301.F财务管理中的风险分析 外文文献.doc

How Can Corporate Governance ControlEnterprises Financial RiskSwapan Kumar Bala, FCMAAssociate ProfessorDepartment of Accounting & Information SystemsUniversity of Dhaka, DhakaAbstract: Financial Crisis in 2008 raised the debate again of whether corporate governance failure should be blamed. Lots of research has discussed the close relationships between corporate governance and risk control. However, empirical study, especially from the whole scenario of financial risk management of non-financial firm, is limited. In this article, Ireferred to a mature corporate governance appraisal framework CCGINK and anew corporate financial risk management system of SASAC to establish a three-layercorporategovernancemeasurementsystem,including relationships between shareholders and managers, between controlling shareholders and minority shareholders and among all stakeholders, and a financial risk framework for non-financial firms. Then through multiple regression between two groups of indices, I suppose to find the answer to the question which aspects of corporate governance are able to control which elements of financial risks of non-financial firms. The research conclusion will provide pragmatic implications to policy makers and corporate executives for their regulation and management practice.Key Words: Corporate GovernanceAgency problemFinancial riskRisk management. IntroductionThe Financial Crisis across the globe and the ramifications for the rest of the global economy in 2008 and 2009 raised the concern, another time, whether the failure is the one of Corporate Governance. According to OECDs most recent report by Richard Anderson, Corporate Governance alone is not the cause of the current Financial Crisis. However, Corporate Governance could have prevented some of the worst aspects of the crisis had effective governance operated throughout the period of time during which the problems were developing and before they crystallized. Furthermore, effective Corporate Governance could have helped to reduce the catastrophic impacts that the global and national economies are now suffering.Corporate Governance is a complex concept with close relevance to economics, finance, laws and management. Through researching institutional changes among shareholders, boards, managers and other interest groups in micro-economics world, corporate governance takes key role in improving corporate performance, especially for public corporations. According to McKinseys serial reports, investors are willing to pay above 20% premium for good corporate governance. Also, failures of firms reform in Eastern Europe and Russia, from the perspective of asset control, which led to substantial diversion of assets by managers of many privatized firms and the virtual non-existence of external capital supply to firms (Boycko, Shleifer and Vishny1995), informed us that we can not avoid the influence of this deepermanagement mechanism beneath property rights allocation and protection,especially in the course of Chinas state-owned enterprises (SOEs) reform.The plush droplight of Sinopec and the employee group house-purchasing of CNPC with low price in 2009 disclosed the high principal-agent risk in corporate governance of SOEs. Besides, a large number of corporatized SOEs remain dominated by a single state shareholder that exercises its control either through formal channels, such as shareholder voting, or through traditional channels, such as the acknowledged authority of the Communist Partys organizational department over personnel appointments in key state-owned and state-controlled enterprises, whether or not corporatized and listedonthestockmarket(Clarke,2003).Relationship-baseddeals expropriate the interests of shareholders, especially minority shareholders. In2005,ChinasState-ownedAssets SupervisionandAdministration Commission (SASAC) applied Temasek Holdings management model into Shanghai Baosteel Group Corporation as an experiment site for Board of Directors Reform. The SOEs further reform needs deeper research in the area ofcorporategovernanceandriskcontrol,especially financialrisk management.The purpose of this study is to address the questions as followings:1) Will corporate governance be an effective risk controller in enterprisesfinancial risk management?2) Which factors in corporate governance will mitigate or avoid what kind of financial risk elements?If we can answer these questions, we may provide concrete advice to policymakers and corporate managers to adapt their management and governance methods rather than just pinpoint the problem. This empirical study of relationship between corporate governance and risk management should have pragmatic implications for further firm application and government policy making.Brief Literature Review1. Corporate GovernanceCorporate Governance was first mentioned as a concept in Willianmsons article On the Governance of the Modern Corporation (Willianmson, Oliver E.,1979). In the following 30 years, Corporate Governance (CG) has become one of the most important ingredients of theories of modern firm, although it is still a new concept even in developed markets such as United States and United Kingdom. As Berglof contended, CG has been a dominant policy issue in developed market economics for more than a decade and one of the most hotly contested issues in the transition economies since the mid-90s (Berglof,1999). However, the numerous debates on corporate governance have not provided us a consensus on CGs conception in the worldwide so far.From the narrowest perspective, the major conflict analyzed in the context of corporate governance is the agency problem between shareholders and managers. In The Wealth of Nations Adam Smith wrote about business firm managers of “other peoples money” as the man who would be unlikely to manage it with the “same anxious vigilance” shown by the active partners in asmaller firm1. Berle and Means addressed the situation in which the owners of a corporation do not actively participate in its management more thoroughly (Berle and Means,1932). The separation of ownership from control that continued with the introduction of limited liability for both public companies and private companies, and the gradualemergence of the modern giant corporation in which none of the directors or managers has more than a minority financial interest have given rise to the possibility that the interests of those who control business and those who own it may conflict. The theoretical motives for agency problems are analyzed by Jensen and Meckling (1976), who develop a theory of the ownership structure of a firm. The basis for theiranalysis is the perspective that a corporation is “a legal fiction which serves as a nexus for contracting relationships and which is also characterized by the existence of divisible residual claims on the assets and cash-flows of the organization which can generally be sold without the