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Article
Publication date: 6 November 2017

Ebenezer Agyemang Badu and Kingsley Opoku Appiah

The purpose of this paper is to investigate the impact of board experience and independence on mitigating agency conflict between shareholders and managers.

Abstract

Purpose

The purpose of this paper is to investigate the impact of board experience and independence on mitigating agency conflict between shareholders and managers.

Design/methodology/approach

This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. Using agency and resource dependence theories, board experience and independence ignored in previous studies are selected for the study.

Findings

The findings of this paper indicate a negative and statistically significant relationship between board experience, board independence, and agency conflict. A further examination using an agency score computed from the principal factor analysis of the four main agency proxies indicates a significant and negative relationship between board independence and agency conflict, but a negative and statistically non-significant relation between board experience and agency conflict.

Practical implications

The authors’ evidence has important implications for countries that are currently or contemplating pursuing board reforms to recommend the appointment of more independent and experience directors to corporate board.

Originality/value

This paper introduces a new proxy for assessing human and social capital of directors to test the integration hypothesis of a unique data set from Ghana and Nigeria toward mitigating agency conflict.

Details

Journal of Accounting in Emerging Economies, vol. 7 no. 4
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 19 July 2022

Mohammed Sulaiman Hassan Kasbar, Nicholas Tsitsianis, Androniki Triantafylli and Colin Haslam

The study aims to predict and understand the conditions under which the association between corporate governance and a company's financial performance is positive or…

Abstract

Purpose

The study aims to predict and understand the conditions under which the association between corporate governance and a company's financial performance is positive or meaningful by empirically accounting for agency conflicts. This study is motivated by the fact that the separation between ownership and control creates agency conflicts between company owners and managers. Therefore, strong corporate governance systems are expected to align the interests of conflicting parties whereby companies become more likely to improve their financial performance. However, previous research did not yield consistent results in this regard.

Design/methodology/approach

Given the latent nature of corporate governance and agency conflicts, this study uses principal component and exploratory factor analyses to proxy for corporate governance and agency conflicts, respectively. Using dynamic panel data modelling, the authors estimate the change in the relationship between corporate governance and a company's financial performance as a function of the change in the level of agency conflict using data from the UK on 78 non-financial companies listed in the Financial Times Stock Exchange 100 (FTSE100) index between 1999 and 2014.

Findings

The corporate governance quality of companies is significantly differed. Moreover, companies operating at high levels of agency conflict outperform the companies' counterparts operating in low levels of agency conflict only when the former improves the corporate governance quality. This implies that financial performance improves by approximately 11% if companies improve corporate governance quality due to an increase in the level of agency conflicts.

Research limitations/implications

Lack of data on ownership structure for the study period (1999–2014) was the main reason the authors excluded it from the analysis. Additionally, the lack of reliable and quantifiable corporate governance data on small-medium sized enterprises limits findings on large non-financial companies.

Practical implications

The authors propose a framework/tool for the impact of the level of corporate governance compliance on financial performance conditional upon the level of agency conflicts whose importance has largely been neglected by the empirical literature. By providing the right “lens” to de-fragmentise the corporate governance mechanisms and estimate empirically the unobserved agency conflicts, researchers, practitioners and investors are able to get further insights on the composing elements of financial performance and evaluate it more objectively. Managers can allocate companies' resources more efficiently and thus improve financial performance. The auditors can get further background information when they compile their report on company's directors. The study's findings offer valuable suggestions for accounting and corporate governance regulators to further put forward and improve accounting standards so as to enhance existing regulations and internal mechanisms which, in turn, could decrease the scope for managerial opportunistic behaviour as the latter can be empirically estimated through our framework.

