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dc.contributor.advisorRoberts, Helen
dc.contributor.authorBorthwick, Alice Maree
dc.date.available2015-07-13T02:44:30Z
dc.date.copyright2015
dc.identifier.citationBorthwick, A. M. (2015). The Wealth Effect of NZX 2003 Compulsory Compliance: An Event Study (Thesis, Master of Business). University of Otago. Retrieved from http://hdl.handle.net/10523/5801en
dc.identifier.urihttp://hdl.handle.net/10523/5801
dc.description.abstractIn response to a global move towards more strictly regulated corporate governance, the NZX established the Code of Best Practice in 2003. In addition to several guidelines for good corporate governance, two compulsory compliance measures were imposed to enforce greater external monitoring: (1) firms must have a minimum number of independent directors and (2) firms must include an audit committee on their board. However, prior research suggests that boards are endogenously determined based on a firm’s individual characteristics; thus, the imposition of compulsory compliance may force some firms to move away from an optimal board structure. Using event study methodology, with both long-horizon and short-horizon approaches, I examine the cross-sectional variation in stock market returns around the announcement and passage of the new regulations. I find that firms with high benefits of control and low monitoring costs have significantly higher stock market returns around the event than firms with opposing characteristics. Small, growth firms that are operating in uncertain environments have significantly higher costs of monitoring and lower benefits of control. The imposition of the compulsory compliance measures has a significantly negative wealth effect for these firms. Results are robust to the capital asset pricing model (CAPM) and Fama-French (1993) risk adjustments. Analysis of the reaction around individual events related to the NZX Code shows that the bulk of the expected wealth effect of the NZX Code on firms was priced into the market at the first announcement of the new proposed rules (on May 6th). Overall, the findings suggest that a blanket “one-size fits all” regulation pertaining to best board practice is not optimal for the New Zealand market.
dc.format.mimetypeapplication/pdf
dc.language.isoen
dc.publisherUniversity of Otago
dc.rightsAll items in OUR Archive are provided for private study and research purposes and are protected by copyright with all rights reserved unless otherwise indicated.
dc.subjectNew Zealand
dc.subjectagency theory
dc.subjectNZX
dc.subjectCode of Best Practice
dc.subjectcompulsory compliance
dc.subjectaudit committee
dc.subjectindependent directors
dc.subjectevent study
dc.subjectexternal monitoring
dc.subjectregulation
dc.subjectboard structure
dc.subjectmarket returns
dc.subjectbenefits of control
dc.subjectmonitoring costs
dc.titleThe Wealth Effect of NZX 2003 Compulsory Compliance: An Event Study
dc.typeThesis
dc.date.updated2015-06-29T03:59:17Z
dc.language.rfc3066en
thesis.degree.disciplineFinance
thesis.degree.nameMaster of Business
thesis.degree.grantorUniversity of Otago
thesis.degree.levelMasters
otago.openaccessOpen
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