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PurposeThe aim of the paper is to examine the association of corporate governance (CG), the firms' characteristics and the financial performance of firms operating in the Middle East and North Africa (MENA) region after Arab Spring. The study focuses on CG, exemplified by boards' composition and ownership structure. It also explores the possible moderating effects of environmental social and governance characteristics (ESG), leverage and size on the relationship between CG and the company's performance.Design/methodology/approachUsing Thomson-Reuters database, a sample of 67 firms was extracted in the MENA region to measure CG and financial performance post Arab Spring from 2012 to 2016. Panel GLS regression random effects is used to quantify the relationship; robustness is checked by using several alternative regressions and specifications to the performance measure.FindingsThe results reveal that board independence (BI) is negatively correlated with firm profitability but ownership concentration and board gender diversification contribute to profits. When firms that voluntarily form a governance committee are examined, ownership is less concentrated. We obtain a stronger impact of good governance on performance in these firms: board composition, in general, and workers' satisfaction generate more profits; and undertaking ESG activities become a more dispensable activity. The effect of board size (BS) and forming a governance committee are studied and ensuing recommendations are drawn. In addition, relevant internal control of firms' characteristics that strongly predict firms' market values are discussed in the context of agency and stewardship theories.Originality/valueDespite the fact that governance-performance nexus has been extensively discussed and examined, the focus of this volume of research is on western developed countries. The growing economies of the MENA countries, and the limited governance-performance literature in the MENA context have created a demand to understand the governance environment in these countries and its influence on firm's performance. In this region where firms' owners are mainly family members, governments and/or institutions, governance is typically weak; moreover, ownership concentration is expected to guarantee good performance, as the role of independent directors becomes ineffective. For firms where ownership is more diluted, a sound governance system should be established to replace ownership concentration, and to more efficiently monitor management, and consequently improve firm performance. Therefore, this study not only contributes a summary of the prevailing corporate structure in MENA. Moreover, it explains the settings where both the stewardship and agency theories apply in MENA firms. Some recommendation on the importance of changes to the existing governance rules are highlighted in terms of more rules requiring board independence, board gender diversity, limits on board size and establishing governance committees.

ABSTRACTThe recent decade of scandals, financial crisis, and loss in moral values questioned the soundness of firms' governance structure and held them more accountable to their societies. This put corporate boards under increased pressure to acknowledge their monitoring needs and respond to societal obligations. This paper offers a deepened understanding of the CSR-firm welfare relationship by suggesting its reliance on the participation of independent directors on corporate boards. Our findings show that higher board independence increases social disclosures. We also show that the effect of social disclosure on the firm's risk and performance is favorably affected by the participation of independent directors on corporate boards. Accordingly, we demonstrate that board independence not only facilitates firms' CSR reporting, but also positively influences the CSR-firm performance association. Board independence enhances the efficacy of CSR reporting by elevating the reliability of the disclosed information and amplifying its signaling power regarding the firm's future prospects. Our empirical evidence supports the U.K. corporate governance code main principles encouraging higher board independence for effective discharge of responsibilities.

PurposeThere is a growing attention toward the importance of women's participation on corporate boards in enhancing board governance and decision-making quality. The literature lacks sufficient empirical evidence on the relationship between women's involvement on boards and firms' risk. The purpose of this paper is to investigate the influence of board gender diversity on firms' risk.Design/methodology/approachThis paper explores the influence of women's participation on corporate boards on firms' stock return volatility. The examined firms are all non-financial firms listed on the FTSE 350 index between 2008 and 2013. The Bloomberg database is used to collect the needed variables. Panel data are employed through a regression model to estimate relationships. One-step Arellano and Bond and the generalized method of moments are used to control for reverse causality and the existence of endogenous variables.FindingsThe results suggest that women's participation on corporate boards favorably impacts firms' risk by reducing firms' stock return volatility. The authors also find that the influence of women on reducing stock return volatility is higher in four particular industries recognized by their close proximity to consumers (consumer goods, consumer services, health care, and utilities).Originality/valueThe study contributes to the growing literature on women on boards and offers solid empirical evidence of the correlation between board gender diversity and firms' risk. The empirical results provide economical and statistical validity to the "voluntary business-led" approach of Davies reports and to the recommendation by the UK Corporate Governance Code 2014 on the favorable influence of board gender diversity for effective functioning.

