Legal and voluntary investor protection and early IFRS-adoption: A study of European companies.

Previous studies (Dumontier and Raffournier, 1998, El-Gazzar et al, 1999; Cuijpers and Buijink, 2004) typically explain the early adoption of IFRS by firm-specific benefits. However, the adoption of IFRS also leads to costs for company insiders, namely less managerial discretion and as a consequence smaller private benefits due to increased disclosure requirements and less accounting method choices. This paper argues that the cost of adopting IFRS depends on characteristics of the institutional environment, more specifically the level of investor protection. Using a sample of European companies, we find that IFRS is more likely adopted in countries with strong laws protecting investors and/or extensive corporate governance recommendations where the loss of private benefits following IFRS-adoption is lower. Furthermore, the results show that corporate governance recommendations are as effective as hard laws in stimulating IFRS-adoption and that their impact increases as laws become weaker. This suggests that by improving corporate governance codes, countries can easily reduce the extraction of private benefits by managers and enhance the quality of the financial information. However, when looking at specific recommendations and laws, we find that shareholder rights with regard to voting rights and the general meeting need to be regulated by law in order to effectively reduce the level of private benefits.Accounting; Characteristics; Choice; Companies; Corporate governance; Cost; Costs; Country; Disclosure; Early adoption of IFRS; Governance; Impact; Information; Law; Legal investor protection; Managers; Order; Private benefits of control; Quality; Recommendations; Requirements; Research; Studies;

Corporate governance and performance: Controlling for sample selection bias and endogeneity.

Studies investigating the relation between corporate governance and performance find only weak evidence that corporate governance affects performance. One reason could be that these studies fail to control properly for sample selection bias and endogeneity. Without controlling for these problems, the relation between corporate governance and performance is not inferred correctly. With this study, we provide evidence on the influence of endogeneity and sample selection bias on the coefficient of corporate governance. We use panel data for the FTSE Eurotop 300 companies over 5 years, from 1999 to 2003. We find that using a sample of the 300 largest companies induces selection bias in the results. Furthermore, the results show that an endogeneity problem is present. This endogeneity problem is caused by a negative reverse causality between performance and corporate governance. After controlling for both problems the coefficient on corporate governance increases and becomes highly significant, where it is insignificant when we use OLS. The results also show that controlling for both problems at the same time is important as by controlling for just one of these problems the bias is only partially reduced. Furthermore, we find that both problems have an equally large impact on the bias in the coefficient. Overall, our findings indicate that the lack of significant results in prior studies is due to not controlling properly for sample selection bias and endogeneity.Negotiations; performance; Selection bias; Law; Panel data; Trade liberalization;

Power quality improvements through power electronic interfaced distributed generation

In low-voltage distribution networks a large amount of single-phase nonlinear loads are connected. This leads to the combined presence of power system unbalance and harmonic distortion. The research presented in this paper focusses on these steady-state power quality problems. It uses a harmonic load flow program, implemented in symmetrical components, to investigate the influence of several single-phase inverter control strategies used to connect any kind of primary energy source to the grid. The influence of these single-phase distributed generation units in the three-phase four-wire distribution network is discussed by means of two recently formulated indicators that combine the power system unbalance and the existing harmonics