Managerial dominance and audit committee independence in Spanish corporate governance

The purpose of this paper is to analyse whether the independence of audit committees is affected by the degree of control exerted by managers over the board of directors. Results from a sample of 75 listed Spanish companies show that the majority of firms that voluntarily adopted an audit committee between 1998 and 2001, made an effort to guarantee their independence from management. The degree of independence is shown to be determined by the proportion of inside directors on the board, the same person holding both the CEO and board chairperson positions, and the level of management ownership. These findings may have political implications because existing regulations do not limit the presence of inside directors on audit committees. The presence of inside directors may compromise effectiveness, turning audit committees into instruments of management to provide the appearance of monitoring.

The effects of board size and ‘busy’ directors on the market value of Italian companies

This paper presents evidence that corporate governance quality measured by (1) the board size and (2) the fraction of directors that serve on more corporate boards, influences the market value of firms. The analysis is based in Italy, a country that is characterized by family and concentrated ownership, low legal protection of investors and pyramidal firm structures. Our empirical results suggest that the level of ‘busy-ness’ of corporate directors as a measure of board effectiveness has a significant influence on firm’s market performance. By contrast, we find limited evidence that board size has a substantial impact on the market valuation, except in small and medium enterprises and in some specific industry sectors.

Australian evidence on corporate governance attributes and their association with forward-looking information in the annual report

We investigate the role played by a firm’s corporate governance framework in the decision to voluntarily disclose forward-looking information in the published financial reports of Australian companies in 2000 and 2002. With respect to the year 2000, the corporate governance category, audit quality, consisting of the presence and independence of the audit committee, its meeting frequency, the use of a big 6 auditor and the auditor’s independence, is positively associated with the disclosure of forward-looking information. The corporate governance category, board committees, consisting of the appointment and independence of a compensation committee and the creation of a nomination committee, and the overall efficacy of the corporate governance system are also positively associated with the disclosure of forward-looking information. However, corporate disclosure does not seem to be driven by the same factors in 2002 since in that year none of the governance categories is significantly associated with the firm’s decision to publish forward-looking information in financial reports.

Behavioral finance in corporate governance: economics and ethics of the devil’s advocate

The Common Law, parliamentary democracy, and academia all institutionalize dissent to check undue obedience to authority; and corporate governance reformers advocate the same in boardrooms. Many corporate governance disasters could be averted if directors asked hard questions, demanded clear answers, and blew whistles. Work by Milgram suggests humans have an innate predisposition to obey authority. This excessive subservience of agent to principal, here dubbed a “type II agency problem”, explains directors’ eerie submission. Rational explanations are reviewed, but behavioral explanations appear more complete. Experimental work shows this predisposition disrupted by dissenting peers, conflicting authorities, and distant authorities. Thus, independent directors, chairs, and committees excluding CEOs might induce greater rationality and more considered ethics in corporate governance. Empirical evidence of this is scant—perhaps reflecting problems identifying genuinely independent directors.

Making corporate governance count: the fusion of ethics and economic rationality

Corporate governance codes extensively appeal to ethical standards of conduct. Rather than being articulated alongside economic axioms, ethical and moral precepts are intertwined within neo-classical economic argumentation across corporate governance standards. This paper explores the fusion between ethics and modern economic rationality and reflects on the scientisation of economics and ethics in academic discourse. The argument is then made that the enlistment of ethics within the epistemologically privileged posture of economics characterises corporate governance codes. The UK Combined Corporate Governance Code of 2006 is analysed to draw out the paper’s contention.

Activity-based diversification,corporate governance,and the market valuation of commercial banks in the Gulf Commercial Council

This article examines the effect on market valuation of both corporate governance and the diversity of activities conducted by GCC commercial banks. It shows evidence on the endogenous effect of corporate governance and the characteristics of the banking industry in determining the diversification level of a bank. Empirical findings show a bias in results using ordinary least squares regressions. When controlled for endogeneity, they indicate a negative (but weak) association between the diversification index and the market valuation—consistent with the agency-based hypothesis. Interestingly, foreign banks and corporate shareholders are effective monitors who invest in more diversified GCC banks with higher valuation multiples. Conversely, domestic corporate shareholders—related by a complex web of relationships—invest in less diversified banks with a lower market valuation. In addition, diversified commercial banks with either subsidiaries in developed countries or involvement in market-based activities have higher market valuation. The latter may be explained by the effect on performance of the recent bubble in the Arab stock market.

