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Impact of Corporate Governance Framework on Economic Performance in European Union

Abstract

In the current post-crisis period, the implementation of Corporate Governance principles has proven to be important. The Organization of Economic Cooperation and Development considers failure of Corporate Governance as one of the causes of the latest financial and economic crisis. We assume that the higher quality of institutional environment point to higher performance of the economy. The aim of the paper is to quantify the implementation of Corporate Governance in the European Union through selected qualitative indicators and his impact on economies. We have verified that countries with better values of judicial independence, protection of property rights, corruption, minority investor protection, extent of conflict of interest and resolving insolvency have a higher value of gross domestic product per capita. The index of enforcing contracts was statistically insignificant.

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The Transition of Joint Stock Companies in Slovenia: Shareholder-Value Approach versus Stakeholder-Value Approach

The Transition of Joint Stock Companies in Slovenia: Shareholder-Value Approach versus Stakeholder-Value Approach

In the shareholder theory of firms, the company's assets are the property of the shareholders, and managers are viewed as agents of the shareholders with all of the enforcement difficulties associated with agency relationships, but without legal obligations to any other stakeholder. An alternative view is the stakeholder theory of firms. The standard principal-agent paradigm can be expanded to the stakeholder agency problem. In this view, managers can be seen as the agents of all stakeholders. From the perspective of social responsibility, enlightened organizations view the internal and external environment as a variety of stakeholders.

This paper offers some insights into the characteristics of the corporate governance system in Slovenia. Its focus is on the relationship between governance and management. The authors tried to determine in their research the roles of various groups of stakeholders in Slovenian companies. The paper's conclusions are based on a longitudinal research method. The paper is the result of three consecutive research studies on the characteristics of corporate governance in Slovenia over the period from 1998 to 2006. The paper compares the results from studies conducted in 1998 and 2002 with the latest results in 2006. The most important long-term strategic objective of Slovenian companies is growth. The share of Slovenian companies - excluding equity opportunity costs - has decreased significantly in the last six years due to the consolidation of ownership structures. The controlling owners are more active in setting the required rate of return on their equity investments. There is no conflict of interest between internal and external shareholders in most companies. Obviously, Slovenian companies have changed their strategic behaviour to reflect the interests of their stakeholders. It may be argued that some stakeholders, like customers and employees, are even more important for Slovenian managers than the owners.

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The Impact of Corporate Governance on Company Performance: A Study among Medium and Large Enterprises in Kosovo

Abstract

An effective corporate governance system is established to ensure proper balance of long-term interests of different stakeholders (primarily: owners, employees and management) and improve company's performance and its competitive position in the market. This paper provides a theoretical discussion and empirical evidence on the interdependence between corporate governance and company performance among medium and large enterprises in Kosovo. A questionnaire survey was employed for data collection purposes. The study included a sample of 87 managers from 87 medium and large enterprises. Results indicate that effects of corporate governance on the performance tend to be greater in larger companies. Regarding the determinants, the theoretical expectations are confirmed. Results confirm that the size of the company, the level of investment, export activities and company life expectancy are statistically significant determinants of the adoption of corporate governance practices. As a result, larger companies with large scales of investment and longer market experience tend to adopt more corporate governance practices. The study suggests that corporate governance will inevitably affect companies’ performance and further research is needed in this context.

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The Quality of Explanations for Deviation from Principles of Corporate Governance. An Introduction

Abstract

Purpose: The purpose of this paper is to summarize studies aiming to define matters related to the quality of explanations found in corporate governance statements published by listed companies. Another important aspect of the conducted analysis is the identification of various dimensions of explanation quality. Methodology: The character of the conducted research is that of an overview of literature devoted to the subject. Apart from scientific articles, it covers European Union regulations, regulations characteristic of countries selected for the analysis (member states of the European Union), and applied solutions aimed at guaranteeing the desired quality of explanations for deviation included in corporate governance statements that are in the centre of attention. Findings: The conducted analysis organizes the current knowledge concerning actions aimed at improving the quality of explanations for deviation from principles of corporate governance. Without a doubt, the primary pillar consists of the level of information and its quality, as found in explanations for shareholders. It is this quality that determines if the shareholder understands the processes occurring in the realm of corporate governance in the company. Research limitations: The conducted analysis should be treated as an introduction to related research issues. It should be stressed that research into explanations provided by companies is still in the process of development, and the number of publications devoted to this topic is still modest. Practical implications: The study fits in the research into the phenomena of the “comply or explain” mechanism as applied in practice, which according of many researchers, continues to be poorly investigated. In terms of the directions for further research, there are promising topics including e.g. identification of factors that may translate into the quality of such statements (e.g. ownership structure, identity of shareholders), the role that should be played by institutions involved in developing CG codes (i.e. their successive versions), and the involvement of the board of directors/ supervisory board in the evaluation process. Originality: The present paper identifies the key factors perceived as determining the quality of corporate governance statements. In addition to that, it outlines new avenues for further investigation.

