The impact of the Malaysian code on corporate governance: compliance, institutional investors and stock performance

In 2001, the Malaysian Code on Corporate Governance (MCCG) became an integral part of the Bursa Malaysia Listing Rules, which requires all listed firms to disclose the extent of compliance with the MCCG. Our panel analysis of 440 firms from 1999 to 2002 finds that corporate governance reform in Malaysia has been successful, with a significant improvement in governance practices. The relationship between ownership by the Employees Provident Fund (EPF) and corporate governance has strengthened during the period subsequent to the reform, in line with the lead role taken by the EPF in establishing the Minority Shareholders Watchdog Group. The implementation of MCCG has had a substantial effect on shareholders' wealth, increasing stock prices by an average of about 4.8%. Although there is no evidence that politically connected firms perform better, political connections do have a significantly negative effect on corporate governance, which is mitigated by institutional ownership.

Rethinking corporate governance and law in China : the theories, rules and practices

Economic reforms have transformed China into a modern economy - this requires greater emphasis on regulating markets and governing corporations to ensure economic growth continues. Yet, legal reforms are not as straightforward as transplanting Western models; more modification to suit Chinese political land cultural considerations needs to be incorporated. Likewise privatisation of the telecommuications sector does not mean that government influence in the new corporations cease. This is not necessarily negative as long as safeguards are in place. Plainly further reforms to the law and governance will be needed. Given that Confucian philosophy continues to play a central role in Chinese society and values, developing laws and governance practices from Confucian principles will arguably be appropriate for modern China.

Corporate governance and compliance : preventative measure or just another fad?

In the wake of recent corporate collapses, 'corporate governance' has received unprecedented levels of attention. It can be narrowly defined as how a company is directed and steered. The responsibility of steering a company is entrusted with the board of directors, who become the focus of governance mechanisms.Yet this is not as straightforward as it appears - Australia has experienced massive shifts in business regulations over the past two decades. One innovation in Australian business regulation is 'enforced self-regulation' which combines the benefits of voluntary self-regulation with the coercive power of the State, implemented via a compliance program. A possible hazard of compliance system is that management might treat this responsibility as a 'box ticking' exercise. Therefore effective governance and compliance entails more than setting up internal and regulatory mechanisms; the willingness of various stakeholders to collaborate is crucial. This suggests that managing relationships between stakeholders of an organization is the key to averting corporate collapses.

Continuous disclosure compliance: Does corporate governance matter?

Our study investigates the quality of firms’ continuous disclosure compliance during mandatory continuous disclosure reform, and whether the compliance quality is impacted by corporate governance, using the New Zealand market as the setting. We use a novel coding of different categories of disclosures (nonroutine, non-procedural and internal), which represents the extent of proprietary insider information inherent in disclosures, to evaluate firms’compliance quality. Our findings provide evidence that firms’ compliance quality improved after the reform, and this improvement is inconsistently impacted by corporate gvernance. Our findings provide important implications for regulators in their quest for a superior disclosure regime

Role of corporate governance in mitigating the selective disclosure of executive stock option information

We examine the nature and extent of statutory executive stock option (ESO) disclosures by Australian listed companies over the 2001 to 2004 period, and the influence of corporate governance mechanisms on these disclosures. Our results show a progressive increase in overall compliance from 2001 to 2004. However, despite the improved compliance, the results reveal managements’ continued reluctance to disclose more sensitive ESO information. Factors associated with good internal governance, including board independence, audit committee independence and effectiveness, and compensation committee independence and effectiveness are found to contribute to improved compliance. Similarly, certain external governance factors are associated with improved disclosure, including external auditor quality, shareholder activism (as proxied by companies identified as poor performers by the Australian Shareholders’ Association), and regulatory intervention.

Regulating corporate governance in China and Hong Kong : do Chinese values and ethics have a place in the age of globalization?

