Empirical Study on Influence of Optimization of Share Structure to Debt Maturity

Because of historical reasons, shares of listed companies were divided into tradable shares and non-tradable shares, which could result to serious corporate governance problem. The Split Share Structure Reform, which started from the year of 2005, is aiming to optimizing the share structure of listed company and bringing about a convergence of profit target of all the share holders. It is worth for us to examine the change of ownership structure of listed companies in mainland to see whether there is an impact on the debt maturity choice in the split share reform context. It has both theory and practice guiding significance to analyze the relationship between share structure and debt maturity because share structure is a main component of corporate governance. This paper adopts multiple linear regression models by using China mainland listed company’s data to analyze the effect of debt maturity caused by share structure. It indicates that optimization of share structure can relieve the profit conflict between major shareholders and minor shareholders, which can promote company to select debt maturity appropriately and improve listed company’s performance at last

Comparative Study of the Impact of Compliance with Corporate Governance Regulations & Internal Governance Mechanisms on Financial Performance of Listed Firms in Africa

This thesis examines and compares the impact of internally generated alternative corporate governance structures and compliance with country-level corporate governance regulations on financial performance of listed firms in South Africa and Nigeria. Firm-level data for the study was collected manually and triangulated with Datastream dataset for 100 listed firms for the period 2010–2014 (500 firm-years) in South Africa and 80 listed firms for the period 2011–2015 (400 firm-years) in Nigeria. Adopting a multi-theoretical approach and more importantly New Institutional Economics (NIE) theory, this study shows that cultural, contextual and institutional similarities and differences in corporate governance mechanisms across different countries impact differently on firm-level behaviour, which affects firm financial performance differently. Empirically, the thesis shows there is a statistically significant positive effect of compliance with Nigerian and South African corporate governance code (compliance index model) on firm accounting performance (ROCE). This implies that firms that comply with corporate governance regulations in both countries benefit from increasing accounting returns more than firms that do not. However, results based on market performance (Q-ratio) show that compliant firms with King III corporate governance guidelines in South Africa are associated with decreasing market valuation (Q-ratio), whereas firms compliant with Nigeria SEC 2011 corporate governance regulations are associated with increasing market valuation (Q-ratio). The alternative internal corporate governance mechanisms (variables in the equilibrium variable models) show similar and consistent mixed results compared to those reported by previous studies. Specifically, in South Africa, excluding board size which showed consistent negative statistically significant coefficients across both performance measures, the rest of the internal mechanisms are either statistically significant with one performance measure but insignificant with the other performance measure or significant with both measures but with contradictory signs of coefficients. Similarly, in Nigeria, out of the 14 firm-level internal corporate governance structures, six showed insignificant results irrespective of the performance measure, whereas six showed significant results with one performance measure and insignificant results with the other. Only gender diversity and ethnic diversity showed consistent statistically significant coefficients across both firm financial performance proxies. The study contributes to corporate governance literature in many ways. First it shows the level of maturity in governance institutions, in addition to normative rules and informal norms across countries, has a significant bearing on firm-level governance practices. More so, historical and contextual path dependence has produced a diversity of firm-level and country-level specific internal CG structures that may work well within an institutional environment in which they have evolved but may not work in others. The resulting consequence is that in countries with developed or more mature governance institutions (e.g. South Africa), stock markets undervalue firms with high compliance with normative governance rules, whereas in countries with emerging/growing governance institutions (e.g. Nigeria), stock markets highly value firms’ compliance with normative governance guidelines. Furthermore, the impact of compliance with normative CG guidelines on firm accounting performance in countries with mature governance institutions (South Africa) is similar to that with emerging governance institutions (Nigeria). More so, despite institutional voids, firms in African markets are committed in improving governance institutions by adopting recommended good CG practices implemented by regulatory authorities. Hence emerging African economies are adopting institutional isomorphic practices in governance compliance. Specifically, firms in these markets are transmitting good governance institutions to emerging economies by improving on their CG practices

