Bankers on boards as corporate governance mechanism: evidence from Poland

This paper examines whether a bank exercises a monitoring role when a banker is represented on a firm’s board. Bank monitoring reduces information asymmetries, and hence lessens firm’s financial constraints—phenomenon frequently measured by investment-cash flow sensitivity in the sample of all non-financial companies listed during 1999–2002 on the Polish stock exchange. I find that firms with a banker on the board rely more heavily on bank loans than on internal capital in their investment activities. In contrast, firms with no banker on the board finance to a larger extent their investment with internal capital than with credit. However, firms with the bank-lender representation on the board are almost as much financially constrained as firms without a bank-lender representative on the board. Hence, the presence of bankers on boards is not associated with bank monitoring. They rather promote their employer’s business. The findings show that investment of firms with a banker on the board is less sensitive to cash flow than investment of firms without bank representatives on the board. This result suggests that bankers on the board provide financial expertise that help those firm to reduce financial constraints.     

Effects of corporate equity ownership on firm value

We investigate the valuation effects related to corporate minority block purchases for a European sample of 113 purchases over 1993–2006. We argue that corporate block ownership, as opposed to institutional or individual block ownership, has several unique characteristics and can create significant short- and long-term wealth for target and acquiring firm shareholders. Because target firms that exhibit signs of inefficient monitoring or agency problems benefit the most, we conclude that corporate block ownerships can align incentives and mitigate information problems in corporate business relationships.     

公司治理对资本选择的影响——理论和证据

结合中国制度,理论分析公司治理如何影响资本选择,提出研究假设.接着,使用中国非金融上市公司横截面数据,应用二阶段多元程序实证检验公司治理对资本选择的影响.研究发现.治理水平高的公司,其内部人机会主义行为受到限制,股权融资偏好在一定程度上受到抑制,债务水平提高.     

Self-regulation of corporate governance in Russian firms: translating the national standard into internal policies

We consider how firms develop internal corporate governance policies based on external nation-wide standards. Flexibility in interpreting external standards allows firms to develop internal regulations focused on governance procedures that are only loosely coupled with expected governance outcomes. Our results demonstrate that firms tend to adopt less restrictive policies than what is recommended by the national standard and are more willing to adopt policies regulating governance procedures than policies regulating governance decisions. We also argue that the process of translating external standards into internal guidelines is affected by firm-specific characteristics and explore factors that determine to what extent firms switch the focus of internal policies from regulating governance decisions to regulating governance procedures.     

The impact of corporate governance on auditor choice: evidence from Germany

Statutory audits are only beneficial if the appropriate audit quality is both provided and perceived by the users of audited financial statements. On the one hand, Big 4 audit firms are commonly viewed as producing high quality audits. On the other hand, regulators complain about the high market share of Big 4 audit firms. In this context, it is of interest to examine the drivers of a Big 4 audit firm selection. Despite extensive prior research, there is still a lack of findings form Continental European countries and on the impact of corporate governance on auditor choice. This paper on hand is intended to fill the related research gap. Thus, our study identifies variables that determine the auditor choice of large German listed companies. Based on a sample of 432 firm-year observations for the period 2010–2014, our logistic regression analysis suggests that the corporate governance structure influences auditor choice significantly. Notably, the annual meeting frequency of the audit committee and the size of the supervisory board are positively associated with the engagement of a Big 4 audit firm. However, the meeting frequency of the supervisory board and the compliance to the German corporate governance code are negatively related to the choice of a Big 4 auditor. Additionally, the proportion of female supervisory board members does not exert a significant impact. The results remain stable when the DAX30 observations, for which statutory audits are exclusively performed by Big 4 audit firms, are excluded. The main contribution of our paper is, that it sheds light on the impact of corporate governance variables not analyzed by prior research, like supervisory board characteristics, deviations from a corporate governance code, or the female quota, in a Continental European setting, and that it mainly indicates a complementary relationship. Despite the peculiarities of the German setting, the two-tier corporate governance system and the low level of investor protection, the findings of our study are not only relevant for Germany, since many other Continental European countries are characterized by a similar environment. The study’s findings are of particular interest for regulators when addressing audit market structure problems.     

