Search

Research regards related party transactions (RPTs) and control-ownership divergence (wedge) as expropriation mechanisms manifesting severe agency conflict in emerging markets. Since corporate governance greatly influences firms' investments and strategic behavior, this study examines how different RPTs and the wedge affect cross-border acquisition (CBA) size and returns. In line with agency theory, opportunistic RPTs like loans/guarantees reduce CBA returns. However, operating RPTs are positively related to returns as the market seems to link these RPTs with benefits to firms. The CBA performance of wedge firms varies with RPT types. While loans/guarantees by wedge firms reduce returns due to combined tunneling incentives, operating RPTs impact returns positively, reflecting more economic benefits in wedge firms. The wedge or RPTs are also positively related to CBA size. But increased tunneling incentives restrain wedge firms that give loans/guarantees from large CBAs. Finally, family firms or large group affiliates that provide loans/guarantees or sustain the wedge reduce returns yet make larger CBAs. Overall, agency costs of expropriation mechanisms depend on RPT types and receive further impetus in family firms or group affiliates with extensive intra-group linkages. [ABSTRACT FROM AUTHOR]

This study explores the association between board composition and the financial performance of the companies listed on the BSE-500 Index. The authors also analyse whether financial performance mediates the relation between board composition and executive compensation or not. The authors utilised a sample of 319 non-financial firms from the BSE-500 Index from 2010–11 to 2019–20. This time period was purposely chosen to eliminate the consequences of the 2007–2008 global financial crisis to reduce any uncertainty that may influence the company's financial performance. OLS regression techniques with firm fixed and time effects have been incorporated to test the hypotheses. To address the issues of reverse causation and endogeneity, regression models were employed with one-year lagged values for all predicted variables. In addition to OLS, the GMM technique is also used to validate the findings of the study. The findings show that financial performance fully mediates the link between board composition variables, except gender diversity, and executive compensation. These results suggest that a successful corporate governance system relies on the board's composition and how well it supervises its executives. Thus, the board may devise a fair compensation structure which is linked to financial performance to reduce managerial opportunism. This could help in aligning the interest of managers and shareholders, therefore lowering agency costs and boosting financial performance. Although executives are held accountable for the organisation's growth, sometimes they may act in their interest instead of the shareholders. Therefore, this study contributes to the literature on executive compensation and provides insights into reducing the opportunistic behaviour of managers through compensation design. In the pre-existing literature, limited studies are available that examine the direct or indirect effect of financial performance on the association between board composition and executive compensation among Indian companies. This study adds evidence to the literature on board composition of companies, financial performance, and executive compensation. This study is helpful for executives of the company and regulatory authorities while making decisions regarding board composition and executive compensation. This study encourages future researchers to conduct longitudinal studies with a larger sample and a longer time horizon. [ABSTRACT FROM AUTHOR]

The study is conducted to assess the impact of corporate governance on the firm performance and to study the mediating role of agency cost in the association between corporate governance and firm performance. 74 non-financial companies are selected as a sample for the study. The data from 2017 to 2022 is assessed in the study. Regression analysis is used to assess the direct impact of corporate governance on agency cost and firm performance. Mediation is assessed using Sobel Test. The finding of the study revealed that better corporate governance leads to better firm performance. Results also showed that stronger governance decreases agency cost which in turn leads to better firm performance. This study is unique in a way that it studied the mediating role of agency cost in the relationship between corporate governance and firm performance. The study will help the companies to recognize the importance of strong governance structure in order to increase financial performance. The study will also help to identify the role of agency cost on financial performance and to recognize that agency cost can be reduced via better corporate governance. [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]

This study aim was to verify if Brazilian firms that adopt good corporate governance practices have a higher capital structure adjustment speed. To this end, an unbalanced panel sample of 165 non-financial firms listed on the B3 between 2010 and 2021 was adopted. The adjustment speed heterogeneity was verified by statistically comparing the estimates in two subsamples: i) of firms listed in some B3's governance special segment; and ii) firms in the basic segment. In each sample cut, a dynamic partial adjustment model was estimated with the same leverage target determinants through the dynamic panel fractional estimator of Elsas and Florysiak (2015). The results exposed that the average leverage and the speed of adjustment of Brazilian firms with special governance practices are significantly higher. Therefore, corroborating with the dynamic Trade-Off model with agency costs by Morellec et al. (2012). [ABSTRACT FROM AUTHOR]

