bluuebunny/crossref_metadata_2025 huggingface dataset:
Corporate governance and firm performance in an emerging market - An exploratory analysis of Pakistan
Authors: Nishat Mohammed , Shaheen Rozina
Published: February 2017

This preliminary study aims to develop a corporate governance index based on governance practices followed by the listed firms at Karachi Stock Exchange (KSE). Since the corporate governance concept is at very initial level of its implementation and practices, this study also analyses the structure of good corporate governance practices and level of awareness about new regulations of corporate governance implemented by Security Exchange Commission of Pakistan. The data is collected through a structured questionnaire covering seven corporate governance categories: audit committee, board of directors, charter/bylaws, director education, executive and director compensation, ownership, and the progressive practices during the year 2004. The results indicate that all of the firm performance measures; return on equity, net profit margin, sales growth and dividend yield (except Tobin’s Q) have their expected positive relation with corporate governance index score (Gov-Score) and are significant in correlation and decile analysis. This suggests that firms with relatively poor governance are relatively less profitable, less valuable, and pay less cash to their shareholders. The role of audit and board of director are highly associated with good performance while the governance categories related to director’s education and charter/bylaws are least associated with good performance
Incentive compensation in Fritz Hansen: The shortfall of incentives theory and the insights from contingency theory
Authors: Bech-Nielsen Anne Britt , Rom Anders
Published: February 2017

This paper studies incentive compensation at Fritz Hansen, a Danish manufacturer of exclusive design furniture. A vast amount of literature exists within incentives theory. However, regardless of the establishedness of incentives theory it is not able to fully explain the case at Fritz Hansen. Several short-comings of incentives theory are found: managers whose compensation is not tied to BSC measures behave in accordance with these measures; no bonus bank is included in the incentives system to accompany EVA measures on which managers are rewarded but there seem to be no resulting focus on short-term results; managers self-select the bonus measures but they select measures that they cannot directly influence. Regardless of these breaches, the situation at Fritz Hansen seems to be in equilibrium with managers behaving in the interest of the owners and the owner representatives being satisfied with the incentives system. In order to better understand how and why the design of incentive compensation at Fritz Hansen seems to function, contingency theory is drawn upon. While contingency theory provides a usable framework for the study important variables not previously mentioned in contingency theory is missing before the case of Fritz Hansen can be explained. Using the case study method the variables change urgency, the presence of an ultimate lagging goal, the legitimising effect, the system of measurement, non-financial measurement and lastly the controllability principle are extracted from the case. Together, these can explain why EVA is still included as a compensation base and why managers are motivated by BSC measures although they are not part of the compensation base
Ownership structure and stock liquidity: Some evidence from the Jordanian capital market
Authors: Omet Ghassan
Published: February 2017

It is common knowledge that the microstructure of securities markets has generated a large number of research papers. This effort is not really surprising if one understands that market liquidity is important because of its implications for firms’ investment and financing decisions and the development of financial markets. This paper examines the issue of stock liquidity in the Jordanian capital market. Specifically, we provide of measure of liquidity cost and relate it to firm specific characteristics including the ownership structure of stocks. Based on the daily trading data for a total of 131 listed companies during 2005, the results indicate that liquidity cost in the Jordanian market is high. In addition, the results indicate that while risk is the main determinant factor of spread, higher ownership dispersion does not improve market liquidity.
Ownership structure and operating performance changes surrounding stock option adoptions: Evidence from Japan
Authors: Uchida Konari , Matsumoto Mamoru
Published: February 2017

Stock option adoptions by IPO firms account for about one-third of Japanese stock option adoptions during 1997-2000. Non-IPO firms that adopt stock options tend to decrease financial institutions’ ownership levels less than the average whereas reduce other corporations’ ownership levels more than the average. The result suggests firms that care more about shareholder wealth decrease cross-shareholdings as well as issue stock options. However, such firms need to keep shareholdings by financial institutions to prevent increases in agency costs of debt. Finally, we do not find a significant change in firms’ operating performance surrounding stock option adoptions.
The relationship between board size, board composition, CEO duality and firm performance: Experience from Ghana
Authors: Kyereboah-Coleman Anthony , Biekpe Nicholas
Published: February 2017

The paper examined board characteristics and its impact on the performance of non-financial listed firms in Ghana. Data covering 11 year period (1990-2001) was used and analysis conducted within the panel data framework. The study shows that most Ghanaian firms adopt the two-tier board structure and are largely non-independent. The regression results, though relatively mixed, confirm other studies and show that there should be a clear separation of the two critical positions of CEO and board chairman in order to reduce agency cost for enhanced firm performance.
Corporate governance and bank performance: Does ownership matter? Evidence from the Kenyan banking sector
Authors: Barako Dulacha G. , Tower Greg
Published: February 2017

