FUNG Ho Cheong Dissertation’s Ch4 draft 2010-12-31

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93949A Group 6

Chapter 4 Analysis, results and findings

4.1 Introduction

According to the chapter 3, this chapter will provide empirical results, analysis

and interpretation of the results. The structure of this chapter is as followings: section

4.2 will provide a description regarding the data and the screening process; section 4.3

will provide a discussion regarding the summarization on the 12 categories

disclosures of the sample companies; section 4.4 will provide a analysis regarding the

descriptive statistics of the data; section 4.5 will provide an result and analysis from

the correlation analysis; finally, section 4.6 will provide an result and analysis from

the regression analysis.

4.2 Data description

The sample companies of this research are the companies that listed in the main

board of Hong Kong Stock Exchange between 2007 and 2009 as a basis. Afterward,

64 listed companies are selected preliminarily in accordance with the Properties and

Constructions industry index of Hang Sang Composite Industry Indexes (HSCII).

Afterward, companies that are non-property nature such as construction,

infrastructure, building materials, etc, and companies that the main business are

outside Hong Kong, are deducted. Finally, the valid samples companies are 15 for this

research. The samples screening process is presented in Table 4.1 below:

Table 4.1 - Screening process of samples

Samples screening process No. of
companies
Listed companies which contained in the 64
list of Properties and Constructions industry
index
in accordance with HSCII
　 　

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FUNG Ho Cheong Dissertation’s Ch4 draft 2010-12-31
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93949A Group 6
Less: non-property nature companies 19
(E.g. construction, infrastructure, building
materials, etc)
　 　
Less: companies which main business outside HK 30
　 　
Valid samples for this research 15
　 　

The main research data is the CGDscore and its 5 determinants (BODsize,

INEDproportion, FIRMsize, LEVERGE and ROA) of the sample companies. For the

independent variables, the data regarding the BODsize, INEDproportion, FIRMsize

and LEVERGE are fully sourced from the annual reports while the ROA is sourced

from AAStocks (www.aastocks.com). For the dependent variable (CGDscore), the

data used to calculate the CGDscore are fully sourced from the information disclosed

in the annual reports only. That means the information disclosed on the other media,

such as web-site or newspapers, are not considered.

4.3 Summary analysis of CG disclosure

This research constructs a score card to measure the transparency of the CG

disclosure (CGDscore). The assessment items contained in the score card are

extracted from the extracted from the Appendix 23 of the Listing Rules issued by

HKEx and the guide regarding corporate governance disclosure in annual reports

issued by HKSA in 2001. The score card contained 2 types of items, mandatory and

voluntary, and divided into 12 categories. The scoring standard has been already

discussed in section 3.5.1. For the 15 sample companies, the summary results of the

CG disclosures disclosed in the annual reports are presented in Table 4.2 below:

Table 4.2 - Summary results of CG disclosures

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93949A Group 6
Disclosure categories Type No. of Percentag
s compani e
es (%)
(1) Board structure and functioning M 15 100.00%
　 　
(2) Remuneration committee M 15 100.00%
　 　
(3) Nomination committee M 14 93.33%
　 　
(4) Audit committee M 15 100.00%
　 　
(5) External autidors M 15 100.00%
　 　
(6) Capital Structure M 15 100.00%
　 　
(7) Management disscussion and analysis M 15 100.00%
　 　
(8) Corporate Social Responsibility V 15 100.00%
　 　
(9) Share interests of senior management V 1 6.67%
　 　
(10) Shareholders' rights V 14 93.33%
　 　
(11) Investor relations V 15 100.00%
　 　
(12) Internal control V 15 100.00%

According to the Table 4.2, it shows that the major parts of companies are

complied with the mandatory disclosure required by HKICPA and HKEx while only

one mandatory disclosure is not complied by all sample companies. For the voluntary

disclosure, there are fewer companies that are willing to disclose voluntary CG

disclosures.

In order to protect the public has right to know, the HKICPA and HKEx should

review the existing requirements regarding the mandatory CG disclosures in the

annual reports, and should consider why some of the company can ignore the

requirements, not to provide such mandatory disclosure. On the other hand, the

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FUNG Ho Cheong Dissertation’s Ch4 draft 2010-12-31
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HKICPA and HKEx should also pay attention on why some of the companies are

willing to disclose voluntary CG disclosures in the annual reports even though such

voluntary CG disclosures are not required to disclose necessarily, this may help to

modify the requirements and strengthen the transparency of CG disclosure in the

future.

4.3 Descriptive statistics

The descriptive statistics of the variables by using mean as a basis for each of the

3 years is presented in Table 4.3 below:

Table 4.3 - Mean of the variables between 2007 and 2009

Variables 2007 2008 2009
BODsize 11.73333 11.93333 12.2
INEDproportion 36% 36% 37%
FIRMsize ($HK million) 89738.33 99175.47 105683.4
LEVERGE 13.15% 14.03% 13.29%
ROA 9.58% 3.90% 6.35%
CGDscore 64.06667 67.1 69.83333

Table 4.3 shows the trend of each variable between 3 years, 2007 and 2009.

Firstly, the mean of BODsize is increasing from 11.73 to 12.2. This might indicate

that the Hong Kong listed property companies seem to expand the manpower of the

board in order to gather more diverse opinions for decision-making. Secondly, the

mean of INEDproportion is also increased from 36% to 37%. This might indicate that

the Hong Kong listed property companies seem to improve the independence of the

board since the