This Article focuses on the power and corporate governance significance of the three largest index fund managers commonly referred to collectively as the "Big Three." We present current evidence on the substantial voting power of the Big Three and explain why it is likely to persist and, indeed, further grow. We show that, due to their voting power, the Big Three have considerable influence on corporate outcomes through both what they do and what they fail to do. We also discuss the Big Three's undesirable incentives both to underinvest in stewardship and to be excessively deferential to corporate managers. In the course of our analysis, we reply to responses and challenges to our earlier work on these issues that have been put forward by high-level officers of the Big Three and by a significant number of prominent academics. We show that these attempts to downplay Big Three power or the problems with their incentives do not hold up to scrutiny. We conclude by discussing the substantial stakes in this debate--the critical importance of recognizing the power of the Big Three, and why it matters. [ABSTRACT FROM AUTHOR]

This research foremost intention is to investigate the corporate governance structure effect on the firm's performance of the Indian-listed companies. The study was based on a six-year financial figure from FY 2014–2015 to FY 2019–2020 of Indian-listed companies on the Bombay Stock Exchange (BSE). The study applied the panel data statics model such as pooled OLS, fixed effect and random effect model, Hausman test and the Sys-GMM models for testing the study hypotheses. The study findings indicate that higher board size has a positive significant impact with the ROA, Tobin's Q on the firm's performance, and this helps in strengthen the decision-making process. Besides, the study results show statistically insignificant correlation among the ROA, EPS and NPM with the board independence. The results also reflected the positively correlation among the board meetings and the performance indicators of Tobin's Q, and these scenarios lead to that enhancement of corporate governance practices. Besides, the results negatively revealed correlation amongst the ROE, NPM and corporate governance indicators of CEO duality. The results of the study suggested that companies likely implement proper corporate governance practices leading to sophisticated effectiveness in firm's performance and minimize agency cost. The study attempted corporate governance issues with the several different measures and firm's variables other than using a single-measure context. Additionally, various model descriptions and statistical techniques are applied for analyzing the corporate governance structure and firm-related performance. [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]

The economy is an essential factor in constructing a resilient city, and listed companies play a vital role in the local economy. From the microbehavior of corporate governance, we examine the relationship among corporate governance, agency costs, and corporate sustainable development for a panel sample of 690 state-owned firms in China during 2015–2019. We found that agency costs mediate the relationship between board size, management compensation, debt ratio, dividend policy, and corporate sustainable development. Specifically, decreasing the board size can reduce agency costs and enhance the company's sustainable development capabilities. The existing compensation system is to the disadvantage of the sustainable development of the company. Increasing the salaries of managers will increase agency costs and reduce the company's ability to develop sustainably. Although increasing liabilities can reduce agency costs, increasing liabilities will increase financial risks. The bankruptcy costs caused by increasing liabilities are more significant than agency costs, which leads to a decline in the company's ability to develop sustainably. The implementation of cash dividend policies will help reduce agency costs, thereby increasing their sustainable development capabilities. This also provides new ideas for the Modigliani–Miller (MM) theory and agency cost theory. [ABSTRACT FROM AUTHOR]

The objective of the study is to verify the moderating effect of earnings management on the relationship between corporate governance and the cost of third-party capital of publicly-held companies listed in [B]?, in the period from 2012 to 2017. Initially descriptive analyses were made and later the panel data technique was used. The results reveal that companies with a higher level of corporate governance are able to raise capital from third parties at a lower cost, however, these same companies when associated with the use of earnings management practices make the cost of capital from third parties higher. In general, the evidences from this research contribute to fill an important gap in the national literature, by verifying that companies that use earnings management practices annul the likely favorable effect of corporate governance in reducing the cost of third-party capital. [ABSTRACT FROM AUTHOR]

