Showing papers on "Corporate group published in 2010"

The Structure and Formation of Business Groups: Evidence from Korean Chaebols

Abstract: In this paper we study the determinants of business groups' ownership structure using unique panel data on Korean chaebols. In particular, we attempt to understand how pyramids form over time. We find that chaebols grow vertically (that is, pyramidally) as the family uses well-established group firms ("central firms'') to set up and acquire younger firms that have low profitability and high capital requirements. Chaebols grow horizontally (that is, using direct family ownership) when the family acquires firms that are highly profitable and require less capital. Our evidence suggests that the (previously documented) lower profitability of pyramidal firms is partly due to a selection effect (e.g., the family optimally places low profitability firms in pyramids). To show this, we examine instances of large changes in the ownership structure of group firms. Specifically, we find that poor past performance predicts an increase in the degree of pyramiding in a firm's ownership structure. Most compellingly, we find that the profitability of new group firms in the year before they are added to the group predicts whether they are added to pyramids or controlled directly by the family. We also examine the relative valuation of chaebol firms. We find that the group's central firms trade at a discount relative to other public group firms possibly due to the selection of low-profitability, high capital intensity firms into pyramids. Our results shed light on the process by which pyramids form, and provide new evidence on the performance and valuation of business group firms.

Does market-oriented institutional change in an emerging economy make business-group-affiliated multinationals perform better? An institution-based view

Abstract: Viewing market-oriented institutional change as a two-staged process, we propose that the effects of market-oriented institutional change on two organizational forms – business-group-affiliated and independent firms – are different, depending on the stage of institutional change. Specifically, we examine how the two distinct periods of market-oriented institutional change – that is, institutional friction and institutional convergence – affect business-group-affiliated firms and independent firms in their abilities to profit from international diversification. Using data on 140 Korean manufacturing multinational firms from 1993 to 2003, we find that emerging-economy firms face an international diversification discount – a negative relationship between international diversification and firm performance. We also find that business group affiliation affects the international diversification discount differently during the two periods of market-oriented institutional change, particularly when firm performance is measured by the market-to-book value (MBV). The moderating effect of business group affiliation on the relationship between international diversification and MBV is negative during the institutional frictions period, but becomes positive during the institutional convergence period in the later stage of institutional change. Our findings warn against viewing market-oriented institutional change as a discrete event, highlighting the importance of recognizing the qualitatively distinctive nature of different periods of market-oriented institutional change in future research.

Outside directors on Korean Boards: governance and institutions

Abstract: Drawing on institutional theory, this study examines the factors that pressured Korean firms to appoint outside directors to their boards. While this practice could be considered to be a management innovation in Korea, in the Anglo-American corporate governance system it has long been used as one of several mechanisms to mitigate agency costs between management and shareholders. As such, this response by Korean firms, following the 1997–98 currency crisis in Asia, could be seen as an example of corporate governance convergence on the Anglo-American model, where higher levels of outside director representation on the board are the norm. We examine the antecedents of having a higher proportion of outside directors on Korean boards. Our findings indicate that larger firms that are under stricter control by the government have higher representation of outside directors on the board. We also find a positive and significant relationship between the proportion of outside directors and business group affiliation, poor prior firm performance, higher levels of debt and foreign ownership.

Experiential Learning: A Definitive Edge In The Job Market

Abstract: The value of experiential learning is explored as it has now become a given among educators and corporate leaders that a university must provide experiential learning programs such as internships; real-life cases in marketing research, advertising, etc.; and voluntary student participation in income tax preparation for the needy and elderly; and many additional types of programs to promote the application of learning and involvement with the world of work. The paper presents one unique experiential learning program in complete detail—Student in Free Enterprise’s Walgreens Wrangle. This is a twelve-university business strategy competition sponsored by the Students in Free Enterprise team at Southern Arkansas University that has the three-day involvement of managers of four major corporations. This period of time to interact both professionally and socially with a corporate group has proven to be invaluable to business majors and provided them with many experiential learning experiences.

