Title: The efficacy of the principle-based corporate governance practices: a case study of New Zealand

Authors: Krishna Reddy

Addresses: Department of Finance, Waikato Management School, The University of Waikato, Private Bag 3105, Hamilton 3240, New Zealand

Abstract: This study explores the efficacy of principle-based corporate governance practices on the financial performance of publicly listed companies in New Zealand. The New Zealand Securities Commission (hereafter NZSC) in 2004 promulgated nine high level principles and guidelines with an aim of improving corporate governance practices and boosting investor confidence in the New Zealand capital market. Our results show that the publicly listed companies have universally adopted the Securities Commission recommendations, establishing subcommittees for audit, remuneration and nomination, and have a majority of non-executive/independent directors on the boards. The empirical results suggest that the NZSC recommendations have had a positive effect on companies' financial performance. This study offers insights for policy makers interested in adopting principle-based corporate governance practices within their country. Within New Zealand, public policy developments and stock exchange listing requirements/regulatory issues with associated compliance burdens are better informed as a consequence of the research.

Keywords: principle-based corporate governance; agency problem; board of directors; managerial ownership; block ownership; financial performance; firm performance; New Zealand; investor confidence; audit subcommittees; remuneration subcommittees; nomination subcommittees; non-executive directors; independent directors.

DOI: 10.1504/IJCG.2013.055755

International Journal of Corporate Governance, 2013 Vol.4 No.2, pp.138 - 161

Received: 30 May 2013
Accepted: 30 May 2013

Published online: 04 May 2014 *

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