It has been suggested that the development of decentralised autonomous organisations (DAOs) will lead to a paradigm shift in the way we perceive businesses. DAOs ostensibly eliminate agency costs due to the absence of a board of directors, automated governance mechanisms and transparency provided by the blockchain upon which the DAO is launched. This article undertakes a comparative analysis between DAOs and corporations and questions whether DAOs really do improve the corporate form. Using a corporate governance and legal realist lens, this article suggests that a number of the purported benefits of DAOs are overly simplified. Moreover, there are several practical and legal obstacles that technological advancements and improved engineering must overcome before DAOs become a viable, mainstream organisational structure. Balancing the inevitable improvement in technology against these significant obstacles, this article predicts an incremental integration of DAOs into society through a hybrid approach, involving interim legal solutions and varying degrees of automation and decentralisation. [ABSTRACT FROM AUTHOR]

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]

Purpose: Many farm producer organizations pursue growth and complexity in response to price volatility, industry consolidation and other external developments. Consequently, as ownership is dispersed and control is delegated, members may face increasing agency cost. In spite of the potential to impact performance and even survival, empirical attention to agency problems in farm producer organizations is limited. The purpose of this paper is to address the gap in the literature with an empirical study. Design/methodology/approach: With survey responses from 365 farm producer organizations in the USA, the author uses a two-limit tobit model to estimate the relationships of six ownership and governance characteristics (i.e. board size, management size, director independence, manager independence, CEO independence and non-member ownership) to agency cost, which is proxied by the operating expense ratio. Findings: While controlling for heterogeneity in scale and technology, the author finds positive relationships of board size, management size and CEO independence to agency cost. The novel result illustrates there is a significant cost to the adoption of non-traditional ownership and governance characteristics by farm producer organizations. Practical implications: The presence of agency cost serves as motivation to farm producer organizations to implement new or adapt old agency mechanisms. One recommendation is to reconsider the payment structure of non-member CEOs. There may not be enough incentive to inspire an upstream bias, which is perhaps possible by linking CEO performance to price, patronage and member-oriented performance measurements. Originality/value: Agency cost is rarely studied in relation to farm producer organizations. Recent contributions in the empirical literature lacked an explicit connection of ownership and governance characteristics to agency cost. [ABSTRACT FROM AUTHOR]

Index funds own an increasingly large proportion of American public companies. The stewardship decisions of index fund managers--how they monitor, vote, and engage with their portfolio companies--can be expected to have a profound impact on the governance and performance of public companies and the economy. Understanding index fund stewardship, and how policymaking can improve it, is thus critical for corporate law scholarship. In this Article we contribute to such understanding by providing a comprehensive theoretical, empirical, and policy analysis of index fund stewardship. We begin by putting forward an agency-costs theory of index fund incentives. Stewardship decisions by index funds depend not just on the interests of index fund investors but also on the incentives of index fund managers. Our agency-costs analysis shows that index fund managers have strong incentives to (i) underinvest in stewardship and (ii) defer excessively to the preferences and positions of corporate managers. We then provide an empirical analysis of the full range of stewardship activities that index funds do and do not undertake, focusing on the three largest index fund managers, which we collectively refer to as the "Big Three." We analyze four dimensions of the Big Three's stewardship activities: the limited personnel time they devote to stewardship regarding most of their portfolio companies; the small minority of portfolio companies with which they have any private communications; their focus on divergences from governance principles and their limited attention to other issues that could be significant for their investors; and their pro-management voting patterns. We also empirically investigate five ways in which the Big Three could fail to undertake adequate stewardship: the limited attention they pay to financial underperformance; their lack of involvement in the selection of directors and lack of attention to important director characteristics; their failure to take actions that would bring about governance changes that are desirable according to their own governance principles; their decision to stay on the sidelines regarding corporate governance reforms; and their avoidance of involvement in consequential securities litigation. We show that this body of evidence is, on the whole, consistent with the incentive problems that our agency-costs framework identifies. Finally, we put forward a set of reforms that policymakers should consider in order to address the incentives of index fund managers to underinvest in stewardship, their incentives to be excessively deferential to corporate managers, and the continuing rise of index investing. We also discuss how our analysis should reorient important ongoing debates regarding common ownership and hedge fund activism. The policy measures we put forward, and the beneficial role of hedge fund activism, can partly but not fully address the incentive problems that we analyze and document. These problems are expected to remain a significant aspect of the corporate governance landscape and should be the subject of close attention by policymakers, market participants, and scholars. [ABSTRACT FROM AUTHOR]

