This thesis consists of two essays on the impacts product market competition has on the real investment efficiency of firms. While the first essay looks at this question through the corporate governance angle and finds product market competition complements institutional investors in disciplining firms, the latter one studies the impacts from an information production point of view and concludes competition reduces the incentive of firms to acquire information thereby reduces investment efficiency. Using product market competition as a proxy for external corporate governance, the first essay documents a sizeable difference between the governance impact of institutional investors on firms with strong and weak external corporate governance. Higher institutional ownership is associated with real efficiency of firms, but only when external corporate governance is strong. The real efficiency is reflected in higher investment sensitivity to investment opportunities and higher firm value. Utilizing the passing of business combination laws as a negative shock to external corporate governance, the essay identifies that firms with higher institutional ownership suffer a larger decrease in real efficiency, suggesting external corporate governance such as product market competition is critical for institutional investors in disciplining firms. The second essay attempts to figure out the impact of product market competition from an ex ante point of view. Specifically, how does product market competition change the incentive of firms to acquire information about investment opportunities ex ante? The essay provides both a model and a series of extensive empirical tests. The model features a two-stage Bayesian game in differentiated products market competition. This essay finds that competition causes firms to acquire less information and that investment becomes more inefficient in competitive industries. Empirically investment efficiency is measured by a latent variable technique and related to competition using a Herfindahl-Hirschman index as well as more exogenous measure such as trade costs. The panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries. / published_or_final_version / Economics and Finance / Doctoral / Doctor of Philosophy

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This study investigates the implementation of non-financial corporate governance principles at the eNdondakusuka municipality. The study draws largely on the reports of the King Commission of 1994 and 2002 because there is very little written about non financial corporate governance principles in South Africa. Specifically, the study looks at safety, health, ethics and issues related to human resources management. Information on financial corporate governance principles is readily available and hence subject to easier monitoring and analysis than that on non-financial corporate governance principles. In this study a questionnaire was used to solicit for information from employees about the extent to which non-financial corporate governance principles are implemented within the municipality. The thrust of the study was to get an in-depth understanding of the issues and their application to the daily functioning of the municipality. Out of the one hundred questionnaires that were distributed 64 were completed and returned. The key findings of the study suggest that municipal workers are neutral towards non financial matters of corporate governance at the municipality (in terms of mean scores are relative to the mid-point score of three (3) on the five (5) point scale utilized in the study). However, two principal areas emerge from the analysis. One is a negative point of view, the effectiveness of the HIV/AIDS plan is regarded with disfavor by the municipal workers and second point of view which is positive, where the municipal effort to address environmental issues is regarded in a favorable light by municipal workers in the study. In sum, one can conclude that the municipality has not been able to effectively implement non-finance corporate governance principles with particular reference to safety and health issues. The perceptions of employees on ethics at the workplace, just like those for safety and health are neutral. Though an above neutral point is recorded for transparency by management the common belief is that information on organizational performance is not readily available. Added to this is the lack of an effective system for reporting unethical behaviour. Though less than ten percent responses were recorded for these aspects, poor discipline and lack of role clarity were identified as the major obstacles to ethical behaviour in the organization. The key issues for human resource development relate to performance management and training. The responses suggest that if employees are to be effective, more training needs to be conducted. Though respective Sectors of Education and Training Authority (SETAs') offer an opportunity for further staff development, the benefits of such initiatives have not been felt by the employees. Furthermore, the association between performance appraisals and training is yet to be seen. Overall, this study confirms that there is neither a complete lack of non-financial corporate governance principles nor is the implementation of the same clear and beneficial to all employees. Seemingly, employees across the board do have a hazy picture about the application of these principles in the municipality but apparently do not have adequate information to take a definite stance and hence the majority gave neutral responses. In conclusion the study recommends that with regard to the health and safety working environment the employer needs to intensify its HN/AIDS programmes which are contained in the HIV/AIDS policy of the Municipality. In this effort it should conduct more workshops that encourage voluntary testing which will assist the organization to plan ahead with regard to future human capital needs resulting from HIV/AIDS pandemic. There was recognition of a certain concern for the safety of its employees,however, not as fully recommended by Occupational Health and Safety Act, No. 181 of 1993. It is therefore recommended that the municipality applies the requirements of this Act to ensure the safety of its employees. It was further recommended that a hot-line facility to report any unethical behavior be implemented and that the employer take what has been reported seriously so that employees and the community could have confidence in the system. The employer was also encourage to improve consultation with the stakeholders so that its policies and strategies are not considered to have been taken unilaterally, in other words, the employer should promote democracy in the workplace. The employer was further adviced to implement a performance management system that would link with training and development of human resource capital. In fact chapter 6 of the Municipal System Act, No. 32 of 2000 suggests that municipalities should have organizational and individual performance management systems so that they can measure their performance at organizational as well as individual level to enhance service delivery. / Thesis (MBA)-University of KwaZulu Natal, 2005.