This paper provides an empirical analysis of banks performance in Kenya. The primary purpose of this study is to investigate the association between ownership structure characteristics and bank performance. Data utilised in the study is collected from the Financial Institutions Department of the Central Bank of Kenya, both on-site inspection reports and off-site surveillance records. Empirical results indicate that ownership structure of banks significantly influence their financial performance. In particular, board and government ownership are significantly and negatively associated with bank performance, whereas foreign ownership is strongly positively associated with bank performance, and institutional shareholders have no impact on the performance of financial institutions in Kenya. The study makes a significant contribution to financial research by extending examination of banks performance to a developing country context beyond the usual confines of the developed western economies, and adds to the small number of similar studies in the African context. The results are consistent with prior research findings, and more importantly, presents statistical justification for pursuing further corporate governance reforms with respect to banks’ ownership structure to enhance the financial stability of the sector
The fiscal piece of advice as instrument of protection and generation of value to the minority shareholders. An vision of corporate governance.
Authors: Loureiro Escuder Sergio Antonio , Prudencio Tinoco Joao Eduardo
Published: February 2017

The present article inserted in the extent of the corporate governance has as objective contributes in the evaluation of the importance of the fiscal piece of advice in the structure of the organizations, with lucrative purposes, as control instrument and support to the shareholders’ Assembly, to the light of the legislation of the limited companies and of the reduction entities, class organs, like IBGC, CVM, IBRACON and BOVESPA. It was observed, on the other hand, that the family company is preponderant in Brazil, and that that central aspect limits the performance of the fiscal piece of advice in the context of the corporate governance
Corporate governance in the financial services sector of small island economies: A case study of Mauritius
Authors: Boolaky Pran Krishansing
Published: February 2017

This study investigates the practices of corporate governance in the financial services sector of small island economies with special reference to banks and insurance companies in Mauritius with a view to assess the level of compliance. The financial sector is today an important economic pillar on which the government is relying given the imminent recession in the sugar industry. In this respect financial institutions play a key role because they are the core set of the financial sector. It is therefore important for people to have confidence in both banks and insurance companies of their country. This is possible by ensuring compliance with good governance. In Mauritius, the Central Bank has issued its guidelines on good corporate governance for banks and this guide is made in line with the Corporate Governance Code issued by the National Committee on Corporate Governance. Banks are also required to comply with the codes as per the Banking Act 2004 and the Financial Reporting Act 2004. In a similar vein insurance companies should comply with the National Code on Corporate Governance and relevant laws related to good governance of insurance business, such as the Insurance Act 2005, the Financial Services Commission guidelines on Corporate Governance and the Financial Services Development Act 2002. In addition insurance companies should also comply with the Companies Act 2001 and the Financial Reporting Act 2004. This paper initially reports on the practice of corporate governance in the financial services sector of small island economies by drawing data from the Financial Sector Assessment Programme of the International Monetary Fund. A content analysis of the annual reports of companies in the sector is used to assess the level of compliance to corporate governance code in Mauritius and concludes that compliance rate is above 70% as regards board’s composition, audit committee, disclosure of policies and practices. This study reports that there are few cases of noncompliance with the National Code but good governance is necessary in the financial services sector to inspire stakeholders confidence.
The impact of institutional shareholding on firm income instability risk: Evidence from Finland.
Authors: Graham Michael , Yawson Alfred
Published: February 2017

We empirically examine the effect of institutional shareholding on firm risk-taking, narrowly defined. We categorize institutional shareholding into those with both investment and business relationships with the firms in which they own equity stakes (termed pressure-sensitive institutions), and institutions with only an investment relationship with the firm (termed pressure-resistant). The results suggest a differential impact of different institutional investors on firm risk-taking
Firm performance and the ownership of the largest shareholder
Authors: Chen Xiaoyue , Kim Jeong-Bon , Wang Steven Shuye , Xu Xiaodong
Published: February 2017

We examine the relationship between cash-flow rights held by the largest shareholders and firm performance in Chinese capital market. Using a sample of all listed A-share firms between 2000 and 2003, we find that there are “region effects” with an “M” shape in the relationship between cash flow rights held by the largest shareholder and firm performance. The non-monotonic variations of firm performance associated with changes of the largest shareholdings suggest that there may be an optimal ownership structure existed in listed Chinese firms. We also find that firms under the control of largest state shareholders have poorer performance than that under the control of largest non-state shareholders
Corporate governance and fraud: Evidence from China
Authors: Chen Langnan , Lin Weibin
Published: February 2017