This study investigates the market reaction to the increases and decreases in corporate governance ratings of public firms quoted at the Borsa Istanbul (BIST), as well as the market reaction to the increases and decreases in the scores for the subcomponents of the total ratings. The findings suggest that investors react negatively to the announcements of decreases in the overall corporate governance ratings and the scores for the four subcomponents. On the other hand, the findings surprisingly suggest that investors also react negatively to the announcements of increases in the overall corporate governance ratings and the scores for the subcomponents of these ratings. These findings contradict the expectation that investors would value improvements in governance ratings highly based on the assumption that increases in these ratings would imply improved corporate governance that would lead to decreased agency costs and therefore, increased firm value. The findings are robust to various econometric specifications and tests. [ABSTRACT FROM AUTHOR]

In this study, it is aimed to reveal the relationship between the agency cost and board structure of 18 manufacturing industry within the BİST corporate governance index firms between 2006 and 2016. Agency cost is represented with free cash flow and growth opportunity ratio, the board size, number of independent members and CEO duality are represented board structure. According to the empirical results, there is a negative relationship between the board size and agency costs, a positive relationship between the number of independent members and agency costs. However, there is no significant relationship between the CEO duality and the agency costs. The results revealed that the board structure has a significant impact on firms' 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]

The article contends that artificial intelligence (AI) can help enhance board independence by reducing agency costs. Topics mentioned include the use of AI to help directors discharge their duties, the role of the corporate board and the underlying principles behind the duties of directors, and the use of AI in oncology and the learnings relevant to the use of AI in corporate governance.

Family firms have idiosyncrasies which may influence corporate governance. In that regard, this work's contribution is twofold. First, it compares corporate governance of family and non-family firms. Second, it further examines these firms, discriminating between firms listed in the Portuguese stock market index and the others. The sample includes 37 Portuguese listed firms, 16 listed in the Portuguese stock index, the PSI 20. Following a quantitative analysis, the findings show that family firms, especially the ones listed in PSI 20, have more independent members, tend to comply more with corporate governance recommendations, and display more corporate governance information on their websites than other firms. This suggests that family firms try to avoid information asymmetries, so as to evade mispricing, sustain their sustainability, and reduce agency costs. [ABSTRACT FROM AUTHOR]

The desirability of a dual-class structure, which enables founders of public companies to retain a lock on control while holding a minority of the company's equity capital, has long been the subject of a heated debate. This debate has focused on whether dual-class stock is an efficient capital structure that should be permitted at the time of initial public offering ("IPO"). By contrast, we focus on how the passage of time since the IPO can be expected to affect the efficiency of such a structure. Our analysis demonstrates that the potential advantages of dual-class structures (such as those resulting from founders' superior leadership skills) tend to recede, and the potential costs tend to rise, as time passes from the IPO. Furthermore, we show that controllers have perverse incentives to retain dual-class structures even when those structures become inefficient over time. Accordingly, even those who believe that dual-class structures are in many cases efficient at the time of the IPO should recognize the substantial risk that their efficiency may decline and disappear over time. Going forward, the debate should focus on the permissibility of finite-term dual-class structures--that is, structures that sunset after a fixed period of time (such as ten or fifteen years) unless their extension is approved by shareholders unaffiliated with the controller. We provide a framework for designing dual-class sunsets and address potential objections to their use. We also discuss the significant implications of our analysis for public officials, institutional investors, and researchers. [ABSTRACT FROM AUTHOR]

The problem of managerial agency costs dominates debates in corporate law. Many leading scholars advocate reforms that would reduce agency costs by forcing firms to allocate more control to shareholders. Such proposals disregard the costs that shareholders avoid by delegating control to managers and voluntarily restricting their own control rights. This Essay introduces principal-cost theory, which posits that each firm's optimal governance structure minimizes the sum of principal costs, produced when investors exercise control, and agent costs, produced when managers exercise control. Both principal costs and agent costs can arise from honest mistakes (which generate competence costs) and from disloyal conduct (which generate conflict costs). Because the expected costs of competence and conflict are firm-specific, the optimal division of control is firm-specific as well. Thus, firms rationally select from a range of governance structures that empower shareholders to varying degrees. The empirical predictions produced by principal-cost theory are more accurate than those produced by any theory focused solely on agency costs. Principal-cost theory also suggests different policy prescriptions. Rather than banning some governance features and mandating others, lawmakers should permit each firm to tailor its governance structure based on its firm-specific tradeoff between principal costs and agent costs. [ABSTRACT FROM AUTHOR]