ESSAYS ON EXECUTIVE COMPENSATION, CAPITAL STRUCTURE AND CORPORATE GOVERNANCE

This dissertation consists of three essays on the relation between executive compensation, capital structure and corporate governance. In the first essay, I examine the relation between CEO option compensation and firm capital structure. The empirical challenge in studying this relation is that these are both choices of the firm that are made simultaneously. Therefore, it is difficult to conclude from the existing literature the causation of this relation. Using the Internal Revenue Code (IRC) 162(m) tax law as an exogenous shock to the compensation structure in a natural experiment setting, I can identify now firm leverage changes as a result of the CEO option compensation changes. The evidence provides strong support for the debt agency theory. The results indicate that firms decrease leverage when CEOs are paid with more option grants and as those options become a higher percentage of the firm's future cash flows. The findings are robust to addition of corporate governance and convertible debt dimensions to estimation. The second essay studies the effect of internal board monitoring on the firm's debt maturity structure. I use the Sarbanes - Oxley Act of 2002 (SOX) and the Securities and Exchange Commission (SEC) regulations as exogenous shocks to board structure in a natural experiment setting. Supporting the agency theory, the findings indicate that firms have debt with longer maturity as board independence increases and internal board monitoring becomes powerful. The results are even stronger for complex and larger firms such as conglomerates. I find the relation between internal monitoring and debt maturity becomes less clear during times of financial instability. The third essay investigates the impact of externally mandated versus organically determined corporate governance modifications on firm performance. SOX and SEC regulations are employed as a natural experiment in order to examine the imposed rules and elucidate the identification issues. The findings suggest that companies which voluntarily determine the necessary corporate governance modifications based on firm specific characteristics and needs perform better than the case where they are all forced to alter their board structure

Short-term debt maturity, monitoring and accruals-based earnings management

Most prior studies assume a positive relation between debt and earnings management, consistent with the financial distress theory. However, the empirical evidence for financial distress theory is mixed. Another stream of studies argues that lenders of short-term debt play a monitoring role over management, especially when the firm’s creditworthiness is not in doubt. To explore the implications of these arguments on managers’ earnings management incentives, we examine a sample of US firms over the period 2003–2006 and find that short-term debt is positively associated with accruals-based earnings management (measured by discretionary accruals), consistent with the financial distress theory. We also find that this relation is significantly weaker for firms that are of higher creditworthiness (i.e. investment grade firms), consistent with monitoring benefits outweighing financial distress reasons for managing earnings

PENGARUH PROFITABLITAS, UKURAN PERUSAHAAN, LEVERAGE, DAN PRAKTIK MEKANISME GCG TERHADAP NILAI PERUSAHAAN PADA SEKTOR PERTAMBANGAN YANG TERDAFTAR DI BEI PERIODE 2011-2015

The purpose of this study is to understand the effect of profitability, company size, leverage and good corporate governance mechanisms on firm value. The object of this research is mining sector companies on the IDX for the period 2011-2015. This study uses a quantitative approach with secondary data. The population in this study consisted of 41 companies, the sample consisted of 27 companies taken according to the sample selection criteria using purposive sampling. The method of data analysis in this study is a multiple regression model. The results of this study indicate that the variable profitability and company size do not affect the value of the company. While leverage and good corporate governance mechanisms have a significant influence on firm value, this shows that the greater the proportion of capital using long-term debt in corporate funding the greater the risk of the inability to pay long-term debt and interest at maturity and will have an impact on campus performance in operating the company so that it will affect the profit and value of the company. Keywords: Leverage, good corporate governance mechanism, company value, profitability, company siz

Corporate Governance and the Cost of Debt: Evidence from Director Limited Liability and Indemnification Provisions

We find that firms that provide limited liability and indemnification for their directors enjoy higher credit ratings and lower yield spreads. We argue that such provisions insulate corporate directors from the discipline from potential litigation, and allow them to pursue their own interests by adopting low-risk, self-serving operating strategies, which coincidentally redound to the benefit of corporate bondholders. Our evidence further suggests that the reduction in the cost of debt may offset the costs of directorial shirking and suboptimal corporate policies occasioned by this insulation, which may explain why stockholders have little incentive to rescind these legal protections

