Search results

The purpose of this paper is to explain the amendments to the listing standards of the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (Nasdaq), which were approved by the Securities and Exchange Commission (the SEC) on January 11, 2013 to implement the SEC's final rules on the independence of compensation committees and their selection of advisors pursuant to Rule 952 of the Dodd‐Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd Frank).

After a summary of notable provisions, the paper explains effective dates and respective Nasdaq and NYSE listing standards pertaining to compensation committee compensation; director independence standards, advisors, and charters; certain exemptions for foreign issuers; exemptions for certain types of companies and partnerships; and recommended next steps for companies that are subject to the amended listing standards.

Over the past few years, the independence of compensation committees and their advisors has been a hot button corporate governance issue. Dodd‐Frank prohibits national securities exchanges from listing any equity security of an issuer that is not in compliance with the exchanges' compensation committee independence and advisor requirements.

The listing standards generally become effective on July 1, 2013; however, listed companies have until the earlier of: their first annual meeting after January 15, 2014; or October 31, 2014, to comply with certain requirements including the independence structure of their compensation committees.

The paper provides practical advice from experienced financial services lawyers.

We obtained information on China Gerui from secondary published sources, including annual reports downloaded from the Securities and Exchange Commission’s (SEC) EDGAR database, news sites and newspapers, the company’s website and journal articles. One of the authors visited the China Gerui plant in Henan, China.

China Gerui, a Chinese metal fabrication company, enjoyed exponential growth because of its location, product innovation and ability to move up the value chain. At the height of its success, the company listed on the Nasdaq and had plans to raise capital to fund ambitious expansion plans. Unfortunately, four years after listing on Nasdaq, the company received a letter from the listing qualifications department notifying China Gerui that they were not in compliance with Nasdaq’s filing requirements because it had not filed its Form 20-F. Now, the company had only five days to decide whether to request an appeal of the letter.

This case is best suited for higher-level undergraduate accounting and finance courses such as intermediate accounting, auditing, international accounting, financial statement analysis, corporate finance and investments analysis. It is especially appropriate for graduate-level global accounting and advanced financial statement analysis courses. In these courses, the best placement is after coverage of SEC regulations and requirements for financial statement reporting and disclosure. Moreover, the case may be used as a tool to demonstrate the step-by-step process for searching and retrieving information from a public company’s filings through the SEC’s EDGAR database.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger and have more independent boards, higher institutional investor holdings, and an NYSE listing. Firms with greater anticipated benefits from monitoring also adopt an LID role, e.g., firms with dual CEO-Chairman, with more takeover defense mechanisms, and with higher cash holdings. Using an event study methodology, we find that investors respond positively to the adoption of an LID board role. Lastly, using instrumental variables to address endogeneity in the LID board role, we find that firms with an LID are more likely to terminate poorly performing CEOs. Taken as a whole, these results suggest that the LID board role enhances firm value and improves the quality of corporate governance.

This paper aims to examine whether board-related characteristics matter for cost efficiency in banking sector.

This study uses a sample of publicly traded US commercial banks and savings institutions to estimate a relationship between cost efficiency measured by stochastic frontier analysis and a set of board-related characteristics for the period 2007-2013.

An inverted U-shape relation is found between board size and efficiency. Thus, there is a trade-off between costs and benefits of larger boards. Optimal board size is higher for banks with more complex operations. This study also observed an inverted U-shape relation between board independence and cost efficiency. The banks where the Chairman also executes the CEO responsibility show lower efficiency. However, a higher proportion of independent board members in banks with unitary leadership structure may mitigate the conflict of interest and lower efficiency stemming from CEO duality.

This study’s evidence supports the Basel Committee on Banking Supervision emphasis on advising a board composition that provides for a sufficient degree of director independence.

The results are relevant for banks and their external and internal stakeholders. Banks may adjust their current board characteristics to increase the board effectiveness. Externally, potential investors can evaluate the quality of corporate governance of banks before making investment decisions. The empirical findings can also be useful for regulators imposing corporate governance codes in banking.

To the best of the authors’ knowledge, this is the first paper to provide empirical evidence on the impact of board characteristics on bank efficiency for a wide panel of US banks. Additionally, a comprehensive set of board-related variables is used.

Prior research shows that co-opted directors adversely impact many corporate outcomes, yet little is known about these directors' impact on CSR performance. The authors investigate whether and how co-opted boards affect the firm's CSR score and component CSR scores.

The authors use panel regression models to investigate this study's research questions and address endogeneity concerns using the system generalized method of moments (system GMM) and a quasi-natural experiment.

The authors report new evidence showing that co-opted boards negatively impact CSR performance based on the CSR score. Results identify board characteristics that accentuate or moderate the effect of co-option on the CSR score and show that board independence, the presence of women on the board, and CEO duality positively and significantly impact the CSR score. These findings are robust across alternative measures of co-option and in the results of models addressing endogeneity concerns. An extended analysis utilizing CSR component scores reveals a significant negative impact of co-option on the environment component score using various measures of co-option and on employee relations, product quality, and human rights component scores using selected measures of co-option.

Findings have implications for board structuring and composition for firms aiming at improving their CSR score.

The study provides new evidence on the impact of co-opted boards on CSR performance. The results help inform stakeholders such as policymakers, executives and directors, shareholders, and capital market participants on how board composition affects socially responsible activities and performance and identify CSR component areas that require attention.

