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New issue of the Corporate Ownership and Control

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The recent issue of the journal Corporate Ownership and Control pays attention to issues of online financial disclosure, Medium and Micro-Enterprise (SMME) sector, international accounting standards, family firms, firm size etc. More detailed issues are given below:

Abdalmuttaleb M.A. Musleh Al-Sartawi aims to measure the level of Online Financial Disclosure in the Gulf Cooperation Council Countries. Extensive literature review was carried out and a checklist of 90 items (71 for content and 19 for presentation) was developed to measure the level of Online Financial Disclosure for the companies that are listed in the Gulf Cooperation Council Bourses. The findings show that the overall level of Online Financial Disclosure in the Gulf Cooperation Council is 77% but it is varies across the sampled firms according to countries and industry type. The study recommends that regulatory bodies should develop a guideline for disclosing information through the internet in order to enhance the corporate transparency level among the Gulf Cooperation Council listed companies.

Michael Colin Cant conducted a study amongst 946 SMMEs in a developing country, using non-probability sampling regarding their experiences dealing with organisations assisting to SMMEs. The focus was on aspects such as: how queries were handled by the various management levels of the institutions, types of queries submitted, type of assistance received, and how problems were overcome by SMMEs. There was a clear indication that there is a lack of commitment from staff of these support organisations, their level of knowledge and their willingness to assist. The majority of respondents indicated that small businesses were not seen as important enough to warrant sufficient and dedicated attention. The nett effect is that the assistance offered to SMMEs is ineffective or not sufficient to address the needs of SMMEs – resulting in a culture by organisations to “just tick the boxes”. Recommendations are made on how the needs of SMMEs can be better addressed by organisations that aim to support and assist SMMEs.

George Drogalas, Konstantinos Arampatzis and Evgenia Anagnostopoulou examine the relationship of corporate governance and internal audit process in companies listed in the Athens Stock Exchange. In the present research, internal audit is examined in terms of audit quality and the consulting role of internal audit, in order to highlight the new management-oriented and value adding scope of internal audit. Data was collected via a survey questionnaire methodology and was analyzed using regression analysis. The results show that corporate governance is positively associated to the consulting role of internal audit, to internal audit quality and to the audit committee.

Donatella Busso, Alain Devalle and Fabio Rizzato analyse the largest forty constituents of both Italy’s FTSE MIB index and the UK’s FTSE 100 index. The results show that although Corporate Governance Codes’ requirements are similar, implementation of these requirements and the related disclosure continue to show significant differences. The UK companies seem to have a stronger “forward-looking” approach compared to Italian companies. Disclosure provided by Italian companies is too often not enough to enable stakeholder understanding of the process and its outcome. This research contributes to the literature by providing results on the evaluation of boards of directors: regulators, practitioners and researchers must deal with this topic in order to strengthen the rules of corporate governance.

Vincenzo Foglia Manzillo examines the European capital markets and the differences in the way in which share prices reflect financial information in light of the European project “Capital Markets Union”. Findings suggest that diversity exists and enforcement regime affects the above relationship. In particular, Small and Medium Enterprises (SMEs) are characterized by a weak relationship between prices and accounting information compared to large issuers, but this relationship enhance if the SMEs have an institutional investor as significant shareholder. Finally, findings reveal that whether there are ratings or analyst coverage on an issuer, prices are more linked to expected net income instead of the historical data. These results confirm the goodness of the action plan of building a Capital Markets Union.

Helena Isidro, Maria Manuela Martins and Ilídio Tomás Lopes focus on the relationship between the quality of financial reporting and the level of corporate governance of Brazilian firms, particularly between New Market and Traditional Market. Authors measure earnings quality based on a widely used accruals model. Governance quality is represented by the type of market the firms chosen to be listed in. Firms that opt for the New Market must apply more stringent governance principles. The empirical analysis shows evidence of a positive relationship between the quality of financial reporting and the level of corporate governance. Thus, firms listed on the New Market characterized by better governance practices evidence better quality financial reporting.

