Camelia Liliana Dobroţeanu, Laurenţiu Dobroţeanu, Adriana Sofia Răileanu, Reporting on corporate

governance – a case study on Romanian companies, Transformations in Business&Economics, vol. 9, no.

1(19), supplement A, 2010, ISSN 1648-4460, pp. 273-288

Reporting on corporate governance – a case study on Romanian

companies

Camelia Liliana DOBROTEANU

Faculty of Accounting and Management Information Systems
Academy of Economic Studies, Bucharest
6, Romana Square 010374 – Bucharest, Romania
Phone: + 40 - 21 319 19 00
Fax: + 40 - 21 319 18 99
E-mail: camidll@yahoo.com

Laurentiu DOBROTEANU
Faculty of Accounting and Management Information Systems
Academy of Economic Studies, Bucharest
6, Romana Square 010374 – Bucharest, Romania
Phone: + 40 - 21 319 19 00
Fax: + 40 - 21 319 18 99
E-mail: laurdll@yahoo.com

Adriana – Sofia RAILEANU

Faculty of Accounting and Management Information Systems
Academy of Economic Studies, Bucharest
6, Romana Square 010374 – Bucharest, Romania
Phone: + 40 - 21 319 19 00
Fax: + 40 - 21 319 18 99
E-mail: sofia.raileanu@gmail.com

Camelia Liliana DOBROTEANU is a PhD professor on internal and external auditing, and
accounting at the Academy of Economic Studies from Bucharest, Romania. Along with her
teaching career, she develops her research interests acting as member or manager of various
research projects. Apart from an excellent appreciation coming from her students, Ms.
Dobroţeanu enjoys a good reputation within the audit profession members, particularly due to her
publications and lectures taught tackling issues of a wide interest for them.

Laurentiu DOBROTEANU is a PhD professor at the Academy of Economic Studies from

Bucharest, Romania. His teaching subjects and research interests are circumscribed to the fields
of financial accounting, auditing, history of accounting, and corporate governance. Apart from his
academic profession, after being the general secretary and CEO of the Chamber of Financial
Auditors from Romania, he currently acts as the CEO of the Public Supervision Institute of the
accounting and auditing profession members.

Adriana – Sofia RAILEANU, PhD candidate, is an Assistant Professor of Accounting at the

Faculty of Accounting and Management Information Systems, Academy of Economic Studies in
Bucharest. She completed an MSTCF and a Master 2 Comptabilité, Contrôle, Audit program, at
the National Institute of Accounting and Economic Techniques in Paris, France. She is involved
in several national funded research projects and she published conference papers on creative
accounting. Her current research interests are creative accounting and corporate governance.

Abstract

The main purpose of our paper is to investigate the disregarding attitude showed
by companies toward the mandatory or voluntarily corporate governance disclosures. Our
study does not seek to demonstrate (nor does it reveal) the extent to which companies
apply the Corporate Governance Code, but the extent to which they disclose information
regarding corporate governance. Therefore, the poor reporting on this subject indicates
the companies` lack of interest where as to such reports.
Although limited to the sample size level, our research conclusions show a
material ignorance gap for the Romanian companies as far as the usefulness of corporate
governance disclosure is concerned. Our paper contributes to the widening of corporate
governance research and practices. The particular issues approached in our study (such as
identification, measuring and providing possible explanations for the ignorance gap)
render it with originality.

Keywords
Corporate governance, ignorance gap, perceptions, Romania, disclosure

JEL Classification :
M 10, M 14, M 21

Summary

In most local and international references sources, the speech concerning

corporate governance sets out ideas such as the usefulness of governance for investor
protection, sustainable growth and better reliability. On the other hand, frequent studies
addressing the causes of financial scandals and economic crises point out a corporate
governance failure.
The main objective of our paper is to investigate the disregarding attitude showed
by companies toward the mandatory or voluntarily corporate governance disclosures.
The paper is organized as follows: after critically reviewing the most recent
related researches, the first section summarizes the Bucharest Stock Exchange corporate
governance disclosure requirements, followed by a section detailing the research methods
employed. Referring to the research methods used in order to conduct the study, a short
presentation of them would highlight the use of quantitative research methods (social
survey and empirical study), accompanied by the specific instruments of qualitative
research methods. The particular issues approached in our study (such as identification,
measuring and providing possible explanations for the ignorance gap) render it with
originality. The last section shows the results and our concluding remarks.
Our study contributes to the widening of corporate governance research and
practices, being useful to corporate governance regulators and stock market players.

