Advertisement

Patterns of compliance with soft regulation in Italian listed companies

  • Pietro PrevitaliEmail author
  • Paola Cerchiello
Original Article
  • 1 Downloads

Abstract

The aim of this paper is to identify some clusters of companies which represent and classify different forms of compliance with soft regulation and the comply-or-explain principle. The analysis was conducted through the administration of a structured questionnaire to a sample of compliance officers from 102 companies listed on the Italian stock market. Our results identify three different clusters of companies with different patterns of compliance characterised by distinct forms of regulation conformity. The first cluster of companies called “regulation adherents” favour a clear and explicit application of compliance, the second cluster called “regulation dissenters” favour the “explain” principle and show compliance values below the sample average, while the third cluster called “regulation dissenters with balanced task orientation and an independent supervisory unit” fall between the first two clusters. Our study gives a contribution to corporate governance literature, with the aim of contributing to both the studies focused on the measurement of code compliance and the studies focused on identification of different patterns of code conformity. This paper extends the literature related to compliance and makes a relevant step towards the identification of principles and practices related to an innovative and unique application of the anti-corruption system based on the comply-or-explain principle.

Keywords

Compliance Comply-or-explain Soft regulation Supervisory unit Anti-corruption 

Notes

References

  1. Aguilera, R., and A. Cuervo-Cazurra. 2004. Codes of good governance worldwide: What is the trigger? Organization Studies 25: 415–444.  https://doi.org/10.1177/0170840604040669.Google Scholar
  2. Aguilera, R.V., and A. Cuervo-Cazurra. 2009. Codes of good governance. Corporate Governance: An International Review 17: 376–387.  https://doi.org/10.2139/ssrn.1773090.Google Scholar
  3. Aguilera, R.V., I. Filatotchev, H. Gospel, and G. Jackson. 2008. An organizational approach to comparative corporate governance: Costs, contingencies, and complementarities. Organization Science 19(3): 475–492.  https://doi.org/10.2139/ssrn.955043.Google Scholar
  4. Akkermans, D.H.M., H. Van Ees, C.L.M. Hermes, R.B.H. Hooghiemstra, G. Van der Laan, T.J.B.M. Postma, and A. Van Witteloostuijn. 2007. Corporate governance in the Netherlands: An overview of the application of the Tabaksblat Code in 2004. Corporate Governance: An International Review 15: 1106–1118.  https://doi.org/10.1111/j.1467-8683.2007.00634.x.Google Scholar
  5. Altman, A. 2001. Arguing about law (2nd ed.). Belmont: Wadsworth Publishing Company.Google Scholar
  6. Arthur, J., & Shaw, W. 2006. Readings in the philosophy of law (4th ed.). Upper Saddle River: Prentice-Hall.Google Scholar
  7. Berglöf, E., and A. Pajuste. 2005. What do firms disclose and why? Enforcing corporate governance and transparency in Central and Eastern Europe. Oxford Review of Economic Policy 21: 178–197.Google Scholar
  8. Brick, I.E., and N.K. Chidambaran. 2010. Board meetings, committee structure, and firm value. Journal of Corporate Finance 16(4): 533–553.  https://doi.org/10.1016/j.jcorpfin.2010.06.003.Google Scholar
  9. Cotton, P., I. Fraser, and W.Y. Hill. 2000. The social audit agenda—Primary health care in stakeholder society. International Journal of Auditing 4(1): 3–28.  https://doi.org/10.1006/cpac.2000.0436.Google Scholar
  10. Dedman, E. 2000. An investigation into the determinants of UK board structure before and after Cadbury. Corporate Governance: An International Review 8: 133–153.  https://doi.org/10.1111/1467-8683.00191.Google Scholar
  11. Fernández-Rodríguez, E., S. Gómez-Ansón, and A. Cuervo-García. 2004. The stock market reaction to the introduction of best practices codes by Spanish firms. Corporate Governance: An International Review 12: 29–46.  https://doi.org/10.1111/j.1467-8683.2004.00341.x.Google Scholar
  12. Goncharov, I., J.R. Werner, and J. Zimmermann. 2006. Does compliance with the German Corporate Governance Code have an impact on stock valuation? An empirical analysis. Corporate Governance: An International Review 14: 432–445.  https://doi.org/10.1111/j.1467-8683.2006.00516.x.Google Scholar