The Effects of Board Independence in Controlled Firms: Evidence from Turkey

Abstract: A large number of empirical studies in the U.S. report that there is no cross-sectional relationship between board composition and firm performance. On the other hand, a relatively small but growing literature on boards in emerging market corporations shows that a higher level of board independence is associated with both firm actions which are consistent with the interests of shareholders and with superior firm performance. This important difference between developed and emerging markets suggests that boards matter more in weak governance systems. We analyze the relationship between board structure and firm performance for a sample of listed companies in Turkey - a country that features relatively weak protection for investors, firms associated with family controlled business groups and pyramidal structures. We do so by using a hand-collected data set on directors’ personal characteristics and their roles. We document that Turkish boards are populated besides members of the controlling shareholder and their affiliated parties, by employees of the apex firm in the business group, by ex-politicians, ex-bureaucrats and ex-military officers. Classifying the board members as independent and affiliated directors, we report three main results: (i) Board independence is unrelated to equity issues, (ii) Independent directors are unlikely to curb the extent of related party transactions, and (iii) Depending on the statistical methods we use, the presence of independent board members and firm performance are negatively related or uncorrelated. These results are robust under different specifications and estimation methods which try to deal with the endogeneity problems inherent in board research. Especially the findings (ii) and (iii) challenge the usefulness of independent directors as an internal governance device in Turkish companies.

Family Business Groups Around the World: Costs and Benefits of Pyramids

Abstract: Using a comprehensive dataset of 28,039 firms in 45 countries, this study investigates the motivations for family-controlled business groups, focusing on the question of how such groups are able to attract minority shareholders and allay their concerns about being expropriated. We argue that minority shareholders co-invest with group controlling owners because group structures play critical roles in financing projects that might not be otherwise funded by external investments, especially in underdeveloped capital markets. Our analysis offers support for this argument and provides new insight into how the balance of costs and benefits of group affiliation varies both within the pyramidal structure of a group and across investment environments. At the country level, we find that restricted access to external capital is associated with a greater prevalence of family business groups. Within individual groups, we find evidence consistent with funding advantages that pyramid structures offer: among group members, firms at the bottom of a pyramid receive the greatest internal capital support. In particular, internal equity funding, investment intensity, and firm performance all increase down a pyramidal chain. Comparing group affiliates and independent firms, we find that the former is associated with a valuation discount, which is consistent with evidence from prior studies. However, controlling for endogeneity in group affiliation shows that certain firm types benefit from business group membership. Overall, our results highlight that in addition to the well-documented control motivations behind pyramidal groups, these structures also provide important funding and certification support to members firms.

The impact of business group affiliation on performance: evidence from China's ‘national champions’

Abstract: An important aspect of China’s economic reforms has been an ambitious policy to develop 100 or so large, internationally competitive business groups. Very little is known about these national champion groups or the benefits to subsidiary firms of belonging to them. This study, building from insights and methods used in existing literature, examines the performance of subsidiaries affiliated to China’s national champion groups. Our results find that they perform comparatively well.We discuss possible reasons for this finding and comment more generally on the important role that business groups now play in China’s reform and development.

Performance and Value Creation: Family Managed Business versus Non-Family Managed Business

Abstract: Business groups today, by and large, play a vital role in Indian economy. Corporate India, as seen today, was nurtured by many business groups that had left a strong imprint on the country’s economy. In this context, it is highly interesting to explore the underpinnings of a business group’s ability to create value for its shareholders. For this purpose, business groups have been categorized as family managed and non-family managed. This paper attempts to compare the performance indicators and the value created by a family managed firm with those of a non-family managed firm belonging to the same industry. It also throws light on the literature-based definitions of a Family Managed Business (FMB) and how it is different from a Non-Family Managed Business (NFMB). Further, the paper gives a concrete analysis of the various parameters used to assess shareholder value creation from both perspectives. The study shows that even a professionally managed non-family business can create value to its shareholders.