Introduction

Corporate governance is a complex topic characterized by multiple cross-linked

features and implications which even though has recently attracted much of the
researchers’ interest, still leaves enough green fields to be further explored. Our study
attempts to investigate the ignorance gap related to corporate governance disclosure. The
ignorance gap, in our view, reflects the disregarding attitude showed by companies
toward the mandatory or voluntarily corporate governance disclosures.
The main reasons that justify our attempt are detailed below.
Theoretically, it is widely accepted that good and strengthened corporate
governance framework and practice generate economic benefits for all participants to
economic cycle. Using the “benefits for all” argument, the international regulatory
community begun to debate, to initiate, to issue, and to promote recommendations,
frameworks, and principles of corporate governance (FEE (2003), OECD (2001, 2004),
IFAC (Ricol, 2008), IIA (2002)). In a recent study, Windsor (2009, p. 306) draws the
attention on the major differences among countries as regards the corporate governance
frameworks and their weak enforcement, particularly in emerging economies.
Additionally, based on this diversity, there were debates about the prospective for
convergence of the corporate governance frameworks applicable to companies listed on
stock exchange aiming to harmonize the disclosure requirements from various capital
markets (Rossouw, 2009, p. 43; Jeffers, 2005, p. 221; La Porta et. al, 2000, p. 3).
After the corporate scandals that took place at the beginning of this decade,
followed by the current global economic crises that undermined even the strongest
economies of the world, views that advocate the corporate governance failure as one of
the crises determinants have emerged. In other words, the economic crises of this decade
– either local or global – seem to have demonstrated the lack of effectiveness of corporate
governance frameworks in terms of control over the business risks along with the limited
usefulness of companies’ corporate disclosures as an early warning system for the
market. It is quite difficult to indicate which view is appropriate, given that there are
valuable researches which scientifically validate both groups of opinions with pros and
cons. For instance, Byard et. al (2006, p. 609) showed that better quality corporate
governance is associated with a key benefit to the end users of firm-provided financial
disclosures: an increase in the overall quality of information possessed by financial
analysts. On the other hand, Aluchna (2009, p. 185) develops a case study on Poland that
questions about the utility of compliance with corporate governance rules in assessing
corporate performances. Her results reveal the stronger the compliance, the weaker are
the corporations performances (measured by return on investment). Epps&Cereola (2008,
p. 1135) examine the relation between the actual corporate governance rating received by
a firm and the firm's performance during the years 2002–2004. Their results show that
there is no statistical evidence suggesting that the firms’ operating performance is related
to the firms’ corporate governance rating.
In spite of an impressive number of papers on corporate governance recently
published, little is known about the attitude and perceptions of the reporting companies
towards the mandatory or voluntary disclosure on their corporate governance practices.
The literature review on recent publications reveals that the researchers’ preferences fall
under three major categories. The first group of researchers is testing the relationship
between various corporate governance associated variables and the reporting companies’
performances (Collier, 1993, p. 429; Bhagat&Bolton, 2008, p. 257), Chambers, 2003).
The second group approaches multinational comparative studies on corporate governance
frameworks (Yeoh, 2007, p.57; Dewing&Russell, 2004, p.289; Hermes et al, 2006,
p.280), while the third group would include studies that suggest sophisticated assessment
models of corporate governance practices (Khanchel, 2007, p.740).
As far as the corporate governance disclosure is concerned, there is only a limited
number of studies conducted concerning disclosure practices in Romania (Dobroteanu et.
al, 2009). A very recent paper published by the Canadian Businessmen Association from
Romania reads an assessment made over the observance of corporate governance rules by
the Romanian listed companies (CBA, 2009). Nevertheless, contrary to our initial
expectations, we have also found a limited number of studies conducted concerning
corporate governance disclosure practices abroad. Most of them examine the
determinants of voluntarily versus mandatory corporate governance disclosures (Wallace
& Naser,1995, p. 311, Wallace et. al, 1994, p. 41; Kun Wang, 2008, p.14; Ho&Wong,
2001, p. 139; Arcay&Vázquez, 2005, p. 299; Bujaki& McConomy, 2002, p.105).
However, going beyond the controversies and debates from academic world,
scientific and regulators communities, answers capturing the reporting companies views
should be given to questions such as: “What are the perceptions regarding the disclosure
on corporate governance practices? What is the added value attached to such reports?
What are the benefits of these reports? Do the benefits exceed the costs incurred?” To
explore these perceptions our research initially attempted an empirical approach based on
a questionnaire sent to a sample of ten Romanian companies 1 listed on the Bucharest
Stock Exchange (BSE). Unfortunately, the response rate to our questionnaire was
materially low, and therefore an alternative research approach has been identified. We
have conducted an extensive analysis and assessment of the corporate governance
information disclosed by the selected companies within their annual reports, those
required by the Stock Exchange Commission, as well as the information available on
their official websites. An index (margin) based on a set of key corporate governance
information (e.g. board structure, audit committee, “comply or explain” disclosure etc.) is
used as a proxy for companies’ perceptions. The paper is organized as follows: the first
section summarizes the BSE corporate governance disclosure requirements, followed by

