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Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We construct firm-level indexes for agency conflicts between controlling shareholders and outside investors by estimating a dynamic model of financing decisions. Our estimates for 12,652 firms from 14 countries show that agency conflicts are large and highly variable across firms and countries. Differences in agency conflicts are largely due to differences in firm-level governance, ownership concentration, and other firm characteristics. The origin of law is more relevant for curtailing governance excesses than for guarding the typical firm. Agency costs split about equally between wealth transfers and value losses from policy distortions. Recent governance reforms in Europe have significantly reduced agency costs. Received April 19, 2016; editorial decision November 18, 2017 by Received April 19, 2016; editorial decision November 18, 2017 by Editor Francesca Cornelli. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Purpose: Joint board management meetings bring boards of directors and top management teams together to share information and discuss company matters. The authors investigate whether these joint meetings are associated with higher agency costs or information sharing benefits in the context of firm earnings management. Design/methodology/approach: Using publicly disclosed data on the frequency of joint board management meetings in Indonesian firms, the authors examine the relationship between joint board management meetings and earnings management during 2010–2017. Findings: The authors find that more joint board management meetings are associated with lower earnings management. This is consistent with joint board management meetings providing net information sharing benefits. Additional testing indicates that the results are the strongest when firms hold more joint board management meetings than regular board meetings. Originality/value: The findings suggest that in addition to holding regular board and audit committee meetings, formal meetings between boards of directors and top management teams are beneficial to shareholders by restricting opportunistic accounting choices by firm management. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to discuss whether a new accounting policy can help enterprises withstand operating risks and whether corporate governance can play a supervisory role. Taiwan took the lead worldwide in allowing companies to distribute cash dividends from capital reserves. Compared with traditional cash dividends distributed from retained earnings, this move was aimed at maintaining the stability of cash dividends and helping listed companies address the risks of temporary downturns. However, the distribution of cash dividends from capital reserves may violate the principle of capital maintenance and damage creditors' equity. The authors sought to examine whether corporate governance could play a supervisory role. Design/methodology/approach: The present study targeted Taiwanese listed companies and cited data from the Taiwan Economic Journal. The study period was from 2011–2019. The authors tested the hypotheses using the least square method. Findings: The results showed that ultimate controlling shareholders of listed companies can maximize their own interests through ownership arrangements, whereas corporate governance cannot play a supervisory role nor protect creditors' equity. The findings provide insight on whether, in the development process of corporate governance, appropriate measures are taken to protect creditors' equity in addition to shareholders' equity, or achieve a good coordination of interests among all stakeholders. Originality/value: The ultimate controlling shareholders or directors of a listed company would seek to maximize their own interests, and transfer the operating risks to creditors through the arrangement of dividend policy, thus harming creditors' equity. However, independent directors cannot play a supervisory role. The authors inferred that corporate governance standards previously focused on the shareholder level or alleviation of the agency problem between controlling shareholders and non-controlling shareholders but ignored creditors' equity. [ABSTRACT FROM AUTHOR]

This Article offers a novel typography of expenditures on corporate social responsibility, highlighting that such spending often requires a public business corporation to engage in corporate speech. When this speech pertains to social or political issues unrelated to the company's business, this Article argues that such expenditures are generally not in the best interests of the firm's stockholders and terms this spending "corporate activism." Corporate activism is described as the product of agency costs and ideological conflict that derive from an expansion of corporate speech rights under the First Amendment. To protect shareholders from corporate activism, courts have relied upon various disciplining mechanisms that are often not up to the task. This Article offers a different solution, placing the responsibility squarely upon the board of directors of public corporations to limit "expressive" expenditures on corporate social responsibility that do not directly advance the best interests of a company's shareholders. As a tentative policy proposal, this Article suggests that the Securities and Exchange Commission encourage public companies that trade on U.S. stock exchanges to have a "Communications Committee" responsible for the oversight of all forms of corporate speech. [ABSTRACT FROM AUTHOR]

This paper examines empirically the announcement effect of commercial corporate governance ratings on share returns. Rating downgrades by Institutional Shareholder Services (ISS) are associated with negative returns of –1.14% over a 3-day announcement window. The returns are highly correlated with the proprietary analysis of ISS and are decreasing in agency costs, consistent with ratings providing independent information on underlying corporate governance quality. We thus show that the influence and impact of ISS extends beyond proxy recommendations and subsequent voting outcomes. Our findings contrast with the insignificant price impact of Daines, Gow, and Larcker (2010) , whose analysis we replicate and successfully reconcile to ours by pooling upgrades and downgrades together. [ABSTRACT FROM AUTHOR]

