The Demand for External Audit Quality: The Contribution of Agency Theory in the Context of Cameroon

This study examines the effect of agency theory on the demand for external audit quality in Cameroon. Specifically, it looks at the impact of shareholder/manager agency cost, shareholders/creditors agency cost, and majority/minority shareholders agency cost on external audit quality demand in Cameroon. The focus is on a sample of 171 companies drawn from the regions of Littoral, Centre and North-West using questionnaires. We assess the explanatory power of agency theory on the demand for a better quality of audit in the Cameroonian context by modelling external audit quality as a function of agency costs. The logistic regression analysis allows us to study the nature of any possible interaction. The analysis shows that while an increase in shareholder/creditor agency cost and an increase in shareholder/manager agency cost negatively affect the demand for audit quality, the majority/minority agency cost and the size of the audited client positively and significantly affect the demand for audit quality.

Minority investor protection mechanisms and agency costs: An empirical study using a World Bank–developed approach

This study aims to examine the impact of minority investor protection mechanisms on agency costs. All relevant indicators of minority investor protection adapted from the World Bank’s annual ‘Doing Business’ reports, along with concentrated government ownership, are employed with a panel data sample of 135 Vietnamese listed firms during the period 2014–2018. It is found that the following mechanisms are effective in mitigating agency costs and hence agency problems at the firm level: 1) review and approval requirements for related-party transactions; 2) minority shareholders’ ability to sue and hold directors liable for their duties; 3) minority shareholders’ access to internal corporate documents; 4) investors’ rights to approve major corporate investment and sale of asset decisions; and 5) disclosure in annual reports of salaries, bonuses and other forms of remuneration to directors and management. Interestingly, board independence and controlling government shareholders are not confirmed to play significant roles in addressing agency problems. To the best of the authors’ knowledge, this is the first attempt at testing for the impact of minority investor protection mechanisms developed by the World Bank on agency costs at the firm level, hence providing empirical evidence for the adoption of the minority investor protection mechanisms promoted by the World Bank. This study also provides policy implications for selecting effective mechanisms to mitigate agency conflicts between controlling shareholders and minority investors in order to enhance the financial performance of firms in an Asian emerging market.

Derivative Lawsuit in Ukraine: The Issue of Improving Legal Regulation

Background: Some jurisdictions provide for the right of members of a corporation to sue on its behalf and in its interests. This remedy is called ‘a derivative action’ (derivative lawsuit), and the right to file such a lawsuit is granted to a company’s members in case the wrongdoers are in its control, preventing the company from taking actions to protect its rights and interests – which is detrimental to the interests and rights of minority shareholders. However, derivative lawsuit’s regulation differs in each jurisdiction despite sharing common features, raising a variety of issues to be resolved. Methods: In this article, the author points out several issues and their possible solutions, which could be implemented in Ukrainian legislation: property qualification by itself cannot prevent abuse in filing a derivative lawsuit – extended ‘locus standi’ has to be implemented; holders of preferred shares have to be granted the right to file a derivative lawsuit; property qualification has to be substituted with a representation quota for members of non-entrepreneurial corporations; the circle of defendants should include major members (majority of members) and third parties, etc. Results and Conclusions: The concepts of a preventive derivative lawsuit and a derivative lawsuit for the invalidation of a company’s transaction and possible issues regarding them are analysed. Additionally, the necessity for implementing a ‘business judgement rule’ is emphasised.

THE RELIEF PROVIDED TO A COMPLAINANT UNDER SECTION 163(1)(a) OF THE 2008 COMPANIES ACT: AN EXAMINATION OF THE CRITERION WITH REFERENCE TO PEEL v HAMON J&C ENGINEERING (PTY) LTD

The remedies in favour of minority shareholders that have developed over the years have been informed by the discriminatory manner in which the proper-plaintiff rule has been applied within the management of companies, in disregard of the rights and interests of minority shareholders. Broadly, section 163(1) of the Companies Act 71 of 2008 accords shareholders or directors of a company three circumstances in which they have rights to apply to court for relief. One ground for application is that an act or omission of a company, or a related person, has had a result that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, the applicant. From the contemporary debates and court decisions consulted, it is clear that the criterion that complainants must satisfy under section 163(1) – “any act or omission of the company, or a related person, has had a result”, – and the manner in which parties must go about meeting such criterion, is not yet settled. The intention of this paper is to analyse and examine this criterion. The paper seeks to contribute to the debate by using the case of Peel v Hamon J&C Engineering (Pty) Ltd as the point of reference. The case is pertinent because it touches on all the elements that must be satisfied under section 163(1). Secondly, much as the decision is supported, it seems an error of law was made in one aspect of the decision.

