New issue of the Corporate Ownership and Control journal
The recent issue of the journal Corporate Ownership and Control is devoted to the questions of IFRS 7, audit committees, financial accounting, shareholder activism, management control systems, debt access, board composition etc. More detailed issues are given below.
Alessandra Allini, Luca Ferri, Marco Maffei and Annamaria Zampella investigate the level of comparability of the IFRS 7 Financial Instruments Disclosure in banks’ annual reports across different European countries (Italy, Spain, France, Germany and UK) from 2007 to 2014. Despite the accounting boards’ and authorities’ commitment to regulating this information, there are still substantial differences in the practices of risk disclosure, which have negative effects on comparability. The findings show that an increase in the degree of comparability exists during the observed period but the situation is still far from a condition of full comparability due to the presence of factors other than regulations that may affect accounting practices.
Patrick Velte evaluates 117 empirical research studies on audit committee (AC) composition, resources and incentives (period 2007 through 2015). The study briefly introduces the theoretical, normative and empirical AC framework that comprises an adequate structure of the state-of-the-art of empirical research in this field. Numerous studies have shown a positive impact of the AC’s financial expertise on earnings quality. In this context, AC financial expertise has recently been increasingly specified, wherefore positive impacts of accounting, legal or industry expertise were measured either separately or in combination. Both the number of studies conducted and the observed significances are significantly lower for the other components of the monitoring process (internal and external audit quality) and the firm performance.
Kim Backhouse and Mark Wickham explore the link between corporate governance approaches and innovative capacity in the Australian superannuation industry. Analysis of the data indicated that the major corporate governance factors driving innovation in the industry included: ‘possessing a progressive organisational culture’, ‘emphasis on marketing-orientation’, and ‘engaging in co-opetition’. Similarly, the data indicated that the major corporate governance factors inhibiting innovation included: ‘possessing a conservative/risk-averse organisational culture’, ‘unwillingness to deviate from a strict interpretation of regulation’, ‘emphasis on a profit-orientation’, and ‘the absence of any formalised innovation processes within the firm’.
Massimo Belcredi, Stefano Bozzi, Angela Ciavarella and Valerio Novembre provide evidence that specific classes of institutional investors do actively monitor investee firms under concentrated ownership, and that Proxy Advisors (PAs) perform an informational role: i) while general shareholder dissent on SOP is low, dissent by mutual and pension funds holding small equity positions (nonblockholders) is high; ii) nonblockholders’ dissent is negatively correlated with ownership concentration, suggesting that they tend to trust control shareholders to act as delegated monitors on managerial remuneration; iii) voting by institutional investors is strongly correlated with PA recommendations; iv) institutional investors do not follow PA recommendations blindly but look at specific reasons of concern expressed in PA reports.
Jeanette Willert, Poul Israelsen, Carsten Rohde and Thomas Toldbod explore data from a comprehensive survey of the use of management control systems in 120 strategic business units at some of the largest companies in Denmark. The study identifies how senior management guides and controls their subordinates to meet their companies’ objectives. The presentation and discussion of the results, including citations from executive managers, use Ferreira and Otley’s (2009) conceptual and holistic framework for performance management systems, supplemented by elements of contextual factors and organisational culture.
Fayrouz Bencheikh and Neila Boulila Taktak study the effect of cronyism on debt access. Cronyism is concretized by two factors: regulation and political connections. The study is carried out on a sample of Tunisian firms for the period between 2006-2013. The authors test the effect of regulation and political connections on debt access by proceeding with a multiple linear regression model. Results show that regulation is positively associated with the debt ratio. However political connections do not increase the debt ratio.
Georgia Kontogeorga investigates the results from the first period of implementation of ex-ante audit in Greece municipalities. Although European countries have already ceased the traditional type of audit, Greece still exercises an “a priori” audit in the expenses of public organisations. The “ex-ante” audit in Greece has a long tradition with the exemption of local government for which this type was established relatively recently, namely in 2005. The research was conducted with the statistical analysis of Annual Reports of the Hellenic Court of Audit and questionnaires distributed to the auditors of the Court and the executives of audited entities and led to the conclusion that the introduction of ex-ante audit in the local government illustrated serious problems in their financial management.
