ADHERENCE TO THE 1999 BLUE RIBBON COMMITTEE GUIDELINES AND DIVIDEND PAYOUT POLICY: EVIDENCE FROM KUWAIT
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Published
Mar 1, 2014
Abstract
The objective of this research is to examine the adherence to the 1999 Blue Ribbon Committee (BRC) recommendations and its impact on corporate dividends policy in Kuwait. These recommendations are deemed guidelines for improving the effectiveness of audit committees of shareholding firms. Both descriptive as well as analytical methods have been used to test for such effectiveness. A short questionnaire was distributed to 63 listed firms in Kuwait as well as examining published financial data of Kuwaiti firms with respect to dividend policies during 2007-2012. Results of the multiple regressions and sensitivity analysis indicated that there is no significant evidence on compliance with BRC guidelines when setting dividend policies by Kuwaiti firms, thus hardly any effect audit committees have on such policies.
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Keywords
Audit CommitteesCorporate GovernanceDividendsAccounting PoliciesBRC-1999
References
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• Bean, J. W. (1999). The audit committee’s roadmap. A.I.C.P.A.
• Black F. (1976). The dividend puzzle. Journal of Portfolio Management. 2: 5-8.
• Blue Ribbon Committee -BRC- (1999). On Improving the Effectiveness of Corporate Audit Committees. 1999. Stamford. CT.
• Bushman, R., M. and Smith, A. J. (2003). Transparency Financial Accounting Information and Corporate Governance. FRBNY Economic Policy Review.
• Chen, C.R., and Steiner, T.L. (1999). Ownership and agency conflicts: a non-linear simultaneous equation analysis of managerial ownership, risk taking, debt policy, and dividend policy. The Financial Review. 34. Pp. 119-136.
• Chen, J., and Dhiensiri, N. (2009). Determinants of Dividend Policy: The Evidence from New Zealand. International Research Journal of Finance and Economics. ISSN 1450-2887. Is: 34.
• Cheung, S. and Chan, B. (2004). Corporate Governance and Earnings Management. Available at SSRN http://www.SSRN.com.
• Dah, A., Beyrouti, N. and Showeiry, M. (2011). The Effect of Independent Directors on Firm Value. Orlando Conference 2012, available at: http://www.aabri.com/ OC2012Manuscripts/OC12090.pdf.
• De Vaus, D. (2002). Analyzing Social Science Data. London. SAGE.
• Easterbrook F. H. (1984). Two agency-cost explanations of dividends. American Economic Review. 74. Pp. 650-659.
• El-Gammal, W. and Showeiry, M. (2012). Corporate Governance and Quality of Accounting Information: Case of Lebanon. The Business Review. Cambridge Vol. 19. Is. 2. Pp. 310-315. Summer.
• Eugene, A. and Imhoff, J.R. (2003). Accounting Quality, Auditing and Corporate Governance. Auditing: A Journal of Practice and Theory. 22.
• Farook, S., Hassan, M. and Clinch, G. (2012). Profit Distribution Management by Islamic Banks: An Empirical Investigation. The Quarterly Review of Economics and Finance. 52. 333-347.
• Fluck Z. (1998). Optimal financial contracting: debt versus outside equity. Review of Financial Studies. 11. Pp. 383-418.
• Garcia-Meca, E. and Sanchez-Ballesta, J.P. (2009). Corporate Governance and Earnings Management: A Meta-Analysis. Corporate Governance: An International Review. Volume 17. Issue 5. Pp. 594-610, September.
• Gomes, A. (1996). The dynamics of stock prices, manager ownership, and private benefits of control. Manuscript. Harvard University. Cambridge.
• Grossman, S. and Hart (1980) Disclosure laws and take-over bids. Journal of Finance. 35. Pp. 323-334.
• Heuvel, J. V, Gils, A. V. and Voordeckers, W. (2006). Board Roles in Small and Medium- Sized Family Business: Performance and Importance. Corporate Governance: An International Review. 14. Pp. 467-485.
