Compensation-related institutional investor activism – a literature review and integrated analysis of sustainability aspects

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Patrick Velte ◽  
Jörn Obermann
Keyword(s):  
Literature Review ◽  
Institutional Investors ◽  
Institutional Investor ◽  
Future Research ◽  
Integrated Analysis ◽  
Principal Agent ◽  
Management Compensation ◽  
Principal Agent Theory ◽  
Content Type ◽  
Agent Theory

Purpose This paper aims to analyse whether and how different types of institutional investors influence shareholder proposal initiations, say-on-pay (SOP) votes and management compensation from a sustainability perspective. Design/methodology/approach Based on the principal-agent theory, the authors conduct a structured literature review and evaluate 40 empirical-quantitative studies on that topic. Findings The traditional assumption of homogeneity within institutional investors, which is in line with the principal–agent theory, has to be questioned. Only special types of investors (e.g. with long-term and non-financial orientations and active institutions) run an intensive monitoring strategy, and thus initiate shareholder proposals, discipline managers by higher SOP dissents and prevent excessive management compensation. Research limitations/implications A detailed analysis of institutional investor types is needed in future empirical analyses. In view of the current debate on climate change policy, future research could analyse in more detail the impact of institutional investor types on proxy voting, SOP and (sustainable) management compensation. Practical implications With regard to the increased shareholder activism and regulations on SOP and management compensation since the 2007/2008 financial crisis, firms should be aware of the monitoring role of institutional investors and should analyse their specific ownership nature (time- and content-driven and as well as range of activity). Originality/value To the best of authors’ knowledge, this is the first literature review with a clear focus on institutional investor range and nature, shareholder proposal initiation, SOP and management compensation (reporting) from a sustainability viewpoint. The authors explain the main variables that have been included in research, stress the limitations of this work and offer useful recommendations for future research studies.

Mutualistic symbiosis?

2020 ◽  
Vol 43 (8) ◽  
pp. 989-1011
Author(s):  
Jörn Obermann ◽  
Patrick Velte ◽  
Jannik Gerwanski ◽  
Othar Kordsachia
Keyword(s):  
Corporate Governance ◽  
Psychological Ownership ◽  
Empirical Literature ◽  
Future Research ◽  
Principal Agent ◽  
Stewardship Theory ◽  
Principal Agent Theory ◽  
Content Type ◽  
Mutualistic Symbiosis ◽  
Agent Theory

Purpose Although principal–agent theory has gained a prominent place in research, its negative image of self-serving managers is frequently criticized. Thus, the purpose of this paper is to examine how existing theories of agency and stewardship can be combined by using behavioral characteristics. Design/methodology/approach This study reviewed articles on the behavior of agents and stewards from the domains of finance, economics, management, corporate governance and organizational research. Additional theoretical and meta-analytical empirical literature from the fields of psychology and sociology was used to account for general patterns of human behavior. Findings The results indicate that goal congruency and the perception of fairness can serve as moderators distinguishing agency theory and stewardship theory. Goal congruency can be achieved by stipulating psychological ownership. The perception of distributive and procedural fairness is demonstrated by two major corporate governance mechanisms: performance-based compensation and board monitoring. The results are summarized in six hypotheses that allow a situational, customized corporate governance. These hypotheses can be tested in future research. Originality/value Prior work either focused on the merits of principal-agent theory or advocates the utilization of positive management theories, such as stewardship theory. However, little work has been done on bridging the gap between both constructs and develop a more extensive view of management theory.

Is institutional investor a supervisor or cooperator?

