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Article
Publication date: 16 April 2020

Feng Zhang, Lei Zhu and Liqun Wei

Whether shareholders’ involvement in management benefits the organization’s performance remains inconclusive. The purpose of this study is to reconcile the conflicting…

Abstract

Purpose

Whether shareholders’ involvement in management benefits the organization’s performance remains inconclusive. The purpose of this study is to reconcile the conflicting results by exploring whether and under which contexts shareholder involvement may impact firm innovation performance.

Design/methodology/approach

This study attempts to combine previous theoretical views (reactance and agency theories) to examine a curvilinear effect of shareholder involvement on firm innovation performance based on governance related to cost-benefit analysis. Drawing on data from 174 Chinese manufacturing firms, the hierarchical regressions were used to test the hypotheses.

Findings

The study finds that shareholder involvement has a U-shaped relationship with firm innovation performance. Moreover, ownership incentive strengthens the U-shaped relationship, while monitoring weakens it.

Originality/value

Examination of the U-shaped main effect of shareholder involvement and these contingent factors further explains the mixed empirical results concerning the link between shareholder activism and firm-level performance.

Details

Chinese Management Studies, vol. 14 no. 3
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 17 May 2011

Thanida Chitnomrath, Robert Evans and Theo Christopher

This research seeks to investigate the role of key corporate governance mechanisms in determining a firm's post‐bankruptcy performance following reorganisation.

Abstract

Purpose

This research seeks to investigate the role of key corporate governance mechanisms in determining a firm's post‐bankruptcy performance following reorganisation.

Design/methodology/approach

The study is based on agency theory and uses a unique sample of 111 filing companies whose reorganisation plans have been confirmed by the Thai Central Bankruptcy Court during the period 1999‐2002.

Findings

The results indicate that monitoring and incentive mechanisms are significant determinants of a firm's post‐bankruptcy performance. The key monitoring mechanism is ownership concentration, measured by shares held by the largest shareholder, whereas the critical incentive mechanisms are cash compensation and percentage of common shares held by the plan administrator. The results indicate that these mechanisms can mitigate agency problems in previously insolvent companies and increase post‐bankruptcy performance over a three year period.

Originality/value

The study is timely given that many organisations are facing rebuilding programs following the impact of the global financial crisis. Prior research in Thailand and elsewhere has not measured bankruptcy reorganisation outcomes in terms of the difference of actual financial performance to predicted performance and in relation to the governance factors of the reorganisation process. Neither has this aspect been considered within an agency theory framework. This provides a unique opportunity to consider these variables based on the theoretical framework of agency theory and to evaluate the importance of governance mechanisms in reorganisation proceedings.

Details

Asian Review of Accounting, vol. 19 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 1 July 2006

Jordi Surroca, Miguel A. García‐Cestona and Lluís Santamaria

This paper builds upon recent advances in the corporate governance framework to extend and complement the economic literature on producer cooperatives. We argue that the…

Abstract

This paper builds upon recent advances in the corporate governance framework to extend and complement the economic literature on producer cooperatives. We argue that the problem of governance in a cooperative is twofold and consists in designing mechanisms and setting up institutions that (1) encourage workers to define a goal that maximizes workers’ welfare and (2) induce managers to pursue and internalize such a broad goal. When compared to capital‐controlled firms, the agency problems become more complex and harder to solve in the cooperative framework. As empirical evidence of this problem and its corresponding solution, we illustrate the case of the Mondragón cooperatives, explaining in detail the incentive system and the control mechanisms now in place in this successful business group. The study of the governance architecture of Mondragón may help us to propose solutions to traditional problems of the cooperative firm and to reach a better understanding of both the governance of cooperatives and corporate governance in general.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 4 no. 2
Type: Research Article
ISSN: 1536-5433

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Article
Publication date: 1 August 1995

Jo Evans and Charlie Weir

In large firms the managers who run the business tend not to belarge shareholders. In addition, managers are said to have objectiveswhich differ from those of the owners…

Abstract

In large firms the managers who run the business tend not to be large shareholders. In addition, managers are said to have objectives which differ from those of the owners. Aligning these conflicting interests is the basis of the agency problem. Various corporate governance schemes have been introduced to ensure that managers follow profit‐driven policies. Looks at the separation of decision management from decision control, the frequency of meetings between divisional managers and their superiors, performance‐related pay and performance‐related incentives. Examines their impact on firm profitability. Finds that the level of monitoring of divisional managers and the use of divisional performance‐related pay has a significant effect on performance. Finds incentives in general do not affect performance. Finds on average that performance is unaffected by the separation of decision processes, although it does help to achieve very good profitability.

