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Article
Publication date: 13 February 2018

Fabrizio Rossi, Robert Boylan and Richard J. Cebula

The purpose of this study is to investigate the relationship between financial decisions and ownership structure by using the control contests on a sample of Italian listed…

1151

Abstract

Purpose

The purpose of this study is to investigate the relationship between financial decisions and ownership structure by using the control contests on a sample of Italian listed companies.

Design/methodology/approach

The analysis adopts a balanced panel data set of 984 firm-year observations for the period of 2002-2013, with estimation using a generalized method of moments.

Findings

The results appear to confirm both the hypotheses of the alignment of interests and the entrenchment effect. The entrenchment and alignment effects are not found to be alternatives but rather are found to co-exist. The presence of a coalition of minority shareholders acts as a tool to control agency costs, particularly when the coalition is instrumental in the contestability of corporate control.

Practical implications

These findings suggest that minority shareholders may have a larger impact than previously identified by strategically aligning with other shareholders to form coalitions. This study provides several practical implications. First, dividend payout is not necessarily a good instrument to control and monitor agency costs. This is because the payout can be used to expropriate benefits from the minority shareholders. Second, high ownership concentration does not always reduce agency costs. Third, a non-collusive coalition can be more useful in the monitoring of agency costs than other tools, such as the debt level.

Originality/value

This study shows that there is considerable value to the firm when individual blockholders come together in a contestable environment and become instrumental in making business decisions. The results support the contention that contestability is an excellent deterrent to dampen the expropriation of benefits to minority shareholders. This study also provides evidence that cash holding can be a good substitute for dividends and debt in the effort to limit agency costs.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Book part
Publication date: 23 May 2017

Samantha Miles

Stakeholder theory has been accused of being an umbrella concept rather than a distinct theory per se. Recognizing the stakeholder concept as an essentially contested concept…

Abstract

Stakeholder theory has been accused of being an umbrella concept rather than a distinct theory per se. Recognizing the stakeholder concept as an essentially contested concept subject to multiple competing interpretations, this chapter presents a systematic meta-level conceptual analysis. This chapter aims to contribute to the optimal development of stakeholder theory by clarifying the conceptual confusion surrounding its central construct to help prevent stakeholder theory from developing into an accumulation of disparate ideas. Multi-contextual contributions to stakeholder theory are analysed via an unparalleled bounded systematic review of 593 stakeholder definitions. Determinants of the stakeholder concept have been deconstructed and analysed to establish how definitional variables relate to variants of stakeholder theory. These determinants have been sorted, filtered and ordered to produce a comprehensive, multi-dimensional classification of stakeholder theory based on four hyponyms which relate to 16 definitional categories. The classification was then subjected to empirical testing with positive results. This evaluation of the stakeholder concept illustrates how contributions are aligned and interrelated, thereby prescribing what is acceptable (unacceptable) as inclusion within stakeholder theory. An invaluable overview of what we know about stakeholder theory is presented within a single model, drawing the conclusion that stakeholder theory is indeed a single theory.

Article
Publication date: 3 November 2020

Laura García-García, Macarena Gonzalo Alonso-Buenaposada, M. Elena Romero-Merino and Marcos Santamaria-Mariscal

The purpose of this paper is to analyze the relationship between the ownership structure and the investment in research and development (R&D) for a sample of listed Spanish…

Abstract

Purpose

The purpose of this paper is to analyze the relationship between the ownership structure and the investment in research and development (R&D) for a sample of listed Spanish companies.

Design/methodology/approach

Following the agency theory and the socioemotional wealth (SEW) perspective, the authors propose that R&D investment is affected by ownership structure, specifically by the identity of the controlling owner (family firms and firms with an institutional investor) and the level of contestability by other shareholders. In order to test these hypotheses, the authors build an original database identifying, at a 10% threshold, the ultimate shareholders of a sample of 96 Spanish firms listed during 2008–2018 (1,002 obs).

Findings

The results show that there is no significant relationship between the ownership concentration and the R&D investment. Only when the authors consider the nature of the main shareholder, the authors find that in family firms there is an inverted U relationship between ownership and R&D, so that at low levels of ownership, the R&D increases, while at high levels of ownership (that we compute around 54%) the R&D decreases. Also, when the main shareholder is an institutional investor, the greater its ownership, the higher the R&D investment. Finally, the authors test that, contrary to what mainstream suggests, contestability in family firms is higher when ownership in the hands of other family shareholders increases.

Originality/value

The work uses an original database to test a nonlinear relationship between ownership and R&D investment in family firms. Also, the study addresses a topic hardly ever discussed in the literature about R&D as it is the role of the contestability by other controlling shareholders.

