bluuebunny/crossref_metadata_2025 huggingface dataset:
Executive stock options: Preliminary Australian evidence of shareholder wealth effects of pre-effort contracting
Authors: Canil Jean M. , Rosser Bruce A.
Published: February 2017

We document a structure of pre-effort conditions associated with ESOPs. Since we can observe shareholder returns at award we infer incentive effects in a setting where premium and discounted executive stock options are regularly awarded. Discounted (premium) awards are associated with the highest (lowest) exercise rates, implying a successful incentive (disincentive) effect. Exercise restrictions (comprising hurdles and vesting restrictions) necessarily lower exercise rates, but may be preferred in combination with a discounted or premium award. Typically, a discount choice is associated with hurdles but not vesting restrictions. Empirically, shareholders benefit most from regular awards which are discounted and do not have hurdle price restrictions. Shareholders also benefit from hurdle provisions in irregular awards which may expose shareholders to CEO opportunism.
Company mission statements and financial performance
Authors: Atrill Peter , Omran Mohammed , Pointon John
Published: February 2017

Is there a value-relevance associated with the disclosure of a corporate mission? In this study the mission orientation of 143 UK listed companies are analysed according to their orientation towards shareholders, stakeholders, customers and markets. Performance is then analysed by means of multiple regressions, allowing for beta, gearing, size and tax, as control variables, and taking account of mission orientation by means of a dummy variable in separate regressions. As to the accounting return on equity, dummy variables were not significant in the service sector. In the non-service sector the shareholder-orientated dummy was relevant to the accounting return on equity over three years, but the overall model was not very significant. However, three-year stock returns in the service sector are strongly influenced by whether company mission is shareholder orientated or not. In the non-service sector, six-year stock returns, and also excess returns, are influenced by whether a company is stakeholder orientated or not. Mission, according to customer orientation, did not affect performance. The overall conclusion is that there may be some value-relevance attached to mission orientation, although in this sample it was invariant to customer-orientation.
Which anti-takeover devices affect firm value?
Authors: Bosworth William
Published: February 2017

This research is a two-stage, cross sectional analysis that finds evidence that nine antitakeover defenses (ATDs) are associated with lower firm value in terms of Tobin’s Q. Of the nine, six are limits on shareholder rights such as staggered boards. The other four have the potential of increasing the cost of a takeover such as pension parachutes that prohibit successor firms from using pension surpluses to finance the takeover. Six ATDs, such as anti-greenmail provisions, are associated with higher firm values.
Corporate governance: Understanding important contingencies
Authors: Huse Morten
Published: February 2017

The objective of this paper is to explore important contingencies for boards and governance designs. The paper is made in a setting where governance in SMEs in transition economies is to be developed, and knowledge from advanced market economies constitutes the framework to be built on. The core of the paper is the presentation of six groups of important contextual variables that must be analyzed and understood when corporate governance systems shall be developed. The framework presented in the paper includes understanding the perspectives of both internal and external actors in the corporate governance process, and that the design of a governance system will include issues related the board working style as well as thee board members.
FCF agency costs, earnings management, and investor monitoring
Authors: Chung Richard , Firth Michael , Kim Jeong-Bon
Published: February 2017

Free cash flow has been identified as having the potential to be a major agency cost where managers make expenditures that have negative NPVs. This agency problem reduces profitability and lowers stock market valuations. We argue that firms with high free cash flow and poor growth opportunities will suffer from the free cash flow agency problem. Our results are consistent with expectations and show that firms with high free cash flow and low growth are associated with low long term profitability. We also find that managers use income-decreasing accruals when a firm has high free cash flow agency costs. This earnings management is motivated by managers’ desire to shift profits to future years when the full impact of the sub-optimum investments hits earnings. The evidence supports Fudenberg and Tirole’s (1995) managerial self-interest hypothesis. Consistent with the institutional investor monitoring hypothesis, we show that institutional shareholders act to deter managers from using negative discretionary accruals when free cash flow agency costs are potentially high.
Perfect competition: A case of “market-failure”
Authors: Barnett II William , Block Walter , Saliba Michael T.
Published: February 2017

In this paper we research one of the corporate governance mechanisms, i.e. market for goods and services. We focus on perfect competition. We concluded with the explicit argument for letting loose the dogs of the Federal Trade Commission and the Antitrust Division of the Justice Department upon perfect competitors. Our main concern is the failure of mainstream economics to incorporate, properly and completely, the concept of foregone alternatives, into its analysis. The present paper is an attempt to trace out the some of the implications of this critical error for industrial organization.
Does pyramiding have an impact on firm’s capital structure decision among Malaysian distress companies?
Authors: Mat Nor Fauzias , Bany-Ariffin Amin Noordin
Published: February 2017

