I find evidence to support the negative impact of growth options on corporate social responsibility (CSR). I propose that attention-constrained managers reduce corporate goodness to focus on growth opportunities. The effect is more pronounced for well-governed firms, for financially-constrained firms, and for capital-intensive social dimensions. Firms reduce their research and development (R&D) and capital expenditures, and experience lower annual buy-and-hold abnormal returns (BHAR) subsequent to significant increases in their social performance. I also report value implications of CSR investments. The empirical evidence suggests that managerial choices to divert attention from growth projects toward CSR hurt shareholders.

The primary objective of this dissertation is to show that corporate governance affects the value relevance of earnings in the presence of earnings management. The role of corporate governance is to reduce the divergence of interests between shareholders and managers. The role of corporate governance is more useful when managers have an incentive to deviate from shareholders’ interests. One example of management’s deviation from shareholders’ interests is the management of earnings through the use of accounting accruals. Corporate governance is likely to reduce the incidence of earnings management. Corporate governance is also likely to improve investors’ perception of the reliability of a firm’s performance, as measured by the earnings, in situations of earnings management. That is, corporate governance will be value relevant when earnings management exists. The results of this research support these propositions.In this thesis, the value relevance of earnings is measured using the earnings response coefficient. Earnings management is measured using the magnitude of abnormal accruals as estimated by the modified Jones (Dechow et al., 1995) model. A review of the corporate governance literature revealed nine attributes that were expected to impact on shareholders’ perception of earnings reliability due to their role in enhancing the integrity of the financial reporting process. The nine attributes represent three categories of corporate governance: 1) organisational monitoring; 2) incentive alignment; and 3) governance structure.Although not all corporate governance attributes suggested in the literature impact on investors’ perception of a firm’s performance, the primary proposition that corporate governance affects this perception when earnings are managed is supported. The primary contribution of the study is finding evidence supporting the moderating effect of earnings management on the relationship between corporate governance and the value relevance of earnings. These results validate Hutchinson and Gul’s (2004) claim that the role of corporate governance attributes in firm performance should be evaluated in concurrence with a firm’s organisational environment. Future research should control for corporate governance and earnings management, as indicators of earnings reliability, when using returns-earnings regressions to address a research question.

In the course of 2002 and 2003, the Australian Government introduced a fundamental change to the taxation of corporate groups. The new tax consolidation legislation allows wholly-owned groups to be regarded as one homogenous entity for income tax purposes from 1st of July 2002. After making an irrevocable decision to implement the elective consolidation provisions, a group, consisting of a head company and at least one other wholly-owned entity (company, trust or partnership), lodges a single income tax return and pays a single set of PAYG instalments over the period of consolidation. The assessment of the policies, principles and rules governing the implementation and operation of the consolidation regime reveals far-reaching implications for the accessibility of tax attributes and changes to the tax cost / adjusted values of capital / depreciating assets. Tax accounting systems and corporate governance guidelines established by groups are also affected. Groups deciding against the implementation of the consolidation rules, on the other hand, face the removal of previous grouping concessions, such as loss transfer provisions, CGT asset roll-overs and inter-corporate dividend rebates. Furthermore, a number of modified anti-avoidance and integrity measures affect intra-group transactions undertaken outside the consolidation regime. This thesis identifies and analyses the areas of taxation, accounting and corporate governance which are relevant for the initial consolidation decision. The following analysis is structured with primary regard to legal concepts stipulated by the consolidation legislation. However, frequent references to policies underlying the relevant provisions, for instance the wholly-owned approach, allow a deeper understanding of the consolidation core rules and the effects arising for groups deciding to implement them. Finally, this thesis also provides a comparative perspective through the discussion of consolidation policies and rules delivered by German tax legislation, accounting regulations and corporations law.

