Financial and non-financial determinants of delisting and emergence from rehabilitation

The objective of this thesis was to derive two models: the first, to predict which companies on the Stock Exchange of Thailand would join the Companies Under Rehabilitation (REHABCO) sector; and the second to predict which companies in the REHABCO sector would go on to be delisted from there.

Corporate governance: quo vadis?

Purpose – This paper aims to examine current research trends into corporate governance and to propose a different dynamic, humanistic approach based on individual purpose, values and psychology. Design/methodology/approach – The paper reviews selected literature to analyse the assumptions behind research into corporate governance and uses a multi-disciplinary body of literature to present a different theoretical approach based at the level of the individual rather than the organisation. Findings – The paper shows how the current recommendations of the corporate governance research models could backfire and lead to individual actions that are destructive when implemented in practice. This claim is based on identifying the hidden assumptions behind the principal-agent model in corporate governance, such as the Hobbesian view and the Homo Economicus approach. It argues against the axiomatic view that shareholders are the owners of the company, and it questions the way in which managers are assessed based either on the corporate share price (the shareholder view) or on a confusing set of measures which include more stakeholders (the stakeholder view), and shows how such a yardstick can be demotivating and put the corporation in danger. The paper proposes a humanistic, psychological approach that uses the individual manager as a unit of analysis instead of the corporation and illustrates how such an approach can help to build better governance. Research limitations/implications – The paper's limited scope can only outline a conceptual framework, but does not enter into detailed operationalisation. Practical implications – The paper illustrates the challenges in applying the proposed framework into practice. Originality/value – The paper calls for the use of an alternative unit of analysis, the manager, and for a dynamic and humanistic approach which encompasses the entirety of a person's cognition, including emotional and spiritual values, and which is as of yet usually not to be found in the corporate governance literature.

Perceptions of corporate boards about standards of corporate governance in Thailand

The aim in this study is to discover the nature and extent of corporate governance in listed companies in Thailand. This includes a consideration of theoretical underpinning for amendments made to the western models of corporate governance that have been implemented by Thai listed companies, and of the effect of corporate governance principles on financial information, including financial reports, used by stakeholders in Thai listed companies. The results in this study show that after the Asian financial crisis corporate governance in Thailand improved especially in enforcement and disclosure, and outside/independent directors and professional organisations are playing leading roles in that process. Better corporate governance has resulted from improved internal corporate governance mechanisms and enhanced accounting standards, information disclosure, and auditing standards. New and up-dated rules, new and revised laws, and increased regulation are in the forefront of improved corporate governance. Process-related activities like monitoring, supervising, enforcing, and higher awareness have increased. Moreover, corporate governance practices are now in the spotlight throughout the financial and investment markets.

Applying metaethical and normative claims of moral relativism to (shareholder and stakeholder) models of corporate governance

There has, in recent decades, been considerable scholarship regarding the moral aspects of corporate governance,and differences in corporate governance practices around the world have been widely documented and investigated. In such a context, the claims associated with moral relativism are relevant. The purpose of this paper is to provide a detailed consideration of how the metaethical and normative claims of moral relativism in particular can be applied to corporate governance. This objective is achieved, firstly, by reviewing what is meant by metaethical moral relativism and identifying two ways in which the metaethical claim can be assessed. The possibility of a single, morally superior model of corporate governance is subsequently considered through an analysis of prominent works justifying the shareholder and stakeholder approaches, together with a consideration of academic agreement in this area. The paper then draws on the work of Wong (Moral relativity, University of California Press, Berkeley, CA, 1984, A companion to ethics, Blackwell, Malden, 1993, Natural moralities: A defense of pluralistic relativism,Oxford University Press, Oxford, 2006), firstly in providing an argument supporting metaethical moral relativism and secondly regarding values of tolerance and/or accommodation that can contribute to the normative claim. The paper concludes by proposing an argument that it is morally wrong to impose a model of corporate governance where there are differences in moral judgements relevant to corporate governance, or to interfere with a model in similar circumstances, and closes with consideration of the argument’s implications.

History repeats itself: The failure of rational choice models in corporate governance

Marnet, Oliver, 'History repeats itself: The failure of rational choice models in corporate governance', Critical Perspectives on Accounting (2005) 18(2) pp.191-210 RAE2008

Corporate governance in european transition economies: Emerging models

The purpose of this paper is to contribute to the debate on corporate governance models in European transition economies. The paper consists of four parts. After a historic overview of the evolution of corporate governance, the introduction presents various understandings of the corporate governance function and describes current issues in corporate governance. Part two deals with governance systems in the (mainly domestically) privatized former state-owned companies in Central European transition countries, with the main types of company ownership structures, relationships between governing and management functions, and deficiencies in existing governance systems. Part three is dedicated to the analysis of factors that determine the efficiency of the relationship between the corporate governance and management functions in Central European transition economies. It deals with the issue of why the German (continental European) governance model is usually the preferred choice and why the chosen models underperform. In the conclusion the author offers his suggestions on how the Central European transition countries should improve their corporate governance in the future.

