3.3 Research design and strategy
3.3.8 Data sampling
The sample includes the major international financial institutions, com- prising thirty-four companies listed on the NYSE as Foreign Private Is- suers, which are non-domestic companies. This group was selected for content and research methodological reasons.
The NYSE is one of the few stock markets consisting of global-wide operating companies and is therefore very interesting, as the scope of research is a global CG study. The sample includes the major interna- tional financial institutions, comprising thirty-four companies. These corporations represent the largest non-domestic foreign filers in terms of revenues and market capitalization and are large international corpo- rations. All these corporations are listed on the NYSE and therefore have to fulfil the SEC and SoX-requirements on CG. According to the NYSE listing rules, foreign private issuers listed have to report the dif- ferences between their domestic CG practice and the NYSE listing standards and thus contribute to more transparency for US investors for deviating CG practice. However, this is not expected to be a detailed
The sample size is a result of the following applied criteria:
According to the NYSE directory (NYSE, 2015), as of 2015, the total number for foreign private issuers is 421. This total pool was further descoped by using the following criteria. The listing directory of the NYSE was selected for industry classification. As the research covers only financial institutions, the financial industry was selected, which consists of banks, financial services and insurance.
This empirical study aims to develop a taxonomy that can be used in- ternationally for different companies in terms of country of origin and local reporting requirements. As the DBA follows the aim to treat a real company issue, a sample was chosen, which is the researcher’s peer group. Financial institutions have specific CGR requirements, as, for instance, their business typically relies on loans and on deposits they receive from customers, which industrial companies do not have, as the nature of their business is different: therefore, specific CGR exist to pro- tect customers from going bankrupt and from loss of deposits. Addition- ally, foreign filers are subject to the challenge to comply with local as well as listing-related CGR requirements.
This population was chosen because these financial institutions provide sophisticated CG, which is suitable for the study. To determine the ap- propriateness of the sample, the market capitalization of the worldwide existing corporations operating in the financial service sector was calcu- lated and the sample reached about 50% of the worldwide market capi- talization.
Table 3.5: Sample selection for empirical study NYSE-listed non domestic filers
Aegon ING Westpac
Aviva Orix Woori South Korea
Scotia KB South Korea
Credit Corp China Life Insurance Banco Bradeco Lloyds
Bank of Chile Maiden
Barclays Mitsubishi
BVA Argentina National Bank Macro Argentina Nomura
Brookfields Noah Cina
Bancolombia National Westminster Deutsche Bank Chile Pension
Doral RBS UBS Santander HSBC Shinhan Korea Inyuan Sumitumo ∑ 34 (Source: author, 2015)
3.3.8.1 Geographic focus
The sample consists of thirty-four corporations operating in the financial service sector. They originate from seventeen different countries: 54% are from Europe, 10% from North America, 13% from Asia and 23% from other countries. Therefore, the analysis and the assessment of their reporting enable the researcher to analyse CGR on a global level. Foreign private issuers have to submit their annual reports on the SEC- required Form 20-F, which is comparable to Form 10-K for domestic US filers.
Figure 3.5: Country distribution of sample
(Source: author, 2015)
3.3.8.2 Information Sources
Many previous studies have derived their findings based on corporate information disclosed by firms (Healy and Palepu, 2001; Abraham and Cox, 2007; Elshandidy et al., 2013). As the research question and the objective of the thesis are to develop an XBRL-based taxonomy that can be used in practice by companies, the selection of the annual re- ports as data is justified. The type of data collection is a specific differ- entiation for content analysis. The primary source of data related to the information source in this thesis was based on public available infor- mation provided directly by companies in their annual reports. Annual reports are classified as a primary source of data. The main area of fo- cus for this study’s data collection is narrative non-financial information related to CG.
The following arguments justify the selection of this data collection source:
Secondary sources of information represent a convenient and efficient way of collecting data; however, they imply two major disadvantages. Gaps with regard to the completeness of data are very probable, as the existing secondary sources are typically not fit for purpose regarding the research requirements of the new study. Additionally, data might be outdated, as economic and social changes are rapidly advancing. Spe- cifically for research topics related to technological changes, with which XBRL can be associated, existing research might no longer be useful. According to the researcher’s knowledge, during this study there did not exist secondary information that would have substituted the data collec- tion on CG disclosures for foreign private issuers. However, there are numerous secondary sources that provide studies about corporate dis- closures and governance matters, which have been taken into account in the literature review, in the interpretation of the results and in the as- sessment of the study’s limitations and the outlook for future research.
The year-end financial report is recognized as an essential source for periodical disclosures (Botosan, 1997; Stanton and Stanton, 2002), de- spite the increasing information set which becomes available for inves- tors. Primarily institutional investors regard the annual reports as the number one source and rank this source much higher than electronic database information. As the research objects are companies listed on the NYSE and corporations need to file specific financial reports, name- ly the annual report on form 20-F, the researcher will specifically base the present empirical study on the publication of these Annual Report forms. Consequently, primary data are used, which are publically avail- able to all investors. The source for the empirical data is recommended and supported by other researchers who have undertaken similar re- search (Hommelhoff and Schwab, 2003). Annual reports can be re- garded as a valid source as management “spends considerable time outlining the content of the report, sketching out much of it, and proof- reading and changing most of it to their taste” (Bowman, 1984, p. 63). According to Werder and Grundei (2006), primary public available data are an important source for CGR research. Although the annual report represents only one channel of communication from managers to shareholders, according to Lang and Lundholm (1993) the levels of an- nual report disclosures are positively correlated with the amount of dis- closures submitted via other sources (Knutson, 1993).