Abstract
Further to the various scandals that shook North-American markets in the early 2000s, Canada reacted in 2004 and 2005 by changing its regulations on the governance practices of listed companies. Faccio (2006) and otherauthors have argued that politically connected companies can have less regulatory oversight than unconnected firms. This affirmation raises an issue that this article attempts to solve, i.e., whether politically connected Canadian companies are less compliant with regulatory requirements on governance than unconnected firms, and with board of directors requirements in particular. Although politically connected and unconnected firmsdiffer significantly in their compliance with regulation, the analyses show that the state of being politically connected tends to have little bearing on regulatory compliance.
Highlights
Corporate governance is assured through a number of structures and mechanisms that reconcile the divergent interests of officers and shareholders
This affirmation raises an issue that this article attempts to solve, i.e., whether politically connected Canadian companies are less compliant than unconnected firms in regard to regulatory requirements on governance, and on the board of directors in particular
Thereafter, linear regressions helped determine whether the fact of being politically connected influences the firm’s compliance with regulations on the board of directors
Summary
Corporate governance is assured through a number of structures and mechanisms that reconcile the divergent interests of officers and shareholders. Different governance mechanisms are instituted to maximize the value of the firm (Agrawal & Knoeber, 1996), ensure better returns and limit the transfer of wealth among shareholders and officers so as to reduce the risk of total shareholder loss (Parrat, 2003). (Note 2) Given that most of these regulations are voluntary, it is relevant to investigate the factors that influence compliance decisions by Canadian firms. Faccio (2006) and other authors have maintained that politically connected companies can have less regulatory oversight than unconnected firms. This affirmation raises an issue that this article attempts to solve, i.e., whether politically connected Canadian companies are less compliant than unconnected firms in regard to regulatory requirements on governance, and on the board of directors in particular
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