https://personal.lse.ac.uk/FERREIRD/gender.pdf

Women in the boardroom and their impact on governance and performance

Data on corporate governance and disclosure practices reveal wide within-country variation that decreases with the strength of investors’ legal protection. A simple model identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data from 27 countries, we find that all three firm attributes are related to the quality of governance and disclosure practices, and firms with higher governance and transparency rankings are valued higher in stock markets. All relations are stronger in less investor-friendly countries, demonstrating that firms adapt to poor legal environments to establish efficient governance practices.

/pdf/to-steal-or-not-to-steal-firm-attributes-legal-environment-14qocik7c3.pdf

To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation

Corporate governance has received much attention in recent years, partly due to the Asian financial crisis. We review the literature on corporate governance issues in Asia to develop region-specific and general lessons. Much attention has been given to poor corporate sector performance, but most studies do not suggest Asian firms were badly run. The literature does confirm the limited protection of minority rights in Asia, allowing controlling shareholders to expropriate minority shareholders. Agency problems have been exacerbated by low corporate transparency associated with rent-seeking and relationship-based transactions, extensive group structures and diversification, and risky financial structures. The controlling shareholder bears some of agency costs in the form of share price discounts and expenditures on monitoring, bonding and reputation building. The Asian financial crisis further showed that conventional and alternative corporate governance mechanisms can have limited effectiveness in systems with weak institutions and poor property rights. Overall, the understanding of the determinants of firm organizational structures, corporate governance practices and outcomes remains limited, however.

/pdf/corporate-governance-in-asia-a-survey-4x5jlsabkn.pdf

Corporate Governance in Asia: A Survey

Corporate governance in emerging markets: A survey

We examine the relationship between corporate governance and the extent of corporate social responsibility (CSR) disclosures in the annual reports of Bangladeshi companies. A legitimacy theory framework is adopted to understand the extent to which corporate governance characteristics, such as managerial ownership, public ownership, foreign ownership, board independence, CEO duality and presence of audit committee influence organisational response to various stakeholder groups. Our results suggest that although CSR disclosures generally have a negative association with managerial ownership, such relationship becomes significant and positive for export oriented industries. We also find public ownership, foreign ownership, board independence and presence of audit committee to have positive significant impacts on CSR disclosures. However, we fail to find any significant impact of CEO duality. Thus, our results suggest that pressures exerted by external stakeholder groups and corporate governance mechanisms involving independent outsiders may allay some concerns relating to family influence on CSR disclosure practices. Overall, our study implies that corporate governance attributes play a vital role in ensuring organisational legitimacy through CSR disclosures. The findings of our study should be of interest to regulators and policy makers in countries which share similar corporate ownership and regulatory structures.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2050630_code921139.pdf?abstractid=2050630&mirid=5&type=2

Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy

A recent stream of literature shows that family control is central in most countries of the world, but little research exists regarding family control and corporate governance. This paper analyses family control and corporate governance using a sample of Taiwanese firms. The results suggest that family control is even more prevalent than previously suggested and that a non-linear relation exists between family control and relative firm performance. Family-controlled firms that have low levels of control have lower relative performance than both family-controlled firms with high levels of control and widely held firms. This is consistent with the conflict of interest between majority and minority shareholders being the greatest when the majority shareholder’s level of control is high enough to influence a firm’s decision-making process but ownership is low enough that the benefits of expropriation outweigh the costs. Furthermore, a positive valuation effect exists when controlling families hold less than 50% of a firm’s board seats. Taken together, the results in this paper suggest that when family control is central, high levels of family ownership and low levels of family board representation are effective ways of mitigating the separation of cash flow rights and control and, thus, decreasing the conflict of interest between majority and minority shareholders.

