This thesis examines the effect of a responsible investment index (FTSE4Good) on corporate social responsibility (CSR). In the first study I investigate the impact of the FTSE engagement reinforced by the threat of exclusion from the index on companies’ improvements in environmental management. The results show that FTSE involvement doubles the probability that a company will meet stricter environmental management requirements within the three-year period 2002 to 2005. Both the dialogue and the exclusion threat stimulate compliance but the dialogue appears to be more effective where the perceived threat of exclusion is higher. The engagement effect persists for at least five years and is positively related to low concentrated ownership and to domicile in a coordinated market economy. In the second study I examine FTSE4Good’s effect on the probability that a company will implement strong countering bribery practices within the two-year time period 2007 to 2009. The results demonstrate that the combined effect of engagement and exclusion threat is significant in promoting compliance and the two act independently. Stronger anti-bribery provisions are positively associated with companies based in liberal market economies, with better internal governance and higher reputational concerns related to ethical controversies. In the third study I investigate FTSE4Good’s impact on companies’ compliance with climate change criteria. The results show that the index is able to stimulate compliance and the dialogue appears to contribute more than the exclusion threat. I also find that the likelihood of the company adopting the required practices is negatively associated with concentrated ownership and with strong internal governance. Finally, the results offer some evidence that compliance is related to subsequent reduction in greenhouse gas emissions. These studies contribute to the understanding as to how different CSR areas are promoted or discouraged by the managers and the owners, and how the institutional environment influences this. The results are consistent with engagement via a responsible investment index being an effective means of large-scale collective monitoring by institutional investors. The findings are also relevant for policy makers who wish to promote active ownership.

Bangladesh reformed its corporate governance by adopting Bangladesh Corporate Governance Guidelines-2006 (the BCGG-2006 hereafter) due to pressures from international financial institutions (IFIs). However, there is huge controversy in prior literature regarding the IFIs’ suggested reform initiatives. The thesis asks specific research questions: RQ1. Do institutional investors and bankers in Bangladesh perceive that the level of compliance with the BCGG-2006 by the investee or borrowing company influences the investment and lending decisions respectively? RQ2.1. To what extent is the BCGG-2006 implemented in form rather than in substance? RQ2.2 Is there a relationship between the nature of compliance with the BCGC-2006 and firm performance? RQ3.1. To what extent does reported compliance with the BCGG-2006, as reported in annual reports, overstate underlying compliance with the BCGC-2006? RQ3.2 Does the overstatement of compliance reported in annual reports lead to a different relative ranking of a firm’s corporate governance structure? RQ3.3 What factors influence the overstatement of compliance with the BCG-2006 in annual reports? To investigate RQ1, an inductive approach is taken and data are collected by using semi-structured interviews of investment managers and credit rating analysts. In order to examine the remaining RQs, a deductive approach is taken and data are collected: (1) by using a structured survey questionnaire addressed to company secretaries or CFOs; and (2) from annual reports and stock exchanges. With respect to RQ1, this study finds (1) strong evidence that institutional investors and bankers perceive limited impact of corporate governance mechanisms recommended by the BCGG-2006 on investment and lending decisions respectively. In order to theorise the above findings, two theories: agency theory and the theory of path dependence are contrasted. Using a grounded theory coding, this study finds that (1) companies are locked in the path of control by sponsor families and sponsor families then impede the implementation of the BCGG-2006 and (2) institutional investors and bankers lock themselves in the path of name-based and relationship-based investment and lending practices which deters consideration of corporate governance mechanisms introduced by the BCGG-2006. Very few interviewees provide an explanation consistent with the agency theory. This evidence thus points more to the theory of path dependence than to agency theory. In relation to RQ2.1, this study finds that local privately-owned companies and government-owned companies either do not comply or comply in form but not in substance with the BCGG-2006, while subsidiaries of foreign multinational companies comply in form and in substance with the BCGG-2006. The relative strength of path dependence in local privately-owned companies and government-owned companies and subsidiaries of foreign multinational companies explains these results better than agency theory. The evidence with respect to RQ2.2 provides an indication that the nature of compliance with separation of the chairman and CEO, board independence and audit committee does not have an association with firm performance in case of local privately-owned companies. However, the evidence in relation to RQ2.2 provides an indication that the nature of compliance with the corporate governance mechanisms introduced by the BCGG-2006 makes a difference in firm performance in subsidiaries of foreign multinational companies. With respect to RQ3.1, it is found that companies overstate compliance with the BCGG-2006 in annual reports. With respect to RQ3.2, this study finds that the rank of a firm’s corporate governance is different when comparing compliance with the BCGG-2006 as reported in annual reports with compliance with the BCGG-2006 as stated in the survey. With respect to RQ3.3, it is found that overstatement of compliance is more pronounced with respect to less-observable provisions of the BCGG-2006, is positively associated with control by sponsor families and is negatively associated with control by institutional investors. This evidence is again more consistent with the theory of path dependence and institutional logic than agency theory. The findings of this thesis suggest that corporate governance researchers in developing countries should consider the role of path dependence rather than agency theory exclusively. This thesis also makes a methodological contribution by investigating overstatement of compliance with the BCGG-2006. The findings of this study may also assist regulators in developing countries and the IFIs in formulating future governance guidelines for developing countries.