Much has been said about the convergence of corporate governance and regulations. The underlying assumptions of this phenomenon are driven by globalisation and the dominance of the Anglo-US model of corporate governance. Since the Asian crisis in 1997, Hong Kong and perhaps to a less extend Mainland China, had amended both Company laws and Stock Exchange Listing Rules obligations, arguably, mirroring provisions and rules in the UK and US. However, there has been a small amount of literature in law drawing from cross cultural management asking the question - is Western governance and regulation appropriate for the East? This paper will approach this issue from a different mindset, instead of drawing distinctions about East and West, a meta-regulatory framework will attempt to incorporate Western ‗hard‘ and ‗soft‘ laws with Asian ethical values. The aim is to combine laws and ethics thereby enhancing corporate governance and, improve compliance of those rules by adapting Chinese ethical values like Confucianism into the regulatory system. The overarching goal of this exercise is to adapt the wisdom of Chinese ethics into regulatory guidelines to suit the modern global market.

Tax morale affects tax compliance : evidence from surveys and an artefactual field experiment

Our working hypotheses is that cross-cultural differences in tax compliance behaviour have foundations in the institutions of tax administration and citizen assessment of the quality of governance. Tax compliance being a complex behavioural issue. Its investigation requires use of a variety of methods and data sources. Results from artefactual field experiments conducted in countries with substantially different political histories and records of governance quality demondtrate that observed differences in tax compliance levels persist over alternative levels of enforcement. The experimental results are shown to be robust by replicating them for the same countries using survey response measures of tax compliance.

Money laundering and FATF compliance by the international community

This paper examines the anti-money laundering systems of Australia, the United Arab Emirates (UAE), the United Kingdom (UK) and the United States of America (USA), the extent to which they have implemented the Financial Action Task Force (FATF) recommendations, and how compliance with these recommendations is affected by local cultural and economic factors. The paper makes use of FATF evaluation reports to compare the countries’ compliance; it examines some of the underlying cultural considerations and culture-specific ethical issues that affect the extent of compliance, and how cultural and ethical considerations may affect good governance. The findings indicate that the UK and the USA are the most advanced with regards to their compliance with the FATF recommendations and Australia and the UAE less so. The UAE is in particular found to be least compliant. We relate this finding to previous work on how a country’s legal and financial systems develop in line with its religion, culture and socio-economic situation, and examine how such local factors have affected the UAE’s financial and anti-money laundering and combating the financing of terrorism (AML/CFT) systems. This research will be of interest to policy-makers and government agencies involved in addressing money laundering and its successful detection and prosecution.

An exploratory study into audit challenges in IT governance : a Delphi approach

Information technology (IT) has been playing a powerful role in creating a competitive advantage for organisations over the past decades. This role has become proportionally greater over time as expectations for IT investments to drive business opportunities keep on rising. However, this reliance on IT has also raised concerns about regulatory compliance, governance and security. IT governance (ITG) audit leverages the skills of IS/IT auditors to ensure that IT initiatives are in line with the business strategies. ITG audit emerged as part of performance audit to provide an assessment of the effective implementation of ITG. This research attempts to empirically examine the ITG audit challenges in the Australian public sector. Based on literature research and Delphi research, this paper provides insights regarding the impact of, and required effort to address these challenges. The authors also present the ten major ITG audit challenges facing Australian public sector organisations today.

A Delphi study into the audit challenges of IT governance in the Australian public sector

Information technology (IT) has been playing a powerful role in creating a competitive advantage for organisations over the past decades. This role has become proportionally greater over time as expectations for IT investments to drive business opportunities keep on rising. However, this reliance on IT has also raised concerns about regulatory compliance, governance and security. IT governance (ITG) audit leverages the skills of IS/IT auditors to ensure that IT initiatives are in line with the business strategies. ITG audit emerged as part of performance audit to provide an assessment of the effective implementation of ITG. This research attempts to empirically examine the ITG audit challenges in the public sector. Based on literature and Delphi research, this paper provides insights regarding the impact of, and required effort to address these challenges. The authors also present the ten major ITG audit challenges facing Australian public sector organisations today.

