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Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse and often complex, represent a corporate governance challenge. This paper initiates research in finance on related party transactions, which have implications for agency literature. We first explore two alternative perspectives of related party transactions: the view that such transactions are conflicts of interest which compromise management’s agency responsibility to shareholders as well as directors’ monitoring functions; and the view that such transactions are efficient transactions that fulfill rational economic demands of a firm such as the need for service providers with in-depth firm-specific knowledge. We describe related party transactions for a sample of 112 publicly-traded companies, including the types of transactions and parties involved. This paper provides a starting point in related party transactions research.

Agency theorists diagnosed the economic malaise of the 1970s as the result of executive obsession with corporate stability over profitability. Management swallowed many of the pills agency theorists prescribed to increase entrepreneurialism and risk-taking; stock options, dediversification, debt financing, and outsider board members. Management did not swallow the pills prescribed to moderate risk: executive equity holding and independent boards. Thus, in practice, the remedy heightened corporate risk-taking without imposing constraints. Both recessions of the new millennium can be traced directly to these changes in strategy. To date, regulators have proposed nothing to undo the perverse incentives of the new “shareholder value” system.

This paper aims to further contribute to the growing stream of literature on the CEO's impact on corporate social responsibility (CSR). The authors shed light on the implications of attunement theory on which relatively less research has been done. Furthermore, this paper strives to reconcile contradictory findings of the effect of CEO tenure on CSR and use the immediate changes of CSR enacted by the new CEO upon firm value.

The empirical strategy of the paper is centered around CEO transition. Applying first difference model, the authors identify a tenure-varying pattern of CEO influence on CSR. Moreover, the authors base the analyses of CSR value relevance on the sudden change of CSR during CEO transition, and use a within-industry matching approach as the inferential strategy. Manual data collection is conducted extensively for robustness checks.

The authors find that CSR activities change drastically at the beginning of the new CEO's ascendancy. One exception to this general pattern of CSR policy change is when the new CEO is brought from outside the organization, a result supporting the attunement theory. The authors find that firm value increases (decreases) when the new CEO increases (decreases) the CSR investment above (below) the industry norm.

This paper is among the first ones in the extant literature that directly examines the analytical implications of attunement theory concerning the CEO's impact on the firm's CSR policies. Furthermore, the positive association between CSR and firm value corroborates the arguments of instrumental stakeholder theory.

This paper aims to propose several factors which can explain the negative relationship between financial constraints and investment-cash flow sensitivity.

The author uses traditional fixed effects model and minimum distance panel estimation by Erickson and Whited (2000) to estimate investment-cash flow sensitivity in the cash flow-augmented investment equation. In addition, principal component analysis is used to construct a financial constraints measure.

First, it was found that substitutability between cash holdings and free cash flow can partially explain why financially constrained firms do not depend on cash flow as heavily as we expect. Second, it was confirmed that the level of net external financing can also partially explain the investment-cash flow sensitivity puzzle. Furthermore, it was argued that the influence of cash holdings and external financing on investment-cash flow sensitivity is caused by the low level of internal cash flow for financially constrained firms. This argument is supported by our findings from an examination of investment-cash flow sensitivity for bank-dependent firms during the recession periods.

This paper contributes to the literature by suggesting possible partial explanations for the contradictory relationship between investment-cash flow sensitivity and financial constraints.

In this paper, we explore an extensive panel data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on ownership structure and firm performance. We document a negative firm-level correlation between shareholder protection and ownership concentration. Differentiating between shareholder types, we find that this pattern is mainly driven by strategic investors. In contrast, we find a positive correlation between shareholder protection and block ownership of institutional investors, in particular when we restrict the analysis to independent institutional investors. Finally, we find that independent institutional investors are positively associated with firm valuation as measured by Tobin’s Q. The opposite applies for strategic investors. Overall, our results are consistent with the view that (i) high shareholder protection and (ii) limited ownership by strategic investors make small investors and investors interested in security returns more confident in their investments.