• ICAEW. (2001). The Effective Audit Committee: A Challenging Role. London: ICAEW. Internal Auditor.
• Jensen, M. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review. 76. Pp. 323-329.
• Joshi, P.L. and Wakil, A. (2004). A study of the audit committees' functioning in Bahrain: Empirical findings". Managerial Auditing Journal. Vol. 19 Is: 7. Pp.832 - 858.
• Karamanou, I. and Vafeas, N. (2005). The association between corporate boards, audit committees and earnings forecasts: An empirical analysis. Journal of Accounting Research. Vol. 43. No. 3. pp. 453-86.
• Kieso, D. E.,Weygandt, J.J. and Warfield ,T. D. (2005) Intermediate Accounting - IFRS updates. 11th Edition. Wiley Publications Inc.
• Klein, A. (2002). Audit committee, board of director's characteristics, and earnings management. Journal of Accounting and Economics. Vol. 33. No. 3. Pp. 375-400.
• KPMG. (2003). Internal Audit's Role in Modern Corporate Governance. Available at http://www.kpmg.com.au
• Lawson B. and Wang D. (2011). Auditor Monitoring and Dividend Payout Policy. Available at SSRN: http://ssrn.comlabstract=1 786948
• Mancinelli, L. and Ozkan. A. (2006). Ownership structure and dividend policy: Evidence from Italian firms. The European Journal of Finance. 12. Pp. 265-282.
• Mangena, M. and Pike, R. (2005). The effect of audit committee shareholding, financial expertise and size on interim financial disclosures. Accounting and Business Research. Vol. 35. No. 4. Pp. 327-49.
• Mangena, M. and Tauringana, V. (2008). Audit Committees and Voluntary External Auditor Involvement in UK Interim Reporting. International Journal of Auditing. 12. Pp. 45-63.
• Mostaque H., Mazhar M., Islam, A. and Gunasekaran, K. M.(2002). Accounting standards and practices of financial institutions in GCC countries. Managerial Auditing Journal. Vol. 17. Is: 7. Pp. 350 - 362.
• Myers, S.C. and Majiuf, N. S. (1984). Corporate financing and investment decisions when firms have information those investors do not have. Journal of Financial Economics. 13. Pp. 187-221.
• Pourheydari, O. (2009). A survey of management views on dividend policy in Iranian firms. International Journal of Islamic and Middle Eastern Finance and Management. Vol. 2. No. Pp. 20-31.
• Ramli, N. M. (2010). Ownership Structure and Dividend Policy: Evidence from Malaysian Companies. International Review of Business Research Papers. Vol.6. No.1. Pp.170-180.
• Sawicki. J., (2009). Corporate Governance and Dividend Policy in Southeast Asia Pre- and Post-Crisis. European Journal of Finance. 15:2: Pp.211-230.
• Smith Committee, (2003). Audit Committees Combined Code Guidance. A report and proposed guidance by the FRC-appointed group. London: FRC.
• Solomon, A. and Solomon. J. (2004). Corporate Governance and Accounting. Available at:http://www.SSRN.comwww.transparency-lebanon.org
• Song, J. and Windram, B. (2004). Benchmarking audit committee effectiveness in financial reporting. International Journal of Auditing. Vol. 8. Pp. 195-205.
• Subramanian, M. B. and Johnson, J. (2006). Perspectives of Corporate Governance in the US and Broad. The Business Review. Cambridge. 36-43.
• Tobins, J. (1969). A General Equilibrium Approach to Monetary Theory. Journal of Money, Credit, and Banking Vol.1. Pp. 15-29.
• Turley, S. and Zaman, M. (2004). The corporate governance effects of audit committees. Journal of Management and Governance. Vol. 8. Pp. 305-32.
• Warrad, L., Abed, S., Khriasat, O. and Al-Sheikh, I. (2011). The Effect of Ownership Structure on Dividend Payout Policy: Evidence from Jordanian Context. The Editorial Board of International Board of Economics and Finance. Canadian center of science and education.
