Tor Brunzell

Determinants of Capital Budgeting Methods and Hurdle Rates in Nordic Firms

We study the determinants for the choice of capital budgeting methods and the setting of hurdle rates (WACCs) in five Nordic countries. Combining survey data with a rich set of determinants, including ownership data, CFO characteristics, and financial data, we find that the use of the Net Present Value method and the sophistication of the capital budgeting are related to firm characteristics, variables proxying for real option features in investments and CFO characteristics (age and education). We also find support for significantly higher hurdle rates than motivated by economic theory. The premium is weakly positively related to managerial short-term pressure and strongly negatively related to the sophistication level of the firm’s capital budgeting.

The Use of Derivatives in Nordic Firms

We contribute to the previous literature on the use of derivatives by studying separately the determinants of profit seeking versus those of hedging. In our sample of listed firms from four Nordic countries, about 62% use derivatives. Although the hedging motive clearly dominates, over half of the firms give some weight for additional income as a motive for the use of derivatives. Combining survey data on the use of derivatives with financial variables, data on management and blockholder ownership, and data on firm-level diversification, we find that very different determinants drive the use of derivatives for these two motives. Firm-level diversification is negatively related to hedging, but is positively related to the use of derivatives for additional income. Financial firms use derivatives more for profit than for hedging. We also find weak support for a value-increasing effect of the use of derivatives.

Chairmen's perceptions of female board representation : a study on Nordic listed companies

Purpose – The purpose of this paper is to survey chairmens perceptions of female board representation in five Nordic countries, focussing on whether the chairmans perception of board work is rela ...

Gender Representation in Nordic Boards: Evaluation of Board Work

We study the consequences of gender representation on board work in listed firms in five Nordic countries. Using survey data on chairmen perceptions, we contribute to the literature on gender diversity in boards by providing an inside view. We find that the predominantly male chairmen are significantly less satisfied with the female board members, when directly asked to rate various groups of board members. When analyzing the grading of various aspects of board work, and controlling for a number of factors, we do not find evidence of gender diversity contributing positively on perceptions of board work. However, contrary to the idea that more homogeneous groups would work better when risk is high, we find some signs of a positive effect of gender diversity in high risk firms.

Ownership as a determinant of chairperson activity: a study of Nordic listed companies

Purpose - – The purpose of this study is to explicitly focus on the roles of ownership concentration, ownership by the board, the chief executive officer (CEO) and the chairperson in the involvement and capabilities of chairpersons and other governors in their work. Design/methodology/approach - – In this study, the authors investigate the impact of the concentration of ownership, the ownership of the board, the CEO and the chairperson on the chairperson’s activity when the roles of the chairperson and the CEO are separated The empirical analysis of this study is based on a survey sent to Nordic listed firms. Findings - – The results show that the ownership characteristics of a company are important in determining the chairperson’s working hours, the chairperson’s communication with the CEO and the performance of governance activity. In addition, the authors found that while the ownership of the chairperson and the board of directors and ownership concentration improve governance activity, CEO ownership may undermine governance activity. Research limitations/implications - – The primary implication of the study is that both ownership by internal governors and ownership concentration play an important role in determining the involvement of internal corporate governors. Originality/value - – The study provides unique evidence that ownership by the chairperson, concentrated ownership and ownership by the board can potentially mitigate the costs of separating the roles of the chairperson and the CEO.

Capital Structure Policy Decisions in Nordic Listed Firms

In this paper we report the results from a survey among all publicly listed Nordic firms on their policy decisions concerning their capital structure. We find that more than 60 percent of the companies have rather or relatively flexible debt target, whereas a strict target or no target at all is approximately equally common. We also study the determinants for the strictness of the debt target, and find support for both firm characteristics as well as behavioral variables. We also study the link between capital structure policy and dividend policy, and find that dividend paying firms - firms with a definite dividend policy are more likely to have a stricter debt target. These results indicate that more research should be done on the joint setting of capital structure and dividend policies.

Board Evaluation and It's Effect on Board Composition and Board Work

In this paper, the effect board evaluation has on the board’s composition and work is studied. Board evaluation is considered vital for the development of the board’s work, which in turn is essential for the development of the company. The study is performed on companies listed on the NASDAQ OMX Nordic list and the Oslo Stock Exchange as a questionnaire study, where the chairperson was asked to grade (on a scale from 1 to 5) how satisfied she/he was with the different aspects of the board’s composition and work. Of the 157 responding chairmen, 120 (76%) were chairing companies that employ a board evaluation process. The chairperson was often the key person in these evaluation and most of the evaluations are delivered verbally to the nomination committee. Of the 120 companies with board evaluation, 20 companies use only informal discussions as the evaluation method. The remaining 100 use at least one of the methods: individual open/anonymous questionnaire or interviews. Furthermore, the responses were tested with ordered probit model for the effect of board evaluation on the board’s composition and work. The results show that board evaluation affect positively, according to the chairperson perception in all asked aspect (with one exception) of board’s composition and work, with significant results in four aspects: first, better decision-making; two, better discussion of short-term development; three, more actively discussion of business strategy; and four, better understanding of non-financial objectives. Last, the results of the study do not show that board evaluation affect the company’s financial performance (proxy with Tobin’s Q, ROA or ROE).