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The purpose of this paper is to examine the association between institutional investor ownership and the compensation of executives at US banks during the financial crisis period.

This paper uses a linear regression model to examine the association between institutional ownership and the level of executive compensation at US banks.

Institutional investors influence executive compensation at banks with the impact being most pronounced for the CEO. Ownership by the top five investors is associated with greater total compensation. Active investors have the strongest impact on executive compensation as evidenced by a positive association between active ownership and both equity compensation and total compensation. As well, active ownership is negatively associated with bonus compensation. The paper also finds that passive and grey investors influence compensation but to a less significant extent than active investors.

The results suggest that the monitoring role of active and passive institutional investors is different in the banking industry. As well, institutional investors were likely a driving factor in shaping the compensation packages of the top executive team during the financial crisis period.

Stakeholders at banks should be aware that not all types of institutional investors act as effective monitors over issues such as controlling the amount of executive compensation paid to the highest paid executive, the CEO. Prospective investors should consider the type of institutional investor that owns large blocks of equity when making an investment decision. Namely, the interests of existing institutional investors may differ from their own interests.

This paper provides a new perspective on the monitoring roles played by different types of institutional investors. Furthermore, it provides a more comprehensive analysis by investigating the role of institutional investors in shaping the compensation packages of CEOs and other top executives including chief financial officers (CFOs) who play a vital role in risk management at banks.

In both Britain and the USA, the majority of the shares in quoted companies are owned by institutional shareholders such as pension funds and insurance companies. But, in most cases these major shareholders are “passive”, that is they prefer not to become involved in the management of the companies in which they invest – unless there is a crisis. By this time unfortunately it is often too late to prevent their shareholders or pensioners from losing money. In this article Rolf Carlsson describes how the Wallenberg family through their holding company Investor AB have helped a number of Swedish companies to become world leaders by working with their managers as active investors. He tells the story of ABB and L.M. Ericsson but the Wallenberg sphere of influence has also included Atlas Copco, SAAB Scania, SKF, Swedish Match, Alfa Laval, Stora and Electrolux. Also he explains how the Wallenberg family evolved the competencies and structures which they needed to fulfil their role as an active investor. These competencies included: choosing the right businesses in which to invest; “meta‐management” – recruiting and appointing the right chief executives; “legitimization” – building the Wallenberg reputation and good name in Swedish society and internationally by pursuing socially responsible and ethical policies; and nurturing corporations so they can become global leaders. The family works through two key structures: Investor AB – an investment company which has a board of non‐executive directors and two executive vice chairmen most of whom are experienced CEO’s from industry and commerce; and independent company boards, with strong CEO’s – which they change as necessary to ensure that they have the competencies required to deliver the agreed strategies. The Wallenberg’s approach to active ownership is entrepreneurial: “the need for incessant renewal”.

This paper investigates the role of board independence in determining the relationship between firm ownership and auditor choice.

The research uses a logistic regression to test the direct and indirect effects of ownership structure on the decision to hire a high-quality (Big 4) audit firm. The sample consists of 207 non-financial firms listed on the Gulf Cooperation Council (GCC) countries stock markets between 2009 and 2016.

Empirical findings show that family ownership is associated with a negative and significant coefficient suggesting that an increase in family ownership decreases the likelihood that the firm will employ a Big 4 auditor. This finding suggests that family owners are reluctant to impose external monitoring. Furthermore, we find a positive relationship between institutional ownership and auditor choice supporting the conjecture that institutional investors are more likely to choose a Big 4 auditor. The results also reveal that the effects of family and institutional ownership on auditor choice are partially mediated by independent directors.

This study has important implications for GCC economies whose policymakers and regulators may need to address the conflict between controlling and non-controlling shareholders. It provides guidance for firms in the construction and implementation of their own corporate governance policies. Furthermore, the study findings may be useful to investors, assisting them in making better informed decisions and aids other interested parties in gaining a better understanding of the role played by ownership structure in the quality of auditors. Finally, the paper highlights the importance of the composition of the board of directors in increasing the likelihood of hiring a high-quality audit firm.

The main contribution of the present paper is to examine the board composition as a potential mediating variable between ownership structure and auditor choice. Moreover, it highlights the issue of improving governance mechanisms.

This study aims to examine the mediating effect of board independence on the relationship between ownership structure and audit quality.

