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Empirical Findings and Analysis

The presentation and analysis of the empirical findings will be integrated in this chapter and will follow the frame of references structure. We will discuss the Swedish code of corporate governance in the light of Agency Theory and Institutional Theory and analyse how the Swedish code has affected the information provided in annual reports from the years 2001, 2005, and 2006. We will continue to describe connections between in-formation provided and our investigated variables, Turnover, Board of directors, Spread of Ownership, In-dustry, and Audit firm. The information will be analysed from the shareholders’ perspective and we will dis-cuss if companies have changed their information. A question that arouse in the problem discussion was to investigate if companies already before the implementation of the Swedish code were superior at providing the shareholders with the same information and if trends can be seen in improvement of the information.

Corporate Governance

Corporate governance is described as a framework for creating conversation between the company and its shareholders (Parum, 2005). Mallin (2006) discusses corporate governance as a global phenomenon, in which the interest among the world has increased over the years. We have collected information related to the percentage of pages on corporate gov-ernance information in the annual reports as additional information to our research model. We can support Mallin (2006) and her statement that the interest has increased over the years, as the corporate governance information takes up a greater proportion of the annual reports in 2006 compared to 2001 (figure 4). The font of the text, layout and total pages varies among the investigated annual reports and we have focused on comparing the per-centage of information on corporate governance in relation to the total pages in the annual report. As illustrated in figure 4, there has been an increase in corporate governance infor-mation. The low result in 2001 can be explained by the fact that the Swedish code of cor-porate governance was not yet introduced and many of the investigated companies did therefore not have a specific section related to corporate governance. Only five out of 65 companies had a section of corporate governance in 2001, and four of them are not follow-ing the Swedish code. These four might have been required, already in 2001, to have a cor-porate governance report according to the code they are following. Wearing (2005) argues that annual reports, nowadays, contains much more corporate governance information and that this is related to the implementations of codes of corporate governance. Our findings can therefore support Wearing’s (2005) statement, and conclude that corporate governance have received an increased focus in the Swedish annual reports and that it is related to the Swedish code as figure 4 illustrates. Nevertheless, even if the corporate governance section has increased, it is important to know that this section only constitute a small part out of the entire report.
To penetrate the subject further, we have investigated if the information required by the Swedish code was still included in the annual reports from 2001 which will be discussed be-low. Corporate governance is related to the separation of ownership and management and Gabrielsson (2003) stresses that corporations often have problems with the conflicts that arouses because of this separation. Smith (1776) discovered the possible conflicts between shareholders and owners and corporate governance already in 1776. As a solution to this Mallin (2004) considers the corporate governance as a useful tool to minimize the prob-lems that may arise between the owners and managers. The increase in importance of cor-porate governance (figure 4) might be the answer to the ongoing conflicts of interest be-tween principals and agents. In addition, as a result of the general public’s attention to eco-nomic scandals more information regarding corporate governance might have been re-quested.
The board has the overall responsibility for the company and the implementation of the Swedish code of corporate governance (Svernlöv, 2006). The board members are elected on the Shareholders general meeting and the Swedish code suggests an equal gender com-position (Kodgruppen, 2005). Because of this suggestion we were curious to investigate the gender composition of the boards. However, we have only investigated it in turns of addi-tional information. The total number of board members and composition has varied among companies and years, and as figure 5 shows the female participation in the boards is weak. Although, we conclude that the females have increased their participation and 19 percentages of the board members are females in 2006. Nonetheless, we do not relate this increase to the implementation of the Swedish code; instead we believe it is related to the ongoing gender discussion in society. Schyman and Odabas (2007), for instance, put effort into this question by obtaining shares in different companies, in order to attend their gen-eral meeting and discuss this gender issue. Another support for our argument that the Swedish code is not the main reason for the increase is that after the first and second year of the Swedish code’s implementation, the gender difference is still significant. The board members are elected every year and we argue that this could have been adjusted if compa-nies were obligated to follow the suggestion made by the Swedish code. At the same time, there has been an ongoing discussion in society for a number of years that concerns the is-sue of the rare female board members.
As illustrated by figure 5 there is a difference in the gender composition in the investigated companies over the three years, and we are questioning the Swedish code for giving a sug-gestion of an equal gender composition. We argue that the Swedish code should not have suggestions. Instead it should focus on specific rules that companies could either follow or deviate from. In this sense we believe that the Swedish code becomes meaningless, because suggestions are not followed to the same extent. Furthermore, companies do not have to explain if and why they are not following a suggestion and the shareholders can thereby not receive the information related to the underlying causes of the board composition. In spite of all, Mallin (2006) argues that an efficient corporate governance section brings individu-als, companies and countries together.
We will now present and discuss the empirical findings, gathered with our research model. Our empirical findings will be presented in terms of different figures in relation to our dif-ferent variables and categories. The information will be illustrated by the mean value of the total points received in our model, and the percentage of increased or decreased changes in information over time. The possible points for companies to receive in our research model are 46.

