Corporate governance mechanisms and income smoothing: the case of European Union banks

2018 ◽  
Vol 1 (3) ◽  
pp. 295
Author(s):  
Konstantinos Vasilakopoulos ◽  
Christos Tzovas ◽  
Apostolos A. Ballas
Keyword(s):  
European Union ◽  
Corporate Governance ◽  
Income Smoothing ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms

The impact of corporate governance mechanisms on EU banks’ income smoothing behavior

2018 ◽  
Vol 18 (5) ◽  
pp. 931-953 ◽  
Author(s):  
Konstantinos Vasilakopoulos ◽  
Christos Tzovas ◽  
Apostolos Ballas
Keyword(s):  
European Union ◽  
Corporate Governance ◽  
Ordinary Least Squares ◽  
Income Smoothing ◽  
Green Paper ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

PurposeThis paper aims to investigate the impact that governance mechanisms have on European Union ‘banks income smoothing behavior.Design methodology/approachThe authors examine the impact that corporate governance mechanisms included in European Commissions’ proposals regarding the improvement of corporate governance mechanisms (Green Paper) have upon European Union banks’ accounting policy decisions regarding the level of loan loss provisions (LLPs). In addition, the authors examine whether banks’ capital structure operates as an effective internal corporate governance practice. The authors investigate the association between certain corporate governance characteristics and the level of LLPs for a sample of 98 banks from 23 European Union countries for the period of 2010-2013, in the aftermath of the 2008 financial crisis. To test the hypotheses, a multivariate regression model is run. Similar to previous research, the authors use ordinary least squares analysis to test the results.FindingsEmpirical findings provide evidence that there is a positive association between LLPs and accounting income, implying the existence of an income-smoothing pattern of provisions. In addition, the results suggest that banks managers’ decision to smooth income may differ with regard to the board structure, the level of leverage and the provision of disclosure for remuneration for chief executive officer.Originality/valueThe findings of this study contribute to the existing literature concerning banks’ income smoothing behavior. These findings can be useful to regulators, as the authors provide some evidence regarding the effectiveness of the European Union corporate governance framework.

Corporate governance, foreign direct investment, and bank income smoothing in African countries

2019 ◽  
Vol 15 (4) ◽  
pp. 670-690 ◽  
Author(s):  
Inês Pinto ◽  
Cristina Gaio ◽  
Tiago Gonçalves
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Direct Investment ◽  
Managerial Discretion ◽  
Income Smoothing ◽  
Governance Mechanisms ◽  
African Countries ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to investigate the role of corporate governance mechanisms and foreign direct investment (FDI) to restrain or stimulate the use of loan loss provisions (LLPs) by managers to smooth earnings in African banks. Design/methodology/approach This study uses a sample of 112 listed and non-listed banks from 20 African countries, covering the period 2011–2017. Models are estimated using the pooled ordinary least squares regression, as well as Blundell and Bond (1998) system GMM. Findings The results suggest that bank managers use LLPs to reduce income volatility and that ownership concentration increases income smoothing. The findings also show that FDI plays a fundamental role to restrain managerial discretion in developing countries, increasing corporate governance practices in the host country. Practical implications These findings are relevant for banking regulators and supervisors in order to determine which corporate governance mechanisms can be used in developing countries to increase the quality of financial reporting. A policy model that promotes FDI boosts financial reporting transparency, contributing to greater financial markets development. Originality/value The authors extend the existing literature on the influence of corporate governance mechanisms in limiting managerial discretion by focusing on the role that foreign shareholders may have in disciplining banks financial reporting quality in countries with weak institutional quality.

scholarly journals Is corporate governance of private equity targets more effective for risk mitigation?