It is documented by La Porta, Lopez and Shleifer (1999) that ultimate owners around the world usually control an array of affiliated companies through hierarchical intermediary corporations forming pyramidal holdings. A direct result of this pyramidal ownership structure is divergence of cash flow rights from control rights in the hand of the largest shareholders (Claessens, Djankov and Lang 2000). This paper investigates the impact of this separation of cash flow rights from control rights resulting from these pyramidal forms of ownership structure on firm’s capital structure. In particular, our objective is to examine whether such separation affects the financing decisions among Malaysian listed distressed companies. Even though it is not conclusive our findings somewhat lend support to the leverage-increasing non-dilution entrenchment effect on corporate leverage, whereby the separation of cash flow rights and control rights leads to the increase of leverage among the distressed companies. Consequently, excessive use of leverage in order to protect ultimate owner’s dominance in these companies then leads to disastrous financial valuation.
Regulating the corporation: the role of the institutional investor
Authors: Sanderson Paul , Hendry John , Roberts John , Barker Richard
Published: February 2017

Government has been pressing one group in civil society – financial institutions - to regulate the behaviour of another group - the companies in which they invest. We consider the implications of this and assess the prospects for success, drawing on evidence obtained in our recent study of the preparation, conduct and consequences of regular face to face meetings between fund managers and senior executives.
Concentration of ownership and control as a governance mechanism in the Brazilian financial system
Authors: Gonçalves Carlos Alberto , Pardini Daniel Jardim , de Moraes Meirelles Anthero
Published: February 2017

In this paper we analyse how ownership and control work in the main banks operating in Brazil. Our purpose is to identify the mechanisms through which investors try to secure the control of the corporations and the return of the capital invested. Unlike the Anglo-Saxon governance model, where the usual practice is to distribute the share capital among a large number of shareholders, or still, the Japanese or German models, with a massive participation of the banks in the control of the companies, recent research in the Brazilian companies listed in the stock exchange indicate a great volume of voting shares in the hands of a few shareholders. In the present study we seek to reveal whether this corporate governance mechanism also prevails in the Brazilian banking sector. The analysis comprised fifty of the biggest banks operating in Brazil, accounting for over 90% of the total assets of the Brazilian financial system. This study, besides revealing the levels of concentration of control and ownership of the leading Brazilian financial institutions, elucidates the corporate governance models featuring in the literature. It also explains how, in the management of the financial organizations, the investor, when making use of the mechanisms that secure their rights to ownership, guarantees the control and legal protection of his/her investment. The results of the research point to high levels of ownership concentration in the financial institutions in Brazil
Earnings management and industry classification in Brazil: An exploratory investigation
Authors: de Almeida Jose Elias Feres , Broedel Lopes Alexsandro , da Costa Fabio Moraes , Toniato João Batista Amorim
Published: February 2017

Enron and Worldcom accounting scandals brought new attention over the quality of financial accounting reports produced by listed corporations. Earnings management has generally been considered as the main cause of the alleged decrease in earnings relevance over the last decades (Lev, 1989). Following this line of inquiry this paper investigates earnings management activities of Brazilian firms. Prior research suggests that industrial organization can play a relevant role in motivating earnings management practices. To take this effect into account we control for industry classification using Economatica´s 20 sector definition excluding financial services, banks, insurance, and agribusiness. Our earnings management metric is based on the Kang and Sivaramakrishnan (1995) model. Results are only statistically significant for four sectors suggesting that industry classification does not explain the variance in earnings management activities for the selected sample. This output is not consistent with the stated hypothesis. Our findings contribute to the recent debate among practitioners, regulators and academics about the determinants of earnings management practices and accounting quality.
Personal taxation, corporate agency costs and firm performance
Authors: Alford Stephen C. , Stangeland David A.
Published: February 2017

This paper investigates the effect of personal-tax progressivity on management performance and agency costs by examining measures of corporate operating efficiency. We study a sample of US-based manufacturing and service firms and variations in a cross-state tax policy. Using matched-pair testing and regression analysis, we find evidence consistent with the hypothesis that increased personal-tax progressivity negatively impacts management productivity and is manifested in reduced firm efficiency. We control for several other factors that the literature suggests is relevant to firm operating efficiency and find that our results are robust
The determinants of the investor relations information in the Malaysian companies’ website
Authors: Abdul Hamid Fathilatul Zakimi , MD Salleh MD Suhaimi
Published: February 2017

