Research Outputs
Corporate governance, national culture and bank performance: evidence from MENA countries
Purpose Despite global economic liberalization, the Middle East and North Africa (MENA) banking sector remains uncompetitive and resistant to globalization. This study aims to extend corporate governance (CG) literature by examining the interplay between CG, national culture and bank performance, using data from listed banks in MENA countries. Design/methodology/approach This research analyzes 1,920 bank-year observations from 124 banks across 13 MENA countries from 2009 to 2023. National culture data was sourced from Hofstede’s index, and panel data techniques were used to account for individual heterogeneity and endogeneity issues. Findings Empirical results reveal that larger boards, well-structured committees with nonexecutive directors, fewer board meetings and limited involvement of independent directors significantly enhance bank performance. These governance structures align with key cultural traits such as high power distance, collectivism and uncertainty avoidance, which favor hierarchical decision-making, group consensus and stability. Practical implications This study provides practical insights for policymakers aiming to improve banking sector performance in MENA by aligning CG frameworks with cultural values. Recommendations include forming larger, well-structured boards and adapting decision-making processes to reflect the region’s preference for stability and collaboration. These insights can serve as a practical guide for improving governance systems in MENA and beyond. Originality/value While previous studies have explored the impact of CG and national culture on banking, this study is the first, to the best of the authors’ knowledge, to integrate both factors within the MENA context, offering a comprehensive perspective on their combined impact on bank performance.
Founding-family-controlled firms, intergenerational succession, and firm value
Using a unique, hand-collected data sample and panel-data econometric techniques, we analyse the impact of founding-family control and intergenerational succession on the value of Chilean listed companies. After controlling for firm- and ownership-specific characteristics, we find an inverse U-shaped relationship between a founding family’s degree of ownership and firm value. Hence, family ownership at first increases firm value. However, when family ownership exceeds a threshold of about 38 percent of outstanding shares, the family takes advantage of its power in the firm and extracts wealth from minority shareholders. Further, if the founder of the company is the CEO or chairman of the board, firm value increases. However, family businesses with a subsequent-generation owner-manager destroy value.
Chilean pension fund managers and corporate governance: The impact on corporate debt
In this paper we analyse the relationship between the investment of Pension Fund Managers (AFPs) and the cost of corporate debt (public and private). Using a sample of 93 non-financial Chilean listed firms between 2009 and 2014, we find that AFPs increase the probability of issuing bonds. Moreover, in line with our crowding out hypothesis, we show that AFPs increase the cost of bank borrowing. In line with the monitoring view, we find that AFPs decrease bond yields. On average, our results suggest that AFPs improve corporate governance by influencing information disclosure and by reducing the intensity of lending relationships with banks.
Group affiliation and ownership concentration as determinants of capital structure decisions: Contextualizing the facts for an emerging economy
This study considers the firm’s affiliation with business groups and the ownership structure as determinants of leverage decisions in Chilean firms. The major findings show that group-affiliated firms take advantage of internal capital markets and transactions with related parties (e.g., low transference price or loans at competitive interest rates) that reduces the demand for external debt. Majority shareholders in affiliated firms behave as controllers of managers, on the one hand, and avoid the supervisory role of debt, on the other hand. In stand-alone firms, supervision led by majority shareholders is complemented by the monitoring role of debt through higher levels of leverage. We conclude that further developments in capital structure theories adjusted to the particularities of the different institutional contexts are needed
Do board gender diversity and remuneration impact earnings quality? Evidence from Spanish firms
Purpose: This study aims to investigate how gender diversity and remuneration of boards of directors’ influence earnings quality for Spanish-listed firms. Design/methodology/approach: The sample includes 105 nonfinancial Spanish firms from 2013 to 2018, corresponding to an unbalanced panel of 491 firm-year observations. The primary empirical method uses a Tobit semiparametric estimator with firm- and industry-level fixed effects and an innovative set of measures for earnings quality developed by StarMine. Findings: Results exhibit a positive correlation between increased gender diversity and a firm’s earnings quality, suggesting that a gender-balanced board of directors is associated with more transparent financial reporting and informative earnings. We also find a nonmonotonic, concave relationship between board remuneration and earnings quality. This indicates that beyond a certain point, excessive board compensation leads to more opportunistic manipulation of financial reporting with subsequent degradation of earnings quality. Research limitations/implications: This study only covers nonfinancial Spanish listed firms and is silent about how alternative board features’ influence earnings quality and their informativeness. Originality/value: This study introduces measures of earnings quality developed by StarMine that have not been used in the empirical literature before as well as measures of board gender diversity applied to a suitable Tobit semiparametric estimator for fixed effects that improves the precision of results. In addition, while most of the literature focuses on Anglo-Saxon countries, this study discusses board gender diversity and board remuneration in the underexplored context of Spain. Moreover, the hand-collected data set comprising financial reports provides previously untested board features as well as a nonlinear relationship between remuneration and earnings quality that has not been thoroughly discussed before.
