Search results

CEO incentive contracts are commonplace in China but their incidence varies significantly across Chinese cities. We show that city and provincial policy experiments help explain this variance. We examine the role of two policy experiments: the use of Special Economic Zones (SEZs) to attract Foreign Direct Investment (FDI), and the privatisation of State-Owned Enterprises (SOEs). The introduction of SEZs is found to be uncorrelated with the prevalence of CEO incentive contracts. However, firms are more likely to use such contracts in areas that saw rapid SOE privatisation, irrespective of the firm’s own current ownership status and irrespective of the size of the SOE sector in the late 1970s. The positive effect of privatisation is robust to various estimation techniques and model specifications. These findings suggest that domestic privatisation policies have been more influential than FDI in driving the expansion of incentive contracts in China.

Business corporations (and unincorporated joint-stock companies) formed in Britain and the United States in the eighteenth century and the first half of the nineteenth century were lightly regulated by today’s standards and, as startups, sold equity directly to investors without the aid of intermediaries, yet they suffered relatively few governance breakdowns. That is because republican government-style checks against the arbitrary power of any group of stakeholders (managers, blockholders, directors) suffused their founding documents (charters/constitutions, articles of agreement, bylaws), raising the expected costs of defalcation above the expected benefits. Over the latter half of the nineteenth century, however, the original checks disintegrated. They were functionally replaced twice, first by financial capitalism a la J. P. Morgan, then by corporate raiders and takeover specialists like KKR, but politicians neutralized the first and managers (and judges) the second, leaving many widely held corporations today under the control of CEOs/Board Chairmen who can self-deal with near impunity and have apparent incentives to do so. A return to the precepts of the republican model could help to improve governance outcomes in the future.

Research and development (R&D) is a vital strategy for firms to sustain their competitive locus and profitability in the global marketplace. Therefore, the existing research is engrossed in the correlation between firm performance (FP) and R&D intensity (RDI) meta-analysis. It also examined the ‘Type of Firm’ as a moderator in this relationship.

This study is motivated by its potential to address existing knowledge gaps, guide decision-making, influence policy and contribute to advancing theoretical and practical insights in the domain of business, economics and innovation.

This study is based on the secondary data. The researcher uses ‘Meta- Essentials 1.5’ for meta-analysis covering the studies of developed and emerging economies from 1985 to 2022.

The outcome conveys a small effect of magnitude between RDI and FP. It also indicates the positively significant linkage between them, directing that investing in R&D projects leads to improvement in the performance of companies. It also points out that private firms engaging in R&D activities have a negative while public firms have a positive correlation with their performance.

Understanding this linkage is imperative as it aids managers in making strategic decisions, the government in funding research-related schemes and investors in choosing R&D projects for investment.

Change of leadership is a big and important incident in the life of a company. As important as it is for the company, it is equally a difficult decision to make for the board of directors. Most of the big companies have a committee dedicated toward laying out a succession plan of the existing chief executive officer (CEO). The big dilemma, however, is whether to appoint someone from within the company and let him or her lead as he or she has been associated with the company and knows the internal dynamics better or to induct some outsider and take advantage of his or her expertise/reputation in the market. The balance appears lopsided when the result of this chapter is perused. Companies on an average seem to reap more benefits if an existing executive is promoted to the office of CEO rather than hiring an outsider. The benefits which are talked here from promoting insiders are indirect ones and do not have a direct bearing with the finances of the company. As shown by the results that insiders are more likely to continue with the company for a longer duration as the CEO as well as not as the CEO which defers the hiring and firing costs (screening candidates, conducting interviews, huge severance packages, golden parachutes, etc., are the costs referred to) for a longer period. Other benefits arising from insider CEOs are upfront awareness about the company’s work culture, production/service capacity, efficiency, strategies followed till date, etc., which gives him or her a head start compared to an outsider.

Vietnam started significant transition policy since 1986 with the introduction of extensive policy of Doi Moi process. The transition from a centrally planned economy toward market-oriented economy has brought some significant results; however Vietnam has until recently stood out as a success story among the transitional economies from a developmental perspective. This requires further investigation of other factors relating to the viability assumption of neoclassical economics. This paper aims to investigate the relationship between corporate governance and firm value in Vietnam, a small and open neo-transitional economy. The result suggests a positive relationship of board size and the value of a firm, but it is not significant. The result also shows a lack of significant negative relationship of other two independent corporate governance variables (shareholder concentration and CEO duality) and the value of a firm. However, to some extent, too high shareholder concentration and CEO duality tend to have negative impacts to the firm value. Other control variables such as price-to-book value ratio and return on total assets have significant and positive impacts on the value of a firm, while the market capitalization has a negative relationship with the value of a firm.

