An examination of the relationship of governance structure and performance: Evidence from banking companies in Bangladesh

Corporate governance has become increasingly important in developed and developing countries just after a series of corporate scandals and failures in a number of countries. Corporate governance structure is often viewed as a means of corporate success despite prior studies reveal mixed, somewhere conflicting and ambiguous, and somewhere no relationship between governance structure and performance. This study empirically investigates the relationship between corporate governance mechanisms and financial performance of listed banking companies in Bangladesh by using two multiple regression models. The study reveals that a good number of companies do not comply with the regulatory requirements indicating remarkable shortfall in corporate governance practice. The companies are run by the professional managers having no duality and no ownership interest for which they are compensated by high remuneration to curb agency conflict. Apart from some inconsistent relationship between some corporate variables, the corporate governance mechanisms do not appear to have significant relationship with financial performances. The findings reveal an insignificant negative impact or somewhere no impact of independent directors and non-independent non-executive directors on the level of performance that strongly support the concept that the managers are essentially worthy of trust and earn returns for the owners as claimed by stewardship theory. The study provides support for the view that while much emphasis on corporate governance mechanisms is necessary to safeguard the interest of stakeholders; corporate governance on its own, as a set of codes or standards for corporate conformance, cannot make a company successful. Companies need to balance corporate governance mechanisms with performance by adopting strategic decision and risk management with the efficient utilization of the organization’s resources

Justifying top management pay in a transitional economy

We investigate some aspects of top management pay in China\u27s listed firms. We find positive pay and performance sensitivities and elasticities for top executives. In terms of magnitude, these sensitivities are similar to those reported in U.S. firms during the 1970s. However, the pay and performance relation is slightly weaker for firms located in less developed provinces. We also find that the pay disparities between top managers and employees are positively related to a firm\u27s performance. Thus, it appears that any deviation away from a manager-worker compensation norm has to be justified by superior firm performance. In additional analyses, we find that managers\u27 perquisites are not related to performance

Frequencies of board meetings on various topics and corporate governance: evidence from China

This paper examines the relationship between number of topic-specific board meetings and quality of corporate governance. The quality of corporate governance is estimated by CEO turnover-performance and compensation-performance sensitivities. Information about topic-specific meetings is collected from the reports of independent directors of Chinese listed firms. We find that more frequent discussions of growth strategies related to the use of IPO proceeds, investment and acquisitions increase CEO compensation-performance sensitivity. By contrast, more discussions about the nomination of directors and top management are likely to reduce the sensitivities of both CEO turnover and compensation to performance. Our findings shed light on what makes boards efficient, and how board monitoring of assorted decisions modifies the relationship between CEO interests and firm performance

Network 'small-world-ness': a quantitative method for determining canonical network equivalence

Background: Many technological, biological, social, and information networks fall into the broad class of 'small-world' networks: they have tightly interconnected clusters of nodes, and a shortest mean path length that is similar to a matched random graph (same number of nodes and edges). This semi-quantitative definition leads to a categorical distinction ('small/not-small') rather than a quantitative, continuous grading of networks, and can lead to uncertainty about a network's small-world status. Moreover, systems described by small-world networks are often studied using an equivalent canonical network model-the Watts-Strogatz (WS) model. However, the process of establishing an equivalent WS model is imprecise and there is a pressing need to discover ways in which this equivalence may be quantified. Methodology/Principal Findings: We defined a precise measure of 'small-world-ness' S based on the trade off between high local clustering and short path length. A network is now deemed a 'small-world' if S. 1-an assertion which may be tested statistically. We then examined the behavior of S on a large data-set of real-world systems. We found that all these systems were linked by a linear relationship between their S values and the network size n. Moreover, we show a method for assigning a unique Watts-Strogatz (WS) model to any real-world network, and show analytically that the WS models associated with our sample of networks also show linearity between S and n. Linearity between S and n is not, however, inevitable, and neither is S maximal for an arbitrary network of given size. Linearity may, however, be explained by a common limiting growth process. Conclusions/Significance: We have shown how the notion of a small-world network may be quantified. Several key properties of the metric are described and the use of WS canonical models is placed on a more secure footing

