This paper investigates whether “skin in the game” has an impact on the actively managed funds’ performance. Based on the agency theory where an agent and a principal in different scenarios might have access to different information etc., can result in differences in financial decisions. In this case it could be whether to invest in the fund they manage or not. We examine the time period from 2018 to 2020, where each year has been analyzed as well as the three-year period. To perform the tests, information on the actively managed funds’ managers has been collected from 160 funds, along with the returns of each year and fund. Both funds with skin in the game and without have been found in Large Value Funds at Morningstar, where all of them are actively managed value or equity funds. We have analyzed 80 funds with skin in the game and 80 funds without. After comparisons to the index Russel 1000 Value Total Return USD, we tested whether there are significant differences in performance between the two groups. What the results indicate is that differences are significant which might be due to the fact that managers have skin in the game, but also that these funds tend to perform better.

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Background: All companies need to portray themselves to society and since the majority of employment stems from SMEs there are different ways SMEs can communicate to society and their stakeholders. This can be communicated through both formal and informal reporting. Purpose: The purpose of this thesis is to identify the relationship between SMEs and their stakeholders in the context of reporting. Through the widespread distribution of SMEs as a topic the purpose is to further investigate SMEs and their use of formal and informal reporting. Methodology: This thesis adopts a qualitative comparative case study of Swedish SMEs. The sample consisted of ten companies where an abductive approach was used throughout the study. The findings were analyzed with the help of stakeholder theory, agency theory and institutional theory to answer the research question. Conclusion: The findings indicate that the studied companies in general use different kinds of formal and informal reporting for each stakeholder. The findings also indicate that by using different kinds of reporting for each stakeholder, the company thus aligns the interests of the stakeholders with the company and therefore reduces information asymmetry. Regarding what kind of information they choose to report, previous knowledge is proven to be one of the most important factors since knowing what the stakeholders want can be crucial for any company.

“Show me the incentive and I will show you the outcome”. Charlie Munger The use of adjusted earnings as a presentation alternative to GAAP earnings is intended to help financial statement users understand the underlying performance of a company. The approach is highly prevalent and growing in frequency and adjustment magnitude, as “by 2017, for example the average adjustment per firm was 26 cents per share or about 15% of average GAAP earnings per share” (Rouen, So, and Wang, 2020, p. 3). While some adjustments are standard adjustments for non-recuring items like accounting rule changes, or part of a set of consistently communicated recurring items, there is another group of adjustments that are infrequent, subject to considerable management latitude and often inconsistently categorized. Across the range of academic research on this phenomenon, there are questions regarding management motivation, communication clarity and persistence of these non-GAAP adjustments. There is a broader question regarding business decision rigor, and quality of earnings versus peers for those firms with a large adjusted to reported earnings difference. In Chapter 3, I assess the consequences of the use of Adjusted Earnings, by testing whether the size of the difference between reported and adjusted earnings is associated with a difference in performance against a set of key firm performance measures. The underlying hypothesis is that firms with a large adjusted-earnings differential have weaker underlying operational performance, compared to their peers and that ultimately the decisions and adjustment actions being taken (e.g., more acquisitions, business reorganizations or “one-offs”) that drive up the earnings adjustment subsequently erode performance. The study of a set of large New York Stock Exchange (NYSE) listed companies over a ten-year period (2011 through 2020) showed that firms with large adjusted-earnings differentials had statistically significant performance gaps versus peers that had smaller earnings adjustments on return on assets (ROA) and return on equity (ROE), both contemporaneously and prospectively. There were also performance differences in current year total shareholder return (TSR), although that was mostly a short-term phenomenon and did not hold for future TSR. The study results were particularly significant for the operational measure return on assets (ROA). The tests controlled for firm sector, size and leverage ratio. In Chapter 4, I examine whether CEO incentive compensation (total current year variable pay, variable pay as a percentage/fraction of total compensation, and unvested equity) is a possible cause of the expanded use of Adjusted Earnings practices, and associated with the size of the difference between adjusted and reported earnings. The hypothesis for this follow-on study was that CEO incentives are enhanced by a higher adjusted earnings number, given the typical structure of incentive plans and thus they could influence higher adjusted-earnings differentials. The literature is mixed on this topic as some studies like Black, Black, Christensen and Gee (2021) show no significant relationship between CEO pay and aggressive non-GAAP earnings reporting, while others show that large positive non-GAAP earnings adjustments predict abnormally high CEO Pay (Guest, Kothari and Pozen, 2017). Cohen, Dey and Lys (2008) found that unexercised options were positively associated with income-increasing accrual-based earnings management activities, but that activity is not necessarily impacting reported performance measures (p. i). This second study, found only partial statistical support for the hypothesis that current year variable compensation was associated with the Adjusted Earnings differential, but it was inconclusive. There was statistical significance for the tests of the variable compensation ratio and total unvested equity being related to future adjusted earnings differentials, but those findings were at a relatively low significance level. / Business Administration/International Business Administration