Board size and firm value: evidence from Australia

We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001–2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value.     

Revisiting corporate governance through the lens of the Spanish evidence

The purpose of this study is to illustrate the characteristics of the Spanish corporate governance system and especially describe the diffusion of each mechanism among listed firms, in comparison with other industrialized countries. In doing so, we identify idiosyncratic traits of the Spanish corporate governance model that points up how the dichotomy between outsider- and insider-oriented models is simplistic and does not fit with the Spanish context. We argue, instead, that corporate governance has evolved in Spain towards a hybrid model that is situated in an intermediate position between the two aforementioned systems. The result of this hybridization is a system characterized by a new role for the state as a regulator, the presence of large blockholders, and a higher free float of capital on the stock market. Still, it is a very weak market for corporate control, and has reduced incorporation of Anglo-Saxon practices such as information transparency, board independence, or variable compensation packages for the management.     

The substitution of governance mechanisms in the evolution of family firms

This paper examines how family firms substitute corporate governance with family governance and self-governance at different stages of their development. We argue that the types of agency problems that family firms face as they pass from one generation to the next determine the extent to which these mechanisms can be used as substitutes for one another. Our empirical investigation provides evidence that in the early stages of a family firm's life cycle, instruments of self-governance lessen the need for mechanisms of corporate governance, whereas in the later stages, instruments of family governance can substitute for mechanisms of corporate governance.     

The effect of public involvement on firm inefficiency: evidence using Japanese private firms

The purpose of this paper is to investigate the effect of public involvement on firm inefficiency. Public involvement is defined as the actions taken by governments to control firm management, as expressed in regulation and public ownership. We make the following three contributions. First, we show public involvement is an important determinant of the inefficiency of private firms. Although public involvement has been shown to influence firm behavior in public or regulated sectors, existing studies in the private sector tend to ignore its effects. Second, we analyze firm inefficiency rather than firm performance by focusing on cost factors. Previous work tends to use performance measures such as return on assets or return on equity rather than inefficiency measures to judge a firm’s management level. Performance measures are problematic, however, in that they are affected by not only cost factors but also demand factors. Therefore, we must separate these factors when we analyze a firm’s management. Third, we use a stochastic cost frontier model for the estimation. Although this is a suitable approach for estimating firm inefficiency, it is rarely used for private firms. Our results suggest that public ownership increases firm inefficiency while regulation decreases firm inefficiency. It is also clear that the effect of public ownership is not significant in the manufacturing industry, while it is strongly significant in the nonmanufacturing industry. This shows the importance of studying the effect of public involvement in the private sector.     

International corporate social responsibility and post-entry performance of developing market INVs: The moderating role of corporate governance mechanisms

Building on the stakeholder, agency, and resource dependence theories; this paper investigates the role of international corporate social responsibility (CSR) for the post-entry performance of developing market international new ventures (INVs) in the presence of corporate governance mechanisms to overcome their agency and environmental problems. We test and validate the conceptual model using survey data collected from 110 INVs operating in the developing market of Pakistan. Our results show that international CSR promotes the post-entry performance of developing market INVs. Further, we found that this association is moderated by corporate governance mechanisms of ownership, board independence, and returnee board members. Specifically, the relationship between international CSR and post-entry performance is weaker when ownership is concentrated but stronger when outsider and returnee board members are present in developing market INVs. The findings of this study have important theoretical and practical implications for INVs' social strategies and international performance contingent upon corporate governance.     

The constituents of core competencies and firm performance: evidence from high-technology firms in china

This paper, unlike previous studies, focuses on the decomposition of impacts of core competencies on firm performance and the moderating effects of environmental turbulence on the basis of developing structural equation models using the partial least square (PLS) method. By taking a disaggregated approach, the decomposed effects of core competencies on firm performance are examined and the relative influences of all three major constituents of core competencies, marketing competencies, technological competencies and integrative competencies, are studied. Furthermore, this approach helps to avoid the so-called “pitfall” of being vague, tautological, endlessly recursive, and non-operational, for which some studies based on a resource-based view have been criticized. All three constituents are found to have significant influences on firm performance. And these relationships are moderated significantly by environmental turbulence such as market turbulence and technological turbulence, except that market turbulence is found to have no significant moderating effect on the relationship between integrative competencies and firm performance.     