'Shareholder rights' are the legal entitlements of shareholders vis-à-vis companies in which they invest. A large body of research has sought to investigate how shareholder rights foster accountability of controllers. The concern has been that without accountability, managers and dominant shareholders will use their power to further their own interests at the expense of outside investors. A contrasting concern is that strengthening shareholder rights may come at the expense of other parties, which may also lead to misallocation of corporate resources. A recently-emerging body of research suggests that the relationship between shareholder rights and social welfare is not monotonic, but rather inverse-U-shaped. We argue that the calibration and impact of shareholder rights depends crucially on the institutional channel(s) through which they are implemented—voting, litigation, and/or market pricing. In particular, the market pricing channel intensifies the effects of shareholder rights in ways that can be excessive. This can harm not only other constituencies but also shareholders, as it can promote short-termism and systemic externalities. These problems are less pronounced for shareholder rights implemented through the voting channel. [ABSTRACT FROM AUTHOR]

The article focuses on the implication of controlling shareholders on corporate governance. Topics mentioned include good law jurisdictions, nonpecuniary private benefits of control, the different types of controlling shareholders, the role of nationalism in the development of corporate law and governance, and the efficiency of corporate governance in reducing agency costs

Shareholder inspection rights allow a shareholder to access the relevant documents of the company in which they hold an interest, so as to address the problem of information asymmetry and reduce the agency costs inherent in the corporate structure. While Chinese corporate governance and American corporate governance face different sets of agency cost problems, this Article shows that shareholder inspection rights play an important role in both China and the United States. On the books, while shareholder inspection rights in both countries are broadly similar, there are some important differences on issues such as the proper purpose requirement. The empirical analysis of this Article further sheds light on how inspection rights operate on the ground. A good number of inspection cases are filed in both China and in Delaware. These cases are resolved by the courts relatively quickly. While inspection rights in both countries are frequently used as a presuit discovery device, the types of subsequent litigation that can be filed in each country are quite different. Efforts are made to explain, and draw implications from, the similarities and differences on shareholder inspection rights between the two countries. [ABSTRACT FROM AUTHOR]

This study examines the effects of the firm's ownership concentration and its institutional environment on corporate debt maturity choices. As ownership concentration and debt maturity are alternative governance mechanisms, we theorize and investigate whether their association is influenced by country‐level governance factors that enhance outside monitoring by minority shareholders and debtholders. Our investigation is based on a dataset of 50,599 firm‐year observations from 38 countries. We use a propensity‐score matching approach and find that the effect of ownership concentration on debt maturity is conditional to country‐level governance attributes. Ownership concentration has a negative effect on debt maturity in countries where both shareholder protection and creditor rights are weak. Ownership concentration, however, tends to lengthen debt maturity as protection increases, and this positive effect on the length of debt maturity is stronger in countries enhancing protection towards debtholders (instead of shareholders). We also explore other characteristics of ownership structure, such as the identity and presence of controlling shareholders. These results corroborate the view that entrenched shareholders may use debt maturity opportunistically. Our study provides new insights into the interplay between firm‐ and country‐level governance mechanisms and a deeper understanding of cross‐country differences in the association between ownership structure and debt financing. [ABSTRACT FROM AUTHOR]

Using a large sample of litigation events involving publicly listed defendants, we document a surprising fact. The resolution of litigation through a court's decision dominates settlement of litigation from the shareholders' point of view, even when the firm loses. We develop a model using agency costs within the firm to explain why the market views settlement as a negative outcome on average and find empirical evidence supporting the implications of the model. Specifically, firms with weak corporate governance settle litigation more quickly, and the market reacts more negatively to settlements involving firms with higher agency costs. [ABSTRACT FROM AUTHOR]

