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Using the L. Bebchuk, Cohen, and Ferrell (2009) entrenchment index (E-index), the authors examine the relation between management entrenchment and the probability of a firm being implicated in the stock option backdating scandal. The authors conduct the analysis of this study using logistic regression, and they document a negative relation between the E-index and the probability of a firm being implicated in the stock option backdating scandal. The results of this study are consistent with the view that management entrenchment is advantageous to shareholders as it protects managers from short-term reporting pressures and egregious opportunistic behavior that can be detrimental to firm value.

The main purpose of the study is to examine the influence of family directors on the firm performance of public listed companies (PLCs) in Malaysia. This study provides empirical evidence on the agency problems between controlling shareholders and minority interests in the concentrated ownership setting.

Samples of the study are 112 PLCs in year 2006. Two measures of firm performance are used: return on assets (ROA) and Tobin’s Q. Managerial ownership refers to the percentage shareholdings of executive directors with direct and indirect holdings. It was further categorized into family ownership and non-family ownership.

In relation to ROA, managerial ownership is found positively significant. The results also show that the positive relationship between managerial ownership is contributed by the managerial-non-family ownership. In relation to Tobin’s Q, the results show a U-shape with turning point at 31.38% for managerial ownership and 28.29% for the managerial-family ownership. The results found significant and positive relationships between managerial ownership and both measures of firm performance which indicates that managerial ownership and family ownership yield greater efficiency.

The study highlights the effects of corporate governance on ROA and Tobin’s Q are somewhat different. It provides some evidence on the need to use appropriate measure of firm performance. The significant relationship supports the argument of Chami (1999), Fama and Jensen (1983), and DeAngelo and DeAngelo (1985) and empirical evidence of Lee (2004) that family ownership enhances monitoring activities.

Differentiating the types of managerial ownership into family and non-family categories enriches our knowledge about who actually contributes to the improved performance.

Effective mechanisms for corporate governance are essential for market-based economic systems. This chapter addresses the necessity of corporate governance research to address the competing goals of various stakeholders in the firm: managers, suppliers of financial capital, and other stakeholders. The review of literature reveals that firm-level complexity, as well as diversity of national business systems, are important for understanding corporate governance practices and regulations around the world.

We examine whether the curvilinear relationship between directors’ equity ownership and firm performance exists in a non-Western economy such as Singapore. We find that it does, although the inflection points are much higher than that generally cited for U.S. firms. We then compare this relationship across two kinds of firms that are not common to the U.S. marketplace. We observe for founder-controlled firms that the impact of director ownership is insignificant. We also examine government-linked corporations and in spite of the presence of a government blockholder, find that the pattern of alignment, entrenchment and then alignment remains operative.

This study investigates the impact of insider-ownership of publicly traded firms on their performance, cost of debt (COD) and cost of equity. We use a sample of 104 non-finance listed companies of Pakistan for the period from 2006 to 2016. Our study is conducted in Pakistan as a developing country in which insider-ownership is dominant, and a weak external corporate governance mechanism increases the payoffs from insider-ownership. We use feasible generalized least square (FGLS) regression methods to examine these hypotheses. Based on agency theory, we find that insider-ownership enhances firm performance. Furthermore, our results show that insider-ownership reduced the COD and equity. Higher ownership decreases the opportunistic behavior of insiders. It also reduces the creditor’s perception of the likelihood of default on loan payments and reduces agency issues among shareholders. The insider will invest in positive NPV projects which will help maximize shareholders’ wealth and minimize the COD. Similarly, the relationship between insider-ownership and cost of equity is significant but negative. Supporting the convergence of interest increase in ownership helps in aligning the goals of managers and stakeholders whereby the insider will focus on value creation by minimizing equity cost.

This paper addresses the interaction relationship between debt financing and ownership structure towards firms’ value in Malaysia. Two issues are addressed in this study. The study examines whether managers and controlling large shareholders pursue rent-seeking objective through excessive leverage in a firm. Second, the paper examines whether financial restraint policy is effective in enhancing corporate governance. The sample of the study covers a small economy – Malaysia where rent-seeking opportunities prevail. A total 256 manufacturing firms are examined. The hypotheses are set to examine whether rent seeking prevails in firms with high intangible asset and less competitive industries. The findings show that first, financial restraint policy is only effective when managerial equity interest is relatively low. Managers with a higher equity interest hinder the positive effects driven by financial restraint policy. Second, at a higher threshold of equity interest, the use of excessive leverage by managers leads to a lower firm value, confirming the presence of rent-seeking motive. The presence of the largest shareholder as directors also follows the same conjecture despite at a lower magnitude. Both findings could not be refuted in less competitive industries. Other findings from this paper conclude that a high industrial concentration industry increases firms’ value in this economy. Financial institutions can also exert corporate governance on firms in less competitive industries. It is, however, the agency problem mitigates the positive effects brought forth by financial rent in this emerging economy.

We study the events that motivate CEOs to underinvest in R&D long-term projects (CEO myopia). Based on the existing literature in earnings management and agency theory, myopia is likely to become more problematic under five circumstances: when the CEO nears retirement (the CEO horizon problem), R&D projects have very long time horizons (the project horizon problem), the firm’s financial health is deteriorating (the cover-up problem), ownership structure is heavily weighted toward insider owners (minority owner oppression problem), and when the threat of hostile takeover increases (the entrenchment problem). We setup a dynamic simulation model in which rational CEOs maximize the total value of their bonus compensation over their tenure. Our findings related to the five circumstances are consistent with the extant literature. However, we found an unexpected stable, nonlinear (inverted U-shaped) relationship between CEO tenure and R&D investment. We discuss the theoretical implications of our model and offer suggestions for future research.

This study aims to analyze the effect of top management team (TMT) expertise on real earnings management (REM) and accrual earnings management (AEM) activities in companies in Indonesia by examining a hand-collected secondary data from non-financial publicly listed companies in Indonesia in 2016 and 2017. The expertise of TMT members is measured by possession of a master’s degree, understanding and experience of managed core functional areas, and possession of accounting certifications such as CA or CPA. The results of the study show that the expertise of the members of the TMT has no influence on the activity of AEM in companies in Indonesia. Meanwhile, understanding and experience on the managed core functional areas have a positive influence on REM activities through abnormal cash flows. Possession of accounting certification has a positive influence on REM activities in companies that are in accordance with managerial entrenchment effects, as well as a negative influence on REM activities in companies through abnormal discretionary expenses that are in line with incentive-reduction effects.

This paper empirically explores the relationship between the identity and concentration of different block holders and firm value for 89 industrial and service firms listed at the Amman Stock Exchange (ASE) over the period 1998–2001. The paper examines the role of block holders (institutional investors who are not on the board of directors, the institutional investors who are on the board of directors, the ownership of the board of directors, and the financial policy of the firm, such as the capital structure) in controlling the managerial actions which leads, on average, to better firm valuation in the emerging market of Jordan. The paper employs a piecewise regression specification methodology. The results of the piecewise regression analysis indicate a positive and significant relationship between the ownership of securities above 25% by the board of directors, institutional investors on the board of directors, the institutional investors not on the board of directors and firm value. There is no significant relationship between the above-mentioned ownership and firm value for ownership below 25%. The results also indicate a significant and negative relationship between ownership by the CEO below 5% and firm value. Leverage is significantly and positively related to firm value when we relate ownership by institutional investors not on the board of directors and firm value. This might imply that creditors work as complementary monitors of value along with institutional investors who are not on the board of directors. The paper concludes that block holders are important monitors of firm value especially if they own large amounts of securities to justify the high cost of monitoring.