  13. Goodwin-Stewart, J., and P. Kent. 2006. Relation between external audit fees, audit committee characteristics and internal audit. Accounting and Finance 46(3): 387–404.  https://doi.org/10.1111/j.1467-629X.2006.00174.x.Google Scholar
  14. Guest, P.M. 2008. The determinants of board size and composition: Evidence from the UK. Journal of Corporate Finance 14(1): 51–72.  https://doi.org/10.12691/jfa-2-4-2.Google Scholar
  15. Haines, F. 1997. Corporate regulation: Beyond punish or persuade?. Oxford: Clarendon Press.Google Scholar
  16. Haxhi, I., & Van Ees, H. 2010. Explaining diversity in the worldwide diffusion of codes of good governance. Journal of International Business Studies 41: 710–726.Google Scholar
  17. Johansen, K., S. Laser, D. Neuberger, and E. Andreani. 2014. Inside or outside control of banks? Evidence from the composition of supervisory boards. European Journal of Law and Economics.  https://doi.org/10.1007/s10657-014-9463-y.Google Scholar
  18. Jokipii, A. 2010. Determinants and consequences of internal control in firms: A contingency theory based analysis. Journal of Management and Governance 14(2): 115–144.  https://doi.org/10.1007/s10997-009-9085-x.Google Scholar
  19. Pass, C. 2006. The revised Combined Code and corporate governance. An empirical survey of 50 large UK companies. Managerial Law 48(5): 467–478.  https://doi.org/10.1108/03090550610715963.Google Scholar
  20. Peterson, E.A. 2013. Compliance and ethics programs: Competitive advantage through the law. Journal of Management and Governance 17(4): 1027–1045.  https://doi.org/10.1007/s10997-012-9212-y.Google Scholar
  21. Previtali, P., and P. Cerchiello. 2017. Structuring supervisory board for an anti-corruption strategy: a new application of a compliance system. Corporate Governance: The International Journal of Business in Society 17(1): 48–63.  https://doi.org/10.1108/CG-09-2015-0126.Google Scholar
  22. Rose, C. 2015. Listed firm’s level of stakeholder transparency—The comply or explain evidence from the Danish corporate governance code. International Journal of Business Science and Applied Management 10(2): 1–15.Google Scholar
  23. Rose, C. 2016. Firm performance and comply or explain disclosure in corporate governance. European Management Journal 34(3): 202–222.  https://doi.org/10.1016/j.emj.2016.03.003.Google Scholar
  24. Seidl, D., P. Sanderson, and J. Roberts. 2013. Applying the “comply-or-explain principle: Discursive legitimacy tactics with regard to codes of corporate governance. Journal of Management and Governance 17: 791–826.  https://doi.org/10.1007/s10997-011-9209-y.Google Scholar
  25. Talaulicar, T., and A.V. Werder. 2008. Patterns of compliance with the German corporate governance code. Corporate Governance: An International Review 16(4): 255–273.  https://doi.org/10.1111/j.1467-8683.2008.00696.x.Google Scholar
  26. Upadhyay, A.D., R. Bhargava, and S.D. Faircloth. 2013. Board structure and role of monitoring committees. Journal of Business Research 67(7): 1486–1492.  https://doi.org/10.1016/j.jbusres.2013.07.017.Google Scholar
  27. Vafeas, N. 1999. Board meeting frequency and firm performance. Journal of Financial Economics 53(1): 113–142.  https://doi.org/10.1016/S0304-405X(99)00018-5.Google Scholar
  28. Werder, A.V., T. Talaulicar, and G.L. Kolat. 2005. Compliance with the German Corporate Governance Code: An empirical analysis of the compliance statements by German listed companies. Corporate Governance: An International Review 13: 178–187.  https://doi.org/10.1111/j.1467-8683.2005.00416.x.Google Scholar
  29. Werder, A.V., and T. Talaulicar. 2006. Corporate governance developments in Germany. In Handbook on international corporate governance: Country analyses, ed. C.A. Mallin, 28–44. Cheltenham: Edward Elgar.Google Scholar
  30. Walker, C. 2014. Organizational learning: the role of third party auditors in building compliance and enforcement capability. International Journal of Auditing 22(2): 213–222.  https://doi.org/10.1111/ijau.12026.Google Scholar

Copyright information

© Springer Nature Limited 2019

Authors and Affiliations

  1. 1.Department of Economics and Management SciencesUniversity of PaviaPaviaItaly

Personalised recommendations