Claude Francoeur

What Makes Better Boards? A Closer Look at Diversity and Ownership

This study investigates the joint effect of corporate ownership and board of directors’ diversity configurations on the success of strategic mergers and acquisitions (M&A) decisions. Board diversity is defined as the extent to which its demographic diversity as measured by the culture, nationality, gender and experience of its directors complements its statutory diversity. A theoretical framework linking ownership, board diversity and M&A strategic decision making is proposed and tested. Based on a sample of 289 M&A decisions undertaken by Canadian firms over the period 2000-2007, demographic diversity is found to have a clear and non linear effect on M&A performance while statutory diversity is of limited influence. Ownership is found to influence the effect of diversity, making the relation finer and more precise. This has practical implications. First, statutory diversity is not sufficient for well-performing boards. Also, ownership is an important factor. The mostly advocated board diversity aimed at insuring the board’s independence is not valid across all ownership configurations. From a public policy perspective, results provide support for the principles-based approach in governance. Governance regimes should encourage the search for a balance between board diversity and the need for cohesion that best serves the firm’s purpose and obligations.

Corporate governance mechanisms, accounting results and stock valuation in Canada

Purpose - The purpose of this paper is to investigate the relationship between corporate governance practices or mechanisms and firm value, as measured by accounting and market data. Design/methodology/approach - Partial least square analyses were performed on a sample of 355 observations from 199 Canadian listed companies. The greater variability allowed under the Canadian principles-based institutional setting than under the rules-based USA SOX environment is well-suited for these tests. Findings - Results suggest that some governance practices, namely the percentage of independent directors on the board, the use of stock options and the frequency of board meetings are significantly and negatively related to the firms net book value or income. However, most individual governance practices appear to have no significant impact on the firms’ market value. Research limitations/implications - The potential interrelationships between corporate governance practices and contextual variables are not specifically taken into account, except for the firms’ industrial sector. It is also possible that certain governance mechanisms jointly impact firm value. Practical implications - This study does not support the current emphasis by regulators on governance practices which mainly concern the monitoring function of the board as opposed to its strategic one. Originality/value - The paper uses Canada as a laboratory where companies are “invited” rather than “required” to follow corporate governance best practices. This greater corporate discretion in the choice of governance practices provides the variability necessary to test the effect of governance on firm value. Furthermore, in the interest of triangulation, a model seldom seen in the governance literature is used to examine the impact of governance mechanisms on firm value and performance, as measured by accounting and market data.

Ownership structure, earnings management and acquiring firm post-merger market performance: Evidence from Canada

Purpose - The purpose of this paper is to investigate the link between ownership structure, earnings management (EM) preceding mergers and acquisitions (M&A) and the acquiring firms subsequent long-term market performance. Design/methodology/approach - The authors measure the magnitude of discretionary current accruals using two methodologies, that of Teoh Findings - It was found that firms using stock as a financing medium exhibit significant positive discretionary accruals during the year preceding the M&A and during the year of the acquisition. It was also documented that voting right concentration and control-enhancing mechanisms are not associated with any significant level of earnings management. Finally, a negative association was found between EM and abnormal stock returns over a three-year period following the acquisition. Research limitations/implications - These results suggest that the concentrated ownership alignment effect dominates the entrenchment motives and acts as a deterrent mechanism to prevent controlling shareholders from managing earnings in stock-financed M&A. Practical implications - The authors’ results highlight the importance of maintaining good legal and extra-legal protection of minority shareholders. Regulators can play an important role in preventing dominant shareholders from engaging in opportunistic EM in stock-financed M&A. Originality/value - The paper extends prior literature by taking a closer look at dominant shareholders’ motivations to manage earnings in stock-financed M&A. Large shareholders have strong incentives to manage earnings upward prior to stock-financed transactions to limit the dilution of their controlling position.

International Corporate Sustainability Barometer 2012: Sustainability Management in France

This chapter summarises the results for France as part of the International Corporate Sustainability Barometer (ICSB). The introduction and the first section describe the context of sustainability in France and the characteristics of the French companies surveyed. The second section presents the main findings and some comparisons between our sample of French companies and the international average regarding the three main topics of the International Corporate Sustainability Barometer. Concerning the intention to manage sustainability issues, French firms are found to be most strongly influenced by national authorities. With regard to the integration of sustainability into the organisation, the results show that in France social and environmental issues affect the majority of organisational units to a lesser degree than is the case on international average. In addition, differences exist between organisational units in France. More specifically, sustainability-related and externally-oriented units, such as CSR and communication, are most supportive of sustainability. By contrast, performance-oriented units, such as finance and accounting, are less supportive. Lastly, the actual implementation of corporate sustainability is characterised by the fact that the application of sustainability management tools is less common among French companies when compared to the international average. Nevertheless, French companies frequently measure the impact of their sustainability measures.

Stock Market Reaction to Sell-Offs Announcements: Canadian Evidence

This study examines the effects of Canadian divestitures announcements on selling companies’ shareholder wealth. Using a non parametric bootstrap approach to test for significance, our results show that the sell-off announcement produces significant positive average abnormal returns of 0.92% over a two day announcement period. Gains arise predominantly from divestitures that focus firm’s activities. A cross sectional regression shows that private lender monitoring and focused operations have a positive and significant wealth effect on the divesting firms.