Invisible ties : implicit contracting and its implications for the agency relationship in corporate governance research

Research that applies agency theory to boards of directors suffers from being quite narrow as it does not recognize the true legal relationships between directors, managers and shareholders. Instead, the board of directors is best conceptualized as the principal, management as agents and stockholders’ relationships as a mix of legal and implicit contracts. We propose a recast agency relationship and develop a contingency approach that proposes (1) how a corporation’s goals vary with a board’s implicit contracting and (2) a reconceptualization of the agency problem facing boards.

Forms of capital, intra-ethnic variation and Polish entrepreneurs in Leicester

A study of ten Polish entrepreneurs operating in Leicester, UK is reported in this article. The concepts of social, cultural and economic capital are used as the lens through which to explore the way the capital they access is employed and converted into entrepreneurial activity. Ethnic entrepreneurship takes place within wider social, political and economic institutional frameworks and opportunity structures and so this is taken into account by differentiating two groups – post-war and contemporary Polish entrepreneurs. The differing origins and amounts of forms of capital they can access are shown as is how these are converted into valued outcomes. Combining the mixed embeddedness approach with a forms-of-capital analysis enables looking beyond social capital to elaborate on intra-ethnic variation in the UK’s Polish entrepreneurial community.

Psychological capital as moderator of organizational change demands on nursing stress

Healthcare organizations in all OECD countries have continued to undergo change. These changes have been found to have a negative effect on work engagement of nursing staff. While the extent to which nursing staff dealt with these changes has been documented in the literature, little is known of how they utilized their personal resources to deal with the consequences of these changes. This study will address this gap by integrating the Job Demands-Resources theoretical perspective with Positive Psychology, in particular, psychological capital (PsyCap). PsyCap is operationalized as a source of personal resources. Data were collected from 401 nurses from Australia and analyses were undertaken using Partial Least Squares modelling and moderation analysis. Two types of changes on the nursing work were identified. There was an increase in changes to the work environment of nursing. These changes, included increasing administrative workload and the amount of work, resulted in more job demands and job resources. On the other hand, another type of changes relate to reduction to training and management support, which resulted in less job demands. Nurses with more job demands utilized more job resources to address these increasing demands. We found PsyCap to be a crucial source of personal resources that has a moderating effect on the negative effects of job demands and role stress. PsyCap and job resources were both critical in enhancing the work engagement of nurses, as they encountered changes to nursing work. These findings provided empirical support for a positive psychological perspective of understanding nursing engagement.

Gender and entrepreneurial performance : testing a holistic framework

The aim of this study was to test a holistic framework for assessing new venture performance outcomes that incorporates the impact of gender on internal resource availability (human, financial and social capital) and how, in turn, this impacts: the entrepreneurs’ goals; the investment (both money and time) they make in their new ventures; and the performance outcomes of those ventures. Our results indicate that a majority of the paths examined (using structural equation modeling) are significant and in the expected direction. For example: an entrepreneur’s human capital (comprising management work experience, start-up experience and industry experience) is significantly related to her/his growth goal (in terms of employee numbers); the entrepreneur’s growth goal is positively related to the time invested in the new venture; and the time invested in the new venture is positively related to new venture outcomes.

Turnbull : generating undue expectations of the corporate governance role of audit committees

Following an initial consultation draft (Turnbull 1999a), the Internal control Working Party of the Institute of Chartered Accountants in England and Wales, chaired by Nigel Turnbull, executive director of Rank Group plc. has published Internal Control: Guidance for Directors of Listed companies Incorporated in the UK (Turnbull, 1999b). The guidance is commonly referred to as the Turnbull Report. This paper outlines the key recommendations of the report and discusses some of its implications, particularly in the context of the increasing emphasis on a broader corporate governance role for audit committees. The paper suggests that the increasing role envisaged of audit committees for example lately in the UK by Turnbull, may generate undue expectations are premised on an unsubstantiated notion of the contribution of audit committees.

Public policy on corporate audit committees : case study evidence of current practice

Corporate failures and malpractices have led to an increasing emphasis on the governance role of audit committees. The Smith report Audit Committee Combined Code Guidance and the Higgs Review of the Role and Effectiveness of Non-Executive Directors (now incorporated in a Revised Combined Code) represent further attempts to strengthen corporate accountability in the UK. Although the regulatory focus on audit committees indicates confidence in their role as part of the solution to governance failures, questions remain about their efficacy in practice. Against the background of the publication of the Smith report and the wider reliance on audit committees in several countries to help improve corporate accountability, this paper provides research evidence, drawn from an ACCA-sponsored project, on the processes and effects of the audit committees in three UK companies. This study complements other research on audit committees by adopting a case study approach, in order to reflect the importance of investigating audit committee operations from within the organisation and to develop a closer understanding of audit committee impact than is available from generally observable data. The empirical evidence for the case studies was obtained from semi-structured interviews with personnel involved in the audit committee process, internal documents made available by the companies, and publicly available information, including annual reports.