Regional foreign direct investment and wage spillovers:plant level evidence from the UK electronics industry

This paper examines the extent to which foreign investment in the UK generates wage spillovers in the domestic sector of the economy using a simultaneous dynamic panel data model and focusing on the electronics sector, possibly the most ‘globalized’ sector of UK manufacturing. It finds evidence that the higher wages paid by foreign firms cause wages in the domestic sector to be bid up. This phenomenon is, however, largely confined to the region where foreign direct investment takes place

Communitarian perspectives on social enterprise

Concepts of social enterprise have been debated repeatedly, and continue to cause confusion. In this paper, a meta-theoretical framework is developed through discussion of individualist and communitarian philosophy. Philosophers from both traditions build social theories that emphasise either consensus (a unitarist outlook) or diversity (a pluralist outlook). The various discourses in corporate governance reflect these assumptions and create four distinct approaches that impact on the relationship between capital and labour. In rejecting the traditional discourse of private enterprise, social enterprises have adopted other approaches to tackle social exclusion, each derived from different underlying beliefs about the purpose of enterprise and the nature of governance. The theoretical framework offers a way to understand the diversity found within the sector, including the newly constituted Community Interest Company (CIC).</p

Did Corporate Governance Compliance Have an Impact on Auditor Selection and Quality? Evidence From FTSE 350

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.This paper examines the possible effects of corporate governance (GC) on audit quality (AQ) among the FTSE 350 companies. Using a sample of 180 companies from 2012 to 2017 (i.e., 1080 firm-year observations) a binary logistic model has been employed to investigate the CG-AQ nexus. This analysis was supported by conducting a probit logistic model as a sensitivity analysis. Our findings are associative of a heterogeneous impact of CG on AQ post the implementation of the 2012 CG reforms in the UK. For example, although institutional ownership and management ownership are positively associated with auditor selection and AQ, board independence, non-executive directors and audit committee are not attributed to AQ in the UK. This implies that corporate compliance with good CG practices has a limited impact on the decision to select a Big4 auditor in the UK. Despite the limitations of our study, we hope it can motivate further investigations in this area

Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation

Although studies about the determinants of CEO compensation are ubiquitous, the balance of evidence for one of the more controversial theoretical approaches, managerial power theory, remains inconclusive. The authors provide a meta-analysis of 219 U.S.-based studies, focusing on the relationships between indicators of managerial power and levels of CEO compensation and CEO pay-performance sensitivities. The results indicate that managerial power theory is well equipped for predicting core compensation variables such as total cash and total compensation but less so for predicting the sensitivity of pay to performance. In most situations where CEOs are expected to have power over the pay setting process, they receive significantly higher levels of total cash and total compensation. In contrast, where boards are expected to have more power, CEOs receive lower total cash and total compensation. In addition, powerful directors also appear to be able to establish tighter links between CEO compensation and firm performance and can accomplish this even in the face of powerful CEOs. The authors discuss the implications for theory and research regarding the determinants of executive compensation

Us knows us in the UK: On director networks and CEO compensation

We analyze the relation between CEO compensation and networks of executive and non-executive directors for all listed UK companies over the period 1996-2007. We examine whether networks are built for reasons of information gathering or for the accumulation of managerial influence. Both indirect networks (enabling directors to collect information) and direct networks (leading to more managerial influence) enable the CEO to obtain higher compensation. Direct networks can harm the efficiency of the remuneration contracting in the sense that the performance sensitivity of compensation is then lower. We find that in companies with strong networks and hence busy boards the directors' monitoring effectiveness is reduced which leads to higher and less performance-sensitive CEO compensation. Our results suggest that it is important to have the 'right' type of network: some networks enable a firm to access valuable information whereas others can lead to strong managerial influence that may come at the detriment of the firm and its shareholders. We confirm that there are marked conflicts of interest when a CEO increases his influence by being a member of board committees (such as the remuneration committee) as we observe that his or her compensation is then significantly higher. We also find that hiring remuneration consultants with sizeable client networks also leads to higher CEO compensation especially for larger firms. © 2011 Elsevier B.V