Giddens’ structuration theory and its implications for management accounting research

The purpose of this essay is to briefly review the pillars and the rationale of Giddens’ theory of structuration, and offer a snapshot of the impact of these ideas on research in management accounting. Conceptualised as a way of making sense of social life, structuration theory represents a sensitizing device for researchers, which has be drawn upon “in a selective way in thinking about research questions or interpreting findings” (Giddens, Modernity and self-identity: Self and society in the late modern age, 1991). In the following pages the duality of structure, the modalities of structuration, the concept of double positioning, the theory of the subject as well as concepts such as ontological security, routines or trust will be reviewed as essential elements of a vocabulary originally framed within Giddens’ The constitution of society (1984). The essay ends sketching the work of Macintosh and Scapens (Management accounting and control systems—an organisational and behavioural approach, 1990), who broke new ground to interpret management accounting systems in light of structuration theory terms and concepts, as well as some of the more recent works in accounting that have built on Giddens’ latest ideas on the The Consequences of Modernity (1990).

The influence of executive age,career horizon and incentives on pre-turnover earnings management

In this paper we hypothesize that CEOs will be motivated to manage earnings prior to a turnover decision. This motivation comes from the horizon problem for CEOs nearing retirement age and for CEOs whose profit-based bonus is a large portion of their total compensation. We find that firms in which CEOs are nearing retirement age have large discretionary accruals in the year prior to turnover. Although we find firms with a larger proportion of profit-based bonus pay have larger discretionary accruals, this result is not robust with the inclusion of control variables in the regressions.

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Can institutional investors fix the corporate governance problem? Some Danish evidence

It has been advocated within corporate governance that institutional investors may discipline management in listed firms and thereby alleviate the free rider problem associated with dispersed ownership. This article tests this hypothesis using a sample of Danish listed firms during 1998–2001 determining, whether ownership by institutional investors impacts performance, measured by Tobin’s q. Using three stage least squares, it is shown that aggregate ownership by institutional investors does not influence firm performance. However, when decomposing the results, it is found that joint ownership by the largest two Danish institutional investors, has a significant negative impact firm performance. Ownership by banks and to a lesser extent insurance companies significantly influences firm performance positively. The results somehow challenge the conventional wisdom, arguing that the black box view of institutional investors should be abandon. Therefore it is suggested that a more careful analysis should be devoted to each institutional investors own legal environment.

Strangers in a Strange Land: Shock,Disappointment, and Adjustments Experiences of Expatriates in Central Asia

Increasing globalization is driving an increase in diversity and interaction. A more mobile and international workforce frequently requires that individuals try to understand the norms of their “new” society. This paper provides a preliminary exploration of the types of issues and concerns raised by expatriates working in a new foreign environment. In particular, the paper uses a hybrid survey/interview methodology to identify specific issues raised by expatriates working in Kazakhstan, Central Asia.

Quo Vadis? Suggestions for future corporate governance research

In this paper I first review the basic tenets of agency theory and theory of managerial capitalism as well as some of the major research in these areas then suggest for areas for future research that go beyond the extant empirical work. First, I suggest that it would be useful to reconsider the basic nature of the agency relationship, taking into account that while equity holders can be considered the principal, the board of directors may be more realistically in need of agent-like controls. Second, the complementary or supplementary nature of the monitoring/incentive alignment relationship has been shown theoretically but the empirical evidence is equivocal and needs future investigation. Third, there has been very limited research on the construct validity of archival measures of the sort used in agency theory. This requires the use of methodologies outside those of the more conventional type used in agency theory (i.e., from economics and finance). Finally, agency theory development would profit greatly by more extensive use of research methods such as laboratory studies and survey methodology and the integration of concepts such as personality and control processes.