The main objective of this study is to extend the prior research in Investor relations information and communication through World Wide Web, by looking into the variation of investor information located at the Malaysian corporate website to the factors thought to influence the disclosure level. This study revealed that company size and industry classification was found significantly has positive association with the existence of investor information in the corporate website. On the other hand, for profitability and foreign ownership variables, result show insignificant relationship. The descriptive result may indicate that Malaysian companies may not take the opportunity to communicate with investors and stakeholders via internet, and choose the present traditional communication as what required by law. Another explanation is that, Malaysian companies may be complacent with the current traditional IR communications with institutional investors and funds managers in which this group are indeed familiar with how these Malaysian firms are operating.
Earnings management and internal mechanisms of corporate governance: Empirical evidence from Chilean firms
Authors: López-Iturriaga Félix J. , Saona Hoffmann Paolo
Published: February 2017

We analyze the ability of the capital structure and the ownership structure as mechanisms of control of the managers of the firms and to reduce their accounting discretionary power for a sample of Chilean firms. Using earnings management and abnormal accruals as indicators of discretionary behavior, our results show that both debt and ownership concentration reduce the managers’ discretionary behavior, so we corroborate the outstanding role both mechanisms play in a country with low protection of investors’ rights. At the same time, we find that earnings management is fostered by institutional investor ownership
Corporate governance and competition: Conceptual thoughts
Authors: Reaz Masrur , Arun Thankom
Published: February 2017

This study attempts to explore the theoretical and empirical evidence on the relationship between competition and corporate governance in the broader back ground of economic reforms in developing economies, and analyses the problems that may occur due to inadequate corporate governance practices in an enhanced era of competition. The paper also discusses the areas of corporate governance that required immediate attention in developing countries such as protecting shareholder rights and market for corporate control, which are emerging issues in the context of rapid privatization and deregulations
Government and market: a critique of Professor James Buchanan’s “what should economists do?”
Authors: Block Walter
Published: February 2017

For Professor James Buchanan, government is just one more player in the market, along with all others, such as consumers, landlords, farmers, etc. This view is subjected to sharp criticism by the present author, who makes the case that the government differs from all other participants in society in that it and it alone enjoys a legal monopoly over initiatory aggression against person and property. No individual presumes to take on the role accorded the state (e.g., to “tax” anyone, or prevent businesses from merging under threat of fine or jail); the government does this every day.
Campaign finance and corporate governance: The case of Brazil
Authors: Carvalhal da Silva Andre , Graminho Flavia Mourao
Published: February 2017

Corporate governance mechanisms, such as transparency, accounting standards, responsibility, accountability, fairness, business ethics, efficient shareholder controls, and ownership rights are key tools in combating corruption. This paper investigates on a firm-level basis the relation between corporate governance practices and campaign finance in Brazil. We interpret campaign finance as a proxy for political influence by interest groups. Our results indicate that family-owned firms contribute significantly more for political campaigns, both in terms of proportion of firms and total amount spent to finance the candidates. Higher concentration of capital and the separation of ownership and control are positively related to campaign donations, while better corporate governance is negatively related to political contributions.
Independent directors? Supervisors? Who should monitor China’s boards?
Authors: Wang Margaret
Published: February 2017

After the collapse of a number of well-known companies such as Enron and WorldCom, there has been much debate over this is the most effective model of corporate governance in monitoring the board of directors from misconduct: the Anglo-American model of independent directors or the German model of supervisory boards. Most countries have chosen to adopt one either the Anglo-American or the German model. However, the People’s Republic of China (“China”) has adopted both models of corporate governance. This paper seeks to explore the differences between the two models as they apply in China. Further, it examines the challenges which these two models face with regard to their implementation. Finally, an evaluation will be made to ascertain whether the two models encounter the same problems and whether either or both of these two models would be able to effectively monitor Chinese boards.
Political costs and lobbying activity of Australian gold mining firms
Authors: Monem Reza M.
Published: February 2017

This paper provides empirical evidence on the lobbying behaviour induced by political costs in the Australian gold mining industry. The Australian gold mining industry remained tax-exempt for nearly seven decades until 1 January 1991. Due to its rapid prosperity in the early 1980s, the industry came under intense political scrutiny in the mid- to late-1980s. In particular, in December 1985 a federal tax inquiry was commissioned which investigated the economic and social impact of removing the tax-exempt status of the industry. Using the voluntary submissions to the federal tax inquiry as a measure of lobbying activity, this study documents that gold mining firms’ lobbying positions were positively related to the quantity of recoverable gold reserves held by them and profitability of their operations. Results of this paper confirm findings in prior research that firm lobbying positions are consistent with the adverse economic consequences of regulatory changes
Discount and premium awards in the context of pre-existing ESOP conditions
Authors: Rosser Bruce A. , Canil Jean M.
Published: February 2017