Thesis (MBA)--Stellenbosch University, 2015. / ENGLISH ABSTRACT: Corporate governance codes such as King III are focussing on IT governance due to the strategic nature of IT systems and the impact security breaches or failure of IT systems can have on a company’s sustainability. The convergence of Operational Technology (OT) and IT brings about both risks and opportunities for OT systems, while further entrenching their strategic nature within organisations. These systems are therefore key to the sustainability of an organisation and this necessitates the extension of sound governance not only to IT but also to OT. In many organisations, due to the previously closed or proprietary nature of OT systems, no governance controls or frameworks have traditionally been needed or put in place for OT systems. The aim of this research was to explore whether the lack of OT governance controls or framework within OT reliant organisations could be addressed by adapting and implementing leading IT governance models for OT systems due to the convergence between traditional IT and OT. The research methodology employed was a literature review followed by the selection and adaptation of a leading IT governance framework for OT governance. Additional data regarding OT incidents was gathered from the author’s own organisation and documented as mini case studies to determine if OT governance could have mitigated or minimised the impact of the documented OT incidents. The research showed that IT and OT are converging on two fronts, firstly due to integration between IT and OT and secondly due to the sharing of common technologies at a hardware, software and network layer. The research also indicated that the security risks facing IT continue to grow in number and sophistication. By extension, due to the technology convergence, these risks are now extending to OT systems, adding to the risks already facing OT systems. Leading corporate governance codes are espousing holistic governance to ensure the sustainability of an enterprise. Certain codes such as King III from South Africa have specifically called out IT governance as a key element of a holistic governance practice. Due to the convergence between IT and OT as well as the increasing risk, the lack of governance in OT can have a material impact on the sustainability of an OT reliant enterprise, necessitating the extending of governance to cover not only IT but OT as well. The research showed that a leading IT governance framework such as COBIT 5 can be applied to OT with little or no adaptation firstly due to the closeness between IT and OT brought about by the convergence between IT and OT, and secondly due to the way that COBIT 5 has been developed to serve as an overarching governance framework that can be adapted and applied by Enterprises to suit their unique requirements, one of which could be OT governance.

published_or_final_version / abstract / Economics and Finance / Doctoral / Doctor of Philosophy

published_or_final_version / Law / Doctoral / Doctor of Philosophy

published_or_final_version / Economics and Finance / Doctoral / Doctor of Philosophy

