Analysis on corporate governance compliance standards in New Zealand – a qualitative study on disclosures using content analysis and interviews

Abstract

Purpose This paper aims to provide more insights into the standard of corporate governance in New Zealand. The study intends to uncover how a small country with a well-developed economy with a good system of law and order, good institutional set up and law enforcements and implements the principles contained in the FMA’s corporate governance guidelines in practice. Design/methodology/approach The study is a mixed study one where it employs case study content analysis and augmented by conducting interviews. Large companies are selected to ascertain the level of compliance of NZ companies towards their obligations to report on corporate governance practices within the organisation. At the first stage, the study uses content analysis and looks at contents of company annual reports and publications on websites to determine whether they had disclosed as intended by New Zealand’s corporate governance guidelines. Findings The study found that a high compliance was recorded in areas such as board composition and board committees and low compliance recorded in areas involving costly implementation or when the issue is sensitive such as disclosures regarding remuneration details of directors and what non-audit work was undertaken and whether it compromises auditor independence. Being a small country, NZ has performed well in attracting foreign investment due to its strong tradition of law enforcement and respect for regulations. With greater awareness of the importance of corporate governance to investors, companies may see the benefit of greater compliance with the corporate governance guidelines. This is in line with the stakeholder theory and resource dependency theory where companies will voluntarily disclose information on corporate governance, social and environmental performance over and above mandatory requirements to appease and manage their stakeholders. Research limitations/implications The sample size of this study represents 3 per cent of total listed companies in New Zealand, but the sample is approximately 10 per cent of local NZ listed companies (i.e. not dual listed in Australia). There are 36 large companies in the New Zealand stock market with market capitalisation of 1 billion and above. In addition, the companies selected for this study are well-known in New Zealand, and it is acknowledged that this can be a source of bias in my analysis. Practical implications As was revealed during the interviews with company’s senior officials, Australian companies have achieved a higher level of compliance with the code of corporate governance. In this regard, New Zealand will have to step up and follow Australia’s lead to ensure greater compliance with the New Zealand corporate governance principles and guidelines. It would be in the best interest of the company’s stakeholders if full compliance is achieved. Originality/value Studies on the level of compliance by New Zealand companies on their obligations to meet the full extent of disclosures as stipulated by the New Zealand corporate governance guidelines are rare. This study aims to ascertain the standard of corporate governance reporting in New Zealand and the company’s seriousness to comply or attempt to meet the requirements in the seven stipulated principles.

Does Corporate Governance Compliance Increase Company Value? Evidence from the Best Practice of the Board

“…Our findings suggest that implementing new corporate governance practice is an incremental process. Descriptive statistics are consistent with prior studies on emerging and post-transition countries and demonstrate a slow but steady increase in the number of complying companies, though still lagging behind well-established economies (Albu and Girbina 2015;Chang 2018). The results of the constructed models reveal a statistically significant and negative relationship between all three constructed measures of compliance and firm value as measured by Tobin's Q.…”

“…Conceptually, codes of best practice offer self-regulation for companies (Hooghiemstra and van Ees 2011) and aim to resolve the inherent principal-agent conflict, strengthen monitoring tools over management and limit the power of corporate officials (Pritchett 1983). As a result, corporate governance guidelines reduce information asymmetry, empower shareholders, and lower agency costs (Chang 2018). Despite institutional differences across corporate governance regimes, the code provisions remain similar (Cicon et al 2012;OECD 2015).…”

“…In this paper, we aim to add to the existing literature on corporate governance compliance in developing and emerging markets (Outa and Waweru 2016;Sarhan and Ntim 2018), in addition to smaller economies (Chang 2018), and to deliver insights on the implementation of best practice codes in a post-transition and post-communist economy (Okhmatovskiy and David 2012;Albu and Girbina 2015). In this light, we pose a question concerning the market valuation effect for the implementation of best practice codes.…”

“…Drawing upon agency theory, we address the limitations of best practice codes in an emerging governance context, emphasizing the role of concentrated ownership. While the existing literature emphasizes that the prime objective of best practice implementation lies in creating conditions to attract investors to invest funds (Chang 2018), the reality of operating in the context of concentrated ownership may offer different incentives for blockholders (Chen et al 2011). Compliance per se may be seen in terms of a cost, a loss of power, or a threat from the exposure of internal structure to the scrutiny of the general public.…”

Gobierno corporativo y su relación con los grupos de interés en la banca colombiana

“…Aunque no son fenómenos recientes, las diferentes crisis financieras y los casos de malas prácticas corporativas alrededor del mundo, el tema siempre está presente en el orden del día (Murillo et al, 2019). Estos sucesos ocurridos en las últimas dos décadas han generado un aumento en la vigilancia de los lineamientos de los GC en las instituciones financieras, creando una pérdida en la confianza de los consumidores (Chang, 2018). Es por esta razón que Da Silva en (2019) considera que estas crisis han ocurrido por los frágiles GC en las instituciones.…”