2018 ◽  
Vol 9 (1) ◽  
pp. 2-18 ◽  
Author(s):  
Yuedong Li ◽  
Xianbing Liu ◽  
Qing Yan
Keyword(s):  
Institutional Investors ◽  
Institutional Investor ◽  
Test Methods ◽  
Future Research ◽  
Management Turnover ◽  
Content Type ◽  
Financial Restatement ◽  
Strategic Cooperation ◽  
Financial Restatements ◽  
The Relationship

Purpose The purpose of this paper is to discuss whether top management will assume their liabilities especially when financial restatement occurs, and,based on the “effective supervision theory” and “strategic cooperation theory,” to examine whether an institutional investor is a supervisor or a cooperator considering the management turnover caused by financial restatement in the companies. Design/methodology/approach Using a sample of the A-share-listed companies from year 2010 to year 2014 and dividing financial restatement into fraudulent financial restatement and other financial restatement, the authors examine the relationship between financial restatement and abnormal management turnover, which usually is related to the management integrity or capacity. By using group test methods, the authors test the influence of the institutional investors’ shareholding on the relation between financial restatements and management turnover. Findings This paper finds that financial restatement can result in abnormal management turnover, especially the fraudulent financial restatement. The institutional investors usually are supervisors but when the shareholding of institutional investor is too high and the management turnover results from fraudulent financial restatement, the institutional investors may become cooperators with management in the companies. Besides, the institutional investors play the supervisory function more significantly in non-state-owned enterprises. Originality/value This paper expands literature of the institutional investors in the corporate governance area and provides a basis for future research in the area of the institutional investors’ governance effect. It divides financial restatements into fraudulent financial restatement and other financial restatement and examines the relationship between financial restatement and abnormal management turnover so as to provide evidence about whether the management will assume their responsibilities when there is financial restatement in the company. It also tests whether the institutional investors will play supervisor’s or cooperator’s function in state-owned and non-state-owned enterprises.

Behavioral biases on institutional investors: a literature review

Kybernetes ◽  
2016 ◽  
Vol 45 (10) ◽  
pp. 1668-1684 ◽  
Author(s):  
Selim Aren ◽  
Sibel Dinç Aydemir ◽  
Yasin Şehitoğlu
Keyword(s):  
Literature Review ◽  
Empirical Evidence ◽  
Institutional Investors ◽  
Design Methodology ◽  
Home Bias ◽  
Institutional Investor ◽  
Disposition Effect ◽  
Herding Behavior ◽  
Content Type ◽  
Behavioral Biases

Purpose The purpose of this paper is to evaluate published institutional investor research focused on home bias, disposition effect, and herding behavior in recognized journals and to ascertain some substantial gaps with regard to them. Design/methodology/approach Recently published studies between 2005 and 2014, which intend to examine behavioral biases on institutional investors, have been reviewed through juxtaposing them under the three fundamental titles and figuring them according to the explanation why these biases occurs. Findings The research examining home bias has identified the presence of this effect on institutional investors and explained it with information or culture. Yet, the existence of disposition effect has not been found in the extant research. These studies have estimated disposition effect through overconfidence and experience. Also, extant studies have provided evidence of herding behavior, attributing this behavior to pursuing same published information and protecting their reputation and career. Originality/value Currently, no study, which reviews and evaluates the empirical research body on behavioral biases displayed institutional investors, exists. To the authors’ knowledge, this is the first paper which highlights the empirical evidence on these bias and summarizes the explanations in these studies for these biases exhibited by institutional investors. This could contribute to the researchers focusing on behavioral biases on institutional investors by providing them with a meaningful figuralization regarding their evidence and explanation.

scholarly journals What theories underpin performance-based financing? A scoping review

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Elisabeth Paul ◽  
Oriane Bodson ◽  
Valéry Ridde
Keyword(s):  
Scoping Review ◽  
Healthcare Providers ◽  
Health Sector ◽  
Principal Agent ◽  
Middle Income ◽  
Principal Agent Theory ◽  
Content Type ◽  
Middle Income Countries ◽  
Agent Theory ◽  
Performance Based Financing