Social implications

The findings point out the need for a revised framework accounting for the principal-agent (mis)alignment and the engrained information asymmetries. By acknowledging the level of corporate governance compliance and agency conflict, managers and shareholders should actively strive for the effectiveness of companies, the efficiency of the stock markets and the minimisation of the agency costs. Furthermore, policymakers can look into the development of a code of corporate governance to effectively regulate firms rather than enforcing rigid laws that may not be value relevant. With all these settings in place, the likelihood of corporate failures, corporate scandals as well as corporate violations with the ensuing penalties is set to be reduced. Hence, valuable resources, social capital and effort can be directed into more productive activities.

Originality/value

This study adds to the existing literature by offering empirical and explicit evidence on the dynamic association between corporate governance, agency conflicts and financial performance against a backdrop of high demand for strong corporate governance practices/codes. To the best of the authors' knowledge, there is no study that has yet empirically examined the moderating effect of the level of agency conflicts, given the level of corporate governance compliance on financial performance for listed and internationally aligned companies.

Details

Journal of Applied Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0967-5426

Keywords

Book part
Publication date: 18 November 2014

James A. Chyz and Scott D. White

This paper takes a unique approach to provide additional insight into the agency view of tax avoidance. We directly investigate the association between the presence of…

Abstract

This paper takes a unique approach to provide additional insight into the agency view of tax avoidance. We directly investigate the association between the presence of agency conflicts and corporate tax avoidance. Using a measure of CEO centrality, developed by Bebchuk, Cremers, and Peyer (2011), we identify settings in which agency conflicts are likely to be high. In contrast to prior literature, our primary tests do not rely on the inferences of market participants regarding tax avoidance. We find that CEO centrality is positively and significantly associated with tax avoidance. Additionally, we analyze the mediating role of monitoring by institutional investors in our setting. We find that the relation between tax avoidance and the existence of agency conflicts is strongest for firms with low levels of CEO monitoring. We also add to prior literature by investigating the implications of our setting on future accounting performance and future firm value.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78441-120-6

Keywords

Article
Publication date: 1 February 1994

Jill M. Purdy and Barbara Gray

This study evaluates an attempt to develop a mediation program within a state environmental agency. A number of concerns arose during the agency's efforts to use…

Abstract

This study evaluates an attempt to develop a mediation program within a state environmental agency. A number of concerns arose during the agency's efforts to use mediation, including the neutrality of mediators, the types of cases mediated, the voluntary participation of parties, and acceptance of the mediated agreement. These issues were examined through a case study of a conflict that was mediated by the agency. Based on issues in the case, criteria are suggested which help guard against the problems that arise when government agencies serve a mediating role. These criteria may be useful to any organization that contemplates using mediation to help resolve conflict.

Details

International Journal of Conflict Management, vol. 5 no. 2
Type: Research Article
ISSN: 1044-4068

Article
Publication date: 10 February 2012

Ian Grant, Charlotte McLeod and Eleanor Shaw

The aim of this paper is to explore the tensions and basis for conflict within relationships that embed and connect networked companies involved in the planning of…

3268

Abstract

Purpose

The aim of this paper is to explore the tensions and basis for conflict within relationships that embed and connect networked companies involved in the planning of advertising, with broader relevance for professional service organizations.

Design/methodology/approach

Framed within a social network perspective, this interpretive study draws on 22 in‐depth interviews to discuss the emergence and consequences of conflict within relationships shared by advertising creatives, account managers, researchers and media planners located in Scotland.

Findings

The paper identifies four dominant themes which contribute toward relational conflict: the intensity of involvement in advertising planning, the emergence of role ambiguity, cultural stereotyping, and conflicts of interest.

Originality/value

The paper provides a valuable antidote to studies reliant on dyadic client‐agency perspectives. Adopting a network perspective, it recognizes the importance of the multiple, simultaneous relationships involved in advertising planning. It offers a critical perspective on advertising relationships, considering the emergence, characteristics and consequences of tension and conflict inherent. The discussion reveals ongoing struggles for control over the process of advertising planning, and considers the implications of overt and covert actions on perceptions of network trust. The paper provides a spectrum of outcomes, ranging from collaborative tension to intra‐organisational conflict. This study is most relevant to academics and managers involved in professional services.