This study examines interactions between pre-award ESOP restrictive conditions and award discounts/premiums that characterized executive stock option awards in Australia from the mid-1980s to 2000. Shareholder wealth effects at award suggest that (i) shareholders generally do not gain from offering discounts because associated value increments do not exceed the cost of the discount, (ii) premium awards coupled with exercise restrictions appear to be used to ameliorate the risk of CEO opportunism associated with irregular awards, and (iii) shareholders suffer a wealth decrement when premium awards are used to ameliorate the disinvestment incentive of inferior CEO dilution protection. The second of these findings implies risk of CEO opportunism. A major implication is that award discounts/premiums are used to modify the conditions of pre-existing ESOPs that presumably are dated and no longer optimal for addressing current incentive problems. Analyses of the optimality of award discounts/premiums should take this into account.
The effect of non-recurring gains and losses on the CEO’s compensation
Authors: Nourayi Mahmoud M. , Canarella Giorgio , Krishnan Sudha
Published: February 2017

In this study we examine the impact of ‘Non-recurring Items (NRI),’ reported on the income statements of public companies, on the CEOs’ pay-performance relationship. Using panel (timeseries cross-sectional) data for 435 companies from a wide range of industries over the period 1998-2002, we first revisit the pay-performance model estimated by Gaver and Gaver (1998). We then extend the Gaver and Gaver (1998) model by analyzing a) the impact of NRI on total (cash plus non cash) compensation of CEOs, b) the role of firm size, and c) the influence of multiple NRI reporting by the same firm. Our results indicate that the Gaver and Gaver (1998) findings are robust to the inclusion of firm size in the case of cash compensation. This, however, does not hold in the case of total compensation. The pay-performance model for cash compensation and total compensation yields significantly different results with respect to NRI as well. Our results indicate that multiple reporting of NRI by the same firm affects the parameter estimates. Finally, we examine the issue of parameter heterogeneity using the quantile regression approach, and report findings which provide some evidence that parameter heterogeneity may deserve attention in executive compensation studies.
Strategic governance of the alliance spectrum
Authors: Johnson Lewis D. , Neave Edwin H.
Published: February 2017

This paper applies the principles of transaction cost economics to the strategic management of firms’ external alliances. External alliances span a spectrum from simple transactional relationships to outright control. Each of these alliance types requires a different degree of monetary and managerial investment. The paper shows that the optimal form of alliance aligns the governance capabilities of firm management with the attributes of the alliance relationship. We regard its approach as particularly relevant for cross-border alliances, especially when the legal and regulatory systems differ between the two countries
Corporate control and relationship finance by banks or by non-bank institutional investors? A review within the theory of the firm
Authors: Andreani Ettore , Neuberger Doris
Published: February 2017

In continental Europe, banks are more and more replaced by non-bank institutional investors in the financing and control of firms, which may imply a shift from relationship finance with insider control to arm’s length finance with outsider control. However, non-bank institutional investors may develop relationships with firms similar to the traditional long-term bank-firm relationship, providing substitutive services. The present paper differentiates between relationship banking and relationship investing within the theory of the firm and reviews the financial and corporate control services provided by both arrangements.
Managerial discretion in non-profit organizations: An application to Spanish work accident mutuals
Authors: Suárez-Serrano Eugenia
Published: February 2017

This paper explores the problems of managerial discretion in the non-profit sector, with special consideration to Spanish Work Accident Mutuals (MATEPs). Firstly, from Transaction Costs, Property Rights and Agency perspectives, the economic rationale of mutuals is analyzed, paying particular attention to MATEP’s peculiarities and incentives in terms of competition, regulation and ownership. Subsequently, the effectiveness of governance mechanisms is discussed, showing that the status quo leaves excess power in the hands of the managers of these organizations
Employee stock option exercises - an international analysis
Authors: Balsam Steven , Gifford Richard
Published: February 2017

In this paper we use a proprietary data set that consists of all stock option grants and exercises for a Fortune 100 multinational corporations from 1990 to 1999 to show that the exercise patterns of employees varies across countries. When we examine the variables overall exercise responds to we find evidence that the variables vary with culture, e.g., in general patterns in English speaking countries appear to be comparable, but not so for other countries. When we examine variables that determine the length of time an individual option is held before exercise, we also find it also varies across countries. Further analysis indicates that these differences are tied to systematic differences in national income and tax rates
Ownership structure, large inside/outside shareholders, and firm performance: evidence from Canada
Authors: Schiehll Eduardo
Published: February 2017