This study aims to research examples of mergers and acquisitions of European and Latvian dairy firms, the motivation for these transactions and their results, and to show that mergers and acquisitions had a positive impact on the development of the dairy industry overall and on specific firms by increasing their competitiveness.

The authors analyze the reasons for, as well as the meaning and impact of, mergers and acquisitions on firm development, focusing on the example of dairy companies in Europe, and subsequently on these processes in Latvian dairy industry.

The study is based on the qualitative and quantitative analysis of firm financial reports as well as reports of the International Dairy Federation, publications of the United Nations Food and Agriculture Organization, annual reports of the International Farm Comparison Network, reports on the dairy industry in the European Union, Latvian Central Union of Dairy Producers, Lursoft firm registry data, as well as reports of the Ministry of Agriculture, and Latvian Farm Consultation and Education center.

The study relies on statistical comparisons of firm operations before mergers or acquisitions as well as during the process and afterwards. This allows identifying the impact of mergers itself on particular firms or the industry, while abstracting from exogenous factors. Mergers and acquisitions in Latvian dairy industry had begun in 2011 and continued until 2013. However, the geopolitical situation in Europe in 2015 had fully offset the positive impact of this process. The deterioration in the geopolitical climate due to developments in Russian–Ukrainian relations has had a big impact on the economic processes affecting the development strategy of dairy firms.

This study finds that often the problems of firm development are related to the lack of financial management especially deficiencies in decision making about firm mergers and acquisitions.

Historical and statistical analysis as well as comparisons of successful experiences in Europe and Latvia allows the authors to conclude that in evaluating decisions on the possibilities for mergers and acquisitions Latvian firms have to be guided by the most important results of this process: possible increases in foreign direct investment and the growth in market share. This will, in turn, give the firms an opportunity to acquire new technologies, reorganize manufacturing processes, and start producing goods with larger value added. Ultimately, this will allow increasing firm values.

The research question we address in this paper is whether the effort invested by the internal auditor in the firm is associated with better firm performance. Our measure of effort is the number of audit hours invested in the firm, and firm performance is measured by the likelihood of a restatement of the firm's financial results. This study is the first to analyze this question, an endeavor made possible by a difference in disclosure requirements regarding internal audit effort between the US and Israel. Our analysis is conducted using hand-collected data on firms traded on Tel Aviv Stock Exchange (TASE) during the period 2010–2014. We expect that auditor effort is negatively associated with the likelihood of restatements of the firm's financial results. Indeed, our findings support this hypothesis. We also consider the association between restatements and two audit committee characteristics – the degree of independence and the degree of expertise of its members. However, these associations are not upheld by the data.

This chapter examines the relationship between directors and officers (D&O) liability insurance and stock-price synchronicity by testing competing corporate governance-related monitoring and moral hazard-related agency conflict hypotheses. Testing a sample of stocks listed on the Taiwan Stock Exchange and the Taipei Exchange for 2008–2020, the empirical results of this study indicate that D&O insurance in Taiwan is negatively correlated to stock-price synchronicity. This negative relation is robust to a battery of tests, including those of fixed-effects regression models, alternative sample periods, alternative synchronicity measures, and alternative insurance measures. Further evidence indicates that this negative relationship is more pronounced among firms with greater agency problems, especially during periods of high market uncertainty. Overall, these findings support the corporate governance-related monitoring hypothesis, which posits that firms with greater D&O insurance are likelier to be characterized by better governance structures and information transparency. Additionally, their stock prices are more likely to reflect firm-specific information in a timely and precise manner, and they are more likely to have lower synchronicity with the industry and market.

We examine changes in controlling shareholder holdings, looking for evidence of financial tunneling (unfair wealth transfers from public investors to controlling shareholders). Our sample comprises yearly data during 2000–2011 on 75 large Israeli companies. We find that controlling shareholders are successful in timing the stock market – there exists a significant negative correlation between changes in the mean controlling shareholders’ equity holdings and market return. There is also some evidence that controlling shareholders increase (decrease) their holdings before years of positive (negative) excess returns in their shares. However, statistically significant mean excess returns are documented only after decreases in controlling shareholders’ holdings. Thus, we offer only limited support for the financial tunneling hypothesis.

This chapter focuses on information efficiency as provided by fair value accounting (FVA) and corporate governance (CG) practices in an emerging market. Positive accounting theory was adopted as an empirical model to test the relationship between information efficiency and stock prices. Data for the period 2007–2020 from 576 listed firms on the Stock Exchange of Thailand were collected, tested, and analyzed using a fixed effect estimator. The results indicate that investors in the stock market trust the use of publicized efficient information as provided by FVA and CG practices in making their investment decisions, when FVA and CG proxies were found to significantly influence stock prices. Hence, this evidence implies that information efficiency leads to better firm values in an emerging market.