Foundations of Corporate Law

Abstract: This paper is the first chapter of the third edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda Mariana Pargendler, Georg Ringe, and Edward Rock (Oxford University Press, 2017). The book as a whole provides a functional analysis of corporate (or company) law in Europe, the U.S., and Japan. Its organization reflects the structure of corporate law across all jurisdictions, while individual chapters explore the diversity of jurisdictional approaches to the common problems of corporate law. In its third edition, the book has been significantly revised and expanded. As the introductory chapter to the book, this paper introduces the book’s analytic framework, which focuses on the common structure of corporate law across different jurisdictions as a response to fundamentally similar legal and economic problems. It first details the economic importance of the corporate form’s hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. The major agency problems that attend the corporate form and that, therefore, must be addressed, are identified. The chapter next considers the role of law and contract in structuring corporate affairs, including the function of mandatory and default rules, standard forms, and choice of law, as well the debate about the proper role of corporate law in promoting overall social welfare. While almost all legal systems retain the core features of the corporate form, individual jurisdictions have made distinct choices regarding many other aspects of their corporate laws. The forces shaping the development of corporate law, including evolving patterns of share ownership, are examined.

China's Outward FDI and Resource-Seeking Strategy: A Case Study on Chinalco and Rio Tinto

Abstract: The failed advance of Chinalco on Rio-Tinto and the quick success of Minmetals’ acquisition of Oz Minerals within a week in June 2009 represented China’s persistent thirst for natural resources such as iron ore and bauxite However, the eagerness and scale of acquisitions of foreign mining companies by China’s large state-owned enterprises cannot be satisfactorily explained by existing investment or business theories As a result, it is imperative to propose alternative theories on the motivation of Chinese big businesses making OFDI Using Chinalco as a case study, this chapter makes the following theoretical propositions and conclusions First, unlike western transnational corporations (TNCs), Chinese big businesses going global are part of the country’s powerbuilding globalisation strategy Second, with soft budget constraints and extended protection by the government beyond the nation’s boundary, these business champions can outstrip their foreign competitors in taking risks and raising investment capital The on-going world financial crisis has become a catalyst for them to catch up with gigantic TNCs of the most advanced industrial economies Third, foreign TNCs need be aware of these differences to benefit from Chinese OFDI

Insider Control, Group Affiliation and Earnings Management in Emerging Economies: Evidence from India

Abstract: Using a sample of group affiliated and standalone firms for the years 2001-06 from India, a large emerging economy dominated by family business groups and firms with concentrated ownership, we examine the relationship between insider control and opportunistic earnings management with specific focus on the effect of business group affiliation on this relationship. We test the alignment and the entrenchment hypotheses by examining opportunistic earnings management. We further examine if such behavior is influenced by the complexity of ownership structures that are manifested in incomplete and fragmented information about ownership stakes. Our results indicate that a non-linear U-shaped relationship exists between insider control and opportunistic earnings management and that this relationship is stronger for group affiliated firms as compared to that for standalones. Finally, incomplete and fragmented ownership information is found to be strongly related to opportunistic earnings management in group affiliated firms. Our results highlight that both insider control and group affiliation may independently influence agency costs in emerging economies. This in turn calls for policy actions that focus not only on individual firms but on business groups as consolidated identities.

Freezing out Ben & Jerry: Corporate Law and the Sale of a Social Enterprise Icon

Abstract: Companies with social missions are frequently bought by larger, more conventional profit-seeking firms and just as frequently accused of “selling out.” Ben & Jerry’s Homemade Inc. is perhaps the leading example: its takeover by international conglomerate Unilever is an oft-repeated cautionary tale of the negative proclivities of the publicly-traded corporate form and profit-maximizing corporate law. Contrary to conventional wisdom, however, corporate law did not compel the sale, or sell-out, of Ben & Jerry’s. This familiar account omits a critical part of the narrative -- the company and its founders had established impressive anti-takeover defenses that, when pressed, the board declined to test. The Ben & Jerry’s story demonstrates that a well designed corporate structure can be suitable for social entrepreneurs seeking to pursue both profits and a social mission. Moreover, handwringing by progressives over the sale of social enterprise icons may be misguided, as such transactions may enable these firms to create more social value than they could independently.