Agency Theory

Jensen and Meckling (1976) discuss the problems and conflicts of interest that can arise when the principals hires agents to run their company. This has been taken into considera-tion when structuring our empirical data, as we will emphasise the relationship between the owners and management. The conflicts occur because ownership and control is separated and we have chosen to analyse if the Swedish code of corporate governance has affected the information provided in the annual reports. Eisenhardt (1989) discusses the importance of providing the shareholders with information regarding the management of the company in order to reduce the conflict of interest between principal and agent. Furthermore, Eis-enhardt (1989) claims that it is the principals’ responsibility to delegate the work to the managers. However, Wearing (2005) claims that the principals’ power today is more con-nected to the flow of money rather than delegating of work tasks. We have investigated large companies listed on Stockholm stock exchange and they all have thousands of share-holders with different views and opinions, and can support Wearing (2005) in his discus-sion that it is more about the financial flow nowadays. The Institute of Directors (2005) also confirms his argument as they discuss how the ownership structure have changed and that individuals are investing in funds and pension schemas and therefore become more of indirect owners with limited ability to influence. The conflict between agents and principals is based on the asymmetric information that originate, and Eisenhardt (1989 argues that the agents are more likely to take decisions in favour of the principals when they are provided with rich information of what is expected from the shareholders point of view.

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Turnover

The turnover variable measures the size of the companies and we have divided it into three categories; smaller than 50 billion SEK, 50-100 billion SEK and greater than 100 billion SEK. Our assumption, presented in the method chapter, is that a company with a large turnover would experience more conflicts of interest between managers and owners. This is partly due to more money in circulation but also because more managers are involved in the business operations. Analysing this further, it would result in that information commu-nication becomes more important in order to reduce conflicts. As Botosan (1997) stresses, annual reports are the communication channels between the company and its shareholders, and to reduce conflicts and asymmetric information the company has to have a compre-hensive annual report including corporate governance information. The empirical findings categorised in relation to the turnover is described in figure 6, where the bars show the av-erage point received within each category and investigated year.
The information measured with our research model has increased over the years, as shown in figure 6. However, the difference between each category of turnover is not as large as we could expect. Kenani and Persson (2006) came to the conclusion that larger companies are better at implementing the Swedish code of corporate governance compared to smaller companies. The difference between our studies and their, is that they categorised compa-nies listed on the Stockholm stock exchange A and O list as large companies, whereas we have only investigated large companies listed on Stockholm large cap. In addition, we have divided our companies into three different categories were a difference among them can be found. To expand on Kenani and Persson’s (2006) statement that large companies are su-perior in their implementation of the Swedish code, we wanted to investigate if this was true even when narrowing down the size even further. All companies are listed on Stock-holm large cap, however, the turnover and thereby the size of the company still differs to agreat extent. As shown in figure 6 companies with a turnover between 50 billion SEK and 100 billion SEK have received most points in our research model 2006, and are therefore superior in providing corporate governance information in their annual reports. Our as-sumption was that companies with a higher turnover would provide more information in their annual report’s as they have more money in circulation, engage more employees and the distance to the shareholders become evident. However, our results in figure 6 show the opposite. All companies are viewed as large and the distance between agents and principals might be similar in all of them, especially when comparing the number of shareholders and managers involved. We are surprised with our findings, and are questioning if our meas-urement of size is appropriate. Categorising the companies in accordance to number of shareholders or employees might have given another result. A higher turnover might not necessarily mean more people involved and thereby a large distance between owners and manager.
Another aspect to consider is that companies experience external pressure from media and the society. Companies should be nurturing them with information in order to make them satisfied. This is supported by Institutional Theory, where this type of pressure is called normative pressure (Hatch, 1997). At the same time, it is important to consider that many of the companies classifying into the group of the largest turnover, are companies that have their residence in other countries and are therefore following the code of that country in-stead of the Swedish (OMX, 2006). Nevertheless these are still companies being listed on the Stockholm stock exchange and the large cap list, and through these rules that determine that companies with a residence in another country are allowed to follow that country’s code, less information is provided to the Swedish shareholders. This means that the Swed-ish code is not helping to reduce the information gap between the agents and the principals if the company has its residence outside Sweden (Eun & Resnick, 2004). At the same time, our findings are related to the Swedish code of corporate governance and we have only taken the Swedish code’s requested information into consideration. Nonetheless, the an-nual report contains a lot of information, and as shown above, the corporate governance section only constitutes a minor part (figure 4). It is important to consider that sharehold-ers might request other information that is not demanded by the Swedish code and that is provided in the annual reports. Many companies provided social disclosure to their share-holders already before the implementation of the Swedish code, and companies seem to be aware of both stakeholders and shareholders’ request for information. Annual reports are also reflecting the ongoing debate in the society, and Milne and Chan (1999) discuss how information on environment, employees and community has increased.
All our investigated companies can be categorised as large companies as they are listed on Stockholm large cap list. However, figure 6 describe differences among them and within the results given by our research model each year. Svernlöv (2006) discusses that it is more accepted for smaller companies to diverge from the Swedish code and its principals, and it is therefore unexpected that the companies with a lower turnover are superior at providing the information compared to larger companies with a higher turnover. The difference be-tween each category and the individual years can be explained further in figure 7, were the percentage improvement between the investigated years and categories can be found. The total bar in the chart represents the increase in information between the individual years 2001 and 2006.

Table of Contents
1 Introduction
1.1 Background
1.2 Problem Discussion
1.3 Purpose
1.4 Delimitations
1.5 Structure of the Thesis
2 Frame of References
2.1 Corporate Governance
2.2 Agency Theory
2.3 Institutional Theory
2.4 Swedish Code of Corporate Governance
2.5 Summary of Frame of References
3 Method
3.1 Research Model
3.2 Research Method
3.3 Data Collection
3.4 Sample Selection
3.5 Coding of Data
3.6 Analyzing the Data
3.7 Validity and Reliability
4 Empirical Findings and Analysis
4.1 Corporate Governance
4.2 Agency Theory
4.3 Institutional Theory
4.4 Swedish Code of Corporate Governance
4.5 Swedish Code vs. International Codes
5 Conclusions
5.1 Discussion
5.2 Future Studies