Objetivo

El objetivo del presente trabajo es analizar la relación existente entre la estructura de propiedad y la innovación corporativa para una muestra de empresas cotizadas españolas.

Diseño/metodología/enfoque

Utilizando los planteamientos de la teoría de la agencia y de la perspectiva de la riqueza socioemocional proponemos que la I+D empresarial está relacionada con la estructura de propiedad, específicamente con la naturaleza del accionista de control (empresas familiares y empresas con un inversor institucional como principal accionista) y con el grado de contestabilidad por parte de otros accionistas significativos. A fin de testar nuestras hipótesis, construimos ad hoc una base de datos de propiedad original en la que identificamos, al umbral del 10% de propiedad, a los accionistas últimos de una muestra de 96 empresas cotizadas españolas para el periodo 2008–2018 (1.002 obs).

Resultados

Nuestros resultados muestran que no existe relación significativa entre la concentración de propiedad y la inversión en I + D. Solo cuando consideramos la naturaleza del principal accionista encontramos que en las empresas familiares la relación entre la propiedad de la familia y la innovación corporativa adopta una forma de U invertida, tal que a bajos niveles de propiedad la I + D crece, mientras que a altos niveles de propiedad (que computamos en torno al 54% de propiedad) la inversión en I + D decrece. Asimismo, en las empresas con un inversor institucional como principal accionista, cuanto mayor es la propiedad de este inversor institucional, mayor es la I + D de la empresa. Finalmente testamos que, en contra de la corriente dominante, en las empresas familiares la propiedad en manos de otras familias incrementa el grado de contestabilidad a la familia controladora respecto a su inversión en I + D.

Originalidad

El trabajo utiliza una base de datos de propiedad original para testar una relación no lineal entre concentración de propiedad e innovación corporativa en las empresas familiares. Asimismo, el estudio aborda un tema apenas analizado en la literatura de I + D como es el papel de la contestabilidad al accionista de control.

Article
Publication date: 6 September 2013

Stephen Cummings, Urs Daellenbach, Sally Davenport and Charles Campbell

While the benefits of open innovation (OI) and crowdsourcing (CS) for solutions to R&D problems have been widely promoted in the last ten years, their appropriateness for…

1202

Abstract

Purpose

While the benefits of open innovation (OI) and crowdsourcing (CS) for solutions to R&D problems have been widely promoted in the last ten years, their appropriateness for organisations specialising in providing R&D services has not been explicitly considered. This paper aims to examine an R&D organisation's response to increased adoption of OI and CS, highlight their drawbacks in this context, and analyse how and why the alternative of problem‐sourcing (PS) proved more effective.

Design/methodology/approach

The paper provides an in‐depth documentation and analysis of an initiative called: The “What's Your Problem New Zealand?” (WYPNZ) challenge. The use of a single case and qualitative approach allows the development of an illustrative, rich description and is suited to studying unique and novel events.

Findings

In the context of professional R&D organisations, a range of benefits of CS for R&D problems rather than solutions were identified, including generating a potential pipeline of projects and clients as well as avoiding the challenge to the professional status of the organisation's research capability. An unexpected side‐effect was that the reputation of the research organisation as open, accessible and helpful was greatly enhanced. The success of the PS approach to CS for R&D provides insight into how some of the pitfalls of OI/CS can be better understood and potentially managed.

Originality/value

The PS model provided by the “WYPNZ” initiative represents a new strategic possibility for R&D organisations that complements their traditional competencies by drawing on the openness that OI and CS seek to leverage. As such, it can provide insights for other organisations wishing to make use of the connectivity afforded by OI/CS in an alternative mode to that typically in use and reported in the literature.

Details

Management Research Review, vol. 36 no. 10
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 6 April 2012

Patrick Dolan and Robert F. Alleman

The purpose of this paper is to explain the meaning and legal impact of two September 2011 Supreme Court of Delaware decisions regarding challenges to the validity of life…

173

Abstract

Purpose

The purpose of this paper is to explain the meaning and legal impact of two September 2011 Supreme Court of Delaware decisions regarding challenges to the validity of life insurance policies sold to investors as life settlements on the basis of a lack of an insurable interest after the expiration of the two‐year contestability period.

Design/methodology/approach

The paper outlines the background, factual circumstances, and court decisions on Lincoln Nat. Life Ins. Co. v. Joseph Schlanger 2006 Ins. Trust and PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Trust.

