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Universidade De Lisboa Instituto Superior De UNIVERSIDADE DE LISBOA INSTITUTO SUPERIOR DE ECONOMIA E GESTÃO TESE DE DOUTORAMENTO EM GESTÃO Especialização em Finanças ESSAYS ON CORPORATE GOVERNANCE Paulo Manuel de Morais Francisco Orientadores: Prof. Doutor Eduardo Barbosa do Couto e Prof. Doutor Carlos Pestana Barros Júri: Presidente: Reitor da Universidade de Lisboa. Vogais: Doutor Carlos Alberto Pestana Barros, Professor associado com agregação do Instituto Superior de Economia e Gestão da Universidade de Lisboa; Doutor Eduardo Barbosa do Couto, Professor associado do Instituto Superior de Economia e Gestão da Universidade de Lisboa; Doutor Miguel José Pereira Athayde Marques, Professor auxiliar da Universidade Católica Portuguesa; Doutor Júlio Manuel dos Santos Martins, Professor auxiliar convidado da Faculdade de Economia da Universidade do Porto; Doutor Paulo Fernando Sousa Pereira Alves, Professor adjunto convidado do Instituto Superior de Contabilidade e Administração de Lisboa. Lisboa, Dezembro de 2013 Resumo Na presente dissertação são apresentados quatro ensaios sobre governo das sociedades. No primeiro ensaio é analisada a remuneração dos CEO das empresas cotadas portuguesas. Os resultados obtidos revelam que os fatores específicos das empresas explicam grande parte da variabilidade da remuneração total dos CEO, ao passo que o desempenho das empresas explica menos de 5%. Outras características do governo destas sociedades estão também relacionadas com a remuneração dos CEO. No segundo ensaio é analisada a relação entre o desempenho da empresa e o governo das sociedades, com especial enfoque nas características dos CEO, designadamente quanto ao nível e tipo de educação. Além da relação entre o governo das sociedades cotadas portuguesas e o seu desempenho, os resultados sugerem ainda que existe uma relação positiva entre o nível de educação dos CEO e o desempenho das empresas. No terceiro ensaio é analisado efeito da diversidade de género no conselho de administração na redução dos custos de agência. Os resultados empíricos suportam esta relação. Adicionalmente é encontrada evidência de que as empresas mais complexas e com maior preocupação acerca da independência dos seus dirigentes têm maior diversidade de género no conselho de administração. Por fim, no último ensaio é analisado o efeito da composição do conselho de administração na política de financiamento. Os resultados obtidos suportam a ideia de que conselhos de administração mais independentes reduzem a assimetria de informação, levando a uma maior utilização de fontes externas de capital tais como ações e dívida de longo prazo. Palavras-chave: conselho de administração, presidente executivo, custos de agência, governo das sociedades, finanças empresariais. Classificação JEL: G30, G32, J33, L22 Abstract This dissertation presents four empirical essays on corporate governance. The first essay analyses Portuguese CEO’s earnings. It is found that firm specific factors accounts for the majority of the variance in total CEO pay, while firm performance accounts for less than 5%. It is also found that the CEO characteristics, board of directors’ structures, and shareholders features are related with the CEO pay. In the second essay, we analyse the relationship between company performance and governance characteristics allowing for CEO specific characteristics, such as education, age and tenure. The findings support the conclusion that firm performance relates positively to the CEO’s level of educational attainment. Other governance-specific characteristics also explain this relationship, namely, the presence of independent directors on the board and voting cap restrictions. The third essay empirically analyses whether gender diversity enhances boards of directors’ independence and efficiency. The empirical results support this hypothesis. Moreover, this essay finds that firms that are concerned with board independence and those in more complex environments are more likely to have gender-balanced boards. Finally, the fourth essay empirically analyses the association between the board of directors’ composition and a firm’s financing policies. It is theorised that a more independent and efficient board leads to a shift of financing choices from retained earnings to short-term debt, from short-term debt to long-term debt, and from long-term debt to external equity financing. The results obtained in this last study support this hypothesis. Keywords: board of directors, CEO, agency costs, corporate governance, corporate finance. JEL classification: G30, G32, J33, L22 Ao meu filho Duarte Acknowledgements I am grateful to my supervisors, Eduardo Couto and Carlos Barros, whose dedication, guidance and expertise made it possible to complete this dissertation. I would also like to acknowledge the helpful comments of the Management Department Seminar participants. Special thanks are due to Clara Raposo, Maria João Guedes and Pedro Verga Matos for their helpful remarks. I would also like to thank my colleagues in the ISEG Management PhD program for their support and friendship, particularly, João Nogueira, Tiago Pessoa and Telmo Vieira. I would also like to thank my CMVM colleagues, Alexandra Mourão, Conceição Ribeiro, Gabriela Figueiredo Dias, Mário Freire and Telma Gonçalves. A special thank is due to my colleague and friend Paulo Alves for his support and valuable guidance. I am also grateful to the ISGB, ISEG and CMVM for its institutional support. Finally, I would like to thank my parents and particularly my wife Susana, whose patience and understanding made it possible to finish this work. Contents Resumo ............................................................................................................................. ii Abstract ............................................................................................................................ iii Acknowledgements .......................................................................................................... v Contents ........................................................................................................................... vi List of tables .................................................................................................................... ix List of acronyms .............................................................................................................. xi CHAPTER I – INTRODUCTION AND DISSERTATION OVERVIEW ...................... 1 1.1 Introduction ........................................................................................................... 1 1.2 Corporate governance definition .......................................................................... 2 1.3 Dissertation overview ........................................................................................... 5 References ................................................................................................................... 10 CHAPTER II - EXECUTIVE PAY AND PERFORMANCE IN PORTUGUESE LISTED COMPANIES .................................................................................................. 12 2.1 Introduction ......................................................................................................... 13 2.2 Contextual setting ............................................................................................... 16 2.3 Literature survey ................................................................................................. 18 2.4 Theoretical framework ........................................................................................ 20 2.5 Hypotheses .......................................................................................................... 21 2.5.1 Performance hypothesis ............................................................................... 21 2.5.2 Firm specific characteristics ........................................................................ 22 2.5.3 CEO specific characteristics ........................................................................ 24 2.5.4 Board of directors characteristics ................................................................ 27 2.5.5 Shareholders and ownership characteristics ................................................ 33 2.6 Data and methodology ........................................................................................ 36 2.6.1 Data .............................................................................................................. 36 2.6.2 Methodology ................................................................................................ 40 2.7 Results discussion ............................................................................................... 41 2.8 Conclusion .......................................................................................................... 51 References ................................................................................................................... 54 Appendix A ................................................................................................................. 60 CHAPTER III - PERFORMANCE AND GOVERNANCE IN LISTED COMPANIES: DOES FORMAL EDUCATION OF THE CEO IS ASSOCIATED WITH FIRM PERFORMANCE? ......................................................................................................... 65 vii 3.1 Introduction ......................................................................................................... 66 3.2 Contextual setting ..............................................................................................
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