Details

Management Decision, vol. 33 no. 6
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 23 November 2020

Salman Ahmad, Ciaran Connolly and Istemi Demirag

The purpose of this paper is to explore how localized (organization-level) actors of policy initiatives that are inspired by neoliberal ideologies use management…

Abstract

Purpose

The purpose of this paper is to explore how localized (organization-level) actors of policy initiatives that are inspired by neoliberal ideologies use management accounting and control practices. Specifically, it addresses the operational stages of a case study Private Finance Initiative (PFI) contract within the United Kingdom's (UK's) transport sector of roads for embedding government objectives in the underlying project road.

Design/methodology/approach

This paper adopts Dean's (2010) analytics of government to unpack the accounting-based control practices within the case study contract in order to articulate how, at the micro level, the government's objective of improving road-users' safety is enacted, modified and maintained through such regimes.

Findings

Drawing on a content-based analysis of UK government PFI policy and extensive case study-specific documents, together with interviews and observations, this research provides theoretical insights about how control practices, at a distance without direct intervention, function as forms of power for government for shaping the performance of the PFI contractor. The authors find that the public sector's accounting control regimes in the case study project have a constraining effect on “real partnership working” between the government and private contractors and on the private sector's incentive to innovate.

Research limitations/implications

By analyzing a single road case study PFI contract, the findings may not be generalizable.

Originality/value

This paper provides significant theoretically informed insights about how public service delivery that is outsourced to private contractors is controlled by government at a distance within complex organizational arrangements (e.g. PFI).

Details

Accounting, Auditing & Accountability Journal, vol. 34 no. 3
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 22 May 2009

Michael R. Braun and Scott F. Latham

This study aims to examine the governance structure of the firm undergoing a complete buyout cycle (reverse leveraged buyout). Its purpose is to empirically explore the…

Abstract

Purpose

This study aims to examine the governance structure of the firm undergoing a complete buyout cycle (reverse leveraged buyout). Its purpose is to empirically explore the evolution of corporate board structures as a unique source of value creation, in addition to the agency mechanisms of the discipline of debt and incentives of equity participation.

Design/methodology/approach

The authors rely on agency theory and the resource dependence perspective to develop sets of hypotheses that examine changes in the board composition of 65 R‐LBOs and 65 matched continuing firms spanning a 25‐year period (1979‐2004).

Findings

The empirical results reveal numerous insights about why R‐LBOs go private, to what extent boards restructure during the buyout phase, and how those changes relate to firm performance. Taken together, the findings give strong credence to the argument that boards represent a supplemental source of value creation in the buyout process.

Research limitations/implications

For scholars, the study presents a platform for further inquiry into the role of boards of directors in R‐LBOs as well as the inclusion of resource dependence theory to inform on the phenomenon.

Practical implications

The study helps to address this new source of value creation for practical interest. It offers a benchmark for buyout firms to compare their board characteristics by establishing linkages between pre‐buyout deficiencies, post‐buyout modifications, and post‐SIPO performance.

Originality/value

The results shift scholarly attention away from the structural governance tools to the group dynamics of the board. The findings call into question the restricted attention given by buyout researchers to leverage and ownership as value drivers by prompting a closer evaluation of the relationship between buyout board structures and related structuring of debt and managerial equity participation. Furthermore, the inclusion of the resource‐dependency perspective alongside agency theory as an explanatory theory allows for a richer account of the LBO phenomenon and its sources of value creation.

Details

Management Decision, vol. 47 no. 5
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 3 April 2017

William Kline, Masaaki Kotabe, Robert Hamilton and Stanley Ridgley

The purpose of this paper is to provide insights from the upper echelon, agency, and organizational identification literatures to help explain cross-cultural differences…

Abstract

Purpose

The purpose of this paper is to provide insights from the upper echelon, agency, and organizational identification literatures to help explain cross-cultural differences in top management team pay.

Design/methodology/approach

This is a theoretical paper building upon the executive compensation literature examining US and Japanese pay schemes.

Findings

The paper presents three propositions relating to the influence of organizational constitution and organizational identification on the level of pay, as well as the allocation of pay in top management team compensation schemes.

Originality/value

There is relatively little research focusing on why there are cross-cultural pay differences. This paper uses US and Japanese studies to highlight mechanisms that can foster principal-agent goal alignment in different contexts.

