nep-acc New Economics Papers
on Accounting
Issue of 2005‒06‒14
twelve papers chosen by
Bernardo Batiz-Lazo
Bristol Business School

  1. The Role of Accounting Conservatism in a well-functioning Corporate Governance System By Maria Swärd; Niklas Rosencratz; Supreena Narayanan
  2. The Impacts of Exercise: An inquiry into the Impact of Exercise on an Individual, Work Performance and Company Profits By Erik Arebro; Neesh Chand; Pia-Maria Molin; Supreena Narayanan; Anne O’Higgins
  3. Retained State Shareholding in Chinese PLCs: Does Government Ownership Reduce Corporate Value? By Estrin, Saul; Tian, Lihui
  4. Corporate Governance and Management Succession in Family Businesses By Phillip Phan; John E. Butler; Soo Hoon Lee
  5. The Corporate Governance of Defined-Benefit Pension Plans: Evidence from the United Kingdom By Cocco, Joâo Francisco P.D.; Volpin, Paolo
  6. Risk Management and Corporate Governance: the Importance of Independence and Financial Knowledge for the Board and the Audit Committee By Georges Dionne; Thouraya Triki
  7. Pour une gouvernance d’entreprise «comportementale»:une réflexion exploratoire-Toward a Behavioral Corporate Governance Theory : An Exploratory View By Gérard Charreaux
  8. Compétences, conflits et création de valeur:vers une approche intégrée de la gouvernance By Peter Wirtz
  9. La governancia en las empresas de familia. Un código de buenas prácticas para la supervivencia By Ernesto Barugel
  10. El control del financiamiento de los partidos en Argentina. Qué cambió con la nueva ley? By Delia M. Ferreira Rubio
  11. Optimal Severance Payment: Theory and Practice By Byeongju Jeong

  1. By: Maria Swärd (Stockholm School of Economics); Niklas Rosencratz (Stockholm School of Economics); Supreena Narayanan (Stockholm School of Economics)
    Abstract: This paper analyses accounting related to corporate governance and is organized as follows. The first section deals with understanding the concept of accounting conservatism. In the second section we analyzed the Relevance of Accounting Conservatism in Corporate Governance to the modern corporate world. The third section includes a Case Study on Ericsson, a Swedish Telecommunications company and conservatism in strong governance firms versus weak governance firms. The fourth part is devoted to the conclusion of our research efforts. From this study, we conclude that there are several reasons to use accounting conservatism in corporate governance and that current empirical evidence indicates that conservatism has increased in the last decades. The value of ƒÒ3 in Table 1 indicates that there is a positive significant level of conservatism in accounting practices followed by Ericsson. When the dependent variable is earnings (X), the asymmetric timeliness of earnings coefficient £]3 in Table 2 provides an estimate of the level of conservatism. We observe that strong governance firms are more conservative than weak governance firms (0.13 versus 0.04). We expect and hypothesize that strong governance structures will tend to favour accounting conservatism more than weak governance structures. However, excessive dependencies on old structures show poor growth that has been since the oil crisis.
    JEL: G
    Date: 2005–06–07
  2. By: Erik Arebro (Stockholm School of Economics); Neesh Chand (Stockholm School of Economics); Pia-Maria Molin (Stockholm School of Economics); Supreena Narayanan (Stockholm School of Economics); Anne O’Higgins (Stockholm School of Economics)
    Abstract: In the past few decades increasing attention has been devoted to physical exercise. Experts commend exercise for reducing stress levels, lowering blood pressure and increasing general feelings of well-being. In a society increasingly complex and work-oriented, many turn to exercise as a form of release. But is exercise always beneficial? Are there some cases where this increased focus can potentially harm the individual, company and the society at large? This paper investigates how physical exercise impacts the individual, one’s work performance, companies and societies as a whole. While the conventional thought is that it is beneficial in all respects, we apply a possible social constructionist view challenging some of these societal norms. The paper is organized as follows: The first section examines how exercise – holistic and physical – benefits the human body and mind. From there we take a closer look at how these benefits transfer to individual work performance. The impact of this is then discussed on an aggregate, company-wide level. We then present a picture of a future society in which the government plays an active role in encouraging citizens’ fitness.
    JEL: C9
    Date: 2005–06–07
  3. By: Estrin, Saul; Tian, Lihui
    Abstract: The role of government shareholding in corporate performance is central to an understanding of China’s newly privatized large firms and the stock market. In this paper, we analyse shareholders as agents that can both harm and benefit companies. We examine the ownership structure of 826 listed corporations and find that government shareholding is surprisingly large. Its effect on corporate value is found to be negative, but non-monotonic. Up to a certain threshold, corporate value decreases as government shareholding stakes increase, but beyond this corporate value begins to increase. We interpret this in terms of ownership concentration and the advantages of government partiality.
