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The purpose of this paper is to contrast the historical rise of the managerial function and its reception in law. It thus contributes to the debates on the separation of ownership and control, by showing that managers were never recognized in law. As a result, the managerial function was not protected in law.

This paper brings together management history and the history of UK company law to study the emergence of management in the early twentieth century and the law’s response. The authors bring new historical evidence to bear on the company law reforms of the second half of the twentieth century and, in particular, on the changes inspired by the Cohen Committee report of 1945.

Scientific progress and innovation were important rationales for the emergence of managerial authority. They implied new economic models, new competencies and wider social responsibilities. The analysis of this paper shows that these rationales have been overlooked by company law. The lack of conceptualization of the management in law allowed reforms after 1945 that gave shareholders greater influence over corporate strategy, reducing managerial discretion and the scope for innovation.

This paper focuses on the UK. Further research is needed to confirm whether other countries followed a similar path, both in terms of the emergence of management and in terms of the law’s approach.

This paper is the first, to the authors’ knowledge, to examine the law’s historical approach to management. It calls for a reappraisal of the status of managers and the way corporate governance organizes the separation of ownership and control.

This paper aims to investigate the impact of the separation between control and cash flow rights (control-ownership disparity) on the earnings management practices of Chinese firms. The notable features of Chinese firms are those of concentrated ownership and the severe disparity that exists between the control and cash flow rights of controlling shareholders.

This study measures the level of Chinese firms’ earnings management by adopting two different methods of measurement: accrual-based earnings management (AEM) and real activity earnings management (REM). The authors also consider the possible trade-off effects between these two types of measurements. The data set in this study encompasses over 2,000 Chinese firms, using data from 2003 to 2015.

The results indicate that controlling shareholders are more likely to engage in AEM as their cash flow rights are more concentrated, while they are less likely to use REM as the disparity of control-cash flow rights increases. Further, this inverse relationship between REM and control-cash flow rights disparity becomes more pronounced in the case of a low cash flow rights group. As REM generally causes distortions in firms’ operations, it is possible that the controlling shareholders are more likely to constrain the use of REM as the disparity is perceived to grow. This result may indicate a reduced agency problem between controlling and minority shareholders due to the developing and/or existing ownership dispersions, which are mainly driven by recent reforms applied to Chinese capital markets. However, we do not entirely exclude the possibility of other types of expropriations by the controlling shareholders. It appears that the controlling shareholders are still able to exert a significant level of control, even following a substantial ownership dispersion, and they may seek alternative expropriation methods, including but not limited to intercorporate loan or related party transactions as the disparity of control-cash flow rights increases.

Although the Chinese economy is experiencing a series of reforms to infuse market forces into capital markets, little has been known about the effects of ownership-control disparity in Chinese firms. Our findings highlight the importance of the country specific context in this vein of research.

The purpose of this second part of this special issue is to contribute to a better understanding of the nature of Soviet society. It is not possible to analyse such a society in all its complexities within the space of one study. There are, however, some economic relations which determine society's major features. We believe that commodity‐production relations in the Soviet Union are of this type.

This study examined the attainment and the benefits of financial flexibility in the presence of concentrated ownership in the Caribbean.

This study used qualitative methodology via the use of case studies.

Results revealed that liquidity may be considered the most important form of financial flexibility for firms in transitioning economies, due to constrained capital markets. Blockholder firms also focus on liquidity out of a concern for recovering their substantial investment. This study suggested that in addition to an emphasis on liquidity, blockholder owners emphasise professionalism in managing the firm. This professionalism, accompanied by a genuine separation of ownership and control, may be critical in minimising the possibility of misappropriation of surplus liquidity. The study showed that blockholder owned firms may not recognise maximum capital investment benefits because of the use of sub-optimal capital budgeting techniques reflecting their liquidity preference, or pay maximum dividends, opting instead to use dividends as a governance tool. However, the ability to separate ownership from the management of the operations may counteract this, leading to an increased focus on net present value (NPV) maximising projects, and a dividend policy aimed at preserving future financial flexibility.

This study highlights the value of qualitative studies in finance research, by providing a deeper insight into the management of firm financial flexibility, under blockholder ownership. It emphasises the importance of considering liquidity as a critical form of financial flexibility. Furthermore, the study shows that two significant factors in controlling principal–principal (PP) conflict may be the ability to separate ownership from control and the appointment of a professional management team.

This research introduces the variable of PP agency in the study of financial flexibility.

The purpose of this paper is to present evidence on the effects that different ownership's structures of Greek listed firms exercise on the relation between investment and liquidity constraints.

Corporate governance in Greece is primarily based on the form of family‐owned firms, as in many European countries. In countries with similar corporate governance systems, a possible source of separation (in the absence of bank‐controlled firms and large business groups) between management and ownership is the nationality of the companies, as foreign nationality implies the physical separation of managers and owners. A second possible separation is based on the shareholdings of the CEO when he/she bears no relation with the controlling shareholders. A sample of Athens Stock Exchange listed firms is collected and a generalized (vs a simple) model of investment is applied to test the role of corporate governance using these two basic separations of management and ownership.

The paper's empirical findings support the hypothesis of asymmetric information both in the total sample and in various sub‐samples. Low Q, small, and new firms under the generalized model are facing asymmetric information problems. On the other hand, low Q, old and low dividend firms are more likely to face managerial discretion problems that result in over‐investment.

This paper links information‐related problems of investment with simple corporate governance structures.

This paper aims to investigate whether family CEOs benefit investment efficiency under uncertainty with Chinese family firms and to test the moderating effect of ownership structure, including family ownership, the separation of family control from family ownership and the multiple large shareholder structure.