This study investigates the relationship between corporate governance and corporate fraud by utilizing logit regression and by employing a sample of 176 firms listed in Chinese stock markets during the period from 2001 to 2005. The results s reveal that: (1) the proportion of independent members in board of directors is lower for firms experiencing corporate fraud than for no-fraud firms; (2) the firms with CEOs being the chairmen of board of directors are more likely to commit corporate fraud than the other firms; (3) the financial incentives to executives are greater for firms experiencing corporate fraud than for no-fraud firms; (4) capital structure has significant and positive effect on corporate fraud in China
How toeholds become footholds
Authors: Canil Jean M. , Rosser Bruce A.
Published: February 2017

We document empirical evidence that bidders tailor their takeover strategy when facing entrenched target managers. Key elements of a takeover strategy comprise the toehold purchase and the initial bid premium. We find that toeholds are acquired in cognizance of the principal outsider and target management block. Bidders’ free rider cost savings are measured by the product of the toehold and the initial bid premium. Several relationships are identified. Initial bid premiums for targets characterized by entrenchment are comparatively low and result in low free rider benefits to bidders. To avoid overpayment, bidders do not compensate entrenched managers for lost private benefits. Instead, in entrenchment scenarios toeholds are optimized with respect to the principal outsider as well as the target management block in order to create a foothold that neutralizes entrenchment. At the median toeholds match the spread between the principal outsider and the target management block in entrenchment scenarios, are about double the spread for shareholder-aligned targets and much smaller for owner-managed targets. Takeovers of owner-managed targets rely more on a higher offer price.
Ownership categories and investment patterns after mass privatization in Bulgaria and the Czech Republic
Authors: Peev Evgeni
Published: February 2017

This paper studies the emerging ownership and investment patterns of listed companies during the first years after mass privatization (Bulgaria) and after around ten years after mass privatization (the Czech Republic). It explores firm-level data over the period 1998-2003. We apply accelerator-cash flow model and q-model to cash-flow investment sensitivity. In the Bulgarian sample, contrary to the expectations firms controlled by foreign firms are financially constrained. Firms controlled by stateowned holding company show financial re-allocation investment pattern, while firms under control of privatisation fund have inertial investment behaviour. In the Czech Republic, the estimates of the q-model show that companies controlled by foreign investors are less financially constrained and have profit-maximization behavior, firms controlled by the National Property Fund have insignificant financial re-allocation, and firms under control of other domestic firms are most financially constrained. However, the accelerator model does not confirm these results for the firms under control of other domestic firms
Accounting standards for employee stock option disclosure: The current debate
Authors: Poitras Geoffrey
Published: February 2017

The paper examines the implications of recent changes to accounting standards for employee stock based compensation with contingent features. The Dec. 2005 implementation of FAS 123R by the Financial Accounting Standards Board requires the fair value of such expenses to be recorded in net income. The change is now impacting the reported financial statements of firms that have been substantial users of employee stock options. This provides an opportunity to directly assess the actual impact of FAS 123R on such firms. Arguments for and against mandatory expensing are reviewed and an assessment of the contrasting positions provided. Significant limitations of current reporting requirements are identified
Do family firms perform better: A Belgian survey
Authors: Bughin Christiane , Colot Olivier , Comblé Karin
Published: February 2017

A large conceptual economic literature presents assumptions that family owned and controlled firms perform better than others, essentially on the basis of agency theory, ownership structure, cultural specificities and particular management practices. Large empirical evidence has been supplied by various studies, even if there are still contradictory debates. This paper uses the paired samples methodology to compare operational, economic and financial profitabilities of Belgian family firms. Evidence is given that they perform better, and this significantly for economic profitability. Discussion is engaged about the contribution of family values and practices to their results.
Asymmetric pay-for-performance and corporate governance in the market downturn
Authors: Yang Tung-Hsiao
Published: February 2017

This paper examines the pay-for-performance, corporate governance, and their connection by analyzing the change of executive compensation when the stock market changes from upturn to downturn. We provide the evidence to support the managerial power explanation for the change in executive compensation. We find the asymmetric pay-for-performance and corporate governance in different market conditions and different firm’s market performance. In addition, the outperformed firms reward CEO with more cash-based compensation and less stock-based compensation in the market downturn. Therefore, we conclude that the CEOs of outperformed firms have stronger managerial power than those of underperformed firms. We also find supportive evidence of our conclusion that the firms with lower debt ratio, smaller number of board meetings, and the presence of interlocked relationship have higher probability to be the outperformed firms. This evidence is consistent with the prediction of managerial power approach
Global diversification: Evidence from corporate operating performance
Authors: Iskandar-Datta Mai , McLaughlin Robyn
Published: February 2017