The research uses generalized methods of moments regression to test the relationship between ownership structure and audit quality. The sample consists of 162 non-financial firms listed on the Gulf Cooperation Council stock markets between the years of 2009 and 2016. To test the significance of the mediating effect, this paper uses the Sobel test.

Empirical findings show that companies with higher family ownership are less likely to demand extensive audit services and, as a result, pay lower audit fees. Conversely, this study finds that companies with higher active and passive institutional ownership are more likely to engage high-quality auditors and pay larger audit fees. As for government ownership, it has no significant impact on audit fees. The results also reveal that the negative (positive) effect of family (institutional) ownership on audit quality follows the path through reducing (enhancing) board independence. Further tests are conducted and support the main findings.

This study has important implications for policymakers and regulators to address the conflict between controlling shareholders and minorities by promoting higher standards of audit quality. The study findings may be useful to investors, assisting them in making better-informed decisions and aids other interested parties in gaining a better understanding of the role played by ownership structure in audit quality. The study also contributes to the strategic board behavior by bringing a new perspective on how boards engage in monitoring by requesting external audit services. This behavior is likely to be influenced by the type of controlling shareholder.

The main contribution of the present paper is to examine the board composition as a potential mediating variable between ownership structure and audit quality. Moreover, it highlights the issue of improving governance mechanisms.

The purpose of this paper is to provide a better assessment of the positive impact of family influence (FI) on the performance of SMEs and investigate a possible shift with firm size (FS) and age.

This study is based upon a large sample of 4,240 firms representative of small businesses operating in the USA. It focuses on active ownership, i.e. direct involvement of owners alongside employees as an important factor of FI and conducts hierarchical regression models with profitability as the dependent variable, FI as the independent variable, and FS/age as moderating variables. It also includes other firm characteristics as control variables.

The results show that even though active family ownership is positively associated with the profitability of SMEs, the relationship between FI and profitability is negatively moderated by FS and firm age (FA).

The limitations of this study are mainly related to the definition of family SMEs and to the cross-sectional data used to understand the variations in economic performance. However, the results show the great importance of this kind of study; more attention must be paid to heterogeneity due to the size and age of family businesses as well as the level of owners’ involvement alongside employees.

Practitioners are encouraged to maintain a higher degree of family ownership combined with a higher degree of active ownership in the initial stages, when family businesses are young and small. However, the level of active ownership should be reduced when family businesses increase in age and size. According to this study, practitioners should open up businesses to external human resources other than the owners’ family as the firm increases in size/age to avoid the risks associated with family members lacking talent and/or expropriating benefits.

This study is one of the first to give evidence on not only a direct (and positive) relationship between FI and economic performance, but also an indirect (and negative) moderating effect of FS and FA on this relationship.

This study aims to examine the relationship of ownership behaviors with both firm financial performance and family assets in the context of family owned businesses.

The research framework allows for a comparison of predictions drawn from social psychological, economic, and management literature. The hypotheses are tested using ordinary least squares hierarchical regression analyses conducted on a nonrandom sample of medium and large family businesses.

The empirical results identify four potential categories of responsible ownership behaviors: professionalism, active governance, owner as resource, and basic duties. Professionalism (i.e. acting in accordance with expectations and agreements among owners and in relation to the firm) is the only behavior positively associated with financial performance. The effect of active governance (i.e. the monitoring of management) on financial performance is moderated by business size – this behavior has a negative effect on the dependent variable for all but the largest firms in the sample.

The limitations of the current research and directions for further research include issues related to sampling, other possible variables to be explored, and alternative validations of the responsible ownership concept.

This study has direct practical implications for owners' actions in relation to one another and with other actors in the firm.

This study contributes to existing research on governance by developing a better understanding of the role of owners and their influence on the firm.

This paper aims to analyse whether and how different types of institutional investors influence shareholder proposal initiations, say-on-pay (SOP) votes and management compensation from a sustainability perspective.

Based on the principal-agent theory, the authors conduct a structured literature review and evaluate 40 empirical-quantitative studies on that topic.

The traditional assumption of homogeneity within institutional investors, which is in line with the principal–agent theory, has to be questioned. Only special types of investors (e.g. with long-term and non-financial orientations and active institutions) run an intensive monitoring strategy, and thus initiate shareholder proposals, discipline managers by higher SOP dissents and prevent excessive management compensation.

A detailed analysis of institutional investor types is needed in future empirical analyses. In view of the current debate on climate change policy, future research could analyse in more detail the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation.

With regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/2008 financial crisis, firms should be aware of the monitoring role of institutional investors and should analyse their specific ownership nature (time- and content-driven and as well as range of activity).

To the best of authors’ knowledge, this is the first literature review with a clear focus on institutional investor range and nature, shareholder proposal initiation, SOP and management compensation (reporting) from a sustainability viewpoint. The authors explain the main variables that have been included in research, stress the limitations of this work and offer useful recommendations for future research studies.

With strategy-as-practice theory the authors explore successful business-owning families hand-over of roles to the next generation. The authors argue for the usefulness of strategy-as-practice theory in exploring the complexity and plurality of best practices in intergenerational hand-over. The paper aims to discuss these issues.

A cross-cultural in-depth case study with best practice cases from China, Germany, Sweden, England, Tanzania, Israel and the USA, based on in-depth interviews of family members and non-family employees.

The authors identified three different succession patterns: a “monolithic practice,” a distributed leadership hand-over, and active ownership with a non-family managing director/CEO. Two other types of hand-over practices were categorized as incubator patterns that formed a part of, or replaced, what we traditionally see as a hand-over of roles. Families would switch between these practices.

Surprisingly, a monolithic succession practice (a one-company-one-leadership role) was rarely used. Quantitative and qualitative research should consider, as should advisors to family owners and family businesses, the plurality of succession practices. Education should explore a variation of succession and how the dynamic of gender influences the process.

Giving practitioners, such as research and practitioner, an overview of strategic options so as to explore these in a client or research case.

Adding the notions that the family is an incubator for new entrepreneurship makes it possible to show how not only sector or public policy generate new ventures. That family as source of entrepreneurship has been well established in the field but it mainstream policy thinking the family is not seen as such a source.

The paper offers an integrative model of the complexity of hand-over practices of ownership and leadership roles. It shows how these practices are fundamental for understanding how a family’s ownership and their leadership of businesses and new entrepreneurship develops.

Agency theory suggests that if managers are not monitored, takeover negotiations may be contaminated by agency conflicts, which may weaken a firm's bargaining position. This paper argues that some blockholders are more effective monitors than others, and tests whether the negotiating power of a target or bidder is influenced by their respective blockholder composition. The paper aims to discuss these issues.

This paper classifies target and bidder outside blockholders as either aggressive monitors or moderate monitors, and tests whether the degrees of monitoring effectiveness influence a firm's share of the total wealth created by the takeover (a proxy for bargaining power).

This paper finds that firms that have the types of outside blockholders with a greater tendency to monitor managers elicit higher takeover gains. This suggests that negotiating power in takeovers is conditioned on the types of blockholders that monitor the target and bidder. The results support the premise that better monitoring leads to higher gains for shareholders in a takeover. In particular, the findings suggest that the greater the tendency of outside blockholders to monitor managers, the lower the level of takeover-related agency conflicts and the stronger a firm's relative bargaining power.

These findings imply that agency conflicts on either side of a takeover bid may be reduced by better monitoring, but especially among bidders.

Firms that pursue invention face special conditions that heighten the potential conflict between managers and shareholders. High R&D spending increases the information asymmetry between managers and shareholders because the invention process is rooted in tacit knowledge. Because tacit knowledge is difficult to communicate to external parties, shareholders will have problems monitoring whether managers are spending R&D in a manner that maximizes firm value.

Using agency theory, it is argued that managerial ownership is one solution to this problem and that high levels of R&D intensity will necessitate high levels of managerial ownership to counteract agency problems. However, it is also argued based on signaling theory that a firm's patenting activity reduces ownership requirement as well as moderating the managerial ownership‐R&D relationship.

Using a sample of firms from the knowledge‐intensive biotechnology industry, a positive relationship was found between R&D spending and managerial ownership. It was also found that this relationship is most strongly moderated by patenting activity.

The findings would be strengthened by replication using samples from other knowledge‐intensive industries. Future research should examine how the critical determinants of success in other industries affect managerial ownership of firms in those industries.

The study shows that top managers have some control over the contracting environment. By aggressively pursuing patents managers can reduce their level of ownership in the firm.

The study finds evidence that in order to prevent agency problems firms undertaking inventive activity may require their managers to take larger ownership or aggressively pursue patents. High managerial ownership levels and patents can provide a signal to shareholders about the growth potential of the firm.