Featured Papers in Corporate Finance and Governance

Amid global uncertainties and economic fluctuations, enterprises play a crucial role in fostering sustainable growth and high-quality development through innovative and responsible practices (Xin et al., 2025). However, financial constraints play a pivotal role in the business environment, restricting company growth, performance, profitability, and the efficiency of financial markets (Talalwa et al., 2025). Under such circumstances, sustainability has become integral to corporations, influencing decision-making, enhancing reputability, and ensuring long-term growth by integrating environmental, social, and economic considerations into business models and value chains (Shamsuzzoha & Fontell, 2024). As organizations acknowledge their responsibility as custodians of the environment and active contributors to societal well-being, they are increasingly integrating social and environmental considerations into their strategic objectives (ElAlfy et al., 2024).

To evaluate a company’s going concern status, its ability to continue operations must be assessed. However, traditional financial models often overlook the impact of corporate governance practices, which are essential for long-term sustainability and financial transparency (Hammond et al., 2023). Hence, corporate governance has gained prominence, particularly following major scandals, due to its essential role in protecting stakeholders’ rights, ensuring proper resource allocation, and managing the environmental and social impacts of corporate decisions and strategies (Estévez-Mendoza & Montoro-Sánchez, 2024). Corporate governance is a framework of trust, ethics, moral values, and confidence, formed through the collective efforts of all societal stakeholders, including the government, the public, service providers, and the corporate sector (Aras & Crowther, 2008). Corporate governance is regarded as the system and processes used to direct and manage a company’s operations, with the goal of enhancing business prosperity, ensuring corporate accountability, achieving long-term shareholder value, and addressing the interests of other stakeholders (Abor & Adjasi, 2007). It ensures an effective distribution of power between shareholders and executives, promoting accountability, transparency, and stability, which are vital for a corporation’s survival and the health of financial markets (Mugarura, 2016). Appointing a sound board of directors is crucial, as this shapes corporate leadership, influences the organizational culture, and impacts corporate performance, with a well-structured board driving high performance and effective oversight and a poorly organized board leading to dysfunction and potentially harming the firm’s value (Rebeiz, 2016). The best governance practices foster investor confidence and enhance the firm’s overall value (Singh & Pillai, 2022), playing a critical role in strengthening relationships among all stakeholders (Ahmed, 2023).

This Special Issue, “Featured Papers in Corporate Finance and Governance”, comprises 25 papers covering various aspects of corporate governance, financial performance, and sustainability practices. Topics include the wealth effects of mergers and acquisitions (M&As), particularly the performance differences between cash- and stock-based transactions, and the moderating influence of horizontal M&As on credit risk in the banking sector. The studies also explore the implications of CEO characteristics for investment efficiency, focusing on the influence of political connections and leadership styles, and investigate the relationship between risk committee characteristics, agency costs, and financial performance, with a particular emphasis on financial firms. Further discussions address the role of sustainability report assurance and corporate governance in enhancing environmental, social, and governance (ESG) scores and highlight the importance of governance structures, such as gender-diverse boards, for corporate outcomes. These studies underscore the need for effective risk communication and strategic decision-making, especially in the context of economic uncertainty and regulatory changes. Collectively, they provide valuable insights into the evolving landscape of corporate finance and governance, offering practical recommendations for enhancing corporate practices and financial performance.

Regarding wealth effects, Satapathy et al. (2025) analyzed those of cross-border and domestic M&As in India over the period from 2004 to 2019. The study examined 58 cross-border deals and 34 domestic deals, concluding that there were no significant shareholder gains and that investors were skeptical about the value-creating potential of such M&As. It was also found that advisory services stabilized returns but did not significantly enhance wealth. Cash-based transactions outperformed stock-based deals, with the firm size not influencing the outcomes of these deals. This research highlights the importance of risk management and strategic communication, particularly in cross-border M&As, where stakeholder concerns about transaction risks need to be addressed.

Jallad et al. (2025) examined the moderating effect of horizontal M&As on the relationship between credit risk and bank value using the quantiles via moments estimator. Credit risk negatively affected bank value, but this relationship was less pronounced in banks with higher market value. Horizontal M&As had a direct positive effect on bank value, albeit with a negative moderating role in reducing the unfavorable impact of credit risk. This finding has significant implications for bank management, particularly in terms of risk diversification during M&As.

