127571523812500 SECOND SEMESTER SESSION 2018/2019 BWRR3123 CORPORATE GOVERNANCE WRITTEN REPORT ASSIGNMENT COMPANY:Cadbury (2014) LECTURER NAME:DR. WAEIBRORHEEM WAEMUSTAFA NAME: MUHAMMAD HAFIZ AIMAN BIN ABDUL THALIB NO. MATRIC: 255703CHAPTER 11.1 INTRODUCTIONChapter one consists of an overview of the Cadbury (2014) scandal. This chapter will be discussing the problem statement, research question, and outline of this study. 1.2 Background of the companyChocolate is part of the crowd’s favourite no other cadbury brands may be known from other chocolate companies. Cadbury in Malaysia is controlled by Mondelez Malaysia located in Petaling Jaya.
As we know, the chocolate has got halal recognition. In 2014, there was something happening to chocolate, one of which had been spreading something that would bring down the popular Cadbury name. During the year, cadbury was found to have a pork DNA in the production and caused the races in Malaysia to be angry about the matter. As we know, in Malaysia there are many nations, especially the Islamic religion that is prohibited from eating pigs.
There are many speculations made such as treachery or contamination in the factory or plastic packaging used.After the issue occurred, many media outlets issued a statement calling for a cadbury boycott. JAKIM and the Ministry of Health will investigate the matter as cadbury has been with the user for 40 years. A lot of issues arising out of the producer and the JAKIM clerk are the only one who can issue halal certificates to food producers in Malaysia. JAKIM also issued a statement to the public that they were willing to sue on the issue of the chocolate. There are NGOs representing the Muslim ummah in Malaysia who want the above cadbury suffrage not respecting their religion.This shock caused the manufacturer to re-examine the two products that DNA pork found to restore its loyal users. it would probably make loyal consumers turn to other chocolate manufacturers and possibly subsequent sales of cadbury will decline sharply. 1.3 Research Questions1. What is relationship between macroeconomic factors and dependent variable and independent variable?2. What is relationship between company specific factor and dependent variable and independent variable? 1.4 Outline of StudyThere are five main chapter in this report. Firstly, it discusses the background of the study, consisting of a study overview, problem statement, research goals, and research questions. Secondly, it deal with the literature reviews that search and evaluate the literature that selected. After that, suggest the methodology of research such as sampling techniques, data on SPSS statistics, and variable measurement. Next is discusses the study’s results and findings, including descriptive statistical analysis, correlation and diagnostic testing. Lastly is suggest the result of the discussion, and conclusion as well. Chapter 22. Literature Review2.1 IntroductionThis chapter is to review of literature related to the study. This section consists of the about the general concept of corporate governance and scandal, corporate governance and performance, corporate governance and Tobin’s q, corporate governance and Altman Z and corporate governance and macroeconomics. 2.2 Corporate Governance and Scandals In corporate governance, sustainability is part of principle of corporate governance. Concept of sustainability development have three part which is based on economic, social and environmental pillars. The economic more focus on business activities because by doing a business they can generated the profit than social just focus on community. Environment more to do some improvement and prevention of exhausting the limited natural resources. when the stock of the company increases, the performance also increases it can attract potential investors looking for opportunities in certain markets. Corporate governance plays an important role in the market where investors want to invest because every good corporate governance can improve the efficiency of the economy and increase investor confidence.In this case, every company has departments such as HR, marketing and audit for accounting and finance department. When a company wants to analyse financial reporting due to certain reasons, the auditors appointed by the company need to do the job with the expertise they possess. The appointed audit should do the work with properties such as fairness and accountability. 