This study explores why some university spin-outs (USOs) are able to attract first venture capital (VC) investment. Furthermore, factors including first VC investment are associated with USO’s superior firm performance. The resource-based view (RBV) of the firm is replicated and extended with signalling theory. VC firms (supply-side seeking to reduce uncertainty and information asymmetry problems request positive ‘signals’ from entrepreneurs and firms (demand-side). Entrepreneurs can provide such ‘signals of quality’ relating to their own as well as their firms’ resources. Hypotheses were derived accordingly. This is the first nationwide study using cross-sectional data from British USOs on a firm and founder level related to attracting first VC investment and firm performance. A population of 505 British USOs founded between 1990 and 2007 that were still active in 2008 was identified. Founders of 125 USOs participated in an online survey (25% response rate). No response biases were detected. Secondary data sources provided information on financing and performance. Hypotheses were tested with regression techniques. Key findings on the attraction of first VC investment support the joint framework of the RBV of the firm and signalling theory. The most prominent signals of quality were experienced and reputable founding teams (specific human capital), network links to VC investors (networks), firm-owned IP, patented IP (intellectual capital) and founders who were professor (general human capital). USOs with public backed equity (finance) avoided an ‘equity gap’ when seeking less than £500,000 of VC. USOs with radical innovation (intellectual capital) were less likely to attract generalist VC firms. Key findings on factors related to superior firm performance suggest the importance of USO’s internal resources as implied by the RBV of the firm. Strategic alliances (networks) and USOs with VC investment reported superior firm performance. However, generalist VC firms performed better than industry specialists. VC investment reduced the direct influence of experienced and reputable founding teams (specific human capital) and founders who were professors (general human capital) related to firm performance. Former important signals to attract first VC investment such as patented IP, firm-owned IP (intellectual capital) and public backed equity investments (finance) were not related to firm performance. Best practices and recommendations on how USOs can overcome barriers to attracting first VC investment and achieve superior firm performance are made for several practitioner groups. Limitations and areas of future research are discussed.

The objective of this thesis is to investigate earnings management within a structured sample design focusing upon a M&A context in the US by addressing three main empirical questions in three studies. The first study examines whether firms near M&A manage their earnings and whether this practice has changed after Sarbanes-Oxley Act (SOX). The second study investigates whether debt-financing has implications on event-specific earnings management. Finally, the third empirical study challenges the effectiveness of earnings management in a M&A context by proposing that acquirers’ pre-merger earnings management can be uncovered and adjusted by the transacting targets. The key findings of the first study in this research suggest a strong tendency on the acquirer’s side to manage their earnings upwards before completing non-cash deals, while weak evidence is reported on the target’s side. More importantly, pre-merger earnings management does not seem to be significantly different between pre- and post-SOX eras, despite the assertions that the enactment of SOX was aimed at improving the reporting quality and the containment of earnings management practices. Given that SOX led to stronger due diligence and a more intense use of advisors for M&A deals, it could be argued that the setting of M&A activity creates a greater opportunity to manage earnings, given that managers’ resourcefulness for planning and altering accounting numbers is exclusively much greater in the case of M&A after SOX. However, this finding could be a consequence of employing cross-sectional accruals’ models, by which earnings management is detected relatively to the average level of normal accruals in peer firms at the time of estimation, whilst peer firms’ in general have adopted conservative reporting policies since the enactment of SOX. The second study reports a strong inverse relation between the pre-merger income-increasing earnings management levels and the industry-adjusted leverage of the non-cash acquiring firms, which is consistent with Jensen’s (1986) control hypothesis. This evidence highlights the importance of the industry-adjustment for leverage proxies in earnings management studies and proposes the use of structured sampling designs that controls for the firms’ motivation to manage earnings. The second study’s contribution leads to a better understanding of how a firm makes an accounting choice when it does favour one choice for its economic incentives but at the same time it is under creditors’ monitoring pressures. The third empirical study provides robust evidence of a positive relation between acquirers’ pre-merger earnings management and the non-cash acquisition premia. This evidence contributes to the existing literature by suggesting that even if the managerial team has succeeded in manipulating what is reported on paper, it may actually fail to influence the users’ perceptions - especially the sophisticated ones. The evidence challenges the naive investors’ hypothesis of Sloan (1996), which has been repetitively assumed by several studies in contexts where equity shares are issued.