Veronica Hlongwane and Ophillia Ledimo investigate the role of organisational justice for human resources engagement practices in a developing country’s public service organisation. Organisational Justice Measurement Instrument (OJMI) was used as a measure of organisational justice and the Ultrech Work Engagement Scale measured the participants’ levels of work engagement. Data was collected from a random sample of employees working in a public service organisation (n=350). Descriptive statistics and correlational analysis were conducted to analyse the data. Results of the correlational analysis indicated a significant correlations between organisational justice and work engagement dimensions namely; vigour, dedication and absorption. In terms of contributions and practical implications, insight gained from the findings is relevant for practitioners and managers in the field of organisational behaviour to initiate interventions to enhance employees’ work engagement levels as well as to conduct future research.

Simone Terzani and Giovanni Liberatore examine the marginal value of extra liquidity for a sample of excess cash listed companies (i.e. ECs) operating in the five largest E.U. economies (France, Italy, Germany, Spain and UK). After had shown that these companies are generally penalised by the market, in line with previous literature, authors show that extra cash held is not detrimental to shareholder value when it is combined with high investment opportunities leading, hence, in a premium of 1€ extra held. This relation is even stronger during the financial crisis of 2008. These results confirm that the main reason why ECs are generally valued less by the market is the concern that their managers may deploy excess cash in value-destroying activities. However, EC firms are not penalized ceteris paribus when there are investment opportunities. In addition, such relation is stronger with the presence of financial constraints and lack of liquidity, as explained by the transaction and precautionary motive for holding cash.

Wisnu Untoro empirically investigates the impact of being affiliated firms with business group on firm leverage and liquidity. To do so, author study Indonesian non-financial firms in a panel data over the period 2012-2014. Regression models are estimated using OLS. The empirical results show that there are negative relationship between affiliation with business group and leverage. In addition, being affiliated is also associated with higher liquidity. Pham Hoai Huong investigates Vietnam’s approach to converging with international accounting standards using a variety of de jure convergence scores between Vietnamese Accounting Standards (‘VAS’) and International Accounting Standards/International Financial Reporting Standards (‘IAS/IFRS’), such as full convergence, partial convergence and non-convergence. Vietnam’s initial approach to converging with IAS/IFRS is one of selecting suitable IAS/IFRS issues to fully adopt, but there are few VAS issues modified from IAS/IFRS. The level of convergence between VAS and their equivalent IAS/IFRS is quite high at the beginning (84%), then drops significantly to 63% in 2013 due to non-response to subsequent amendments to IAS and new IFRS.

Lakshmi Kalyanaraman and Basmah Altuwaijri evaluate the firm-size elasticity of top management team (TMT) compensation with a sample of 80 firms listed in Saudi Arabian stock market. We find that the TMT compensation increases with firm size. The results are found to be robust when the total assets as the firm size measure is altered with other proxies, sales and market value of the firm. Authors show that the firm size and TMT compensation relationship is same as in the case of all firms sample when the firms are grouped into family firms and nonfamily firms. This finding is in line with the results of the previous studies that analyze the link between CEO compensation and firm size.

Marco Fazzini analyzes economic multiple evolution and volatility over ten years. Specifically, the paper investigates the evolution of EV/EBITDA and EV/EBIT multiples value in the period 2005-2015 and demonstrates that: (a) EV/EBITDA and EV/EBIT multiples present an appreciable level of volatility from year to year; (b) EV/EBIT multiple presents a standard deviation higher than that of the EV/EBITDA and (b) EV/EBITDA multiple presents a linear correlation with the beta risk coefficient higher than that of the EV/EBIT. The analysis concerns multiples that refer to the North American market, as it constitutes a relatively homogeneous context from regulatory and GAAP-application points of view, and a reliable and comprehensive time series is available. Multiples do not refer to specific companies, but to average sector values, as identified by Bloomberg and Datastream.

Riccardo Tiscini and Alberto Dello Strologo show how, in the soccer clubs sector, where the average financial results are negative, the value of football clubs is not related to income, but to sales turnover and gives a theoretical explanation for that. The literature has shown that the profitability of the industry is generally negative already at the level of operating profit. However, the difference between market value and book value is broadly positive, showing that the market recognizes to these companies a quid pluris in terms of value, not explained by the most rational and generally accepted methods of business valuation. The present study aims to explain, through an empirical analysis, why the value of a football company cannot be estimated only on the basis of expected financial results, but it requires considering the overall benefits for shareholders, represented also by private benefits of control and socio-emotional benefits.

To browse the papers in the issue please visit this page.

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