2.3 Corporate Governance and company’s performanceThis study to the discussion on the relationship between corporate governance and corporate performance. we can differentiate each role or theory used in each relationship between CSR, FP and CG. CSR, FP and CG have four conceptual theories in which all the theories are in consideration to make CG responsible for the actions taken by the CSR that the company does. Besides that, corporate social responsibility used as independent variable such as GRI (Global Report Initiative) on social variable, also financial performance used as dependent variable such as ROA, ROE and QTOBIN. Lack of correlation between financial profitability and CSR is caused by errors in the statistical analyses and the non-inclusion of investment in the Research & Development (R & D) the latter correlates modestly with CSR ( McWilliams and Siegel,2000 ) 2.4 Corporate governance and Tobin qAccording to Investopedia, Tobin’s q is a ratio who hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs. Corporate governance in Malaysia has principal, with the principal it can handle the problem faced by board of directors, director’s remuneration, shareholders and audit. If all companies use the relevant principal to the annual report or to a company’s disclosure, it is an accepted way (FCCG, 2000). MICG has restricted the excessive power of an individual who manages the affairs of the company because in Malaysia it has various one of the precepts of ‘crony capitalism’ with various positions.2.5 Corporate governance and Altman ZWe already know meaning of financial performance but financial distress it quick different. According to Wikipedia, if financial distress cannot be relieved, it can lead to bankruptcy. Tobin q and Altman Z have different functions to evaluate a financial performance.2.6 Corporate governance and macroeconomicChapter 33.METHODOLOGY3.1 Introduction Methodology of research is to identify, select a process and analyse a topic information. The methodology section allows the reader to critically assess the overall validity and reliability of a study. How was the data collected and analyse? IBM Statistical Package for Social Sciences (SPSS) Statistics version 25 is the method used to collect and analyse data.3.2 Statistical techniqueThere are many firms involved in scandals. Some have survived with enormous penalties, some are still in progress and some have even filed for bankruptcy. Cadbury is the companies involved in the scandal in 2014, so I decided to research this company. Five years of annual reporting are collected to analyse and to calculate the company-specific factors that are asset return and Altman Z. It is also used to calculate Tobin’s q. In addition, focus economics is used to collect macroeconomic data such as GDP, inflation rate and unemployment rate. Regression method has been used in this study to analyse data and form the basic for other techniques with SPSS.3.3 Data analysisTo identify the influence of the independent variables on the dependent variable, multiple regression analysis was used. The formula of regression interprets the influence and also the relationship with the dependent variable between independent variable. In the equation form, the multiple regression can be presented as follows:Table 3.1Measurement of VariableNo Variable NaotationMeasurement1 Return on Assets ROA Net income/ Total assets2 Return on Equity ROE Net income/ Total Equity3 Tobin’s q Tob Q Total firm market value / Total firm assets value4 Altman Z Alt Z 5 Gross Domestic Products GDP 5- years gross domestic product6 Inflation INFLA 5-year inflation rate7 Unemployment UNMP 5-yrars daily stock priceAltman Z Calculation T1 = (Current Assets €’ Current Liabilities) / TotalAssetsT2 = Retained Earnings / Total AssetsT3 = Earnings Before Interest and Taxes / TotalAssetsT4 = Book Value of Equity / Total LiabilitiesZ-Score bankruptcy model:Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4Zones of discriminations:Z > 2.6 -Safe Zone1.1 < Z < 2. 