• Abu-Tapanjeh, M. (2006) Good Corporate Governance Mechanism and Firms’ Operating and Financial Performance: Insight from the Perspective of Jordanian Industrial Companies. Working Paper. Faculty of Business Administration. Mutah University. Jordan.
• Adjaoud, F. and Ben-Amar, W. (2010), Corporate Governance and Dividend Policy: Shareholders’ Protection or Expropriation. Journal of Business Finance and Accounting. Jun-Jul. Vol. 37. Issue 5/6. Pp.648-667.
• Baker, H. (2011). Dividend Policy in Indonesia: Survey Evidence from Executives. Journal of Asia Business Studies. Vol. 6. Is: 1.
• Bean, J. W. (1999). The audit committee’s roadmap. A.I.C.P.A.
• Black F. (1976). The dividend puzzle. Journal of Portfolio Management. 2: 5-8.
• Blue Ribbon Committee -BRC- (1999). On Improving the Effectiveness of Corporate Audit Committees. 1999. Stamford. CT.
• Bushman, R., M. and Smith, A. J. (2003). Transparency Financial Accounting Information and Corporate Governance. FRBNY Economic Policy Review.
• Chen, C.R., and Steiner, T.L. (1999). Ownership and agency conflicts: a non-linear simultaneous equation analysis of managerial ownership, risk taking, debt policy, and dividend policy. The Financial Review. 34. Pp. 119-136.
• Chen, J., and Dhiensiri, N. (2009). Determinants of Dividend Policy: The Evidence from New Zealand. International Research Journal of Finance and Economics. ISSN 1450-2887. Is: 34.
• Cheung, S. and Chan, B. (2004). Corporate Governance and Earnings Management. Available at SSRN http://www.SSRN.com.
• Dah, A., Beyrouti, N. and Showeiry, M. (2011). The Effect of Independent Directors on Firm Value. Orlando Conference 2012, available at: http://www.aabri.com/ OC2012Manuscripts/OC12090.pdf.
• De Vaus, D. (2002). Analyzing Social Science Data. London. SAGE.
• Easterbrook F. H. (1984). Two agency-cost explanations of dividends. American Economic Review. 74. Pp. 650-659.
• El-Gammal, W. and Showeiry, M. (2012). Corporate Governance and Quality of Accounting Information: Case of Lebanon. The Business Review. Cambridge Vol. 19. Is. 2. Pp. 310-315. Summer.
• Eugene, A. and Imhoff, J.R. (2003). Accounting Quality, Auditing and Corporate Governance. Auditing: A Journal of Practice and Theory. 22.
• Farook, S., Hassan, M. and Clinch, G. (2012). Profit Distribution Management by Islamic Banks: An Empirical Investigation. The Quarterly Review of Economics and Finance. 52. 333-347.
• Fluck Z. (1998). Optimal financial contracting: debt versus outside equity. Review of Financial Studies. 11. Pp. 383-418.
• Garcia-Meca, E. and Sanchez-Ballesta, J.P. (2009). Corporate Governance and Earnings Management: A Meta-Analysis. Corporate Governance: An International Review. Volume 17. Issue 5. Pp. 594-610, September.
• Gomes, A. (1996). The dynamics of stock prices, manager ownership, and private benefits of control. Manuscript. Harvard University. Cambridge.
• Grossman, S. and Hart (1980) Disclosure laws and take-over bids. Journal of Finance. 35. Pp. 323-334.
• Heuvel, J. V, Gils, A. V. and Voordeckers, W. (2006). Board Roles in Small and Medium- Sized Family Business: Performance and Importance. Corporate Governance: An International Review. 14. Pp. 467-485.
• ICAEW. (2001). The Effective Audit Committee: A Challenging Role. London: ICAEW. Internal Auditor.
• Jensen, M. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review. 76. Pp. 323-329.
• Joshi, P.L. and Wakil, A. (2004). A study of the audit committees' functioning in Bahrain: Empirical findings". Managerial Auditing Journal. Vol. 19 Is: 7. Pp.832 - 858.
