Multiple Comparisons (Tukey’s Honestly Significant Difference)

This research employs a post hoc Tukey HSD test to determine whether there are any statistically significant differences between the means of CG characteristics and firm financial performance variables. The results are presented in Table 4.13, while Appendix 3 presents the full results, which include duplication.

Table 4.13: Multiple Comparisons (Tukey’s HSD)

Period (i) Period (j) Mean

Difference (i-j) Std Error p-value BS Period 2 Period 1 0.043 0.315 0.990 Period 3 Period 1 0.330 0.315 0.547 Period 2 0.287 0.315 0.633

BCOM Period 2 Period 1 ˗0.058 2.785 0.999

Period 3 Period 1 0.703 2.785 0.966

Period 2 0.762 2.785 0.960

BM Period 2 Period 1 0.313 0.198 0.256

Period 3 Period 1 1.026** _{0.198 < 0.001} Period 2 0.713** _{0.195 < 0.001}

BMED Period 2 Period 1 4.536 2.103 0.081

Period 3 Period 1 12.500** _{2.103 < 0.001} Period 2 7.965** _{2.103 < 0.001} BMEX Period 2 Period 1 2.546** _{0.679 < 0.001} Period 3 Period 1 5.220** _{0.679 < 0.001} Period 2 2.675** _{0.679 < 0.001}

ACS Period 2 Period 1 0.032 0.088 0.930

Period 3 Period 1 0.053 0.088 0.818

Period 2 0.021 0.088 0.968

ACCOM Period 2 Period 1 ˗0.218 2.907 0.997

Period 3 Period 1 ˗1.276 2.907 0.899

Period (i) Period (j) Mean Difference (i-j)

Std Error

p-value

ACM Period 2 Period 1 0.493 0.215 0.058

Period 3 Period 1 0.968** _{0.214 < 0.001}

Period 2 0.475 0.215 0.071

ACED Period 2 Period 1 ˗0.217 3.531 0.998

Period 3 Period 1 9.973* _{3.531 0.014}

Period 2 10.190* _{3.531 0.012}

ROA Period 2 Period 1 ˗0.247 0.190 0.397

Period 3 Period 1 0.245 0.190 0.404

Period 2 0.493* _{0.187 0.024}

ROE Period 2 Period 1 ˗0.034 0.225 0.987

Period 3 Period 1 1.889** _{0.225 < 0.001} Period 2 1.923** _{0.221 < 0.001}

Tobin’s Q Period 2 Period 1 0.005 0.028 0.980

Period 3 Period 1 0.082* _{0.028 0.011}

Period 2 0.076* _{0.027 0.017}

** Mean difference is significant at the 0.01 level. * Mean difference is significant at the 0.05 level.

Note: BS = board size, BCOM = board composition, BM = board meetings, BMED = board members’ education, BMEX = board members’ experience, ACS = number of members in the committee, ACCOM

= audit committee composition, ACM = audit committee meeting, ACED = audit committee members’ education,ROA = return on assets, ROE = return on equity, Period 1 = 2006-2007, Period 2 = 2009-2010,

Period 3 = 2013-2014.

4.7.2.2.1Board Size

Board size (BS) comprises the number of directors on the board. The above results show that there are no statistically significant differences between the time periods, which implies that no significant changes occurred between the means of the numbers of directors on the boards for listed companies in the UAE over the sub-periods. This suggests that the implementation of the code was more about formalising and codifying existing arrangements.

4.7.2.2.2Board Composition

Board composition (BCOM) comprises the proportion of independent directors on the board. The findings show no statistically significant differences between the means of the board composition variable over the sub-periods. This finding suggests that the shift from a voluntary to mandatory code did not materially affect board composition, which implies that the firms in the sample period were following the first code and second code, which stipulated that the board should comprise at least one-third of independent directors.

4.7.2.2.3Board Meetings

Board meetings (BM) represent the number of meetings held per year. There is a significant difference of means for Period 3, which encompasses the second CG code. The recommendations in the first and second CG codes are fairly similar, as both expect meetings to be held at least once every two months. Thus, the results suggest that firms in the sample data were not adhering to the first CG code, and that the move to make the second CG code mandatory had the effect of causing significantly more firms to follow the stipulation. This will be discussed further in Section 4.9.

4.7.2.2.4Board Members’ Education

There are statistically significant differences in the level of board members’ education (BMED), which imply that there was a significant difference in the number of directors who studied in foreign developed countries between the sub-periods. Hence, the change to the governance rules caused significant changes to BMED within the listed companies. This will be discussed further in Section 4.9.

4.7.2.2.5Board Members’ Experience

Board members’ experience (BMEX) comprises the average number of years of experience of board members. The Tukey post hoc test results show statistically significant differences between means for all sub-periods. The study results suggest that the second CG code emphasis on improving experience by having board members undertake training to better understand company policies, structure and duties under law has resulted in a positive effect among UAE listed firms. This will be further discussed in Section 4.9.

4.7.2.2.6Audit Committee Size

Audit committee size (ACS) relates to the number of members on the audit committee. A Tukey post hoc test revealed no statistically significant mean differences over the three periods. This implies that the changes to the CG codes have not led to any significant changes to the ACS of UAE listed companies.

4.7.2.2.7Audit Committee Composition

Audit committee composition (ACCOM) relates to the proportion of independent members on the audit committee. The second CG code required at least one independent

member on the audit committee, while the first CG code did not state anything on this matter. The Tukey post hoc test revealed no significant difference in the means of the proportion of independent directors on the audit committees of UAE listed companies between the three selected periods.

4.7.2.2.8Audit Committee Meeting

Audit Committee meeting (ACM) comprises the number of meetings held per year. The Tukey test for a statistically significant difference between the means of the ACM variable over the selected periods was significant. Hence, although the wording of this specific CG code did not change much, the fact that the first CG code was voluntary, while the second CG code was mandatory, suggests that this could be the reason for the significant change that resulted in increased ACM among the UAE listed companies.

4.7.2.2.9Audit Committee Members’ Education

A Tukey post hoc test revealed statistically significant differences between the audit committee members’ education (ACED) periods due to the onset of the second CG code. Specifically, it resulted in a significant difference in the ratio of number of audit committee members holding a degree in a financial discipline to the total members in the committee over the selected periods. The findings for audit committee characteristic changes and changes in the CG code are further discussed in Section 4.9.

4.7.2.2.10Firm Financial Performance Variables

Firm financial performance comprises three measures: ROA, ROE and Tobin’s Q. The Tukey post hoc test revealed differences in the financial parameters across the selected periods. The results showed statistically significant findings for ROA, ROE and Tobin’s Q after the adoption of the second CG code. Specifically, there was a significant increase in ROA in Period 3 compared with Period 2, while ROE experienced a significant increase in Period 3 compared with Periods 1 and 2. The result of the Tukey post hoc test also showed a significant increase in Tobin’s Q in Period 3, compared with Periods 1 and 2. The significant results for all three firm financial performance measures showed positive outcomes, thereby suggesting that changes to the second CG code had a positive effect on the financial performance of UAE listed companies.