A growing number of technology companies, including Google, Zillow, and Snap, have issued stock that does not allow investors to vote on corporate decisions. But there is fundamental disagreement among scholars and investors about whether nonvoting stock is beneficial or harmful. Critics argue that nonvoting shares perpetually insulate corporate insiders from influence and oversight, and therefore increase agency costs. By contrast, proponents contend that nonvoting shares may provide benefits that exceed these agency costs, such as enabling corporate insiders to pursue their long-term vision for the company without interference from outside shareholders. This Article offers a novel perspective on this debate. It demonstrates an important and previously unrecognized benefit of nonvoting stock: that it can be used to make corporate governance more efficient. This is because nonvoting stock allows companies to divide voting power between informed shareholders who value their voting rights and uninformed, "weakly motivated" shareholders who do not. When this efficient sorting happens, a company will lower its cost of capital by reducing agency and transaction costs. Specifically, informed investors will pay more for voting stock that is not diluted by the votes of uninformed, weakly motivated investors; indeed, a company may even entice informed investors to invest by offering two classes of shares. Likewise, weakly motivated investors will gravitate toward shares that do not require them to incur the costs associated with voting, especially because nonvoting stock tends to trade at a discount relative to voting stock. In other words, the company that issues nonvoting shares for its uninformed shareholders will make itself more valuable. This insight has several implications for the law. Most importantly, this Article contends that recent proposals to restrict or deter companies from issuing nonvoting shares should be rejected. Under certain circumstances, nonvoting stock has beneficial functions, and therefore, restricting its use may impede efficient corporate structuring. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to examine the relationship between corporate governance (CG) and firms’ bond recovery rates (RRs). The authors hypothesize that governance features impact RRs by controlling agency costs that result from conflicts between bondholders and shareholders. The authors also test the relationship between CG and RRs during the last crisis. Design/methodology/approach – The authors use a generalized method of moments regression model to test the relationship between CG and firms’ bond RRs. The authors employ a direct measure of recoveries rates from Moody’s ultimate recovery database covering the period from 2003 to 2012. Both firm-level CG and country-level variables are used to examine the determinants of corporate bonds RRs. Findings – The results support a significant impact of CG mechanisms on bond RRs mainly during crisis period. The authors find that firms operating with CEO-Duality decrease their bond RRs during financial crisis. This implies wealth transfers from bondholders to shareholders and provides one explanation why some firms operate with weak governance. Originality/value – This paper provides the first direct evidence that corporate bond RRs are directly related to CG mechanisms. The authors combine firm-level CG and country-level variables to examine the determinants of corporate bonds RRs. Earlier studies focussed on financial firm-level data and macro-economic variables. The authors also test the impact of board composition and ownership structure on bond recoveries. [ABSTRACT FROM AUTHOR]

Purpose -- The agency problem inherent in governing public corporations predicts a management not acting in shareholders' best interest. The purpose of this paper is to use the Green Bay Packers' unique ownership structure as a case study to show that a disperse shareholder base does not necessarily lead to failures in corporate governance. Design/methodology/approach -- The Packers have been run by a great management team since 1992. The authors argue that the new management has become the de facto owners of the Packers organization and dealt away the agency costs as a result. This argument is in line with the Coase Theorem. Findings -- The ownership of the Packers is a property. As would be argued with the Coase Theorem, if the property right is well defined, who controls the property, under certain circumstances, is irrelevant in regard of maximizing ownership value. Research limitations/implications -- With only one sample point, the authors, however, cannot rule out the randomness of the Packers' stellar performance and also the possibility that the new management acts in the best interest of Packers shareholders because they have well-designed employment contracts. Originality/value -- Nevertheless, the findings offer a new perspective to the corporate governance literature. [ABSTRACT FROM AUTHOR]

