The purpose of this research is to analyze the corporate governance information disclosed by Romanian listed companies on the internet, with the objective of assessing the extent and the influence of several corporate characteristics on the level of inforcorporate governance, transparency, online disclosure, Bucharest Stock Exchange, RASDAQ

Cuc Sunhilde

Kanya Hajnalka

English

Research Papers in Economics

60 
 
CORPORATE GOVERNANCE- A TRANSPARENCY INDEX FOR THE ROMANIAN 
LISTED COMPANIES 
 
Cuc Sunhilde  
University of Oradea, Faculty of Textile-Leatherwork str. B.  t.Delavrancea, nr 4, 410058,   
sunhilde_cuc@yahoo.com 
Kanya Hajnalka  
Universitatea  Crestina  Partium,  Facultatea  de  Stiinte  Economice,  RO-410209  Oradea,  str. 
Primariei nr. 27, kanyahajnalka@yahoo.com 
 
The purpose of this research is to analyze the corporate governance information disclosed by Romanian 
listed companies on the internet, with the objective of assessing the extent and the influence of several 
corporate characteristics on the level of information voluntarily disclosed.  The results suggest that there 
was low willingness of Romanian listed companies to provide voluntary information in addition to the 
disclosure requirements. Information relating to financial statements and employees issues are found more 
frequently disclosed by listed companies than those which were regarded as sensitive such Board and 
Executive information. 
 
Key word: corporate governance, transparency, online disclosure, Bucharest Stock Exchange, RASDAQ  
 
 JEL code: G15, G34, L22, M41 
 
1. Introduction 
Recent events have put a global focus on corporate governance issues. Bankruptcy and failures in 
Western banks and financial institutions are in large part attributable to corporate mal-governance 
and distorted incentive structures. The current financial crisis and its contagion and spillover 
effects are currently felt across the globe, including in Romanian market. 
The recent media focus on corporate governance has prompted calls for greater transparency and 
disclosure  on  companies  around  the  globe.  Transparency  regulation  intends  to  improve  the 
quality of information about company and management. It should be noted that the intention of 
this legal strategy is not to improve the quality of the accounting procedures as these are usually 
not incorporated in corporate law but are set by accounting standards boards. More disclosure 
increases the trust of the market on e.g. corporate policies and contracts directly related to the 
management. More specifically, corporate legislation regulates the extent to which information is 
released  on  the  managerial  compensation  package  and  the  requirement  to  disclose  any 
transactions between management and company (e.g. consulting contracts, interest-free loans). 
The quality of the transparency is more reliable when the law or the stock exchange regulations 
include a comply-or-explain principle. 
Global trends lead toward greater disclosure of corporate governance practices, responding to 
market disruptions such as the subprime market collapse and resulting credit crisis on the one 
hand,  and  attracting  investors  by  enhancing  access  to  information  on  the  other  hand.  In  a 
globalizing economy, country markets competing for increasingly mobile pools of capital can 
benefit from strong assurances of good practices in corporate governance disclosure.  
As a result, several leading financial-information providers have launched disclosure rankings, 
evaluations, and research related to how companies disclose information to rely on market force 
and mechanisms to encourage voluntary disclosures of companies. 
 
2. Methodology 
The purpose of this research is to analyze the corporate governance information disclosed by 
Romanian listed companies on the internet, with the objective of assessing the extent and the 
influence of several corporate characteristics on the level of information voluntarily disclosed. 61 
 
The main objective of this research has been the computation of a transparency  index for the 
Romanian companies which are quoted at the Bucharest Stock Exchange (BSE). 
The general population is represented by all the companies which are quoted at the Bucharest 
Stock Exchange in both sections: BSE and Rasdaq. The results following this research can be 
extrapolated at the level of the specified general population. The observation unity is given by the 
quoted company. 
A  total  number  of  2,100  companies  registered  at  the  Bucharest  Stock  Exchange  have  been 
studied, in two sections, BSE and RASDAQ, the following variables having been taken into 
account:  the  number  of  accomplished  transactions  during  the  year  2007,  the  volume  of  the 
transactions  and  the  value  which  was  transacted.  The  selection  was  made  on  two  levels, 
according  to  a  number  of  criteria,  among  which  the  capitalization  and  the  liquidity  of  the 
companies, thus leaving in the end a number of 110 companies available for the computation of 
the transparency index and the accessibility to information. 
The study was based on the ranking of the companies according to six criteria of great interest for 
the corporate governance, an original set of sub criteria having been developed for each of the 
criterion. In the end, a total number of 38 variables have been analyzed for each company.  
 