published_or_final_version / Business / Doctoral / Doctor of Philosophy

This study has examined the relationship between corporate governance structures and the performance of a sample of companies listed on the Malaysian Stock Exchange in the post-Asian financial crisis period beginning 2001 and ending in 2003. The sample was selected to provide matched-pairs of government linked companies (GLCs) and non-government linked companies (NGLCs), as it was anticipated that these groups would have different governance structures and that these differences might impinge on the association being studied. The empirical results indicate that there were eight statistically significant differences between the corporate governance structures of GLCs and NGLCs, thus supporting the contention that it would be useful to examine the association between corporate governance structures and performance for these two distinct groups separately. Accordingly, univariate and multivariate tests were performed on three samples: (i) GLCs; (ii) NGLCs and (iii) a combination of these referred to as All Companies. The multivariate tests were performed both on the dataset collected from published sources and this data transformed using the Van Der Waerden approach. Although tests for conformity suggested no significant statistical problems with the original data-set for multivariate analysis, it was hoped that the transformation would provide better models for explaining the relationship between corporate governance variables and performance. The multivariate analyses on both the standard and transformed data-set found no empirical evidence of a consistent relationship between corporate governance structures and performance measured by return on assets and return on equity in GLCs, NGLCs or the combined sample over the period. Statistically significant relationships were found across the groupings and for different performance measures but were not sustained across all years. The implications for corporate governance research of these inconsistent results across different measures of performance and different samples across the three year period is that empirical research may reach conclusions based on statistically significant results at a point in time that are only relevant for this historic context and may not persist. The results also indicate that, despite the eight differences in governance structures of GLCs and NGLCs, the observed differences in the performance could not be explained by their governance structures. This finding supports the view that these structures provide appropriate monitoring on company’s management rather than improving performance. These findings are consistent with the ambivalent position on the relationship between performance and corporate governance variables observed by the literature which exhibits conflicting arguments about the direction of relationships and empirical results that are extremely variable. This study also found that the relatively poor performance of GLCs in Malaysia which has been associated with government influence on the board structures such as the appointment of a bumiputra as director (BUM), a senior government officer as director (SGO) and a politician as director (POL) were basically unfounded because these variables have no statistically significant adverse impact on performance.