Manuscript Type Empirical Research Question/Issue Do firms take advantage of the flexibility of the 'comply or explain' corporate governance disclosure regime to adopt governance practices that are best suited to their needs and value-added to the firms as predicted by economic theories of the firm? Using the Canadian 'comply or explain' corporate governance disclosure regime, we construct a board score measure based on the Canadian code's 47 'best practices.' We employ a unique approach by positing that the 'explain' disclosures indicate higher agency costs of best practice adoption or indicate the ability of the firm to improve its governance practices relative to 'best practices' in light of firm specific circumstances. Research Findings/Insights We find that our measure is strongly and positively associated with higher firm value and weakly and positively associated with better operational performance. Further, our measure is more strongly associated with both than best practice adoption measures. Theoretical/Academic Implications Our unique measure of governance quality reveals differences in governance efficiency and effectiveness that are consistent with the theorized advantages of 'comply or explain' governance disclosure regimes. Further, our results suggest that firms in a 'comply or explain' regime are not employing, on average, the discretion permitted by such a regime to avoid improvements to their corporate governance practices. Practitioner/Policy Implications Our results support the proposition that the flexibility of a 'comply or explain' governance regime provides tangible financial benefits to shareholders in terms of higher firm value and returns on shareholders' equity investment. [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 investigate the valuation effects of German firms targeted by hedge funds and by private equity investors. We argue that both types of investors differ from other blockholders by their strong motivation and ability to actively engage and reduce agency costs. Consequently, we find positive abnormal returns following a change in ownership structure. However, these effects differ markedly between both investors, as proxy variables for agency costs only explain the market reaction for our private equity subsample. We conclude that private equity funds seem to be more successful at creating shareholder value, which could be due to their longer-term perspective and a higher adaptability to the surrounding corporate governance system. [ABSTRACT FROM AUTHOR]

Abstract: Large shareholders are a potentially very important element of firms’ corporate governance system. Whereas analytical research is typically vague on who these large shareholders are, in practice there are important variations in the types of large owners (and the different types of large owners could play very different governance roles). After briefly reviewing the standard agency cost arguments, in this article I emphasize the heterogeneity of concentrated ownership and in particular focus on the roles of families, institutions, governments, and employee ownership. I also discuss the role of large shareholders in private (i.e., unlisted) firms, where ownership tends to be more concentrated than in publicly traded firms. Finally, I briefly discuss variations in ownership structures across selected countries. [Copyright &y& Elsevier]

We develop a dynamic tradeoff model to examine the importance of manager-shareholder conflicts in capital structure choice. In the model, firms face taxation, refinancing costs, and liquidation costs. Managers own a fraction of the firms' equity, capture part of the free cash flow to equity as private benefits, and have control over financing decisions. Using data on leverage choices and the model's predictions for different statistical moments of leverage, we find that agency costs of 1.5% of equity value on average are sufficient to resolve the low-leverage puzzle and to explain the dynamics of leverage ratios. Our estimates also reveal that agency costs vary significantly across firms and correlate with commonly used proxies for corporate governance. [ABSTRACT FROM AUTHOR]

ABSTRACT Manuscript Type: Empirical Research Question/Issue: Using the conceptual framework of , this study examines the impact of principal-principal agency problems on the quality and effectiveness of corporate governance structures in listed companies from 14 European countries between 1999 and 2003. Specifically, we develop an index on the severity of the agency conflict and investigate whether this index explains the quality of governance structures. We also examine whether, given certain environmental complementarities, this index influences the effectiveness of good governance structures. Research Findings/Insights: Using a simultaneous equations model, we find that the conflict index affects the quality and effectiveness of corporate governance. When agency conflicts are severe, the costs of installing good governance are high for the majority shareholders and the quality is low. Once installed, however, good governance structures complemented with a high-quality disclosure environment leads to higher firm value, especially in companies with a severe agency conflict. Theoretical/Academic Implications: Our study adds to the governance literature by focusing on the costs of installing good governance. Further, it contributes to principal-principal agency studies by examining a number of developed countries and by developing a measure for the severity of the principal-principal conflict. Finally, our study adds to institutional theory by showing how companies' corporate governance choices are affected by the severity of agency conflicts and the way corporate governance is regulated. Practitioner/Policy Implications: Our analyses suggest that regulatory approaches to corporate governance issues should move away from a 'one-size-fits-all' policy toward one that takes into account the organizational and environmental context. By demonstrating that the severity of principal-principal agency conflicts results in significant differences in the existence and effectiveness of corporate governance, our empirical evidence can guide regulators in developing new regulations or laws intended to reduce private benefits of control or improve the disclosure environment. [ABSTRACT FROM AUTHOR]

We review accounting and finance research on corporate governance (CG). In the course of our review, we focus on a particularly vexing issue, namely endogeneity in the relationships between CG and other matters of concern to accounting and finance scholars, and suggest ways to deal with it. Given the advent of large commercial CG databases, we also stress the importance of how CG is measured and in particular, the construction of CG indices, which should be sensitive to local institutional arrangements, and the need to capture both internal and external aspects of governance. The 'stickiness' of CG characteristics provides an additional challenge to CG scholars. Better theory is required, for example, to explain whether various CG practices substitute for each other or are complements. While a multidisciplinary approach to developing better theory is never without its difficulties, it could enrich the current body of knowledge in CG. Despite the vastness of the existing CG literature, these issues do suggest a number of avenues for future research. [ABSTRACT FROM AUTHOR]