[Truncated abstract] Investor relations (IR) management encompasses a broad range of activities including voluntary disclosure, attracting analyst coverage, targeting investors, and providing feedback to corporate managers (Byrd, Goulet, Johnson and Johnson 1993; Brennan and Tamarowski 2000; Bushee and Miller 2005). In recent years, a number of high profile corporate collapses and concerns about selective disclosure have contributed to an increased awareness of the importance of effective IR practices in promoting investor confidence. To this end, Australian market regulators and industry bodies have developed a number of best practice guidelines relating to disclosure and corporate governance. The current study undertakes a comprehensive investigation of corporate approaches to IR in the Australian context, and seeks to explain cross-sectional variation in these. The sample utilised in this study comprises 129 All Ordinaries Index (AOI) constituent companies that responded to a mail survey conducted in 2006 regarding their IR practices. The survey of all AOI companies constitutes the first Australian academic survey of IR practices, and the views of the individuals responsible for the function. Self-reported data are combined with data collected from the sample entities' websites to provide a detailed overview of corporate IR programs. The results of the survey suggest that there is widespread recognition, within the sample, of the importance of devoting organisational resources to IR. ... Several proxies for the extent of investment in IR are developed in this study. Two proxies capture organisational arrangements for managing IR, one proxy captures the frequency of one-to-one meetings with analysts and investors, and one proxy captures the quality of IR websites. Multivariate analyses relate cross-sectional variation in these to a number of firm-specific variables. Consistent with findings presented in the empirical voluntary disclosure literature, this study shows that the extent of investment in IR is positively associated with firm size, a finding that is common across all IR proxies. Ownership characteristics play an important role in explaining different types of investment in IR, as captured by the four proxies. Ownership concentration is negatively associated with the likelihood of employing an external IR consultant and positively associated with the frequency with which one-to-one meetings are held with analysts and investors. Firms with a foreign stock exchange listing, a proxy for the importance of foreign investors, achieve higher scores for the quality of their IR websites. Adverse selection models of voluntary disclosure predict that firms with good news are likely to disclose more. In contrast, the results of this study show that less profitable firms and firms with lower price-to-book ratios are more likely to have an IR department/officer, and they achieve higher scores for the quality of their IR websites. Finally, the nature of the investment in IR appears to differ with sector membership. Firms in the Materials and Energy sectors held more one-to-one meetings than firms in other sectors, while firms in the Information Technology sector are more likely to have an IR department or IR officer, and have higher quality IR websites than firms in other sectors.

The introduction of New Public Management reforms to the Australian Public Service in the 1980s and 1990s marked a substantial shift away from the traditional process-based public sector model to a market-driven one. These reforms accelerated with the election of the Howard government in 1996, which moved the public sector to become more like the private sector, but failed to address directly the changes needed in accountability and control of the APS. This study explores the evolution of corporate governance as a means of filling that gap in the APS. The ultimate responsibility for ensuring corporate governance is appropriately applied in departments of state rests jointly with the minister and the secretary, in their roles in administering and managing the organisation, and in particular fostering and modelling appropriate organisation citizenship behaviour. Corporate governance exists In the APS, as in the private sector, as a dichotomy offormal and informal elements, and the informal elements play a paramount role in achieving results for government that are lawful, fair and reasonable; adherence to formal corporate governance processes alone is insufficient to protect an organisation from failure. The example of DIMA was used to demonstrate that even an organisation with a proud international record in assisting the most vulnerable in the world through its refugee and humanitarian programs can fail if its corporate governance mechanisms are not universally and correctly applied throughout the organisation, resulting in outcomes described as "catastrophic" for the individuals concerned.

This dissertation contains five research projects within the context of two distinctive issues that concern the effectiveness of executive compensation in aligning executive interests with shareholders and how institutional investors play a role in structuring corporate governance mechanisms. The objective of this dissertation is to first determine how institutions should exert their influence if they are serious about alleviating agency problems and improving firm performance. Second, the thesis seeks to determine whether institutional investors use their influence to shape executive compensation and corporate governance mechanisms in a manner consistent with aligning managerial interests with shareholders and increasing shareholder wealth. The thesis finds that CEOs with option incentives increase the likelihood that a firm will increase risk by undertaking both major real investments and acquisitions. Moreover, CEO option grants are positively related to measures of firm valuation and operating performance suggesting option incentives are an important mechanism to align CEO interests with shareholders. This is robust to alternative measures of firm valuation and operating performance, also various estimation techniques. Using these findings to motivate the direction of institutional influence on executive compensation, it is found that institutional investors, particularly smaller activist traders, significantly increase option grant incentives received by executives. Institutional influence also raises CEO pay which is consistent with preservation of reservation CEO utility levels. Addressing the role of institutional investors in the context of other corporate governance mechanisms, it is found that institutional investor influence is also negatively related to board size and positively related to board independence, which is achieved by removal of inside directors. Such actions are consistent with empirical studies that show smaller boards and increased levels of independent directors improve firm performance and board decision making. The main conclusion from this dissertation is that option incentives are an effective mechanism to align CEO interests with those of shareholders. Institutional investors appear to recognise this importance, and effectively use their influence to increase options received by executives. Combined with institutional investors putting in place corporate boards that provide better oversight of management, institutional investors appear to be effective monitors of the firms in which they invest.

