How firms determine the pay of their executive employees is a vital research area. In the Australian context, mining firms form a large portion of listed companies. These miners tend to have more volatile earnings, operate with less certainty and higher risk in relation to capital investment. We look at a sample of ASX listed miners and non-miners from 2005 to 2013. We note that miners pay their CEOs less (AUD 1 m vs AUD 1.5 m for non-miners) overall. However, we also note that miners tend to use enhanced contingent long-term remuneration arrangements to significantly boost the pay-performance relationship compared to non-miners particularly during the pre-GFC period. Curiously, non-miners tend to have more generous short-term contingent arrangements linking executive pay and performance. The GFC, as an event, has adversely impacted these arrangements, lessening the generosity of pay-performance among miners, while enhancing these arrangements among non-miners. Overall, the results of the study provide support for optimal contracting theory and do not generally support the managerial power approach for both mining and non-mining firms.

This paper investigates the interactions between foreign direct investment (FDI) and country-level individual governance indicators for a sample of 173 countries from 1996 to 2007, and also the effect of legal origin, international financial reporting standards (IFRS) and ownership diffusion on them. We find evidence of positively significant two-way relationships between each of the six individual governance indicators and lagged FDI inflows scaled by lagged GDP to confirm that governance is a function of FDI inflows and vice-versa. The overall interpretation of the results is that FDI inflows, IFRS, ownership diffusion and legal framework of a country 'matter' for macro-level governance in a competitive global business environment while FDI inflows are dependent on individual governance indicators and other macro-economic variables to a large extent. Both IFRS and legal origin have no direct link to FDI inflow. These findings have policy implications for individual governments and international donor organizations to undertake tenable actions for the improvement of country-level individual governance indicators to attract more FDI inflow.

Purpose - The purpose of this study is to examine factors influencing decisions to repurchase shares on-market in Australia. The present study also examines the role of board size, board independence and chief executive officer duality on the decision to repurchase shares on-market by Australian firms. Design/methodology/approach - This study blends the traditional motivations of share repurchases with the influences of governance. The sample consists of all non-financial firms included in the Australian All Ordinaries Index (AOI) for the period 2004-2010. The repurchase sample consists of 104 repurchases undertaken by 62 firms. A probit panel model is used to analyse the decision to repurchase shares on the market. To account for unobserved heterogeneity, random effects panel models are also used. Findings - Analyses of a sample of non-financial firms included in the AOI for the period 2004-2010 show that size is significantly positively correlated with the decision to repurchase shares, thus supporting the agency cost. Findings also support the undervaluation and signalling hypotheses. Similarly, there is evidence in support of the view that firms repurchase shares to reach their target optimal capital structure. The present study also finds a significant positive association between board independence and the decision to repurchase shares in Australia. Research limitations/implications - On-market share repurchases help firms to signal their future growth opportunities and resolve agency conflicts. Signals from repurchases also help markets discover the true fundamental values of firms. Governance plays an important role in improving the effectiveness of on-market share repurchases, as independent directors provide both monitoring and discipline which helps to ensure that firms have valid motivations in undertaking share repurchases. Practical implications - These findings have implications for capital restructuring and governance policies. Principle-based governance frameworks that prevail in countries like Australia work as well as rule-based governance. Originality/value - This study highlights the complementary roles that financial policies and corporate boards play in corporate governance. Independent boards ensure that firms pursue appropriate financial policies that help resolve agency conflicts and information asymmetry problems.

Purpose - The purpose of this paper is to examine the influence of corporate governance on the dividend payout decisions of Australian firms by considering two related objectives. First, it considers the role of corporate governance ratings (CGRs) on the decision to pay or not to pay dividends. Second, it considers the influence of CGRs on the average dividend payout level of Australian firms. Design/methodology/approach - The sample consists of 413 non-financial firms included in the All Ordinaries Index for the period 2004-2009. A logit model is employed to analyse the decision to pay or omit dividends. Similarly, tobit method is employed to analyse the factors influencing the dividend payout level of Australian firms. To control for unobserved heterogeneity, this study employs random effects panel logit and panel tobit models. Findings - This study finds that CGRs have a significant positive influence on the decision to pay dividends and on the average dividend payout level of Australian firms. Similarly, the present study finds support for signalling hypothesis as profitability has a significant positive influence and a loss dummy has a significant negative influence on the dividend payout decisions of Australian firms. The study also finds support for the life cycle hypothesis as growth opportunities have a significant negative impact on the average dividend payout level of Australian firms. This study finds no conclusive evidence of the existence of dividend tax clientele in Australia. Research limitations/implications - Dividends provide a complementary governance role consistent with the "outcomes model" of the agency cost theory as proposed by La Port et al. (2000). Practical implications - The findings have implications for corporate governance policies. Principle-based governance mechanisms work as well as the rule-based governance mechanisms in an environment characterized by high levels of investor protection and well-developed stock markets. Companies that are well governed may limit the opportunities for managers to expropriate shareholders and thus governance may reduce the contracting costs associated with compensation policies. Originality/value - This is the first study that examines the influence of governance on dividend policy using the CGRs developed by the WHK Horwath/University of Newcastle. Findings are robust and account for unobserved heterogeneity as random effects panel models are employed.

