Research report presented to the SBL, Unisa, Midrand. / This report proposes to make a contribution in the area of governance by critically analyzing the governance structure of SNV (The Netherlands Development Organization) in implementing projects. This study is motivated by the scarcity of published documentation on corporate and project governance practices specific to the African and particularly Kenyan context which organisations interested in pursuing good governance and managerial practices can use as a reference point.

The 2008 financial crisis that led to the collapse of companies and economic recession in most countries has also increased the concern for transparency, accountability and regulatory oversight and once more put corporate governance and board effectiveness on the front burner of big business issues all over the world. The board is seen as a key player in governance of companies and there is need for a better understanding of how this body works. Majority of the research work in these areas has been in developed economies and not much work has been done in the area of board effectiveness in the emerging markets of Africa. This thesis examines the relationship between key board characteristics and board effectiveness. It also explored the impact of certain mediators on this relationship. Unlike most studies on board which focus on firm performance and mostly in developed markets, this study was conducted in an emerging market and the focus was on board effectiveness. Based on the work done by other researchers in developed economies the researcher developed a theoretical framework and a set of hypotheses to examine the relationship between board characteristics and board effectiveness and the impact of certain mediators on this relationship. Board characteristics considered in this research include board size, CEO duality, board independence, and board diversity. In addition, the impact of board human capital on board effectiveness was also considered. Additionally, the researcher examined if the relationships between board characteristics and board effectiveness will be affected by organization type, ownership, age and size. The empirical examination of the hypotheses developed from the theoretical framework presented in this study show that board characteristics, apart from professional human capital, do not have any significant impact on board effectiveness. Board professional human capital was found to have a positive relationship with board operations and board cohesiveness and also with board effectiveness. The results show that in Nigeria, board diversity and human capital are the most important board structural factors that impact board effectiveness. They also show that board processes of operations, cohesiveness and decision making have significant impact on board effectiveness. Finally the results show that board process factors are more important than board structural factors in determining board effectiveness. The study shows that these relationships were not significantly affected by organization type, ownership, age or size. The study contributes to understanding of board effectiveness in an emerging market where board roles and processes are still developing; by examining both traditional variables such as board size, CEO duality, board independence and other organizational attributes such as board job related diversity and board professional human capital variables. In addition, this is the first study to examine board effectiveness in publicly quoted companies in Nigeria. The study will also contribute to better governance practices in Nigeria, where lack of good governance has been blamed for the slow economic development and growth. The theoretical framework and the findings of this thesis are expected to stimulate scholars for further research into identifying the characteristics that boards must possess if they are to be active and effective. They should also stimulate practitioners and scholars of strategy, organizational behaviour and corporate governance to examine boards and their activities from many perspectives, particularly from the process side.

The thesis explores the relationship between Audit Committees and External Auditors’ fees of a sample of FTSE 350 companies in the UK for the period of 2005-2006. This is achieved by providing answers to three main research questions. First, what are the determinants of Audit Committee activity? Second, what is the relationship between Audit Committee activity and external auditors’ fees? Third, what is the relationship between audit and non-audit fees and how does the Audit Committee affect these? Starting out with an Agency Theoretical background, the study found evidence consistent with the views that a higher proportion of Independent Non-Executive Directors on the board enhances Audit Committees’ activity, but the presence of financial expertise on the committee was not found to be statistically significant in explaining its activity. The thesis also documented evidence that shows that Audit Committee activity is inversely related to managerial ownership of shares in companies. In line with the economic theory of auditing, the researcher used fees paid to the external auditor to proxy for the level of economic bonding between auditors and their clients. Higher fees are interpreted to indicate compromised independence. Five alternative measures of economic bonding were used. The researcher found a stable and statistically significant positive relationship between measures of economic bonding and Audit Committee activity. This finding is consistent with the view that Audit Committees buy more services from the auditors in order to enhance auditing and reporting quality. Strong positive relationships between audit and non-audit services and vice versa were found using a single equation fees model but these relationships were not consistent when the researcher controlled for endogeneity between audit and non audit fees using Simultaneous Equation Models (SEM). Audit Committee activity was not statistically important in these relationships. This evidence taken together supports the proposition that economies of scope exist in the joint provision of both audit and non-auditing services to the same client. Finally the thesis also documents evidence that suggests that knowledge spill-over flows from non-audit services to auditing services and that auditor do not use audit as a loss leader.

Over the last two decades, share repurchases have emerged as the dominant payout channel, offering a more flexible means of returning excess cash to investors. However, little is known about the costs associated with payout-related financial flexibility. Using a unique identification strategy, we document a significant cost. We find that actual repurchase investments underperform hypothetical investments that mechanically smooth repurchase dollars through time by approximately two percentage points per year on average. This cost of financial flexibility is correlated with earnings management, managerial entrenchment, and less institutional monitoring. (C) 2016 Elsevier B.V. All rights reserved.