Corporate governance in China : the role of the state and ideology in shaping reforms

Examines the political and ideological influences on China's economic reforms since the early 1980s. Discusses the influence of the Chinese Communist Party and Confucianism on economic progress and assesses the effect of reforms. Outlines the requirement for new corporate governance laws to meet the needs of expanding private businesses and considers China's use and adaptation of some Western models of corporate governance. Comments on whether these fit easily with China's business culture. Criticises the shortcomings of China's corporate laws. Looks in particular at the telecommunications industry and at the Company Law 2006.

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.

An analysis of the nature and effectiveness of corporate governance in smaller listed Australian companies

The objective of this thesis is to investigate the corporate governance attributes of smaller listed Australian firms. This study is motivated by evidence that these firms are associated with more regulatory concerns, the introduction of ASX Corporate Governance Recommendations in 2004, and a paucity of research to guide regulators and stakeholders of smaller firms. While there is an extensive body of literature examining the effectiveness of corporate governance, the literature principally focuses on larger companies, resulting in a deficiency in the understanding of the nature and effectiveness of corporate governance in smaller firms. Based on a review of agency theory literature, a theoretical model is developed that posits that agency costs are mitigated by internal governance mechanisms and transparency. The model includes external governance factors but in many smaller firms these factors are potentially absent, increasing the reliance on the internal governance mechanisms of the firm. Based on the model, the observed greater regulatory intervention in smaller companies may be due to sub-optimal internal governance practices. Accordingly, this study addresses four broad research questions (RQs). First, what is the extent and nature of the ASX Recommendations that have been adopted by smaller firms (RQ1)? Second, what firm characteristics explain differences in the recommendations adopted by smaller listed firms (RQ2), and third, what firm characteristics explain changes in the governance of smaller firms over time (RQ3)? Fourth, how effective are the corporate governance attributes of smaller firms (RQ4)? Six hypotheses are developed to address the RQs. The first two hypotheses explore the extent and nature of corporate governance, while the remaining hypotheses evaluate its effectiveness. A time-series, cross-sectional approach is used to evaluate the effectiveness of governance. Three models, based on individual governance attributes, an index of six items derived from the literature, and an index based on the full list of ASX Recommendations, are developed and tested using a sample of 298 smaller firms with annual observations over a five-year period (2002-2006) before and after the introduction of the ASX Recommendations in 2004. With respect to (RQ1) the results reveal that the overall adoption of the recommendations increased from 66 per cent in 2004 to 74 per cent in 2006. Interestingly, the adoption rate for recommendations regarding the structure of the board and formation of committees is significantly lower than the rates for other categories of recommendations. With respect to (RQ2) the results reveal that variations in rates of adoption are explained by key firm differences including, firm size, profitability, board size, audit quality, and ownership dispersion, while the results for (RQ3) were inconclusive. With respect to (RQ4), the results provide support for the association between better governance and superior accounting-based performance. In particular, the results highlight the importance of the independence of both the board and audit committee chairs, and of greater accounting-based expertise on the audit committee. In contrast, while there is little evidence that a majority independent board is associated with superior outcomes, there is evidence linking board independence with adverse audit opinion outcomes. These results suggest that board and chair independence are substitutes; in the presence of an independent chair a majority independent board may be an unnecessary and costly investment for smaller firms. The findings make several important contributions. First, the findings contribute to the literature by providing evidence on the extent, nature and effectiveness of governance in smaller firms. The findings also contribute to the policy debate regarding future development of Australia’s corporate governance code. The findings regarding board and chair independence, and audit committee characteristics, suggest that policy-makers could consider providing additional guidance for smaller companies. In general, the findings offer support for the “if not, why not?” approach of the ASX, rather than a prescriptive rules-based approach.