This thesis represents a scholarly journey towards an understanding of corporate governance. Unlike the vast majority of writings on governance, this work attempts to take a step back, and to consider why and how we should study corporate governance. These critical questions have been largely ignored during the frenzy of governance research in the past few decades. The thesis argues that corporate governance theory and practice reflects a Tower of Academic Babel¹ reality as writers from diverse backgrounds use different approaches, invent terminology and proclaim a new 'theory'. The thesis analyses the extent of this conceptual confusion about corporate governance and why this arises. It also considers some possible reasons for the increasing disillusionment with the legal, ethical, cultural, institutional, regulatory and other contexts of corporate governance. The corporate governance literature indicates that much uncertainty has arisen over the nature of corporate governance. Both, denotative and connotative meanings of corporate governance have been ambiguous, often because of poorly defined concepts. This ambiguity is compounded by confusion over methodological concepts such as "paradigm", "system", "model" and "theory", the key constructs employed by many legal, and other, writers. Moreover, much of the literature on corporate governance is founded on ethnocentric concepts that are often "chauvinistic in the extreme".² This confusion has been intensified by the added complexity of unique phenomenology, demonstrated by numerous writers with "scholarship and advocacy that is culturally and economically insensitive"³ This thesis argues that the search for corporate efficiency and effectiveness is often misguided, both because of biased performance criteria and a lack of a clear conceptual domain. Consequently, the corporate governance discourse fails meaningfully to address the enigma of what is the range of corporate governance influence on corporate activities? The overarching argument made in this thesis is that our understanding of corporate governance requires a clarification of methodological approach and a comparative perspective. By recasting corporate governance research within consistent models, theories and applications this thesis lays the foundation for future research by which we may investigate the causal relationships that determine corporate efficiency, effectiveness and the optimum structures for good corporate governance. practitioners from most cultures.

Equity agency costs are important to the firm and the management of these costs is a critical element of corporate governance, yet empirical research that focuses on the magnitude and impact of agency costs is limited. This thesis sets out to furnish empirical evidence in the area of corporate ownership with a particular focus on the magnitude of equity agency costs as well as the relation that exists between the largest shareholder in a firm and equity agency costs and between the largest shareholder and the dividend policy that a firm adopts. This thesis provides an empirical analysis of the effect of corporate ownership, together with other governance mechanisms on equity agency conflicts for the largest 500 Australian listed firms. The results from this analysis provide strong support for the view that equity agency costs are related to corporate ownership. Specifically, there is evidence of a significant non-linear relation between inside ownership and the proxies for agency costs. Further, the results demonstrate that other governance mechanisms, particularly board size, board leadership and short-term debt financing, are effective in improving the use of firm assets, yet they do not seem to restrain firm management from incurring excessive discretionary operating expenses. This thesis also extends the investigation of the corporate ownership-equity agency cost relation by focusing on the largest shareholder for 9,165 listed firms drawn from 43 countries around the world. The results suggest that cross-sectional variation in equity agency costs can be partly attributable to corporate ownership. Specifically, there is evidence of a statistically significant non-linear relation between the shareholding of the largest shareholder and the agency cost proxies. The type of the largest shareholder, i.e. whether the largest shareholder is an insider or a financial institution, is also important in analysis of this relation. Further, debt financing, dividend policy and legal origin vary in their impact on the agency cost proxies. This thesis also investigates the interaction between the largest shareholder and dividend policy for 8,279 listed firms drawn from 37 countries around the world. Consistent with previous studies, the results suggest that firms are more likely to pay dividends when profitability is high, debt is low, investment opportunities are limited, or when the largest shareholder is not an insider. It is also apparent that largest shareholding and dividend payout are related and that, consistent with the extant literature, legal system does matter in dividend policy decisions. Together, the results imply that equity agency costs vary with corporate ownership though this relation remains, of course, the subject of continuing investigation in finance. A major contribution of this thesis is demonstrating that corporate ownership, particularly the largest shareholder, plays a pivotal role in controlling agency costs. Accordingly, this suggests the following policy implication: by improving the legal environment and regulatory constraints imposed on large shareholders as well as legal protection for minority shareholders, the efficiency gains generated from large shareholder control can be translated into higher firm valuation to the benefit of all shareholders in the firm.

Thesis (Ph. D.)--University of Hong Kong, 2007. / Title proper from title frame. Also available in printed format.

Zugl.: Kiel, Univ., Diss., 2007