Patterns of corporate governance and technical efficiency in Italian manufacturing

The purpose of this paper is to analyse the relationship between the corporate governance system and technical efficiency in Italian manufacturing. We use a non-parametric frontier technique (DEA) to derive technical efficiency measures for a sample of Italian firms taken from nine manufacturing industries. These measures are then related to the characteristics of the corporate governance system. Two of these characteristics turn out to have a positive impact on technical efficiency: the percentage of the company shares owned by the largest shareholder and the fact that a firm belongs to a pyramidal group. Interestingly, a trade-off emerges between these influences, in the sense that one is stronger in industries where the other is weaker. Copyright © 2007 John Wiley & Sons, Ltd.

Corporate governance, managers' independence, exporting, and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary, this paper employs Bayesian structural equation modeling to examine the relations among corporate governance, managers' independence from owners in terms of strategic decision making, exporting, and performance. Managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as indicating that concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, but board participation of foreign stakeholders enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

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.

Corporate governance, managers' independence, exporting and performance of firms in transition economies

Using data on 157 large companies in Poland and Hungary this paper employs Bayesian structural equation modeling to examine interrelationships between corporate governance, managers' independence from owners in terms of strategic decision-making, exporting and performance. It is found that managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is contingent on the firm's corporate governance parameters: it is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as an indication that (i) risk averse, concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, (ii) board participation of foreign stakeholders, on the other hand, enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.

Executive remuneration, financial performance and corporate governance in UK and Spanish listed firms

This study examines the relationship between executive directors’ remuneration and the financial performance and corporate governance arrangements of the UK and Spanish listed firms. These countries’ corporate governance framework has been shaped by differences in legal origin, culture and backgrounds. For example, the UK legal arrangements can be defined as to be constituted in common-law, whereas for Spanish firms, the legal arrangement is based on civil law. We estimate both static and dynamic regression models to test our hypotheses and we estimate our regression using Ordinary Least Squares (OLS) and the Generalised Method of Moments (GMM). Estimated results for both countries show that directors’ remuneration levels are positively related with measures of firm value and financial performance. This means that remuneration levels do not lead to a point whereby firm value is reduced due to excessive remuneration. These results hold for our long-run estimates. That is, estimates based on panel cointegration and panel error correction. Measures of corporate governance also impacts on the level of executive pay. Our results have important implications for existing corporate governance arrangements and how the interests of stakeholders are protected. For example, long-run results suggest that directors’ remuneration adjusts in a way to capture variation in financial performance

Related party transactions, corporate governance and accounting quality in Greece

Related Party Transactions (RPTs) have been considered recently in research as a phenomenon which is associated with several financial scandals, shareholder’s wealth expropriation and is used for earnings management (EM) purposes by the reporting entity. This study aimed to: (i) assess the extent of EM and RPTs i Greece; (ii) investigate the association between RPTs and EM; (iii) investigate the association between corporate governance and EM; (iv) investigate the association between corporate governance and RPTs; and (v) investigate the impact of RPTs on Accounting Quality. Greece was selected for this study as it provides a special context due to poor investor protection, high levels of EM and unhealthy financial reporting environment where wealth extraction and EM are more likely. This study examines the relationship between earnings management and RPTs for the firms listed on the Athens Stock Exchange (ASE). Moreover, it examines the association between earnings management and corporate governance activities. The results show a negative and significant relationship between EM and RPTs. This finding does not support the conclusion that RPTs are necessarily conducted to mask fraud or the extraction of firm resources. The results show that firms audited by one of the Big 4 audit firms are associated with less EM. Additionally, the study investigates the relationship between RPTs and accounting quality. The findings show that that there is no significant difference in accounting quality between RPTs firms and non-RPTs firms. This study contributes to the EM, accounting quality and corporate governance literatures. This research suggests recommendations for researchers, data providers and policy makers on ways to reduce the problems associated with RPTs.