This study gathers additional evidence on the association between ownership concentration and firm performance, as measured by the firm’s Q ratio. Using panel data from a sample of 159 Canadian public firms over a three-year period, I focus on the distinction between large inside shareholders, who directly participate in the management of the firm, and large outside shareholders, who do not. I examine whether direct and indirect monitoring on the part of large shareholders has an impact on the association between ownership concentration and firm performance. Along with the distinction between large inside and outside shareholders, this study also investigates whether concentration of voting rights is associated to firm performance, and whether the identity of the owner affects this association. The findings suggest that large inside shareholdings tend to be negatively associated to firm performance, while no association is found in firms with a majority of large outside shareholdings or firms combining large inside and outside shareholdings in its ownership structure. Concentration of voting rights is negatively associated to firm performance only in firms with a majority of large outside shareholders, suggesting that the market may not discriminate between voting rights and ownership concentration in owner-managed firms. Although the results for the identity of large shareholders are not conclusive, there is evidence that family and institutional large shareholders wield different performance impacts
Corporate governance for knowledge production: Theoretical foundations and practical implications
Authors: Osterloh Margit , Frey Bruno S.
Published: February 2017

Agency Theory as the dominant view of Corporate Governance disregards that the key task of firm governance is to generate, accumulate, transfer, and protect firm specific knowledge. Three different foundations to the theory of the firm which underpin different concepts of corporate governance are discussed: The traditional view of the firm as a nexus of contracts, the view of the firm as a nexus of firm specific investments and the view of the firm as a nexus of firm specific knowledge investments. The latter view distinguishes two fundamental differences between contracting firm specific knowledge investments in contrast to financial investment: (1) A knowledge worker cannot contract his or her future knowledge in the same way as the exchange of tangible goods; (2) Only insiders can evaluate firm specific knowledge generation and transformation. We suggest a concept of corporate governance that takes investments infirm specific knowledge into account: (1) The board should rely more on insiders; (2) Those employees of the firm making firm-specific knowledge investments should elect the insiders; (3) A neutral person should chair the board. This concept provides a theoretical foundation of corporate governance based in the knowledge-based theory of the firm.
Ownership structure and performance: Empirical evidence from Chilean firms
Authors: Silva Francisca , Majluf Nicolás , Paredes Ricardo D.
Published: February 2017

This paper analyses the effect of ownership structure (represented by the concentration of the economic rights of the majority shareholder, and the affiliation to a business group) on performance. From a crosssection of publicly traded Chilean firms in the year 2000, we find evidence that the effects on performance depend on ownership concentration in a non-linear way, showing the changing balance of two opposing economic forces: value creation and value expropriation by the controlling shareholder. For the entire sample, the mere fact that a firm is owned by a business group does not affect performance
Roles and responsibilities of board of directors: Paving new path toward corporate governance in Thailand
Authors: Hongcharu Boonchai
Published: February 2017

Board of directors is one of the most essential elements of a corporation. Board members function as representatives of shareholders to monitor the management’s performance. Therefore, the board of directors is directly concerned with corporate governance development. However, it is generally found that the roles and responsibilities of board of directors are often ignored. The Asian financial crisis that first started in Thailand in 1997 triggered the interest in the structure and roles of the board of directors as an attempt to improve corporate governance. As a result, several measures have been set up to strengthen the functions of the board after incidences of corporate disasters resulting from the failure of monitoring systems of the board. This includes both regulatory and voluntary measures to improve corporate governance through board of directors. Recommendations for future development of board of directors are also discussed
Trust and the governance of international strategic alliances
Authors: Globerman Steven , Nielsen Bo Bernhard
Published: February 2017

The aim of this study is to deepen our understanding of the choice of governance mode in international strategic alliances (ISAs) by examining the relationships between opportunism, trust and equity versus on-equity-based governance of ISAs. Previous studies provide ambiguous results regarding the linkages between opportunism, trust and governance form. To resolve this ambiguity, we identify the separate influences of the relational attributes of the partners, host country macro environmental attributes and characteristics of ISA transactional activities on governance choice in ISAs. Empirical estimation using primary data on international strategic alliances involving Danish firms indicate a particularly strong relationship between attributes of alliance partners and ISA governance mode. Specifically, trustworthiness appears to be a substitute for administrative control. In addition, we find attributes of “host country «governance to be relevant to the choice of ISA governance mode, although relational attributes seem far more important
Board configuration and performance in Greece: An empirical investigation
Authors: Koufopoulos Dimitrios N. , Balta Maria Elisavet
Published: February 2017