<p>La thèse se compose de trois chapitres distincts. Le premier, rédigé en français, traite des questions de l’adaptation des établissements de crédits belges à leur environnement économique et financier depuis le milieu des années septante. Il a fait l’objet de deux publications dans les Cahiers Economiques de Bruxelles en 1997. Les deuxième et troisième chapitres, rédigés en Anglais, traitent de questions de Corporate Governance et, en particulier, décrivent et analysent l’actionnariat et les participations des sociétés belges cotées en Bourse de Bruxelles en 1995.<br> <p><b>Chapitre 1 : Impacts des évolutions du secteur financier sur le choix de portefeuille d'une banque</b><br> <p>Comment expliquer l’apparente stationnarité de la structure de bilan des établissements de crédits au cours de ces vingt dernières années? Pour modéliser l'activité bancaire, nous avons utilisé les théories de choix de portefeuille de Markowitz, en considérant la banque comme un investisseur face à trois actifs risqués (crédits, dépôts, fonds d'Etat) et détenant un capital fixé. Le modèle développé est une extension du modèle construit par PYLE (1971) qui prenait en compte deux actifs risqués et un actif sans risque.<br> <p>Le paramétrage ajuste le bilan théorique d'une banque sur le bilan agrégé de l'ensemble des banques en Belgique en 1975. Cet ajustement sur des données du passé permet d'étudier, aux travers de chocs sur les paramètres du modèle calibré, les trois grandes évolutions qu'a connu le secteur bancaire au cours des vingt années écoulées : l'augmentation de la concurrence bancaire, la modification des risques d'intérêt dans le sens d'une plus grande flexibilité des taux de dépôts, et l'introduction du ratio Cooke, imposant aux banques de détenir des fonds propres à hauteur de 8% minimum des crédits accordés au secteur privé.<br> <p>L'étude de ces trois chocs, individuellement d'abord, simultanément ensuite, a mis en évidence notamment les résultats suivants :<br> 1. L'apparente stationnarité de la structure des bilans bancaires depuis 1975 cache la compensation mutuelle des impacts de chacune des évolutions du secteur.<br> 2. L'augmentation de la concurrence bancaire, entraînant la réduction des marges d'intermédiation, a eu pour effet d'entamer la rentabilité du secteur et, par-là, la fragilité financière des établissements de crédits.<br> 3. L’introduction du ratio Cooke il y a quelques années ne fut pas contraignant pour la moyenne du secteur, contrairement à ce que certains ont prétendu à l'époque.<br> <p>Enfin, une actualisation des données de 1992 à 1996 détaille les raisons de l’amélioration de la rentabilité du secteur bancaire sur ces dernières années et confirme la validité du modèle utilisé par un paramétrage actualisé pour l’année 1996.<br> <p><b>Chapitre 2: Shareholdings Structure and Separation between Ownership and Control In Belgium</b><br> <p>The second chapter tends to describe, in a comprehensive manner, the full ownership structure of the 140 Belgian listed companies by the end of 1995, as well as the portfolio of their shareholdings. The paper details the matrix methodology used based on the contribution of Brioschi et al. (1989, 1997) and the database built to this end. The paper is part of a much wider network, the ECGN (European Corporate Governance Network), composed of several researchers in each of the European countries.<br> <p>Results show that direct ownership of listed firms is highly concentrated: on average, the largest shareholder controls, 45% of the votes, while the second one, much smaller, controls 11% and the third one 6%, others are negligible. Ultimate ownership concentration is high also if we consider the possibility of pyramiding. The largest ultimate owner controls on average 30% of the votes in a listed company, 6% for the second one. Pyramids are flat in Belgium: one or two ownership levels maximum in most cases.<br> <p>The ratio between the percentage of stakes owned and the percentage of stakes controlled by investor appear to be very limited in Belgium. Moreover, the effect of pyramiding in the separation between ownership and control seems to be negligible. There are, however, two big exceptions to this state of fact. These are the French holding company Suez and the non-listed Belgian firm Frère-Bourgeois, controlled jointly by the Belgian businessman Albert Frère.<br> <p>International comparisons of separation ratios reveal that in a country knowing the same Corporate Governance system as Belgium - Italy - the situation is similar in many regards, but extreme cases are much more pronounced. The situations are very different in countries belonging to other Corporate Governance systems, like The Netherlands and the United States.<br> <p><b>Chapitre 3: Block Investment and Partial Benefits of Corporate Control: The Case of Belgium</b><br> <p>The work of Zwiebel (1995): “Block investment and partial benefits of corporate control”, brings some answers to the question of the determinants of the shareholder structure of a public company. The objective of the chapter is to check whether Zwiebel’s theoretical predictions remain valid with ownership data of listed Belgian firm. And, more specifically, the results on distribution of small investors across firms compared to large shareholders. The question is also to assess the validity of Zwiebel’s theory across different corporate governance systems.<br> <p>To this end, we use first the same econometric tests as Zwiebel applied to US data in his paper, then we run non-parametrical tests in order to make a deeper analysis of the Belgian data. We test the statement both for direct ownership data and ultimate ownership data. We found a good applicability of Zwiebel’s prediction to the Belgian case. Our results allow us to discuss the robustness of Zwiebel’s theory across very different Corporate Governance system like in the United States and in Continental Europe, and contingent to this, its limitations.

This research offers the perceptions of independent non-executive directors (INEDs) in Thailand of their roles and the way they cope with constraints such as family-concentrated ownership structures and asymmetric information problems. There has been scant prior research in this area. The researcher applied qualitative research techniques to understand what was in the interviewees’ minds. The semi-structured interview was employed because it allowed some flexibility while also providing some guidelines. The fieldwork data reveals that interviewed INEDs were aware of a board’s control role which, in theory, can be realised by nominating and remunerating top management; however, in practice they had no authority to do so due to the family-concentrated ownership of Thai firms. Ensuring compliance with laws and regulations was the actual controlling activity which they undertook. Another role perceived was a service role concerned with giving advice and counsel to management. Although the interviewees rarely got involved with planning and directing, they contributed their expertise to the board. Their service function also helped them to better fulfil a control role because an INED’s service role builds his credibility in the eyes of management. This allows them to gain access to better information about a company – a critical input of a control role. Therefore, a good relationship between executives and non-executives is an essential factor for INED’s effectiveness. i A proportion of outside directors on the board and a director’s independent background were not considered guarantees of board independence. Only an INED’s independence of mind matters. Such independence can be exercised by resigning in order to send a signal to the market and protect minority shareholders. The competencies and personal characteristics of INEDs and their motivations are other elements contributing to their effectiveness.