Essays on Corporate Governance and the Quality of Disclosed Earnings: Across Transitional Europe

A growing body of empirical research examines the structure and effectiveness of corporate governance systems around the world. An important insight from this literature is that corporate governance mechanisms address the excessive use of managerial discretionary powers to get private benefits by expropriating the value of shareholders. One possible way of expropriation is to reduce the quality of disclosed earnings by manipulating the financial statements. This lower quality of earnings should then be reflected by the stock price of firm according to value relevance theorem. Hence, instead of testing the direct effect of corporate governance on the firm’s market value, it is important to understand the causes of the lower quality of accounting earnings. This thesis contributes to the literature by increasing knowledge about the extent of the earnings management – measured as the extent of discretionary accruals in total disclosed earnings - and its determinants across the Transitional European countries. The thesis comprises of three essays of empirical analysis of which first two utilize the data of Russian listed firms whereas the third essay uses data from 10 European economies. More specifically, the first essay adds to existing research connecting earnings management to corporate governance. It testifies the impact of the Russian corporate governance reforms of 2002 on the quality of disclosed earnings in all publicly listed firms. This essay provides empirical evidence of the fact that the desired impact of reforms is not fully substantiated in Russia without proper enforcement. Instead, firm-level factors such as long-term capital investments and compliance with International financial reporting standards (IFRS) determine the quality of the earnings. The result presented in the essay support the notion proposed by Leuz et al. (2003) that the reforms aimed to bring transparency do not correspond to desired results in economies where investor protection is lower and legal enforcement is weak. The second essay focuses on the relationship between the internal-control mechanism such as the types and levels of ownership and the quality of disclosed earnings in Russia. The empirical analysis shows that the controlling shareholders in Russia use their powers to manipulate the reported performance in order to get private benefits of control. Comparatively, firms owned by the State have significantly better quality of disclosed earnings than other controllers such as oligarchs and foreign corporations. Interestingly, market performance of firms controlled by either State or oligarchs is better than widely held firms. The third essay provides useful evidence on the fact that both ownership structures and economic characteristics are important factors in determining the quality of disclosed earnings in three groups of countries in Europe. Evidence suggests that ownership structure is a more important determinant in developed and transparent countries, while economic determinants are important determinants in developing and transitional countries.

Variation in tracheid cross-sectional dimensions and wood viscoelasticity extent and control methods

Printing papers have been the main product of the Finnish paper industry. To improve properties and economy of printing papers, controlling of tracheid cross-sectional dimensions and wood viscoelasticity are examined in this study. Controlling is understood as any procedure which yields raw material classes with distinct properties and small internal variation. Tracheid cross-sectional dimensions, i.e., cell wall thickness and radial and tangential diameters can be controlled with methods such as sorting wood into pulpwood and sawmill chips, sorting of logs according to tree social status and fractionation of fibres. These control methods were analysed in this study with simulations, which were based on measured tracheid cross-sectional dimensions. A SilviScan device was used to measure the data set from five Norway spruce (Picea abies) and five Scots pine (Pinus sylvestris) trunks. The simulation results indicate that the sawmill chips and top pulpwood assortments have quite similar cross-sectional dimensions. Norway spruce and Scots pine are on average also relatively similar in their cross-sectional dimensions. The distributions of these species are somewhat different, but from a practical point of view, the differences are probably of minor importance. The controlling of tracheid cross-sectional dimensions can be done most efficiently with methods that can separate fibres into earlywood and latewood. Sorting of logs or partitioning of logs into juvenile and mature wood were markedly less efficient control methods than fractionation of fibres. Wood viscoelasticity affects energy consumption in mechanical pulping, and is thus an interesting control target when improving energy efficiency of the process. A literature study was made to evaluate the possibility of using viscoelasticity in controlling. The study indicates that there is considerable variation in viscoelastic properties within tree species, but unfortunately, the viscoelastic properties of important raw material lots such as top pulpwood or sawmill chips are not known. Viscoelastic properties of wood depend mainly on lignin, but also on microfibrillar angle, width of cellulose crystals and tracheid cross-sectional dimensions.

Knowledge Transfer within Western Multinationals' Subsidiary Units in China and Finland - The Impact of Headquarter Control Mechanisms, Subsidiary Location and Social Capital (summary section only)

It is suggested that the ability and practices of how the multinational corporation (MNC) manages knowledge transfer among its geographically dispersed subsidiary units are crucial for the building and development of firm competitive advantage. However, cross-border transfer of valuable organizational knowledge is likely to be problematic and laborious, especially within diversified and differentiated MNCs. Using data collected from 164 western multinational companies’ subsidiary units located in China and Finland, this study aims to investigate cross-border knowledge transfer within the MNC. It explores a number of factors that influence the transfer of knowledge among units in the differentiated MNC. The study consists of five individual papers. Paper 1 investigates a range of organizational mechanisms that may positively influence a subsidiary’s propensity to undertake knowledge transfers to other parts of the corporation. Paper 2 explores the impact of subsidiary location on the motivational dispositions of knowledge receiving units to value and accept knowledge from subsidiaries located in economically less advanced countries. Paper 3 examines the influence of social capital variables on knowledge transfer in dyadic relationships between foreign-owned subsidiaries and their sister and patent units. Paper 4 provides some initial insights into potentially different effects of trust and shared vision in intra-organizational vs. inter-organizational relationships. Using a case study setting, Paper 5 explores means and mechanisms used in transferring human resource management practices to Western MNCs’ business units in China from a cultural perspective. The results of the study show that MNC management through choices regarding organizational controls can encourage and enhance corporate-internal knowledge transfer. It also finds evidence that more knowledge is transferred from subsidiaries located in an industrialized country (e.g., Finland) than subsidiaries located in a developing country (e.g., China). While the study has highlighted the importance of social capital in promoting knowledge transfer, it has also uncovered some new findings that the effect of trust and shared vision may be contingent upon different contexts. Finally, in Paper 5, a number of mechanisms used in transferring selected HRM practices and competences to the Chinese business units have been identified. The findings suggest that cultural differences should be taken into consideration in the choice and use of different transfer mechanisms.