1
The companies selected in the sample are those included in the BET Index which best reflects the
liquidity and Romanian stock market capitalization. It is the Romanian equivalent of the wide known
British FTSE 250.
a section detailing the research methods employed. The last sections show the results and
our concluding remarks.
Although limited to the sample size level, our research results indicate a material
ignorance gap for the Romanian companies as far as the usefulness of corporate
governance disclosure is concerned. Our paper contributes to the widening of corporate
governance research and practices. Even though, there are several similar research papers
published during the last decade (Andersson&Daoud, 2005, p. 1-78; Bujaki&
McConomy, 2002, p.105-139), the particular issues approached in our study (such as
identification, measuring and providing possible explanations for the ignorance gap)
render it with originality. In practice, the results of our research may be useful to
corporate governance regulators and stock market players in enhancing the corporate
governance framework and in understanding the disclosure behavior of the reporting
companies.

1. Background

“Corporate governance is a subject of constant debate and wide interest, it

provides an adequate protection especially to investors on the stock market” – as the
Bucharest Stock Exchange (BSE) described the importance of corporate governance in a
public consultation document.
In Romania, the BSE specific reporting requirements regarding corporate
governance of listed companies are contained in the BSE Corporate Governance Code.
The most recent version of the code took effect starting with 2009 and it regulates the
2008 financial annual reports. However, this last version has come a long way, more
specifically from 2001, when the first code of corporate governance was promoted in
Romania. In 2001 BSE required a set of changes for companies admitted for quotation,
thus BSE created the plus category - a virtual category where listed companies could
achieve only after including the 2001 Code of Governance provisions, in their entirely, in
their corporate charters. The promotion in this category was based on communication and
transparency standards, which an issuer was willing to adopt and implement. However,
the BSE’s efforts have not been successful, given the fact that only one company has
asked to be listed in the plus category.
Based on OECD recommendation, in 2003 BSE created the Institute of Corporate
Governance (OECD, 2001). Its main objective was to educate listed issuers regarding the
promotion of principles and best practices of corporate governance.
Romania’s accession process to the European Union concluded in January 2007,
demanding in the same time higher efforts from the BSE to align its regulations with the
European ones. Thus, in 2008-2009, the BSE revised the code of corporate governance
launched in 2001 and composed the present code of governance, as a result of public
consultations with the issuers. Although the present code allows a free will adoption, it
also requires reporting on the compliance / non compliance with the code, in an annual
declaration attached to the annual reports (the “comply or explain” statement). The very
first report should be included in the 2008 annual reports of the issuers (BSE Corporate
Governance Code 2008), followed by the 2009 annual reports (BSE Corporate
Governance Code 2009).
 A review of the BSE Corporate Governance Code (20082 version) reveals several
reporting obligations of issuers. In the following paragraphs, we propose ourselves to
describe the most relevant recommendations provided by the Code.
One of the most important recommendation is that the companies admitted to
trading on the regulated market of the BSE that decide to apply wholly or partially the
Corporate Governance Code have to transmit yearly to the BSE a statement of
compliance or non-compliance with the provisions of the Code. The statement must
provide information specifying which recommendations of the Code have effectively
been implemented by them and what is the implementation method. The statement shall