Details

Asia-Pacific Journal of Business Administration, vol. 9 no. 1
Type: Research Article
ISSN: 1757-4323

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Article
Publication date: 18 September 2017

Maria Aluchna and Bogumil Kaminski

The purpose of this paper is to investigate the links between company ownership structure and financial performance in the context of the largest Central European stock…

Abstract

Purpose

The purpose of this paper is to investigate the links between company ownership structure and financial performance in the context of the largest Central European stock market. Using the framework of agency theory, the authors address the question of the expropriation effect by dominant owners and the effect of collusion between shareholders of different types on company performance.

Design/methodology/approach

The authors test hypotheses on the relations between ownership concentration and the involvement of different shareholders (state, CEO, industry and financial investors) vs return on assets (ROA). The authors adopt the panel model controlling for endogeneity and sector of operation and analyze the data from the unique sample of 495 Polish non-financial firms listed on the Warsaw Stock Exchange in years 2005-2014 with a total of 3,203 observations.

Findings

The authors identify a negative correlation between ownership concentration by the majority shareholder and ROA, which corresponds with the expropriation rationale of blockholders. The authors also observe negative effects due to ownership concentration by the second largest shareholder, supporting the notion of collusion. The results show that ownership by industry investors is associated with a higher ROA. Ownership by the CEO, state and financial investors proves to have no statistically significant effect on performance.

Originality/value

The paper further develops the nature of ownership-performance relations in the specific economic context of a post-transition, emerging European stock market, weak external corporate governance mechanisms, insufficient investor protection and significant concentration of share ownership. The results add to the understanding of monitoring vs expropriation effects by large owners and the collusion between different types of shareholders.

Details

Baltic Journal of Management, vol. 12 no. 4
Type: Research Article
ISSN: 1746-5265

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Article
Publication date: 18 September 2007

Imen Khanchel

This paper aims to investigate the determinants of good governance in the US firms.

Abstract

Purpose

This paper aims to investigate the determinants of good governance in the US firms.

Design/methodology/approach

The data are taken from a sample of 624 US listed and non‐financial firms for the period of 1994‐2003. Four indices were constructed that summarize the governance quality: one indice for the board of directors, another one for the board committees, a third one for the audit committee, and a fourth representing an overall or total index. Multiple regressions analyses are used in the study to find the determinants of strong governance.

Findings

The empirical results show statistically significant and positive associations between each governance index (exception to board index) and firm size, investment opportunities, intangible assets and directors and officers ownership. Furthermore, institutional ownership and external financing needs are positively related to each governance index considered. However, growth opportunities and performance have no significant effect on governance quality.

Research limitations/implications

Other corporate governance mechanisms could be considered (transparency and disclosure, anti‐takeover provisions and shareholder's rights).

Originality/value

This paper adds evidence to the important debate about corporate governance ratings. It gives a most comprehensive analysis to date in term of sample size and breath coverage. This paper also offers a new contribution to the debate on the determinants of good governance by isolating the effects of firm characteristics on the board of directors from the effect on compensation and nominating committees and from the effect on audit committee.

Details

Managerial Auditing Journal, vol. 22 no. 8
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 23 March 2010

M. Sobótka and K.W. Platts

The purpose of this paper is to present an exception to the common belief “If you can't measure it, you can't manage it”. It aims to show how in certain situations

Abstract

Purpose

The purpose of this paper is to present an exception to the common belief “If you can't measure it, you can't manage it”. It aims to show how in certain situations particular practices, attitudes and cultures can remove the need for individual performance measurement.

Design/methodology/approach

First, the paper identifies the usual roles of performance measurement in managing individual employees as described by control and motivation theorists. Second, it identifies a market‐leading organisation where managers deliberately refuse to use their top‐level performance measurement system to manage the performance of individual employees. A case study is carried out to test what non‐measurement mechanisms fulfil the roles of individual performance measurement in this organisation.

Findings

Building on situations observed at this company, a set of possible characteristics of companies that do not require formalised individual performance measurement systems in order to achieve high performance standards is put forward.

Practical implications

Managers should not always assume that individual performance measurement is the only way to achieve excellent performance. This study shows that, by granting responsibilities and providing appropriate support, managers can channel workers' enhanced motivation towards meeting wider organisational goals.

Originality/value

This work broadens the understanding of how excellent performance can be achieved. It shows that excellence can be achieved through practices based on shared values linked to motivation, trust, and a common sense of mission, without the need to install individual performance measurement systems based on cybernetic principles.

Details

Measuring Business Excellence, vol. 14 no. 1
Type: Research Article
ISSN: 1368-3047

Keywords

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