title: The Relationship Between Corporate Governance Practices and Financial Performance in New Zealand: An Empirical Investigation

authors: Reddy, Krishna

subjects: Corporate Governance

abstract: Corporate Governance is the set of structures and behaviours by which a company or other business entity is directed and managed (New Zealand Securities Commission, 2003). The structures and behaviours guide how the entity sets objectives, develops strategies and business plans, monitors and reports on performance, and manages risks. They also guide how directors and managers meet all expectations and that they are responsible and accountable in their respective roles. In 2004 the New Zealand Securities Commission (NZSC) adopted a principle-based corporate governance approach which was intended to contribute to high standards of corporate governance in New Zealand entities. The principles/guidelines are broad statement generally applied to the governance of entities that have economic impact in New Zealand or are accountable, in various ways, to the public. The economic entities are required to observe the principles/guidelines to the fullest extent that they reasonably can and depart only where they are subject to competing statutory or public policy requirements (NZSC, 2004). This thesis investigates the effect principle-based corporate governance practices have on the financial performance of publicly listed companies and public corporate entities in New Zealand. The adoption of the principle-based approach was to encourage entities to develop governance structures that are specific to their context. Therefore, this research examines: (i) whether the NZSC recommendations have encouraged institutions to develop entity and/or industry specific governance structures; and (ii) whether the differences in governance practices at entity and industry level contribute to the differences in the financial performance. Prior studies have examined governance practices of larger corporations in large economies. The governance practices of companies in smaller economies have received little attention. This research extends the understanding of responses to smaller entities, both private and public sector, in a small open economy with a mature capital market. The focus of this thesis is on the governance variables that have been highlighted by the NZSC in 2004 and also other governance variables that are supported in the literature as providing an appropriate structure for the institutions in the environment in which it operates. Data for the small and large capitalisation (cap) companies were obtained from the New Zealand Stock Exchange (NZX) Deep Archive. The data for the small cap companies covered the period 1999 to 2006 and for large cap companies the sampling period was from 1999 to 2007. For public sector corporate entities, data were obtained from their respective annual reports for the period 2000 to 2007. Pooled data were analysed using ordinary least squares (OLS) regression and two stages least squares (2SLS) regression techniques to evaluate: (i) whether entities have complied with the NZSC recommendations; (ii) whether those entities that were continuously compliant with the NZSC recommendations have superior financial performance; (iii) the entities’ financial performance post-NZSC recommendations is better than pre-NZSC recommendations; and (iv) the difference in governance practices in different entities and industries and the effect they have on company financial performance. The findings indicate that small cap and large cap companies and public sector corporate entities have universally adopted the Securities Commission recommendations. Results for the large cap companies show that compliance with NZSC recommendations had a positive effect on financial performance, but empirical results show that compliance with NZSC recommendations has had a negative effect on the financial performance of small cap companies and public sector corporate entities. There is also evidence that governance practices in certain industries have contributed towards the differences in entities’ financial performance. This suggests that a principle-based governance approach led to the development of industry-specific governance structures in large cap companies and State-Owned Enterprises (SOEs) as intended. However, the evidence for the small cap companies is specific to the finance/investment sector. As a result of this study, the relationship between ‘soft regulations’ and entities’ financial performance is better understood, and in terms of public/regulatory requirements, the issues associated with compliance cost burdens are better informed. This study offers insights for policy makers around the world who have adopted principle-based approaches and to those jurisdictions that are interested in adopting similar governance approaches in the future.