Governance of open source software: state of the art

In this overview of governance mechanisms developed within open source software (OSS) circles, three types of governance are studied: ‘spontaneous’ governance, internal governance, and governance towards outside parties. Moreover, two main ways in which lessons from OSS can be applied elsewhere are explored: peer production of products other than software, and embedding ‘peer-produced’ products and peer processes into existing institutions (‘coupling’).

FEMA and the Witt Revolution: Testing the Hypothesis of “Bureaucratic Autonomy”

In the wake of widespread criticism for its poor performance in Hurricane Andrew in 1992, FEMA became a more effective organization under the leadership of James Witt (1993–2001). One answer to the question of how and why FEMA improved so rapidly and significantly during this period is Carpenter’s (2001) theory of “bureaucratic autonomy.” This paper defines the minimum conditions Carpenter considers necessary for the term, evaluates their applicability to FEMA during this period, and briefly examines alternative explanations for FEMA’s organizational transformation. It concludes that the innovation and entrepreneurship FEMA demonstrated during this period do indeed meet the criteria for “bureaucratic autonomy.”

Promoting Public Trust in Public Organizations: Explaining the Role of Public Accountability

This paper is aimed at explaining the role of public accountability in promoting public trust in public organizations. Initially a conceptual model was developed. Then, the model was tested empirically in Iran. The result shows that public accountability influences the public trust by improving citizens’ satisfaction. In other words, legal, ethical, financial, functional, and utmost political accountability affect public trust through influencing citizens’ satisfaction. This study also confirms that changes in social trust, citizens’ trust in government, and media will moderate trust in public organizations.

Does one hat fit all? The case of corporate leadership structure

Recent corporate scandals have led to renewed campaigns for governance reforms, including calls for the separation of CEO and chairman positions. This paper argues that this trend ignores the possibility that differences in firm characteristics determine the appropriateness of separating or combining the two positions. I propose and test hypotheses on the determinants of leadership structure using a sample of 1,883 firms. I find that organizational complexity, CEO reputation, and managerial ownership increase the probability of CEO duality. I also find that whether CEO duality benefits or hurts the firm is contingent on firm and CEO characteristics. These results suggest that firms do consider the costs and benefits of alternative leadership structures, and that requiring all firms to separate CEO and chairman duties may be counterproductive.

The effects of demand,competitive, and technological uncertainty on board monitoring and institutional ownership of IPO firms

This paper considers industry-specific contingencies that may account for some of the inter-firm heterogeneity in the deployment of specific corporate governance mechanisms in IPO firms. We examine how differences in demand, competitive, and technological uncertainty in the industry influence the levels of IPO firm monitoring by board outsiders and institutional investors. We test our theory using a sample of U.S. firms that completed an IPO in 24 manufacturing industries. The results indicate that industry uncertainty is, indeed, significantly related to the use of corporate governance mechanisms. In particular, the empirical results indicate that industry effects on IPO firm board monitoring and institutional investor ownership are the strongest and most consistent for demand uncertainty and competitive uncertainty.

Student Selection and Incentives

The paper discusses the impact of performance based selection in secondary education on student incentives. The theoretical approach combines human capital theory with signaling theory. The consideration of signaling offers an explanation for observed performance of educational systems with a standard peer effect argument. More specifically it can be optimal to select students according to ability even if selective systems do not outperform comprehensive systems in tests. Selection achieves the same output with lower private costs for the students. The paper questions the strong focus on educational tests to measure the efficiency of selective systems as long as these tests provide no information about a student’s incentives and private costs.

Organizational Justice and Job Satisfaction in Coaching

This study explored organizational climate perceptions within high school athletic departments from the point of view of coaches. Five key facets of job satisfaction and satisfaction with the job in general were assessed as well as the relationship between each facet and three distinctive dimensions of organizational justice. High school coaches (N = 392) indicated that their athletic departments maintained a fair operating climate and were satisfied with each of the five facets and their jobs in general. Also, a linear relationship (p ≤ 0.05) was found between each of the three fairness dimensions and each of the job satisfaction facets as well as the job itself.