This study consists of three main projects covering (i) the relationship between disclosure quality and earnings management and (ii) the relationship between corporate governance and disclosure quality. Disclosure quality is measures using the IR Magazine Award, the forward looking information in the annual report, and the analyst forecast accuracy. Match-paired samples comprised of the winners and non-winners of the IR Magazine Award during the years from 2005-2008 were employed in this study. Simultaneity bias in all projects was remedied by the use of a simultaneous system of equation, which was estimated using two-stage least square regression (2SLS). This study provides several interesting findings. With regard to the first project, disclosure quality and earnings management, it is shown that all disclosure quality proxies are consistently reported significant negative relationship with earnings management in the OLS regression. However, audit committee characteristics and board characteristics reveal insignificant relationship with earnings management, except audit committee meeting which reported positive association. Concerning the potential complementary and substitutive effect of internal governance and disclosure quality in deterring earnings management, result of the interaction terms revealed that there is a complementary relationship between audit committee quality and disclosure quality (measured using Investor Relation Magazine Award) in deterring earnings management. When disclosure quality and earnings management are treated as endogenous, this study reveals that there is a significant bi-directional relationship between disclosure quality and earnings management, highlighting that causality can run in both directions. This suggests that future research should control for disclosure quality factors when examining the impact of corporate governance and earnings management and that the potential simultaneity between disclosure quality and earnings management should be considered in future models. With respect to the second project, corporate governance and disclosure quality, this study reveals that audit committee effectiveness, board meeting and board independent are significantly positively related to disclosure quality (measured using IR Magazine Award and the number of forward looking items in the annual report). With regard to the potential complementary or substitutive effect between board and audit committee characteristics in improving firm disclosure quality, this study reveal that there is a substitutive effect between board quality and audit quality in enhancing disclosure quality (measured using analyst forecast accuracy). If disclosure quality and board independence are treated as endogenous, there is a significant positive bi-directional relationship between them when disclosure quality is measured using the number of forward looking items. However, there is a negative bi-directional relationship and an insignificant bi-directional relationship shown when disclosure quality is measured using analyst forecast accuracy and the IR Magazine Award respectively.

Agency theory predicts that corporate governance and external audit enhance the convergence of interests between shareholders and managers. The primary objective of this thesis is to investigate the effect of corporate governance and external audit on constraining earnings management practice in the UK. In this thesis, earnings management is measured using the magnitude of discretionary accruals as estimated by the performance matched discretionary accruals (Kothari et al., 2005) model. A review of the corporate governance literature reveals sixteen attributes that can impact on shareholders’ perception of earnings quality due to their role in enhancing financial reporting integrity. The corporate governance attributes are organized in four categories: 1) Board Composition; 2) Audit Committee Effectiveness; 3) Non-Executive Directors’ (NEDs) Commitment; and 4) Ownership Structures. The external audit factors include auditor independence and audit quality. Two models are constructed and a set of hypotheses are stated. These models are tested using a sample consisting of the top 350 companies listed on the London Stock Exchange. Firms in the financial, mining and regulated industries are excluded due to different accrual choices and valuation processes. The study covers the period of four financial years (2003, 2004, 2005 and 2006). Nineteen hypotheses are derived from both models. These hypotheses are tested using univariate and multivariate techniques to determine if corporate governance attributes and external auditor factors significantly constrain discretionary accruals. The results reveal that board size and independence, audit committee independence and expertise, nomination committee independence, chairman independence, the level of NED fees and an independent and specialised external auditor are negatively associated with earnings management at significant levels. The primary contribution to knowledge of this research is its extension of the literature on the role of corporate governance and the external auditor in constraining earnings management practice in the UK. This study’s results are useable by stock market participants in their evaluation of corporate governance and the role of the external auditor in enhancing earnings quality. The findings will also assist regulators in defining effective corporate governance attributes and assessing the disclosure of corporate governance practices.

This dissertation contributes to the international literature by examining the relation between chief executive officer (CEO) compensation and firm performance in China, especially under different types of ultimate shareholders, who have differing motivations and objectives regarding the structure of CEO compensation. I use unbalanced panel data from more than 1,300 Chinese A-share listed companies over 2005-2009 and find that performance, especially one of market-based measurement, has a significant impact on CEO compensation. CEO compensation levels have risen in recent years due to economic gains rather than poor corporate governance. Firms that operate under other central government ministries (SOECG) than those of the ultimate shareholder do not use performance as a guideline for CEO pay, although they have the highest CEO compensation level amongst all five groups. The size of the board directors and independent directors are contributes positively to CEO compensation. While the degree of ownership concentration and size of supervision board are negative related to CEO compensation. Moreover, CEO gets higher pay if independent direct especially financial one working province is same as companies headquarter. Most of these results are consistent with my hypothesis. Shareholders, managers, government, and others who must make improvements in China’s corporate governance standards should find these results useful. In addition, the findings can offer future research directions.