Background of Problem: This research investigates the corporate governance and performance between founding family firms and non-founding family firms in Hong Kong, and the performance inside founding family firms under three different management status. Agency costs will be generated by the divergence between CEO interest and those of the outside shareholders if the owner-manager sells equity claims on the corporation. There are two different mainstreams of views regarding relationships between ownership and performance in family business: negative and positive effect generated from family ownership and control. To what extents the two different views are relevant to Hong Kong family firms are still unclear. Research Method and Data: By focusing on Hong Kong business, this research seeks to study 75 Hong Kong listed companies in HSCII for 5 years, yielding 347 observations, using archival data. The empirical result suggests that the founding family firms in Hong Kong may not outperform nonfamily firms, and the founding family firms with founders as CEOs are one of best performers among founding family firms. This research not only studies the performance behaviours of Hong Kong founding/ non-founding family business and inside founding family business, but also sets a foundation for further research. This research gives insights for entrepreneurs to manage their businesses and plan the succession of founding family business in Hong Kong. This research into corporate governance is different to that of countries such as USA, Taiwan, and Mainland China. The founding family firms in Hong Kong may not outperform the nonfamily firms and the founding family firms with the founder as CEO is one of the best management techniques inside founding family firms. This research shows agency costs inside founding family firms affects performance and succession of family firms, as descendants may not be the best successors for firm value maximization, and business continuity. Owners of Hong Kong founding family business should pay more attention on business governance and succussion planning. [ABSTRACT FROM AUTHOR]

Managers' pay, and the way it is determined, can have an important impact on the success of firms, and even of whole economies. While there is a rich literature exploring these issues in the for-profit sector, managerial pay at nonprofit firms has received little attention. Yet nonprofit organizations suffer from agency problems that are similar to, or perhaps even more severe than, those observed at for-profit companies. Accordingly, this Article explores the implications for nonprofit governance of a world in which "managerial power" can affect nonprofit pay setting. This Article develops the theory and provides support in the form of original empirical evidence based on data from a large panel of colleges and universities collected across a ten-year period. Our findings support the hypothesis that donors with less leverage suffer from significant agency costs in setting president pay. For example, we find for the first time evidence of an otherwise counterintuitive negative association between the fraction of university revenue provided by current donations and president compensation, which we suggest shows that schools that are less dependent on donors are freer to set high pay. We discuss the implications of these findings for the regulation of nonprofits and for a broader understanding of the pay-setting process at for-profit as well as nonprofit organizations. [ABSTRACT FROM AUTHOR]

Prior research is not conclusive whether information asymmetries or managerial discretion are the cause of observed investment-cash flow sensitivity. This paper examines the effect of family firms' governance heterogeneity on firm's investment-cash flow sensitivity in Brazil. The Brazilian economic and corporate governance context present several idiosyncratic features, including weak minority shareholder protection, an underdeveloped capital market, macro-economic uncertainties, the presence of controlling shareholders (especially families), and the excessive use of control-enhancing mechanisms, allowing us to explore in greater detail the drivers of investment-cash flow sensitivity. We find that investment is more sensitive to cash flow for firms with a highly entrenched family presence (divergence between corporate control and voting rights coupled with family management) than in less entrenched family firms. This result emerges primarily due to financial constraints from asymmetric information, rather than agency problems of free cash flow from abuse of managerial discretion. Our findings shed new light on the role of excessive control rights in investment decisions, allowing family managers to reallocate capital to cope with financial constraints in times of economic uncertainties. • Family entrenched firms reduce the investment-cash flow sensitivity. • Entrenched owners are stewards in times of economic uncertainty. • Underinvestment due to information asymmetries seems to prevail. • There is no evidence of private benefits of control in family entrenched firms. [ABSTRACT FROM AUTHOR]

An essay is presented on American corporate law and governance as of June 2013, focusing on contracting at the initial public offering (IPO) stage, state competition, and corporate takeover defenses. The Seventh Annual Conference on Empirical Legal Studies (CELS) is addressed, along with the 1976 article "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure" by Michael Jensen and William Meckling. A positive and normative theory of corporate law is also examined.

