Corporate boards and ownership structure as antecedents of corporate governance disclosure in Saudi Arabian publicly listed corporations

doi:10.1177/0007650315610611

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Corporate boards and ownership structure as antecedents of corporate governance disclosure in Saudi Arabian publicly listed corporations

Journal Article•DOI•

Corporate boards and ownership structure as antecedents of corporate governance disclosure in Saudi Arabian publicly listed corporations

Waleed M. Al-Bassam¹, Collins G. Ntim², Kwaku K. Opong³, Yvonne Downs²•Institutions (3)

Imam Muhammad ibn Saud Islamic University¹, University of Huddersfield², University of Glasgow³

01 Feb 2018-Business & Society (SAGE Publications)-Vol. 57, Iss: 2, pp 0007650315610611

TL;DR: In this paper, the authors investigated whether and to what extent publicly listed corporations voluntarily comply with and disclose recommended good corporate governance practices, and distinctively examined whether the observed cross-sectional differences in such CG disclosures can be explained by ownership and board mechanisms with specific focus on Saudi Arabia.

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Abstract: This study investigates whether and to what extent publicly listed corporations voluntarily comply with and disclose recommended good corporate governance (CG) practices, and distinctively examines whether the observed cross-sectional differences in such CG disclosures can be explained by ownership and board mechanisms with specific focus on Saudi Arabia. The study’s results suggest that corporations with larger boards, a Big 4 auditor, higher government ownership, a CG committee, and higher institutional ownership disclose considerably more than those that are not. By contrast, the study finds that an increase in block ownership significantly reduces CG disclosure. The study’s results are generally robust to a number of econometric models that control for different types of disclosure indices, firm-specific characteristics, and firm-level fixed effects. The study’s results have important implications for policy makers, practitioners, and regulatory authorities, especially those in developing countries ac...

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Journal Article•DOI•

A study of environmental policies and regulations, governance structures, and environmental performance: The role of female directors

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Mohamed H. Elmagrhi¹, Mohamed H. Elmagrhi², Collins G. Ntim³, Ahmed A. Elamer⁴, Ahmed A. Elamer⁵, Qingjing Zhang³ - Show less +2 more•Institutions (5)

Al Asmarya University for Islamic Sciences¹, University of Huddersfield², University of Southampton³, University of Bradford⁴, Mansoura University⁵

01 Jan 2019-Business Strategy and The Environment

TL;DR: Li et al. as discussed by the authors investigated the extent to which corporate board gender diversity, including the proportion, age and level of education of female directors, affect environmental performance of Chinese publicly listed corporations.

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Abstract: This paper seeks to contribute to the existing business strategy and the environment literature by examining the effect of governance structures on environmental performance within a unique context of improving environmental governance, policies, regulations and management. Specifically, we investigate the extent to which corporate board gender diversity, including the proportion, age and level of education of female directors, affect environmental performance of Chinese publicly listed corporations. Using one of the largest Chinese data sets to date, consisting of a sample of 383 listed A-shares from 2011 to 2015 (i.e., observations of 1,674), our findings are three-fold. First, we find that the proportion and age of female directors have a positive effect on the overall corporate environmental performance. Second, our findings indicate that the proportion and age of female directors also have a positive effect on the three individual environmental performance components, namely environmental (a) strategy, (b) implementation and (c) disclosure, respectively. Finally, and by contrast, we do not find any evidence that suggests that the level of education of female directors has any impact on environmental performance, neither the overall environmental performance measure nor its individual components. Our findings have important implication for regulators and policy-makers. Our evidence is robust to controlling for alternative measures, other governance and firm-level control variables, and possible endogeneities. We interpret our findings within a multi-theoretical framework that draws insights from agency, legitimacy, neo-institutional, resource dependence, stakeholder, and tokenism theoretical perspectives.