Corporate Group Formation and Differentiation in Early Puebloan Villages of the American Southwest

Abstract: The development of corporate groups and social differentiation has long been studied by scholars interested in the historic development of Puebloan societies in the American Southwest. Recent discussions of these issues have suggested that corporate group organization and differentiation were formalized during the transition from pithouse to pueblo architecture from A.D. 700 to 1000. In this article, I examine the history and process of the pithouse-to-pueblo transition in the northern San Juan region from A.D. 700 to 900. Unlike in most parts of the ancient Southwest, the architectural transition in this area was accompanied by a significant settlement change resulting in the founding of large, permanent villages housing hundreds of residents. I present an analysis of architectural differences within McPhee Village, one of the largest of these settlements, that documents variability in corporate group organization and socioeconomic power near the end of this transitional period. This study contributes to a growing body of archaeological literature that highlights the importance of internal social dynamics and corporate strategies within early village societies.

The Role of Internal Audit in Optimization of Corporate Governance at the Groups of Companies

Abstract: Recent financial scandals have demonstrated that the risk of accounting fraud may be vague in any type of economic system. In this context, transparency of information, indispensable element for competitiveness in the market is an efficient operation of systems of corporate governance and especially of control systems. All these must be appropriate in the legislation in terms of external information. The issue of governance will thus be seen as a fundamental pillar against pressures which induce at the fraud as a result of lack of transparency of information flows. In all models of corporate governance, external regulations cover a primary role in ensuring the effectiveness of controls, but remain central the responsibility of entities to adopt a virtuous mechanism as an internal control profile. An example in this sense of "best practice" may be represented by the multinational companies that have known to harmonize the national rules with the typical instruments of other models of governance. The authors have established that the main objective in this work is the evaluation model of governance already existing in a group of companies in accordance with the principles of corporate governance. In the first part of the work it was made a comparitive analysis between the models of corporate governance, focusing on the role of transparency of communication, the primary tool in prevention of frauds, the link between information and prevention of frauds being independent of the model of corporate governance adopted, by the structure of organization and the control mechanisms. The work

Business Groups’ Financial Performance: Evidence from Pakistan

Abstract: We examine comparative financial performance of business groups in Pakistan employing samples of firms listed on the Karachi Stock Exchange. Our descriptive results show that group firms are larger in size and have higher operating profits. Group firms also exhibit lower sales growth variability over a five year period than non-business group firms. Our statistical analysis reveals that business group firms have significantly higher liquidity and significantly lower financial leverage than the non-business group firms. More importantly, business group firms are more profitable (higher ROA) than non-group firms. Our results based on superior financial performance of business groups indicate that business groups in Pakistan are efficient economic arrangements that substitute for missing or inefficient outside institutions and markets, hence supporting the market failure argument.

CSR and inter-organisational network management of corporate groups: Case study on environmental management of Sekisui House Corporation Group

Abstract: When social demand emerged for corporations to adopt principles of environmental protection and preservation, building constructors, with their high volume of construction waste, faced a dilemma in devising countermeasures. Sekisui House Corporation's response was to tackle its social responsibility obligations over waste by establishing practical cooperation throughout its whole corporate group. This article investigates the process of corporate social responsibility (CSR) management in the Sekisui House Corporate group, and makes clear the best practice of middle managers’ leadership in the field. In this case, middle managers created an inter-organisational network in the corporate group as follows: First, they socialised and externalised workers’ sense of value on CSR and concrete ideas for it by making the inter-organisational network denser and network ties stronger. Second, they combined workers’ sense of value and concrete ideas by serving as mediators between corporate headquarters and branch offices, and created an appropriate route for CSR. Third, they internalised this approach by making the inter-organisational network denser and ties stronger.

