Robert Evans

Non‐Executive Directors: A Question of Independence

This Australian study utilises disclosure requirements in accordance with Australian Accounting Standards AASB 1017: Related Party Disclosures, to provide a richer description of non-executive director characteristics. Consistent with the findings of Baysinger and Butler (1985) we find a three scale classification system for directors (insider, grey area, outsider) to better reflect board composition.The results indicate that 35% of non-executive directors were involved in transactions with their companies which potentially threaten their independence (i.e. grey area directors). On average, our findings reveal that the combination of insider and ‘grey’ area directors would constitute a majority of the board. This could lead to companies appearing to comply with current Australian recommendations through possessing a non-executive majority on the board, whilst in fact being controlled by internal management. This finding similarly applied to the composition of the audit committee.

The Influence of Non-Executive Director Control and Rewards on CEO Remuneration: Australian Evidence

The study examined whether non-executive director (NED) control and remuneration impact on the CEO pay decision. NED control was represented by three measures. The first, the existence of a majority of non-executive directors on the board of directors; second, the instalment of a nomination committee to facilitate the employment of properly qualified, independent directors to the board; and third, participation of NEDs in the company?s operation as evidenced by attendance at regularly scheduled board meetings. This study finds no evidence that these variables have a significant impact upon the determination of CEO pay levels. The second aspect of the study explored the impact of NED remuneration (including an equity component) on the setting of CEO pay levels. It finds evidence that these variables have a significant influence upon the determination of CEO pay levels, with NED equity holdings apparently acting as restraint on CEO cash pay, and alternatively, NED pay (retainer) increasing in line with CEO cash pay.

The Decision to Repurchase Shares: A Cash Flow Story

Utilising classification systems developed by Helfert (1982); and Gentry, Newbold and Whitford (1985, 1990), this paper presents a summary of changes in the cash flow position of companies embarking on a share repurchase strategy. The results from the adoption of a repurchasing strategy show that subsequent to the repurchase, Net Working Capital flow components get smaller, Net Operating flow gets smaller while Net Investment flows increase. There also exist a clear cash flow effect leading up to the announcement period as well as reduced reliance on external funds. The findings are of interest to corporate executives, credit analysts, investors and other outside parties in evaluating the strategic and operational change occurring in firms who choose to repurchase shares. The results are also consistent with firms using share repurchase programs as a way of adjusting payouts.

An Examination of Economic Value Added and Executive Compensation

Despite a growing literature, the relationship between the structure of executive compensation and firm performance is not fully understood. Furthermore, little work has been done on the link between Economic Value Added (EVA) as a measure of firm performance and the form of executive compensation. An examination of the compensation structure and economic value added of 209 companies in 1995 - 1998 provides evidence supporting incentive compensation. Economic Value Added is found to be positively and significantly related to incentive based compensation. Cash based remuneration, was found to be unrelated to EVA performance.

Corporate governance and post‐bankruptcy reorganisation performance : Evidence from Thailand

Purpose - This research seeks to investigate the role of key corporate governance mechanisms in determining a firms post-bankruptcy performance following reorganisation. Design/methodology/approach - The study is based on agency theory and uses a unique sample of 111 filing companies whose reorganisation plans have been confirmed by the Thai Central Bankruptcy Court during the period 1999-2002. Findings - The results indicate that monitoring and incentive mechanisms are significant determinants of a firms post-bankruptcy performance. The key monitoring mechanism is ownership concentration, measured by shares held by the largest shareholder, whereas the critical incentive mechanisms are cash compensation and percentage of common shares held by the plan administrator. The results indicate that these mechanisms can mitigate agency problems in previously insolvent companies and increase post-bankruptcy performance over a three year period. Originality/value - The study is timely given that many organisations are facing rebuilding programs following the impact of the global financial crisis. Prior research in Thailand and elsewhere has not measured bankruptcy reorganisation outcomes in terms of the difference of actual financial performance to predicted performance and in relation to the governance factors of the reorganisation process. Neither has this aspect been considered within an agency theory framework. This provides a unique opportunity to consider these variables based on the theoretical framework of agency theory and to evaluate the importance of governance mechanisms in reorganisation proceedings.

Successful turnaround strategy: Thailand evidence

Purpose – This research seeks to determine the success of turnaround strategies adopted by corporations in Thailand following post‐bankruptcy reorganization plans approved by the Thai Central Bankruptcy Court.Design/methodology/approach – The study uses a sample of 101 companies whose reorganization plans have been confirmed by the Thai Central Bankruptcy Court in the period 1999‐2002, with performance measures to 2005.Findings – The results indicate that over a three‐year reorganization period successful companies were found to be most likely to adopt cost and expense reduction, company size reduction and disposal of non‐core assets while operational strategies aimed at reconfiguring internal operations and systems were not likely to be associated with successful companies.Practical implications – The data suggests, subject to limitations, the selection of restructuring methods may differ between those companies which successfully reform and those which do not. Companies pursuing successful turnaround st...

Impact of operating and balance sheet performance of Japanese international banks on bank safety levels and risk ratings

Using a simultaneous equation model initially developed by Shrieves and Dahl this article shows that Japanese banks in comparison to European banks, have focused on factors other than those that impact on bank safety levels. This has left Japanese banks in a vulnerable position with respect to levels of non-performing loans and indicates that less attention has been paid to prudent credit risk assessment and management practices. Recent events and actions initiated by the Japanese government suggests that Japanese banks are in crisis in terms of their dangerously large burden of non-performing loans. The broad objective of this study is to demonstrate that the attention of any healthy and safe banking system needs to be focused on operating and balance sheet fundamentals. Focus needs to be on maximization of earnings, determination of the appropriate level of financial risk, careful management of expenses and the optimisation of bank size in a deregulated, competitive environment where prudent lending criteria are applied.