    Keywords: China; corporate governance; government shareholding
    JEL: G15 G32 G34 L33
    Date: 2005–02
  4. By: Phillip Phan (Rensselaer Polytechnic Institute); John E. Butler (Hong Kong Polytechnic University); Soo Hoon Lee (Old Dominion University)
    Abstract: Family businesses carry the weight of economic wealth creation in most economies. In the U.S. alone, family businesses account for 80 to 90 percent of the 18-million business enterprises in the United States, and 50 percent of the employment and GNP. In many ways, the family business is synonymous with the entrepreneurial organization as many were started as a means to provide for the financial well being of the founder's family. Founders who went on to build family empires started many of today's large corporations (e.g., Anheuser-Busch, Dupont, and Seagrams). Still, we know relatively little about the issues peculiar to a family business, such as the process and impact of succession planning. Yet, no recurring event in the life of the family firm is more critical to survival than the transfer of power from the incumbent to the successor. Organizations are especially susceptible to loss of vision and purpose during periods of CEO transition, as the leaders who helped shape the vision are replaced by others who may not share the same values and abilities. This study addresses the importance of understanding business succession planning by proposing and empirically verifying a model of succession planning and firm effectiveness in the family business. It links aspects of succession planning and successor preparation to the effectiveness of transition and from performance. The model depicts multiple interactive relationships, with emphasis placed not only on the planning and process-specific but also on successor-specific factors that lead to effectiveness.
    Keywords: corporate governance, family businesses, management succession, firm performance, successor characteristics
    JEL: G34 L21 L23 M12 M13
    Date: 2005–06–04
  5. By: Cocco, Joâo Francisco P.D.; Volpin, Paolo
    Abstract: This paper studies the governance of defined-benefit pension plans in the United Kingdom. We construct a governance measure, equal to the proportion of trustees of the pension plan who are also executive directors of the sponsoring company. Our findings indicate that pension plans of indebted companies with a higher proportion of insider-trustees: (i) invest a higher proportion of the pension plan assets into equities, (ii) contribute less into the pension plan, and (iii) have a larger dividend payout ratio. This evidence supports an agency view, whereby insider-trustees act in the interest of shareholders of the sponsoring company, and not necessarily pension plan members.
    Keywords: corporate governance; defined benefits; insiders; pension plans; pension trustees
    JEL: G23 G34
    Date: 2005–02
  6. By: Georges Dionne; Thouraya Triki
    Abstract: The new NYSE rules for corporate governance require the audit committee to discuss and review the firm's risk assessment and hedging strategies. They also put additional requirements for the composition and the financial knowledge of the directors sitting on the board and on the audit committee. In this paper, we investigate whether these new rules as well as those set by the Sarbanes Oxley act lead to hedging decisions that are of more benefit to shareholders. We construct a novel hand collected dataset that allows us to explore multiple definitions for the financially knowledgeable term present in this new regulation. We find that the requirements on the audit committee size and independence are beneficial to shareholders, although maintaining a majority of unrelated directors in the board and a director with an accounting background on the audit committee may not be necessary. Interestingly, financially educated directors seem to encourage corporate hedging while financially active directors and those with an accounting background play no active role in such policy. This evidence combined with the positive relation we report between hedging and the firm's performance suggests that shareholders are better off with financially educated directors on their boards and audit committees. Our empirical findings also show that having directors with a university education on the board is an important determinant of the hedging level. Indeed, our measure of risk management is found to be an increasing function of the percentage of directors holding a diploma superior to a bachelor degree. This result is the first direct evidence concerning the importance of university education for the board of directors.
    Keywords: Corporate governance, risk management, corporate hedging, financial knowledge, board independence, audit committee independence, board of directors, university education, empirical test, unrelated directors, NYSE rules, Sarbanes Oxley act, audit committee size, financially educated directors, financially active directors, firm performance
    JEL: G18 G30
    Date: 2005
  7. By: Gérard Charreaux (Université de Bourgogne)
    Abstract: (VF)L’objectif de cet article est de montrer l’intérêt des approches comportementales, notamment de la finance comportementale, pour construire une théorie de la gouvernance permettant de remédier aux nombreuses lacunes de la théorie juridico-financière dominante. La réflexion entreprise montre les problèmes soulevés par la notion de biais comportemental et son intégration dans la théorie de la gouvernance.(VA)The objective of this article is to show how behavioral theories, in particular behavioral finance, can help to build a corporate governance theory allowing to fill the many gaps of the dominant law and finance theory. In particular, we underline the problems raised by the concept of behavioral bias and its integration in the corporate governance theory.