Corporate governance's main purpose is to ensure that companies act in a way that is beneficial for their shareholders. This study presents skin in the game as a possible solution and investigates its impact on firm performance on the Swedish market. More precisely, the board of directors’ amount of skin in the game in the companies they manage and its impact on return on assets (ROA). Data of board composition and stock ownership are, among other variables related to the board of directors, used in a multiple regression to determine possible relationships with firm performance. Swedish corporate governance tradition advocates a clear separation of ownership and control. Despite this, a positive relationship between skin in the game and firm performance in Swedish companies is confirmed. ​​The conclusion of the study is that a board of directors with skin in the game increases firm performance.

The size of the remuneration paid to CEOs is a continuously debated area in society. In times of inflation, where the real wages are decreasing at the same time as the remuneration to CEOs are increasing, the phenomenon becomes more relevant. Is the remuneration paid to CEOs at a reasonable level? Are they getting paid in accordance with the performance of the company they manage? The purpose of this study is to see if there is a pay-performance relation in the most traded companies in Scandinavia. To fulfill the purpose, analyses were performed to test the relationship between CEOs remuneration and the financial performance of the firm they manage for the years 2018 to 2021. The sample consists of 71 companies that are listed on one of the indexes OMXS30, OMXC25 and OBX in Scandinavia. 28 out of the companies are Swedish, 23 Danish and 20 are Norwegian. Both the total and variable CEO remuneration in the companies were manually gathered from remuneration and annual reports and then tested against the financial performance measures Return on Assets and Total Investment Return. As the CEO is in an agency position where the shareholders work as the principals, an agency problem is present. To reduce the agency problem, incentives for the CEO to work in the shareholders’ best interest are important. One way of doing that is to design the CEOs remuneration package so it has a relation to the performance of the company. Originating from the Agency Theory, the Managerial Power and the Optimal Contracting theories try to explain the way these packages are designed. The Optimal Contracting theory explain that the design is to align the participants interest in order to maximize both parties’ outcomes, while the Managerial Power theory is explained as top executives possesses substantial power in the company, it enables them to extract higher remuneration than what is optimal for the shareholders. The empirical result showed a significant positive relationship between variable remuneration and both performance measures along with total remuneration and Total Invest Return. A positive relationship was found between total remuneration and Return on Assets, but not statistically significant. Based on the results a conclusion can be drawn that there is a pay-performance relation in companies listed on the main indexes in Scandinavia, and that the Optimal Contracting theory better explain the way remuneration packages are designed.

The need for reliable financial information has led to the establishment of audits as a vital component of corporate governance. Audits serve to enhance the credibility of financial statements, mitigate agency conflicts, and instill trust among stakeholders. In an evolving business landscape, external factors such as covid, war, and climate change have emerged, potentially impacting the determinants of audit fees. Purpose: The main objective of this thesis is to investigate the influence of external risk factors such as the covid pandemic, the Russia-Ukraine war, and climate change on audit fees. Theoretical perspectives: Theoretical concepts base on previous research and publications on determinants of audit fees, audit risk, the covid pandemic, Russia-Ukraine war, and climate change. Literature was used to derive the research gap and research questions. Methodology: A qualitative method base exploratory approach. A literature review was conducted to uncover areas of interest that require more research. The influence of external risk on the audit fees was identified as a potential area for research; a focus on the covid pandemic, the Russia-Ukraine war, and climate change. The research is based on semi-structured interviews with auditors from big four audit firms in Sweden. Empirical foundation: Six auditors from various professional levels participated in the interview process to obtain empirical data. Conclusions: The findings of the study show that covid, Russia-Ukraine war, and climate change have significant implications on audit fees. These external factors contribute to increased complexity and risk in the audit process, necessitating additional resources and effort leading to increase in audit fees. Recognizing the influence of COVID-19, war, and climate change on audit fees is crucial for auditors, audit clients, policymakers, and regulators. This awareness can inform decision-making processes, financial planning, risk assessments, and the development of appropriate regulatory frameworks, ultimately promoting transparency and strengthening the overall integrity of the audit process. The findings contribute to the existing body of knowledge and serve as a foundation for further exploration and understanding of the complex relationship between these external factors and audit fees.