be drawn, as appropriate, in a format established by the BSE. The reporting obligation
relates to the principles and criteria stated in each article of the Code.
If the principles and recommendations in the Code contain provisions relating to
issuers, directors, auditors, shareholders or other company’s bodies, each company traded
on the regulated market of the BSE shall provide accurate, correct, concise and easy
understandable information on the manner in which the recommendations have been
implemented.
If issuers do not implement fully or partially one or more recommendations of the
Code, they will provide adequate information with regard to the reasons for partial
compliance or overall non-compliance with those recommendations.
The companies admitted to trading on the regulated market of the BSE shall adopt
a clear and transparent corporate governance framework that shall be adequately
disclosed to the general public.
Also the Code recommends to the issuers to prepare and disseminate relevant
periodic and continuous information, in accordance with the International Financial
Reporting Standards (IFRS) and other standards of financial and non-financial disclosure.
The information will be disseminated both in Romanian and English as international
language in the financial field.
Another important recommendation provided by the Code is that the companies
admitted to trading on the regulated market of the BSE shall make every necessary effort
to ensure the access of their shareholders to relevant information, so as to allow them to
exercise all their rights in an equitable manner. To this end, the companies admitted to
trading on the regulated market of the BSE shall create a special section on their web
page, easily identifiable and accessible, where the above mentioned information will be
available. Relevant information will refer, without limitation, to: procedures for access
and participation in the shareholders’ meetings, the exercise of the voting rights in the
shareholders’ meetings, materials related to items on the agenda of shareholders’
meetings, templates of special procure, financial calendar, etc.
In the Annual Report the issuers shall provide a chapter on corporate governance.
In that chapter they must describe the relevant events related to corporate governance
recorded in the preceding financial year.
Among others, the responsibilities of the Board of Directors shall be to provide
information on the appliance of the provisions of the Corporate Governance Code, on the
number of meetings of the board and, if necessary, on the number of meetings of the
executive committee held during that financial year. Also the board shall provide

2
Since the annual reports of companies for the year 2009 have not yet been developed and published, we
have taken into account the provisions of the code of governance applied to reports for the year 2008.
information on the percentage of attendance in these meetings for each member. This
information has to be provided in the above mentioned chapter related to corporate
governance from the Annual Report.
In the Annual Report, the issuers must disclose their remuneration policy.
According to the Code, they have to disclose information on the total amount of direct
and indirect remuneration received by directors and executive managers. They must
present separately the fixed and variable components of this remuneration.
Whenever a new system of management and control is proposed, the managers
shall inform the shareholders and the market of the reasons that led to this proposal, as
well as the manner in which the Code will be applied to the new management and control
system.
More precisely, the issuer shall describe in detail in the chapter dedicated to
corporate governance of the first Annual Report published after modification of
management and control system, by what means the Code has been applied to the new
system.
As it can be noted, according to the Code, high transparency of corporate
governance practices can be achieved in three separate but complementary sections: the
“Comply or Explain” statement, the issuers’ websites and additional information in the
Annual Report.

