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This study studies whether the Social Insurance Law implemented in 2011 affects the stock price crash risk. Using the data of Chinese listed companies from 2006 to 2018, this study uses the difference-in-difference method to show that the Social Insurance Law significantly reduces stock price crash risk, and when the tax department collects social insurance premiums, this inhibitory effect still exists, which depends on its taxation efforts. Mechanism analysis find that Social Insurance Law reduces agency costs and improves the transparency of enterprises, indicating that the behavior of enterprises to hide and hoard bad news is reduced. Finally, these effects are more pronounced for enterprises with poor corporate governance, enterprises in regions with poor marketization, and enterprises with lower media attention. Overall, this study provides new insights into reducing systemic financial risks and improving financial market stability. [ABSTRACT FROM AUTHOR]

Corporate governance theories suggest that concentrated ownership can be a mechanism for addressing the agency problem in a firm, and large shareholders matter for managerial decisions. Theoretically, the effect of large shareholders on innovation proxied by R&D is not determined yet, since their risk averseness and long-term time horizon affect R&D investment in opposite direction. It is quite unclear which effect is dominant. Thus, this issue should be explored by empirical evidence. The effect of ownership concentration on R&D investment is empirically examined by using firm-level panel data of Korea between 1980 and 2018. The empirical findings are: i) the effect of ownership on R&D is negative; ii) a bell-shaped relationship between ownership and R&D is observed; iii) the negative effect of ownership on R&D is found in old firms only; iv) the effect of ownership on R&D is positive for large firms and negative for small firms; and v) the effect of ownership on R&D is positive before the financial crisis. [ABSTRACT FROM AUTHOR]

The growing use of public-private partnerships (PPPs) in infrastructure delivery has rekindled the public versus private cost-of-capital debate. Early debate concluded that the social cost of public-sector capital is below that of private capital because risk can be spread across numerous taxpayers. Intervening research focused on the agency costs that arise due to increased separation between equity holders and managers and the various mechanisms to control those agency costs. We analyze differences in public versus private residual claims and their associated agency costs. We conclude that earlier discussions that omitted agency-cost analysis should be revisited. [ABSTRACT FROM AUTHOR]

This study examines the impact of directors' famine experience on the corporate donation decision. We use a unique data set of 16,082 firm-year observations from Chinese listed firms to show that directors who experienced the Great Chinese Famine during 1959–1961 make more corporate donations, a result that supports the path dependency theory related to the effect of prior experiences on subsequent behaviors. The relationship between a director's famine experiences and corporate charitable contributions is robust across different types of ownership and industry. We further show that these directors appear to consume fewer perquisites (i.e., lower agency costs), improve social responsibility, mitigate earnings management, and enhance internal control quality. [ABSTRACT FROM AUTHOR]

We examine whether the practice of integrated reporting (IR) can reduce agency problems between managers and investors, resulting in lower agency costs. We construct a sample of firms that voluntarily use IR in practice, drawn from 35 countries, and find that firms that apply IR practice more extensively (high IR firms) are associated with lower levels of agency costs and more negative year-to-year changes in agency costs compared to other IR firms (low IR firms). We also find that the relation between the level of IR practice and agency costs is more negative in countries with a stakeholder orientation than in countries with a shareholder orientation. Additionally, the effectiveness of IR is more pronounced in diversified firms that face greater agency problems. Our results are robust in a series of additional tests that address endogeneity. Overall, our evidence is consistent with IR having a disciplining role for managers. [ABSTRACT FROM AUTHOR]

Our study examines the influence of institutional investors on firm investment efficiency based on nonfinancial firms listed on Chinese stock exchanges over the period 2009–2014. Our results show that institutional ownership generally improves firm investment efficiency. However, after considering the independence of institutional ownership, we find that only pressure-resistant institutional ownership increases firm investment efficiency by alleviating both overinvestment and underinvestment. We also find that the pressure-resistant institutional investors' horizon matters. In particular, pressure-resistant institution investors who have higher shareholdings are more stable—that is, they tend to hold shares longer and thus have a more intensive effect on firm investment efficiency. Our results also show that relaxing external financing constraints, reducing agency costs, and increasing executive incentives significantly improve firm investment efficiency. The results are robust to controlling for endogeneity. Documenting the positive influence that pressure-resistant institutional investors have on firm investment efficiency and the channels through which they improve firm investment efficiency should be of interest to investors, regulators, and academics. [ABSTRACT FROM AUTHOR]

This paper shows that in the lightly regulated Alternative Investment Market (AIM) voluntary corporate board structures might not reduce agency costs between shareholder and executive directors. In this less regulated market, we find that the extent of debt affects executive pay. In addition, the theoretical determinants of executive pay affect CEO and other executives' pay and incentives differently in this market. We find no evidence that debt levels affect CEO pay in a matched sample of Main Market firms. Our results suggest that debtholders could be better monitors of executive directors' actions, in comparison to voluntary governance committees in less regulated markets. [ABSTRACT FROM AUTHOR]

Corporate governance denotes different practices and procedures in economic sociology and in the economic theory literature; while economic sociologists are concerned about understanding the institutional features of corporate law and other corporate governance vehicles, economists are primarily interested in theorizing how capital owners can reduce agency costs. In pursuing the latter objective, agency theory has been remarkably successful in advancing shareholder value creation as the only legitimate objective of firms. This accomplishment is deeply entangled with a series of political macroeconomic and institutional changes in (primarily) the US economy and political life, including the financialization of the world economy. The article examines these changes and stresses the capital funding of free-market advocates in academic communities as a decisive factor that contributes to the popularity of shareholder value creation. The study thus calls for a broader institutional view of the political economy of corporate governance and in the study of the 'managerial revolution in reverse' taking place as managerial capitalism is displaced by investor capitalism. [ABSTRACT FROM AUTHOR]

Using newly available data, we examine the effects of the agency conflicts between ultimate controlling shareholders and minority shareholders in China's publicly listed firms between 2004 and 2009. We measure the severity of these agency problems by the excess control rights of the ultimate controlling shareholders. We show that higher excess control rights are associated with significantly lower firm value. We identify two channels through which the excess control rights affect firm value: (1) related-party loan guarantees, and (2) legal violations. We find that higher excess control rights are associated with significantly larger amounts of related-party loan guarantees (scaled by assets) for non-state and private firms, but not for state-owned firms. We find that, for non-state and private firms, the excess controls rights are associated with (1) significantly higher probability that the firm will issue value-destroying related-party loan guarantees and (2) significantly worse stock market reactions to the announcements of related-party loan guarantees. However, these results do not hold for state-owned firms. We also find that higher excess control rights are associated with significantly higher probability, frequency and severity of legal violations for non-state and private firms, but not for state-owned firms. [ABSTRACT FROM AUTHOR]

We argue that partnerships are the optimal governance structure for professional service firms (PSFs) based on our analysis of their need for collegial controls, the use of tacit knowledge, and an investigation of agency costs. However, these factors and the resulting choice of partnership as a governance structure constrain the ability of PSFs to successfully pursue growth strategies. In addition, their growth potential is further circumscribed by diversification limitations, as well as reputational and resource constraints. [ABSTRACT FROM AUTHOR]