International risk management:systems, internal control and corporate governance

This book is very practical in its international usefulness (because current risk practice and understanding is not equal across international boundaries). For example, an accountant in Belgium would want to know what the governance regulations are in that country and what the risk issues are that he/she needs to be aware of. This book covers the international aspect of risk management systems, risk and governance, and risk and accounting. In doing so the book covers topics such as: internal control and corporate governance; risk management systems; integrating risk into performance management systems; risk and audit; governance structures; risk management of pensions; pension scheme risks e.g. hedging derivatives, longevity bonds etc; risk reporting; and the role of the accountant in risk management. There are the case studies through out the book which illustrate by way of concrete practical examples the major themes contained in the book. The book includes highly topical areas such as the Sarbanes Oxley Act and pension risk management.

Corporate governance and related party transactions research:an assessment of theories and methodologies

This paper critically evaluates the paradigm, theory, and methodology that dominate research on related party transactions (RPTs). RPTs have been debated in the literature whether they are a facet of conflict of interest between major and minor shareholders or they are normal efficient transactions that help the firms to achieve asset utilization. Literature has been widely interested in studying the association between corporate governance and RPTs especially that according to the agency theory it is assumed that corporate governance as a monitoring tool should impede the negative consequences of RPTs and ensure they are conducted to achieve better asset utilization.

Corporate governance and compliance with International Financial Reporting Standards (IFRSs):evidence from two MENA stock exchanges

This study examines the influence of corporate governance structures on the levels of compliance with IFRSs disclosure requirements by companies listed on the stock exchanges of two leading MENA (Middle East and North Africa) countries, Egypt and Jordan. This study employs a cross-sectional analysis of a sample of non-financial companies listed on the two stock exchanges for the fiscal year 2007. Using an unweighted disclosure index, the study measures the levels of compliance by companies listed on the two stock exchanges investigated.Univariate and multivariate regression analyses are used to estimate the relationships proposed in the hypotheses. In addition, the study uses semi-structured interviews in order to supplement the interpretation of the findings of the quantitative analyses. An innovative theoretical foundation is deployed, in which compliance is interpretable through three lenses - institutional isomorphism theory, secrecy versus transparency (one of Gray’s accounting sub-cultural values), and financial economics theories. The study extends the financial reporting literature, cross-national comparative financial disclosure literature, and the emerging markets disclosure literature by carrying out one of the first comparative studies of the above mentioned stock exchanges. Results provide evidence of a lack of de facto compliance (i.e., actual compliance) with IFRSs disclosure requirements in the scrutinised MENA countries. The impact of corporate governance mechanisms for best practice on enhancing the extent of compliance with mandatory IFRSs is absent in the stock exchanges in question. The limited impact of corporate governance best practice is mainly attributed to the novelty of corporate governance in the region, a finding which lends support to the applicability of the proposed theoretical foundation to the MENA context. Finally, the study provides recommendations for improving de facto compliance with IFRSs disclosure requirements and corporate governance best practice in the MENA region and suggests areas for future research.

Intellectual capital disclosures and corporate governance:an empirical examination

Empirical examinations of the links between corporate governance and intellectual capital are underresearched, particularly from the context of emerging economies where corporate governance mechanisms tend to be largely ceremonial due to family dominance. This study aims to address this gap in the intellectual capital disclosure (ICD) literature by undertaking an empirical examination of the relationship between corporate governance and the extent of ICD of Bangladeshi companies. Inter alia, the key findings of this study suggest that there is a non-linear relationship between family ownership and the extent of ICD. This research also found that foreign ownership, board independence, and the presence of audit committees are positively associated with the extent of ICD. Conversely, family duality (i.e., where the positions of CEO and chairperson are occupied by two individuals from the same family) is negatively associated with the extent of ICD.

State control and corporate governance in transition economies:25 years on from 1989

Research Question/Issue - Which forms of state control over corporations have emerged in countries that made a transition from centrally-planned to marked-based economies and what are their implications for corporate governance? We assess the literature on variation and evolution of state control in transition economies, focusing on corporate governance of state-controlled firms. We highlight emerging trends and identify future research avenues. Research Findings/Insights - Based on our analysis of more than 100 articles in leading management, finance, and economics journals since 1989, we demonstrate how research on state control evolved from a polarized approach of public–private equity ownership comparison to studying a variety of constellations of state capitalism. Theoretical/Academic Implications - We identify theoretical perspectives that help us better understand benefits and costs associated with various forms of state control over firms. We encourage future studies to examine how context-specific factors determine the effect of state control on corporate governance. Practitioner/Policy Implications - Investors and policymakers should consider under which conditions investing in state-affiliated firms generates superior returns.