The business corporation is an important engine for the creation of wealth and it plays a vital role in promoting economic development and social progress in both domestic and international economies. Hence companies must operate within a governance framework that keeps them focused on their objectives and accountable for their actions. There is the need to establish adequate and credible governance arrangements. The degree of observance to the basic principles of good corporate governance is an important factor for investment decisions. / Traditional corporate doctrine has taken the separation of ownership from control as the core problem of corporate governance. On this view, the principal function of corporate law is to devise strategies and mechanisms to ensure that corporate decision-making is based only on shareholders' interests. However, corporate managers are subject to influence from many other sources. Thus, the study of corporate governance must take account of all factors that affect managerial decision-making. / In this thesis, I examine the influence that debt financing brings to bear on corporate governance and examine whether debt-holders should be beneficiaries of corporate fiduciary duties. I conclude that any such duty should be narrowly cast.

This thesis examines the relationship between Chief Executive Officer (CEO) origin and performance consequences in a New Zealand (NZ) setting. The NZ setting is unique because previous research on this topic is from the United States (US) and in one instance the United Kingdom (UK); and the NZ setting is intriguing because it has four important institutional differences: NZ directors hire outsiders much more frequently than their US and UK counterparts; NZ has no discernible trend in the frequency of outsider appointments over time, whereas the US has a marked upward trend; average CEO tenure in NZ is much shorter than that observed in the US or globally; and CEO succession occurs in relatively small firms. These four differences suggest that the NZ CEO market has some unique dynamics and perhaps unique performance consequences. This thesis fills a gap in our knowledge of executive and director practice in NZ and contributes to the CEO origin debate by analysing a new setting. Using a hand collected sample of 162 CEO appointments from NZ firms between 1991 and 2008, I find some significant performance differences between insider and outsider CEOs. Outsiders elicit a higher abnormal return around the appointment announcement: the 1-day and the 3-day differentials are approximately 1.2% and 1.7% respectively. In contrast, insiders create more shareholder wealth during their first three years in charge: insiders increase the appointing firm’s market-to-book ratio by approximately 27 percentage points more than outsiders. I also discover that insiders are around 37 percentage points more likely to last at least three years in the job. The main difference between these findings and those from the US and UK is that insiders easily outperform outsiders in the medium term. Also, I document an intuitive finding for grey insiders: grey insiders by definition possess a blend of insider and outsider attributes and perform between insiders and outsiders on all three performance measures. These findings are robust to various controls and subsamples, and there is also some evidence that the market-to-book finding is robust to selection bias.

This dissertation focuses on two central capital market transactions, takeovers and initial public offerings (IPOs), from both a theoretical and an empirical point of view. After an introductory chapter, the first two chapters analyse how minority shareholders are affected by a change in take-over regulation (introduction of the mandatory bid rule) in Germany in 1995. The last chapter focuses on the pricing and timing of going-public transactions. Chapter 2 focuses on the absolute wealth effect of the mandatory bid rule and formalises the trade-off minority shareholders of corporate raiders face with respect to the adoption of a mandatory tender offer after a shift in control. Under plausible assumptions about the distribution of security and control benefits, minority shareholders of acquirers profit from the adoption of the mandatory bid rule. A subsequent empirical study supports this hypothesis by measuring the stock price effects after the acceptance of the German Takeover Code. Chapter 3 uses a dataset of German dual-class shares during 1988-1997 to study how the change of corporate governance rules affects the price differential between voting and non-voting stock. First, the chapter discusses how mechanisms to separate control from cash-flow rights relate to the value of control. Second, the chapter analyses how minority voting and non-voting shareholders participate in transfers of corporate control under the alternative regulatory structures pre- and post- 1995. By providing an analysis of sequential going-public decisions. Chapter 4 outlines conditions under which the likelihood of a second IPO increases after a first firm has gone public ('hot issue markets'). Two effects can trigger the rise of hot issue markets in a setting with asymmetric and costly information about both firm quality and industry prospects: risk-induced selling pressure and informational free-riding on the industry news conveyed by a first IPO. Finally, the model offers an explanation for the empirical finding that hot issue markets exhibit a higher degree of underpricing than cold issue markets.

The intent of this research is to inform companies that the internal audit function has greater utility than just corporate governance. The internal audit function represents a resource to the business that can be used in a number of ways to help it survive, compete and establish new growth opportunities in the marketplace for the firm. The proposed project will demonstrate through an interpretive process study using case study research how the internal audit function can be a strategic business partner by highlighting its contribution ability in a dynamic, ever-changing, regulatory laden environment. This paper uses Punctuated Equilibrium Theory to explain the organizational transformation of the internal audit function from a professional bureaucracy to an adhocracy as an unintended consequence of corporate governance legislation over time. The study contributes to the literature by explaining the evolutionary change in the internal audit function from scorekeeper-and-watchdog to business-partner-and-change agent. This study analyzes how senior management benefits from utilizing the internal auditors’ experience as an organizational tool to address threats and opportunities.

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This thesis examines the development of the independent director system in China. The newly introduced independent director system is viewed as a revolutionary change to the Chinese corporate governance development. After analyzing the barriers in independent directors’ practice in China, this thesis gives some suggestions on how to improve the independent director system in China. Finally the thesis concludes that the independent director system will certainly become effective in China, but only if China’s policy makers can eventually solve the existing problems.