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251 citations

Journal Article•DOI•

Board diversity, corporate governance, corporate performance, and executive pay

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Ahmed A. Sarhan¹, Ahmed A. Sarhan², Collins G. Ntim³, Basil Al-Najjar¹•Institutions (3)

University of Huddersfield¹, Zagazig University², University of Southampton³

01 Apr 2019-International Journal of Finance & Economics

TL;DR: In this paper, the impact of board diversity on corporate performance and executive pay within the context of MENA countries was investigated, and it was found that board diversity, as measured by director gender and nationality, has a positive effect on corporate financial performance.

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Abstract: Departing from previous studies, this paper investigates the impact of corporate board diversity on corporate performance and executive pay within the context of MENA countries. Our sample includes a balanced panel of 600 firm-year observations, consisting of 100 individual firms drawn from 5 Middle Eastern countries (Egypt, Jordan, Oman, Saudi Arabia and United Arab of Emirates) over the 2009–2014 period. The findings are three-fold. First, board diversity, as measured by director gender and nationality, has a positive effect on corporate financial performance. Second, the relationship between board diversity and corporate performance is stronger in better-governed firms than their poorly-governed counterparts. Finally, board diversity, as measured by director gender, ethnicity and nationality, enhances the pay-for-performance sensitivity, but not the actual executive pay. Our results suggest that decisions about board diversity are not merely influenced by moral values; they arise because of the cost-benefit considerations of what diversity can bring to the firm. The findings are robust to controlling for different alternatives of board diversity measures, corporate governance proxies, corporate outcomes and types of endogeneities.

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116 citations

Journal Article•DOI•

Islamic governance, national governance, and bank risk management and disclosure in MENA countries

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Ahmed A. Elamer¹, Ahmed A. Elamer², Collins G. Ntim³, Hussein A. Abdou⁴, Hussein A. Abdou¹ - Show less +1 more•Institutions (4)

Mansoura University¹, University of the West of Scotland², University of Southampton³, Manchester Metropolitan University⁴

01 May 2020-Business & Society

TL;DR: In this article, the authors examined the relationship among religious governance, especially Islamic governance quality (IGQ), national governance quality, and risk management and disclosure practices (RDPs), and consequently ascertain whether NGQ has a moderating influence on the IGQ-RDP nexus.

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Abstract: We examine the relationships among religious governance, especially Islamic governance quality (IGQ), national governance quality (NGQ), and risk management and disclosure practices (RDPs), and consequently ascertain whether NGQ has a moderating influence on the IGQ-RDPs nexus. Using one of the largest datasets relating to Islamic banks from 10 Middle East and North Africa (MENA) countries from 2006 to 2013, our findings are three-fold. First, we find that RDPs are higher in banks with higher IGQ. Second, we find that RDPs are higher in banks from countries with higher NGQ. Finally, we find that NGQ has a moderating effect on the IGQ-RDPs nexus. Our findings are robust to alternative RDPs measures and estimation techniques. These results imply that the quality of disclosure depends on the nature of the macro-social level factors, such as religion that have remained largely unexplored in business and society research, and therefore have important implications for policy-makers.

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111 citations

Cites background or result from "Corporate boards and ownership stru..."

...improve economic efficiency by offering Islamic banks’ access to critical resources, such as Islamic bonds (‘Sukuk’) and contracts (Al-Bassam et al., 2017; Pfeffer & Salancik, 2003)....
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..., 2007), and hence improving organisational legitimacy, can serve as a motivation for Islamic banks to engage in or mimic accepted social behaviour (Al-Bassam et al., 2017)....
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...From legitimation/moral view of neo-institutional theory predicts that Islamic governance may offer incentives to engage in greater RDPs in order to enhance their legitimacy within the broader society (Al-Bassam et al., 2017; Haniffa & Hudaib, 2007; Ntim et al., 2013; Pittroff, 2014)....
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...This is because conforming to such expected social behaviour can be a strategic approach towards enhancing Islamic banks’ legitimacy and justifying their right to exist (Al-Bassam et al., 2017; Ntim et al., 2013)....
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...9, International Accounting Standards 32 and 39), and corporate governance reforms worldwide (Abdulrahman et al., 2017; Al-Bassam et al., 2017; Elmagrhi et al., 2016), existing RDPs research is largely focused on examining the influence of either firm-level characteristics (e....
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Journal Article•DOI•

