Corporate governance, accountability and mechanisms of accountability: an overview

Purpose – This paper aims to review traditional corporate governance and accountability research, to suggest opportunities for future research in this field. Design/methodology/approach – The first part adopts an analytical frame of reference based on theory, accountability mechanisms, methodology, business sector/context, globalisation and time horizon. The second part of the paper locates the seven papers in the special issue in a framework of analysis showing how each one contributes to the field. The paper presents a frame of reference which may be used as a “roadmap” for researchers to navigate their way through the prior literature and to position their work on the frontiers of corporate governance research. The paper is primarily discursive and conceptual. Findings – The paper encourages broader approaches to corporate governance and accountability research beyond the traditional and primarily quantitative approaches of prior research. Broader theoretical perspectives, methodological approaches, accountability mechanism, sectors/contexts, globalisation, and time horizons are identified. Research limitations/implications – Greater use of qualitative research methods are suggested, which present challenges particularly of access to the “black box” of corporate boardrooms. Originality/value – Drawing on the analytical framework, and the papers in the special issue, the paper identifies opportunities for further research of accountability and corporate governance. Keywords Corporate governance, Management accountability, Research Paper type General review

Global financial crisis: implications for Chinese corporate governance

This paper analyses the role of corporate governance failures and weaknesses in the global financial crisis with reference to the evolution of post-crisis corporate governance arrangements in China. The current crisis presents China with an opportunity to analyse its governance problems, reflect on its weaknesses and implement a strategy to address areas which need attention. This paper opens with a description of China’s exposure to the current global financial crisis and continues to critically evaluate the effectiveness of a free market system on corporate governance. Bratton (2002) maintains that incentive structures that motivate the self-regulatory systems generate less powerful checks against abuse than scholars and practitioners have believed. The paper highlights the need for corporate regulatory bodies and policy makers to revise and re-develop financial services sector regulations. Finally, the paper discusses the need of ethics in organizations - an issue that is beyond legislation. In an increasingly interconnected global economy, it is imperative to increase our understanding of what constitutes an effective corporate governance system. The paper contributes to the corporate governance body of literature within the Chinese context by providing insights into the contributing factors to corporate governance failure that led to the global financial crisis. It also provides policy recommendations for China’s policy makers to seriously consider. The results suggest a need for the re-examination of corporate governance adequacy and the institutionalisation of business ethics.

Legal and regulatory barriers to effective public-private partnership governance in Kazakhstan

Purpose – The purpose of this paper is to provide a critical assessment of legal and regulatory impediments to effective governance of public-private partnerships (PPPs) in Kazakhstan. Design/methodology/approach – The qualitative study develops propositions from the PPP literature and then tests them against findings from in-depth interviews. Interviewees have been selected by a purposeful sampling from PPP projects in Kazakhstan as well as from national and regional PPP centres. Findings – The identified barriers to effective PPP management include irregularities in the PPP legal framework, such as lack of legal definition of a PPP and controversy with the government guarantee’s legal status for its long-term payments to partnerships; bureaucratic tariff setting for partnership services; non-existent opportunity for private asset ownership; and excessive government regulation of PPP workers’ wage rates. Practical implications – The partners’ opposing perspectives on a number of PPP issues show that management needs to identify and carefully reconcile stakeholder values in a partnership in order to achieve more effective PPP governance. Practitioners, particularly those in the public agencies, have to be concerned with ways to reduce the government overregulation of the private operators, which is likely to result in greater PPP flexibility in management and, ultimately, higher efficiency in delivering the public services. Originality/value – By elucidating multiple examples of overregulation and PPPs’ inefficiency, the paper demonstrates that the government dominance in PPP management is conceptually inappropriate. Instead, the government should adopt the concept of co-production and manage its relations with the private sector partner in a collaborative fashion.

