The impact that a company generates on all its stakeholders and its consequences should not be underestimated; good management of stakeholders interests can strategically encourage their commitment and help stakeholders promote the business. However, hypothesis 1 indicated that there is a positive and significant relationship between independent board and firm performance, which is not supported. Routledge, London, UK, pp 164. In the emerging market context, studies [77, 90] find a positive association between ownership concentration and accounting profit for Chinese public companies. WebCorporate Governance and Sustainability. Int Rev Financ Anal 41:162175, Liang Q, Ling L, Tang J, Zeng H, Zhuang M (2019) Managerial overconfidence, firm transparency, and stock price crash risk Evidence from an emerging market. Evidence from China. Managerial overconfidence was measured by the corporate earnings forecasts. For instance, Ibrahim [39] reported firms to operate in competitive industries record more returns of share compared with the concentrated industries. J Financ Econ 102(2):272292, Koke J, Renneboog L (2005) Do corporate control and product market competition lead to stronger productivity? School of Business, University of International Business and Economics, Beijing, 100029, China, You can also search for this author in This test indicates the result of AR (1) and AR (2) is tested for the first-order and second-order serial correlation in the first-differenced residuals, AR (2) test accepted under the null of no serial correlation. According to Baccar et al. The study findings indicate a negative significant influence of managerial overconfidence when the firm is measure by Tobins Q (=4.624, p<0.10), but a negative relationship is insignificant when the firm is measured by ROA. [38] noted that overconfident managers normally overestimate the profitability of investment projects and underestimate the related risks. A multivariate regression model analyzes the association between audit delay and six corporate governance mechanisms, namely, joint auditor combination, board size, board independence, role duality, institutional ownership and government ownership.,There is a wide range in audit delay among KSE companies, ranging from 7 to 159 days. J Financ Econ 85(2007):66101, Boyd BK (1995) CEO duality and firm performance: a contingency model. Russias invasion of Ukraine in 2022, coupled with strained relations between two of the worlds economic superpowers (the US and China), are a few of many factors that have converged to create chaos in supply chains, as well as subsequent economic uncertainty on a global scale. Such a result push managers to make sub-optimal decisions and increase observed corporate distortions as a result. A typical characteristic of such dynamic panel data is a large observation, small-time, i.e., that there are many observed individuals, but few observations over time. Better corporate governance, The recent financial crises, the fast growth of privatizations, and financial institutions have reinforced the improvement of corporate governance practices in numerous institutions of different countries. Acad Manag J 44:639660, Chen CH, Al-Najjar B (2012) The determinants of board size and independence: evidence from China. The research employed nine consecutive years from 2010 to 2018 that met the condition that financial statements are available from the CSMAR database. In this condition, these two roles in one person made a concentration of power and responsibility, and this may result in busyness of CEO which affects the normal duties of a company. Also, studies like [77, 86] examine empirically the effect of debt on firm investment decisions and firm value; reveal that debt finance is a negative effect on corporate investment and firm values [69] find that there is a significant and negative relationship between debt intensity and firm productivity in the case of Indian firms. However, in China, the main source of debt financers for companies is state banks [82], and most overconfidence CEOs in Chinese firms have political connections [96] with the state and have a better relationship with external financial institutions and public banks. Princeton University Press, Princeton, NJ. This finding is in line with Wu and Cui [90], and Pant et al. Corporate governance has got attention and developed as an important mechanism over the last decades. External corporate governance mechanisms like product market competition and debt financing are limited from emerging market CG literature; therefore, this study provided comprehensive empirical evidence. Large private organizations may use a board of directors, but their influence in the absence of shareholders may diminish. Technol Forecast Soc Chang 135(2):208216. Implementing target-oriented internal corporate governance mechanisms such as board diversity, board independence, the board size, the board-level sustainability committee, the role of the CEO, ownership concentration, and the disclosure and transparency practice enables firms to implement target-oriented sustainability measures. As Yu and Wen [92] argued, Chinese companies have a concentrated ownership structure, limited disclosure, poor investor protection, and reliance on the banking system. This focus on board independence is grounded in agency theory, which addresses inefficiencies that arise from the separation of ownership and control [24]. The broad question that we analyse in this paper is: what are the corporate Thus, the distribution of control power can be measured by calculating the ownership concentration indices, which are used to measure the degree of control or the power of influence in corporations [88]. Corporate governance is a system that guides the conduct of the people within an organization, as well as the direction of the organization itself. Ive found these goals can only come to fruition if the board of directors is effective. Crisis management is increasingly relevant due to the high frequency and speed with which crises occur. Bell J Econ 14:366382, Heaton JB (2002) Managerial Optimistic and Corporate Finance. It is put together on a number of consistent mechanisms; internal control systems and external environments that contribute to the business corporations increase successfully as a complete to bring about good corporate governance. Filatotchev and Nakajima [26] suggest that an integrated approach bringing external and internal mechanisms jointly enhances to build up a more general view on the effectiveness and efficiency of different