CORPORATE GOVERNANCE SYSTEMS’ IMPACT ON THE GLOBAL AUTOMOTIVE INDUSTRY’S COMMUNICATION OF FINANCIAL RATIOS
Abstract
The influence of corporate governance systems on the reporting practices of the global automotive industry firms is investigated. This industry is important due to its truly global scope and the economic ripple effect of its vastly intertwined supply chain. The extent of financial ratio disclosure information in the annual reports of the world’s top automotive firms is measured. The findings show that although most firms are profitable in 2008, they are sparse in communicating their financial ratio positions. Most of these massive automotive firms are deemed to have good corporate governance systems. However, improvements could be made with regard to corporate governance practices. These corporate governance systems are found to be a statistically positive influence on the extent of financial ratio disclosures. Improved communication should enhance stakeholder understanding of the actual financial position of firms in this most highly visible global industry.
References
Aripin, N., Tower, G. and Taylor, G. (2009) Reporting financial ratios in annual reports: Voluntary disclosure perspective. In M. H. Eken (10th)Asian Academic Accounting Association Annual Conference. Istanbul, Turkey.
Bowen, R., Rajgopal, S. and Venkatachalam, M. (2008) Accounting discretion, corporate governance, and firm performance. Contemporary Accounting Research, 25 (2) pp 351-405.
Edmister, R. (1972) An empirical test of financial ratio analysis for small business failure prediction. The Journal of Financial and Quantitative Analysis, 7 (2) pp 1477-1493.
Epstein, R. (1931) Profits and size of firm in the automobile industry, 1919-1927. American Economic Review, 21 (4) pp 636-647.
Healy, P. and Palepu, K. (2001) Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31 (1-3) pp 405-440.
Henning, D. (2008) World financial crisis leads to auto industry layoffs across Europe. World Socialist Web Site, published by the International Committee of the Fourth International (ICFI) Retrieved: 5 September 2009 from <http://www.wsws.org/articles/2008/oct2008/auto-o10.shtml>
Ho, P., Tower, G.D. and Barako, D.G. (2008) Improving governance leads to improved corporate communication. Corporate Ownership & Control, 5 (1) pp 26 -33.
Horrigan, J. O. (1965) Some empirical bases of financial ratio analysis. The Accounting Review, 40 (3) pp 558-568.
Irandoust, M. (1999) Market structure and market shares in the car industry. Japan & The World Economy, 11 (4) pp 531-544.
Ito, K. (2002) NBER Thirteenth Annual East Asian seminar on economics, foreign ownership and productivity in the Indonesian automobile industry: Evidence from establishment data for 1990 -1999. Melbourne, Australia. Available at <http://www.icsead.or.jp/7publication/workingpp/wp2002/2002-25.pdf>
Ito, K. (2004) Foreign ownership and plant productivity in the Thai automobile industry in 1996 and 1998: A conditional quantile analysis. Journal of Asian economics, 15 (2) pp 321-353.
Jan, T. and Hsiao, C. (2004) A four-role model of the automotive industry development in developing countries: A case in Taiwan. Journal of the Operational Research Society, 55 (11) pp 1145-1155.
Joh, S. W. (2003) Corporate governance and firm profitability: Evidence from Korea before the economic crisis. Journal of Financial Economics, 68 (2) pp 287-322.
KPMG. (2008) KPMG International Survey of Corporate Responsibility Reporting 2008. The Netherlands, KPMG International.
Lind, D., Marchal, W. and Wathen, S. (2004) Statistical Techniques in Business and Economics. McGraw-Hill Irwin, New York.
Malone, D. and Roberts, R. (1996) Public interest reports as a medium for corporate disclosure: The case of General Motors. Journal of Business Ethics, 15 (7) pp 759-771.
McGahan, A. and Porter, M. (1997) How much does industry matter, really? Strategic Management Journal, 18 (2) pp 15-30.
OICA. (2008) Organisation internationale des constructeurs d’automobiles. (International Organisation of Motor Vehicle Manufacturers). World Motor Vehicle Production by Manufacturer. OICA. World Ranking of Manufacturer Year 2008. Available at <http://www.oica.net>
Pauwels, K., Silva-Risso, J., Srinivasan, S. and Hanssens, D. M. (2004) New products, sales promotions, and firm value: The case of the automobile industry. Journal of Marketing, 68 (4) pp 142-156.
Pfaffmann, E. and Stephan, M. (2001) How Germany wins out in the battle for foreign direct investment: Strategies of multinational suppliers in the car industry. Long Range Planning, 34 (3) pp 335-355.
Ravenhill, J. (2001) From national champions to global partnerships: The Korean auto industry, financial crisis and globalization. MIT Japan Program Working Paper Series.
Rumelt, R. P. (1991) How much does industry matter? Strategic Management Journal, 12 (3) pp 167-185.
Saccani, N., Songini, L. and Gaiardelli. P. (2006) The role and performance measurement of after-sales in the durable consumer goods industries: An empirical study. International Journal of Productivity and Performance Management,55 (3/4) pp 259-283.
Schlie, E. and Yip, G. (2000) Regional follows global: Strategy mixes in the world automotive industry. European Management Journal, 18 (4) pp 343-354.
Seidel, M., Loch, C.H. and Chahil, S. (2005) Quo vadis, automotive industry? A vision of possible industry transformations. European Management Journal, 23 (4) pp 439-449.
The Straits Times (2008) Toyota loss expected. 22 December. Retrieved: 12 September 2009 from <http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_317382.html>
Taylor, G., Tower, G., Van Der Zahn, M. and Neilson, J. (2008) Corporate governance determinants on Australian resource companies' financial instrument disclosure practices. Asian Review of Accounting, 16 (1) pp 56-73.
Tian, L. (2007) Does government intervention help the Chinese automotive industry? A comparison with the Chinese computer industry. Economics Systems, 31 (4) pp 364-374.
Vickery, S. K., Jayaram, J., Droge, C. and Calantone, R. (2003) The effects of an integrative supply chain strategy on customer service and financial performance: An analysis of direct versus indirect relationships. Journal of Operations Management, 21 (5) pp 523-539.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2010 The journal of contemporary issues in business and government
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
You are free to:
- Share — copy and redistribute the material in any medium or format for any purpose, even commercially.
- Adapt — remix, transform, and build upon the material for any purpose, even commercially.
- The licensor cannot revoke these freedoms as long as you follow the license terms.
Under the following terms:
- Attribution — You must give appropriate credit , provide a link to the license, and indicate if changes were made . You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
- No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
Notices:
You do not have to comply with the license for elements of the material in the public domain or where your use is permitted by an applicable exception or limitation .
No warranties are given. The license may not give you all of the permissions necessary for your intended use. For example, other rights such as publicity, privacy, or moral rights may limit how you use the material.