The corporate governance effects of audit committees

Arguments associated with the promotion of audit committees in many countries are premised on their potential for alleviating weaknesses in corporate governance. This paper provides a synthesis and evaluation of empirical research on the governance effects associated with audit committees. Given recent policy recommendations in several countries aimed at strengthening these committees, it is important to establish what research evidence demonstrates about their existing governance contribution. A framework for analyzing the impact of audit committees is described, identifying potential perceived effects which may have led to their adoption and documented effects on aspects of the audit function, on financial reporting quality and on corporate performance. It is argued that there is only limited and mixed evidence of effects to support claims and perceptions about the value of audit committees for these elements of governance. It is also shown that most of the existing research has focused on factors associated with audit committee existence, characteristics and measures of activity and there is very little evidence on the processes associated with the operation of audit committees and the manner in which they influence organizational behaviour. It is clear that there is no automatic relationship between the adoption of audit committee structures or characteristics and the achievement of particular governance effects, and caution may be needed over expectations that greater codification around factors such as audit committee members’ independence and expertise as the means of ‘‘correcting’’ past weaknesses in the arrangements for audit committees. The most fundamental question concerning what difference audit committees make in practice continues to be an important area for research development. For future research we suggest: (i) greater consideration of the organizational and institutional contexts in which audit committees operate; (ii) explicit theorization of the processes associated with audit committee operation; (iii) complementing extant research methods with field studie, and; (iv) investigation of unintended (behavioural) as well as expected consequences of audit committees.

Capital-C culture : the perfect American at the Brisbane Festival

A review of Philip Glass's opera The Perfect American. The Brisbane Festival’s production of Philip Glass’s opera The Perfect American is only the third production of the 2012 work ever to be staged. That’s quite a coup for the Brisbane Festival and Opera Queensland. The Perfect American was commissioned by Madrid’s Teatro Real and London’s English National Opera to mark the American composer’s 75th birthday. Glass’s telling of the Disney myth focuses on the final stages of Walt Disney’s life and career – a high art critique of a popular culture icon...

Marx as a Critical Discourse Analyst : The Genesis of a Critical Method and its Relevance to the Critique of Global Capital (with Phil Graham)

In this paper we identify elements in Marx’s economic and political writings that are relevant to contemporary critical discourse analysis (CDA). We argue that Marx can be seen to be engaging in a form of discourse analysis. We identify the elements in Marx’s historical materialist method that support such a perspective, and exemplify these in longitudinal comparison of Marx’s texts.

Corporate credit risk prediction under stochastic volatility and jumps

This paper examines the impact of allowing for stochastic volatility and jumps (SVJ) in a structural model on corporate credit risk prediction. The results from a simulation study verify the better performance of the SVJ model compared with the commonly used Merton model, and three sources are provided to explain the superiority. The empirical analysis on two real samples further ascertains the importance of recognizing the stochastic volatility and jumps by showing that the SVJ model decreases bias in spread prediction from the Merton model, and better explains the time variation in actual CDS spreads. The improvements are found particularly apparent in small firms or when the market is turbulent such as the recent financial crisis.

Audit committee effectiveness in a mandatory disclosure environment

This study examines audit committee effectiveness in its association with regulatory compliance in a highly sanctioned environment. It uses the Australian continuous disclosure regime to investigate whether audit committee effectiveness is associated with a higher frequency of disclosures, thereby enhancing the efficiency of the capital market and creating more informed individual investors. The findings show that, as hypothesised, audit committee effectiveness measured as an index composed of sub-components involving audit committee size, meeting frequency, independence, member financial literacy and membership of other audit committees, is positively associated with disclosure frequency. Further tests show that it is the financial literacy sub component which is most implicated in this relationship. Company size, years of listing, the proportion of inventories and receivables to total assets, whether or not the company has been involved in a takeover offer or bid or in changes to its number of shares are significant control variables.

On the efficacy of key corporate governance recommendations in mid-tier companies : window-dressing or value-adding?

This paper examins the relationship between firm performance and key board and audit committee variables in a sample of mid-tier listed Australian firms. Unlike the UK where the corporate governance Code specifically outlines special arrangements for companies outside the FTSE 350 index, the ASX Corporate Governance recommendations make no special provisions for mid-tier companies. Consequently, mid-tier Australian companies may be expending scarce resources in conforming with recommendations that are not value-creating.

The rise of englightened shareholder primacy and its impact on US corporate self-regulation

Enlightened shareholder primacy (“ESP”) is a new approach in the corporate governance (“CG”) framework. The emergence of this approach is important owing to its role in answering a vital question: is the company really a private organisation to be seen only through the economic prism of contract? Or is it public and about a wider group of interests and underwritten by communitarian concern about social responsibility? Apart from answering this question, ESP explains the changes in corporate directors’ roles and self-regulation strategies of companies.

Convergence in European corporate governance : the audit committee concept

This paper analyses recent corporate governance codes issued by 20 countries for evidence of convergence in corporate governance systems in Europe. The analysis shows that there has been a degree of convergence towards an Anglo-Saxon model of corporate governance as the audit committee concept is widely accepted in countries with both unitary and two-tier governance systems. Further, the latest audit committee recommendations in countries that have issued several governance codes show a strengthening of the recommendations for an audit committee over time in line with the Anglo-Saxon audit committee concept and convergence with the debate in the US and UK on issues such as the independence and financial expertise of members. However, consistent with the literature on the convergence of European corporate governance systems, at an operational level there is limited consistency in the recommended structure and role of audit committees.