Many scholars have found a negative relationship between a firm's size and its value, as measured by Tobin's q. This result is called the size discount. There are hypotheses about why the size discount exists, but none have been rigorously empirically tested. This paper argues that the size discount is created by the inability of shareholders to minimize agency costs in larger companies. Statistical tests suggest that the size discount only appears in large firms with managers that impose excessive agency costs upon their shareholders. Empiricists who use Tobin's q to proxy for growth opportunities may need a different proxy. [ABSTRACT FROM AUTHOR]

This article investigates the impact on share prices when news released on the specialized media indicates that the interests of controlling and minority shareholders groups diverge. Methodologically, we analyze 24 announcements of conflicts between shareholder groups in Brazil using two event study methodologies. We find strong support for our hypothesis that such news constitutes a proxy for relevant agency costs taking place, leading to a higher perception of risk and reduced share price. To our knowledge, this is the first article to estimate the impact of specific agency costs between controlling and minority shareholders in an environment characterized by concentrated ownership structures. The article is relevant for all capital markets' investors, as well as for analysts and other capital markets' agents. For policy makers and practitioners, our results provide evidence on the potential corporate value loss owing to conflicts between shareholders groups. As a result, they reinforce the argument for the adoption of good corporate governance practices, in order to avoid corporate value destruction resulting from problems between different shareholding groups. The main author is a professor at the School of Economics, Management and Accounting of University of São Paulo (FEA/USP) in Corporate Governance courses at both graduate and undergraduate level. In addition, he is Executive Coordinator of the Center for Corporate Governance Research of Fipecafi (CEG – www.ceg.org.br), Vice-President of the Brazilian Society of Finance (www.sbfin.org.br) and Senior Researcher of the Brazilian Institute of Corporate Governance (IBGC – www.ibgc.org.br). He is author of several books and articles on corporate governance, and writes a monthly column on corporate governance issues for Capital Aberto magazine, one of the most prominent capital markets' magazines in Brazil, making him well known among the corporate governance community in Brazil and Latin America. All persons involved with capital markets, media and policy makers should take note of these results, as most have corporate environments characterized by controlling shareholders, and their relationship with minority shareholders can be a potential source of relevant value destruction. [ABSTRACT FROM AUTHOR]

It has been advocated within corporate governance that institutional investors may discipline management in listed firms and thereby alleviate the free rider problem associated with dispersed ownership. This article tests this hypothesis using a sample of Danish listed firms during 1998–2001 determining, whether ownership by institutional investors impacts performance, measured by Tobin’s q. Using three stage least squares, it is shown that aggregate ownership by institutional investors does not influence firm performance. However, when decomposing the results, it is found that joint ownership by the largest two Danish institutional investors, has a significant negative impact firm performance. Ownership by banks and to a lesser extent insurance companies significantly influences firm performance positively. The results somehow challenge the conventional wisdom, arguing that the black box view of institutional investors should be abandon. Therefore it is suggested that a more careful analysis should be devoted to each institutional investors own legal environment. [ABSTRACT FROM AUTHOR]

We find that corporate voluntary disclosure is negatively associated with the separation of cash flow rights from control rights. This result is consistent with the notion that as the separation of cash flow rights from control rights increases, controlling owners have larger incentives to expropriate the wealth of minority shareholders and low corporate disclosure constitutes a mechanism to facilitate controlling owners in masking their private benefits of control. The negative association between voluntary disclosure and the separation of cash flow rights from control rights is less pronounced for firms with greater external financing needs. This result suggests that for firms with high separation of cash flow rights from control rights, those with greater external financing needs undertake higher firm-level voluntary disclosure to reduce information asymmetry. We also find that the negative association between voluntary disclosure and the separation of cash flow rights from control rights is less pronounced for firms that have a large non-management shareholder. Our result supports the role of large non-management shareholder in mitigating agency problems associated with the separation of ownership and control. [ABSTRACT FROM AUTHOR]