Corporate Boards, Ownership Structures and Corporate Disclosures: Evidence from a Developing Country

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Abdalrhman Alnabsha¹, Hussein A. Abdou², Collins G. Ntim³, Ahmed A. Elamer•Institutions (3)

University of Huddersfield¹, Manchester Metropolitan University², University of Southampton³

12 Feb 2018-Journal of Applied Accounting Research

TL;DR: In this article, the effect of corporate board attributes, ownership structure and firm-level characteristics on both corporate mandatory and voluntary disclosure behavior was investigated, and the authors found that board size, board composition, frequency of board meetings and the presence of an audit committee have an impact on the level of corporate disclosure.

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Abstract: Purpose The purpose of this paper is to investigate the effect of corporate board attributes, ownership structure and firm-level characteristics on both corporate mandatory and voluntary disclosure behaviour. Design/methodology/approach Multivariate regression techniques are used to estimate the effect of corporate board and ownership structures on mandatory and voluntary disclosures of a sample of Libyan listed and non-listed firms between 2006 and 2010. Findings First, the authors find that board size, board composition, the frequency of board meetings and the presence of an audit committee have an impact on the level of corporate disclosure. Second, results indicate that ownership structures have a non-linear effect on the level of corporate disclosure. Finally, the authors document that firm age, liquidity, listing status, industry type and auditor type are positively associated with the level of corporate disclosure. Research limitations/implications Future research could investigate disclosure practices using other channels of corporate disclosure media, such as corporate websites. Useful insights may be offered also by future studies by conducting in-depth interviews with corporate managers, directors and owners regarding these issues. Practical implications The evidence relating to the important role that corporate governance mechanisms play in shaping the expectations relating to the level of corporate voluntary and/or mandatory disclosures may be useful in informing investor decisions, as well as future policy and regulatory initiatives. Originality/value This paper contributes to the existing literature by examining the governance-disclosure nexus relating to both mandatory and voluntary disclosures in both listed and non-listed firms operating in a developing country setting.

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102 citations

Journal Article•DOI•

Executive pay and performance: the moderating effect of CEO power and governance structure

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Collins G. Ntim¹, Sarah Lindop², Dennis Thomas², Hussein A. Abdou¹, Kwaku K. Opong³ - Show less +1 more•Institutions (3)

University of Huddersfield¹, Aberystwyth University², University of Glasgow³

26 Mar 2019-International Journal of Human Resource Management

TL;DR: In this paper, the authors examined the effect of chief executive officer (CEO) power and corporate governance structure on the pay-for-performance sensitivity (PPS) using a large up-to-date South African data set.

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Abstract: This paper examines the crucial question of whether chief executive officer (CEO) power and corporate governance (CG) structure can moderate the pay-for-performance sensitivity (PPS) using a large up-to-date South African data-set. Our findings are threefold. First, when direct links between executive pay and performance are examined, we find a positive, but relatively small PPS. Second, our results show that in a context of concentrated ownership and weak board structures; the second-tier agency conflict (director monitoring power and opportunism) is stronger than the first-tier agency problem (CEO power and self-interest). Third, additional analysis suggests that CEO power and CG structure have a moderating effect on the PPS. Specifically, we find that the PPS is higher in firms with more reputable, founding and shareholding CEOs, higher ownership by directors and institutions, and independent nomination and remuneration committees, but lower in firms with larger boards, more powerful and long-t...

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90 citations

Cites background from "Corporate boards and ownership stru..."

...Different mechanisms, including incentive alignment (pay) and monitoring (CG) have, therefore, been suggested to motivate managers to work in the best interests of owners (Jensen & Meckling, 1976; Al-Bassam et al., 2016; AlBassam & Ntim, 2016)....
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References

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Theory of the firm: Managerial behavior, agency costs and ownership structure

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Michael C. Jensen¹, William H. Meckling¹•Institutions (1)

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TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.