The increasing global concern for the environment, the demand for increased stakeholder reporting, and the importance of sound corporate governance structures have triggered the need for more research into the value creation of environmental disclosure for stakeholders and its integration within corporate governance structures. The main objective of the current study is to empirically examine the relationship between corporate governance and each of the quantity and the quality of corporate environmental disclosures in the UK, while controlling for some corporate characteristics as well as an in-depth exploration of quality identification and assessment issues. In doing so, the study distinguishes between the different categories or areas of activity to which environmental disclosure relates as well as between the different types of environmental information content. Based on stakeholders-agency theory, the study argues that the quantity and quality of corporate environmental disclosure directed to various stakeholders are enhanced when managers' opportunism is monitored by corporate governance mechanisms, thereby, reducing the information gap or asymmetry. Content analysis of a sample of UK companies' annual reports is undertaken to examine the quantity and quality of corporate environmental disclosure practices and their association with corporate governance mechanisms, over a period of four years. Hence, the annual reports of FTSE-All share companies are examined for years 2004-2007 inclusive. A checklist of environmental disclosure items and categories is developed and environmental disclosure indices are computed. The study suggests an extensive four-dimensional framework for assessing environmental disclosure quality. The metric developed attempts to capture the qualitative characteristics of information in a manner consistent with well-supported frameworks elaborated by professional accounting bodies and standard setting organizations. Although corporate environmental disclosure quantity in UK companies' annual reports is relatively low, corporate environmental disclosure quality is comparatively high. Results also revealed a significant association between environmental disclosure quantity and, to a lesser extent, environmental disclosure quality and most corporate governance mechanisms. In addition, it appears that other corporate governance mechanisms are significant at some categorical levels of environmental disclosure. The major strength of the current study is its practical implications and its usefulness in providing data for further extensive environmental disclosure quality development. The comprehensive framework developed in this study for identifying and assessing environmental disclosure quality, is an initial step in the direction of examining environmental disclosure from the stakeholder perspective, negating the traditional belief of quantity representation of quality and shifting disclosure quality perspective from volumetric measurement to semantic assessment.

A consolidation system is a type of an accounting information system that aims to facilitate the consolidation process of organisations that are comprised of a collection of entities, but that are required to produce one set of consolidated financial statements. Contingency theory postulates that organisational sub-systems should be designed in accordance with the contextual variables and that performance will result if a match is achieved between these contextual variables and the characteristics of the sub-systems. The aim of this research is to explain variations in the performance of the consolidation system of listed companies in terms of the relationships between a contingency variable and the characteristics of the consolidation system. The contingency variable that was used by this research is the extent of company decentralisation, while the characteristics of the consolidation system are integration; formalisation; and sophistication. The performance of the consolidation system has been measured by means of the number of accountant days that are required to complete the consolidation at the financial year-end. The quantitative data was collected by means of self-completion questionnaires. Four hypotheses were assessed by means of Pearson correlation coefficients and a research model was evaluated by means of a structural equation model. The qualitative data collected by means of semi-structured interviews provided a more in-depth view of the manner in which consolidation systems are used at an organisational level. It was shown that organisational decentralisation is positively related to consolidation system integration, sophistication and formalisation. It is contended that the findings of this research provide some support for contingency theory‘s central tenet of no universally appropriate consolidation system. The structural equation model that was developed fits the quantitative data very well, but the results were not entirely consistent with theoretical expectations, with only the system integration shown to influence the resources that are required to complete the year-end consolidation. This research extended contingency theory to this relatively new type of system and provided practitioners with evidence regarding the type of consolidation system that is appropriate to different organisations.