text: The Relationship Between Corporate Governance Practices and Financial Performance in New Zealand: An Empirical Investigation Corporate Governance is the set of structures and behaviours by which a company or other business entity is directed and managed (New Zealand Securities Commission, 2003). The structures and behaviours guide how the entity sets objectives, develops strategies and business plans, monitors and reports on performance, and manages risks. They also guide how directors and managers meet all expectations and that they are responsible and accountable in their respective roles. In 2004 the New Zealand Securities Commission (NZSC) adopted a principle-based corporate governance approach which was intended to contribute to high standards of corporate governance in New Zealand entities. The principles/guidelines are broad statement generally applied to the governance of entities that have economic impact in New Zealand or are accountable, in various ways, to the public. The economic entities are required to observe the principles/guidelines to the fullest extent that they reasonably can and depart only where they are subject to competing statutory or public policy requirements (NZSC, 2004). This thesis investigates the effect principle-based corporate governance practices have on the financial performance of publicly listed companies and public corporate entities in New Zealand. The adoption of the principle-based approach was to encourage entities to develop governance structures that are specific to their context. Therefore, this research examines: (i) whether the NZSC recommendations have encouraged institutions to develop entity and/or industry specific governance structures; and (ii) whether the differences in governance practices at entity and industry level contribute to the differences in the financial performance. Prior studies have examined governance practices of larger corporations in large economies. The governance practices of companies in smaller economies have received little attention. This research extends the understanding of responses to smaller entities, both private and public sector, in a small open economy with a mature capital market. The focus of this thesis is on the governance variables that have been highlighted by the NZSC in 2004 and also other governance variables that are supported in the literature as providing an appropriate structure for the institutions in the environment in which it operates. Data for the small and large capitalisation (cap) companies were obtained from the New Zealand Stock Exchange (NZX) Deep Archive. The data for the small cap companies covered the period 1999 to 2006 and for large cap companies the sampling period was from 1999 to 2007. For public sector corporate entities, data were obtained from their respective annual reports for the period 2000 to 2007. Pooled data were analysed using ordinary least squares (OLS) regression and two stages least squares (2SLS) regression techniques to evaluate: (i) whether entities have complied with the NZSC recommendations; (ii) whether those entities that were continuously compliant with the NZSC recommendations have superior financial performance; (iii) the entities’ financial performance post-NZSC recommendations is better than pre-NZSC recommendations; and (iv) the difference in governance practices in different entities and industries and the effect they have on company financial performance. The findings indicate that small cap and large cap companies and public sector corporate entities have universally adopted the Securities Commission recommendations. Results for the large cap companies show that compliance with NZSC recommendations had a positive effect on financial performance, but empirical results show that compliance with NZSC recommendations has had a negative effect on the financial performance of small cap companies and public sector corporate entities. There is also evidence that governance practices in certain industries have contributed towards the differences in entities’ financial performance. This suggests that a principle-based governance approach led to the development of industry-specific governance structures in large cap companies and State-Owned Enterprises (SOEs) as intended. However, the evidence for the small cap companies is specific to the finance/investment sector. As a result of this study, the relationship between ‘soft regulations’ and entities’ financial performance is better understood, and in terms of public/regulatory requirements, the issues associated with compliance cost burdens are better informed. This study offers insights for policy makers around the world who have adopted principle-based approaches and to those jurisdictions that are interested in adopting similar governance approaches in the future.

year: 2010

title: Some evidence that women are more mobile than men: Gender differences in UK graduate migration behaviour

authors: Faggian, Alessandra

subjects: university graduate

abstract: In this paper we employ dichotomous, multinomial and conditional logit models to analyze the employment-migration behavior of some 380,000 U.K. university graduates. By controlling for a range of variables related to human capital acquisition and local economic conditions, we are able to distinguish between different types of sequential migration behavior from domicile to higher education and on to employment. Our findings indicate that U.K. female graduates are generally more migratory than male graduates. We suggest that the explanation for this result lies in the fact that migration can be used as a partial compensation mechanism for gender bias in the labor market.

text: Some evidence that women are more mobile than men: Gender differences in UK graduate migration behaviour In this paper we employ dichotomous, multinomial and conditional logit models to analyze the employment-migration behavior of some 380,000 U.K. university graduates. By controlling for a range of variables related to human capital acquisition and local economic conditions, we are able to distinguish between different types of sequential migration behavior from domicile to higher education and on to employment. Our findings indicate that U.K. female graduates are generally more migratory than male graduates. We suggest that the explanation for this result lies in the fact that migration can be used as a partial compensation mechanism for gender bias in the labor market.

year: 2007

title: Green or grey pandemic recovery? Revealing the blue–green infrastructure influences in Aotearoa-New Zealand’s “Shovel Ready” Covid-19 response

authors: Hanna, Christina Jane

abstract: This paper analyses Aotearoa-New Zealand’s “shovel-ready fund” to assess if, and how, blue–green infrastructure systems were present in bids from its largest city regions. Findings indicate a greater prevalence in areas with existing spatial plans, and while there was some consideration of climate resilience, there was no real acknowledgement of the pandemic or human health. More positively, there was some evidence of unique indigenous influences that have potential to develop more inclusive and holistic blue–green infrastructure initiatives. The overall response, however, demonstrates a disjointed approach to blue–green infrastructure-related projects, and a missed opportunity for a more transformative response to the climate crisis and human health emergencies.

text: Green or grey pandemic recovery? Revealing the blue–green infrastructure influences in Aotearoa-New Zealand’s “Shovel Ready” Covid-19 response This paper analyses Aotearoa-New Zealand’s “shovel-ready fund” to assess if, and how, blue–green infrastructure systems were present in bids from its largest city regions. Findings indicate a greater prevalence in areas with existing spatial plans, and while there was some consideration of climate resilience, there was no real acknowledgement of the pandemic or human health. More positively, there was some evidence of unique indigenous influences that have potential to develop more inclusive and holistic blue–green infrastructure initiatives. The overall response, however, demonstrates a disjointed approach to blue–green infrastructure-related projects, and a missed opportunity for a more transformative response to the climate crisis and human health emergencies.

year: 2022