6 -Grey ZoneZ < 1.1 -Distress Zone3.4 IBM statistical package for social sciences (SPSS statistics)To complete this research, IBM SPSS Statistics version 25 has been used to calculate the results from the annual reports. The Social Sciences or SPSS Statistical Package was developed at the University of Standford by Norman H. Nie, C. Hadlai (Tex) Hull and Dale H. Bent. SPSS was officially named in the current version (2015) as IBM SPSS Statistics after IBM acquired it. SPSS is the most widely used social science or research statistical analysis programs due to its multi-functional features such as statistical analysis, data management and data documentation, which helps to make better decisions. IBM SPSS Statistics has been used for this research to calculate descriptive statistics, linear regression, correlation and coefficient between independent variables and dependent variable based on quantitative data from annual reports and official websites.Chapter 44. Finding and analysis4.1 IntroductionIn this study, Pearson correlation had been used to present the data for determine the correlation between the dependent variable and independent variables.Table 4.1Size of correlation Interpretation0.90 to 1.00 (-0.90 to “1.00) Very high positive (negative) correlation0.70 to 0.90 (-0.70 to -0.90) High positive (negative) correlation0.50 to 0.70 (-0.50 to -0.70) Moderate positive (negative) correlation0.30 to 0.50 (-0.30 to -0.50) Low positive (negative) correlation0.00 to 0.30 (-0.00 to -0.30) Negligible correlationSOURCE: Hinkle, Wiersma & Jurs as cited in Mukaka (2012)4.2 Relationship between corporate governance index and firm specific determinants, bankruptcy and macroeconomics.Pearson Correlations Table 4.2CorrelationsTobin’s Q ROA ROE Altman Z GDP per capital (USD) Unemployment rate Exchange ratePearson Correlation Tobin’s Q 1.000 -.020 -.118 -.570 .906 -.951 -.796ROA -.020 1.000 .978 -.087 .022 .008 -.123ROE -.118 .978 1.000 -.003 -.131 .158 .059Altman Z -.570 -.087 -.003 1.000 -.767 .604 .366GDP per capital (USD) .906 .022 -.131 -.767 1.000 -.973 -.858Unemployment rate -.951 .008 .158 .604 -.973 1.000 .922Exchange rate -.796 -.123 .059 .366 -.858 .922 1.000Sig. (1-tailed) Tobin’s Q . .487 .425 .158 .017 .007 .054ROA .487 . .002 .444 .486 .495 .422ROE .425 .002 . .498 .417 .400 .462Altman Z .158 .444 .498 . .065 .140 .273GDP per capital (USD) .017 .486 .417 .065 . .003 .031Unemployment rate .007 .495 .400 .140 .003 . .013Exchange rate .054 .422 .462 .273 .031 .013 .N Tobin’s Q 5 5 5 5 5 5 5ROA 5 5 5 5 5 5 5ROE 5 5 5 5 5 5 5Altman Z 5 5 5 5 5 5 5GDP per capital (USD) 5 5 5 5 5 5 5Unemployment rate 5 5 5 5 5 5 5Exchange rate 5 5 5 5 5 5 5Based on Table 4.2, unemployment and tabin-Q has the highest negative correlation with tobin q if compare to the other variables. There is a significant correlation of r= – 0.951 for unemployment and r= -0.951. This high value indicates that there is a strong negative relationship between Tobin Q and CGI. Therefore, if unemployment increases, the CGI will decrease.. A higher GDP means higher earnings for companies hence more company’s developments and/or expansion. Financially strong firms can maintain a fully functional board of directors as it will have a high cost of maintaining it.. In addition, the board of directors can be given higher performance – based incentives to encourage them to perform their fiduciary duty effectively and efficiently as directors to protect shareholders ‘ interests. As a result, a better performance in corporate governance can be achieved.Table 4.3The coefficient table 4.3, Independent variables with p ” value <0.806 imply that they have the greatest impact or influence on the dependent variable. Based on table, unemployment is one of the most influences. In standard coefficients beta, only unemployment have a negative sign -2.214, which means it has a negative impact on Tobin q.Based on Table, unemployment is one of the CGI’s most variable influences. It indicates that the CGI is not affected by any changes in unemployment. The beta of unemployment is -2.214 in the findings, which means it has a negative impact on the CGI of Corporate governance affects growth and development, helping companies to gain access to external financing, leading to higher investment, higher growth and more jobs. It also lowers capital costs and associated higher corporate valuation that attracts investors and also improves jobs. This therefore supports the findings that there is a negative impact between unemployment and CGI.Table 4.4Based on Table 4.4, Unemployment has the highest mean which is 6.340 with standard deviation of 1.2973. It means inflation is highly sensitive