With respect to the stakeholder models of state-owned enterprises (SOEs), Rissy (2025) analyzed the narrow legalistic framework of SOEs in Indonesia, emphasizing the need for a moral and legal stakeholder model to protect the interests of various stakeholders. Using doctrinal and empirical legal research methods, the study highlights that Indonesian SOEs often fail to fulfill their obligations to stakeholders due to the current legal framework’s limitations and advocates for a more inclusive stakeholder approach to ensure better governance and accountability within SOEs.

In terms of sustainability report assurance within corporate governance, Handayati et al. (2025) investigated its role in enhancing environmental, social, and governance (ESG) scores in Indonesian firms. Firms with assured sustainability reports had higher ESG scores, suggesting that third-party assurance enhances the credibility of sustainability reports. Additionally, the gender diversity of boards did not have a significant impact on ESG scores, but the presence of sustainability committees positively influenced ESG performance. The study underscores the importance of robust corporate governance practices, including the implementation of board committees, in promoting sustainability goals.

Concerning financial performance during mergers and acquisitions, Dogan and Ugurlu (2024) focused on target companies in the UK, examining their liquidity, profitability, and asset management before and after the transaction. Cash acquisitions tended to lead to better financial outcomes than non-cash acquisitions, especially in terms of the short- and medium-term liquidity and profitability. Low-value acquisitions were also more likely to benefit liquidity and profitability, emphasizing the potential for value creation with smaller deals.

With respect to dividend policy and its relationship with leverage and profitability, Akpadaka et al. (2024) explored this in manufacturing firms across Nigeria and South Africa. Nigerian firms faced greater financial constraints, with high leverage negatively impacting dividend payouts, whereas South African firms were more flexible in their dividend policies. Profitability also moderated this relationship in Nigeria, allowing firms to sustain dividend payments despite high leverage.

Shaheen et al. (2024) examined the impact of CEO characteristics, particularly political connections, on investment efficiency in Jordanian firms. Older CEOs tended to make more balanced and less aggressive investment decisions, while younger CEOs exhibited more efficient decision-making by investing in high-growth projects. Furthermore, political connections were found to reduce the likelihood of under-investment but encouraged over-investment, especially when coupled with older or family CEOs.

Regarding employee equity compensation and pension obligations, Klumpes (2024) analyzed the relationship between these factors, focusing on how they impact a firm’s cost of capital. Pension risks had a more complex relationship with firm risks than was previously thought, and pension benefit obligation (PBO) measures led to higher cost of capital estimates than more restricted accumulated benefit obligation (ABO) measures. This research highlights the importance of accounting for pension risks when estimating a firm’s cost of capital.

Le et al. (2024) studied the link between CEO pay disparities, insider trading activity, and CEO turnover in the US. Large pay gaps between CEOs and their employees reduced the likelihood of CEO dismissal, particularly when insiders were buying stock, indicating entrenchment behavior. On the other hand, insider stock sales signaled an impending CEO departure, suggesting that investor actions reflect perceptions of a CEO’s performance.

Regarding executive pay disparities and insider trading activity, Nguyen et al. (2024) examined how these affect stock returns prior to earnings announcements. Larger pay gaps between executives and their employees were associated with higher returns from insider purchases before positive earnings disclosures, while a high pay disparity reduced the returns from insider sales before negative earnings news was received. This highlights the role of governance in shaping insider behavior and market reactions.

With respect to risk disclosure and readability, Moussa and Elmarzouky (2024) investigated the relationship between these in the annual reports of non-financial UK firms. Increased risk disclosure led to more readable reports, with COVID-19 disclosures strengthening this relationship. The study emphasizes the importance of clear and transparent risk communication, especially in times of crisis, to ensure that stakeholders can make informed decisions.

Abdul-Kareem et al. (2024) focused on optimizing insolvency prediction models by balancing data and selecting the most relevant features for prediction. A Multi-Layer Perceptron (MLP) model combined with Particle Swarm Optimization (PSO) outperformed traditional methods in terms of speed and efficiency, providing more accurate predictions of financial insolvency.

Salikhova et al. (2024) studied how corruption levels and minority shareholder protection influence corporate debt decisions in various countries. In more corrupt countries, firms tended to take on more debt to shield assets from political risks. Moreover, firms in countries with stronger minority shareholder protection took on more debt, a finding that was more pronounced in developed countries.

