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Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse and often complex, represent a corporate governance challenge. This paper initiates research in finance on related party transactions, which have implications for agency literature. We first explore two alternative perspectives of related party transactions: the view that such transactions are conflicts of interest which compromise management’s agency responsibility to shareholders as well as directors’ monitoring functions; and the view that such transactions are efficient transactions that fulfill rational economic demands of a firm such as the need for service providers with in-depth firm-specific knowledge. We describe related party transactions for a sample of 112 publicly-traded companies, including the types of transactions and parties involved. This paper provides a starting point in related party transactions research.

This study examines the relationship between institutional investors and director remuneration in Malaysia against an important institutional backdrop of political connection. Our panel analysis of 434 firms from 1999 to 2003 finds a negative relationship between institutional ownership and director remuneration suggesting the effectiveness of institutional monitoring. Although we find no evidence to suggest a politically determined remuneration scheme, the negative relationship between institutional ownership and remuneration becomes less in politically connected firms. This suggests that political connections mitigate institutional monitoring in relationship-based economies.

In this chapter, we explore the legal framework of AGMs in seven Member States (Austria, Belgium, Germany, France, Ireland, the Netherlands, and the United Kingdom) of shareholder decision-making rights. We find that, since only a small part of the decision-making rights is harmonized at the European level, there are numerous differences in shareholder rights among national laws. These decision-making rights are usually about the topics director (re-)elections, pay matters, share capital, amendments to articles of association, annual accounts, etc. To be able to conduct empirical research in the remaining chapters, we develop a categorization framework of 15 voting items.

Recent high profile U.S. corporate collapses have their counterparts in other international markets, such as Australia. The corporate governance failures that led to major corporate collapses in both countries are strikingly similar, despite differences in their respective corporate governance systems. In this paper, I present an examination of the corporate governance failures that led to the demise of three prominent Australian firms in 2001 and illustrate that the corporate governance failures are not limited to the existing corporate governance system in the United States. I will also outline the various corporate governance reforms that were established to restore investor confidence.

Purpose – The relationship between the board characteristics (i.e. board independence, CEO duality, board size, board meeting and board tenure) and the ownership structure (i.e. managerial ownership, family ownership and institutional ownership) and earnings quality is examined.

Design/methodology/approach – Data from 280 non-financial companies listed on Bursa Malaysia's Main Board for the year 2004 is used.

Findings – Significant association was found between board tenure and earnings quality. In addition, a positive significant association was found between outside board ownership and family ownership and earnings quality. However no significant relationship was found between board of directors’ independence and earnings quality.

Research limitations/implications – The association between audit committees’ characteristics and earnings quality was not examined. An examination of the impact of ownership structure on boards of directors and audit committees is warranted. An investigation of the impact of the ownership structure on earnings quality in Malaysia using separate test on family-controlled and non-family-controlled firms is suggested.

Practical implications – The appropriateness of policy directives requiring majority independent directors may be considered by policy makers.

Originality/value – The conflict of interest between outside shareholders and managers in a diffused ownership support the agency theory. However, utility of agency theory to explain the conflicts between the controlling owners and the minority shareholders where ownership concentration is prevalent is limited. Whilst demonstrating the dominant impact of ownership structure on earnings quality in Malaysia the study calls for alternative explanations of corporate governance practices in different institutional settings.

Defaults in corporations, financial institutions and semipublic organizations have resulted in (corporate) governance Codes and Law provisions that aim to improve governance, risk management and policy making by executive and non-executive directors of involved boards in The Netherlands and across the globe. The aim of this chapter is to discuss how semipublic organizations deal with public interest and the contribution of multiple stakeholder team production theory (MSTP) to effectively deal with the issue of how to include interests of different stakeholders and the general public interest in the governance of and policy making by boards of semipublic organizations. This includes the identification, raising awareness and analysis of various interests and their implications.

The authors use a literature review and their own experience.

Based on our literature review and experience converging in a case study design, we hold that a semipublic organization’s exposure to public interests and how it deals with that will remain a critical issue.

We develop a research approach for dealing with stakeholders’ and the public interest and conclude that a governance perspective grounded in team production theory allows for a much better focused incorporation of possibly conflicting stakeholder interests, including public stakeholder interests and stakeholder commitment and cooperation than the dominant control perspective that is currently prevailing.

We contribute to the literature by arguing that the combined MSTP approach offers a pre-eminent approach to influence and shape board behaviour, an increased awareness of interests of different stakeholders coalescing in the public interest and an alternative, complementary view on decision-making by boards viewed as a team.

Conceptual Paper

Purpose of paper – The study investigates the association between corporate governance mechanisms (proportion of finance experts on the audit committee, PFAC; frequency of board meetings, FBMG and proportion of non-executive directors, PNED), dual language reporting (DULR) (in English and Swahili) and timeliness of annual reports (TIME) of companies listed on the Nairobi Stock Exchange (NSE) in Kenya.

Design/methodology/approach – The data for the analysis is gathered from annual reports of 36 companies listed on the NSE for two financial years ending in 2005 and 2006. Ordinary least square (OLS) is used to determine the association between the corporate governance mechanisms, DULR and TIME. Company size (SIZE), gearing (GEAR), profitability (PROF) and industry (INDS) are used as control variables.

Findings – The findings suggest that there is a significant negative relationship between corporate governance mechanisms (PFAC and FBMG), DURL and TIME. Consistent with extant research, the study also found that SIZE and INDS are significantly associated with TIME. No significant association is found between PNED, GEAR, PROF and TIME.

Research limitations/implications – The findings of the research will help Kenyan policy makers and practitioners in formulating corporate governance policies. However our research is limited, among others, because it focuses on only companies listed on the NSE. The results may therefore not be representative of all companies operating in Kenya.

Originality/Value of paper – The value of the paper lies in that the results provide, for the first time, evidence of the relationship between corporate governance mechanisms (PFAC, FBMG and PNED), DURL and timeliness of the annual reports.