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Abstract: This article synthesizes the large but diverse literature on organizational legitimacy, highlighting similarities and disparities among the leading strategic and institutional approaches. The analysis identifies three primary forms of legitimacy: pragmatic, based on audience self-interest; moral, based on normative approval: and cognitive, based on comprehensibility and taken-for-grantedness. The article then examines strategies for gaining, maintaining, and repairing legitimacy of each type, suggesting both the promises and the pitfalls of such instrumental manipulations.

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13,229 citations

"Corporate boards and ownership stru..." refers background in this paper

...…through increased disclosure of CG practices that may not only help in legitimising (legitimacy theory) their operations (Ashforth & Gibbs, 1990; Suchman, 1995), but also secure access to critical resources (resource dependence theory) (Branco & Rodrigues, 2008; Reverte, 2009), such as…...
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...…terms of expertise (Branco & Rodrigues, 2008; Chen & Roberts, 2010), experience and stakeholder (stakeholder theory) representation (Reverte, 2009; Ntim & Soobaroyen, 2013 2013a, b), which can enhance corporate legitimacy (legitimacy theory) and reputation (Ashforth & Gibbs, 1990; Suchman, 1995)....
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...…through increased disclosure of CG practices that may not only help in legitimising (legitimacy theory) their operations (Ashforth & Gibbs, 1990; Suchman, 1995), but also secure access to critical resources (resource dependence theory) (Branco & Rodrigues, 2008; Reverte, 2009), such as…...
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Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

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Mitchell A. Petersen¹•Institutions (1)

Northwestern University¹

01 Jan 2009-Review of Financial Studies

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Abstract: In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on clustered standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper examines the different methods used in the literature and explains when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.

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The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems

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Michael C. Jensen¹•Institutions (1)

Harvard University¹

01 Jul 1993-Journal of Finance

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7,121 citations

"Corporate boards and ownership stru..." refers background in this paper

...…CG practices and performance (Samaha et al., 2012), whereas others have suggested that larger boards are often characterised by poor co-ordination, communication and monitoring problems (Jensen, 1993; Ntim et al. 2015a, b), which can impact negatively on CG disclosure and financial performance....
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...…is usually associated with block ownership can be expected to minimise agency problems and improve financial performance (Jensen & Meckling, 1976; Jensen, 1993; Botosan, 1997), and hence a lesser need for increased CG disclosures in order to gain legitimacy (legitimacy theory) from powerful…...
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...…with block ownership can be expected to minimise agency problems (agency theory) and improve financial performance (Jensen & Meckling, 1976; Jensen, 1993; Botosan, 1997), and hence a lesser need for increased CG disclosures in order to gain legitimacy (legitimacy theory) from powerful…...
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...With respect to board size, theoretically, increased managerial monitoring associated with larger boards can have a positive influence on corporate disclosures, including CG ones and performance (Jensen & Meckling, 1976; Jensen, 1993)....
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Journal Article•DOI•

Auditor size and audit quality

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Linda DeAngelo¹•Institutions (1)

University of Pennsylvania¹

01 Dec 1981-Journal of Accounting and Economics

TL;DR: In this paper, the authors argue that audit quality is not independent of audit firm size, even when auditors initially possess identical technological capabilities, and when incumbent auditors earn client-specific quasi-rents, auditors with a greater number of clients have more to lose by failing to report a discovered breach in a particular client's records.

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4,969 citations

"Corporate boards and ownership stru..." refers background in this paper

...One way of determining external auditor quality is the level of disclosure, and in fact, audit firm size has been suggested to have a positive effect on corporate disclosure (Owusu-Ansah, 1998; Eng & Mak, 2003) and audit quality (DeAngelo, 1981)....
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...This is because larger audit firms have greater financial strength, experience, expertise, information and knowledge (DeAngelo, 1981; Ntim et al., 2012a, b), which can improve their independence and ability to limit opportunistic activities of managers (Alsaeed, 2006; Aly et al., 2010)....
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...In a similar vein, and with respect to audit firm size, larger audit firms have greater financial strength, knowledge and independence, which can impact positively on voluntary CG disclosure (DeAngelo, 1981; Owusu-Ansah, 1998; Eng & Mak, 2003; Han et al., 2012)....
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