Board Intellectual Capital, Board Effectiveness and Corporate Performance: Goodness of the Data

Many factors influence corporate performance and among them, intellectual capital (IC) and corporate governance are the most important determinants. Based on the literature, the direct effect of IC and corporate governance mechanisms on corporate performance have been measured in the past several years. Nevertheless, to empirically test indirect effect of board IC and board effectiveness on corporate performance remains scant. In addition, most of the research in these areas have been conducted in developed countries. It is found that not much research has been carried out in the emerging markets of Middle-East like Iran. The purpose of this paper is to present goodness of data processes in relation to study board IC, board effectiveness and corporate performance of listed companies in Iran. The goodness of data involves screening and purifying of raw data in accordance with the assumptions of multivariate analysis. Data screening is the process of checking data for errors and correcting them before performing data analysis. The study employed census method where all listed companies in Tehran Stock Exchange (TSE) were investigated. Data were obtained through the questionnaire survey on 292 board members in TSE. Raw data were keyed into Statistical Package for Social Science (SPSS) version 22. A descriptive statistic, treatment of missing data, univariate assessment and removing of outliers, normality and multicollinearity tests were conducted. The results from data cleaning revealed a significance and the suitability of the data for multivariate analysis

An Integrative Proposed Model of Corporate Governance: The Corporate Governance Mechanisms Mediates the Relationship between Board Intellectual Capital and Corporate Performance

Corporate Governance (CG) foster dynamic economic growth, increase financing, reduces costs of capital, manage stakeholder interest which ultimately increase corporate performance (CP). Researchers have argued that employees must be inspired by CG practices to manage the conflicts of interest.  There is a growing need for integrative model for CG, however the gaps are still exist in the literature on corporate governance mechanism (CGM) and their mediating role to influence the interlinkages between board intellectual capital (BIC) and CP. This study propose an integrative model CG by reviewing the literature CGM, prior models and relevant constructs of BIC, structures, process, and performance. This paper synthesizes the thinking arising from the review of previous literature and models of CG, and proposes an integrative research model. From the perspectives CG, this study argues that the new model should explore the relationship among BIC, CGM and CP. Keywords: Intellectual Capital, Corporate Governance, Performance JEL Classifications: G34; O16; O3

What explains the investment decision-making behaviour? The role of financial literacy and financial risk tolerance

Investment decision-making behaviour has a significant role in the financial growth of individual investors. This study investigates the impact of financial literacy on investment decision-making behaviour by taking mediating role of financial risk tolerance. The study employed quantitative research design and multi-stage random and convenience sampling. A survey questionnaire was used to collect data from 384 registered individual investors of Pakistan Stock Exchange (PSX). Structural equation modelling (SEM) was used to test the relationships between the constructs. Results showed positive and significant impact of financial literacy on investment decision-making behaviour and financial risk tolerance among individual equity investors. Similarly, financial risk tolerance mediated the relationship between financial literacy and investment decision-making behaviour. The study suggests measures to policy makers for improving financial literacy among individual investors. It also proposes significant functional insights for stockbrokers, investment advisors, and financial managers through examining the investment decision-making behaviour of individual equity investors. This study serves as a guideline for academia to further develop/improve the financial literacy of future investors

Intellectual capital in internal auditing: a review

Today’s business survival is always allied to the people behind it. Strategies and success are created and driven by individuals. Indeed, the knowledge, expertise and skills that one possesses is like one precious gem stone that money cannot buy (Brooking, 1997; Bontis and Fitz-enz, 2002; Roos et al. , 2005). It is an intangible asset and commonly termed as intellectual capital (IC). Though IC has no physical form nor is it easily measured in monetary form, nevertheless, it is extremely important to appreciate and appropriately manage IC particularly to upbeat positive corporate performance (Bontis et al., 2000; Usoff et al. , 2002). IC is frequently referred as intangibles that includes information, knowledge, skills, experience, innovation, customer loyalty, patents, trademarks, relationships and intellectual property will force innovation and value creation of an organization (Bontis et al. , 2000; Usoff et al. , 2002; Tayles et al. , 2007). Indisputably, the existence of IC in the global business would allow companies to gain a competitive edge and promote sustainable growth of the business. It is evidenced in Bontis et al. (2000), Bontis and Fitz-enz (2002), Usoff et al. (2002), Pek (2005), Roos et al. (2005) and Tayles et al. (2007) that IC is a positive attribute that influences corporate performance. The importance of IC, particularly human capital is highlighted and documented in The Ninth Malaysian Plan. Human capital is stressed as one element that is crucial to achieve the nation’s mission

Auditor independence debate : a critical review of the UK and the US responses and proposed reforms to strengthen auditor independence in the wake of Enron-Andersen scandal