This study is an attempt to shed light on board configuration-board size, leadership structure, CEO dependence/independence alongside with firm’s performance relying on financial ratios, namely ROE, ROCE and profit margin. Data were gathered from annual reports and proxy statement of 316 Greek organisations quoted in the Athens Stock Exchange, shortly after the financial crisis of 1999. This period the Greek Capital market was upgraded to a mature market status. Findings from this research suggest that neither board leadership structure nor CEO dependence/independence showed any significant effects on firm’s financial performance
Government-owned companies and corporate governance in Australia and China: beyond fragmented governance
Authors: Tomasic Roman , Fu Jenny Jian Rong
Published: February 2017

The ownership and control of government owned companies presents a major challenge for the integrity of established corporate law ideas regarding accountability of directors and the independence of government owned companies. Drawing upon experience from China and Australia, the article discusses some of the key corporate governance tensions that have emerged from the corporatization of state owned assets. The attempt to uncritically apply private sector ideas to the corporatisation of state-owned and controlled companies is fraught with difficulties that are discussed in this article. The article also examines attempts to place state owned companies on a sounder conceptual footing through changes to their culture brought about by adopting and embedding guidelines and standards, such as the recent OECD Guidelines on the Corporate Governance of State-owned Enterprises
Does the stock market punish corporate malfeasance? A case study of Citigroup
Authors: Mizrach Bruce , Zhang Weerts Susan
Published: February 2017

This paper examines how well the market anticipates regulatory sanction. We look at key dates of SEC, NASD, FTC, Congressional and foreign investigations and their subsequent resolution. Our event study confirms that the settlements provide little new information to the market. In six major case groupings, we find highly accurate predictions from market capitalization changes of settlements and associated private litigation.
The association between corporate governance and earnings management: The role of independent directors
Authors: Benkel Mark , Mather Paul R. , Ramsay Alan
Published: February 2017

The agency perspective of corporate governance emphasizes the monitoring role of the board of directors. This study is concerned with analyzing whether independent directors on the board and audit committee (recommendations of the ASX Corporate Governance Council, 2003) are associated with reduced levels of earnings management. The results support the hypotheses that a higher proportion of independent directors on the board and on the audit committee are associated with reduced levels of earnings management. The results are robust to alternative specifications of the model. This study adds to the very limited research into the relationship between corporate governance and earnings management in Australia. It also provides empirical evidence on the effectiveness of some of the regulators’ recommendations, which may be of value to regulators in preparing and amending corporate governance codes
Financial policy determinants: Evidence from a nested logit model
Authors: Couderc Nicolas
Published: February 2017

How do managers set financial policy? The aim of this paper is to document the driving factors of the financial policy choice and to evaluate the relevance of two alternative theories, the trade-off theory and the pecking order theory. We use a database of 3,659 firms, over the period 1991-2002; our study relies upon the estimation of two qualitative variable models, a multinomial logit model and a nested logit model. We show that trade-off models are more pertinent than pecking-order models so as to explain the financial policy choice of a firm, but none of these models are sufficient to explain all our results
Closely-held corporations participate less in corporate social reporting
Authors: Lin Jia , Vos Ed
Published: February 2017

This study investigates the relationship between corporate social reporting (CSR) disclosures and firm characteristics (such as: financial performance and corporate structure) in 100 multinational companies that list on the main U.S. stock exchanges. By using content analysis method, it evaluates annual reports according to several criteria. The results show that the absolute measure of net income and firm size are significant predictors of CSR disclosures. This association does not hold for the relative measure of income and other variables. However, not surprisingly, closely-held shares percentage variable has a significant negative relationship with corporate social reporting. This reveals that closely-held corporations are expected to conceal more information from the public than others. In sum, the findings confirm that large firm and profitable firms are more likely to disclose their CSR practices, but less so when closely held
Investor protection, share repurchases, irrationality and agency conflicts: The implications for corporate governance
Authors: Zhang Ganggang , Fairchild Richard
Published: February 2017

This paper provides a theoretical analysis of the effects of the strength of investor rights on a firm’s share repurchase policy in the face of agency conflicts and behavioural biases. We consider three reasons for firms to repurchase their shares; to eliminate agency costs of free cash-flow, to time the market, and to cater to investors. In the first case, we demonstrate that investor rights and repurchases may be complements or substitutes in addressing free cash flow problems. In the second case, we argue that stronger investor rights increase informational disclosure which reduces the ability to time the market using repurchases. In the final case, we argue that stronger investor rights may reduce value reducing repurchase catering. We consider the corporate governance implications of our analysis, and discuss the effects of behavioural factors, such as bounded rationality, overconfidence, and regret, on the efficacy of governance systems to deal with the problems relating to repurchases
Common structures of asset-backed securities and their risks
Authors: Sabarwal Tarun
Published: February 2017

