Ownership, corporate governance and liquidity in Caribbean firms

This thesis provides the first evidence on how ownership structure and corporate governance relate to stock liquidity in the Caribbean. Based on panel data of 71 firms from three selected Caribbean markets − Barbados, Jamaica, and Trinidad & Tobago − results show that firms with concentrated ownership are associated with lower liquidity. The identity of the largest shareholder also matters: family firms and firms with foreign holding companies are more liquid than government firms. Although the second largest shareholding does not appear to matter to liquidity, there is some evidence showing that firms with foreign holding companies as the second largest shareholder are less liquid. Caribbean firms suffer from poor corporate governance but this study is unable to establish a significant relationship between corporate governance and liquidity.

Corporate ownership, corporate governance reform and timeliness of earnings : Malaysian evidence

This paper provides the first evidence showing that ownership concentration and the identity of the largest shareholder matter to the timeliness of corporate earnings, measured by a stock price-based timeliness metric and the reporting lag. Using panel data of 1276 Malaysian firms from 1996 to 2009, we find a non-linear relationship between concentrated ownership, measured by the largest shareholding in a firm, and the reporting lag but not the timeliness of price discovery. Although firms with government as the largest shareholder and political connections have a significantly shorter reporting lag, only the former are timelier in price discovery. Firms with family and foreigners as the largest shareholder however are less timely in price discovery. While the reporting lag is shorter in the period after the integration of the Malaysian Code of Corporate Governance (MCCG) into Bursa listing rules, its impact on the timeliness of price discovery is mostly immaterial.

Ownership, corporate governance and IPO post-listing liquidity

This thesis investigates how ownership structure and corporate governance relate to the post-listing liquidity of IPO firms. Using a sample of 1,049 Chinese IPOs from 2001 to 2010, the results show firms with a broader shareholder base and higher ownership concentration have greater post-listing liquidity. So do firms with higher state ownership and lower institution ownership. Corporate governance is also important; post-listing liquidity is higher for firms with CEO duality, a larger and more independent board, and more frequent board meetings. The 2005 Split Share Structure Reform, which increased the proportion of tradable shares, has a positive impact on liquidity.

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

The impact of corporate governance on private placements in Australia

In private placement transactions, issuing firms sell a block of securities to just a small group of investors at a discounted price. Non-participating shareholders suffer from ownership dilution and lose the opportunity to receive the discount. This thesis provides the first evidence on whether and how corporate governance can protect non-participating shareholders' interests. Results from an examination of 329 private placements issued by the top 250 Australian firms between 2002 and 2009 demonstrate that firms with higher governance quality are more likely to issue a share purchase plan (SPP) along with the private placement, thus providing greater protection to non-participating shareholders' interests.

Disclosure of climate change-related corporate governance practices

Based on a survey of climate change experts in different stakeholder groups and interviews with corporate climate change managers, this study provides insights into the gap between what information stakeholders expect and what Australian corporations disclose. This paper focuses on annual reports and sustainability reports with specific reference to the disclosure of climate change-related corporate governance practices. The findings culminate in the refinement of a best practice index for the disclosure of climate-change-related corporate governance practises. Interview results indicate that the low levels of disclosures made by Australian companies may be due to a number of factors. These include a potential expectations gap, the absence of pressure from powerful stakeholders, a concern for stakeholder information overload, the cost of providing information, limited perceived accountability for climate change, and preferring other media for disclosure.

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.

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.

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.

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.

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.

Institutional investors, risk/return and corporate governance : practical lessons from the Global Financial Crisis

The global grown in institutional investors means that firms can no longer ignore their influence in capital markets. However, not all institutional investors have the same motives to influence the firms they invest in. Institution investors' ability to influence management depends on the size of their investment and whether they have any business relations with the firm. Using a sample of Australian firms from 2006 to 2008, our empirical results show that the proportion of a company's shares held by institutional investors is positively associated with firm governance ratings, risk and profitability. This study shows that a positive association between risk and return is associated with large active institutional ownership, which we interpret as shareholders with sufficient power to pressure management to increase short-term profits.

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.

Corporate governance and bankruptcy risk

We examine how firm characteristics, particularly the degree of firm complexity and the firm’s need for specialty knowledge, affect the relationship between corporate governance and the risk of bankruptcy. We find that having larger boards reduces the risk of bankruptcy only for complex firms. Our results also suggest that the proportion of inside directors on the board is inversely associated with the risk of bankruptcy in firms that require more specialist knowledge, and that the reverse is true in technically unsophisticated firms. The results further reveal that the additional explanatory power from corporate governance variables becomes stronger as the time to bankruptcy is increased, implying that although corporate governance variables are important predictors, governance changes are likely to be too late to save a firm on the verge of bankruptcy.