2021 ◽  
Author(s):  
Vladimiro Marini ◽  
Massimo Caratelli ◽  
Gian Paolo Stella ◽  
Ilaria Barbaraci
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Financial Distress ◽  
Private Equity ◽  
Risk Mitigation ◽  
Governance Mechanisms ◽  
Active Monitoring ◽  
Industry Expert ◽  
Corporate Governance Mechanisms

AbstractPrivate equity is a source of finance and a governance device characterised by active monitoring through sponsors that intervene in targets’ corporate governance. As sponsors are skilled and motivated acquirors, we investigated whether corporate governance mechanisms mitigate leveraged targets’ risk of financial distress differently compared to non-acquired companies through the lenses of agency theory and resource-based theories. We found that targets and non-acquired companies are not significantly different in terms of corporate governance features, but sponsors are skilled enough to choose corporate governance members to mitigate risk more, especially when boards are smaller, have busier industry expert directors, and mandate execution to more managers. These results can be useful to targets, targets’ investors and lenders, and policymakers.

IMPLEMENTATION OF THE VIRTUAL-NETWORK PARADIGM OF CORPORATE GOVERNANCE AT THE ENTERPRISES OF THE FUEL AND ENERGY COMPLEX

2021 ◽  
Vol 4 (8) ◽  
pp. 58-62
Author(s):  
Kamila Zagidullina ◽  
Keyword(s):  
Corporate Governance ◽  
Economic Development ◽  
Functional Approach ◽  
Process Approach ◽  
Virtual Network ◽  
Governance Mechanisms ◽  
Theoretical Substantiation ◽  
Energy Complex ◽  
Corporate Governance Mechanisms ◽  
Market Transformation

The relevance is increasing due to the need for a theoretical substantiation of the directions and mechanism of further market transformation of the fuel and energy complex, taking into account the dependence of the processes and results of its economic development on the effectiveness of corporate governance mechanisms. Key words:economics, fuel and energy complex, corporate governance, functional approach, process approach, virtual-network paradigm, mechanism

scholarly journals Corporate governance and conglomerate diversification strategy – evidence from Vietnam

2018 ◽  
Vol 13 (6) ◽  
pp. 1578-1596 ◽  
Author(s):  
Thi Xuan Trang Nguyen
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Board Composition ◽  
Governance Mechanisms ◽  
Content Type ◽  
Unrelated Diversification ◽  
Corporate Governance Mechanisms ◽  
Control Devices ◽  
Interest Alignment ◽  
The Relationship

Purpose The purpose of this paper is to examine the impact of internal corporate governance mechanisms, including interest alignment and control devices, on the unrelated diversification level in Vietnam. Additionally, the moderation of free cash flow (FCF) on these relationships is also tested. Design/methodology/approach The study is based on a balanced panel data set of 70 listed companies in both stock markets, Ho Chi Minh Stock Exchange and Hanoi Stock Exchange, in Vietnam for the years 2007–2014, which gives 560 observations in total. Findings The results show that if executive ownership for CEOs is increased, then the extent of diversification is likely to be reduced. However, the link between unrelated diversification level and executive stock option, another interest alignment device, cannot be confirmed. Among three control devices (level of blockholder ownership, board composition and separation of CEO and chairman positions), the study finds a positive connection between diversification and blockholder ownership, and statistically insignificant relations between the conglomerate diversification level and board composition, or CEO duality. Additionally, this study discovers a negative link between diversification and state ownership, although there is no evidence to support the change to the effect of each internal corporate governance mechanism on the diversification level of a firm between high and low FCF. Practical implications The research can be a useful reference not only for investors and managers but also for policy makers in Vietnam. This study explores the relationship among corporate governance, diversification and firm value in Vietnam, where the topics related to effectiveness of corporate governance mechanisms to public companies has been increasingly attractive to researchers since the default of Vietnam Shipbuilding Industry Group (Vinashin) happened in 2010 and the Circular No. 121/2012/TT-BTC on 26 July 2012 of the Vietnamese Ministry of Finance was issued with regulations on corporate governance applicable to listed firms in this country. Originality/value This research, first, enriches current literature on the relationship between corporate governance and firm diversification. It can be considered as a contribution to the related topic with an example of Vietnam, a developing country in Asia. Second, the research continues to prove non-unification in results showing the relationship between corporate governance and conglomerate diversification among different nations. Third, it provides a potential input for future research works on the moderation of FCF to the effects of corporate governance on diversification.

Sign in / Sign up

Export Citation Format

Share Document