Corporate Governance Report Research Articles

Corporate Governance and Risk Reporting: Evidence from Operational Risk Disclosures in European Banks

In this paper, we examine the impact of corporate governance mechanisms on the quality of operational risk disclosures provided in the annual reports and risk reports in a representative sample of 63 publicly listed European banks for the fiscal years 2008 and 2009. We find that banks having a higher proportion of outside board directors are associated with higher operational risk disclosure quality. Additionally, our results make it clear that the agency theory outweighs the management entrenchment theory in banks as implied by a consistent positive association between the proportion of outstanding shares held by executive directors and operational risk disclosure quality. Interestingly, we find that more stringent legal system could enforce, or motivate, senior management to provide their bank’s stakeholders with operational risk information of higher quality. Our results coincide with the findings of previous studies and confirm the positive impact of effective corporate governance mechanisms on disclosure quality in public firms and the importance of considering the effects of the legal setting in which various disclosure practices take place.

CEO Compensation and Firm Performance: an Empirical Investigation of UK Panel Data

Abstract This paper examines the link between CEO pay and performance employing a unique, hand‐collected panel data set of 390 UK non‐financial firms from the FTSE All Share Index for the period 1999–2005. We include both cash (salary and bonus) and equity‐based (stock options and long‐term incentive plans) components of CEO compensation, and CEO wealth based on share holdings, stock option and stock awards holdings in our analysis. In addition, we control for a comprehensive set of corporate governance variables. The empirical results show that in comparison to the previous findings for US CEOs, pay‐performance elasticity for UK CEOs seems to be lower; pay‐performance elasticity for UK CEOs is 0.075 (0.095) for cash compensation (total direct compensation), indicating that a ten percentage increase in shareholder return corresponds to an increase of 0.75% (0.95%) in cash (total direct) compensation. We also find that both the median share holdings and stock‐based pay‐performance sensitivity are lower for UK CEOs when we compare our findings with the previous findings for US CEOs. Thus, our results suggest that corporate governance reports in the UK, such as the Greenbury Report (1995) that proposed CEO compensation be more closely linked to performance, have not been totally effective. Our findings also indicate that institutional ownership has a positive and significant influence on CEO pay‐performance sensitivity of option grants. Finally, we find that longer CEO tenure is associated with lower pay‐performance sensitivity of option grants suggesting the entrenchment effect of CEO tenure.

Corporate Governance and Stock Market Liquidity in India

Corporate Governance encompasses processes for board effectiveness and enhanced transparent disclosures. Both these requirements result in improved quality and quantity of information made available to investors. This information flow is expected to result in informed trading, reduce information asymmetry and improve market liquidity. We examine the relationship between the firm level corporate governance and stock liquidity in Indian market. We constructed corporate governance index through content analysis of corporate governance reports published annually as a part of annual report of the Indian listed companies. We used Illiquidity Ratio suggested by Amihud (2002) and its modified form used by Bortolotti et al. (2007) to measure the stock liquidity. We empirically observe that corporate governance had a positive impact on stock liquidity. Better governed companies had higher liquidity. This is positive finding for the cross section of governance players (both for policy makers as well as the listed companies) that a decade of governance reforms provides benefit for the firms' adhering good governance practices. Our results are in support of arguments made by Welker (1995) and Chung (2010). We also examine the relationship between the ownership pattern and the stock liquidity. We found that higher promoter holdings reduce stock liquidity. We strengthen the belief that foreign institutional investors and their investments provide liquidity to emerging stock markets like India.

Corporate Governance and Financial Reporting Quality: The Case of The Tunisian Firms

The proliferation of accounting scandals has prompted the need to improve the relevance of financial reporting by setting up good governance structures. The relationship between governance and information quality has been strongly debated in the context of developed countries. It is only recently that attention turned to the study of governance and financial disclosure in emerging countries.In this paper, we examine the effect of the governance mechanisms on the financial reporting quality for a sample of Tunisian firms. Specifically, we focus on the characteristics of the board of directors and the ownership structure of the firms listed on the Tunis Stock Exchange during the period 1997–2007. The results reveal that the governance mechanisms affect the financial information quality of the Tunisian companies. Particularly, the power of the foreigners, the families and the blockholders reduces the reporting quality, while the control by the State and the financial institutions is associated with a good quality of financial disclosure.