Corporate governance mechanisms and earnings management in transitional countries – evidence from Chinese listed firms

The objective of this thesis is to investigate whether the corporate governance practices adopted by Chinese listed firms are associated with the quality of earnings information. Based on a review of agency and institutional theory, this study develops hypotheses that predict the monitoring effectiveness of the board and the audit committee. Using a combination of univariate and multivariate analyses, the association between corporate governance mechanisms and earnings management are tested from 2004 to 2008. Through analysing the empirical results, a number of findings are summarised as below. First, board independence is weakened by the introduction of government officials as independent directors on the boards. Government officials acting as independent directors, claim that they meet the definition of independent director set by the regulation. However, they have some connection with the State, which is the controlling shareholder in listed SOEs affiliated companies. Consequently, the effect of the independent director’s expertise in constraining earnings management is mitigated as demonstrated by an insignificant association between board expertise and earnings management. An alternative explanation for the inefficiency of board independence may point to the pre-selection of independent directors by the powerful CEO. It is argued that a CEO can manipulate the board composition and choose the "desirable" independent directors to monitor themselves. Second, a number of internal mechanisms, such as board size, board activities, and the separation of the roles of the CEO and chair are found to be significantly associated with discretionary accruals. This result suggests that there are advantages in having a large and active board in the Chinese setting. This can offset the disadvantages associated with large boards, such as increased bureaucracy, and hence, increase the constraining effects of a large and resourceful board. Third, factor analysis identifies two factors: CEO power and board power. CEO power is the factor which consists of CEO duality and turnover, and board power is composed of board size and board activity. The results of CEO power show that if a Chinese listed company has CEO duality and turnover at the same time, it is more likely to have a high level of earnings management. The significant and negative relationship between board power and accruals indicate that large boards with frequent meetings can be associated with low level of earnings management. Overall, the factor analysis suggests that certain governance mechanisms complement each other to become more efficient monitors of opportunistic earnings management. A combination of board characteristics can increase the negative association with earnings management. Fourth, the insignificant results between audit committees and earnings management in Chinese listed firms suggests that the Chinese regulator should strengthen the audit committee functions. This thesis calls for listed firms to disclose more information on audit committee composition and activities, which can facilitate future research on the Chinese audit committee’s monitoring role. Fifth, the interactive results between State ownership and board characteristics show that dominant State ownership has a moderating effect on board monitoring power as the State totally controls 42% of the issued shares. The high percentage of State ownership makes it difficult for the non-controlling institutional shareholders to challenge the State’s dominant status. As a result, the association between non-controlling institutional ownership and earnings management is insignificant in most situations. Lastly, firms audited by the international Big4 have lower abnormal accruals than firms audited by domestic Chinese audit firms. In addition, the inverse U-shape relationship between audit tenure and earnings quality demonstrates the changing effects of audit quality after a certain period of appointment. Furthermore, this thesis finds that listing in Hong Kong Stock Exchanges can be an alternative governance mechanism to discipline Chinese firms to follow strict Hong Kong listing requirements. Management of Hong Kong listed companies are exposed to the scrutiny of international investors and Hong Kong regulators. This in turn reduces their chances of conducting self-interested earnings manipulation. This study is designed to fill the gap in governance literature in China that is related to earnings management. Previous research on corporate governance mechanisms and earnings management in China is not conclusive. The current research builds on previous literature and provides some meaningful implications for practitioners, regulators, academic, and international investors who have investment interests in a transitional country. The findings of this study contribute to corporate governance and earnings management literature in the context of the transitional economy of China. The use of alternative measures for earnings management yields similar results compared with the accruals models and produces additional findings.

The new governance approach to the devolution of corporate governance

The moral arguments associated with justice, fairness and communitarianism have rejected the exclusivity of cost‐benefit analysis in corporate governance. Particularly, the percepts of new governance (NG) have included distributive aspects in efficiency models focused on maximizing profits. While corporate directors were only assigned to look after the return of investment within the traditional framework of corporate governance (CG), NG has created the scope for them to look beyond the set of contractual liabilities. This article explores how and how far NG notions have contributed to the devolution of CG to create internal strategies focusing on actors, ethics and accountability in corporate self-regulation.

Corporate governance convergence and moral relativism

Research question / issue This paper frames the debate on corporate governance convergence in terms of the morality underlying corporate governance models. The claims and arguments of moral relativism are presented to provide theoretical structure to the moral aspects of corporate governance convergence, and ultimately the normative question of whether convergence should occur. Research findings / insights: The morality underlying different models of corporate governance has largely been ignored in the corporate governance convergence literature. A range of moral philosophies and principles that underlie the dominant corporate governance models are identified. This leads to a consideration of the claims and arguments of moral relativism relating to corporate governance. A research agenda around the claims of Descriptive and Metaethical moral relativism, and which ultimately informs the associated normative argument, is then suggested. Theoretical / Academic implications The application of moral relativism to the debate on corporate governance convergence presents a theoretical structure to the analysis and consideration of its moral aspects. This structure lends itself to further research, both empirical and conceptual. Practitioner / Policy implications The claims and arguments of moral relativism provide a means of analysing calls that are made for a culturally or nationally ‘appropriate’ model of corporate governance. This can assist in providing direction for corporate governance reforms and is of particular relevance for developing countries which have inherited Western corporate governance models through colonialism.