C1: THE ATTITUDE TOWARDS THE CORPORATE GOVERNANCE 
  C1.1 The existence of a reference towards CG 
  C1.2 The existence of a commitment towards CG 
  C1.3 The existence of a special column dedicated to the corporate governance 
C2: INFORMATION REGARDING THE STRUCTURE OF THE OWNERSHIP 
  C2.1 Ownership structure 
  C2.2  Shareholder  type  (individual  investors,  institutional  investors,  shareholding  by 
  nationality etc) 
  C2.3 The list comprising the significant shareholders 
  C2.4 Information about Corporate group structure 
C3: THE RELATION WITH THE INVESTORS 
  C3.1 Number of issued stocks and their nominal value 
  C3.2 The transaction value 
  C3.3 Information regarding the transaction 
  C3.4 GMS convening notice 
  C3.5 Attorney form 
  C3.6 GMS decisions 
  C3.7 Information regarding the dividends 
C4: FINANCIAL TRANSPARENCY 
  C4.1 Annual report  
  C4.2 Half-yearly report 
  C4.3 Quarterly report 
  C4.4 The report of the audit firm 
C5: INFORMATION REGARDING THE COMPANY BOARD 
  C5.1 List of Board members 
  C5.2. Details of the current occupation of the members of Board 
  C5.3. Details on age, studies, experience 
  C5.4. Details of role and functions of the board of directors 
  C5.5. Details of the duties of each member 
  C5.6. Duration of directors’ contracts 
  C5.7 List of specialized committees 
  C5.8 Annual number of held meetings 
  C5.9 Official statements of the Board 62 
 
  C5.10 Details of the shares owned by the Board 
  C5.11 Details of the compensation system of the Board members 
  C5.12 The list of the Board of directors 
  C5.13 Details of the top manager’s professional experience   
  C5.14 Details of the top manager’s compensation 
C6: ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE 
  C6.1 Clients – details of the offered services / products 
  C6.2 Details of the main clients 
  C6.3 Made or planned investments 
  C6.4 Information which is of interest for the employees (employments, wage system 
policy,  information regarding the syndicate etc) 
  C6.5 Information regarding environmental problems 
  C6.6 Declarations concerning the social responsibility of the corporation 
The rating for the C1 criterion has been done as following: 
  0 – there is no reference to corporate governance 
  1 – The C1.1 sub criterion is fulfilled 
  2 – The C1.2 sub criterion is fulfilled 
  3 – The C1.3 sub criterion is fulfilled 
The rating for the C2 – C6 has been made from 0 to 3 under the following conditions: 
  0 – the information does not exist or is not up to date 
  1 – the information exists but it is not visible 
  2  –  the  information  can  easily  be  found  but  it  is  difficult  to  be  understood  or  it  is 
incomplete 
  3 – the information can easily be found, it presents no understanding difficulty and it is 
  complete 
The general transparency index has been computed as a simple arithmetic mean of the arithmetic 
means of the six criteria.  
M1 = max (C1.1, C1.2, C1.3) 
M2 = Σ C2i /i    ,  i = 4 
M3 = Σ C3j /j   ,   j = 7 
M4 = Σ C4k /k    ,   k = 4 
M5 = Σ C5m /m,    m = 14 
M6 = Σ C2n /n    ,   n = 6 
Mt = (M1+M2+M3+M4+M5+M6) / 6 
 
A classification has been made according to the general transparency index. According to this 
ranking, the company which is situated on the first place, SNC Petrom SA, has obtained the 
maximum value 1. The values of the indices obtained for the other companies have been obtained 
by referring the total indices afferent to the companies to the maximum index.  
The transparency index takes values between [0, 1] 
It  = Mti/Mt max,   i =2 ─58 
The transparency index on a scale from 0 to 3 was also tracked, according to the note above, 
which is afferent to each of the sub criterion for the whole sample.  
 
