Oct'21
The IUP Journal of Corporate Governance
Focus
The first paper, "Does Corporate Governance Lead to Profitability of Financial Institutions? An Empirical Study on Bangladesh", by Md. Abdur Rashed Kabir, Md. Sumon Ali, Abu N M Wahid and Md. Fahad Uddin, has investigated whether corporate governance leads to profitability of financial institutions. The authors' motivation is rooted in the recent Bangladesh Securities and Exchange Commission's (BSEC's) new Corporate Governance Code-2018 and its revised mandate on the number of directors on the board. The study captures data for the period 2015 to 2019 from 12 financial institutions listed on the Dhaka Stock Exchange (DSE). Variables considered were board size, independent directors, audit committee, CEO duality, and female directors. The control variables considered for the study are firm size and firm age. To achieve the proposed objective, the study has employed Fixed effect OLS method. The results, limitations and implications are discussed.
The second paper, "Factors Restraining Independent Directors from Effectively Discharging Their Duties", by Devendra Jarwal and Soni Mitali, focuses on effective corporate governance. The motivation for this study has come from the literature and news on the role of independent directors, their ineffectiveness, and their failure to deliver. To address this, the authors have identified and investigated the factors that would restrain the independent directors from performing. The solutions to the same are suggested by the authors. The authors have opted for a qualitative exploratory study with focused group discussion involving field experts. The sample consists of independent directors and company secretaries who have had more than 15 years of experience. The authors have documented in detail how external and internal factors intervene and influence the directors in performing independently to their full potential.
The third paper, "Does Corporate Governance Impact Firm Performance? A Comparative Analysis of State-Owned Enterprises Versus Private Enterprises in India" by Neetu Yadav, Vijaya Lakshmi and Sonali Narbhariya, gives an insight on State-Owned Enterprise (SOE) and private enterprise. It emphasizes that the practice of corporate governance is equally important in state-owned enterprises. The study considered 20 SOEs and 33 private firms listed in India. The authors employed Ordinary Least Square (OLS) regression analysis to check the impact of corporate governance separately for private enterprise and SOEs. The results obtained were substantiated, with suggestions and possible scope for future studies.
The last paper, "The Role of Tax Havens in Base Erosion and Profit Shifting: Impact on Indian Economy" by Shweta Jain, qualitatively examines the most pressing concern of the developing nations with regard to tax havens. It presents various tax havens and their operating procedures in specific case scenarios. The author underlines that the countries that act as tax havens do not mandate residency requirements and therefore are found to be more favorable destinations to evade tax. The author has articulated how tax evasion affects wealth redistribution, income inequality, Base Erosion and Profit Shifting (BEPS) action plan and so on. The paper has also covered Tax Information Exchange Agreements (TIEA) and the role of technology in combating tax evasion.
Consulting Editor
Does Corporate Governance Lead to Profitability of Financial Institutions? An Empirical Study on Bangladesh
The study explores the effect of corporate governance on the performance of financial institutions in Bangladesh. This empirical analysis focuses on 12 selected financial institutions from the Dhaka Stock Exchange from 2015-2019. To achieve this objective, the authors have considered Return on Asset (ROA), Return on Equity (ROE), and Earnings Per Share (EPS) as the profitability measurements, and corporate governance mechanisms, which include size of the board, independent directors, audit committee members, CEO duality, and female directors. Applying the Fixed Effect Ordinary Least Square method, the study found that board size, independent directors, audit committee members, and percentage of female directors substantially influence at least one measurement criterion of the performance of firms under investigation. Moreover, regarding the control variables-firm age and leverage negatively influence firm performance. The findings suggest that firms that practice good and effective corporate governance procedures may expect better market and financial performance.
Factors Restraining Independent Directors from Effectively Discharging Their Duties
Independent directors are expected to play a pivotal role in effective ethical corporate governance. Incidences of corporate governance failures, despite the adequate presence of independent directors on the board, indicate their ineffectiveness, and therefore it is essential to examine the various factors that restrain them from effectively discharging their duties. The authors employed qualitative exploratory study strictly limited to enumerating the factors that are restraining independent directors from performing their duties effectively. And, for such explorative study, the authors found that focused discussion group method with analysis of case studies of select companies is the best-suited method to conduct this study. The legal framework is continuously empowering independent directors with various powers and safeguards. Yet, they failed to come up to the expectations of the stakeholders and policymakers. The study concluded that both external and internal factors restrain independent directors from performing their duties. The study will be helpful for policymakers and managers in the identification of behavioral factors responsible for independent directors' ineffectiveness and accordingly will help in formulating policies that will strengthen the position of independent directors. .
Does Corporate Governance Impact Firm Performance? A Comparative Analysis of State-Owned Enterprises Versus Private Enterprises in India
This paper examines the impact of Corporate Governance (CG) variables on firm performance, and studies if the relation is different for State-Owned Enterprises (SOEs) and private enterprises. The study examined 53 listed Indian firms, wherein 33 are private and the remaining are SOEs for the period 2011 to 2019, using multivariate regression analysis. The CG variables used in the study are independent director, non-executive directors, meetings, audit committee, and board size. Further, the study provides evidence that among all the CG variables, independent director and audit committee are found to be significant and this relation remains consistent in both types of firms: SOEs and private. The study concludes that the overall performance of SOEs is less than that of the private firms.
The Role of Tax Havens in Base Erosion and Profit Shifting: Impact on Indian Economy
The use of tax havens leads to a loss of tax income for non-tax haven countries. Capital stored in tax havens has the potential to erode the tax base permanently, which is called base erosion. A tax haven is a nation, location, or jurisdiction with an extremely low rate of taxation. This low rate of taxes even goes as low as zero per cent in some cases. Tax havens through their way of working help to make this tax evasion seem legal. India being a developing economy is affected by tax evasion. The paper covers the legal mechanism, rules and regulations, and the technology adopted by government to control this huge loss of tax revenue.