This study sought to explore the governance mechanisms that result in agent principal alignment in Public Private Partnerships (PPPs), with specific reference to Job Creation. This is important to understand in South Africa as infrastructure PPPs are central to the government’s economic growth strategy. The Renewable Energy Programme (REIPPPP), a decade-old PPP, was identified as the ideal context given its consistent job-creation alignment between the state and its agents, Independent Power Producers (IPPs). Agency Theory posits that agents are inherently self-interested and thus unlikely to act in the interests of principals. However, while some theoretical propositions envisage instances of agent-principal alignment, what is less known are the precise mechanisms by which this can be achieved. This study explored the questions of moral hazard and adverse selection, which refer to goal conflict and information asymmetry in agent-principal relationships. The research was undertaken through a qualitative study, comprised of secondary data analysis as well as semi-structured interviews. It was found that by aligning contracts across multiple stakeholders, agents can increase their enforcement capacity. Furthermore, a rigorous data collection system accompanied by credible penalties, results in greater compliance. This contribution enhances the theory in respect of governance mechanisms whilst simultaneously providing practical guidance for PPP structuring. / Mini Dissertation (MBA)--University of Pretoria, 2021. / Gordon Institute of Business Science (GIBS) / MBA / Unrestricted

Residents are main actors in the context of publicly funded sport events due to their role as taxpayers, and the importance of their support in an event’s success. The use of taxpayer dollars for hosting sport events is typically justified by event proponents (e.g., the local government) by highlighting purported positive event outcomes for the community. The extent to which such outcomes are attained may therefore influence the relationship between residents and their local government. Thus, the purpose of this dissertation was to investigate the long-term outcomes of publicly funded, non-mega sport events, and to examine the role of trust, knowledge, and power in the public/government relationship and event support in relation to these outcomes. To achieve this purpose, I focused on two publicly funded non-mega sport events, specifically the 2011 and 2019 Canada Winter Games, and drew on agency theory. The project progressed through three phases of research, each culminating in a research article. The first phase involved outlining the theoretical approach taken for this project. Next, I investigated the event objectives and long-term outcomes from resident and event provider perspectives. Finally, I investigated the public/government relationship by determining factors that predict general political trust and event support. The first article explains how agency theory, and the concepts of power, knowledge, and trust can be used to investigate political implications of publicly funded sport events. The second article suggests that while most residents evaluated their respective event positively, the interests of residents and event providers regarding event objectives and outcomes diverge. The final article revealed that event experiences positively predicted event support three- and 11-years following the event, and that residents’ power (i.e., ability to influence) negatively predicted political trust, while knowledge (i.e., understanding) positively impacted political trust in the event context. The three articles are preceded by a general introduction and are wrapped-up by a concluding chapter. Cumulatively, the results demonstrate that actors within the context of a publicly funded non-mega sport event may act as principals and agents in various moments of the event hosting process. Further, findings suggest that ensuring host residents are informed of the event will foster trust in the local government, and that community-focused tangible outcomes in particular will foster event support. This dissertation contributes conceptually and empirically to sport event management literature by taking a long-term post-event perspective on publicly funded, non-mega sport events. Practically, event providers should ensure that residents are fully informed of the event hosting process, and should ensure that tangible, and sustainable event outcomes occur as these seem to impact the most residents in a host community even from a long-term perspective. Finally, this work outlines the need for future research addressing methodological challenges in non-mega sport event research, investigating opportunism and monitoring in principal-agent relationships, and determining appropriate public engagement strategies for sustainable event outcomes.

The initial public offering (IPO) of a company is characterized by uncertainty, and a large body of research has focused primarily on underpricing. This study takes a different approach by examining the changes and composition of the board of directors in IPO companies and the effect on market valuation measured by the market-to-book ratio. A company's preparation for the IPO is argued to be made with value maximization features, and it is therefore interesting to see if the market assesses specific changes and the characteristics of the board of directors on the first day of trading. This study takes a starting point in agency theory, signaling theory, and the role of the board of directors in a company to protect and maximize shareholder value, in order to examine the effect on firm value. The sample consisted of 204 IPOs between 2018 and 2021 on Nasdaq Stockholm and First North Growth Market. The study has used multiple OLS regression models to examine the relationship between the board of directors' composition, characteristics, and market-to-book ratio. The findings suggest that an increase in the proportion of directors that have been subject to change two years or less before the IPO is negatively related to market valuation.