The Corporate Pyramid Fable

Abstract: In many parts of the world, it is commonplace for wealthy families and successful entrepreneurs to parlay a relatively small financial investment into control of a sprawling corporate empire through the use of a pyramid-like structure in which they directly control a firm that owns a dominant stake in a company or companies with outside investors, which in turn controls other firms in the same manner and so on. In the United States, however, corporate pyramids are the exception to the rule. Why is this controversial business arrangement, stigmatized as a device economic elites use to disguise market power and manipulate government, largely absent from the U.S. corporate landscape? The conventional wisdom is that they were dismantled by New Deal policymakers who introduced in 1935 a tax on dividends paid to corporate shareholders. We show that this version of events is more fable than truth, relying primarily on a hand collected dataset drawn from filings made with the Securities and Exchange Commission between 1936 and 1938 by companies owning 10% or more of shares of companies registered with the Commission. We account for the rarity of corporate pyramids in the U.S. largely in terms of history, indicating that prior to the New Deal they were only ever extensively used in the utilities sector, where elimination of pyramidal structures was driven primarily by the Public Utilities Holding Company Act of 1935. Tax may have had an effect on corporate structure, but, at least in this instance, it was not the great leveller that the corporate pyramid fable would suggest.

The Paradox of Corporate Giving: Tax Expenditures, the Nature of the Corporation, and the Social Construction of Charity

Abstract: Corporate charitable giving is big business. Fundraisers estimate that in 1992, U.S. corporations contributed $6 billion to qualified charitable organizations. Hard-pressed for funds, qualified charities actively seek and compete for corporate contributions. Fundraising literature identifies corporate giving as the last great frontier of philanthropy. Marketing literature touts corporate giving as the latest advertising and public relations technique. Both camps proclaim that corporate giving is good for business and extol the business advantages which flow from transfers to charity. In short, corporate giving means doing best by doing good. Legal scholarship ignores the way corporate giving is described, justified, and expressed by those making the transfers (corporate managers) and those receiving the transfers (fundraisers). Instead, it presents the widespread practice of corporate giving as an apparent paradox: why would corporations give away $6 billion in assets each year? It then analyzes this practice in terms of the theory of corporate purpose and federal tax policy. Both approaches fail because they misapprehend the behavior they purport to explain. Both assume that the distinguishing feature of corporate giving is the absence of a quid pro quo; the absence of an expected commensurate benefit. Yet, this assumption is at odds with the contemporary understanding of corporate giving. Marketing and fundraising literature describes corporate giving in terms of enlightened self-interest, making it clear that a corporate transfer to charity is not altruistic; it is intensely self-interested. Such transfers are made with the expectation of receiving a commensurate benefit in return, ranging from immediate advertising and marketing services to long-term public relations and goodwill advantages. Only corporate transfers to qualified charitable organizations made without the expectation of receiving a commensurate benefit qualify as a deductible contribution or gift under section 170. Other transfers to charity may be deductible as ordinary and necessary business expenses under section 162. Thus, federal tax policy assumes that there are two distinct types of corporate transfers to charity: one advances the corporate goal of social responsibility (section 170 contribution or gift), and the other furthers the goal of profit maximization (section 162 ordinary and necessary business expenses). The proponents of corporate giving explain corporate giving in terms of the two classic expressions of corporate purpose: profit maximization and social responsibility. When a corporation makes a transfer to charity it advocates a model of corporate social responsibility, but it articulates the goal of profit maximization. Corporate giving consciously tries to capitalize on the goodwill associated with social responsibility and to use such charitable goodwill for corporate advantage. This commodification of charitable goodwill is known in the advertising and marketing industry as the halo effect. This article examines and documents why corporations make transfers to charity. Part I provides a historical background of corporate giving. Part II reviews the various explanations for corporate giving, including the current understanding of corporate giving as expressed in marketing and fundraising literature. Part III discusses the tax expenditure theory of deductions and recasts the analysis of the corporate charitable contribution deduction as an indirect federal subsidy for the corporate purchase of advertising or public relations services.