State ownership and corporate governance

State ownership of publicly-traded corporations remains pervasive around the world, and has been increasing in recent years. Existing literature focuses on the implications of government ownership for corporate governance and performance at the firm level. This Article, by contrast, explores the different but equally important question of whether the presence of the state as a shareholder can impose negative externalities on the corporate law regime available to the private sector. Drawing from historical experiments with government ownership in the United States, Brazil, China, and Europe, this study shows that the conflict of interest stemming from the state’s dual role as a shareholder and regulator can influence the content of corporate laws to the detriment of outside investor protection and efficiency. It thus addresses a gap in the literature on the political economy of corporate governance by incorporating the political role of the state as shareholder as another mechanism to explain the relationship between corporate ownership structures and legal investor protection. Finally, this Article explores the promise of different institutional arrangements to constrain the impact of the state’s interests as a shareholder on the corporate governance environment, and concludes by offering several policy recommendations.

Legitimacy and context: Implications for public sector reform in developing countries

This article examines the interplay between legitimacy and context as key determinants of public sector reform outcomes. Despite the importance of variables Such as legitimacy of public institutions, levels of civic morality and socio-economic realities, reform strategies often fail to take such contextual factors into account. The article examines, first, relevant literature both conceptual and empirical, including data from the World Values Survey project. It is argued that developing countries have distinctive characteristics which require particular reform strategies. The data analysed shows that in Latin American countries, there is no clear Correlation between confidence in public institutions and civic morality. Other empirical studies show that unemployment has a negative impact on the level of civic morality, while inequality engenders corruption. This suggests that poorer and socio-economically stratified countries face greater reform challenges owing to the lack of legitimacy of public institutions. The article concludes that reforms should focus on areas of governance that impact on poverty. This will in turn help produce more stable outcomes. Copyright (C) 2008 John Wiley & Sons, Ltd.

I doveri e le responsabilità contabili nella corporate governance delle società di capitali

La costruzione di un modello efficiente di corporate governance deve offrire una disciplina adeguata dei doveri contabili. Ciò nonostante, gli ordinamenti giuridici configurano i doveri di contabilità in modo incompleto, giacché l’inadempimento di questi non comporta una sanzione diretta per il soggetto inadempiente. Come informazione sulla situazione economica e finanziaria della società, esiste un interesse pubblico nella contabilità, e questa può servire come base di giudizio a soggetti interni ed esterni all’impresa, nell’adozione delle sue scelte. Disporre di un’informazione falsa o inesatta al riguardo può comportare un danno ingiustificato alla società stessa, ai soci o ai terzi, che potranno esercitare le azioni precise per il risarcimento del danno cagionato. Per evitare la produzione di questi danni, da una prospettiva preventiva, la corporate governance delle società di capitali può prevedere dei meccanismi di controllo che riducano il rischio di offrire un’informazione sbagliata. Questi controlli potranno essere esercitati da soggetti interni o esterni (revisori legali) alla struttura della società, ed avranno una configurazione diversa a seconda che le società adottino una struttura monistica o dualistica di governance. Questo ci colloca di fronte ad una eventuale situazione di concorrenza delle colpe, giacché i diversi soggetti che intervengono nel processo d’elaborazione dell’informazione contabile versano la sua attuazione sullo stesso documento: il bilancio. Risulta dunque cruciale determinare il contributo effettivo di ciascuno per analizzare il suo grado di responsabilità nella produzione del danno.

Corporate Governance and Dividend Policy in European Banking

This dissertation investigates corporate governance and dividend policy in banking. This topic has recently attracted the attention of numerous scholars all over the world and currently remains one of the most discussed topics in Banking. The core of the dissertation is constituted by three papers. The first paper generalizes the main achievements in the field of relevant study using the approach of meta-analysis. The second paper provides an empirical analysis of the effect of banking corporate governance on dividend payout. Finally, the third paper investigates empirically the effect of government bailout during 2007-2010 on corporate governance and dividend policy of banks. The dissertation uses a new hand-collected data set with information on corporate governance, ownership structure and compensation structure for a sample of listed banks from 15 European countries for the period 2005-2010. The empirical papers employ such econometric approaches as Within-Group model, difference-in-difference technique, and propensity score matching method based on the Nearest Neighbor Matching estimator. The main empirical results may be summarized as follows. First, we provide evidence that CEO power and connection to government are associated with lower dividend payout ratios. This result supports the view that banking regulators are prevalently concerned about the safety of the bank, and powerful bank CEOs can afford to distribute low payout ratios, at the expense of minority shareholders. Next, we find that government bailout during 2007-2010 changes the banks’ ownership structure and helps to keep lending by bailed bank at the pre-crisis level. Finally, we provide robust evidence for increased control over the banks that receive government money. These findings show the important role of government when overcoming the consequences of the banking crisis, and high quality of governance of public bailouts in European countries.