This paper aims to investigate the internal and external determinants of firms’ efficiency and develop optimal corporate governance risk benchmarks for the manufacturing sector across different countries.

Corporate governance risk data were acquired from Institutional Shareholder Services Europe SA. Data on firms’ efficiency and for explanatory and control variables were taken from the DataStream database. The generalised directional distance function data envelopment analysis (GDDF-DEA) model and its stochastic extension provided corporate efficiency measures and optimal corporate governance benchmarks. The authors used ordinary least squares multiple regression analysis with wild bootstrapping to test the study hypotheses.

The authors found significant differences between firms’ optimal and actual efficiency input/output variables and corporate governance risks in the manufacturing sector across countries. Internal firm characteristics such as group affiliations, product market competition and insider ownership and external institutional factors such as the legal system, the rule of law, control of corruption, law enforcement and cultural values are vital determinants of firms’ efficiency.

This paper provides valuable guidance to enable corporate managers, regulators and policymakers to enhance firms’ efficiency and corporate governance practices.

This paper develops optimal corporate governance risk benchmarks and identifies the most critical internal and external factors affecting firms’ efficiency in the manufacturing sector in various countries. It also used a novel GDDF-DEA model, with the multi-parametric model for bias correction of efficiency estimator.

In one of the last major Enron‐related corporate reforms, the SEC approved on November 4, 2003 the final versions of both the New York Stock Exchange’s and Nasdaq’s corporate governance proposals. Generally, both sets of rules require listed companies to have a majority of their boards comprised of independent directors. In addition, the rules impose significant responsibilities on listed companies’ nominating, compensation, and audit committees. With certain exceptions, both NYSE and Nasdaq companies will have until the earlier of (i) the company’s first annual meeting occurring after January 15, 2004 or (ii) October 31, 2004 to comply with the new rules. This article compares both sets of new rules to current rules, discusses the differences between the NYSE’s and Nasdaq’s new rules and suggests steps issuers should take to comply with the new rules.

To explain the rule changes in Nasdaq’s new Listing Rule IM-5315-1, approved by the US Securities and Exchange Commission (SEC) on February 15, 2019, that permit direct listings on Nasdaq without an initial public offering, similar to the New York Stock Exchange (NYSE) rule changes approved in 2018.

Explains the legislative and regulatory background, historic limitations on direct Nasdaq listings, and de-tailed provisions of Nasdaq’s new Listing Rule IM-5315-1.

The direct listing alternative to an IPO may appeal to cash-rich companies that do not need the publicity or new capital associated with a traditional IPO.

Expert analysis from experienced securities litigation and corporate governance lawyers.

The survival rate of newly listed firms is low, and there is evidence of a surge of poorly performing new listed firms leading up to the crash of the dot.com bubble. The author investigates this phenomenon and analyzes investors' ability to understand the quality of accounting information and to adjust their expectations.

The author employs the dividend discount model in conjunction with clean surplus accounting discussed by Ohlson (1995) to compare the value relevance of earnings and research and development (R&D) expenditures for short and longer listed National Association of Security Dealer Automated Quotations (NASDAQ) firms between 1980 and 2014. The author also uses univariate tests and logistic regression to analyze both recently listed and short-listed firms. In this analysis, the author compares the differences in investors' expectations for the first five years for both types of firms.

The author provides convincing evidence that markets clearly placed lower valuation weights on accounting earnings and R&D expenditures for short-listed firms on NASDAQ. Market participants originally had high expectations for these ventures. But, they gradually understood the lower quality of accounting information and adjusted their expectations downward.

The author’s results show that optimistic expectations along with easy equity financing created a surge of new listings. My analysis of the interplay between the quality of accounting information and investors' expectations indicates a negative spillover effect where investors are overoptimistic about firms that rode on waves of new listings backed by liberal financing. The author shows that analysis of Tobin's Q and negative earnings can separate ill-prepared from longer-listed firms.

The purpose of this study is to investigate if non-US/non-Canada (international) equity listings in the Canadian stock exchanges increased with the adoption of International Financial Reporting Standards (IFRS) in Canada. A question of interest is whether the adoption of common global accounting standards (IFRS) was beneficial in attracting international firms to the Canadian exchanges.

The authors use difference-in-difference ordinary least square methodology to conduct inter-country (between Canada and the USA) and intra-country (between the Toronto Stock Exchange [TSX] and the TSX Venture Exchange [TSXV]) tests to investigate whether there is increased listings of international firms on Canada’s exchanges associated with mandatory adoption of IFRS in Canada compared to such listings in the American exchanges.

The authors did not find evidence of a relative increase in listings by international firms on the TSX and the TSXV after Canadian adoption of IFRS, but they did find that listings by international firms on the TSX, Canada’s primary exchange, increased when the authors include the year before mandatory Canadian adoption as part of the IFRS adoption period. The authors also find that international listings from outside the North American, European and Australasian regions increased on the TSXV, consistent with IFRS adoption making the smaller Canadian exchange more attractive to listers from these regions.

With the increasing use of IFRS throughout the world, US regulators, the US Congress and other capital market participants seek to understand the costs and benefits of potential IFRS adoption in the USA. The authors contribute to this debate by examining the effect of Canada’s adoption of IFRS on growth in international stock listings in the Canadian stock exchanges.