This study casts light on the impact of the decision to diversify globally on the firm’s operating performance. Examining operating performance enables us to circumvent the measurement errors associated with excess value that is used to measure the diversification discount/premium. Our central empirical results for a sample of firms that chose to diversify globally reveal that sample firms, in spite of exhibiting a diversification discount, significantly outperform their domestic counterparts following the diversification. Our findings imply that global diversification does not result in misallocation of investment resources. The fact that our firms exhibit the diversification discount and yet outperform their domestic counterparts confirms previous studies’ conclusions that the diversification discount is most likely an artifact of measurement error
Fraudulent financial reporting detection: Corporate governance red flags
Authors: Grove Hugh , Cook Tom
Published: February 2017

The recent fraudulent financial reporting by Enron, Qwest, and other companies was facilitated by poor corporate governance. As shown in this paper, ten timeless factors of corporate governance helped detect such reporting. Weak corporate governance facilitated both classic and recent financial reporting frauds, particularly the following factors: all-powerful CEO, weak system of internal control, focus on short-term performance goals, weak or non-existent code of ethics, and questionable business strategies with opaque disclosures. These factors implied ineffective boards of directors and audit committees. New corporate governance guidelines for boards and audit committees by the U.S. stock exchanges and the Sarbanes-Oxley Act appear to have good potential for strengthening corporate governance to help prevent earnings manipulations and fraudulent financial reporting. These new regulations should continue to strengthen strong corporate governance and control systems, especially in relation to the ten timeless factors for fraudulent financial reporting. If corporate governance guidelines are not followed, then, these stock exchanges can delist the offending companies
Do trade sale privatizations in Europe create value to shareholders of acquiring firms?
Authors: Zeidler Felix , Schiereck Dirk
Published: February 2017

Many authors have identified zero to negative announcement returns for acquirers in traditional mergers and acquisitions. When purchasing state-owned enterprises as compared to public assets the acquirer faces one particular difference: the distinct characteristics of the seller. The selling government is assumed to lack bargaining power and experience selling off its assets and also often to consider non-economic objectives when privatizing. Furthermore it has a tendency to privilege domestic acquirers. By conducting standard event study methodology and analyzing 90 European trade-sale privatizations we document that acquirers in a privatization context yield significant positive abnormal stock returns
Effects of deregulation on executive compensation revisited: The evidence from three industries
Authors: Cho Theresa Seung
Published: February 2017

This study examines the linkage between a heightened managerial discretion due to an environmental change on executive compensation. Specifically, we consider the impact of deregulation on three facets of executive pay: structure, level and the degree of disparity among the top executives. The results indicate mixed support for previous findings on the effects of an environmental shift on executive incentive system
Value relevance of key accounting information and earnings management: high-tech versus low-tech firms
Authors: Kwon Sung S. , Gaber Brian , Ng Peggy
Published: February 2017

This paper examines the value-relevance of primary accounting information and the size of earnings management concurrently for high-tech versus low-tech firms. Specifically, the results reveal that earnings and changes in earnings of high-tech firms reflect lower levels of security price reactions and associations than those of low-tech firms. In addition, consistent with evidence from prior research, greater levels of earnings management, measured by modified Jones and performance-matched discretionary accruals (proxies for earnings management), exist for high-tech firms vis-à-vis low-tech firms over the sample period. More importantly, this paper also documents that the association between cumulative adjusted returns and key financial variables, including earnings, changes in earnings, sales, and changes in sales, remains weaker for high-tech firms than for low-tech firms even after levels of earnings management have been controlled for.
Does the national interest matter? A case study of a cross-border merger
Authors: Sawyer Kim R. , Johnson Jackie
Published: February 2017

In cross-border mergers, matters of national interest often emerge. In this paper, we examine the question as to what constitutes the national interest, and whether it affects the probability of a merger receiving regulatory approval. To illustrate, we examine the takeover of the Australian resources company Western Mining Corporation
Can agency theory recommendations affect performance of family firms? Evidence from the Italian market
Authors: Caselli Stefano , Gatti Stefano
Published: February 2017