and have a risk. Besides that, ROA fluctuates at least with a Standard deviation of 0.0200660 and their mean is 0.043060. Less fluctuates means less risky and not too much sensitive. The other variables than ROA and Unemployment have a very low risk.Table 4.5The ANOVA model is used to indicate the model of the study is acceptable and reliable. Based on the ANOVA table above, it shows there is .004 significant value between dependent variable and independent variable.Table 4.6The R- Square is equal to 95.6 % according to the model summary above. The implies that 95.6% of Cadbury corporate governance performance can be explained by the independent variable used in the model. Chapter 55. DISCUSSION AND CONCLUSION5.0 IntroductionThe purpose of this study is to determine Cadbury ( Mondelez International) corporate governance with respect to its determinants. 5.1 Discussion of ResultBased on the table of both correlation (Table 4.2) there are evidence showing that CGI has been influenced and affected by macroeconomic factors only in terms of unemployment. It is shown that unemployment is strongly negative and significantly correlated to CGI. This will cause the board of directors ‘ efficiency to fall because they will no longer have the incentive to fulfill their fiduciary duty. As a result, the company’s performance in corporate governance will fall. Vice versa when the unemployment rate falls, meaning that the economy is in a healthy state. Better economic situation gives businesses more earnings. This will reflect indirectly on the performance of corporate governance of the company as they are capable of maintaining a fully functional management board.5.2 LimitationsThis study is limited to only Cadbury ( mo). This study also covers only five years financial statements from year 2012 until 2016. Thus, only limited amount of information can be collected and analysed due to the time constraint.5.3 ConclusionsUnemployment is showing a significant relationship with CGI based on the findings. Better practices in corporate governance can reduce unemployment. Companies who has better corporate governance structure tend to attract more investors hence more developments or expansion can be done on the company which also leads to more employment. More job opportunities have reduced the rate of unemployment as people can easily get jobs. Reduced unemployment also indicates that businesses are gaining more profit as a result. It also makes it easier for the firm to maintain a fully functional board of directors despite the high cost and more performance – based incentives can be given to the board of directors to encourage them to fulfill their fiduciary duty to protect the interest of shareholders.REFERENCESAbdul Rahim, N. R. (2017). Handling of crisis communication: A case study of Cadbury porcine DNA row.Agrawal, A., & Chadha, S. (2005). Corporate governance and accounting scandals. The Journal of Law and Economics, 48(2), 371-406.Ghazali, E. M., Mutum, D. S., Radzi, M. M., & Woon, W. P. (2019). Cadbury and the Porcine DNA Crisis. In Management of Shari’ah Compliant Businesses (pp. 163-169). Springer, Cham.Haniffa, R., & Hudaib, M. (2006). Corporate governance structure and performance of Malaysian listed companies. Journal of Business Finance & Accounting, 33(78), 1034-1062.Jaques, T. (2015). Cadbury and pig DNA: when issue management intersects with religion. Corporate Communications: An International Journal, 20(4), 468-482.Kolk, A. (2008). Sustainability, accountability and corporate governance: Exploring multinationals’ reporting practices. Business Strategy and the Environment, 17(1), 1-15. DOI: 10.1002/bse.511.Kocmanova, Alena & H™ebek, Ji™ & Doekalov, Marie. (2019). CORPORATE GOVERNANCE AND SUSTAINABILITY.Rodriguez-Fernandez, M. (2016). Social responsibility and financial performance: The role of good corporate governance. BRQ Business Research Quarterly, 19(2), 137-151.Wernerfelt, B., & Montgomery, C. A. (1988). Tobin’s q and the importance of focus in firm performance. The American Economic Review, 246-250.CK TAN, (June 03, 2014). Malaysia U-turns on Cadbury pig DNA scandal.Yasmine Hafiz, (28/05/2014). Cadbury Malaysia Upsets Muslims After Pork DNA Found In Halal’ ChocolateRobin Hicks, (May 29,2014). How Cadbury can market its way out of the pork chocolate scandal in Malaysia
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