corporate governance mechanisms. Shareholders, investors, banks and the general public rely on this information to provide an objective assessment of an organization. Thus, the study includes both internal and external CG mechanisms to broadly show the connection of these components. Theoretical models have argued that competition in product markets is a powerful force for overcoming the agency problem between shareholders and managers [78]. Previous studies claimed that overconfidence is a dysfunctional behavior of managers that deals with unfavorable consequences for the firm outcome, such as value distraction through unprofitable mergers and suboptimal investment behavior [61], and unlawful activities (Mishina et al. These can be separated into two main systems (Shleifer and Vishny, 1997): large-shareholder control systems, such as those in Germany, France or Spain, and market con-trol systems, such as those in the USA and the UK. PubMedGoogle Scholar. They execute their activities according to firm and CEO status. In other ways, overconfidence managers are irrational behaviors that tend to consider themselves better than others on different attributes. Int Bus Rev 21(5):831846, Chen X (2019) Corporate Governance Structures, Corporate Entrepreneurship and Firm Performance. WebDownloadable (with restrictions)! Issues 6(2):529537. Futur Bus J 7, 50 (2021). There are two competitive views about dual leadership in corporate governance literature. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Md. Evolving market dynamics and economic realities are putting pressure on the corporate governance functions at organizations around how stakeholder needs are identified and managed. The board of directors has the formal authority to endorse management initiatives, evaluate managerial performance, and allocate rewards and penalties to management on the basis of criteria that reflect shareholders interests. This study sample was limited to only listed firms on the stock market, due to hard to access reliable financial and corporate governance data of unlisted firms. J Manage Governance 21(3):737755, Ben Mahamed E, Baccat A, Bouri A (2013) Managerial optimism, overconfidence and board characteristics: towards a new role of corporate governance. Therefore, the following hypothesis was proposed: Managerial overconfidence moderates the effect of product market competition on firm performance. According to Wahyudin and Solikhah ( 2017 ), corporate governance is a system of rules that is closely related to managers, directors, employees, controllers, and other stakeholders. Even within the confines of one countrys system, such as the UK, arriving at a definition of corporate governance is no easy task, Accounting, transparency, fairness, and responsibility are the four fundamental principles of corporate governance. Structured Query Language (known as SQL) is a programming language used to interact with a database. Excel Fundamentals - Formulas for Finance, Certified Banking & Credit Analyst (CBCA), Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM), Commercial Real Estate Finance Specialization, Environmental, Social & Governance Specialization, Shareholder Primacy vs. Stakeholder Primacy, Current Trends & Corporate Governance Pressures, Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management Professional (FPWM). This area is often referred to as. Int Rev 15(2):239250, Chou J, Lilian N, Valeriy S, Qinghai W (2010) Product Market Competition and Corporate Governance. Behavioral finance theory incorporates managerial psychological biases and emotions into their decision-making process. Russo and Schoemaker [76] found that there is opposite relationship between overconfidence managers and quality of decision making, because overconfident behavioral bias reduces the ability to make a rational decision. These corporate governance mechanisms ensure that businesses or organizations follow national accounting standards, regulations or other external guidelines. An internal control mechanism ownership concentration believes in the existence of strong control against the managers decisions and choices. 1). A healthy corporate governance function requires a clear and formal separation of duties between management and the Board. Jensen [41] board of directors is described as the peak of the internal control system. Agency theory by Jensen and Meckling [42] has a very clear vision of the problems that exist in the company to know the disagreement of interests between shareholders and managers. [69]. Theoretical literature has argued that product market competition forces management to improve firm performance and to make the best decisions for the future. This study finding is consistent with the previous studies: Shao [79], Nguyen [66] and Wintoki et al. Thus, the board of directors has the responsibility to monitor and initiate managers in the company to increase the wealth of ownership and firm value. Oliver [68] argued the human character of individual managers affects the effectiveness of corporate governance. Managers are more focused on enhancing productivity that is more likely to reduce cost and increase firm performance. Balancing power in an organization ensures that no one individual has the ability to overextend resources. Low credit rating occurs when bankers believe firms are overestimating the investment projects. The board represents a firms owners and is responsible for ensuring that the firm is managed effectively. The average value of the independent board of directors ratio was 0.374. Well-managed corporate governance mechanisms play an important role in improving corporate performance. Russo JE, Schoemaker PJH (1992) Managing overconfidence. Thus, this study contributed to the emerging market by providing comprehensive empirical evidence to the corporate governance literature using unique characteristics of Chinese publicity listed firms covering nine years (20102018). Corporate governance is the system or structure of rules, practices, and laws by which a firm is directed and controlled. These internal mechanisms of CG work to check and balance the power of managers, shareholders, directors, and stakeholders. Thus, ownership concentration in Chinese firms may be an alternative governance tool to reduce agency problems and enhance efficiency. However, the result indicated there is no significant moderating role of managerial overconfidence in the relationship between product market competition and firm performance in Chinese listed firms. 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