This paper argues on auditor independence and its safeguarding tools developed to preserve independence in the wake of Enron-Andersen debacle. Likewise, the safeguarding tools aimed to strengthen auditor independence and to secure public's confidence in the credibility of the accountancy and auditing profession. Auditor independence has always been difficult to define despite its continuous debate for over three decades. Since Enron, in addition to current tougher independence regulations, more calls demanding further reforms to strengthen auditor independence have been received. This study attempts to discuss the proposals to strengthen auditor independence argued in the UK and the US. In the UK, the Co-ordinating Group on Audit and Accounting Issues (CGAA) was set up under the Department of Trade and Industry (DTI) to coordinate works of reviewing UK regulation in the light of Enron. While, in the US, the Securities and Exchange Commission (SEC) and The American Institute of Certified Public Accountants (AICPA) perform major regulatory works in response to the collapse. The main proposals discussed in this paper include: ban of non-audit services, establishment of tougher regulation and appointment of auditors by the state or agency. Responses towards the proposals between the two countries vary. This has much to do with the differing approach in standard-settings. The viability and practicability of the proposals are discussed. The paper indicates that the proposals have their own strengths and weaknesses in its objective to achieve maximum independence. On one hand, the proposals may mitigate impairment of auditor independence in the first instant. On the other hand, there are great possibilities that any new standards or guidelines could appear obsolete within short period. Then, regulatory reviews and reforms need to take place continuously. The regulation on auditor independence has not sufficiently address the fundamental elements that genuinely affect independence. Other reasons for corporate failures need consideration as well. There is a need for further empirical research to analyze the implications of auditor independence regulation towards the perceptions of independence. This could contribute to a better regulatory process in effort to strengthen auditor independence and simultaneously boost capital market

The Enron-Andersen regulatory review to strengthen auditor independence

The crash of Enron in the US, followed by the worldwide collapse of its auditor, Arthur Andersen (Andersen), has shaken the business world. It was the biggest corporate collapse uncovered in business history. Since then, the investor and public's perception towards the accounting and auditing profession has been badly tarred. Following Enron -Andersen scandal, giant companies like WorldCom, Xerox and WasteManagement faced similar fate. Worst still, the auditors of all these companies are among the Big Fives (now Big Fours). Nevertheless, the reputation of most certified public accountant (CPA) firms are seriously confronting the problems of regaining public's confidence at post-Enron era. Among the major issues elevated was 'auditor independence' of the CPA firms. Arguments rest on the issue of auditor independence and factors like regulatory framework, and business pressures (also corporate governance) that are found to be major contributor to crashes of Enron like. In response to the scandal, the standard-setters, regulators, professions and other related bodies (in the UK and the US) emerged with constructive proposals, which aim to strengthen auditor independence (and corporate accountability). Though, new regulatory have been laid out, the success rate is yet proven. This paper review holds the regulatory scenario depicted in the UK and the US. This is after considering that most of the recent bankrupt cases and regulatory reviews are actively performed in both countrie

Cost & management accounting an introduction

Accounting has always concerned itself with information production, processing and reporting while cost and management accounting has sought to provide managers with accounting techniques involved in the production of cost information. Cost and management accounting also describes the application of the techniques to a broad range of managerial decision-making, planning and control activities. The aim of the text is provide a thorough understanding of the basic theory and practice of cost and management accounting. Cost and Management Accounting – An Introduction contains thirteen chapters representing a wide variety of cost and management accounting topics particularly in manufacturing context. The textbook is divided into three parts. Part One (Chapter 1 and 2) gives an overview of cost and management accounting and introduces some cost concepts While Part Two (Chapters 3 to 8) focuses on product cost determination. Part Three (Chapters 9 to 13) discusses the provision of information for management decision-making, planning and control. Each chapter in the book provides learning objectives, content-rich materials and exercises. More examples have been included in the text to provide students with greater exposure in problem solving. This book is specifically written for students on foundation courses in Accounting, Management and Business Studies. The book is also relevant to students preparing themselves for the foundation level of professional examinations such as Association of Certified Chartered Accountants (ACCA) and Chartered Institute of Management Accountants (CIMA) as well as managers and others in industry, commerce, local authorities and similar organizations who wish to gain knowledge of the basic principles and processes of cost and management accounting

Characteristics of audit committee and corporate performance in Saudi joint stock companies: descriptive study

The study aimed to develop a theoretical framework to understand the relationship between Audit Committees Characteristics and Corporate governance effectiveness. It is a descriptive study that described some of the factors that may affect the achievement of the objectives of corporate governance. The study focused on six characteristics of the audit committees included in previous literature to form a comprehensive theoretical framework on the importance of each of them in achieving the objectives of corporate governance by examining the internal control system of the corporate. The study found that there is a consensus in previous studies on the importance of the characteristics of the audit committees and their effective role in the performance of corporate governance. However, there is a difference in the importance of each property according to the different environments and countries of previous studies

Intellectual capital as the essence of sustainable corporate performance

The term 'intellectual capital' (IC) may sound unfamiliar to the wider public. However, IC has started to cast greater attention in the corporate world. IC refers to intangible asset which is closely related with the development of strategic decision and corporate performance. With endless challenging business environment and complicated electronic transactions, IC is argued to act as a vital essence for a business to innovate which then drives business sustainability. The ultimate purpose of this study was to investigate whether IC is acknowledged and managed towards improving performance, be it financial or non-financial performance. For this purpose, a questionnaire survey was distributed to the head of internal audit of Malaysian public listed companies. Questions tapping on core IC components including human capital, structural capital, relational capital and spiritual capital were included. Data were analysed using inference analysis methods, including ANOVA, t-test and regression. Findings revealed that IC does exist, but not much of IC management is sought in the companies, although the practice is in place. The results also demonstrate that relational capital emerged as the most influential IC component on corporate performance, while human capital ranked the last. This is an obvious indication that IC is well in fact has developed within Malaysian companies and become an important source for business performance