In recent years, one area of growing concern in corporate governance is the accounting and transfer of risk using special purpose entities (or trusts). Such entities are used widely in issuing asset-backed securities. This paper provides an overview of the asset-backed securities market, and discusses the common structures used in this market to transform the risks associated with the underlying collateral into risks associated with the issued securities. Understanding these structures is essential to understanding the allocation and transfer of risk among the different parties in an asset-backed transaction – the originator, the special-purpose entity, investors, and related parties such as insurance guarantors. Understanding these structures is also essential in proposing potential solutions to regulatory and accounting concerns about the transfer of risks in asset-backed securities
Do boards and CEOs matter for bank performance? A comparative analysis of banks in Ghana
Authors: Kyereboah-Coleman Anthony , Biekpe Nicholas
Published: February 2017

In this study, we examine whether Board characteristics have impact on bank performance by comparing listed and non-listed banks. The study uses panel data covering the eight year period, 1997– 2004 from all the 18 Banks in Ghana. Findings of the study confirm earlier studies. While the size of the board has positive correlation with bank performance whether listed or not listed, the more independent a board is the better the performance in spite of a bank’s listing status. Of significance is the finding that when a CEO doubles as a board chairman, it impact positively on performance in the overall sample, but negatively in both sub-samples.
Dependent or independent? The performance contribution of board members in Italian venture backed firms
Authors: Caselli Stefano
Published: February 2017

In this paper we tested the relationship between the IRR and the corporate governance choices of 87 Italian closed-end funds for the management of 698 private equity operations carried out from 1999 to 2003. In particular, we looked for information about the role of independent directors and their ability to stimulate firm growth and the closed-end funds final return, compared with the performance of dependent directors. We found no differences in the performance of venture-backed firms due to the presence of independent members in the board of directors, and concluded that this does not influence final results
Ownership, control and performance in the most actively traded companies on Stockholm stock exchange. A comparison between 1999 and 2001
Authors: Bjuggren Per-Olof , Bohman Helena
Published: February 2017

The relationship between ownership, control and firm value is the subject matter studied. The study is essentially empirical. Data about the most actively traded non-financial companies on the Stockholm Stock Exchange is used. A comparison is made between the years 1999 and 2001. What do the relationships between firm value and different ownership characteristics like ownership concentration, foreign ownership and inside ownership look like? Do these characteristics differ between the booming year of 1999 and the recession year of 2001? Is there a relation between stock price and ownership structure? These are the three main questions addressed in the study.
Owner-managers’ equity portfolio choice
Authors: Holmen Martin , Råsbrant Jonas
Published: February 2017

Some studies have shown that managers concentrate large fractions of their wealth in the equity of their own firm. In this paper we use a unique dataset and investigate how Swedish owner-managers invest remaining wealth conditional on a major investment in their own firm. We find no evidence that owner-managers seek diversification benefits when they invest remaining wealth. Instead some owner-managers invest remaining wealth in the industry where they already have a substantial capital investment. We conclude that some owner-managers seek to exploit their industry-specific superior information when they invest wealth not tied up in their own firms
Does ownership structure matter? Evidence from Malaysian equity market
Authors: Chu Ei Yet , Cheah Kooi Guan
Published: February 2017

The paper examines the determinants of ownership structure characteristics of the 147 firms listed on main board of the Kuala Lumpur Stock Exchange (KLSE). Three dimensions of governance issues in firm theory:- asymmetric information, agency conflicts and risk as discussed in Putterman (1993) are used to assess the effects of ownership concentration. Ownership concentration is divided into dispersed, dominant minority, and majority controlled firms, while ownership identities are classified as family controlled, conglomerate, others institution, state, foreign and dispersed firms in explaining the above determinants of firm’s ownership. With the exception of leverage and year effects, we prove that ownership structure is able to extract cost and benefits from governance structure. We further provide evidence that ownership identities influence asymmetric information and risk
Disclosure of individualized executive compensation figures: An empirical analysis of compliance with the German corporate governance code
Authors: Werner Joerg Richard , Zimmermann Jochen
Published: February 2017

