- Title
- Does Certification of Corporate Governance Compliance Pay Off? Evidence from a Unique Regulatory Settings
- Creator
- Sobhan, Abdus; Bose, Sudipta; Miah, Muhammad Shahin; Razzaque, Rushdi Md. Rezaur
- Relation
- Corporate Governance Vol. 32, Issue 4, p. 670-702
- Publisher Link
- http://dx.doi.org/10.1111/corg.12563
- Publisher
- Wiley Blackwell
- Resource Type
- journal article
- Date
- 2024
- Description
- Research Questions/Issues: Using insights from agency and signalling theories, we examine the effect on companies’ market-based performance of a unique monitoring mechanism of compliance with a corporate governance (CG) code, that is, independent certification of compliance with a CG code and type of certification provider. Furthermore, we examine the impact of two boundary conditions, family company status and company-level information asymmetry, influencing the effect of independent CG compliance certification and type of certification provider on the market-based performance of companies. Research Findings/Insights: Based on 1,110 Bangladeshi company-year observations from 2006–2017, we firstly find that independent CG compliance certification is positively associated with companies’ market-based performance. Secondly, we show that CG compliance certification by a chartered secretarial firm is related to higher market-based performance. Thirdly, we document that family companies attenuate both these associations. Finally, we find that, while company-level information asymmetry reinforces the association between CG compliance certification and market-based performance, it weakens the relationship between certification by a chartered secretarial firm and companies’ market-based performance. Theoretical/Academic Implications: Our findings are consistent with the agency and signalling theory that independent certification of CG compliance and this certification by a chartered secretarial firm reduce information asymmetry between managers and external investors by signalling enhanced credibility of reported CG compliance information. However, the roles of CG compliance certification and certification by a chartered secretarial firm to reduce agency conflict and provide credible signals are conditional on two boundary conditions, family company status and company-level information asymmetry. Practitioner/Policy Implications: This study’s findings highlight the economic implications of a unique mechanism for monitoring compliance with an adopted CG code. The findings have significant implications for policy makers and regulators in emerging economies. KEYWORDS: corporate governance, certification of compliance, chartered secretarial firm, market-based performance of companies, emerging economy JEL Classifications: G21; G34; M14; M41
- Subject
- corporate governance; certification of compliance; chartered secretarial firm; market-based performace of companies; emerging economy
- Identifier
- http://hdl.handle.net/1959.13/1508160
- Identifier
- uon:56092
- Identifier
- ISSN:0964-8410
- Rights
- x
- Language
- eng
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