Information on corporate
governance relevant to
shareholders

Compliance/ non compliance

with the Code articles, principles
and recommendations

Timely and continuous

information in Romanian
and English
Source: own compilation
Figure 1.Sections to provide high transparency of corporate governance practices

2. Research Methodology

Starting from the reporting requirements of the BSE Corporate Governance Code,
as detailed in the previous paragraph, the investigation of the perceptions of companies
listed on the BSE followed two different methodological approaches. Referring to the
research methods used in order to carry out the study, a short presentation of them would
highlight the use of quantitative research methods (social survey and empirical study),
completed by the specific instruments of qualitative research methods: the analysis of
variables correlation in the considered model and the inductive-deductive reasoning.

2.1. The Social Survey

In order to obtain reliable data, we developed a questionnaire, which was sent by

email to the BSE listed companies, contained in BET-10 index. The selection for the
study sample of these companies was based on the following criteria:
 BET is a reference index for the Romanian capital market (the equivalent of the
FTSE 250 at London Stock Exchange or Dow Jones at New York Stock
Exchange)
 It comprises the 10 most liquid companies on the market;
 Similar studies published by other researchers in international journals in the main
informational flow show that such indexes were also used as a model in building
the sample.
The selected period in order to carry out the study was May-June 2009. It was
intended to avoid the peak periods of activity / reporting for the respondent companies
participating in the survey.
The questionnaire includes 28 semi-open questions relating to the provisions of
the BSE Corporate Governance Code, covering the following sections:
 demographic information;
 utility: 6 questions;
 flexibility: 3 questions;
 structure: 3 questions;
 completeness: 2 questions;
 clarity: 3 questions;
 communication and transparency: 2 questions;
 other issues: 6 questions;
 ethics: 3 questions.

In order to receive the answers, in the first phase we have taken into account a
waiting period of two weeks. After the deadline, since we haven’t received any
completed questionnaire, we have resent a letter which extended the deadline for
completing the questionnaires by one week. Unfortunately, after the second term, the
response rate was zero as well.
Under such circumstances, it was necessary to rethink the research methodology,
so that the objective could be achieved.

2.2. The Empirical Study

Using the initially built database, conceived to carry out the social survey, the
internet sites of the sample companies were accessed. Also we accessed the BSE site, in
order to extract the annual reports of the sample companies, for the financial year 2008
(the first year when the Comply or Explain statement was mandatory). In addition, we
examined the internet sites of the sample companies, in order to check the information
provided by them, referring to the used practices of corporate governance.

The basic hypothesis of our study is: disseminating information on corporate

governance according to the Corporate Governance Code reflects the extent to which
companies exploit the principles of corporate governance.

Evaluation: For each followed criterion while evaluating the annual reports and
analyzing the information on corporate governance contained in the web sites of the
sample companies, a score on a scale of three values was given. The poorest score, which
is 1, is the score awarded to the lack of information on the criteria evaluated. The highest
score, which is 3, reflects the maximum points awarded for a supply of sufficient
information, in quantitative terms, according to the Corporate Governance Code. For
each criterion, a specific margin (MC) was calculated, reflecting the dimension of
ignorance on reporting on that criterion. The index was obtained by subtracting the
number of points awarded, from the maximum number of points possible, for each
criterion, recorded at each sample company. By adding specific margins:
 obtained by each sample company on one criterion (vertical line), we were able to
find the overall margin of the criterion (MGC);
 related to all evaluated criteria for each sample company (horizontal line), we
were able to find the individual margin (MS).
Also, we determined the global dimension of ignorance gap towards the reporting
requirements on corporate governance principles and practices (MG), by using the
relationship:

The evaluated criteria were:

 the Comply or Explain statement
 the disclosure of information concerning:
- the governance model
- the structure of the board
 - the responsibilities of the Non-Executive Board
- the responsibilities of the Executive Directors
- the Audit Committee: composition, independence, responsibilities,
program
- the other committees

3. Research Results

The charts illustrated in Figure 2 and 3 below reveal the indexes’ values,
determined accordingly to the described methodology.