    Keywords: théorie comportementale de la gouvernance;biais comportemental;behavioral corporate governance theory;behavioral bias
    JEL: G30
    Date: 2005–06
  8. By: Peter Wirtz (Université Louis Lumière (Lyon 2))
    Abstract: L’approche dominante de la gouvernance d’entreprise s’inscrit dans une logique d’essence disciplinaire. Pourtant, la création de valeur ne se réduit pas à un simple problème de discipline, mais comporte également une dimension cognitive, notamment dans le cas des entreprises innovantes. Fort de ce constat, le présent article tente de contribuer à un effort d’intégration des explications disciplinaire et cognitive des phénomènes de gouvernance, en défendant l’hypothèse selon laquelle le poids respectif des variables disciplinaires et cognitives n’est pas figé, mais dépend du stade de développement des entreprises étudiées. Ce cadre théorique est illustré à travers l’histoire longue du Groupe Air Liquide.
    Keywords: gouvernance;approche cognitive;approche disciplinaire;coût cognitif
    JEL: G32
    Date: 2005–05
  9. By: Ernesto Barugel
    Abstract: Al analizar la problemática particular de las empresas de familia surgen dos características bien distintivas: a) la gran contribución que realizan estas empresas al desarrollo de las economías donde actúan y b) la altísima probabilidad de desaparecer en sus primeros años de vida. Para superar esta amenaza es necesario recurrir a las herramientas que nos provee la disciplina llamada "Governancia Corporativa". Esta ha puesto especial énfasis en los problemas organizacionales que se derivan precisamente de la separación de propiedad y control, pero en este trabajo utilizamos los mismos instrumentos que ella provee, como ser un Código de Buenas Prácticas, para ordenar la correcta interacción de las instituciones de gobierno de una empresa que aún concentra la propiedad y el control. La columna vertebral de la necesaria transformación será entonces este Código de Buenas Prácticas que nos permite avanzar en pos de la supervivencia de la organización y su crecimiento continuo.
    Keywords: Governancia; Empresas de familia; Códigos de Buenas Prácticas; Propiedad y control; Directorio; Consejo de Familia.
    JEL: G34 G32
    Date: 2005–06
  10. By: Delia M. Ferreira Rubio
    Abstract: En el presente documento analizamos los alcances, limitaciones y consecuencias de la nueva ley de financiamiento de los partidos políticos y las campañas electorales (Ley 25.600). Para ello, nos preguntamos cuáles son las características principales del sistema legal vigente en Argentina en materia de financiamiento de partidos y campañas. Luego formulamos un balance provisorio de la experiencia de aplicación de estas nuevas normas con motivo de la elección presidencial del 2003. Por último, partiendo del supuesto de que la transparencia opera como principio rector e informador de la tarea de control y supervisión del financiamiento de la política formulamos algunas sugerencias sobre reformas a introducir en el sistema de control y supervisión.
    Date: 2005–06
  11. By: Byeongju Jeong
    Abstract: I present a model in which the employment contract includes severance payment as an instrument for achieving optimal separation between the firm and the worker. I show that the privately optimal severance payment from the model can replicate the level and the variation in actual severance payments (and notice periods) across OECD countries. I conduct a policy experiment in which the existing unemployment benefits are financed by a separation tax. Under this policy, the actual severance payments need to change only marginally in order to achieve socially optimal separation.
    Date: 2005–04
  12. By: Mahesh Kumar Tambi (IIMT, Hyderabad India)
    Abstract: This paper is an attempt to evaluate the impact of Mergers on the performance of the companies. Theoretically it is assumed that Mergers improves the performance of the company due to increased market power, Synergy impact and various other qualitative and quantitative factors. Although the various studies done in the past showed totally opposite results. These studies were done mostly in the US and other European countries. I evaluate the impact of Mergers on Indian companies through a database of 40 Companies selected from CMIE’s PROWESS, using paired t- test for mean difference for four parameters; Total performance improvement, Economies of scale, Operating Synergy and Financial Synergy. My study shows that Indian companies are no different than the companies in other part of the world and mergers were failed to contribute positively in the performance improvement.
    Keywords: Mergers, Amalgamation, Acquisition, Horizontal Mergers, Vertical Mergers, Backward Integration, Foreword Integration, Circular Mergers, Conglomerate Mergers, Congeneric Mergers,
    JEL: G
    Date: 2005–06–08

This nep-acc issue is ©2005 by Bernardo Batiz-Lazo. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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