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Book part
Publication date: 11 November 2014

Helen Wei Hu and Ilan Alon

Stewardship theory is an emergent approach for explaining leadership behavior, challenging the assumptions of agency theory and its dominance in corporate governance…

Abstract

Purpose

Stewardship theory is an emergent approach for explaining leadership behavior, challenging the assumptions of agency theory and its dominance in corporate governance literature. This study revisits the agency and stewardship theories by seeking to answer whether chief executive officers (CEOs) in China are committed stewards or opportunistic agents.

Design/methodology/approach

Based on 5,165 observations of 1,036 listed companies in China over the period 2005–2010, the results suggest that the corporate governance mechanisms developed from the agency theory in the West are not necessarily applicable in the Chinese context.

Findings

This study supports the stewardship theory in its findings that empowering CEOs through the practice of CEO duality and longer CEO tenure have a positive effect on firm value in China. Additionally, the positive relationships between CEO duality, CEO tenure and firm value are strengthened by the number of executive directors on the board, and weakened by the number of independent directors on the board.

Practical implications

One size does not fit all. Leadership behaviors in China do not follow the agency assumptions inherent in Western practices, rather they favor the conditions of positive leadership expressed by the stewardship theory. Assuming that the motivations of managers in emerging markets such as China are similar to those in the West may lead to a poor fit between governance policies and the institutional context.

Originality/value

As one of the few studies to connect the theoretical debate between the agency and stewardship theories, this study presents new evidence to support the stewardship theory, thereby strengthening its theoretical importance and relevance in corporate governance literature.

Details

Emerging Market Firms in the Global Economy
Type: Book
ISBN: 978-1-78441-066-7

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Article
Publication date: 1 July 2006

Michael Bradbury, Y T Mak and S M Tan

This paper examines the relation between governance (as measured by board and audit committee characteristics) and accounting quality (as measured by abnormal accruals) in…

Abstract

This paper examines the relation between governance (as measured by board and audit committee characteristics) and accounting quality (as measured by abnormal accruals) in a setting where there is no a priori reason to suspect systematic management of earnings. Using data from Singapore and Malaysia, we find both board size and audit committee independence are related to lower abnormal working capital accruals. Furthermore, the relation between audit committee independence and higher quality accounting exists only when the abnormal accruals are income increasing. This suggests that audit committees are effective in the financial reporting process by reducing the level of income increasing abnormal accruals. The results also indicate that audit committees are effective only when all members are independent directors.

Details

Pacific Accounting Review, vol. 18 no. 2
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 1 January 1991

Lisa Borstadt, Thomas Zwirlein and James Brickley

Innovations in takeover financing, less restrictive regulatory requirements, and a general desire to enhance market position have led to a substantial increase in…

Abstract

Innovations in takeover financing, less restrictive regulatory requirements, and a general desire to enhance market position have led to a substantial increase in corporate takeover and restructuring activity. In response target firm managers have become increasingly active in devising defensive strategies and tactics designed to ward off hostile bidders. It is well‐ documented, however, that large wealth gains accrue to target firm shareholders in mergers and acquisitions. Thus the emergence of such terms as “shark repellents”, “poison pills”, and “greenmail”, raises the question of whose best interests are really being served by antitakeover measures.

Details

Managerial Finance, vol. 17 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 December 2000

Mine Uĝurlu

Documents evidence on the interdependence between the mechanisms used to control the agency costs in Turkish manufacturing firms where the external control devices are…

Abstract

Documents evidence on the interdependence between the mechanisms used to control the agency costs in Turkish manufacturing firms where the external control devices are restricted and most of the firms have concentrated ownership. The ownership concentration, board size and composition, managerial shareholdings, institutional shareholdings, and family shareholdings are the selected devices. Evidence reveals that the proportion of insiders on the board is positively related to the percentage of family shareholdings and negatively related to the percentage of foreign institutional shareholdings and ownership concentration. Board size shows a significant negative relation with all the control mechanisms except the debt ratio. The finding that the managerially controlled firms have lower debt ratio than the institutionally controlled firms and the family controlled firms supports the entrenchment hypothesis. The capital market seems to complement the institutional shareholdings, family shareholdings, and ownership concentration in monitoring the CEOs.

Details

Journal of Economic Studies, vol. 27 no. 6
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 January 2006

James W. Bannister and Harry A. Newman

The purpose of this paper is to investigate whether proxy statement performance graph disclosures are influenced by the firm's governance structure and management concerns…

Abstract

Purpose

The purpose of this paper is to investigate whether proxy statement performance graph disclosures are influenced by the firm's governance structure and management concerns about relative performance.

Design/methodology/approach

Logistic regression is used to test whether the level of performance graph disclosure decreases with lower relative performance and higher insider director membership on the compensation committee of the board. Also, Z and t‐statistics test whether bias in the selected peer group benchmark is related to insider membership on the committee.

Findings

The empirical results suggest that reporting discretion was exercised for management's benefit. The amount of explicit disclosure on cumulative returns in the performance graph decreases as relative performance declines and decreases when insider directors serve on the compensation committee. Moreover, the presence of insider directors on the compensation committee is associated with a biased choice of peer group benchmark return.

Research limitations/implications

The sample for the study consists of 141 large firms. Future research could examine a larger group of firms that vary in size or other disclosures.

Practical implications

These findings support recent actions taken to improve corporate governance. Further public policy steps could be taken. For example, the SEC could require firms to include an explanation for appointing insiders to the compensation committee.

Originality/value

The results are consistent with managers using discretion over information disclosures and suggest that compensation committees with insider members play a less active role in providing information that is helpful to shareholders.