The diversity of interests in environmental governance : a challenge for the rule of law

The function of environmental governance and the principle of the rule of law are both controversial and challenging. To apply the principle of the rule of law to the function of environmental governance is perhaps even more controversial and challenging. A system of environmental governance seeks to bring together the range of competitive and potentially conflicting interests in how the environment and its resources are managed. Increasingly it is the need for economic, social and ecological sustainability that brings these interests – both public and private – together. Then there is the relevance of the principle of the rule of law. Economic, social and ecological sustainability will be achieved – if at all – by a complex series of rules of law that are capable of enforcement so as to ensure compliance with them. To what extent do these rules of law reflect the principle of the rule of law? Is the principle of the rule of law the formally unstated value that is expected to underpin the legal system or is it the normative predicate that directs the legal system both vertically and horizontally? Is sustainability an aspirational value or a normative predicate according to which the environment and its resources are managed? Let us deal sequentially with these issues by reviewing a number of examples that demonstrate the relationship between environmental governance and the rule of law.

Corporate governance and securities class actions

This study investigates the governance attributes of firms that have been subject to securities class actions (SCAs). There has been a recent sizable increase in the number of firms subject to SCAs in Australia. We examine a sample of firms that have been subject to SCAs due to disclosure breaches and match the firms by industry and size to a control sample. First, we examine the compliance culture of the SCA firms via the frequency of Australian Securities Exchange (ASX)queries of the firm and find that the frequency of ASX queries is positively associated with the occurrence of a SCA. Secondly, we provide evidence that SCA firms exhibit weaker levels of corporate governance than the matched control sample. In addition, we contribute to the understanding of firms subject to SCAs and their corporate governance attributes. Our results suggest the presence of a nomination committee may be associated with higher agency costs and that the influence of CEO duality may reduce the effectiveness of a nomination committee.

Examining corporate governance disclosures of listed companies in Fiji

In 2009, the Capital Markets Development Authority (CMDA) - Fiji’s capital market regulator - introduced the Code of Corporate Governance (the Code). The Code is ‘principle-based’ and requires companies listed on the South Pacific Stock Exchange (SPSE) and the financial intermediaries to disclose their compliance with the Code’s principles. While compliance with the Code is mandatory, the nature and extent of disclosure is at the discretion of the complying entities. Agency theory and signalling theory suggest that firms with higher expected levels of agency costs will provide greater levels of voluntary disclosures as signals of strong corporate governance. Thus, the study seeks to test these theories by examining the heterogeneity of corporate governance disclosures by firms listed on SPSE, and determining the characteristics of firms that provide similar levels of disclosures. We conducted a content analysis of corporate governance disclosures on the annual reports of firms from 2008-2012. The study finds that large, non-family owned firms with high levels of shareholder dispersion provide greater quantity and higher quality corporate governance disclosures. For firms that are relatively smaller, family owned and have low levels of shareholder dispersion, the quantity and quality of corporate governance disclosures are much lower. Some of these firms provide boilerplate disclosures with minimal changes in the following years. These findings support the propositions of agency and signalling theory, which suggest that firms with higher separation between agents and principals will provide more voluntary disclosures to reduce expected agency costs transfers. Semi-structured interviews conducted with key stakeholders further reinforce the findings. The interviews also reveal that complying entities positively perceive the introduction of the Code. Furthermore, while compliance with Code brought about additional costs, they believed that most of these costs were minimal and one-off, and the benefits of greater corporate disclosure to improve user decision making outweighed the costs. The study contributes to the literature as it provides insight into the experience of a small capital market with introducing a ‘principle-based’ Code that attempts to encourage corporate governance practices through enhanced disclosure. The study also assists policy makers better understand complying entities’ motivations for compliance and the extent of compliance.