This article deals with the exclusion of non-profit-making entities from the right of freedom of establishment of Articles 49 and 54 TFEU. It analyses the historical reasons for this exclusion. It is argued that the exclusion from freedom of establishment is no longer justified on the basis of two elements. Firstly, the development of the jurisprudence of the European Court of Justice in the fields of competition law, free movement of capital and tax law makes such exclusion systematically no longer tenable. Secondly, a law and economics treatment of non-profit firms as organisations that efficiently provide services in alternative to for-profit firms weakens the reasons for the exclusion. The article proposes a uniform, European notion of non-profit entity based on a law and economics analysis of this type of firm for the purposes of Article 54 TFEU as opposed to possible different national notions. This is followed by a brief analysis of the hypothesis of regulatory competition among jurisdictions for the law regulating the corporate governance of non-profit entities. [ABSTRACT FROM AUTHOR]

The degree of ownership concentration may influence executive and board compensation (Bebchuk & Fried, 2003). This article analyzes this relationship. Detailed information about top management and board compensation became available starting in 2010 through new Securities Commission filings. Linear regression models applied to a sample of 315 Brazilian companies traded on the national exchange indicate a negative and statistically significant economic correlation between executive compensation and the degree of ownership concentration. Ceteris paribus, companies with a lower degree of ownership concentration pay higher compensation to top executives. Family controlled companies pay more to their chief executive, but not to the managerial team as a whole, and the compensation of directors increases with a greater proportion of control group members or their relatives on the board. There was support for the Managerial Power Hypothesis in companies with a lower degree of ownership concentration and for the extraction of private benefits in companies where it is greater. [ABSTRACT FROM AUTHOR]

This article examines the regulation of directors' remuneration in EU, UK and Belgian law. The author argues that there are two categorises of norms for the regulatory framework of directors' remuneration: one is market-based, market efficiency norms of agency costs; the other is socio-legal norms. The paper argues that agency costs – a responsive mode of governance – alone cannot adequately address the problems of directors' remuneration. On the other hand, socio-legal norms – which are value and ethics-focused – can better construct a paradigm capable of addressing a broader issue of directors' remuneration in the EU context. Agency costs-based regulation has been used by the EU whereas socio-legal matters have been left to Member States. The article shows how socio-legal norms could form the underlying basis of the regulatory regime by examining the laws in the UK and Belgium. It is concluded that the European Court of Justice will need to carry out the role of negative integration by harmonising these social values in developing EU company law. [ABSTRACT FROM PUBLISHER]

Abstract: This study focuses on firms that are audited by a big auditor and examines the differentiation in the earnings management potential and the level of conservatism. It also investigates whether being audited by a big auditor would lead to lower agency costs and lower cost of equity. The study focuses on emerging common-law South Africa and code-law Brazil, and seeks to identify whether there are material differences given their dissimilar institutional characteristics. The study reports that even though firms may be audited by high quality auditors, their institutional differences influence significantly firms'' earnings conservatism, agency costs and cost of equity. Client firms of big auditors in both common-law South Africa and code-law Brazil exhibit lower discretionary accruals. The study has found evidence of more conservative earnings for South Africa but insufficient levels for Brazil. For common-law South Africa, the presence of effective corporate governance mechanisms reduces agency costs. For code-law Brazil, the corporate governance mechanisms generally display an insignificant impact on reducing agency costs. For common-law South Africa, firm-level performance, growth and market determinants tend to lead to a lower cost of equity. For code-law Brazil, it is found that significant discretionary accruals, market beta and analyst forecast dispersion would result in higher uncertainty and would consequently raise the cost of equity. [Copyright &y& Elsevier]

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]

We apply the paradigm of the firm as a nexus of contracts to the debate on regulatory competition vs. unification of law as an alternative way of regulating the business corporation. This approach views the business corporation as a set of coordinated contracts among different parties. Agency problems and related agency costs are the result of this interaction. The economic analysis of corporate law, securities regulation and bankruptcy law identifies law as a means to minimise such agency costs. In this paper, we develop a model where companies are heterogeneous in their preferences about the legal regulation of contractual relationships. We then compare a regime of regulatory competition with one of single supply of regulation and we analyse their relative costs and benefits. [ABSTRACT FROM AUTHOR]