Findings

The court certified three legal questions concerning life insurance policies sold to investors as life settlements: whether two‐year statutory contestability limits apply to insurance policies deemed void for lack of an insurable interest; whether the Delaware statute requiring an insurable interest is violated when the insured individual procures a life insurance policy on his or her own life and immediately transfers the policy to a person without an insurable interest; and whether Delaware law confers an insurable interest upon a trustee of a trust established by an individual insured when at the time of application for a life insurance policy the insured intends to transfer the beneficial interest of the trust to a third‐party having no insurable interest on the individual insured's life.

Practical implications

Investors may require legal comfort concerning insurable interest for policies beyond the two‐year contestability period, but the Delaware court's ruling explicitly affirms the legality of selling life insurance policies to third‐party investors.

Originality/value

The paper provides expert guidance from experienced financial services lawyers.

Book part
Publication date: 8 September 2022

Caroline Colton

William Baumol is best-known as an academic. He was a prodigious researcher and publisher of texts on microeconomic theory, and a highly regarded educator with roles as head of…

Abstract

William Baumol is best-known as an academic. He was a prodigious researcher and publisher of texts on microeconomic theory, and a highly regarded educator with roles as head of the Department of Economics at Princeton University, director of the C.V. Starr Center for Applied Economics and director of the Berkley Center for Entrepreneurship and Innovation at New York University. Less well-known were his engagements as a corporate consultant, notably for the telecommunications monopoly AT&T. Baumol’s work as an advisor, expert witness and theorist for AT&T spanned three decades from 1966. His relationship with AT&T arguably forms the context within which we can better understand his work on contestability theory, which he developed with a team of economists working for AT&T’s Bell Telephone Laboratories in the 1970s. Contestability theory was later deployed as a policy tool to justify industry deregulation and even advocate for monopolies and oligopolies on the ground that they were optimally efficient industry structures if potential competitors faced low barriers of entry. Baumol’s intellectual contribution to contestability theory was arguably influenced by the Chicago school and by AT&T’s drive toward the technological integration of telecommunications. Contestability was a rebellion against economic orthodoxies concerning competition and government regulation, and the status quo within AT&T which opposed market competition on the ground that it threatened the technological integration of the Bell system. The outcome was a revolution in industrial organization that would pave the way for the emergence of platform business models incorporating multi-sided and two-sided markets as exemplified by Amazon and Uber.

Details

Research in the History of Economic Thought and Methodology: Including a Symposium on the Work of William J. Baumol: Heterodox Inspirations and Neoclassical Models
Type: Book
ISBN: 978-1-80382-708-7

Keywords

Article
Publication date: 27 March 2023

Laurence Ferry, Henry Midgley and Stuart Green

The study explains why Parliamentarians in the United Kingdom (UK) focused on accountability through data during the COVID-19 pandemic, as well as on how data could be used to…

Abstract

Purpose

The study explains why Parliamentarians in the United Kingdom (UK) focused on accountability through data during the COVID-19 pandemic, as well as on how data could be used to improve the government’s response to the pandemic.

Design/methodology/approach

Understanding the implications of accountability for COVID-19 is crucial to understanding how governments should respond to future pandemics. This article provides an account of what a select committee in the UK thought were the essential elements of these accountability relationships. To do so, the authors use a neo-Roman concept of liberty to show how Parliamentary oversight of the pandemic for accountability was crucial to maintaining the liberty of citizens during the crisis and to identify what lessons need to be learnt for future crises.

Findings

The study shows that Parliamentarians were concerned that the UK government was not meeting its obligations to report openly about the COVID-19 pandemic to them. It shows that the government did make progress in reporting during the pandemic but further advancements need to be made in future for restrictions to be compatible with the protection of liberty.

Research limitations/implications

The study extends the concept of neo-Roman liberty showing how it is relevant in an emergency situation and provides an account of why accountability is necessary for the preservation of liberty when the government uses emergency powers.

Practical implications

Governments and Parliaments need to think about how they preserve liberty during crises through enhanced accountability mechanisms and the publication of data.

Originality/value

The study extends previous work on liberty and calculation, providing a theorisation of the role of numbers in the protection of liberty.

Details

Accounting, Auditing & Accountability Journal, vol. 37 no. 1
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 1 July 2021

Xiaolin Qian and Lewis Tam

Proper empirical tests of the effect of blockholders’ monitoring incentives on corporate governance are scant in the literature because the relationship between ownership…

Abstract

Purpose

Proper empirical tests of the effect of blockholders’ monitoring incentives on corporate governance are scant in the literature because the relationship between ownership structure and enforcement of corporate governance mechanisms is bidirectional. This study aims to address the endogeneity issue by examining the effect of blockholding on executive turnover–performance sensitivity, using the split-share-structure (SSS) reform in China as an exogenous shock to blockholders’ monitoring incentives.