Details

European Journal of Marketing, vol. 46 no. 1/2
Type: Research Article
ISSN: 0309-0566

Keywords

Article
Publication date: 12 February 2021

Mohammad Nisar Khattak, Noor Muhammad and David Robinson

This study determines the relationship between small and medium-sized enterprises (SMEs) and their support providers during three phases: pre-conflict environment, during…

Abstract

Purpose

This study determines the relationship between small and medium-sized enterprises (SMEs) and their support providers during three phases: pre-conflict environment, during conflict environment, and the post-conflict (uncertain) environment with the reference to institutional theory in the northwest region of Pakistan where there is ongoing unrest between the authorities and the insurgents.

Design/methodology/approach

Using a qualitative approach, a total of 23 semi-structured interviews were conducted, 19 with the owner-managers of small manufacturing firms and 4 from small business support providers in the region.

Findings

The authors theorise the changing role of support agencies as differing institutional gaps, while conflict is destructive for SMEs and support agencies; paradoxically the crisis results in stronger relationships between the support providers and SMEs which was weaker in the pre-conflict environment. Such stronger relationship enhanced the cognitive pillar of institutional theory where entrepreneurship is supported by various groups including government agencies and SMEs to alleviate unemployment in the region which is one of the potential reasons of terrorism in the country.

Practical implications

The study may have value for policymakers who need to know more about how small businesses and support providers develop a support network in difficult regions and give a comprehensive framework to other conflictual regions who face similar circumstances.

Originality/value

This research contributes to the previous literature in several ways. First, the study reveals the impact of conflict environment on small businesses and support providers where a little research has been undertaken. Second, the study shows the support mechanism in three different intervals pre-conflict, during the conflict and post-conflict and how the Talibanization in the region has a positive impact by strengthening the support structure among small businesses and support providers. Finally, the study contributes to the growing body of literature on entrepreneurship in conflict environments.

Details

Asia-Pacific Journal of Business Administration, vol. 13 no. 2
Type: Research Article
ISSN: 1757-4323

Keywords

Article
Publication date: 8 February 2016

Josh Bendickson, Jeff Muldoon, Eric Liguori and Phillip E Davis

Theories develop over time and are influenced by both events and people. Looking primarily at the applications between contracting principal-agent relationships, the…

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Abstract

Purpose

Theories develop over time and are influenced by both events and people. Looking primarily at the applications between contracting principal-agent relationships, the purpose of this paper is to explore how agency theory emerged from a number of economic and social developments. In doing so, the authors explain how this once dominant theory comes up short regarding varying realms of entrepreneurship as well as with multiple modern business phenomena.

Design/methodology/approach

The authors first present a brief overview of agency theory. Second, the authors identify major events and people and address how they impacted the development of agency theory. Third, the authors provide insights on agency theory across three contexts (strategic entrepreneurship, social entrepreneurship, and family business). Implications, limitations, and future research directions are then offered.

Findings

The authors provide a deeper understanding of agency theory, thus broadening its underpinnings and enabling readers to more readily understand why agency theory is limited in its explanation of certain and modern business phenomena. The authors find that some of the seminal influences to agency theory are quite dated which has limited its explanatory power in terms of the modern day business and with more recent disciplines such as entrepreneurship.

Research limitations/implications

The authors are limited by their choices of major events that influenced agency theory at the expense of not being able to include everything that may have impacted the theory over time. These limitations, however, are offset by the research implications. As the authors highlight the underpinning of agency theory, the authors subsequently provide scholars and practitioners with five primary boundary conditions, each of which are in need of attention for agency theory to maintain relevant explanatory power.

Originality/value

A deeper understanding of agency theory can be gained by looking at its underpinnings. By presenting numerous principal-agent conflicts and demonstrating areas in which it has fallen short (i.e. entrepreneurship and more recent business phenomenon), we shed light on the obstacles agency theory must overcome in order to maintain its position as a prominent theory.

