Corporate governance and securities class actions

Abstract

This study investigates the governance attributes of firms that have been subject to securities class actions (SCAs). There has been a recent sizable increase in the number of firms subject to SCAs in Australia. We examine a sample of firms that have been subject to SCAs due to disclosure breaches and match the firms by industry and size to a control sample. First, we examine the compliance culture of the SCA firms via the frequency of Australian Securities Exchange (ASX) queries of the firm and find that the frequency of ASX queries is positively associated with the occurrence of a SCA. Secondly, we provide evidence that SCA firms exhibit weaker levels of corporate governance than the matched control sample. In addition, we contribute to the understanding of firms subject to SCAs and their corporate governance attributes. Our results suggest the presence of a nomination committee may be associated with higher agency costs and that the influence of CEO duality may reduce the effectiveness of a nomination committee.

Remuneration committees, shareholder dissent on CEO pay and the CEO pay–performance link

“…Fewer institutional shareholders lead to less external monitoring and increased agency conflicts (Fleming et al ., ; Henry, ). Australia also has a less litigious environment than the United States (Chapple et al ., ).…”

Chief financial officer demographic characteristics and fraudulent financial reporting in China

“…Australian studies have relied on relatively small sample sizes in comparison with our current study using self-reporting data in the KPMG Fraud Survey (Coram et al, 2008;Tan et al, 2015;Capezio and Mavisakalyan, 2016) and data on companies that are subject to regulatory investigation, class actions and media releases (Sharma, 2004;Chapple et al, 2014;Yuan and Zhang, 2016).…”

Corporate fraud culture: Re‐examining the corporate governance and performance relation

“…Researchers have found various ways to identify and observe instances of financial statement fraud, for example, using account restatements (Ahmed and Goodwin, 2007; and international databases such as Government Audit Office; Audit Analytics), securities class actions (Chapple et al, 2014; and international databases such as Stanford's Securities Class Action Clearing House), Australian Securities and Investments Commission (ASIC) actions (Da Silva Rosa et al, 2008) and the SEC's Accounting and Audit Enforcement Releases (AAERs) (Karpoff et al, 2013). However, it is much more difficult to identify and measure misappropriation-type fraud.…”