20
20
18 The Comply or Explain
16 17 Statement
The governance model
14 15 15
The structure of the
12 13 Supervisory / Management
10 The responsibilities of Non-
Executive Board
8 The responsibilities of
Executive Directors
6 7 The Audit Committee
4 The other committees
2
0
0
Source: own compilation based on the results of the research
Figure 2.MGC Representation

It may be noted that there is only one criterion of the criteria assessed, related to
which all the selected companies provide sufficient information either in the Annual
Report, either on their web site or in other reports. It is the criterion number 3 - the
structure of the Board. Most companies offer a rich information palette about the board
composition, its responsibilities, experience, training and expertise area covered within
the company. By contrast, criterion 1 - Comply or Explain statement (CE) – is the
criterion that recorded the highest degree of ignorance (MGC1 = 20p, maximum level
possible). Basically, if we exclude Petrom from the analysis, no company reported such a
statement. Petrom was the only company which presented in the Annual Report a section
about corporate governance, which met the characteristics of the CE statement, but did
not contain the declaration itself, stating the compliance with the principles of the
Corporative Governance Code, or explaining the deviations.
At a very little distance after the value recorded by the CE statement criterion,
MGC2 recorded a very high value (17p). Only two of the analyzed companies - Petrom
and BRD – disclosed clearly the governance model that they implemented. It is true that
the company’s manner of organization can be inferred by the well informed and educated
reader, on the basis of information concerning the responsibilities of the board and
executives directors.
However, if one takes into account that these criteria have very high margins
(MGC4 = 13p respectively MGC6 = 15p) - which shows a poor information, sometimes
superficial, on these issues - it is very difficult to conclude on the applied model of
governance. Another nonperforming score (MGC7 = 15p) was obtained by criterion
number 7 - the information provided about the existence, role and responsibilities of other
committees of the supervisory board / management. In most of the cases, such
information is missing from the media of dissemination used by the companies, and if
any, they are presented in a superficial way.
The criterion number 5 – information on the responsibilities of executive directors
– was placed on average, because it recorded a significantly better value (MGC5 = 7p).
While assessing this criterion, the main notified dysfunctions were the briefly
presentation of the board composition, followed by a series of formal and standard
statements, regarding the absence of interest conflicts or the date on which they took
office. In very few cases the annual reports contain complete information regarding the
responsibilities of the Executive Directors: areas of responsibility within the organization,
expertise, as well as performances / failures in the closed reporting year, remuneration
policies, etc.

12 12
12 11
10 10 10
10 9
8
8

4
3
2
2

AZOMURES SA TRANSILVANIA BANK

BIOFARM SA BRD - GROUPE S-TE GENERALE
C.N.T.E.E. TRANSELECTRICA PETROM SA
S.N.T.G.N. TRANSGAZ SA S.S.I.F. BROKER SA
DAFORA SA ROMPETROL RAFINARE SA

Source: own compilation based on the results of the research

Figure 3.MS Representation
 The chart above captures and compares specific margins determined for each
company in the sample. It can be noted that only two companies (Petrom and BRD)
recorded reasonable specific margins attached to criteria considered for evaluation (2 and
3), which revealed a raised level of concern for the transparency of information on
corporate governance. They are followed by Transilvania Bank (8) and Transelectrica
(9), where MS is significantly placed below the average, revealing a rather neutral
attitude on transparency. Finally, the interpretation of the scores calculated for all the
other companies remaining in the sample (60%) suggest their indifference to the
disclosure of information on corporate governance. Nevertheless, the overall margin
determined in the sample (87p) supports the same conclusion.
Without supporting that there is a correlation between the level of information on
governance practices and performance on stock exchange (such a case has not been the
subject of our study), the analysis of evolution of stock quotes for companies in the
sample of our study (Fig. 4) reveals however the largely speculative characteristic of the
domestic stock market. In such circumstances, as described in the next paragraph, it is
expected that the market does not provide a sufficiently strong incentive to encourage
issuers to increase voluntary the disclosure of information relating to corporate
governance.