Concerning ESG performance, Gidage et al. (2024) explored how this affects a firm’s sensitivity to systemic risk (SR). Better ESG ratings helped to reduce a firm’s exposure to systemic risk, as firms with high ESG ratings tended to attract more loyal consumers and stable investors. Factors like the firm size, age, and borrowing costs also affected how ESG improvements impacted risk sensitivity.

Regarding corporate governance practices, Rahman et al. (2024) analyzed how these influence earnings quality and idiosyncratic risk in Pakistan. Strong governance practices and a higher earnings quality reduced the idiosyncratic risk, underscoring the importance of effective corporate governance in managing financial risk and enhancing firm stability.

Al-Nimer et al. (2024) investigated the relationship between the capital structure, liquidity risk, and profitability in Jordanian banks. A strong capital structure reduced the liquidity risk and improved profitability and operational efficiency. This research emphasizes the importance of optimal capital structure management in mitigating liquidity risk and enhancing financial performance.

Gharios et al. (2024) analyzed the relationship between board characteristics, such as gender diversity and independence, and corporate profitability. Gender diversity and board independence positively impacted profitability, while the board size and meeting frequency had no significant effect. These findings underscore the importance of diverse and independent boards in fostering better financial outcomes.

In relation to the impact of risk committee characteristics in financial firms, Almulhim et al. (2024) found that independent and expert risk committees were effective in reducing agency costs and improving financial performance. However, larger committees were found to increase agency costs. This highlights the need for well-structured risk committees to enhance firm performance.

Persakis and Tsakalos (2024) examined how economic uncertainty influences audit quality, particularly how the amount of power wielded by a CEO moderates this relationship. Economic uncertainty negatively affected audit quality, but this effect was less severe in firms with more powerful CEOs, indicating that strong leadership can help maintain audit quality in uncertain times.

Concerning the financial performance of state-owned enterprises (SOEs), Wibowo et al. (2024) found that Indonesian SOEs suffer from lower profitability and liquidity compared to private firms, primarily due to inefficiencies in capital management. The study calls for improved liquidity management and debt restructuring to enhance the financial performance of SOEs.

Cheng et al. (2024) explored the impact of a CEO’s regulatory focus on corporate social responsibility (CSR) and firm performance in US firms. CEOs with a promotion-focused regulatory style tended to lead firms with lower CSR engagement, which negatively impacted firm performance. However, CEO equity compensation was found to mitigate the negative impact of a promotion-focused regulatory style.

Athanassakos (2024) explored how CEOs’ asset allocation skills affect firm stock returns. CEOs with stronger asset allocation skills, especially those following value-investing strategies, led firms with superior stock performance, highlighting the importance of effective asset management in boosting firm value.

With respect to non-CEO top management team (TMT) turnover, Chulkov (2024) analyzed its impact on firm decisions and performance. Turnover among non-CEO TMT members often signaled poor investment decisions, as it was associated with the increased reporting of discontinued operations and extraordinary items. The study suggests that non-CEO TMT turnover can help prevent the escalation of commitment to failing projects.

Concerning the influence of financial indicators on sustainability reporting practices in Vietnam, Anh et al. (2024) found that leverage was negatively correlated with the quality of sustainability reports, while asset turnover and returns on equity positively affected the report quality. The study suggests that firms should integrate both financial and non-financial metrics to improve the quality of sustainability disclosures.

Examining CFO-related research contributions and their limitations, Rashid et al. (2024) provided a review of CFO research using a bibliometric analysis, highlighting the need for more research looking beyond the role of the CEO to that of the CFO. The authors identified key limitations in CFO research and suggested future directions to improve the understanding of CFOs’ responsibilities and their influence on firm performance.

The papers included in this Special Issue provide an in-depth and insightful exploration of the evolving relationship between corporate governance, financial performance, and sustainability practices. Covering a wide array of topics—from mergers and acquisitions to CEO characteristics and ESG performance—these studies highlight the critical role governance plays in shaping corporate strategies and long-term success. The findings offer valuable directions for future research, encouraging further examination of how effective governance can drive sustainable growth, enhance stakeholder value, and contribute to responsible business practices in an ever-changing global landscape.