PurposeThe study aims to explore the theoretical bases justifying the use of performance-based financing (PBF) in the health sector in low- and middle-income countries (LMICs).Design/methodology/approachThe authors conducted a scoping review of the literature on PBF so as to identify the theories utilized to underpin it and analyzed its theoretical justifications.FindingsSixty-four studies met the inclusion criteria. Economic theories were predominant, with the principal-agent theory being the most commonly-used theory, explicitly referred to by two-thirds of included studies. Psychological theories were also common, with a wide array of motivation theories. Other disciplines in the form of management or organizational science, political and social science and systems approaches also contributed. However, some of the theories referred to contradicted each other. Many of the studies included only casually alluded to one or more theories, and very few used these theories to justify or support PBF. No theory emerged as a dominant, consistent and credible justification of PBF, perhaps except for the principal-agent theory, which was often inappropriately applied in the included studies, and when it included additional assumptions reflecting the contexts of the health sector in LMICs, might actually warn against adopting PBF.Practical implicationsOverall, this review has not been able to identify a comprehensive, credible, consistent, theoretical justification for using PBF rather than alternative approaches to health system reforms and healthcare providers' motivation in LMICs.Originality/valueThe theoretical justifications of PBF in the health sector in LMICs are under-documented. This review is the first of this kind and should encourage further debate and theoretical exploration of the justifications of PBF.

CIO reporting structure and firm strategic orientation – a content analysis approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Erastus Karanja ◽  
Donna Grant ◽  
Jigish S. Zaveri
Keyword(s):  
Content Analysis ◽  
Educational Background ◽  
Principal Agent ◽  
Press Releases ◽  
Data Set ◽  
Principal Agent Theory ◽  
Content Type ◽  
Agent Theory ◽  
Strategic Orientations ◽  
Reporting Relationships

Purpose Grounded in the principal-agent theory, this study aims to develop and test hypotheses too, investigate how the firm’s strategic orientations, namely, innovation, growth, differentiation and cost leadership impact the chief information officer (CIO) reporting relationship and structure. Design/methodology/approach The study uses content analysis to analyze a data set of press releases collected from the LexisNexis Academic wire index. The press releases were issued by firms when they hired CIOs between 2003 and 2007, yielding 128 firms, which had specific information about the CIO reporting relationship and structure. Findings The results reveal that firms seeking an innovation, growth or differentiation strategy have their CIOs reporting to the chief executive officer. Research limitations/implications The current study is motivated by the desire to replicate and extend the works of previous researchers who have assessed various CIO issues. Replication takes several forms such as the use of similar or different data sets, different research environments or reinvestigating research concepts through a different theoretical lens. This study makes use of a multi-firm data set spanning five years and the principal-agent theory as the theoretical framework to explore the CIO reporting relationship and structure. Although this study focuses on the hiring trends and the strategic orientations of the firms, future studies should explore other characteristics associated with the CIOs that might have an impact on the reporting relationship such as the years of experience, age, educational background of CIOs and information technology budgets. Practical implications The existing literature has not settled the debate as to whom the CIO should be reporting to and understanding the reporting relationships is important because, in many firms, the organizational structures and the reporting relationships are indicative of the power dynamics and how the organizational resources are controlled and shared. Originality/value Replication studies are important because they confirm, reinforce, extend and provide reliability to the paradigms and knowledge in the discipline, as well as offer reliability of the results upon which scientific progress is based.

Study on incentive and supervision mechanisms of technological innovation in megaprojects based on the principal-agent theory

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jiawei Liu ◽  
Guanghong Ma
Keyword(s):  
Risk Assessment ◽  
Information Asymmetry ◽  
Technological Innovation ◽  
Effective Means ◽  
Unit Cost ◽  
Principal Agent ◽  
Principal Agent Theory ◽  
Content Type ◽  
Agent Theory ◽  
Incentive Intensity

