Is a loosely specified regulatory intervention effective in disciplining management commentary? The case of performance indicator disclosure

This paper offers a contribution to the call for research on the effectiveness of regulatory interventions governing management commentary disclosure. Specifically, we focus on the mandatory requirement concerning performance indicator disclosure introduced by the Modernisation Directive (2003/51/EC). In keeping with other regulators, the European legislator opted to implement a regulatory approach based on a rule with loose specifications. To understand the effects of this Directive, we have investigated the Italian context, in which neither the national legislator nor the standard setter have supported companies with detailed specifications or guidelines aimed at integrating the European provision. We have compared companies’ disclosure practices before and after the adoption of the Directive, investigating the number of disclosed indicators and also their modalities of presentation, as they are considered essential to guaranteeing the quality of this disclosure. Our results document that a mandatory intervention, even if based on loose specifications, is associated with an increase in disclosure practices. Nevertheless, such regulation does not seem able to guarantee high quality disclosure practices. In fact, before and after the regulation, companies primarily disclose common financial measures. Moreover, the usefulness of such disclosure is undermined by a limited compliance with the international guidelines concerning the modalities of presentation. These results reveal some weaknesses in the European approach to performance indicator regulation. In general, the EU legislator fails to explain the purpose and the objective of performance indicator disclosure and does not take into account the differences between financial and non-financial indicators. Furthermore, it does not provide firms with clear guidelines concerning the presentation modalities.     

The role of the board in shaping foundations’ strategy: an empirical study

This paper investigates the relationships of the choice of philanthropic strategy with board capital (diversity and networks), board activities (board processes, internal board committees, and board effectiveness), and CEO leadership. Using a sample of 110 Italian foundations, the research shows that board processes have the strongest positive association with an evolved strategic approach to philanthropic institutional grant-giving, while board diversity and strong CEO leadership are associated with the strategic approach only under certain conditions. In particular, good governance processes (e.g., training the board, self-evaluation of trustees, setting the stage for effective board and committee meetings, implementing control software, and steering meetings to improve the board’s analysis) are positively associated with evolved strategic approaches to philanthropy (e.g., signaling other funders for the best grantees, improving the performance of grant recipients, and advancing selected social fields’ state of knowledge and practice).     

Do auditors’ perceptions actually help fight against fraudulent practices? Evidence from Tunisia

The purpose of this paper is focused on investigating empirically how Tunisian Auditors perceive their status regarding fraud fighting issue. In this respect, a set of auditor-associated mental representations will be expressed in terms of their respective roles as relevant governance models (legal versus ethical ones), via the cognitive mapping technique. The findings reveal that corporate governance can be globally depicted within these particular representations, indicating the supremacy of the legal governance approach over the ethical one with regard to the Tunisian case. .     

Information security governance: pending legal responsibilities of non-executive boards

The study shows that a structural conflict of interest in non-executive boards exists due to missing corporate governance structures and a lack of awareness for legal issues with regard to information security risks. Non-executive boards receive information on strategic security threats as a part of their oversight function to fulfill investor interest in transparency. At the same time, they act as representatives of company stakeholders and have an interest to counteract to information security risks based on the stakeholder’s risk disposition. If not properly structured by corporate governance rules, these different interests may lead to regulatory aberrations on non-executive board level. The study analyses a Deutsche Telekom AG case where non-executive board members, employees, and journalists fell victim to a spying scandal subject to the German telecommunications secrecy law in 2005–2006. The analysis demonstrates how the handling of information security on non-executive board level bears governance risks as well as legal risks that are insufficiently addressed in corporate governance research. The paper contributes to avoid a reproduction of events in the future, by suggesting the principle of a segregation of duties on non-executive boards as well as providing an overview of relevant legislative requirements that clarify tasks of non-executive board members with regard to information security. The study therefore helps protecting corporations and their stakeholders from similar consequences of missing corporate security governance.     

Minority and majority private equity investments: firm performance and governance

This paper adds to the literature on the determinants of the effects of private equity (PE) investments. Using an original dataset of 191 target firms in Italy, we study the effects on performance and governance of the stakes acquired by the PE investor. We employ a difference-in-differences approach and compare target and control firms sharing similar characteristics and performance in the years preceding the deal. We find that PE investment has a positive effect on profitability, sales, and employment; these effects are larger for minority investments. We argue that this signals effective governance that follows from complementing rather than substituting incumbent managers in minority investments.     