Using data on all family owned firms listed on the Italian Stock Exchange for the entire period between 2001 and 2005, it is shown that agency theory prescriptions and monitoring activities differentially impact the market value and profitability of family owned firms. Specifically, nonfounder family firms benefit from a low level of board and insider stock ownership and a high level of stockholder and foreign investor ownership, because these firms necessarily face high agency costs. Conversely, founder family firms benefit from a high level of board and insider ownership, and a low level of stockholder and foreign investor ownership, owing to their lower agency costs
Investment value of recommendations in the Italian stock exchange
Authors: Cervellati Enrico Maria , Della Bina Antonio Carlo Francesco , Pattitoni Pierpaolo
Published: February 2017

Financial analysts’ research activity seems to be important for investors in their investment decisions. Understanding if financial analysts’ reports can influence the market and the degree of reliability of their forecasts has been a theme lively debated in the academic literature but also in the press, mainly because of recent financial scandals. The main objective of the paper is to calculate the investment value of financial analysts’ recommendations on companies listed in the Italian Stock Exchange and to verify the possibility of profiting from relying on the average consensus of recommendations. We have enclosed in the analysis all the 16,634 reports issued between the 1st January 1999 and the 23rd July 2004 and available on the website of the Italian Stock Exchange, constructing a unique database for Italy. After classifying companies by quarter, five portfolios are formed based on analysts’ average consensus to calculate the excess returns of each portfolio in each quarter. Our results suggest that analysts’ recommendations have indeed investment value, even if investors should carefully consider neutral recommendations that can be considered as negative ones. These results, furthermore, give some interesting regulatory suggestions for a policy maker that wants to ensure transparency in the markets
Path-dependency and corporate governance in Italy: The political origins of debt financing
Authors: Nicita Antonio , Vannini Riccardo
Published: February 2017

In this paper we investigate the emergence and the co-evolution of institutional complementarities between debt and equity as alternative financial instruments in the case of Italy. We focus on the evolution of Italian firms (related to the benchmark years from 1952 to 1991). Through the data collected we observed the collaterals that firms were able to transfer to loan institutes. We also examined the factors which made difficult to switch to equity financing, comparing the rate of profitability of Italian firms with alternative investments. The results show a financial structure for Italian firms that rely exclusively on debt, independently of the public or private nature of firms’ property and of the economic sector. This anomaly seems to be the consequence of path-dependencies between “political origins” and firm’s governance structure in Italy.
The effect of takeover defenses on long term and short term analysts’ earnings forecasts: The case of poison pills
Authors: Turk Thomas A. , Goh Jeremy , Ybarra Candace E.
Published: February 2017

This study examined the effect of poison pill adoption on long term and short earnings forecasts by security analysts. Our results provide no evidence of significant revisions in one-year or five-year earnings forecasts following the adoption of poison pills. We do find evidence, however, that firms adopt poison pills following a period of significant negative revisions in earnings forecasts. Our results suggest that poison pill adoptions may be a response to downward revisions in earnings forecasts
Directors’ and officers’ insurance in Canada
Authors: Boyer M. Martin
Published: February 2017

This paper looks at the insurance demand of a firm’s directors and officers using a sample of Canadian corporations (excluding firms from the financial services and mining sectors) from 1993-1999. More to the point, we study the demand for directors’ and officers’ insurance. Contrary to the financial distress theory of hedging, our results suggest that larger corporations are more likely to purchase D&O insurance. On the other hand, insurance is more likely when the firm is financially weak. Firms are also more likely to purchase D&O insurance when there are few outsiders on the board of directors and when the board members have an important financial stake in the corporation, suggesting that D&O insurance is yet another tool for managerial entrenchment. Surprisingly, being listed on a stock exchange in the United States does not seem to have an impact on the demand for D&O insurance, contrary to previous results
Corporate governance in Brazil: A study on 647 open corporations
Authors: Monaco Douglas C.
Published: February 2017

This article draws on a sample of 647 Brazilian publicly traded corporations to explore some of the features of corporate governance in this country. The results that due to the size of the sample (80% of total population) are particularly reliable, show that ownership concentration is by far the mostly used governance mechanism what matches the patterns observed in Continental European countries. Results also raise doubts about the real role boards of directors play in Brazilian open corporations, what offers new streams for researchers willing to tackle issues in emerging economies.
The non-linear relationship between managerial ownership and firm performance
Authors: Bonardo Damiano , Paleari Stefano , Vismara Silvio
Published: February 2017

We investigate the relationship between operating performance and ownership structure using a sample of Italian IPO-firms in the period 1995-1999. Overall, we find that their performance declines after the IPO. We find evidence of a non-linear relationship between ownership and performance using different measures of operating performance and managerial ownership. This result supports the hypothesis of a combined effect of ownership on firm performance, with a positive effect at low and high levels of managerial ownership (alignment of interest hypothesis) and a negative effect at intermediate levels (entrenchment hypothesis)
The evolution of ownership structure, path dependency and enterprise performance using dynamic panel data models
Authors: Shehaj Entela , Hashi Iraj
Published: February 2017