350.00%
300.00%
BRD
250.00%
TLV
200.00% SNP
150.00% RRC
100.00% TGN
50.00% BIO
0.00% TEL
-50.00% BRK
-100.00% AZO
ATB

Source: own compilation based on the results of the research

Figure 4. Market evolution of the stock quotes for the companies in the sample

Conclusions

Our study’s results, as they have been described in the previous paragraph, allow us
to conclude that according to listed companies’ perceptions (at least those selected for our
examination) nearly all information regarding corporate governance principles and practices
are perceived as not being necessary for reporting purposes.
 We underline that our study does not seek to demonstrate (nor does it reveal) the
extent to which companies apply the governance code, but the extent to which they
disclose information regarding corporate governance. Therefore, the lack of reporting on
this subject indicates the companies` lack of interest where as to such reports. Using
logical reasoning, we can conclude that “what does not matter is useless / unnecessary.”
The paragraph above reveals that, with very few exceptions – for instance Petrom and
BRD – companies do not disclose sufficient and/or appropriate information on corporate
governance. Moreover we are able to note that our research results converge with those
revealed by the few similar studies related to the issuers of local stock market, even if
these results have been obtained independently and with completely different objectives
and research methodologies. Thus, the Bucharest Stock Exchange concluded in one of its
reports, dated 2008, that the introduction of the plus3 category to listing on stock
exchange recorded a total failure, only one company requiring access to it. Also, the
public consultation launched by BSE in early 2008, meant to review the Corporate
Governance Code, does not seem to have awakened the interest expected from issuers.
More recently, Canadian Businessmen's Association published a study that noted the
indifference of companies listed on BSE, concerning the observance of corporate
governance principles and practices (CBA, 2009). The study`s conclusions were
reproduced and widely publicized in the local media but the stock exchange players`
interest concerning this sort of information don`t seem to have been affected, at least not
for now.
Among the potential factors that could justify this approach we might include:
 Although the Governance Institute leads a sufficiently broad campaign, in order to
promote the principles and practices of corporate governance, and also in order to
train the management structures of listed companies, the effectiveness of such
courses does not translate, at least not currently, in a better perception and in a
wider awareness of the importance of reporting on corporate governance. There is
no doubt that, at least on this issue, education and information do not represent the
only mechanisms that can enhance such a perception.
 The lack of a clear evidence to link an extended disclosure with a better and
immediate performance of stock quotation or with a higher return on investments
is one of the major barriers to the acceptance of corporate governance reporting
efforts. In a stock exchange market largely characterized by speculative
investments, investors’ expectations are naturally directed towards optimizing the
investment in a short time-frame: the minimization of efforts duplicated by
maximizing the gains (Depoers, 2000, p. 260). Thus, any further effort unpaid
immediately is eliminated. Such an attitude is accentuated in times of crisis when,
on one hand, companies need to reduce costs and, on the other hand, risk
minimizing requires caution as regards the time horizon of investment.
 Nevertheless, corporate culture plays an important role. The local stock market is
young, compared with mature capital markets, and it has its own cultural
characteristics. Inserting an organizational culture based on transparency,
communication, principles, voluntary implementation of the code in an
environment strongly anchored in the Roman origin law culture - “it is mandatory
3
Plus category – the access to this listing category was based on additional information on transparency
and not on financial performance.
 only if written in the law” – undoubtedly encounters reluctance to assimilate,
which determines a slower rhythm of acceptance of the change. In addition, the
absence of specific unfavorable consequences for companies that don’t disclose
information required by the governance Code could be one of the factors that
hinder the assimilation of responsibility concerning the transparency of
information on corporate governance (Cooke, 1989, p.191).
 The non application of corporate governance practices and principles cannot be
ruled out. This could be one of the reasons due to which companies avoid
disclosing such information (Wallace&Naser, 1995, p. 367).
In most local and international references sources, the speech concerning
corporate governance sets out ideas such as the usefulness of governance for investor
protection, sustainable growth, better reliability, etc. (Hutchinson&Gul, 2004, p. 610;
DeZoort, 1997, p.208). On the other hand, frequent studies addressing the causes of
financial scandals and economic crises point out a corporate governance failure. However
a thorough analysis (Dobroţeanu et al, 2009) on a sample of U.S., British and French
companies4, facing serious difficulties due to the current financial crisis context, reveals
that the disclosure of a wide range of information concerning practices and principles of
corporate governance (information disclosed voluntarily beyond the level required by the
applicable governance codes), did not protect them from the crisis, failure or criticism.
Furthermore, a careful examination of the information published by those companies
indicates not only the existence of reporting tools, but also the application of some
governance principles and practices regarded until recently as a positive example. In
other words, even in mature capital markets, corporate governance ability to provide
adequate protection to investors and issuers is questioned. The more so, in emerging
markets like Romania! If they can’t identify a strong real motivation - neither the
alternative of a winning, nor the protection against some risks - then why would
Romanian companies be interested in disclosing information related to governance? In
addition to this, we observe that in fact, in most companies listed on BSE, the executive
management’s role is to implement governance mechanisms, respectively to ensure their
reporting. Therefore, it is natural for the executive management to show at least
reluctance to implement a system, which places it under the control of others. Delaying
the process leads to a poorly reporting process on this segment.

