firm, the stakeholders’ and the economy as a whole and hence any definition for corporate governance should encompass the agency conflict. In relation to the second objective based on the review of the relevant literature, five reasons have been identified as the major causes for calls to improve corporate governance. These causes are a) increase in firm size and complexity, b) separation of ownership and management, c) exponential growth of capital markets, d) increase in fraud cases and financial crises and, e) increased awareness of corporate governance impact on firm financial performance. Keywords: Corporate Governance, firm size, market growth, fraud, separation of ownership

Why does Corporate Governance Become So Important? An Attempt to Identify the Major Causes for Calls to Improve Corporate Governance

This paper is an attempt to identify the major causes for calls to improve corporate governance whether at the firm level or at the country level. The last three decades has witnessed exponential increase in corporate governance awareness, corporate governance regulations and a drive for improved corporate governance. Based on the review of the relevant literature five reasons has been identified as the major causes for calls to improve corporate governance. These causes are a) increase in firm size and complexity, b) separation of ownership and management, c) exponential growth of capital markets, d) increase in fraud cases and financial crises and, e) increased awareness of corporate governance impact on firm financial performance. Keywords: Corporate Governance, firm size, market growth, fraud, separation of ownership

Microstructure and mechanical properties of electron beam welded dissimilar steel to Fe-Al alloy joints

Electron beam welding (EBW) technique was used to perform dissimilar joining of plain carbon steel to Fe-7%Al alloy under three different weld conditions such as with beam oscillation, without beam oscillation and at higher welding speed. The effect of weld parameters on the microstructure and mechanical properties of dissimilar joints was studied using optical microscopy, SEM, EBSD, hardness, tensile and erichsen cup tests. Microstructure results show that the application of beam oscillation resulted in uniform and homogeneous microstructure compared to without beam oscillations and higher welding speed. Further, it was observed that weld microstructure changes from equiaxed to columnar grains depending on the weld speed. High weld speed results in columnar grain structure in the weld joint. Erichsen cup test results show that the application of beam oscillation results in excellent formability as compared to high weld speed. Tensile test results show no significant difference in strength properties in all three weld conditions, but the ductility was found to be highest for joints obtained with the application of weld beam oscillation as compared to without beam oscillation and high weld speed. This study shows that the application of beam oscillations plays an important role in improving the weld quality and performance of EBW dissimilar steel to Fe-Al joints