The Redistribution of Property Rights, Corporate Governance and Company Restructuring after Privatisation"

The project covered the main issues of privatisation, corporate governance and company restructuring after privatisation in Hungary and in the Russian Republic, together with a summary of the broader picture of company-level changes in Central and Eastern Europe, discussing the issues of micro-financial restructuring in the Czech Republic, Hungary, Poland and Slovakia. The two countries selected as the focus of research can be regarded as the two most widely differing cases of the economic transformation in Central and Eastern Europe. Hungary began its transition very early in 1989, while Russia was very late in doing so. Hungary first implemented a series of institutional and systemic reforms before stabilising its public finances, while Russia has struggled with financial stabilisation for years without great success. Company restructuring and the introduction of new forms of governance only began in Russia in the mid-1990s. Hungary opted for "traditional" western methods of privatisation and invited a large amount of foreign direct investment (FDI) while in Russia the bulk of state-owned property was privatised either by free distribution or by a strange blend of ESOP-MBO schemes. FDI in Russia remained modest because of the high risk and uncertainty surrounding economic transactions there. Hungary was a forerunner in privatising public utilities, while Russia has moved cautiously in this area. The group's studies show that the Hungarian economy is now over the "transformation recession" and its economic success is largely due to its successful privatisation and to the dominant participation of foreign investors in company take-overs and in the restructuring process. The study of Russia provides a comprehensive account of the main factors in the so-far modest results in Russian privatisation and economic transformation.

Corporate Governance in Indonesia: A Study on Governance of Business Groups

This study deals with the issue of corporate governance in the case of Indonesian business groups. It examines what factors can be attributed to failures of corporate governance. Through case studies of six different types of business groups, it evidences that self-governance by owner-managers can function well if there is no other key stakeholder and no collusion with the government. When this is not the case, however, self-governance does not work, and governance by creditors or professional managers over owner-managers has limitations. For better corporate governance, there is a need not only for building internal governance mechanism of business groups, but also for strengthening external monitoring institutions including creditors, capital markets, the governmental as well as non-governmental systems.

Corporate governance and finance in Poland and Russia

This book provides a comparative analysis of the emerging corporate control structures in the transition economies. It details characteristics of corporate governance in the two largest transition economies: Russia and Poland. It explores what kind of ownership structures are emerging in these two countries and to what degree they are they path-dependent and conditional on the initial choice of privatisation methods - fast ownership transfer through the mass privatisation programme and loans-for-equity scheme in Russia, and a more 'organic' growth of the new private sector in Poland. It examines the directions of the subsequent, post-privatisation, secondary ownership flows in both countries and the impact of the government on corporations, implied both by the residual shareholding of the state and by its regulatory and administrative actions.

Public sector efficiency, foreign aid and small island development states

This paper examines the efficiency of public sector expenditures and foreign aid at achieving social sector outcomes in Small Island Developing States (SIDS). Efficiency is estimated using a Stochastic Production Function (SPF) approach and panel data since 1990. A second stage of the analysis examines the determinants of efficiency. Results indicate that the efficiency of aid and public sectors at improving life expectancy has deteriorated during the 1990s but efficiency at improving school enrolments has increased. Higher levels of governance are associated with higher efficiency. There is also evidence to suggest that efficiency is lower in SIDS, as well as in Sub-Saharan Africa.