The present study analyses the share of the top executive compensation captured by the CEO for a sample of 2,153 firm-years of Australian firms for the period 2005 to 2011. Empirical findings from both the OLS and FE analyses show that median industry CEO pay slice, board independence, CEO tenure and insider shareholding have a significant positive influence on the CEO pay slice, while board size, CEO turnover and CEO shareholding have a significant negative influence after controlling for economic determinants of CEO pay such as size of firm, growth opportunities and performance. CEO pay slice has no significant influence on the firm value as measured by Tobin's Q. Analyses also show that CEO pay slice has a significant positive impact on RoA and stock returns. These results for the Australian firms are in variance with that of Bebchuk et al. (2011) for the American firms.

The present study focuses on the performance sensitivity of CEO wealth for a sample of Australian firms for the period 2005 to 2011. For a sample of 2153 non-financial firm-years, the study analyses the influences of economic determinants, governance and ownership factors on the performance sensitivity of CEO wealth for the pre-GFC, post-GFC sub-periods. Employing pooled OLS and panel random effects (RE) regressions, the study finds that firm size, performance and growth opportunities have a significant positive influence on the performance sensitivity of CEO wealth. Board size, CEO duality, average director tenure and board interlocking have a negative significant influence on the performance sensitivity of CEO wealth while CEO tenure and managerial ownership have a significant positive influence.

The present study analyzes the relationship between ownership and leverage levels of a sample of 465 non-financial Australian firms for the period 2004-10. Blockholders in Australia have a significant positive influence on the capital structure but, as their shareholding levels rise, their influence on leverage becomes negative. Managerial ownership, on the other hand, has no influence on the capital structure, but is found to have a significant impact on the short-term debt levels. The relationship between ownership and leverage is bidirectional as both ordinary least squares (OLS) and panel data analyses show significant positive relationships between blockholder ownership and capital structure.

The present study analyses the relationships between corporate governance, CEO pay and the performance of corporate firms in Australia. Following J. E. Core, Holthausen, and Larcker (1999), this study analyses the role of corporate governance in executive pay design and the alignment of incentives of top management with that of shareholders. The sample consists of 1945 non-financial firm-years for the period 2005-2011. The average total compensation of CEOs of the sample firms stood at $1.44 million and in the wake of the Global Financial Crisis (GFC), the growth rate in average compensation declined in 2008 and 2009 before recovering in 2010.

Purpose - The purpose of this paper is to examine the influence of board structure on dividend policy of Australian corporate firms. It also considers the traditional explanations of corporate dividend choice, such as agency cost theory, signalling hypothesis, the life cycle hypothesis along with tax-based explanations of dividend policy. Design/methodology/approach - The final sample consists of 413 non-financial firms that are part of the All Ordinaries Index. The causal analysis was undertaken in three stages. In the first stage, the authors analyse the likelihood of paying dividends. And classify all firms as either dividend payers or non-payers. The authors then model this binary variable as a function of different sets of variables. In the second stage, the authors analyse the factors determining the magnitude of dividend payout by those firms that have paid a dividend. In contrast, stage three employs all firms - those which did not pay any dividend and those firms which paid a dividend. Findings - For the study period 2004-2009, this study finds that board independence has a significant positive influence on the dividend payout of Australian firms. This finding is consistent with the 'outcome' model of La Porta et al. (2000). This study also finds that size has a significant positive influence on the dividend payout of Australian firms thus providing support for the agency cost view of dividend policy. Similarly, this study also finds support for the signalling hypothesis and the life cycle theory given the significant positive influence of profitability and the significant negative influence of current losses and growth opportunities on the dividend policy of Australian firms. Research limitations/implications - The findings of the study are robust with to alternative measures of variables employed and are not influenced by the global financial crisis. However, this study did not consider the possible endogenous and multiple relationships between dividends, debt, profitability, cash holdings and governance structures given the limited study period considered. Practical implications - This study finds that board independence has a significant positive influence on the dividend behaviour of Australian firms. This suggests that dividends and independent directors play complementary governance roles. While dividends provide the monitoring and disciplinary roles, independent directors act as catalysts for enhancing effective board functioning. These findings have implications for corporate governance policies and the payout policies. Originality/value - Though the governance role of dividends has long been recognized in the literature (Easterbrook, 1984; Jensen, 1986), very few studies analyse the influence of board characteristics on the decision to pay dividends in Australia. Given the distinct Australian setting where the tax imputation system allows companies to pay franked dividends to domestic investors, this study provides evidence on the interaction of corporate and dividend policies. This study finds that dividend polices are influenced by percentage franking of dividends. This study also finds that board independence has a significant positive influence on the dividend policy of Australian firms.