Details

Review of Accounting and Finance, vol. 5 no. 1
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 8 March 2021

Pattanaporn Chatjuthamard, Pornsit Jiraporn, Sang Mook Lee, Ali Uyar and Merve Kilic

Theory suggests that the market for corporate control, which constitutes an important external governance mechanism, may substitute for internal governance. Consistent…

Abstract

Purpose

Theory suggests that the market for corporate control, which constitutes an important external governance mechanism, may substitute for internal governance. Consistent with this notion, using a novel measure of takeover vulnerability primarily based on state legislation, this paper aims to investigate the effect of the takeover market on board characteristics with special emphasis on board gender diversity.

Design/methodology/approach

This paper exploits a novel measure of takeover vulnerability based on state legislation. This novel measure is likely exogenous as the legislation was imposed from outside the firm. By using an exogenous measure, the analysis is less vulnerable to endogeneity and is thus more likely to show a causal effect.

Findings

The results show that a more active takeover market leads to lower board gender diversity. Specifically, a rise in takeover vulnerability by one standard deviation results in a decline in board gender diversity by 10.01%. Moreover, stronger takeover market susceptibility also brings about larger board size and less board independence, corroborating the substitution effect. Additional analysis confirms the results, including propensity score matching, generalized method of moments dynamic panel data analysis and instrumental variable analysis.

Originality/value

The study is the first to explore the effect of the takeover market on board gender diversity. Unlike most of the previous research in this area, which suffers from endogeneity, this paper uses a novel measure of takeover vulnerability that is probably exogenous. The results are thus much more likely to demonstrate causality.

Details

Corporate Governance: The International Journal of Business in Society, vol. 21 no. 5
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 1 July 1995

Iqbal Mansur and Elyas Elyasiani

This study attempts to determine whether the level and volatility of interest rates affect the equity returns of commercial banks. Short‐term, intermediate‐term, and…

Abstract

This study attempts to determine whether the level and volatility of interest rates affect the equity returns of commercial banks. Short‐term, intermediate‐term, and long‐term interest rates are used. Volatility is defined as the conditional variance of respective interest rates and is generated by using the ARCH estimation procedure. Two sets of models are estimated. The basic models attempt to determine the effect of contemporaneous and lagged interest rate volatility on bank equity returns, while the extended models incorporate additional contemporaneous macroeconomic variables. Contemporaneous interest rate volatility has little explanatory power, while lagged volatilities do possess some explanatory power, with the lag length varying depending on the interest rate series used and the time period examined. The results from the extended model suggest that the long‐term interest rate affects bank equity returns more adversely than the short‐term or the intermediate‐term interest rates. The findings establish the relevance of incorporating macroeconomic variables and their volatilities in models determining bank equity returns.

Details

Managerial Finance, vol. 21 no. 7
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 August 2008

Anthony Kyereboah‐Coleman and Kofi A. Osei

This paper aims to examine how selected governance indicators impact on performance measures of outreach and profitability in microfinance institutions (MFIs).

Abstract

Purpose

This paper aims to examine how selected governance indicators impact on performance measures of outreach and profitability in microfinance institutions (MFIs).

Design/methodology/approach

The paper adopts a quantitative approach based on both primary and secondary data from conveniently sampled 52 microfinance institutions. A panel data technique is employed as the key analytical framework.

Findings

It is shown that governance plays a critical role in the performance of MFIs and that the independence of the board and a clear separation of the positions of a CEO and board chairperson have a positive correlation with both performance measures.

Research limitations/implications

It would have been appropriate to have a larger number of MFIs for the study. This limitation however does not compromise on the validity of the conclusions based on the findings of the study.

Practical implications

In the context of multi‐dimensional and sometimes conflicting objectives facing MFIs, a clear balancing act of social objectives and institutional sustainability to ensure effective performance of MFIs is recommended.

Originality/value

Studies on governance and its relationship with firm behaviour is limited especially in Sub‐Saharan Africa. Its application in the microfinance sector with its peculiar characteristics is the added value of this paper.

Details

Journal of Economic Studies, vol. 35 no. 3
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 January 1993

Abdul Aziz and Saeed Mortazavi

Since the publication of The Modem Corporation and Private Property, by Adolf A. Berle, Jr. and Gardiner C. Means, economists have written extensively on the proposition…

Abstract

Since the publication of The Modem Corporation and Private Property, by Adolf A. Berle, Jr. and Gardiner C. Means, economists have written extensively on the proposition that ownership and control have been separated in the large corporations. Additionally, the effects of this separation on the conduct of corporate enterprise have been the subject of many investigations. The present standing of financial economists on this issue is formalized by Jensen and Meckling. They consider the managers as the agents of firm's stockholders and conclude that a certain amount of agency costs is unavoidable. These costs, they argue, emanate from pecuniary as well as non‐ pecuniary expenditures by the managers to maximize their own utilities that will be detrimental to the firm's stockholders.

Details

Managerial Finance, vol. 19 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 April 1989

Ike Mathur, Indudeep Chhachhi and Sridhar Sundaram

The number of mergers in the U.S.A. increased from 2,339 in 1983 to 3,701 in 1987—an increase of 58.23 per cent. Over the same time period the value of mergers increased…

Abstract

The number of mergers in the U.S.A. increased from 2,339 in 1983 to 3,701 in 1987—an increase of 58.23 per cent. Over the same time period the value of mergers increased from $51.89 billion to $167.48 billion—an increase of 323 per cent. Merger activities of this magnitude can be expected to attract a great deal of attention, and they have.

Details

Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 0307-4358

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