SACM - Australia
Permanent URI for this collectionhttps://drepo.sdl.edu.sa/handle/20.500.14154/9648
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Item Restricted Continuous Evaluation of the Two-Strikes Rule: Long-Term and Spill-Over Effects(Curtin University, 2024-04) Babkair, Fawaz; Sing, Harjinder; Sultana, Nigar; Makarem, NaserThis thesis presents three essays that have a shared objective, which is to evaluate the impact of introducing and implementing the two-strikes rule in Australia. The failure to remunerate chief executive officers (CEOs) appropriately caused a series of corporate collapses in the early twenty-first century and led to the global financial crisis (GFC) in 2007. As a result of regulators’ efforts, since 2011, shareholders have been able to participate in the setting of remuneration under the two-strikes rule. According to this rule, non-executive directors may stand for re-election if 25% of shareholders vote against the remuneration report in two consecutive years. This unique mechanism renders this rule more controversial than the remuneration of CEOs. Concerns about remuneration practices persistently appear in the financial press, independent organisation reports and empirical studies which consistently indicate a rise in CEO remuneration. Moreover, concerns have been raised regarding the ability of shareholders to vote appropriately. In this situation, the response of boards on behalf of shareholders results in unfair remuneration settings from the CEOs’ perspective, thereby adding more pressure on CEOs. Therefore, the first essay aims to test whether the two-strikes rule is able to effectively curb the increase in CEO remuneration and whether it can bring about positive changes in the remuneration structures of CEOs in the long-term. It also identifies the reasons for the high levels of dissent and the resulting strikes. The second essay aims to investigate CEOs’ proactive response strategies in terms of earnings management following the introduction of the rule. The third essay aims to investigate CEOs’ reactive response strategies after experiencing a high level of dissent. This thesis contributes to the existing body of research literature by responding to the concerns regarding the increase in remuneration and shareholder voting behaviour and by exploring the relationship between the implementation of the two-strikes rule and earnings management. Chapter One presents the background information and motivation for this thesis. It also summarises the results of the three essays and their contributions to the existing body of knowledge. Chapter Two identifies the direct impact of the two-strikes rule on the level and structure of CEO remuneration as well as determining the shareholder vote. The descriptive and univariate analyses indicate that the two-strikes rule effectively reins in increases in CEO remuneration and also brings about changes the remuneration structure. During 2019, total CEO remuneration and cash bonuses were at their lowest levels since 2007 and 2004, respectively, but equity-based pay as a proportion of total remuneration was at its highest level across 16 years. With regards to voting results, shareholders are more inclined to object to remuneration reports when CEOs receive high levels of remuneration, when firms have poorly structured corporate governance and when firms’ performance is unsatisfactory. In addition, shareholder dissent is significantly greater under the two-strikes rule than that under the Corporate Law Economics Reform Program 9 (CLERP9), especially in sectors experiencing significant increases in remuneration. Therefore, the findings do not suggest any further regulatory reforms regarding CEO remuneration in Australia at this time. However, the findings should motivate countries facing CEO remuneration increase to adopt the two-strikes rule. Chapter Three aims to identify the impact that the introduction of the two-strikes rule had on CEOs’ earnings management activities. The results indicate that CEOs shifted away from accrual-based earnings management to real earnings management, which is most obvious when the proportion of a CEO’s bonus paid in cash is high. However, CEOs with high equity-based remuneration and high total remuneration have been cautious about engaging in earnings management activities since the rule’s passage. Also, a good corporate governance structure would prevent CEOs from shifting to real earnings management. Therefore, legislators should not neglect the continuous strengthening of corporate governance, especially when shareholders have a role in determining remuneration. Additionally, board members should be cautious about rewarding CEOs with cash bonuses in these circumstances and instead replace them with equity-based remuneration. Chapter Four examines the relationship between shareholder voting outcomes and CEO earnings management activities in the subsequent year. The findings indicate that shareholder dissent is positively associated with accrual-based and real earnings management in the following year. This association is most apparent when CEOs receive significant cash bonuses. However, CEOs receiving high equity-based remuneration have been cautious about engaging in earnings management activities post-dissent. Nevertheless, a shift from accrual-based to real earnings management can be observed among CEOs receiving a high level of total remuneration. This shift tends to be favoured by boards that