Fixed-effects models are designed for a sample of 5,734 firm-year observations for Chinese family firms from 2009 to 2014.

The results show that investment efficiency is low under uncertainty, and having family CEOs can reduce this negative relationship. Further analysis reveals that for firms with family CEOs, the negative effect of uncertainty on investment efficiency is weaker when the family has higher ownership, when family control is less separated from family ownership, or when family firms have multiple large shareholder structures.

The authors do not distinguish founder-CEOs and descendant-CEOs. Most of Chinese family firms are still managed by founders, so the authors cannot explore the generation effect although different generations manage firms differently. Because family succession is becoming a more and more important problem in China, further research may be able to explore the generation effect.

This paper suggests that in emerging economies with weak investor protection, outside minority shareholders can avoid expropriation from family owners by investing in firms with large family ownership, little separation of family control from ownership or multiple large shareholder structure. In addition, policymakers can encourage institutional investors to participate in family business to improve corporate governance.

Drawing on both Type I and Type II agency theory perspectives, the authors argue that although family CEOs can generally benefit firms’ investment efficiency, the benefits vary with firms’ ownership structure. In other words, family CEOs are not absolute agents or stewards but some extent of combination of both.

Currently, most research studies focus on ownership reforms and governance reforms, while only a few research studies focus on management system innovations. Based on an evolution of state-owned enterprises’ (SOEs) performance appraisal systems, this paper investigates the influence of performance appraisal system on earnings management.

Using a natural experiment that central government-owned enterprises (CGOEs) carried out economic value-added performance appraisal (EVA-PA) in 2010, the authors adapt difference-in-difference method to analyze the relationship between EVA-PA and earnings management choice. Furthermore, the authors consider the situation which contained financial status, separation between decision-making rights and decision-control rights, separation between ownership and control and industrial characteristics.

The research finds that after carrying out EVA-PA, CGOEs prefer accrual-based earnings management to real earnings management, and there is substitution effect between the two types of earnings management. Moreover, further research studies reveal that enterprises suffering losses in the previous year and featuring higher separation between decision-making rights and decision-control rights and higher separation between ownership and control have stronger earnings management motive under EVA-PA. In contrast, enterprises achieving satisfactory financial performance in the previous year and engaging in businesses within protective industry have weaker earnings management motive under EVA-PA. After the implementation of EVA-PA, accrual-based earnings management and real earnings management both impair operating performances of CGOEs.

Theoretically, this paper enriches research studies on earnings management from the perspective of incentive mechanism and expands research studies on economic consequences of EVA-PA. In addition, it validates the relationship between the two types of earnings management. As an important mechanism of corporate management and control, performance appraisal system is an important part for establishing ownership management system and improving internal management system of SOEs.

The aim of this paper is to revisit the board independence–audit fees (BI–AF) relationship while taking into account the ownership structure of the firm. Two effects are unfolding along the ownership concentration spectrum: separation of ownership and control (principal–agent problems) and separation of voting and cash flow rights (principal–principal problems).

The study is conducted over a seven-year period (2002-2008) using panel regressions on a sample of Canadian publicly traded companies. The authors use a moderated regression analysis incorporating two-way interactive terms (ownership × BI) and a sub-group analysis.

The results show a positive and significant relationship between BI and AF when ownership is concentrated in the hands of a dominant/controlling shareholder. The higher the gap between voting and cash flow rights of the ultimate owner, the stronger the relationship between BI and AF. Overall, evidence supports both the demand-based perspective on AF and the expropriation effect argument.

Results support a one-size-fits-all approach to governance despite growing concerns from academics and interest groups about the appropriateness of pursuing such strategy when ownership is concentrated in the hands of a dominant/controlling shareholder.

By taking the excess voting rights into account (difference between voting rights and cash-flow rights of the ultimate owner), the authors propose a refined classification of the sample firms along the ownership concentration spectrum.

Under IAS 24 a related party transaction (RPT) is a “transfer of resources, services or obligations between related parties, regardless of whether a price is charged” (IASB). The purpose of this paper is to consider the interest of the business group and the directing activity of the parent company for the interpretation of the RPT. Considering the interest of the group means to interpret the intra-group transactions not as isolated transactions, as usually done by the empirical studies, but in a wider perspective, that of the group.

This paper builds on explanatory multiple case studies in order to answer the following research questions: why the interest of the business group and the directing activity of the subsidiaries by the parent company are important in the interpretation of RPTs. How RPTs can be interpreted in the light of the directing activity of the holding company.

Dominant shareholder tends to demonstrate that the group it is not managed as a single economic entity and sometimes that subsidiaries are not really controlled. The case studies show that a regulation that imposes the transparency of the directing activity has at least two effects: the controlling shareholder finds it convenient to delegate the decision-making power and to not carry out RPTs among firms that do not present clear economic links. Thus, the transparency of the directing activity seems to be a disincentive to the establishment of a pyramidal group with expropriation purposes.

It is appropriate that the interpretation of the RPT take into account not only the disclosure of the RPT (e.g. type and nature), but also the following disclosure: the reason and the business purpose that lead to RPT; the interest of the company in engaging such transactions; and the procedures for their approval. The independence of subsidiaries directors is necessary to ensure the management autonomy of the boards, and in the case of directing activity they have to protect outsiders in the case of detrimental transactions ordered by the controlling and directing company that are not carried out in the interest of the group.

Unlike what has been done so far by the literature on RPT, this paper considers the interest of the group to interpret the intra-group transactions and the separation between control and direction. It means do not interpret RPT as isolated transactions, as usually done by the empirical studies, but in a wider perspective, that of the group.