Dual class shares,board of directors’ effectiveness and firm’s market value: an empirical study

This study aims to identify whether a relationship exists between the controlling shareholders’ voting power and outside directors’ effectiveness in maximizing firms’ financial performance. We analyze a panel data with 3057 observations for the 2000–2012 period using a random effects model, logit and probit regressions, and the two-stage model of Heckman in the Brazilian stock market. Our findings show that firms whose controlling shareholders use dual class shares to leverage their voting power have less independence from the board and worse financial performance and market value. Further, the percentage of outside directors tends to be ineffective in increasing the firm’s value, and in changing the firm’s chief executive officer (CEO) when (1) the controlling shareholder’s voting power is leveraged, or (2) when the CEO assumes a position on the board of directors simultaneously. We interpreted that these results are in line with the arguments in favor of the existence of a new agency cost, which is related to the undue obedience of board members to authority, such as the largest controlling shareholder or the CEO in Brazilian listed firms.     

The Weight Function Lemma for graph pebbling

Graph pebbling is a network model for studying whether or not a given supply of discrete pebbles can satisfy a given demand via pebbling moves. A pebbling move across an edge of a graph takes two pebbles from one endpoint and places one pebble at the other endpoint; the other pebble is lost in transit as a toll. It has been shown that deciding whether a supply can meet a demand on a graph is NP-complete. The pebbling number of a graph is the smallest t such that every supply of t pebbles can satisfy every demand of one pebble byt a vertex. Deciding if the pebbling number is at most k is \(\Pi _2^\mathsf{P}\)-complete. In this paper we develop a tool, called the Weight Function Lemma, for computing upper bounds and sometimes exact values for pebbling numbers with the assistance of linear optimization. With this tool we are able to calculate the pebbling numbers of much larger graphs than in previous algorithms, and much more quickly as well. We also obtain results for many families of graphs, in many cases by hand, with much simpler and remarkably shorter proofs than given in previously existing arguments (certificates typically of size at most the number of vertices times the maximum degree), especially for highly symmetric graphs. Here we apply the Weight Function Lemma to several specific graphs, including the Petersen, Lemke, \(4\mathrm{th}\) weak Bruhat, and Lemke squared, as well as to a number of infinite families of graphs, such as trees, cycles, graph powers of cycles, cubes, and some generalized Petersen and Coxeter graphs. In doing so we partly answer a question of Pachter, et al., by computing the pebbling exponent of cycles to within an asymptotically small range. It is conceivable that this method yields an approximation algorithm for graph pebbling.     

Is there any polynomial upper bound for the universal labeling of graphs?

A universal labeling of a graph G is a labeling of the edge set in G such that in every orientation \(\ell \) of G for every two adjacent vertices v and u, the sum of incoming edges of v and u in the oriented graph are different from each other. The universal labeling number of a graph G is the minimum number k such that G has universal labeling from \(\{1,2,\ldots , k\}\) denoted it by \(\overrightarrow{\chi _{u}}(G) \). We have \(2\Delta (G)-2 \le \overrightarrow{\chi _{u}} (G)\le 2^{\Delta (G)}\), where \(\Delta (G)\) denotes the maximum degree of G. In this work, we offer a provocative question that is: “Is there any polynomial function f such that for every graph G, \(\overrightarrow{\chi _{u}} (G)\le f(\Delta (G))\)?”. Towards this question, we introduce some lower and upper bounds on their parameter of interest. Also, we prove that for every tree T, \(\overrightarrow{\chi _{u}}(T)={\mathcal {O}}(\Delta ^3) \). Next, we show that for a given 3-regular graph G, the universal labeling number of G is 4 if and only if G belongs to Class 1. Therefore, for a given 3-regular graph G, it is an \( {{\mathbf {N}}}{{\mathbf {P}}} \)-complete to determine whether the universal labeling number of G is 4. Finally, using probabilistic methods, we almost confirm a weaker version of the problem.     

Distance domination in graphs with given minimum and maximum degree

For an integer \(k \ge 1\), a distance k-dominating set of a connected graph G is a set S of vertices of G such that every vertex of V(G) is at distance at most k from some vertex of S. The distance k-domination number \(\gamma _k(G)\) of G is the minimum cardinality of a distance k-dominating set of G. In this paper, we establish an upper bound on the distance k-domination number of a graph in terms of its order, minimum degree and maximum degree. We prove that for \(k \ge 2\), if G is a connected graph with minimum degree \(\delta \ge 2\) and maximum degree \(\Delta \) and of order \(n \ge \Delta + k - 1\), then \(\gamma _k(G) \le \frac{n + \delta - \Delta }{\delta + k - 1}\). This result improves existing known results.     

Total edge irregularity strength of accordion graphs

An edge irregular total k-labeling \(\varphi : V\cup E \rightarrow \{ 1,2, \dots , k \}\) of a graph \(G=(V,E)\) is a labeling of vertices and edges of G in such a way that for any different edges xy and \(x'y'\) their weights \(\varphi (x)+ \varphi (xy) + \varphi (y)\) and \(\varphi (x')+ \varphi (x'y') + \varphi (y')\) are distinct. The total edge irregularity strength, tes(G), is defined as the minimum k for which G has an edge irregular total k-labeling. We have determined the exact value of the total edge irregularity strength of accordion graphs.