Ukraine’s stock market: development prospects and global experience of state regulation

The Ukrainian stock market has a huge potential for development, but many systemic problems hold it back. The purpose of the study was to develop proposals for the use of international experience in regulating the stock market of Ukraine. To achieve the goal, the current state of development of the stock market of Ukraine was analyzed and its main problems were identified. It is revealed that the nominal indicators of the volume of the stock market have been decreasing since 2015, but qualitatively the market is developing. The number of organizers of exchange trades and the number of new issues of securities decreased, many licenses to work on the stock market were revoked. At the same time, the responsibility of exchange traders is growing, information sharing is improving, and most traders adhere to accepted trading principles. The article analyzes the legislative changes in the regulation of the stock market, which have occurred since the signing of the Association Agreement between Ukraine and the EU. Separately identified elements of the stock market and technological processes of stock trading, requiring increased government regulation. Despite the increased level of institutional independence of the NSSMC and improvements in depository and clearing activities, the current legal framework allows owners of large businesses to forcibly buy out minority shareholders' shares. There are almost no shares of large profitable enterprises for free sale, and the level of monopolization of key sectors of the national economy is too high. The results of the analysis of U.S. laws and EU directives regulating the operation of stock markets, allowed to formulate proposals for the use of the experience of developed countries in the practice of reforming the stock market in Ukraine. In particular, changes are proposed regarding the obligation of issuers to ensure a minimum free float of their securities, strengthening accountability for violations on the stock market, streamlining the work of investment companies (funds) of various types, investment incentives in the real economy, protecting investors' rights and providing large stock exchanges with the status of self-regulatory organizations. Proposed measures for the development of legal regulation of the Ukrainian stock market will bring us closer to ESMA standards, to sign a Multilateral Memorandum of Understanding concerning consultation, cooperation and the exchange of information with IOSCO, increase overall market capitalization and liquidity of the market and allow the Ukrainian economy to attract capital on favorable terms.

Does one size fit all? A configurational approach to board effectiveness in limiting the excess cash

Purpose The study, by focusing on a context dominated by firms with a concentrated ownership, in which type-II agency problems (principal-principal conflicts) may occur, aims to depict which board configurations may be effective in protecting minority shareholders by mitigating the risk of controlling shareholders' expropriation via cash holdings.Design/methodology/approach The research adopts a configurational approach and empirically conducts a fuzzy set/qualitative comparative analysis on a sample of 268 Italian listed companies.Findings The analysis depicts three combinations of board configurations and ownership structures that can be considered effective, namely Active Independent Control, Female Active Control and Double Internal Control.Originality/value The study revisits the topic of the risk of expropriation via cash holdings in a type-II agency problem framework and delineates the meaning of board effectiveness in a mature context ruled by family firms, like Italy. Furthermore, by drawing on a configurational approach, it overcomes the causality relationship between each board characteristic and cash holdings policies and reasons from a “bundle” perspective.

Minority Shareholders’ Legal Protection in a Limited Liability Company System

The purpose of this study is to determine the legal protection model for the majority and minority shareholders in public limited companies. This research method is normative research. To investigate the ineffectiveness of laws and regulations, in particular, Law No. 40 of 2007 on limited liability companies in providing shareholder protection, researchers have studied the laws and regulations and considered the views of experts on legal concepts related to legal protection for shareholders, particularly, minority shareholders. The results showed that the law did not provide maximum legal protection for minority shareholders, creating an imbalance between the rights of the minority and majority shareholders. For this reason, 1) reform or progressive changes in laws and regulations are needed, for instance, in PT Law No. 40 of 2007. These changes should be fundamental to philosophical aspects (values and perspectives) in providing shareholder protection; 2) the review of shareholders’ protection methods should be based on the aspects of fairness

Evaluating the activity of a chemical enterprise based on the comprehensive analysis of trends in technical, economic, and financial indicators

Subject. The article analyzes the economic activity of a large enterprise and forecasts basic technical and economic indicators. Objectives. Our aim is to develop analytical tools for business analysis, based on official reporting data, intended to increase the reliability of knowledge about the business situation at the enterprise. Methods. The study employs methods of analysis of technical and economic indicators, intelligent multidimensional data analysis, forecasting methods, time series models, and multivariate dynamic regression models. Results. We developed tools to evaluate management decisions on the basis of the volatility of income and expenditure indicators, which enable to assess the effectiveness of technical and economic solutions. We also developed a hybrid approach to forecasting the main technical and economic indicators based on models combining the multivariate dynamic regression models, multivariate autoregressive models, and adaptive forecasting models. The presented analytical tools for business analysis were tested on the materials of three large industrial enterprises of the chemical complex. Conclusions. The offered instrumental methods can be integrated into the analysis of enterprise by minority shareholders or potential investors, who do not have access to management statements. We also recommend them as analytical tools in the field of business consulting and business analysis for various purposes, including investment ones, to increase the reliability of knowledge about the condition of business, according to official reports of the enterprise.

Enforcement

This chapter studies the rules governing the enforcement of the duties imposed on directors, distinguishing between private and public enforcement. Directors owe their duties to the company and so the company is responsible for enforcing these duties. The law prefers such litigation decisions to be taken by the company through its normal process. The courts only interfere if that process cannot be made to work independently of the wrong-doers. It is unlikely for a derivative claim to succeed against the wishes of an independent majority and so it is right to observe that the shareholders are the main focus of the law. But here too the law is more nuanced and integrates the interests of minority shareholders and creditors. The duties of the directors are also enforced through the means of public law. The chapter then shows that public law sanctions particularly attach in relation to duties that enhance the interest of third parties interacting with the company. This leads to the conclusion that these interests are at least formally better protected than those of the shareholders.