Family Control and Corporate Governance: Evidence from Taiwan

Prior empirical evidence supports the wealth expropriation hypothesis that weak corporate governance induced by certain types of ownership structures and board composition tends to result in minority interest expropriation. This in turn reduces corporate value. However, it is still unclear whether corporate financial distress is related to these corporate governance characteristics. To answer this question, we adopt three variables to proxy for corporate governance risk, namely, the percentage of directors occupied by the controlling shareholder, the percentage the controlling shareholders shareholding pledged for bank loans (pledge ratio), and the deviation in control away from the cash flow rights. Binary logistic regressions are then fitted to generate dichotomous prediction models. Taiwanese listed firms, characterised by a high degree of ownership concentration, similar to that in most countries, are used as our empirical samples. The evidence suggests that the three variables mentioned above are positively related to the risk for financial distress in the following year. Generally speaking, firms with weak corporate governance are vulnerable to economic downturns and the probability of falling into financial distress increases.

http://ntur.lib.ntu.edu.tw/bitstream/246246/20060927122731523921/1/7-3.pdf

Corporate Governance and Financial Distress: evidence from Taiwan

The interaction and volatility asymmetry of unexpected returns in the greater China stock markets

We integrated accounting, corporate governance, and macroeconomic variables to build up a binary logistic regression model for the prediction of financially distressed firms. Debt ratio and ROA are found to be the most explanatory accounting variables while the percentage of directors controlled by the largest shareholder (which measures negative entrenchment effect), management participation, and the percentage of shares pledged for loans by large shareholders are shown to have positive contribution to the probability of financial distress. For macroeconomic sensitivities, firms with higher sensitivities to the annualized growth rates of manufacturing production index and money supply (M2) are more vulnerable to financial distress. As to the issue of sampling technique, we find that oversampling of distressed firms is subject to the problem of choice-based sample bias pointed out by Zmijewski (1984). The classification accuracy is overstated consequently. We try to include as many healthy firms as possible in our sample instead of following the traditional 1: 1 or 1: 2 matching principle. The results show that the classification accuracy is mostly significantly improved in our integrated prediction model when the sample is closest to the actual population. For the trade-off between type I and type II errors in the predicted probability classification, we maximize the sum of classification accuracy for both groups of firms (the healthy and the distressed). It is found that an estimated probability of financial distress of 0.2000 represents the optimal cutoff point for predicting financial distress. Under such a cutoff scheme, our integrated model produces an in-sample classification accuracy of 80.7% for distressed firms and 93.2% for healthy firms. For out-sample prediction, 90% of the distressed firms and 85.4% healthy firms in 2001 are correctly identified using an integrated model built upon samples from 1998 to 2000.

/pdf/can-corporate-governance-variables-enhance-the-prediction-2w2a22l59j.pdf

Can Corporate Governance Variables Enhance the Prediction Power of Accounting-Based Financial Distress Prediction Models?

Manuscript Type: Empirical

Research Question/Issue: Prior to China's split-share structure reform, domestic A shares were divided into non-tradable and tradable shares. Non-tradable shareholders represent the government, hold roughly a two-thirds majority, and manage the firms, while tradable shareholders have little power to affect the decisions made by non-tradable shareholders. This is a typical structure to exhibit agency problems. The 2005 structure reform program stipulates that non-tradable shareholders have to bargain with tradable shareholders in order to gain liquidity. The price that non-tradable shareholders pay to tradable shareholders for gaining liquidity is defined as “compensation.” We explore the issue of why corporate governance might play an important role in affecting the level of compensation.

Research Findings/Insights: Firms with a weak governance structure or severe agency problems are required to have a higher level of compensation. The level of compensation is positively correlated with the non-tradable shareholding, the pledge ratio, and related-party transactions, and is negatively correlated with foreign shareholdings. The same set of variables dictates the ex-post wealth effect of tradable shareholders, but in the reverse direction.

Theoretical/Academic Implications: The share reform provides a natural setting that allows tradable shareholders to reflect their concerns with agency problems. The mechanism could ameliorate the agency problems. Corporate governance, in a broad sense, is related to compensation and the ex-post wealth effect of tradable shares.

Practitioner/Policy Implications: A successful mechanism should be designed to have minority shareholders involved in the process and have the final compensation reflect the quality of corporate governance.

https://papers.ssrn.com/sol3/Delivery.cfm/corg_754.pdf?abstractid=1484115&mirid=3

Tsun-Siou Lee

Papers

Family Control and Corporate Governance: Evidence from Taiwan

Corporate Governance and Financial Distress: evidence from Taiwan

The interaction and volatility asymmetry of unexpected returns in the greater China stock markets

Can Corporate Governance Variables Enhance the Prediction Power of Accounting-Based Financial Distress Prediction Models?

Non‐Tradable Share Reform and Corporate Governance in the Chinese Stock Market