Agency theory predicts that corporate governance mechanisms and external audit play an important role in enhancing financial reporting, while institutional theory views these mechanisms as practices or regulations which result from coercion by legislators who impose certain practices in order to improve organizational effectiveness, or as a result of imitation. In terms of earnings management practices, both theories provide an appropriate theoretical framework. Taking agency theory and institutional theory as points of departure, the primary purpose of this study is to: (1) investigate the motivations and techniques of earnings management and; (2) to what extent corporate governance and external audit can affect earnings management practices in Saudi Arabia. To achieve this aim, the questionnaire survey is mainly used to explore the motivations and techniques of earnings management in Saudi Arabia by obtaining the different perceptions of respondents. In terms of the role of corporate governance and external audit in reducing earnings management practices, two models are constructed and a set of hypotheses are formulated. These models are examined, by a logistic regression, using a sample consisting of all companies listed on the Saudi Stock Exchange with the exception of financial and insurance companies which have different practices. In addition, semi-structured interviews are employed in order to provide a better understanding of the research questions, confirming and elaborating on the questionnaire survey and models’ findings and supporting the development of the hypotheses. They were subsequently undertaken, after the questionnaire survey, with 15 individuals including board members, audit committee members, external auditors and academic staff. Although there were significant differences among respondents, the findings reveal that the four main incentives for Saudi managers to manage earnings are ‘to increase the amount of remuneration’, ‘to report a reasonable profit and avoid loss’, ‘to obtain a bank loan’ and ‘to increase share prices’. The findings also indicate that only seven statements relating to earnings management that received support from respondents were techniques of earnings management in Saudi companies. Agency and institutional theory may provide a sensible explanation for previous earnings management practices in Saudi Arabia. Moreover, the expectation of beneficial corporate governance practices and external audit constraining opportunistic earnings management activities was, to a large extent, found to be inaccurate in Saudi Arabia. That is, no internal corporate governance variables, apart from outside director, board size and board meetings, examined in this research are shown to have any significant effect on earnings management. With the exception of auditor opinion, none of the external audit factors and ownership structure affects earnings management. Moreover, the interview survey shows many issues and interesting findings related to previous investigation such as nepotism, illegal competition, and lack of independence. Generally, the findings are not consistent with agency theory that ownership concentration, audit committee, and external audit might mitigate agency problems leading to reduced agency cost by aligning the interests of controlling owners with those of the company. However, previous finding can be interpreted by Institutional theory which views these mechanisms as practices or regulations resulting from coercion by legislators who impose certain practices in order to improve organizational effectiveness, or as a result of imitation. It should be noted that the findings established in this study could be useful to external auditors and regulators and legislators in their attempts to constrain the incidence of earnings management and enhance the quality of monitoring mechanisms.

This thesis investigates the role and effect of different aspects of corporate governance, ownership structure and remuneration consultants on determining the level and the structure of CEO compensation. The main objective of this research is to better understand the impact of these aspects on compensation of Chief Executive Officers (CEOs) in UK firms. Two models are constructed and a set of hypotheses is developed. These models are tested using a sample consisting of the top 350 companies listed on the London Stock Exchange. Firms in the financial, investment and insurance industries are excluded due to the different nature of their accounting, governance, and compensation practices. The study covers the period of five financial years (2004-2008). Twenty-two hypotheses are derived from both models. These hypotheses are tested using multivariate techniques in order to determine to what extent corporate governance, ownership and remuneration consultants’ attributes play a role in monitoring managers and setting appropriate CEO compensation. Using a sample of 237 non-financial FTSE 350 firms during 2004-2008 (i.e. 851 firm-year observations), and after controlling for the standard economic and human capital determinants of compensation, this study finds that corporate governance, ownership and remuneration consultants’ characteristics play an important role in determining CEO compensation. However, the findings do not suggest that these attributes always play a positive role in constraining opportunistic managerial behaviour. Surprisingly, some of the governance attributes have been found to facilitate the executives’ needs rather than to attempt to monitor them. The findings of the thesis suggest that a number of theoretical perspectives can be used to explain the relationship between corporate governance, remuneration consultants and CEO compensation in the UK firms. For example, while the findings of board independence and CEO duality provide strong support to the stewardship theory, as firms enjoy better compensation governance when their boards contain more executive directors and are chaired by CEOs, the results of chairman independence and ownership, and remuneration committee independence, are found to be in line with both agency theory and the alignment of interests’ hypothesis of agency theory since we find these variables play a strong role in mitigating the agency problems and agency costs through setting appropriate CEO compensation. Conversely, the managerial power perspective receives great support from the findings of a number of governance, ownership, and consultants’ variables. That is, the analysis concludes that larger boards, well-compensated board and remuneration committee non-executive directors, CEOs with greater share ownership, CEOs sitting on the remuneration committee, less independent remuneration consultants, and the switch of remuneration consultants all play significant roles in increasing the level of CEO compensation and setting inappropriate designs for remuneration that are more favourable to the CEO (i.e. more fixed and less equity-based compensation). Overall, the findings of this thesis imply that shareholders, regulators, and practitioners should be concerned about the composition and the characteristics of a firm’s board of directors, remuneration committee, and external directors who comprise the firm’s internal control structure as this research finds that the quality of corporate and compensation governance varies depending on board and remuneration committee size and characteristics. Furthermore, it is advised that the relevant parties should pay attention to the remuneration consultants’ independence status and characteristics since this study finds that independent, specialized, and larger remuneration consultants play a significant role in enhancing the quality of compensation arrangements’. Therefore, this study offers new insights over the effect that corporate governance and remuneration consultants can exert over the design of CEO compensation contracts.

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