An examination of the relationship of governance structure and performance: Evidence from banking companies in Bangladesh

Corporate governance has become increasingly important in developed and developing countries just after a series of corporate scandals and failures in a number of countries. Corporate governance structure is often viewed as a means of corporate success despite prior studies reveal mixed, somewhere conflicting and ambiguous, and somewhere no relationship between governance structure and performance. This study empirically investigates the relationship between corporate governance mechanisms and financial performance of listed banking companies in Bangladesh by using two multiple regression models. The study reveals that a good number of companies do not comply with the regulatory requirements indicating remarkable shortfall in corporate governance practice. The companies are run by the professional managers having no duality and no ownership interest for which they are compensated by high remuneration to curb agency conflict. Apart from some inconsistent relationship between some corporate variables, the corporate governance mechanisms do not appear to have significant relationship with financial performances. The findings reveal an insignificant negative impact or somewhere no impact of independent directors and non-independent non-executive directors on the level of performance that strongly support the concept that the managers are essentially worthy of trust and earn returns for the owners as claimed by stewardship theory. The study provides support for the view that while much emphasis on corporate governance mechanisms is necessary to safeguard the interest of stakeholders; corporate governance on its own, as a set of codes or standards for corporate conformance, cannot make a company successful. Companies need to balance corporate governance mechanisms with performance by adopting strategic decision and risk management with the efficient utilization of the organization’s resources.

Three essays on corporate governance and meeting-beating or missing analyst forecasts

The beginning of the 21st century was plagued with unprecedented instances of corporate fraud. In an attempt to address apparent non-existent or “broken” corporate governance policies, sweeping measures of financial reporting reform ensued, having specific requirements relating to the composition of audit committees, the interaction between audit committees and external auditors, and procedures concerning auditors’ assessment of client risk. The purpose of my dissertation is to advance knowledge about “good” corporate governance by examining the association between meeting-or-beating analyst forecasts and audit fees, audit committee compensation, and audit committee tenure and “busyness”. Using regression analysis, I found the following: (1) the frequency of meeting-or-just beating (just missing) analyst forecasts is negatively (positively) associated with audit fees, (2) the extent by which a firm exceeds analysts’ forecasts is positively (negatively) associated with audit committee compensation that is predominately equity-based (cash-based), and (3) the likelihood of repeatedly meeting-or-just beating analyst forecasts is positively associated with audit committee tenure and “busyness”. These results suggest that auditors consider clients who frequently meet-or-just beat forecasts as being less “risky”, and clients that frequently just miss as being more “risky”. The results also imply that cash-based director compensation is more successful in preserving the effectiveness of the audit committee’s financial reporting oversight role, that equity-based compensation motivates independent audit committee directors to focus on short-term performance thereby aligning their interests with management, and that audit committee director tenure and the degree of director “busyness” can affect an audit committee member’s effectiveness in providing financial reporting oversight. Collectively, my dissertation provides additional insights regarding corporate governance practices and informs policy-makers for future relevant decisions.^

Realisable climate change narratives in public discourse: an East/West comparative analysis of environmental, social, and corporate governance (ESG) as a response to global climate change

This thesis looks at how non-experts develop an opinion on climate change, and how those opinions could be changed by public discourse. I use Hubert Dreyfus’ account of skill acquisition to distinguish between experts and non-experts. I then use a combination of Walter Fisher’s narrative paradigm and the hermeneutics of Paul Ricœur to explore how non-experts form opinions, and how public narratives can provide a point of critique. In order to develop robust narratives, they must be financially realistic. I therefore consider the burgeoning field of environmental, social, and corporate governance (ESG) analysis as a way of informing realistic public narratives. I identify a potential problem with this approach: the Western assumptions of ESG analysis might make for public narratives that are not convincing to a non-Western audience. I then demonstrate how elements of the Chinese tradition, the Confucian, Neo-Confucian, and Daoist schools, as presented by David Hall and Roger Ames, can provide alternative assumptions to ESG analysis so that the public narratives will be more culturally adaptable. This research contributes to the discipline by bringing disparate traditions together in a unique way, into a practical project with a view towards applications. I conclude by considering avenues for further research.