Corporate board for innovative managerial control: implications of corporate governance deviance perspective

• Pages: 450-462
• Date: 31 December 2020
• DOI: https://doi.org/10.1108/CG-04-2020-0151
• Published date: 31 December 2020
• Subject Matter: Strategy,Corporate governance
• Author: Irfan Saleem,Mujtaba Nasir Ali Khan,Rashedul Hasan,Muhammad Ashfaq

Corporate board for innovative managerial

control: implications of corporate

governance deviance perspective

Irfan Saleem, Mujtaba Nasir Ali Khan, Rashedul Hasan and Muhammad Ashfaq

Abstract

Purpose –Drawing from the firm’sentrepreneurial identity and ecology perspectives,this study aims to

explain why the firms deviate from standard corporate governance practices and apply innovative

managementcontrol.

Design/methodology/approach –The authors used a panel of 2,538public companies listed with the

New York Stock Exchange to explain the impact of corporate governance deviance on firm’s

performance. The authors relied on unique governance variables extracted from the Bloomberg

databaseto develop the governance deviance index.

Findings –Study unveils that deviance from governance practices influences firm’s performance.

Consequently, it can be said that the firms which use innovative governance mechanisms, usually stay

ahead of the market by leading the governance trends. The findings also generalise the firm’s

entrepreneurialidentity and organisationalecology perspectives.

Research limitations/implications –Research impliesthat the firm’s entrepreneurial identitydemands

innovativemanagerial control. This study is focused on the USfinancial market, but in future, researchers

could revalidatethe deviance index. Scholars canalso use mixed methods to test the need for innovative

governancemechanisms in emerging markets.

Practical implications –The firms should focus on innovative governance practices not only to

safeguard the firm’s entrepreneurial identity but also to pursue the growth objectives. Such innovative

mechanisms and managerial controls are helpful to deal with industrial transformations to satisfy key

stakeholders.

Originality/value –The study contributedto governance and management controlresearch by sharing

insights and catering the potential endogeneity problem faced to measure corporate governance

measures. The study alsoproposes an alternative testing tool to measure governance deviance to add

methodologicaluniqueness and reduce knowledgegap.

Keywords Management control, Corporate governance deviance, Entrepreneurial identity

Paper type Research paper

1. Introduction

The recent wave of the global financial crisis has attracted attention on the governance

practices of US firms among academicians and regulators to study innovative governance

mechanisms (Filatotchev et al., 2020;Joseph et al.,2014). The Dodd–Frank Wall Street

Reform in 2010 is a direct response to the 2008 global financial crisis during the Obama

administration, which presented several provisions to bring financial stability among US

firms. In the USA, as of February 2010, companies are mandated by the Security and

Exchange Commission to present the reason and disclosure about their firm structure

(Carlsson, 2003). The subsequent market crashes, for example, the US stock market crash

in 1929, 1987 and 2008, and lately COVID-19 pandemic and a decade of economic

depression have created an environmentof mistrust between the holders of the capital, and

Irfan Saleem is based at the

Faculty of Business, Sohar

University, Sohar, Oman,

and UCP Business School,

University of Central

Punjab, Lahore, Pakistan.

Mujtaba Nasir Ali Khan is

based at the University of

Central Punjab, Lahore,

Pakistan. Rashedul Hasan

is based at the School of

Economics, Finance and

Accounting, Coventry

University, UK.

Muhammad Ashfaq is

based at the IUBH

University of Applied

Sciences, Germany.

Received 8 April 2020

Revised 30 August 2020

6 November 2020

7 November 2020

Accepted 8 November 2020

PAGE 450 jCORPORATE GOVERNANCE jVOL. 21 NO. 3 2021, pp. 450-462, ©EmeraldPublishing Limited, ISSN 1472-0701 DOI 10.1108/CG-04-2020-0151