A Remuneration Index: Quality of the Remuneration Disclosure in Swiss Firms During Last 10 Years

This paper analyses the quality of the remuneration disclosures in Switzerland during last 10 years (2000 to 2009). First, it briefly mentions the corporate governance/remuneration principles of Swiss regulatory bodies, EU, UK, USA, and ICGN. Then, it focuses on the ICGN and the Swiss remuneration standards to analyze 100 Swiss firms on SPI UBS 100 Index, Swiss Stock Exchange. It is reasonable that Swiss compensation principles are the main source to establish a remuneration quality index since they are traded in the Swiss Stock Exchange. On the other hand, the ICGN standards were also picked because it represents the international investors’ point of view. The remuneration index is made up of 39 questions in line with all items of the Swiss and ICGN remuneration principles, and it includes 4 sub-indices. The quality scores of each individual firm for each year were evaluated in the scale from 1 (very bad) to 6 (very good). 824 remuneration or corporate governance reports were investigated and they were scored for the quality of disclosures over 10 years by the help of the remuneration index. Finally, I have noted the quality of the remuneration disclosures improved after 2007, since they are more consistent with the stated regulations. Moreover, over the last 10 fiscal years (2000 to 2009), financial and industrial sectors, specifically banks and industrial engineering sectors, are more successful in the reporting of the remunerations. To sum up, the descriptive results of this paper may help the academics and the regulatory bodies grasp the quality of the implementation of remuneration principles in the Swiss corporate business and develop further researches on this issue.

Corporate Governance Reporting in Indian Banking Companies

Corporate Governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.

Corporate Governance � Codes and Reports of different Countries

Corporate Governance � Codes and Reports of different Countries

The extent of compliance of corporate governance disclosure: evidence from Indian banking companies

The study examines the compliance of mandatory corporate governance disclosure of the Indian banking companies. The Securities and Exchange Board of India (SEBI) made it mandatory for all listed firms to provide a Corporate Governance Report in a separate section in the Annual Report. The paper has empirically identified the level of compliance of the mandatory disclosure in the corporate governance reporting under the suggested list provided by SEBI and also assessed whether the corporate attributes affect the levels of corporate governance disclosure. The study covered all the 38 banks in India that are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange(NSE). We have identified 46 items of information as mandatory and for inclusion in the disclosure index, and run a linear regression model to examine the relationship between disclosure index and various corporate attributes. The findings revealed that a high level of compliance existed in the Indian banks and that the variables of size, ownership, board composition, and profitability, have significant impact in the corporate governance disclosure

Risk Environments and Corporate Governance

ABSTRACT The aim of the article is to assess to what extent: (a) the financial and economic risks of Hungary, Russia and the Czech Republic could be identified from 1990s to 2004. In order to determine to what extent a given country constitutes a high-risk, a moderate-risk or a low-risk environment, we have used the “International Country Risk Guide” (ICRG); (b) national corporate governance reports in the three countries are based on the same values and attitudes that are required to implement corporate governance systems and rules through international norms.

Determinants of firm level governance: Malaysian evidence

PurposeThe purpose of this paper is to provide an extension of the Corporate Governance Reporting Initiative (CGI) 2004, which reports on Malaysia's first corporate governance ratings. Characteristics of firms with high and low scores in the corporate governance ratings are analysed by comparing companies based on their corporate governance ranking as reported in the CGI.Design/methodology/approachFirms are classified into those at the top 50 percent and the bottom 50 percent of the corporate governance ratings list to examine whether there are any differences in the characteristics of firms in both classified samples. The characteristics of firms that are being examined are firms' profitability, leverage, growth, market valuation, size, age, ownership structure and countries of operation based on the Logit analysis.FindingsThe result shows that firm size has a strong influence with corporate governance ratings, but not so for other variables tested.Research limitations/implicationsThis study analyses only eight corporate characteristics. There are other measures that can represent firms' size such as market capitalization.Practical implicationsIt is hoped that the traits found from the analysis will be able to provide additional information concerning corporate governance to interested parties. The characteristics revealed may probably be found to be essential elements in the development of effective and efficient corporate governance structure. The study could also help corporations in their short‐ and long‐term strategies.Originality/valueThis study bridges the gap of previous studies by using a complete set of governance standards on the analysis and directly identifies firms with certain scores of corporate governance and addresses issues related to these exceptional companies.