Design/methodology/approach

This study uses a logit model for estimating the change in executive turnover–performance sensitivity around the SSS reform. Sub-sample analysis is conducted to examine whether the impact of SSS reform on the turnover-performance sensitivity is stronger for firms with more contestable blockholders who might consider stock liquidity, risk sharing and diversification in their monitoring/trading decisions.

Findings

Top executive turnover, defined as CEO or board chair turnover, becomes less sensitive to firm operating performance after the reform, mainly for firms with contestable blockholders prior to the reform. Stock liquidity and blockholders’ demand for diversification can explain the impact of contestable blockholding. Moreover, blockholding is sensitive to firm operating performance after the reform but not before it.

Originality/value

With few exceptions, most studies in the blockholding literature focus on the effect of blockholder monitoring on firm value. Examining an exogenous shock to blockholding, this paper provides a set of new evidence for the impact of blockholding on executive turnover–performance sensitivity. The results call for more evidence of the impact of blockholding on executive turnover from other markets.

Details

Review of Accounting and Finance, vol. 20 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 8 August 2016

Kostas Selviaridis

The aim of this paper is to understand the antecedents and effects of performance attribution challenges arising in the provision of business-to-business (B2B) services in supply…

1615

Abstract

Purpose

The aim of this paper is to understand the antecedents and effects of performance attribution challenges arising in the provision of business-to-business (B2B) services in supply chains.

Design/methodology/approach

The study draws on three in-depth case studies of logistics service providers (LSPs) offering supply chain solutions to their clients in Sweden. The analysis of performance attribution challenges and their antecedents and effects is based on 38 semi-structured interviews and review of 43 documents, including contracts and performance monitoring records.

Findings

Three key antecedents of performance attribution challenges are stressed. Two of these, the inseparability and contestability of service inputs, are closely related to the notion of service co-production. The third antecedent is the limited provider capability in performance data collection and analysis. Performance attribution challenges may result in provider aversion to performance-related risk and have a harmful effect on client relationships, for example, in terms of provider perceptions of opportunism and unfair allocation of gains. These effects can be mitigated through contracting, interventions in performance measurement system design and deployment of relational mechanisms.

Research limitations/implications

The paper extends the service management literature that emphasises on service co-production by suggesting that inputs of the client firm and its supply chain partners may not only vary in quality but also can be inseparable from provider inputs and highly contestable. It also empirically demonstrates how performance attribution challenges and their antecedents and effects manifest themselves in B2B service provision, as opposed to supply chain settings where the main user of logistics services is the consumer.

Practical implications

LSP managers should contract for performance based on high-quality and incontestable external inputs they rely upon. Contractual specifications (performance indicators and related incentives) should explicate and consider the inputs required by clients and their supply chain partners to minimise their contestability.

Originality/value

The study proposes an empirically based framework of the antecedents and effects of performance attribution challenges, an issue that has received scant attention in logistics outsourcing research and the business services literature more broadly.

Details

Supply Chain Management: An International Journal, vol. 21 no. 5
Type: Research Article
ISSN: 1359-8546

Keywords

Article
Publication date: 9 August 2011

Sabri Boubaker and Hind Sami

The purpose of this paper is to add to the understanding of the monitoring role of multiple large shareholders (MLS) by examining their impact on the informativeness of firms'…

1975

Abstract

Purpose

The purpose of this paper is to add to the understanding of the monitoring role of multiple large shareholders (MLS) by examining their impact on the informativeness of firms' earnings.

Design/methodology/approach

The paper uses regression models that relate earnings to stock returns for a sample of 402 French publicly traded firms covered during 2003‐2007.

Findings

The paper shows that earnings informativeness is significantly positively related to the owner's ultimate cash flow rights. Consistent with the alignment effect, stock ownership aligns management and shareholders interests which reduces managers' incentives to manipulate accounting information. It also finds that earnings informativeness is significantly negatively related to the excess control of the ultimate controlling shareholder. This result supports the entrenchment effect and suggests that controlling shareholders have greater incentives to obscure accounting figures when expropriation is likely. Finally, control contestability of the largest controlling shareholder mitigates information asymmetry problems thereby enhancing earnings informativeness.

Research limitations/implications

The findings stress the importance of MLS in enhancing internal monitoring and mitigating agency costs. Because France is characterized by a weak legal system, highly concentrated ownership structures and excess control, the results provide valuable insights to mitigate extreme agency problems.

Originality/value

The paper adds to the literature on corporate governance and the quality of accounting information by investigating strategic interactions between various blockholders and their impact on earnings informativeness. The study complements prior studies on the monitoring role of MLS by demonstrating that both their presence and control size translate into significantly greater earnings informativeness.

Details

Review of Accounting and Finance, vol. 10 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

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