Corporate governance

About: Corporate governance is a research topic. Over the lifetime, 118591 publications have been published within this topic receiving 2793582 citations.

Fraudulent Financial Reporting: Consideration of Industry Traits and Corporate Governance Mechanisms

Abstract: This paper provides insight into financial statement fraud instances investigated during the late 1980s through the 1990s within three volatile industries—technology, health care, and financial services—and highlights important corporate governance differences between fraud companies and no‐fraud benchmarks on an industry‐by‐industry basis. The fraud techniques used vary substantially across industries, with revenue frauds most common in technology companies and asset frauds and misappropriations most common in financial‐services firms. For each of these three industries, the sample fraud companies have very weak governance mechanisms relative to no‐fraud industry benchmarks. Consistent with prior research, the fraud companies in the technology and financial‐services industries have fewer audit committees, while fraud companies in all three industries have less independent audit committees and less independent boards. In addition, this study provides initial evidence that the fraud companies in the techno...

Does Corporate Governance Predict Firms' Market Values? Evidence from Korea

Abstract: We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining the market value of Korean public companies. We construct a corporate governance index (KCGI, 0~100) for 515 Korean companies based on a 2001 Korea Stock Exchange survey. In OLS, a worst-to-best change in KCGI predicts a 0.47 increase in Tobin's q (about a 160% increase in share price). This effect is statistically strong (t = 6.12) and robust to choice of market value variable (Tobin's q, market/book, and market/sales), specification of the governance index, and inclusion of extensive control variables. We rely on unique features of Korean legal rules to construct an instrument for KCGI. Good instruments are not available in other comparable studies. Two-stage and three-stage least squares coefficients are larger than OLS coefficients and are highly significant. Thus, this paper offers evidence consistent with a causal relationship between an overall governance index and higher share prices in emerging markets. We also find that Korean firms with 50% outside directors have 0.13 higher Tobin's q (roughly 40% higher share price), after controlling for the rest of KCGI. This effect, too, is likely causal. Thus, we report the first evidence consistent with greater board independence causally predicting higher share prices in emerging markets.

Arrangements for information technology governance: a theory of multiple contingencies

Abstract: A key issue facing information systems researchers and practitioners has been the difficulty in IT governance arrangements refers to the patterns of authority for key IT activities in business firms, including IT infrastructure, IT use, and project management. During the last 20 years, three primary modes of IT governance have become prevalent: centralized, decentralized, and the federal mode. These modes vary in the extent to which corporate IS, divisional IS, and line management are vested with authority for the key IT activities. While a significant volume of research has examined the influence of contingency factors on the choice of a specific mode of IT governance, most of this research has examined the singular effects of the contingency factors. The assumption underlying these studies is as though the organizational contingencies act in isolation in influencing the mode of IT governance. However, in reality, business firms are subject to the pulls and pressures of multiple, rather than singular, contingency forces. Therefore, to acknowledge this reality, this study applies the theory of multiple contingencies to examine how contingency forces influence the mode of IT governance. The theory argues that contingency forces interact with each other by either amplifying, dampening, or overriding their mutual influences on the IT governance mode. Three scenarios of multiple, interacting contingencies are identified: reinforcing, conflicting, and dominating. Each of these scenarios of multiple contingencies is hypothesized to influence a particular mode of IT governance. Utilizing rich data from case studies of eight firms, empirical evidence is presented to support these hypotheses. Implications of the multiple contingencies theory for research and for practice are presented.

Analyst Coverage and Earnings Management

Abstract: What is the role of information intermediaries in corporate governance? This paper examines equity analysts' influence on managers' earnings management decisions. Do analysts serve as external monitors to managers, or do they put excessive pressure on managers? Using multiple measures of earnings management, I find that firms followed by more analysts manage their earnings less. To address potential endogeneity problem of analyst coverage, I use two instrumental variables that are based on change in broker size and on firm's inclusion in the S&P 500 index, and find that the result is robust. Finally, given the size of coverage, analysts from top brokers and more experienced analysts have stronger effect against earnings management.