Search results

The purpose of this paper is to investigate the orientation of a firm's governance choices along a continuum of shareholder voice to managerial power and tests whether the governance orientation of a firm can survive regulation.

Using a sample of 873 firms, a set of three index measures is constructed reflecting the orientation of a firm's governing rules, the orientation of the board of directors and the overall orientation of both types of governance structures. The resulting measures are compared pre‐ and post‐SOX.

While specific, individual governance components, such as independence, can be regulated, the overall orientation of a firm's governance mechanisms, as manifested by its aggregate choice of governance structures, appears to be constant overtime suggesting that it is difficult to regulate the governance orientation of a firm.

The findings may be limited due to sample bias. There is both survivor bias and listing bias in the sample. To be included in the sample, firms needed to be publicly listed from 1998 through 2006 and needed to be listed on a major S&P index for each of those years.

The paper highlights ways in which companies circumvent the intention of regulations such as SOX. The paper therefore has implications for regulators and shareholders.

While the index method has been used before it has not been used to compare the impact of regulation on governance orientation. That makes this paper of value to regulators when considering the cost and benefit of regulations.

The purpose of this paper is to examine the effects of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover defense. The results show that the adoption of the measure has a negative influence on shareholders' wealth. These negative results are more prevalent for firms with an operating performance above their industry peers and are significantly influenced by the previous performance of the firm and the size of the golden parachute.

Event study and regression analysis.

The results show that the adoption of the measure has a negative influence on shareholders' wealth. These negative results are more prevalent for firms with an operating performance above their industry peers and are significantly influenced by the previous performance of the firm and the size of the golden parachute.

Investors will have more information about the reaction of stock markets at the announcement of golden parachutes.

The paper presents a new evaluation of the adoption of golden parachutes on shareholders' wealth when the measure is used as a compensation device instead of a takeover defense.

Explains why executive severance contracts contingent on a change in control (i.e. golden parachutes) have developed and reviews previous relevant research. Develops a mathematical model of their effects on shareholder wealth and uses it to determine an optimal contract which aligns the interests of shareholders and managers (i.e. where marginal benefit to shareholders equals marginal cost of the contract). Points out that these contracts alone do not guarantee that managers will aim to maximize shareholders wealth: they should form only part of a package of compensation agreements to align their interests.

The purpose of this paper is to examine the dynamics of human capital accumulation and human capital depletion in the processes leading to business failure.

Building on the human capital theory, strategic human resource and business failure literature, this paper develops a conceptual framework which links the inward and outward dimensions of human capital flows in the business failure process.

The analysis sheds light on why some highly skilled individuals may opt to flee declining firms to avoid being stigmatised whilst others become motivated to joint such firms.

The paper suggests that understanding the nature and dynamics of both flows are essential when seeking to avert collapse.

In spite of a growing body of research on business failure and intense competition for top talent, much of the existing literature has circumvented the relationship between them. This study develops a unified model towards enhancing our understanding of the human capital flows.

This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency. Using exogenous CEO departures as a natural experiment, it establishes a causal link between managerial capability and innovation. Importantly, it reveals that firms with talented managers receive significantly more nonself citations; make significantly lower self-citations and lesser citations to the others, indicating novel and explorative innovation achievements. Also, managers with higher general (specialized) ability are cited more (less) by patents from a wider range of fields. Lastly, career concern is identified as a mechanism linking higher ability and innovation.

Considers the factors affecting chief officers’ (CEOs’) compensation risk and control, develops hypotheses on the relationship between the two and tests them on data from a sample of Fortune 500/Fortune Service 500 companies from 1984 to 1989. Describes the characteristics of the sample and confirms that the relationship between compensation risk and CEO control (measured by board stock ownership/control) is piece‐wise linear. Shows that CEOs in larger firms are likely to have low control (under 8.25 per cent board stock holdings) and higher salaries; while those in the middle control range (8.25 per cent to 23.75 per cent) have the highest proportion of stock‐based compensation and golden parachutes; and those in the high control range have the lowest proportion of both stock‐based compensation and golden parachutes. Compares the results with other research findings and supports the ideas of Morck, Shleifer and Vishny (1988) that equity values decline in the middle range of control because of management entrenchment. Concludes that above a certain threshold of control CEOs can manage their compensation risk by including golden parachutes in their contracts even though this may cause negative returns for shareholders.

The purpose of this paper is to investigate the effects of individual provisions of firm‐level shareholder rights on the cost of equity capital in the USA setting.

Prior literature has shown that strong shareholder rights, as measured by aggregated shareholder rights indices, could mitigate the agency costs and reduce the cost of equity capital. Stepwise regression method with control variables for financial risks and corporate governance risks is used to empirically test whether individual shareholder rights provisions have varying degrees of impacts on a firm's cost of equity capital.

Of the 24 shareholder rights provisions in the shareholder rights index, four provisions are found to be the most significant determinants of cost of equity capital with the absence of three provisions (poison pill, golden parachute, and control share cash out) and the presence of fair value provision reducing the firm's cost of equity capital.

First, the results suggest that a few individual provisions are major determinants of firm value. Hence, investors and regulators should pay the most attention to these provisions. Second, the result that some provisions that limit shareholders' rights actually reduce cost of equity capital suggests that investors and regulators should not view all aspects of weak shareholder rights negatively.

This paper tests the impact of shareholder rights on cost of equity capital from an individual provision basis.

The paper aims to address the recent debate over the “relevance lost” of business school research and points to the establishment of neoliberal economic policy during the past three decades as an example of social change that has not been thoroughly theorized in business school research.

The literature on neoliberalism is reviewed and, more specifically, its implications for the financialization of industry and the widespread use of financial theory in corporate governance. The paper outlines some of the consequences of neoliberalism, pointing out the connections between the growth of the finance industry and the 2008 financial crisis.

The paper demonstrates that the financialization of industry and the institutionalization of finance theory, as the guiding corporate governance model used in the new millennium, have led to a concentration of capital in the finance industry. As a consequence, other productive investments have been postponed. Despite such shifts in corporate governance and economic policy more broadly, neoliberalism is a relatively marginal topic of discussion in business school research.

The study stresses the need for broadening the scope of business school research and addressing more long-term institutional changes in economic policy and corporate governance.

The paper emphasizes the need, not only for promoting practitioner relevance in business school research, but also for enacting an ambitious research agenda of broader social relevance.

We hypothesize that a CEO’s responsiveness to security analysts’ demands for information about the firm is influenced by the structure of the CEO’s compensation package. Our analysis is based on a sample of 469 CEO presentations to security analyst societies by 149 firms during the period 1984‐1988. Consistent with the argu ments of Nagar (1999; 1998) that CEO shareholdings and golden parachutes reduce the cost to the CEO of disclosing proprietary information, we find that CEO share holdings and the presence of golden parachutes are positively associated with the total amount of information that a CEO discloses at an analyst society presentation. Consistent with the argument that CEOs whose cash compensation is sensitive to firm performance have incentives to release bad news so as to lower expectations about future performance and, hence, bonus targets, CEO cash compensation performance sensitivities are positively associated with the CEO’s willingness to disclose bad news.