From 2002 to 2005, the German Corporate Governance Code advised that stock listed companies should (voluntarily) disclose individualized executive compensation figures. In a sample of big publicly traded German companies, we examine which determinants drive firms to comply with that “soft law” requirement. Using a probit model, we consider 15 explanatory variables. We find that block-holdings, average executive remuneration, book-to-market ratio and the percentage of union representatives in the supervisory board significantly decrease the likelihood of disclosures on individualized executive compensation numbers. Firm size, the absolute number of supervisory board members and the presence of takeover activity turn out as having a significant positive influence on the disclosure behavior. Additionally, we find that it was less likely in 2002 that individualized remuneration figures were published, indicating that Code recommendations are considered as more binding than Code suggestions.
IPO boards of directors and firm performance: Threshold firms and governance theory boundaries
Authors: Carter Suzanne M. , Davis James H. , Young Charles R.
Published: February 2017

Past research examining the influence of boards of directors on firm performance has acknowledged, but typically failed to account for, the early life cycle stage of the firm. This study analyzes the effectiveness of board structure and behavior on firm performance in the early stages of the life-cycle for start-up IPO firms. Results suggest that the life-cycle of the firm is an important contextual variable to include when determining board effectiveness
Corporate governance and firm performance of highly leveraged transactions: Evidence from leveraged recapitalizations and management buyouts
Authors: Bae Sung C. , Jo Hoje
Published: February 2017

We examine the effects of several corporate governance mechanisms on firm performance of two highly leveraged transactions (HLTs). Employing forty-one firms that implemented leveraged recapitalizations (LRs) and eighty-eight firms that undertook leveraged management buyouts (MBOs) during the period 1985-1990, we find that prior to their HLT, MBO firms tend to be smaller, be less profitable, have higher managerial ownership, have lower block ownership, and have a smaller fraction of independent outside directors on their board than LR firms. On the other hand, we observe no significant difference in board size or equity-based compensation between MBO and LR firms. Our regression results show that higher managerial ownership and greater equity-based compensation, which presumably help align managers’ incentives with shareholders, are strongly associated with operating performance of MBO firms, but only marginally with operating performance of LR firms. In contrast, greater outside representation on corporate boards, which presumably improves shareholder monitoring, is strongly associated with operating performance of LR firms, but only marginally with operating performance of MBO firms. Blockholders’ ownership, another effective mechanism of internal monitoring, is found to play a relatively insignificant role in enhancing operating performance of firms that go through a HLT. Our results are not attributed either to the difference in firm size or to an industry effect.
Economic growth in Africa: The role of corporate governance and stock market developments
Authors: Kyereboah-Coleman Anthony
Published: February 2017

The study explored the link between corporate governance, stock market developments and economic growth by using data on selected African countries. Analysis was done within the Arellano-Bond Dynamic Panel data modelling. Results show that corporate governance and particularly the independence of corporate boards is important for firm performance and economic growth and that stock markets also play an important role in economic development. However, while market size is conclusive, our findings points to the fact that an increase in stock market activities must be focused and carefully supported with appropriate mix of policies and programs in order to achieve the desired impact on economic growth because too many policies could erode the effect of critical indicators.
The transparency of derivative disclosures by Australian firms in the extractive industries
Authors: Hassan Mohamat Sabri , Percy Majella , Goodwin-Stewart Jenny
Published: February 2017

This paper investigates the transparency of derivative disclosures of Australian firms in the extractive industries using 1998 to 2001 financial reports. The quality of financial reporting has become a major corporate governance issue since the collapse of prominent companies such as Enron in the United States, HIH Insurance in Australia, and, of particular relevance here, Barings PLC in the United Kingdom, where the losses were caused by derivative instruments. Disclosure transparency is an important component of the quality of financial reporting. We measure transparency based on a disclosure index developed from AASB 1033 Presentation and Disclosure of Financial Instruments. We examine the relationship between transparency and firm characteristics represented by size, performance, growth opportunities, auditor and type of extractive firm. The results indicate that the transparency of derivative disclosures among firms in the extractive industries has increased over the period. However, there is still evidence of non-compliance with the disclosure requirements, especially in relation to net fair value. We find that firm size, price-earnings ratio and debt-to-equity ratio, and to a lesser extent, market-to-book ratio and profitability are associated with disclosure transparency.
On defining shareholder activism: Exploring the terrain for research
Authors: Rho Han-Kyun
Published: February 2017

It is crucial to clarify the concept of shareholder activism for the study of shareholder activism. So far a couple of scholars (Black, 1990, 1998; Gillan and Starks, 1998; Hernández-López, 2003) have defined shareholder activism but still there is a room for more clarification. This paper tries to clarify the current definition of shareholder activism by introducing three dimensions of the concept – target, actor and action. Finally it will discuss implications of this clarification for future research, especially from the perspective of representativeness and generalizability.