The purpose of this research is to carry out an empirical investigation of bank corporate governance regulation in The Gambia. The aim is to determine what contributions, if any, effective governance systems can make to the management of the needs of different stakeholder groups within the financial sector. Through the application of grounded theory methodology this research aims to build a substantive theory of corporate governance regulation within The Gambian banking sector. The substantive theory identified the main phenomena and as such outlined the model of corporate governance currently prevailing in The Gambian banking sector. The grounded theory methodology adopted for this research includes a three stage process of analysing data namely open coding, axial coding and selective coding. Firstly, through the application of comparative method in open coding semi structured interviews and focus groups discussions were conducted with senior bank executives, employees and customers, as well as regulators across The Gambian banking sector. Open coding process enables the development and identification of properties and dimensions. The interviews were informed by survey questionnaires designed to sensitise and gain access to the identified participants and subsequently guided the semi structured interview questionnaires and focus groups that followed. Secondly, through axial coding, the open categories were incorporated into wider categories. The use of the paradigm model establishes the relationship among these categories. This led to the development of the human factor model of bank corporate governance regulation in The Gambian banking system. Finally, selective coding identified the core category through the verification of the second set of semi structured interviews and established its’ relationship with other sub categories. The substantive theory was further explored Categorical Imperative theoretical framework leading to a more formal substantive theory that considers corporate governance issues of financial sector stakeholders. It concluded that there is no consistency between banks when it comes to corporate governance mechanisms and codes partly due to obstacles such as environment, culture and policies. Thus, regulatory compliance and ethics are therefore necessary to serve as a moral compass in the absence of a mandatory regulatory framework. Finally, this thesis also explored the phenomenon of corporate governance, grounded theory and Categorical Imperative in an unexplored context. Thus, providing a new approach to corporate governance understanding to inform and to improve corporate governance practice. The identification of the substantive theory will also help key stakeholders to address the challenges, thus, minimising the risk of bank failures and improve the corporate governance regulation framework in The Gambia. Finally, this research also proposed an ethical code of conduct for The Gambia. The proposed code of conduct will influence future behaviour and subsequently improve the robustness of the banking system.

To gain insight into the impact that investors have on the firm's auditor choice decision, this study investigates the association between changes in investor monitoring and auditor turnovers. Hedge fund activism provides a unique setting to observe how highly motivated investors, willing to incur significant expense to effect changes in target firms, are able to influence a firm's decision to dismiss their external auditor. I find that activist hedge fund targets see an increase in auditor turnovers and dismissals during the years following hedge fund activism relative to both the two years' pre-activism and a propensity matched sample of firms. I document that the increase in auditor turnovers is primarily driven by target firms with a Big 4 auditor, and that hedge fund targets primarily seek a lateral change in auditors. Consistent with institutional concerns that excess compensation impairs auditor independence, I find that activist targets are more likely to dismiss their auditors when the auditor is earning high non-audit service fees and high abnormal audit fees. I then examine how the market interprets the lateral change in auditors. I find that financial statement reliability increases for lateral auditor changes associated with independence concerns. Finally, I examine the conditions under which the hedge funds are able to facilitate an auditor change. I find that hedge funds pursuing less aggressive activist campaigns, and hedge funds seeking less public forms of interventions are more likely to seek an auditor dismissal. This relation between non-confrontational campaigns and auditor dismissals is consistent with prior research suggesting that hedge funds seeking to work with management are better able to enact changes in a target firm.

Having dominated policy agenda in developed economies for well over three decades, corporate governance is now getting to the top of the policy agenda in developing countries (Abor and Adjasi, 2007). However, the issues of corporate governance have focused on the major shareholders and institutional shareholders of the organization while little or no attention has been paid to public sector and the private enterprises in developing countries. This has been ignored by the literature. This study investigates the ethical dimensions of corporate governance practice in Ghanaian public sector and private enterprises. It aims to understand the phenomena of governance practices in this context and examine its implications for good corporate governance systems in Ghana. Using grounded theory methodology, data was collected from 28 semi structured interviews with board of directors and senior officials, and group discussion of 9 participants, mainly directors and officials involved with Ghanaian corporate governance system. The interviews were informed by the survey of governance practice. Through the constant comparative method of open coding of interviews, categories emerged which were subsumed into main categories during the axial coding. The paradigm model was used to establish the relationship among the categories. This formed the basis for the selective coding which identified the core category and its relationships with the sub-categories, verified to develop the substantive theory of corporate governance systems. The study explored the relationship between culture relativism and universalism and the formal theory in terms of stakeholder theory and shareholder theory. The substantive theory identifies that corporate governance practice in the public sector and private enterprises is influenced by traditional cultural values which has implications for ethical business environment. This study is the first attempt to combine corporate governance, grounded theory and national level culture in public sector and business enterprises, and to offer relevant recommendations for policy-makers. The substantive theory demonstrate that corporate governance systems are socially constructed and as such understanding the behaviour of board of directors is vital for understanding how corporate governance is practiced. The study contributes to better understanding of governance practice in the public sector organisations and the informal sector

published_or_final_version / Economics and Finance / Doctoral / Doctor of Philosophy

published_or_final_version / Economics and Finance / Doctoral / Doctor of Philosophy

This dissertation consists of two essays on corporate finance. Essay one examines whether corporate governance affects firm performance after capital investments. I find that among firms with weak corporate governance, those with high abnormal capital investments have significantly lower stock performance than those with low abnormal capital investments. In addition, a significant portion of the difference in abnormal stock performance between the two subgroups occurs around earnings announcements. In contrast, the level of abnormal capital investments is not related to subsequent stock performance or earnings announcement returns at firms with strong corporate governance. These findings indicate that corporate governance structure enhances firm value by mitigating the over-investment problem. Essay two examines how insider trading activity prior to seasoned equity offerings (SEOs) is related to subsequent investment, operating, and financing decisions of the issuer. I find that SEO firms with more abnormal insider sales issue more seasoned equity, hold more cash and increase dividend payouts more. They also perform more poorly. Following the SEO, these firms also issue less equity and the effects of the SEO on their capital structures gradually reverses. These findings suggest that SEO firms with more abnormal insider sales are more likely to have overpriced stock, while those with less abnormal insider sales are more likely to have good investment opportunities. Insider trading activity prior to the SEO provides valuable information about the firm’s incentives to issue seasoned equity and help to predict the real activities of the issuer following the SEO. / text