The present paper focuses on privatised firms in Albania, where the evolution of ownership structure has not been studied before. The paper responds to two specific questions: (i) is the evolution of ownership path dependent, i.e., does ownership structure in the past affect ownership now?; and (ii) what influences the evolution of ownership structure of privatised firms. We use the information from an enterprise survey conducted in 2003 and the dynamic panel data techniques to identify the relative importance of previous ownership structure as well as other firm-specific variables.
Corporate expatriations: loosening the bonds of control
Authors: Johnson Jackie , Holub Mark
Published: February 2017

Following criticism of former U.S. corporations for reincorporating offshore, legislation was proposed to remove any financial advantage gained. The move offshore has significant tax implications for the U.S. Treasury, so proposed legislation has tried to either retain some U.S. control over the companies or limit their U.S. government business. Results indicate that individual expatriates show little effect from two years of anti-expatriation proposals and are unlikely to reverse their reincorporation decision. With the Bush administration’s pro-corporate agenda there is little hope for a forceful anti-expatriation stance. Meanwhile the decline in corporate tax revenue continues to be a problem for the U.S. Treasury as they lose control of tax revenue as the budget is squeezed by needs at home and abroad
Managerial flexibility using ROV in South Africa: a survey of the top 40 JSE listed companies
Authors: van Rooyen JH , Mokenela Lehlohonolo
Published: February 2017

The traditional DCF (Discounted Cash Flows) -based techniques have been criticised in finance literature for their failure to incorporate flexibility in the evaluation of projects. Academics are advocating the use of Real Option Valuation theory (ROV) as it quantifies managerial flexibility, thereby bridging the gap between strategic thinking and finance theory and practice. The purpose of the study is to determine whether the largest firms in South Africa are using ROV and also to assess some of the factors that may influence their use of the technique. This paper presents the results of a survey of firms included in FTSE/JSE Top 40 index. The results suggest that while managers in these firms recognise and feel the need for flexibility in projects, most firms do not use ROV to plan their investments. This is largely attributed to managers being unaware of the technique, while the influence of the other factors is less clear.
CanWest global: a multi-media conglomerate amid perilous landscape
Authors: Eid Mahmoud
Published: February 2017

This paper uses the political economy of communication approach to understand and analyze the structure, policy, operations, control, and efficiency of a unique and major Canadian multi-media conglomerate example - CanWest Global Communications Corp. - in the dawn of the twenty first century. It relates the analysis to a range of criteria such as: the historical background and nature of the company, types of corporate conglomeration, tiers of firms, levels of ownership, structures of corporate control, policies of debt and lay-offs, range and diversity of cultural production, corporate sales’ revenues and market share, relationship to government and financial contributions to political parties, and composition of the board of directors and the interlocking relationships between its members and other institutions. The paper highlights debates over the effects of concentration of media ownership to introduce a fair understanding and suggest reasonable actions
Low cost & low fare: strategy in revenue management for GOL air transport S.A.
Authors: Imoniana Joshua Onome , Cavalcanti Marly , de Souza Bispo Marcelo
Published: February 2017

The intention of this paper is to study the concept low cost, low fare as strategy in the market of Brazilian commercial air transport, taking as parameter the case study of Gol Air Transport S.A. For the achievement of the presented objectives the following questions are made: a) what it takes an airline company to take a strategy of low cost low fare? b) The option of low cost low fare, would have contributed to generate a new managerial model in the traditional forms of strategic management in the area of commercial air transport ? c) The constructed scenery tends to be lasting? Adopting the methodological approach of case study and analysis of events, a qualitative and quantitative research was fullfilled on the basis of the studies of Denzin & Lincoln. The results of the analyses indicate the deepening of the phenomenon of low cost & low fare that it is used in world-wide commercial aviation and makes to conclude the relevance and the potentiality of the concept low cost & low fare if it is extend to the tourist industry that suggests a new balance for the traditional companies in the strategic management
Boards and diversification strategy: evidence from the Spanish savings banks sector
Authors: García-Soto María Gracia , Álamo-Vera Francisca Rosa
Published: February 2017