Corporate Governance and Environmental Reporting: an Australian study

The development of best practice recommendations by the Corporate Governance Council (CGC) of the Australian Stock Exchange in 2003 clearly linked corporate regulators' concerns about good governance to the concept of corporate social and environmental responsibility. The CGC recommended that one way to demonstrate good governance was to use the annual report to disclose information to all legitimate stakeholders. This paper reports on the quantity and categories of environmental information disclosed in the corporate annual reports of 41 Australian companies across eight industry groups covering the period 1983–2003. This time period has seen the importance of good corporate governance practice in relation to environmental protection escalate, as demonstrated by the introduction of separate environmental and sustainability reports, the advent of triple bottom line reporting, changes in environmental legislation and the occurrence of major environmental incidents. The results of this study indicate that an increasing number of companies are disclosing environmental information, and the relative volume of such information in annual reports is increasing across all categories.

The problems of minority protection and their solutions within the legal framework in Turkish corporate governance

As the equity capital emerges, as an essential corporate finance mechanism in emerging markets and Europe, the regulation of companies that provides adequate protection for the minority shareholders' and investors' interests enables companies to access the equity capital in the global market. Turkey, a prominent emerging market and formal candidate for the European Union (EU) membership, has to establish the governance structure ensuring the minority shareholder protection to encourage shareholders and investors to participate in capital markets. This will facilitate Turkish companies to access the equity capital. In April 2005, the International Institute of Finance (IIF), which is a private international organisation for promoting the shareholders' and investors' interests, issued its corporate governance report on Turkey, focusing on the problem of the lack of equity culture. The IIF in its report examines the reasons for the paucity of a developed equity culture in Turkey and recommends the ways in which the obstacles to the creation of a well-developed equity culture would be overcome. The purpose of this paper is to contribute to the efforts at creating the corporate governance structure protecting the minority shareholders' and investors' interests, which is a prime requirement for a developed equity culture in Turkey. To this end, the paper, while examining the IIF's report on Turkey (the report), identifies the weaknesses in Turkey's legal framework for minority protection and suggests the ways in which such weaknesses in law would be eliminated. As the implementation of provisions of EU company and capital market law by Turkish law assists in establishing the legal framework for the protection of the minority interest, the paper also considers whether the draft Turkish Commercial Code (TCC) implements relevant EU law provisions appropriately. This will illustrate whether the IIF's recommendations have been taken into consideration by the draft TCC as most of the IIF's recommendations overlap the relevant EU law requirements. The paper therefore examines the report and enhances its proposed recommendations by explaining adequate legal and regulatory framework for the minority shareholder and investor protection in Turkish corporate governance.

CEO Compensation and Firm Performance: An Empirical Investigation of UK Panel Data

This paper examines the link between CEO pay and performance employing a unique, hand-collected panel data set of 390 UK non-financial firms from the FTSE All Share Index for the period 1999-2005. We include both cash (salary and bonus) and equity-based (stock options and long-term incentive plans) components of CEO compensation for a panel of large UK companies. Different from previous studies, we use GMM-system estimation method, which controls for the presence of unobserved firm-specific effects and for the endogeneity of explanatory variables. In addition, we control for a comprehensive set of corporate governance variables. The empirical results indicate that there is a positive and significant relationship between firm performance and the level of CEO cash compensation while the relationship is positive but not significant for total compensation. This finding suggests that corporate governance reports in the UK, such as Greenbury Report (1995) that proposed CEO compensation be more closely linked to performance, have not been totally effective. We also find that proportion of non-executive directors on board does not have a significant impact on CEO cash compensation, while non-executive directors' share ownership has a significant impact suggesting that ownership can provide incentives for non-executive directors to be more active in monitoring for CEO compensation packages. Our results also indicate that institutional ownership has a positive and significant influence on CEO pay-for-performance sensitivity of option grants. Finally, we find that longer CEO tenure is associated with lower pay-for-performance sensitivity of option grants suggesting the entrenchment effect of CEO tenure.

Theorising South Africa’s Corporate Governance

South Africa’s principal corporate governance report aspires to an ‘inclusive’ approach to corporate governance, in which companies are clearly advised to consider the interests of a variety of stakeholders. Yet, in common with many other countries, there is little discussion of the theoretical foundations and assumptions implicit in the recommended approach to corporate governance. The purpose of this article is to provide an analysis of corporate governance and the corporate environment in South Africa in terms of existing theory and models of corporate governance, and to provide a critique based on a consideration of traditional African values and the socio-economic necessities of post-apartheid South Africa. The result is the identification of an incompatibility between the current corporate environment in South Africa and the given exposition of African values. Some prospects for change are then identified.

Corporate Governance Report and Stakeholder View

The increasing importance recognised to corporate governance, the shift from the dominance of the shareholder view to the prevalence of the stakeholder view, and the necessity to recover approval on companies’ actions have stressed the opportunity of complete disclosure about corporate governance structures and performances. The research is founded on an international comparison and is finalised to verify: the existence of principles and recommendations concerning the corporate governance communication; the real quality of corporate governance communication published by some companies, operating in the same sector but in different countries; the effort needful to reach a formal and substantial shared model of communication.