The role of heirs in family businesses: The case of Carvajal

Abstract: We extend the Palia, Ravid and Wang (2008) model of family succession, and argue that family CEOs can be successful if certain characteristics, such as private knowledge, non monetary benefits from managing the firm, and personal skills are met. We use Carvajal, a large Colombian business group, to support our ideas and show that, contrary to international empirical evidence, there are certain circumstances where efforts made by heirs can be similar to those of the founder and exceed those of outside managers.

The Rise of the Japanese Corporate System

Abstract: 1. Corporations for Corporate Employees 2. Comparison with Foreign Corporations 3. The Progressive Nature of the Japanese Corporate System 4. Kigyoism as an Economic System 5. Kigyoism as a Social System 6. The Rise of Kigyoism

A gap in the corporate responsibility to respect human rights

Abstract: The Human Rights Council received well the ‘protect, respect, remedy’ framework that the SRSG for business and human rights, John Ruggie, presented in 2008 and his mandate was renewed for another 3 years. The corporate responsibility to respect human rights is defined narrowly for abuses linked to business activities only. In the same time, the SRSG remarks that conduct in the form of both acts and omissions can fail the responsibility to respect. This article analyses how the SRSG has dealt with a special type of culpable business conduct (omissions as opposed to commissions) of a special business actor (the controlling entity within a business group as opposed to mere affiliates or independent businesses). On what legitimate grounds should the omissions of parent companies be deemed blameworthy and to what extent are issues that the SRSG has not properly differentiated from other cases of business misconduct. The SRSG relies on the concept of “complicity”, which he employs to explain cases of corporate involvement in third parties’ misconduct and took note of jurisprudence, but the incorporation of those insights is partial and the conceptualization is half-baked. An assessment of SRSG’s reports reveals that they lack a proper scheme of attribution to deal with situations where harm caused by third parties gets attributed to the inactive parent company. The result is a hole at the heart of the responsibility to respect. This article explains the problem and considers ways forward to strengthening the foundation of the responsibility to respect in order to go forward in clarifying its scope. (Less)

The Development of Modern Corporate Governance in China and India

Abstract: Introduction Corporate governance reform has become a topic of considerable debate both in the US and in many emerging markets. Indeed, the discussion is important because these reforms may have potentially long-standing effects upon the global allocation of capital, and in understanding the ways in which governance norms are communicated across markets and nations in an ever-globalizing world. In this chapter we examine the corporate governance reform efforts of the world's two biggest and fastest growing emerging markets, the People's Republic of China (PRC or China) and India. In the process we find that our understanding of how and why corporate governance reform comes about, where it leads, and what value it has can vary significantly, but still shares some commonalities that are of considerable theoretical and practical importance. The inquiry commenced in this chapter is inspired by certain key facts. First, China and India are growing at a remarkable and unprecedented pace and seem to have survived the 2008–9 Global Financial Crisis better than most other economies. Second, China and India are not Western countries, but have been heavily influenced by “globalized” Anglo-American notions of corporate law, corporate governance norms, and securities regulation. Third, China and India are presently two of the most popular destinations for foreign capital in the world – whether via foreign direct investment (FDI) in essentially private (or pre-public) transactions or public capital markets transactions.