permission of the other contracting individuals”. Shleifer and Vishny wrote in the opening paragraph of a survey of corporate governance, “Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.” They dealt with corporate governance straightly from the agency perspective, which was referred to as separation of ownership and control. According to Shleifer and Vishny, managers will take highly inefficient actions, which cost investors far more than the personal benefits to the managers, because managers have residual right of control due to incomplete contracts. (Shleifer and Vishny, 1997)Broadly speaking, there are two types of corporate governance mechanisms: between owners and managers, and between controlling shareholders and minority shareholders. When ownership is diffuse, as is typical for US and UK corporations, agency problems will stem from the conflicts of interest between outside shareholders and managers who own an insignificant amount of equity in the firm (Jensen and Meckling 1976).However, when ownership is concentrated to the degree that one owner has effective control of the firm, as is typically the case in Asia, the nature of the agency problem shifts away from manager & shareholder to conflicts between the controlling owner (who is often also the manager) and minority shareholder. Actually, agency problem of big companies in most countries is basically not the conflict between outside investors and managers, but the one between outside investors and controlling shareholders (Shleifer and Vishny, 1997). Claessens and Fan also found, in their review of the literature on corporate governance issues in Asia, that the lack of protection of minority rights has been the major corporate governance issue in many emerging markets. (Claessens and Joseph P.H. Fan,2002)Besides the concerns for investors and managers, scholars also extend corporate governance issue into corporate value in light of creating value for all interestgroups,suchasemployees,suppliers,customersandother stakeholders. John and Senbet (1998) proposed a more comprehensive definition that “corporate governance deals with mechanisms by which stakeholders of a corporation exercise control over corporate insiders and management such that their interests are protected”. They defined stakeholderas not just shareholder, but also debt-holder and even non-financial stakeholders such as employee, supplier, customer, and other interested party. Hart (1995) closely shared this view as he suggested that “corporate governance issues arise in an organization whenever two conditions are present. First, there is an agency problem, or conflict of interest, involving members of the organization these might be owners, managers, workers or consumers. Second, transaction costs are such that this agency problem cannot be dealt with through a contract”. Berglof (1999) also mentioned that, in many contexts, the most immediate concern was to protect other stakeholders than shareholders.The brief literature review above gives us a picture of a layered conception of corporate governance, from agency problems between shareholder and manager, to interest conflicts between dominant shareholder and minority shareholder, and to relationships among all stakeholders. In this study, I will use this corporate governance structure to frame and measure CG.2. Risk ManagementRisk management has received a lot of attention in financial literatures. Several theories have been put forward to explain why and how corporations manage (or should manage) the risks they face (e.g., Stulz (1984); Smith and Stulz (1985); Stulz (1990, 1996); DeMarzo and Duffie (1991); Froot, Scharfstein and Stein (1993); Morellec and Smith (2002), Breeden and Viswanathan (1998) and Carpenter (2000). Just as corporate governance, risk management is a complicated and layered concept as well. In the past twodecades, risk management has evolved from operational risk management, mainly hedging policy, investment and finance decision, etc., into a risk management framework. In 2004, Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued its risk management principle: Enterprise Risk Management - Integrated Framework (ERM), which describes theessentialcomponents,principlesandconceptsofenterpriserisk management for all organizations. With heightened concern and focus on risk management, the ERM framework provides board of directors and manager a clear roadmap for identifying risks, avoiding pitfalls, and seizing opportunities to grow stakeholder value. Actually, risk management has already become one index to measure success of corporate governance in many countries. According to Australian Stock Exchange (ASX) Corporate Governance Council “PrinciplesofGoodCorporateGovernance andBest Practice Recommendations”,goodcorporate governancestructuresencourage companies to create value (through entrepreneurism, innovation, development andexploration)and provideaccountabilityandcontrolsystems commensurate with the risks involved. Inadequate risk management and accountability will lead to poor governance. In academic world, numerous studies have researched the positive linkage between corporate governance and firm performance, and between good risk management and corporate performance; however, the relationship between corporate governance and risk management still lacks enough attention. But there seems a strong positive correlation between risk management and corporate governance. I am concerning: how does this relationship take effects? What constituents ofcorporate governance will reduce corporations exposure to risk? And whatkind of risks?Fortunately, I found some scholars have the same interests in fumbling for correlation of corporate governance and risk management. OECD attributed the financial crisis in 2008 partly to the failure of boards oversight. It encouraged boards to take a more pro-active stance in overseeing the risk management framework as part of the development of the assurance framework. In order to compensate for the extreme pressures for growth and for the distressed state of corporate governance, board should increase significantly its oversight of assurance across the organization, including appointing senior Chief Assurance Officer or Director of Risk Management, and setting up risk management group, the internal audit department and other internal assurance providers (Richard Anderson, 2009). Stulz contended that risk management has a reverse influence on companies capital and ownership structure. Besides increasing corporate debt capacity, the reduction of downside risk could also encourage larger equity stakes for managers by shielding their investments from “uncontrollables.” (Stulz, 1996) Eduardus Tandelilin et al justified a general hypothesis that better corporate governance will lead to better risk management. Corporate governance offers some fair incentives,compensation,andcareerplansformanagerstoreduce expropriating managerial be