PurposeThe high uncertainty of technological innovation in megaprojects brings great challenges to the R&D institution and also acts as a trigger for moral hazard. The incentive and supervision are effective means to improve the performance of innovation. The purpose of this paper is to propose appropriate incentive and supervision mechanisms to reduce information asymmetry and improve the efficiency of incentives. Suggestions on technological innovation are put forward to megaprojects management.Design/methodology/approachAccording to the principal-agent theory, the research develops incentive models under three states, i.e. information symmetry, information asymmetry and information asymmetry based on supervision mechanism. The Bayesian theory is employed to prove the effectiveness of the novel supervision method based on risk assessment.FindingsThe results indicate that under the information asymmetry, the incentive intensity is positively correlated with the social benefits coefficient, and negatively correlated with the patent benefits coefficient. The R&D effort and the owner's incentive intensity decline with the increase of information asymmetry. The supervision of risks can effectively reduce the degree of information asymmetry, and the higher the uncertainty of innovations, the more significant the effect of supervision is. As the supervision intensity increases, the incentive intensity, the R&D effort and the innovation output will increase. In addition, the R&D institutions with high innovation capability, low unit cost of R&D and low risk-aversion are more willing to make efforts to innovate.Originality/valueThis study fills the research gap on incentive and supervision of technological innovation in megaprojects. The externality of innovation benefits is considered in the model. The traditional incentive model is extended through the introduction of supervision. Furthermore, a novel supervision method based on risk assessment is proposed. The results validate the importance of risk management in technological innovation and provide a new insight for project management.

Can TMT vertical pay disparity promote firm innovation performance? The moderating role of CEO power and board characteristics

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Xi Zhong ◽  
He Wan ◽  
Ge Ren
Keyword(s):  
Innovation Performance ◽  
High Tech ◽  
Principal Agent ◽  
Ceo Power ◽  
Firm Innovation ◽  
Principal Agent Theory ◽  
Content Type ◽  
Tournament Theory ◽  
Agent Theory ◽  
Pay Disparity

PurposeBased on the tournament theory and the principal agent theory, this study aims to empirically investigate how top management team (TMT) vertical pay disparity (the pay disparity between the CEO and non-CEO executives) influences firm innovation performance.Design/methodology/approachThis study empirically tested the hypotheses based on a sample of listed high-tech companies in China during the period between 2007 and 2018.FindingsTMT vertical pay disparity promotes innovation performance; CEO power undermines the positive effect of TMT vertical pay disparity on innovation performance; the negative moderating effect of CEO power is mitigated by board age and gender and educational levels, whereas the proportion of female directors has no such effect at any significant level.Originality/valueThis study uniquely contributes to the theoretical and empirical development of tournament theory and the principal agent theory.

A systematic literature review of healthcare supply chain and implications of future research

2019 ◽  
Vol 13 (4) ◽  
pp. 405-435 ◽  
Author(s):  
Anuj Dixit ◽  
Srikanta Routroy ◽  
Sunil Kumar Dubey
Keyword(s):  
Supply Chain ◽  
Literature Review ◽  
Inventory Management ◽  
Cold Chain ◽  
Future Research ◽  
Research Papers ◽  
Content Type ◽  
Drug Manufacturing ◽  
Customer Training

Purpose This paper aims to review the healthcare supply chain (HSC) literature along various areas and to find out the gap in it. Design/methodology/approach In total, 143 research papers were reviewed during 1996-2017. A critical review was carried out in various dimensions such as research methodologies/data collection method (empirical, case study and literature review) and inquiry mode of research methodology (qualitative, quantitative and mixed), country-specific, targeted area, research aim and year of publication. Findings Supply chain (SC) operations, performance measurement, inventory management, lean and agile operation, and use of information technology were well studied and analyzed, however, employee and customer training, tracking and visibility of medicines, cold chain management, human resource practices, risk management and waste management are felt to be important areas but not much attention were made in this direction. Research limitations/implications Mainly drug and vaccine SC were considered in current study of HSC while SC along healthcare equipment and machine, hospitality and drug manufacturing related papers were excluded in this study. Practical implications This literature review has recognized and analyzed various issues relevant to HSC and shows the direction for future research to develop an efficient and effective HSC. Originality/value The insight of various aspects of HSC was explored in general for better and deeper understanding of it for designing of an efficient and competent HSC. The outcomes of the study may form a basis to decide direction of future research.

Sign in / Sign up

Export Citation Format

Share Document