An overview of corporate governance in China

Abstract: The author examines corporate governance qualitatively and applies corporate governance principles to Chinese companies, especially the state owned enterprises. The paper reviews the meaning and importance of corporate governance, the institutional structures that exist, and the corporate governance problems that typically arise. A significant problem with achieving good corporate governance lies with the agency problem. Overcoming this problem therefore is crucial. Key characteristics of good corporate governance emerge. Good corporate governance depends upon company specific structures such as the board of directors as well as market information flows. Corporate governance is examined in its peculiarly Chinese setting. The paper traces the development of reform in China and how it has impacted corporate governance. Developments such as domestic listing and foreign listing are examined as to their impact on corporate governance. Chinese corporate governance still faces many challenges. Corporate governance is often weak because of a variety of problems. Among these are fragmented stock ownership, lack of a bond market, and poor quality information. Improving monitoring and the incentive structure remain significant challenges. Capital formation and securitization are often politically driven. State owned companies may have multiple masters, whose priorities may not lead to value creation. At the same time describing Chinese markets involves a moving target. Substantial changes have occurred in the last decade improving corporate governance and more changes will surely come soon.

Common consolidated corporate tax base. Effects of formulary apportionment on corporate group entities.

Abstract: The European Commission is currently working on a legislative draft to harmonise the corporate income tax provisions for multinational groups of companies throughout the European Union. For that purpose the European Commission has installed a working group with the mission to draft a Common Consolidated Corporate Tax Base (CCCTB) applicable for multinational companies. As the EU member states are not willing to surrender their taxing power to the supranational level of the EU each group entity's tax base would be determined by apportionment of the group's overall taxable income according to a predefined micro-economic factor based formula whereas the group income will be calculated by consolidating earnings beforehand separately determined by each group entity (preconsolidation income). The situs state of the particular group entity would then apply its statutory corporate tax rate on the apportioned tax base. This paper evaluates the effects of this prospective apportionment procedure on any given corporate group entity and finds that the share of the group's income allocated to a particular entity using the apportionment formula does regularly not equal the pre-consolidation income of the respective group entity. The reasons for this regular observable deviation can be found on the one hand in the concept of the apportionment formula and on the other hand in the specifics of the definitions of the apportionment factors. (author's abstract)

The split equity reform and corporate financial transparency in China

Abstract: Purpose – The purpose of this paper is to report the impact of the Chinese capital market split equity (SE) reform in 2005 on the corporate financial transparency of Chinese listed companiesDesign/methodology/approach – Using an International Financial Reporting Standards‐based checklist, the paper investigates whether the post‐reform 2005 annual reports of reformed companies improved transparency compared to pre‐reform 2004 reports The transparency of the reformed companies was also compared to a control group of companies unreformed on December 31, 2005Findings – Results indicate that the SE reform increased corporate disclosures Reformed companies had higher mandatory and voluntary disclosures in their post‐reform 2005 annual reports compared to their pre‐reform 2004 annual reports In addition, the improvement in mandatory and voluntary disclosures for reformed companies is greater than that of the unreformed control groupResearch limitations/implications – The SE reform provides a unique natural

Corporate Social Responsibility: A Broader View of Corporate Governance

Abstract: It is clearly accepted that good corporate governance is fundamental to the successfully continuing operating of any corporation; hence much attention has been paid to the procedures of such governance. Often however what is actually meant by the corporate governance of a firm is merely assumed without being made explicit; moreover it is assumed that the concept is simply connected to the management of investor relationships. Similarly corporate social responsibility is generally accepted to be fundamental to the continuing operating of any corporation, and is arguably the fashionable concept of the moment. While it is clear what is generally meant by corporate governance it is much less clear what is meant by corporate social responsibility and we start by investigating this concept.For two such fundamental concepts however it would seem that there should be a relationship between the two, although little work has been undertaken on exploring this relationship. We argue however that the two concepts are inextricably linked and that it is necessary to take a broader view of corporate governance which encompasses relationships with the whole stakeholder community and necessarily therefore incorporates the principles of corporate social responsibility. We argue that the more progressive corporations recognize this and use evidence from the FTSE100 companies and their corporate governance policies to support our argument.