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CSR Strategies in Greater China: Global, East Asian, American, European Style?

Abstract

The concept of Corporate Social Responsibility emerged in the United States and spread to Europe and Asia while being adapted to national/local characteristics. Since borders between markets and societies are blurring and globalization is promoting MNCs which find themselves acting in hybrid societies, international institutions put efforts into the development and moral acceptance of global CSR standards. The scientific interest in CSR focused on the conflicts between company returns and benefits for society. The resulting concepts of performance-oriented, awareness-oriented and welfare-oriented CSR should facilitate the evaluation of CSR strategies implemented by MNCs. In research on the cultural dimensions of economies, it might be possible to allocate geographically the three concepts. Regarding the newly emerging Chinese MNCs, the paper aims to shed light on which concept they follow. On the one hand, CSR concepts of American and/or European MNCs that are present in China might serve as a role model; on the other hand, by learning from Taiwanese/ Hong Kong MNCs, a “greater China CSR approach” might emerge. Empirical studies and own field research suggest that compared to American and European companies, CSR is less deeply rooted in Chinese companies. Furthermore, significant differences between Mainland China, Hong Kong and Taiwanese companies indicate that a Greater Chinese CSR approach does not yet exist. Therefore, it cannot be assumed that American and European CSR concepts will experience a Chinese influence in the near future.

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Impact of the Corporate Governance Reform on the Management Effectiveness of State-Owned Enterprises in Lithuania in 2012–2014

Abstract

Following previous research on the management efficiency of the state-owned enterprises (SOEs) in Lithuania1, this paper extends the discussion via analysis of the broader period of time not only focusing on 1 year caption (2012), but trying to identify the impacts (if any) of the corporate governance reform of the SOEs in Lithuania looking at the data of 2012-2014. To ensure the consistency and comparability of the results, the theoretical background is sought to be maintained as similar as in the previous papers, following the paradigms of (post) new public management, principle-agent theory, corporate governance guidelines established by such international organisations as the Organisation for Economic Co-operation and Development (OECD), the World Bank, the International Monetary fund and others. In addition to the quantitative part of the analysis (quantitative analysis of the relationship between management of SOEs and results of its operations as measured by Return on Equity (ROE)), case studies representing biggest Lithuanian SOEs and - accordingly - 3 main sectors Lithuanian SOEs are acting in are analysed to understand if and what (i) actual changes of the corporate governance principles are impacting the management effectiveness of SOEs, as well as (ii) what are the limiting factors (if any) reducing the positive effects of the changes being introduced with the new reform. For both parts of the analysis (quantitative and case studies) we focus on (i) the main elements of corporate governance being introduced by the SOE reform and (ii) the relations of the SOEs and the shareholder of theirs (Government and the society). By applying the above described approach, the paper seeks to (i) understand not only the effects of corporate governance on management and performance of SOEs per se, but also include the time dimension with the purpose to understand (confirm) if previous findings (e.g., the fact that board independence and transparency were the key factors influencing SOEs management efficiency in 2012) are sufficiently sustainable outcomes of the reform, which would still be valid in the 3 year period (2012-2014), as well as (ii) explain the most relevant (in terms of impact on management effectiveness) corporate governance principles that should be applied or be promoted stronger in Lithuanian SOEs.