are gender diverse and have long tenures. However, active boards, as proxied by the number of board meetings, constrain only accrual-based earnings management, and large boards fail to restrain real earnings management after facing dissent. The accounting expertise of directors and independent directors enhance financial reporting monitoring because they have the ability to mitigate both forms of earnings management. Regulatory and supervisory authorities must be discerning regarding shareholders' dissent to remuneration reports, even if this opposition does not lead to registering a strike. The Board of Directors should ensure that CEO remuneration structures consist of a small proportion of cash bonuses versus a large proportion of share-based remuneration. Chapter Five presents the conclusion, along with the limitations of this thesis and directions for future studies.21 0Item Restricted Impact of Sustainability Reporting on Saudi-Listed Firms Performance under the Moderating Effect of Corporate Governance(Saudi Digital Library, 2023-07-14) Alhamami, Mahdi; Natoli, RiccardoWith the increasing preference for transparency in economic, environmental and social issues, sustainability reporting (SR) has become a broadly accepted practice for enterprises worldwide. Although SR is not a new concept, research focusing on the potential financial and non-financial benefits of SR is still limited, especially in the context of developing countries such as the Kingdom of Saudi Arabia (KSA). This research adopts a multi-theoretical perspective to examine how SR impacts corporate financial and non-financial performance. Since corporate governance (CG) is considered a potential method for improving SR transparency and efficacy, this research also investigates how specific CG mechanisms moderate this relationship. Although previous studies have examined SR and firm performance, they did not include a focus on Islamic items in SR. Additionally, the role of CG as a moderator in the relationship between SR and firm performance in the context of KSA remains unexplored. Therefore, the present research extends the literature by introducing a new framework through which to investigate CG mechanisms as moderating effects between SR and firm performance of KSA listed firms. This research adopted a quantitative approach and developed a modified global reporting initiative (GRI) disclosure index to collect secondary data through the manual content analysis technique from 121 listed firms. The present research also sourced the annual and sustainability reports for the data collection. The research’s variables included 1) the independent variables of total SR (TSR), economic SR (ECO), environmental SR (ENV) and social SR (SOC); 2) the dependent variable of financial performance, which is proxied by return on assets (ROA), return on equity (ROE) and Tobin’s Q (TQ), with non-financial performance being proxied by market share (MS) and internal business perspective (IBP); and 3) the moderating variable, which comprised the CG mechanisms of board size (BS), independent directors (ID), audit committee size (ACS), independence member of audit committee (IMAC), audit committee quality (ACQ), board gender diversity (BDG), government ownership (GOV) and foreign ownership (FOR). To test the research hypotheses, both univariate statistics (t-test) and fixed effect panel regression analysis were performed for two-panel datasets: 1) pre-COVID-19 (2015–2019, 596 firm–year observations and 2) including COVID-19 (2015–2020, 690 firm–year ii observations). Robustness testing was performed by employing the generalised method of moments (GMM) on the balanced panel data. The findings indicated that in KSA, the modified GRI index is more effective than the traditional GRI index. The research also found that SR and its three components (ECO, ENV, SOC) significantly and positively impact the financial performance indicators in the periods before COVID-19 and including COVID-19. Similarly, SR and its components demonstrated a positive significant relationship with non-financial performance in both data periods (pre and including COVID-19). Further, the findings associated with the moderating variables demonstrated that the CG mechanisms mostly did not moderate the nexus between SR and financial performance. Notably, GOV and ACQ demonstrated a significant moderating impact between SR and financial performance (ROA, ROE, TQ). The results further revealed that BS, ACS and GOV significantly affected SR and MS before COVID-19, while ID and BGD performed a similar role in the period including COVID-19. Similarly, the moderating variables BS and BGD were identified as significant moderators of SR on IBP both pre and including COVID-19. The results from this research offer insights for policymakers, practitioners and key stakeholders in KSA to achieve higher sustainability ratings and subsequently improve the financial and non-financial performance of listed firms. It also illuminates the moderating role of CG on the nexus of SR and firm performance. Practical and policy implications arising from this study include 1) strengthening the role of the board of directors; 2) highlighting the benefits of SR for profitability in KSA companies; 3) implementing comprehensive SR guidance and compliance for KSA listed firms; and 4) increasing the number of IDs, improving ACQ and encouraging the adoption of the International Financial Reporting Standards for effective SR.79 0