Corporate governance: transparency, top executive compensations and board effectiveness
- Autores: Idoya Ferrero Ferrero
- Directores de la Tesis: María Jesús Muñoz Torres (codir. tes.), María Angeles Fernández Izquierdo (codir. tes.)
- Lectura: En la Universitat Jaume I ( España ) en 2012
- Idioma: inglés
- Tribunal Calificador de la Tesis: María Amparo Camarero Olivas (presid.), Juan Carlos Bou Llusar (secret.), Carlos Francisco Ferreira Alves (voc.), Cecilio Mar Molinero (voc.), Francisco José Climent Diranzo (voc.)
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- Resumen
The severity of the most recent global financial crisis and the global economic recession that accompanied it has put in evidence weaknesses in corporate governance system. This PhD dissertation empirically examines the suitability of corporate governance practices in transparency, top executive compensations and board of directors before and during the financial crisis. In this regard, this thesis mainly contributes to understand corporate governance weaknesses and their relationship to the financial crisis. To that end, this thesis focuses on three research objectives: to analyse the transparency of the corporate governance structure based on legal requirements on the disclosure of information; to examine the consistency between variations in top executive compensations and corporate performance; and to investigate how changes in macroeconomic context may affect the value of contributions made by boards of directors to corporate results. Objectives that are addressed by means of three research essays developed in this thesis.
After an introduction in the first chapter, the second chapter addresses the transparency of corporate governance structure in Spanish savings banks. After analysing the peculiar ownership structure of these institutions and reviewing the national legislation related to corporate governance and transparency, a set of indicators concerning public available information of corporate governance is proposed. This set of indicators is chosen according to criteria such as the availability of data on a regular basis in official sources, uniformity, quantitative or dichotomous variables and ease of interpretation. It enables to compare the information over time and between firms. This set of indicators is applied to Spanish savings banks, which allows to provide a general diagnosis about corporate governance in this industry.
The results reveal weaknesses in the public available information such as differences in company data depending on the source: either the annual governance report or the annual accounts. These findings are consistent with international reports about causes of financial crisis that suggest that weaknesses in disclosure and accounting standards have also contributed to poor corporate governance outcomes in the financial services sector. In this regard, the study presents some recommendations for improving the transparency of corporate governance system in Spanish savings banks.
The third chapter empirically examines how top executive compensations have been affected by profits in the Spanish banking system during the period 2004-2008. To that end, this study tests the effect of asymmetries on executive compensations due to variations in the profitability with respect to the previous year. Given the feature of the data, the panel data methodology is used. In particular, GMM estimator is applied to control unobserved heterogeneity and endogeneity problems.
The findings indicate that incentive schemes have focused on immediate profits and have encouraged executives to obtain consecutive increases in profitability year after year. The results call into the question whether the top executive compensation schemes established in banks have conditioned the decisions made by executives and placed the long-term viability of banks at risk. The study also reveals numerous limitations in obtaining public information about executive remunerations. As a result, shareholders may find that controlling excessive executive remuneration is a difficult task.
The fourth chapter investigates the effectiveness of board of directors taking into account the macroeconomic context. This study specifically analyses the changes caused by the global financial crisis on the influence of board characteristics on corporate results, in terms of corporate performance, corporate risk-taking, and earnings management. Firstly, corporate governance theories related to board roles are reviewed in depth and a multitheoretic approach is proposed. Secondly, the research question is empirically tested. Sample comprises S&P 500 listed firms during 2002-2008.
This study provides a novel contribution to multitheoretic approach, which integrates agency, stewardship, and dependence resource theories. It helps to establish a new theoretical approach that is much closer to the true conduct and real behaviour of boards of directors. The empiric analysis reveals that the environmental conditions call for different behaviour from directors to fulfil their responsibilities. This study contributes to a better understanding of weaknesses of board practices which are related to the causes of the recent global financial crisis.
The fifth chapter presents the main conclusions and explains how this thesis advance corporate governance literature, and improve business practices and public policy, as well as opening a broad range of interest research questions regarding the effectiveness of corporate governance mechanisms that should be addressed in future research.