Open access
Supervisory Board Composition and Firm Financial Performance: A Case of Companies Listed on the Warsaw Stock Exchange

Abstract

Purpose: This paper investigates the relationship between the internal governance structure and financial performance of Polish companies. Ensuring diversity of corporate boards has been on the agenda of various regulators on a national and international level as it is generally expected corporate boards that are more diverse will be more competent and more effective monitoring managerial actions, and therefore positively impact company performance. Methodology: This paper uses a sample of companies listed on the Warsaw Stock Exchange and examines the two main compositional features of company supervisory boards (independence and experience) and their practices by companies. We also investigate the effect of diversity on company performance. As our empirical methodology, we use linear regression analysis. Findings: Our findings support the proposal that diversity matters, especially in terms of the presence of experienced members on supervisory boards, and that such diversity positively affects financial results. In addition to the main finding, the results of the study indicate also the importance of the ownership structure. Family firms and companies with a higher level of gearing are more likely to perform less effectively. Originality: To date, research on the association between supervisory board diversity and financial performance in either the Polish or Central and Eastern European capital markets has been limited. The paper also points to the importance of having experienced members on a company’s supervisory board. Independent members on supervisory boards do not seem to have a similar association.

Open access
Bold vision: Gender diversity stuck in transition

Abstract

Canada is often put forward as an example of forward thinking on inclusiveness and gender balance. However, for the last 30 years, while gender diversity progress has been made within Canadian government agencies, commissions and boards (ABCs), the private sector continues to lag behind, stuck trying to break through the barrier of 18-22% females on Boards. This occurs while mounting empirical evidence clearly indicates that it is not just the right thing to do, it is the smart thing to do. This paper looks at where progressive government change has generated results and potential avenues necessary to make gender equality a reality within both the government and private sector beyond 2018. The author reviews the methods used by the Canadian government to achieve gender parity, ending with some insights on how the private sector could implement gender parity without the use of quotas.

Open access
Best practice in bank corporate governance: The case of Islamic banks

Abstract

Islamic banks are growing rapidly with annual growth rates of 17.6% between 2009 to 2013 and 19.7% from 2014 to date. This level of growth is projected to continue into the future. Islamic banks now operate in more than 75 countries with a value of approximately $920 trillion of bank assets. Islamic banks are increasingly being seen as good long-term value propositions and are serving both Muslim and non-Muslim customers across international markets. Despite the rapid growth in Islamic finance, the underpinning corporate governance rules and regulations are at an embryonic stage of development with little attention having been paid to them. The purpose of this paper is to help fill that gap by exploring a conceptual model of corporate governance for Islamic banks based on both Islamic finance principles while fused with elements of corporate governance standards from Western theories and codes, primarily the UK, and thereby ensure that good governance is in place in Islamic banks. The paper links the predominant corporate governance theories of Principal/Agent, Stakeholder and Stewardship with practice based corporate governance codes and explores the potential of applying stewardship theory to Islamic banks. Islamic principles emphasis is on real assets rather than debt as is the case in Western Banks and as a consequence this paper offers the conclusion that the more prudent approach to banking used by Islamic banks could be used as a model for Western banks and thereby deliver a more sustainable future and maintain confidence in banks and substitute for the need for taxpayer support, such as the guaranteed deposit scheme, which acts as a backstop under the Western approach.

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Governance and Management of State-Owned Enterprises in Zanzibar: A Proposed Model for Effective Performance

Abstract

In Zanzibar, the status of SOEs is not as satisfactory as other countries. There has been a countrywide outcry on the performance of SOEs. The purpose of this study therefore, was to examine the governance and management of SOEs, highlight some benefits and challenges as well as propose a model for effective performance. Following the reviews of various literature and government documents, the study on hand has found that the governance of SOEs needs close revision regarding their management structure as there are roles conflicts between the top bureaucrats; the study also found that absence of SOEs policy has been a major bottleneck for the SOEs to perform at a reasonable level as no proper guidelines which direct the SOEs where to go and what to achieve in a specific time period. Furthermore, the study has found that the overstaffing of SOEs in one way or another puts pressure to the management to attain its intended goals resulting to low contribution in the country’s economy. The study recommends that SOEs need to be creative and innovative in their undertakings as they have to undertake diversification of their products in order to attract foreign markets significantly. It is also suggested that proper SOEs policy needs to be made in order to give proper directions to the SOEs so that the goal and objectives of their setup can be successfully attained.

Open access