When executives seek to satisfy their need for prestige and status through long-term strategic decisions that increase the size of the company -such as corporate diversification- but do not improve the firm’s performance, agency costs might appear. Thus, the current work aims to responding the following question: does the corporate governance of an organization influence its diversification strategy? Considering that most research to date has focused on the governance structure of large public limited companies, we considered it would be useful to centre our study on organizations lacking alienable property rights and with an allocation of decision rights decided by law -this is the case of the Spanish savings banks. The results obtained show that board size, number of meetings, and ROE are positively associated with diversification
Quality of governance and the construction of governance indices: evidence from Spain
Authors: Pérez de Toledo Eloisa , Bocatto Evandro
Published: February 2017

Corporate governance is a set of mechanisms relevant to economic efficiency since it can minimize agency problems. The question is to determine how governance and firm performance interact. Recent research shows that firm-level corporate governance mechanisms are more important in countries with low investor protection, suggesting that firms can partially compensate for ineffective legal environments. Within this context, the objective of this paper is to construct a robust proxy for quality of corporate governance for the Spanish public companies. Thus, after providing an extensive literature review on the field of corporate governance and its interaction with firm performance, we construct a governance index (GOV-I) for a sample of 97 Spanish non-financial public companies. Finally, we assess the determinants of governance in the case of Spain. The results show a significant relationship between governance and performance, future growth opportunities and size, demonstrating that Spanish firms adopt better standards of governance to compensate for the low level of investor protection holding in the country.
Corporate governance ratings: general concerns and specific problems in the European context
Authors: Koehn Daryl , Ueng Joe
Published: February 2017

Recent corporate scandals have led investors to monitor corporate governance more closely. Corporate governance ratings by independent agencies have become popular with investors seeking indicators of good market returns. We present empirical data showing that such CG ratings show no significant correlation with European firms’ stock price appreciation. We conclude with a few thoughts concerning possible dangers associated with the use of CG ratings
Overinvestment and underinvestment problems: determining factors, consequences and solutions
Authors: La Rocca Maurizio , La Rocca Elvira Tiziana , Cariola Alfio
Published: February 2017

The potential conflicts of interest between managers, stockholders and debtholders influence capital structure, corporate governance activities and investment policies, which, in turn, could give rise to inefficient managerial decisions and “suboptimal” investments that generally fall under the categories of problems of underinvestment and overinvestment. This paper intends to discuss these problems by identifying their causes, determining factors and the consequences on the value production processes, as well as to point out possible solutions to them. After having confronted the effects and their implications on firm governance activities by clarifying the relevance of the phenomenon and showing the main empirical data that emerged in the prevailing researches, we summarize the main financial proposals found in literature that can diminish their impact
Role for auditing in corporate social responsibility and corporate governance: under new corporate view
Authors: Kurihama Ryuuichiro
Published: February 2017

Auditing plays a key role in Corporate Social Responsibility (CSR) and corporate governance. Auditing is essential to corporations and society because it is a medium to build a good relationship between corporations and stakeholders. However, a role for auditing in CSR and corporate governance has not been adequately discussed under new corporate view. This paper clarifies the relationship between CSR, corporate governance and auditing, and reexamines a role for auditing in CSR and corporate governance through the discussion of the relationship between corporations and society as recently brought up concerning CSR. This is necessary in order to think the view of how corporations and auditing should be toward rebuilding public trust
Effective boards of directors: an examination of director behavioral-types
Authors: Leblanc Richard W. , Schwartz Mark S.
Published: February 2017

The study sought to explore the role that director behavioral-type might play in leading to board effectiveness. The study involved direct observation of twenty-one boards of directors or committee meetings, together with interviews of 194 respondents. The study suggests that board process may be an equal if not more important factor than board structure in determining board effectiveness. The study’s data suggests that board processes, in turn, may be influenced by the behavioral-types of individual board members. Based on the three dimensions of dissent/consensus; individual/collective; and persuasiveness/non-persuasiveness, five director behavioral types leading to a functional board emerged from the study including: (i) change agents; (ii) consensus-builders; (iii) counsellors; (iv) challengers; and (v) conductors. Five director behavioral types leading to a dysfunctional board also emerged including: (vi) controllers; (vii) conformists; (viii) cheerleaders; (ix) critics; and (x) caretakers. The study concludes with its limitations
CEO dominance, family control and modified audit opinions in Hong Kong
Authors: Low Pek Yee , Majid Abdul
Published: February 2017

This study using Hong Kong data examines the linkages between CEO dominance (CEO and Chairman is the same individual), family ownership and control, and the likelihood that firms receive modified audit opinions. Logistic regression results using a matched pair design of 89 firm-years with modified audit opinions for 1997 to 1999 and 89 firm-years with unqualified audit opinions (control sample), show that family controlled firms are less likely to receive modified audit opinions than non-family controlled firms, and the positive association between CEO dominance and modified audit opinions is evident only for non-family controlled firms. This suggests that the abuse of power arising from CEO dominance may be mitigated by the presence of family ownership and control.
Corporate governance and capital markets: a conceptual framework
Authors: Haque Faizul , Arun Thankom G. , Kirkpatrick Colin
Published: February 2017