Business Ethics and Corporate Governance in Africa

In recent years there has been a surge in corporate governance reform around the world. On the African continent this phenomenon is evident in the number of national corporate governance reports that have been produced. This article analyzes these national codes of corporate governance in Africa to determine how the relationship between corporate governance and business ethics is being perceived. The article commences by providing a background to the corporate governance reform process that still is in the making in Africa. It then explores the relation between corporate governance and business ethics by looking at various aspects of corporate governance that might have an impact on how business ethics is being perceived and practiced. Finally new corporate governance developments that potentially might have an impact on the prominence and practice of business ethics are reviewed.

Executive Remuneration in the EU: Comparative Law and Practice

Executive pay practices are currently a cause celebre of corporate governance in the media, among regulators, in the marketplace, and in academia, in the US, the UK, and Europe. The purpose of this paper is to examine the approaches taken across Europe to the regulation of executive pay practices in listed companies. The outstanding feature of the regulation of executive pay across Europe is the extent to which it reflects the interconnection between pay and corporate governance. This link is expanded on in Part B with respect to the different rules found across European legal systems and how they address/prioritize the concerns which executive pay potentially raises. The role of public regulation is relatively important for disclosure of executive pay, while best practices and private codes generally have some impact on the way in which executive compensation is set for listed companies. On the whole, there is some convergence in continental Europe towards the Anglo-American model. The merits of full disclosure of executive remuneration are increasingly acknowledged in corporate governance codes and reports, while the use of remuneration committees is on the rise in the Continent. The research data on reported pay practices for 2001 among FTSE Eurotop300 companies reveal a reliance on performance-based pay generally and a somewhat variable adoption of share options programmes and other equity-based incentive contracts, which are generating difficulties in dispersed ownership systems. The executive pay problem may therefore be a particular cost of dispersed ownership, and the particular legal and policy responses, which are widely debated a specific feature of Anglo-American corporate governance. Nonetheless, the faultline between both systems, which is evident from the different approaches European states have taken, calls for particular care in the adoption of pan-European reforms but also in the transplanting of reforms based on the Anglo-American experience.

Preventing corporate failure: the Cadbury Committee’s corporate governance report

Describes the 19‐point code of corporate governance produced in 1991 by the Cadbury Committee, which was set up by the Stock Exchange, the Financial Reporting Council and the accounting profession; the aim was to improve the standard of corporate governance in Britain. Outlines its narrow terms of reference, which were to spread the boardroom practices of the best run companies to the rest, rather than to reform practice; the main issues covered were board responsibilities, directors’ qualifications, audit rotation, audit committee and auditor liability. Lists the Confederation of British Industry’s reasons for rejecting some of its proposals, proposals rejected by the Committee itself, general criticisms of the report, and Canadian reaction to it as expressed in the Toronto Stock Exchange committee report. Concludes that the Code, though voluntary and lacking enforcement power, is likely to impact on auditors, upon whom it relies as watchdogs to alert the public, especially as it criticises them for charging high consultancy fees.

Corporate Governance Report: Corporate Governance – improving competitiveness and access to global capital markets

Corporate Governance: An International ReviewVolume 7, Issue 2 p. 198-206 Corporate Governance Report: Corporate Governance – improving competitiveness and access to global capital markets First published: 28 June 2008 https://doi.org/10.1111/1467-8683.00147Citations: 5AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume7, Issue2April 1999Pages 198-206 RelatedInformation

Corporate Governance Report: Corporate Governance Principles –a Japanese view

The Corporate Governance Committee of the Corporate Governance Forum of Japan, chaired by Mr. Tadao Suzuki, President of the Mercian Corporation, published their final report in May 1998. Their innovative work followed a long period of discussion and stemmed from the original foundation of the Corporate Governance Forum in 1994 by Mr. Kaneo Nakamura of the Industrial Bank of Japan, who invited top business leaders to discuss governance issues.The following extracts from the first two chapters of the report provide some valuable insights into corporate governance perspectives and practices in Japan. The report offers a set of principles which provide a two‐step formula for realizing effective corporate governance in Japan –“principles which should be adopted immediately (or as soon as possible after legal reform) are shown as step ‘A’ principles: step ‘B’ principles should be aimed for early in the 21st. century “to illuminate the path toward the global market, but require legal reform on a grand scale.”