Details

Management Decision, vol. 54 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 8 April 2021

Lamia Jamel, Hanadi Eid Albogami, Mazen Abduljalil Abdulaal and Nuha Ahmed Aljohani

The purpose of this paper is to examine the impact of agency conflicts between managers and shareholders on corporate risk management and financial performance of Saudi…

Abstract

Purpose

The purpose of this paper is to examine the impact of agency conflicts between managers and shareholders on corporate risk management and financial performance of Saudi firms listed in the Saudi Stock Exchange Tadawul.

Design/methodology/approach

To investigate the effect of agency conflicts between managers and shareholders on corporate risk management and financial performance, we use a sample of 180 Saudi firms listed in the Saudi Stock Exchange Tadawul during the period from 2009 to 2018. Econometrically, we employ Vector Autoregressive (VAR) and General Linear Model (GLM) techniques as an appropriate methodology.

Findings

Our findings show that the risk level of the last year increase the corporate risk management and the performance of Saudi firm. We remark that the separation amongst control and ownership generates agency conflicts amongst managers and shareholders which can affect their behavior in decision-making and performance of the Saudi firms. Thus, the conflicts of interest arise from the differences among the work horizon, the risk assumed, the performance of enterprises, and the level of remuneration desired by the managers and shareholders in the case of Saudi firms.

Originality/value

The main contributions of our paper prove that the deepen the study of agency costs linked to a shareholding structure through the analysis of monitoring, obligation, and opportunity costs in the Saudi firms.

Details

Journal of Investment Compliance, vol. 22 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 26 July 2021

Bennet Schierstedt and Maarten Corten

This study aims to examine the relationship between family firm characteristics and audit fees. It also examines the extent to which the family name is considered a red…

Abstract

Purpose

This study aims to examine the relationship between family firm characteristics and audit fees. It also examines the extent to which the family name is considered a red flag during the risk assessment of these firm characteristics.

Design/methodology/approach

Using an external panel data set that includes 1,252 firm-year observations of 204 private German firms with a time series from 2010–2016, regression analyses were conducted to test the hypotheses.

Findings

This study’s results indicate that family involvement in management and the supervisory board are negatively related to audit fees, suggesting less demand and supply of audit effort due to lower Type I agency conflicts. Family ownership is found to be positively associated with audit fees due to higher Type II agency conflicts. Moreover, the negative effect of family involvement in management on audit fees becomes weaker if the firm name contains the family name, indicating that it is considered a red flag by auditors during their risk assessment.

Originality/value

Prior studies that examined audit fees in family firms mainly compared family firms to non-family firms. However, auditors are not likely to look at firms in a dichotomous way during their risk assessment, especially as there are numerous definitions of family firms. Instead, they will assess the underlying characteristics regarding management, ownership and governance, although a firm name containing the family name may influence this assessment. This study contributes to the literature by accounting for the heterogeneity of family firms and examining how auditors will assess this heterogeneity.

Details

Managerial Auditing Journal, vol. 36 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 1 January 1997

Priscilla Murphy and Michael Maynard

This study tests the premise that conflict between advertising agencies and clients has a cognitive basis — that is, each group weighs decision factors differently, and…

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Abstract

This study tests the premise that conflict between advertising agencies and clients has a cognitive basis — that is, each group weighs decision factors differently, and consequently evaluates campaigns differently. We identified five common decision factors in evaluating campaigns: market research, media planning, message/creativity, budget, and agency/client relationship. Based on these five variables, we used multiple regression‐based judgment analysis to create decision profiles for a group of 120 advertising agency professionals and clients. We compared agencies' and clients' judgments by six categories. Analysis affirmed that cognitive conflict differs by product type, longevity, and campaign purpose; but not by seniority or campaign budget. Clients had less cognitive disagreement with creatives than with agency management.

Details

Journal of Communication Management, vol. 1 no. 3
Type: Research Article
ISSN: 1363-254X

Keywords

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