Ibero-American corporate ownership and boards of directors: Implementation and impact on firm value in Chile and Spain
From a corporate governance point of view, this paper addresses the question of how corporate ownership and board characteristics influence firm value for a sample of Ibero-American companies. Specifically, we analyse indexed non-financial companies from Chile and Spain for the period 2007 – 2016, using the GMM panel data technique. Our research is novel in considering a two-country approach, with one emerging and one developed country, and in analysing how corporate ownership and board characteristics, in addition to contextual variables, determine firm value. Our results assess the efficiency of corporate governance mechanisms. Although findings are intriguing regarding ownership concentration, they confirm the benefits of a good board of directors. This type of board is characterised by a large size, sufficiently independent directors, and a balance in terms of gender diversity. We provide several policy recommendations from our main findings.
Board of director's gender diversity and its impact on earnings management: An empirical analysis for select European firms
From a corporate governance point of view, this paper addresses the question about how board gender diversity influences managerial opportunistic behavior for solving agency conflicts from a sample of European countries. Specifically, we analyzed indexed non-financial companies from Denmark, Finland, France, Germany, Italy, Norway, Portugal, Spain, Sweden, and United Kingdom for the period 2006–2016. Several panel data techniques are used in the empirical analysis to deal with the endogeneity and heterogeneity problems. To the best of our knowledge our research is novel in the literature by providing a multi-country approach in board gender diversity, as well as considering contextual country variables and the role of the regulatory system as determinants of earnings management. Our results confirm the benefits of having a balanced board in terms of gender diversity. An equilibrated board tends to mitigate earnings management practices, reinforcing the value of the laws passed in recent decades in Europe. Our analysis reveals that the regulatory framework regarding board gender diversity established by each country has a determinant role in reaching equality in decision-making positions, as a founding value of the European Union. We provide several policy recommendations from our main findings.
The zero-debt puzzle in BRICS countries: Disentangling the financial flexibility and financial constraints hypotheses
This study analyzes the zero-debt decisions of BRICS firms using a bivariate probit model. The leading hypotheses are financial flexibility and financial constraints. On the demand-side, our findings reveal that managerial debt aversion, early lifecycle stage, growth opportunities, solvency, and concentrated ownership contribute to the lack of debt. Similarly, a country's institutional quality correlates with firms' debt-free status. On the supply-side, creditors fund companies with poor financial records in countries with robust markets and economic freedom. Financial flexibility and restrictions leading to zero debt are linked to firm and institutional characteristics in emerging countries.
Debt, or not debt, that is the question: A Shakespearean question to a corporate decision
Capital structure theories are unable to properly explain the zero-debt puzzle, frequently observed in firms around the world. Our paper’s contribution is to identify the variables that measure either firm’s characteristics or environmental effects, in order to explain why firms have and eventually keep a debt-free policy. Our study includes a comprehensive sample of firms from 47 countries in the period 1996–2014. Our results indicate that all equity companies are small, with no growth opportunities, with a low level of tangible assets, high proportion of liquid assets, profitable, and with diluted insider ownership. Furthermore, it is more probable to find low levels of debt in countries with good governance indicators or when the economy is not growing.
Corporate governance in Latin American firms: contestability of control and firm value
Using a sample of 595 firms listed in the capital markets of Argentina, Brazil, Chile, Colombia, Mexico, and Peru for the period of 2000---2015, we confirm prior literature by showing that when power distribution among several large shareholders (contestability) increases, firms’ financial performance is enhanced. More interestingly, we find that these relations are even more significant in family-owned firms, emphasising the relevance of contesting control in this kind of firm. Furthermore, contestability has a greater influence in family firms that have the most concentrated ownership. We also find that the legal framework attenuates the impact of the balance of ownership. Here, contesting control acts as an internal corporate governance mechanism that provides an alternative to the external legal setting. Taken together, our results mean that in institutional settings characterised by weak investor protection and possible conflicts of interest among shareholders, oversight by multiple large, non-related shareholders (balanced ownership concentration) becomes an important governance mechanism.