Tania Morris

Corporate governance rating and financial performance: a Canadian study

Purpose – This paper aims to examine whether the corporate governance rankings published by a market information intermediary are reflected in the values that investors accord to firms.Design/methodology/approach – Panel data from 289 Canadian firms in the four‐year period 2002‐2005 were analyzed using a price model.Findings – The results suggest that the corporate governance rankings published by the market information intermediary are related to not only firm market value, but also to accounting results.Practical implications – This study provides empirical observations that would be useful for various organizations involved in the regulation of corporate governance practices and the standardization of relevant data elements.Originality/value – This study contributes to the literature by demonstrating that information published by an information intermediary is reflected in firm market values. Moreover, this information appears to be related to the accounting results. Thus, good governance rankings are ...

Is top-management remuneration influenced by board characteristics?

Purpose - – The purpose of this article is to examine if certain board characteristics have an impact on the total remuneration of top management and the ratio of stock-based remuneration to total top-management remuneration. Design/methodology/approach - – The study draws on data from the largest public Canadian companies, the constituents of the TSX/60 index. The study controls for firm size and profitability. Findings - – The authors concludes that total remuneration of top management is directly linked to board-member total remuneration and the board average number of director-tenure years. The study also shows that the ratio of stock-based to total top-management remuneration is positively affected by the percentage of independent directors, total remuneration of board directors, the ratio of stock-based remuneration of directors to their total remuneration and the average number of tenure years of the board of directors. Practical implications - – If regulators are determined to curb the excesses in top-management remuneration by means of promoting boards with certain characteristics, they should implement measures facilitating the control of directors’ remuneration and tenure, to discourage cronyistic behavior. Good corporate governance requires that the board act as a counterbalance to top management, ensuring that a substantial percentage of top-executive total compensation is variable, and not fixed. According to our findings, the boards that are the most likely to hold managerial avoidance of variable pay in check are those favoring director independence, variable director remuneration and longer director tenures. Social implications - – The present article examines specifically the latter aspect, namely, the role of board characteristics (independence, size, compensation, board director ownership and tenure, etc.) in the determination of top-management compensation. This relationship is important because it allows us to further the analysis of corporate governance. If the above-mentioned traits of boards have a meaningful relationship with the compensation of the top management, one might conclude that certain practices in the composition of boards could influence good corporate governance practices. This is relevant for regulatory agencies, for investors and for corporations. Originality/value - – The article adds to the extant literature in a number of ways. Firstly, it considers the role of the traits of the board in the determination of the compensation of the top-management teams, and not only of the chief executive officer, as is the focus of previous literature. Secondly, the article focuses on the power interplay between boards and managers, and, more particularly, on the ability of boards to be an effective mechanism of corporate governance. Finally, the article examines the potential impact of board traits in the determination of top-management compensation in the context of Canadian firms, a subject that has received less attention from academic research, which has mostly concentrated on analyzing the issue in the US context.

Which type of insider transaction is more perceived as a signal by the market

Using a Canadian dataset, we examine the market reaction to insider transactions to discover if the market reacts with greater certainty to specific types of insider trades. Our results suggest that the market reacts mostly to trades carried out by directors or senior officers of the insider company or the subsidiary of the issuer. These results were steady for both sale and purchase transactions. Another interesting result is that, even though the market does not react to sale and purchase transactions by directors, it reacts to purchases by directors if the director is also an administrator of the issuer. Finally, the transaction size only matters if it is a purchase transaction.