• Karamanou, I. and Vafeas, N. (2005). The association between corporate boards, audit committees and earnings forecasts: An empirical analysis. Journal of Accounting Research. Vol. 43. No. 3. pp. 453-86.
• Kieso, D. E.,Weygandt, J.J. and Warfield ,T. D. (2005) Intermediate Accounting - IFRS updates. 11th Edition. Wiley Publications Inc.
• Klein, A. (2002). Audit committee, board of director's characteristics, and earnings management. Journal of Accounting and Economics. Vol. 33. No. 3. Pp. 375-400.
• KPMG. (2003). Internal Audit's Role in Modern Corporate Governance. Available at http://www.kpmg.com.au
• Lawson B. and Wang D. (2011). Auditor Monitoring and Dividend Payout Policy. Available at SSRN: http://ssrn.comlabstract=1 786948
• Mancinelli, L. and Ozkan. A. (2006). Ownership structure and dividend policy: Evidence from Italian firms. The European Journal of Finance. 12. Pp. 265-282.
• Mangena, M. and Pike, R. (2005). The effect of audit committee shareholding, financial expertise and size on interim financial disclosures. Accounting and Business Research. Vol. 35. No. 4. Pp. 327-49.
• Mangena, M. and Tauringana, V. (2008). Audit Committees and Voluntary External Auditor Involvement in UK Interim Reporting. International Journal of Auditing. 12. Pp. 45-63.
• Mostaque H., Mazhar M., Islam, A. and Gunasekaran, K. M.(2002). Accounting standards and practices of financial institutions in GCC countries. Managerial Auditing Journal. Vol. 17. Is: 7. Pp. 350 - 362.
• Myers, S.C. and Majiuf, N. S. (1984). Corporate financing and investment decisions when firms have information those investors do not have. Journal of Financial Economics. 13. Pp. 187-221.
• Pourheydari, O. (2009). A survey of management views on dividend policy in Iranian firms. International Journal of Islamic and Middle Eastern Finance and Management. Vol. 2. No. Pp. 20-31.
• Ramli, N. M. (2010). Ownership Structure and Dividend Policy: Evidence from Malaysian Companies. International Review of Business Research Papers. Vol.6. No.1. Pp.170-180.
• Sawicki. J., (2009). Corporate Governance and Dividend Policy in Southeast Asia Pre- and Post-Crisis. European Journal of Finance. 15:2: Pp.211-230.
• Smith Committee, (2003). Audit Committees Combined Code Guidance. A report and proposed guidance by the FRC-appointed group. London: FRC.
• Solomon, A. and Solomon. J. (2004). Corporate Governance and Accounting. Available at:http://www.SSRN.comwww.transparency-lebanon.org
• Song, J. and Windram, B. (2004). Benchmarking audit committee effectiveness in financial reporting. International Journal of Auditing. Vol. 8. Pp. 195-205.
• Subramanian, M. B. and Johnson, J. (2006). Perspectives of Corporate Governance in the US and Broad. The Business Review. Cambridge. 36-43.
• Tobins, J. (1969). A General Equilibrium Approach to Monetary Theory. Journal of Money, Credit, and Banking Vol.1. Pp. 15-29.
• Turley, S. and Zaman, M. (2004). The corporate governance effects of audit committees. Journal of Management and Governance. Vol. 8. Pp. 305-32.
• Warrad, L., Abed, S., Khriasat, O. and Al-Sheikh, I. (2011). The Effect of Ownership Structure on Dividend Payout Policy: Evidence from Jordanian Context. The Editorial Board of International Board of Economics and Finance. Canadian center of science and education.
How to Cite
Al-Rashed, Wael. 2014. “ADHERENCE TO THE 1999 BLUE RIBBON COMMITTEE GUIDELINES AND DIVIDEND PAYOUT POLICY: EVIDENCE FROM KUWAIT”. Studies in Business and Economics 17 (1). https://doi.org/10.29117/sbe.2014.0078.
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