PurposeThe Gulf Cooperation Council (GCC) countries form a unique socioeconomic environment that makes the conclusions of the prior literature not likely to be applicable. GCC countries have huge oil reserves, yet they are aiming at reducing oil dependency through enhancing transparency, increasing foreign direct investments and reforming their governance structure. Their firms are mainly family owned and have low female representation in leadership positions. The study seeks to fill a literature gap by providing a business case supporting the call for gender diverse boards for better governance.Design/methodology/approachThe study examines a sample of GCC-listed firms for the years 2009–2018. Three measures are used to proxy for firm social engagement, namely, CSR strategy score, environmental, social and governance (ESG) disclosure score and social pillar score. To ensure whether the presence of women on board or the number of women on board is influential on social engagements, the authors use the existence of women on board and the percentage of women on board variables. Data are collected using Thomson Reuters, and generalized least squares (GLS) panel data regression is used to estimate relationships.FindingsThe authors find that female representation on GCC corporate boards is increasing, yet in a slow path. The reported results support the role of women on boards in prompting firms' social agenda and enhancing the level of sustainability reporting. The results also show that female board representation supports the implementation of climate change policy, business ethics policy and health and safety policy.Originality/valueThe paper evidence the add value of women participation on GCC corporate boards in enhancing boards' functionality and governance. The empirical findings encourage firms and policymakers in the GCC countries to increase the share of females on corporate boards to improve firms' citizenship and facilitate attracting foreign investors.

AbstractBecause of the recent collapse of several major companies, investors' confidence in audited financial statements has decreased significantly. Fraud has been a major topic among many scholars and stakeholders due to its importance and impact on financial statements and economies at large. This study examines auditors' responsibility in fraud detection.The results of such an examination highlight the differences between the perception of fraud by audit trainees and by experienced auditors. Gender differences are also highlighted in relation to fraud procedures and perception of fraud. External auditors in the Middle East are aware, to a certain extent, of their responsibilities regarding fraud detection and prevention. Audit work is conducted in relative compliance with established auditing standards. Additional testing that is over and above their responsibilities is being done in some cases due to auditors' concerns for their reputation.This paper fulfils a resource need for academics and practitioners. It indicates that the existence of fraud in the Middle East is not linked to auditors' misunderstanding of their responsibilities, but might be attributed to the corporate culture and environment.

The general goal behind this research is to gain a better understanding of factors leading to dysfunctional behavior of auditors. The role of auditors has been a controversial issue especially after the recent accounting scandals (WorldCom, Enron, Paramalat SpA, Waste Management Inc., Xerox Corporation, and Société Générale). In relation to these scandals and lawsuits, a question is frequently asked "where were the auditors?" The survey we offer up for research is made up of 34 questions that are designed to analyse the perception of auditors and the cause of dysfunctional behavior. The object of this research is comprised of auditors positioned and employed at the Big Four audit firms in Kuwait. The selected sample is comprised from auditors at different levels ranging from audit trainees to audit partners. The so-called stakeholder theory talks about the relationship between audit behavior and audit firm practices with time deadlines and time budgets involved. It is generally accepted that the more auditors align their interests with firms' measures and practices, the more a firm is capable of meeting general goals and objectives. Consequently, this may result in a less dysfunctional workplace conduct. Dysfunctional behavior (DB) is analysed against two signalling proxies of dysfunctional behavior; premature sign-off and under reporting of chargeable time. DB is analysed against time budget and time deadline pressures. The results suggest that the general belief among auditors is that the profession of accountancy predetermines their tendency to commit certain patterns of dysfunctional behavior. The results indicate that auditors understand that dysfunctional behavior is exercised by the majority of auditors. Dysfunctional behaviour is exercised with intention and it is not committed out of ignorance. One of the interesting findings is that auditors, at all levels, are concerned about their reputation. Thus, dysfunctional behavior is exercised, to a certain extent, without harming the quality of the audit work. Having our investigation conducted at the Big Four audit firms, we have come to the conclusion that there is a general difference in behavior patterns among perceptions of dysfunctional behavior and normal skeptic professional behavior. Audit firms should continuously conduct workshop and training events related to dysfunctional behavior. It is revealed that some auditors are not aware that certain practices are considered dysfunctional behavior or not. This research work can be used to aid audit practitioners to mitigate audit dysfunctional behavior. It highlights certain type of practices that is exercised in an improper way.