Acknowledgements

1. The study was conducted within two scientific research projects, currently
running, financed by The National University Research Council (CNCSIS), Romania,
into the framework of PN II, Ideas Program, competition 2008. The titles of our scientific
research projects are “The role of corporate governance in securing the investor
confidence: the national versus European and international performances” - project
manager Camelia Liliana Dobtroteanu (CNCSIS ID_1785) and “Bipolar study of audit
expectations gap: profession versus audit report users”- project manager Laurentiu
Dobtroteanu (CNCSIS ID_1798).

4
For example, General Motors, Renauld, etc.
 2. We are very grateful to Mrs. Nicoleta Coman who has provided the authors
with a very useful database containing information on stock prices and annual reports for
the companies considered in conducting our research.

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Appendix 1

Company: Reports and corporate governance information available at:

http://www.azomures.com:82/raportari/files.php?p=Raportari+CNVM
AZOMURES S.A.
%5C2009%5CRaport+Anual+2008%5C
BANCA TRANSILVANIA http://www.bancatransilvania.ro/uploads/annual_report_2008.pdf
S.A.
http://www.biofarm.ro/investitori_rapoarte_periodice.php?lang=ro&se
BIOFARM S.A.
ctiune=2008&perioada=anual
BRD - GROUPE SOCIETE http://www.brd.ro/&files/raport-fin08-en.pdf
GENERALE S.A.
C.N.T.E.E. http://www.transelectrica.ro/EN/anulcurent.php
TRANSELECTRICA
http://www.petrom.com/portal/01/petromcom/!ut/p/c5/04_SB8K8xLL
M9MSSzPy8xBz9CP0os3gDf1OLQC9HZyNXA3dPD18PQ09DAwjQ
PETROM S.A.
Dy7K1_fzyM9N1S_IdlQEAJbCG7M!/dl3/d3/L2dJQSEvUUt3QS9ZQ
nZ3LzZfTTA5SEZJVTJVQTRJSjBGRkQ2VDAwMDAwMDA!/
http://www.transgaz.ro/ac_raportari_anuale.php
S.N.T.G.N. TRANSGAZ S.A.
http://www.ssifbroker.ro/php-
S.S.I.F. BROKER S.A.
template/afisare_pagina.php?location=situatii_financiare
 http://www.dafora.ro/rapoarte//convocari-
DAFORA SA aga/Raport%20anual%202008%20al%20Consiliului%20de%20Admin
istratie.pdf
ROMPETROL RAFINARE http://www.rompetrol.com/online/index.php?_website_id=67&page_id
S.A. =580