Economic reforms, corporate governance and privatization method as determinants in performance changes of new privatized firms: the case of MENA countries

This paper aims to provide the determinants of how privatization works in some selected Middle East North Africa countries. Using a sample of 75 new privatized firms we examine the performance changes in countries namely Egypt, Morocco, Tunisia and Turkey. We document a significant increase in profitability, efficiency and output as well as a decrease in leverage. We also identify that these improvements vary with economic reforms and environment, effectiveness of corporate governance and the privatization method used. In particular, financial liberalization and control relinquishment by the government are associated with higher efficiency and output. Furthermore, foreign participation and the use of share issue privatization as divestment method appear to have a positive impact on efficiency and output changes. Additionally, the use of private sales is related to a significant decrease in leverage. Finally our results highlight the importance of economic reforms, corporate governance and the choice of privatization method in explaining the post privatization changes in performance.     

The impact of institutional changes on corporate governance mechanisms in transition economies

We examine how institutional changes affect corporate governance in transition economies. We develop a transition model that specifies three stages of the transition process including the early, intermediate, and late. We develop a framework for assessing the effectiveness of widely recognized corporate governance mechanisms (CGMs) in and across these stages. Our general proposition is that as transition economies move from early, to intermediate, to late stages, effective CGMs tend to be those that are based on state administrative control power, social networks and private orders, and market forces and formal institutions, respectively. Our study has contributions and implications regarding the transition economies and the impacts of institutions on corporate governance.     

Regulatory intervention and the effect of changes in corporate governance on firm decisions and market reactions

This paper investigates whether Italian companies that cross-list in the United States between 1993 and 2005 show (1) a change in their internal policies as anticipated by the bonding hypothesis, (2) an increase in market value, or (3) an increase in the access to capital funds. We use the unique environment created by the 1998 Draghi reform which significantly improved the protection of Italian listed companies’ minority shareholders and we further examine the impact of legislated changes in corporate governance in Italy on the decision of Italian companies to cross-list in the United States. Our results indicate that following the Draghi reform (1) firms that cross-list in the United States modify their dividend and cash policies as anticipated by the bonding hypothesis. Contrary to prior research, (2) we do not find evidence that cross-listing serves to enhance shareholder value or (3) is used as a vehicle to more easily access capital funds either before or after the domestic corporate governance is improved. The results of this study provide evidence that country level legislative innovations intended to enhance a weak corporate governance system can be a valid and effective substitute to the bonding mechanism by providing an alternative signal of a firm’s quality.     

Unintended agency: Impression management support as a trigger of institutional change in corporate governance

In this paper we describe an emergent process of institutional change in which institutional entrepreneurs are unintentional contributors to the change process. Our theory suggests how change in the predominant institutional logic of corporate governance at public U.S. companies resulted not from deliberate attempts by corporate leaders to change the criteria by which governance is evaluated, but from the cumulative efforts of top executives to provide “impression management support” (IM support) for individual leaders of other firms. We first discuss how IM support has spread among corporate leaders through generalized social exchange. Then we suggest how individual leaders, in seeking to persuade journalists about the quality of corporate leadership at particular other firms, tend to invoke evaluative criteria that deviate from the prevailing institutional logic of governance. We further suggest how the rhetoric of IM support instigated a cascading social influence process that has contributed to changing perceptions about corporate governance among a broad range of other corporate stakeholders. We discuss the implications of our model for sociological perspectives on corporate governance and the corporate elite. Finally, we consider how the occasional negative commentary by corporate leaders about their peers, in combination with IM support, helps to sustain the credibility of the social system in which leaders, journalists, and other information intermediaries operate.