This paper outlines a conceptual framework of the relationship between corporate governance and two important determinants of capital market development namely, a firm’s access to finance, and its financial performance. The framework assumes that a firm’s corporate governance is simultaneously determined by a group of related governance components and other firm characteristics. Whilst the capital markets play a crucial role in enhancing corporate governance standards, the effectiveness and credibility of such effort might be constrained by poor firm-level corporate governance. Moreover, the cause and effect relationship can work in the opposite direction e.g. firm-level corporate governance quality can enhance both the firm’s ability to gain access to finance and its financial performance, which eventually lead to capital market development. The framework is primarily based on the economic approaches to corporate governance, although it recognises part of the assumptions of the stakeholder theory and the political economy aspects of corporate governance.
The operational and stock performance of spinoffs and carveouts: Some evidence from Canada
Authors: Cox Raymond A. K. , Jain Adishwar V.
Published: February 2017

The purpose of this paper is to examine the financial characteristics and the operating performance of Canadian domiciled parents, before and after a demerger, including an inspection of the financial profile of the divested subsidiaries subsequent to the spinoff or carveout. Additionally, the shareholder wealth impact on parents that demerge is studied including the share volume trading activity.
Determinants of the corporate decision to record goodwill impairment loss: Canadian evidence
Authors: Rakoto Philémon
Published: February 2017

The initial application of the new goodwill accounting standard enables firms to record an actual goodwill impairment loss in their books without affecting their earnings. The recording of a goodwill impairment loss indicates that the acquiring firm paid an excessive premium at the time of the business combination, and that this goodwill does not enable it to generate future earnings. This study is based on the hubris hypothesis and governance structure and is aimed at predicting whether managers will choose to record a goodwill impairment loss. Using a sample of high-tech Canadian firms, we noted that firms where: (1) managers showed excessive confidence, (2) the CEO cumulates the function of chairman and (3) the dominant shareholder was also a manager tended to record a goodwill impairment loss. The results are consistent with those of previous studies, which suggest that systematic differences exist between firms that choose alternative accounting methods. Hence, the results provide further support in the developing framework of a positive theory of accounting methods.
CEO stock and option holdings as a determinant of option hedging by gold mining firms
Authors: Jebli Ali , Khoury Nabil , Savor Marko
Published: February 2017

This paper seeks primarily to analyze CEO holdings of stocks and options in their firm as a determinant of the decision to hedge and the intensity of hedging with option-like securities in the gold mining industry. The findings show that CEO holdings play an important role in the choice and intensity of the use of option-like hedging instruments. In addition, results also show that the intensity of option-like instrument use for hedging is diminished when the CEO is also the chairman of the board. This original finding provides additional insight into the decision making process in this context. Moreover, our results show that when non-hedgeable quantity risk and hedgeable price risk are highly correlated, gold mining firms resort to operational hedging strategies through their production flexibility. Finally, investment opportunities as well as the high correlation between production levels and gold prices seem to have a negative impact on the decision to use option-like hedging in the gold mining industry.
The efficiency of the Italian stock exchange: market reaction following changes in recommendations
Authors: Cervellati Enrico Maria , Della Bina Antonio Carlo Francesco , Pattitoni Pierpaolo
Published: February 2017

The main objective of this paper is to examine the market reaction to the recommendation changes issued by financial analysts. We study the peculiar case of Italy where analysts have to send their reports to the Stock Exchange Commission and the Stock Exchange the same day they give it to their clients. Reports are available on the Stock Exchange website. Our dataset includes about 5,200 reports issued on the 117 IPO firms that went public on the Italian Stock market between 1st January 1998 and 31st December 2003. We calculate abnormal returns and abnormal volumes associated with the dissemination of the reports and perform two short-term event studies: the first associated with the “report date”, the second one with regard to the “public access date”, i.e. when the report is freely and publicly available on the Stock Exchange website. The event study related to the public access date show very different results. We do not find statistically significant average abnormal returns around this date, indicating that the market efficiently does not react to the mere publication of the report on the Stock Exchange website, since prices already included the effect of the recommendation change at the report date, i.e. when the new information was given to analyst’s private clients. It remains to be investigated if the abnormal returns before the report date are due to the effect of news different from the recommendation change or if they show a violation of the Italian regulation.