The Effectiveness of Corporate Boards: Evidence from Bank Loan Contracting

This paper investigates the role of corporate boards in bank loan contracting. We find that when corporate boards are more independent, both price and non-price loan terms (e.g., interest rates, collateral, covenants and performance pricing) are more favorable and syndicated loans comprise more lenders. In addition, board size, board diversity, audit committee structure and other director characteristics also influence bank loan price. However they do not consistently affect all non-price loan terms except for audit committee independence. Moreover, the impact of board independence on bank loans varies with borrower characteristics (e.g., leverage, tangibility and anti-takeover environments) and loan characteristics (e.g., loan types and loan structures). Overall, our study provides strong evidence that banks tend to recognize the benefits of board monitoring in mitigating agency risk and information risk, and reward borrowers with higher quality boards with more favorable loan contract terms.Bank loan contracting, Boards of directors, Corporate governance, Monitoring, SOX

Towards evaluation design for smart city development

Smart city developments integrate digital, human, and physical systems in the built environment. With growing urbanization and widespread developments, identifying suitable evaluation methodologies is important. Case-study research across five UK cities - Birmingham, Bristol, Manchester, Milton Keynes and Peterborough - revealed that city evaluation approaches were principally project-focused with city-level evaluation plans at early stages. Key challenges centred on selecting suitable evaluation methodologies to evidence urban value and outcomes, addressing city authority requirements. Recommendations for evaluation design draw on urban studies and measurement frameworks, capitalizing on big data opportunities and developing appropriate, valid, credible integrative approaches across projects, programmes and city-level developments

Possible impact of corporate governance profile on a Russian bank valuation

This paper aims at explaining the differences in valuation of banking firms in Russia through the impact of selected elements of corporate governance. We rely upon value-based management theory to test the hypothesis that expenses on corporate governance system create shareholder value. The price at which share stakes are acquired by strategic foreign investors is for us a criterion of market-proven value, so we use the standard valuation tool, i.e. price-to-book-value of equity (P/BV) multiple, as the dependent variable. The set of corporate governance parameters whose materiality for a would-be external investor we would like to test includes: the degree of concentration of ownership and control; maturity of corporate governing bodies; degree of Board independence; qualification of external auditors; stability of governing bodies (Management Board and Board of Directors); and availability of external credit ratings from the world's leading rating agencies. We test our approach on a sample of acquisition deals and public offerings over the period 2004-2008 that we develop for the first time. Firstly, we find out which factors are statistically significant and relevant to a bank's selling price. Secondly, a least squares multiple linear regression model is devised to check how each individual variable impacts the dependent variable. We discover that external investors attach value to high concentration of ownership, external credit rating coverage, stability of the Board of Directors, and involvement of well-established external auditors. Investors of a strategic nature tend to pay a higher acquisition premium. Independence of the Board of Directors might be perceived by external strategic investors as a disadvantage and might destroy shareholder value

ERP implementation methodologies and frameworks: a literature review

Enterprise Resource Planning (ERP) implementation is a complex and vibrant process, one that involves a combination of technological and organizational interactions. Often an ERP implementation project is the single largest IT project that an organization has ever launched and requires a mutual fit of system and organization. Also the concept of an ERP implementation supporting business processes across many different departments is not a generic, rigid and uniform concept and depends on variety of factors. As a result, the issues addressing the ERP implementation process have been one of the major concerns in industry. Therefore ERP implementation receives attention from practitioners and scholars and both, business as well as academic literature is abundant and not always very conclusive or coherent. However, research on ERP systems so far has been mainly focused on diffusion, use and impact issues. Less attention has been given to the methods used during the configuration and the implementation of ERP systems, even though they are commonly used in practice, they still remain largely unexplored and undocumented in Information Systems research. So, the academic relevance of this research is the contribution to the existing body of scientific knowledge. An annotated brief literature review is done in order to evaluate the current state of the existing academic literature. The purpose is to present a systematic overview of relevant ERP implementation methodologies and frameworks as a desire for achieving a better taxonomy of ERP implementation methodologies. This paper is useful to researchers who are interested in ERP implementation methodologies and frameworks. Results will serve as an input for a classification of the existing ERP implementation methodologies and frameworks. Also, this paper aims also at the professional ERP community involved in the process of ERP implementation by promoting a better understanding of ERP implementation methodologies and frameworks, its variety and history