3. Survey Results 
Good corporate governance is required in all sectors, but is of particular importance in financial 
institutions. The financial sector plays the central role of intermediating savings and allocating 
capital in the economy. Firms in the financial sector are key players in creating market disciplines 
favouring  better  standards  in  the  corporate  sector  more  generally.  Most  of  these  firms  have 
important  fiduciary  functions  and  act  as  internal  or  external  monitors.  In  part  due  to  the 
multiplicity  of  intermediaries  and  the  increasing  consolidation  in  the  financial  sector  across 63 
 
different activities, conflicts of interest are numerous. This situation has been recognised from 
Romanian companies also, 9 from the first 10 most transparent companies come from this sector.  
A top ten ranking of the companies rated according to each criterion is presented in table 1. 
 
Table1. Top 10 companies according to the transparency criteria 
  M2    M3    M4    M5    M6    MT  IT 
% 
SIF1  3,000
0 
SIF
1 
3,000
0  SNP  3,000
0  SNP 
2,000
0  SNP  3,000
0  SNP 
2,69642857
1 
100,0
0 
SIF4  3,000
0 
SIF
4 
3,000
0  SIF1  3,000
0 
SIF
3 
1,857
1  RRC  3,000
0  SIF1 
2,21825396
8 
82,26 
SIF2  3,000
0 
SIF
2 
3,000
0 
BR
D 
3,000
0 
SIF
2 
1,571
4  PTR  3,000
0 
BR
D 
2,11309523
8 
78,36 
SIF3  3,000
0  OIL  3,000
0  SIF4  3,000
0 
BR
D 
1,357
1  ATB 
2,666
6  SIF4 
1,99603174
6 
74,02 
TLV  3,000
0  TEL  3,000
0  SIF2  3,000
0 
AL
R 
1,357
1  BRD  2,500
0  SIF2  1,98412698
4 
73,58 
BR
K 
3,000
0  IMP 
2,714
2  SIF3  3,000
0 
TL
V 
1,285
7  SCD 
2,500
0  SIF3 
1,96031746
0 
72,70 
SNP  2,750
0 
BR
D 
2,571
4  TLV  3,000
0  OIL  1,285
7  FLA  2,500
0  TLV  1,93253968
3 
71,67 
BR
D 
2,250
0 
SIF
3 
2,571
4  OIL  3,000
0 
SIF
5 
1,214
2 
AM
O 
2,500
0  OIL  1,79761904
8 
66,66 
BC
C 
2,250
0  PCL  2,571
4  ATB  3,000
0 
SIF
1 
1,142
8 
UC
M 
2,333
3  ATB  1,78968254
0 
66,37 
ATB  2,000
0 
SIF
5 
2,571
4 
BR
K 
3,000
0 
SIF
4 
1,142
8  SIF1  2,166
6 
BR
K 
1,77380952
4 
65,78 
 
As  it  can  be seen in table  1  and  also in  figure  1, which  present in  a  graphical  manner the 
transparency  index  online  for  the  58  companies  comprised  in  the  present  study,  there  is  a 
relatively  great  difference  between  the  top  ten  companies  that  are  listed  here.  For  example, 
between SNP Petrom, which is the first company, and SIF Banat Crisana, which is the second 
company, the gap is of 17.74%. Another example can be found between the first company and 
the one that is situated on the 10
th position that is SSIF Broker Cluj, where the gap is 34.22%. 
The  gap  is  even  more  accentuated  between the  first  two  companies  quoted  by  Rasdaq.  The 
difference between the two is of 31.13%.  
 