Olubukola Ranti Uwuigbe, Olayinka Adedayo Erin, Uwalomwa Uwuigbe, Daramola Sunday Peter and Olugbenga Jinadu examine the impact of IFRS on stock market behaviour in the financial and consumer goods sector of the Nigerian economy. The study addresses the research questions by using a sample of 52 selected listed companies (30-financial sector and 22-consumer goods sector) on the Nigeria Stock Exchange. The methods used in analysing the impact of IFRS on stock market behaviour were General Linear Model (GLM) and Fixed Effects Model (FEM). The findings show that IFRS adoption has improved the trading volume activities of listed firms in Nigeria. This study recommends that regulatory bodies in the country should ensure that the companies listed on the Stock Exchange comply strictly with the IFRS implementation because this will help the investors of those companies have relevant information regarding stock market indices. Also, there is a need for the stock market to be efficient so that there will be easy access to information on the stock market on a timely basis so that investors can take a timely and prompt decision.
Majed Alharthi aims to find the determinants of financial performance and stability for Islamic banks in GCC countries during the period 2005-2014. In this study the profitability is represented as three main indicators: the return on assets (ROA), return on equities (ROE) and net interest margin (NIM). On the other side, the stability measures are z-score and capital ratio. The findings show that Islamic banks in GCC countries were well capitalised by the period of Arab Spring. Generally, the global financial crisis has no effect upon financial performance and financial stability.
John M. Holcomb investigates the extent to which U.S. corporate boards have established ethics and compliance committees and the underlying reasons accounting for the development of such committees. The reasons include the evolving legal environment of business and the expanding ethical responsibilities. This paper then examines the skill set of members of ethics and compliance committees and finds they have a different profile from members of either audit committees or public responsibility committees and a profile that seems suitable to their responsibilities. In that sense, they might provide a model for other companies that form ethics and compliance committees in the future.
Daniel Dupuis, Martin Spraggon and Virginia Bodolica explore the relationship between family business identity and corporate governance attributes in family-run companies located in the UAE. Data related to organisational background, familial identification and governance devices were gathered from secondary sources for a sample of 195 UAE-based family firms. Based on quantitative data analyses, the authors uncover the prevailing characteristics of family businesses in the UAE and identify how the familial identification of its members is associated with structural attributes of board of directors and top management team (e.g., size, family relatedness, gender and cultural diversity).
J. Vaz Ferreira examines the pre and post going public process of the operational, social, and financial and dividend policy performance of twenty-five Portuguese family companies in most of the sectors of economic activity that went public through public share offering and direct sale. This investigation develops a framework to conclude if the decision to open the capital by the traditional family firms to the investors, in general, had caused or not, improvements on the economic and financial health of those firms. On the economic side, the authors find relevant declines in profitability, operating efficiency and activity levels and an increase in capital investment and real output. On the employment side, the authors document an irrelevant decline on employment etc.
Shab Hundal investigates, first, the association between multiple directorship assignments (busyness) undertaken by corporate directors and firm performance, second, whether endogenously determined limits of multiple directorships, highlighting the ownership structure and other institutional settings, explain the above association better than those by exogenously mandated by regulators and third, the association between the nature of busyness and firm performance. The study develops measures of busyness in the light of the agency and resource dependence theories.
Lindrianasari, Sondang Berliana Gultom and Liza Alvia aim to provide empirical evidence on investor reaction to the disclosure of Management’s Discussion and Analysis of the companies listed on the Indonesia Stock Exchange in the period of 2011-2013. The findings show that Indonesian capital market is responding to the disclosure of Management’s Discussion and Analysis provided by the company. The more complete disclosure of the information in the Management’s Discussion and Analysis, the better the market response.
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