Fig.1.The general transparency and accessibility index – BSE 
0,00
0,50
1,00
1,50
2,00
2,50
3,00
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 5864 
 
  Fig.2.The general transparency and accessibility index - RASDAQ 
 
As it can be seen in figures 3 and figures 4, it is impossible to establish any correlation between 
the liquidity of a certain issuing agent, expressed by the number of transactions in 2007 and also 
by the transparency index and the access to information which is offered to its stakeholders. 
SIF5, which is the most transacted company in 2007, is not present in the top ten companies list, 
according to the general transparency index and the accessibility, the company occupying only 
the 16
th place, having an index of 61.51%, in comparison with the 1
st listed company. This aspect 
is much more visible for the companies quoted in Rasdaq. 
 
Fig.3.The transaction of the companies and the general transparency and accesiblity index BSE 
0,00
0,20
0,40
0,60
0,80
1,00
1,20
1,40
1,60
1,80
2,00
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
0,000
0,500
1,000
1,500
2,000
2,500
3,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 5765 
 
 
Fig.4. The transaction of the companies and the general transparency and accessibility index RASDAQ 
 
Moreover, none of the computed indices can be correlated with the number of the transactions 
accomplished in these firms, as it can be seen in figure 6.5. 
 
Fig.5. The transaction of the companies and the  transparency and accessibility index for the set out criteria 
 
4. Conclusions 
This  paper  suggests  a  new  approach  that  examines  the  relevance  of  internet,  and  orients 
supervisory  authorities  in  the  direction  to  follow  for  improving  corporate  governance 
transparency in listed companies. The composite voluntary disclosure checklist will serve a good 
basis of measurement in corporate disclosure.  
The results suggest that there was low willingness of Romanian listed companies to provide 
voluntary information in addition to the disclosure requirements. Information relating to financial 
statements and employees issues are found more frequently disclosed by listed companies than 
those which were regarded as sensitive such Board and Executive information. This study fulfils 
a gap in prior research by examining the interest in corporate governance issues, in an emerging 
economy.  
This  is  an  exploratory  study  which  shows  that  further  research  may  provide  more  concrete 
evidence of the changing corporate disclosure environment in Romania.  
 
   
0,00
0,20
0,40
0,60
0,80
1,00
1,20
1,40
1,60
1,80
2,00
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
0,00
0,50
1,00
1,50
2,00
2,50
3,00
3,50
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57
M2 M3 M4 M5 M6 MT66 
 
References 
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pentru  sustenabilitatea  afacerilor,  în  INOVARE  SI  BUNA  GUVERNARE 
ORGANIZATIONALA PENTRU SUSTENABILITATE, Dan Cândea (coord.), Ed. UTPRES, 
Cluj-Napoca, 2008. ISBN 978-973-662-418-6. 
2. Cuc, S.- The  Need of a Good Corporate Governance in Romanian Companies,   13 - 17. 
September 2006 - 6th Internatinal Conference Research and Development in Mechanical Industry 
Radmi 2006 
3. Witherell, B., The Roles of Market Discipline and Transparency in Corporate Governance 
Policy, 2003, http://www.oecd.org/dataoecd/21/4/2717763.pdf 
4. Kirkpatrick,G., Corporate Governance Lessons from the Financial Crisis, Financial Market 
Trends, OECD,2009,http://www.oecd.org/dataoecd/32/1/42229620.pdf 
   

Corporate Governance Lessons from the Financial Crisis, Financial Market Trends,

Cuc Maria Sunhilde- Transparen ă i responsabilitate în guvernan a corporativă pentru sustenabilitatea afacerilor,

The Need of a Good Corporate Governance in Romanian Companies,

The Roles of Market Discipline and Transparency in Corporate Governance Policy,

CORPORATE GOVERNANCE- A TRANSPARENCY INDEX FOR THE ROMANIAN LISTED COMPANIES

http://steconomice.uoradea.ro/anale/volume/2009/v2-economy-and-business-administration/09.pdf

CORPORATE GOVERNANCE- A TRANSPARENCY INDEX FOR THE ROMANIAN LISTED COMPANIES

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