scholarly journals An Applied Econometricians' View of Empirical Corporate Governance Studies

2002 ◽  
Vol 3 (3) ◽  
pp. 295-326 ◽  
Author(s):  
Axel Börsch-Supan ◽  
Jens Köke
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Ownership Structure ◽  
Empirical Studies ◽  
Corporate Control ◽  
Data Availability ◽  
Empirical Literature ◽  
Board Structure ◽  
Critical Survey ◽  
Market For Corporate Control

Abstract The economic analysis of corporate governance is in vogue. In addition to a host of theoretical papers, an increasing number of empirical studies analyze how ownership structure, capital structure, board structure, and the market for corporate control influence firm performance. This is not an easy task, and indeed, for reasons explained in this survey, empirical studies on corporate governance have more than the usual share of econometric problems. This paper is a critical survey of the recent empirical literature on corporate governance - to show which methodological lessons can be learned for future empirical research in the field of corporate governance, paying particular attention to German institutions and data availability.

Tradeoffs in Corporate Governance: Evidence From Board Structures and Charter Provisions

2011 ◽  
Vol 01 (04) ◽  
pp. 667-705 ◽  
Author(s):  
Stuart L. Gillan ◽  
Jay C. Hartzell ◽  
Laura T. Starks
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Board Independence ◽  
Governance Structures ◽  
Board Structure ◽  
System Of Equations ◽  
Costs And Benefits ◽  
Market For Corporate Control ◽  
Monitoring Mechanism ◽  
Three Stage Least Squares

We provide arguments and present evidence that corporate governance structures are composed of interrelated mechanisms, which are in turn endogenous responses to the costs and benefits firms face when they choose those mechanisms. Examining board structures and the use of corporate charter provisions in a sample of more than 2,300 firms over a four-year period, we find that firms cluster in their use of governance mechanisms. In particular, the set of charter provisions that firms use, as measured by the Gompers et al. (2003) G Index, is associated with board structure, with the laws of the state in which the firm is incorporated, and with firm and industry characteristics. We also find that some governance structures appear to serve as substitutes. Specifically, firms that have powerful boards (as measured by board independence) also have the greatest number of charter provisions, suggesting that the market for corporate control is less effective as a monitoring mechanism for these firms. In contrast, firms that have less powerful boards tend to have few charter provisions, suggesting that the market for corporate control plays a greater monitoring role at such firms. To address potential endogeneity issues, we employ three-stage least squares analysis to estimate these relationships within a system of equations. Our results from this analysis are consistent with the hypothesis that powerful boards serve as a substitute for the market for corporate control. Finally, our findings suggest that causality runs from the board to the choice of charter provisions, but not vice versa.

scholarly journals Corporate governance, ownership structure and capital structure: evidence from Chinese real estate listed companies

2020 ◽  
Vol 28 (4) ◽  
pp. 759-783 ◽  
Author(s):  
Yi Feng ◽  
Abeer Hassan ◽  
Ahmed A. Elamer
Keyword(s):  
Corporate Governance ◽  
Real Estate ◽  
Capital Structure ◽  
Ownership Structure ◽  
State Ownership ◽  
Board Structure ◽  
Data Set ◽  
Content Type ◽  
Corporate Governance Reforms ◽  
Governance Reforms

Purpose This paper aims to contribute to the existing capital structure and board structure literature by examining the relationship among corporate governance, ownership structure and capital structure. Design/methodology/approach The paper uses a panel data of 595 firm-year observations from a unique and comprehensive data set of 119 Chinese real estate listed firms from 2014 to 2018. It uses fixed effect and random effect regression analysis techniques to examine the hypotheses. Findings The results show that the board size, ownership concentration and firm size have positive influences on capital structure. State ownership and firm profitability have inverse influences on capital structure. Research limitations/implications The findings suggest that better-governed companies in the real estate sector tend to have better capital structure. These findings highlight the unique Chinese context and also offer regulators a strong incentive to pursue corporate governance reforms formally and jointly with the ownership structure. Finally, the results suggest investors the chance to shape detailed expectations about capital structure behavior in China. Future research could investigate capital structure using different arrangement, conducting face-to-face meetings with the firm’s directors and shareholders. Practical implications The findings offer support to corporate managers and investors in forming or/and expecting an optimal capital structure and to policymakers and regulators for ratifying laws and developing institutional support to improve the effectiveness of corporate governance mechanisms. Originality/value This paper extends, as well as contributes to the current capital structure and corporate governance literature, by proposing new evidence on the effect of board structure and ownership structure on capital structure. The results will help policymakers in different countries in estimating the sufficiency of the available corporate governance reforms to improve capital structure management.

scholarly journals Corporate governance: the impact of director and board structure, ownership structure and corporate control on the performance of listed companies on the Ghana stock exchange

2016 ◽  
Vol 16 (2) ◽  
pp. 259-277 ◽  
Author(s):  
Josephine Darko ◽  
Zakaria Ali Aribi ◽  
Godfrey C. Uzonwanne
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Ownership Structure ◽  
Audit Committee ◽  
Corporate Control ◽  
Sub Saharan Africa ◽  
Board Structure ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between corporate governance and firm performance of listed Ghanaian companies. Design/methodology/approach The paper adopts a longitudinal and cross-sectional data set of 20 sampled companies over a period of five years. The data were analyzed using a panel regression and ANOVA analysis to establish the relationship between corporate governance and firm performance. Corporate governance is defined in terms of three indices – board structure, ownership structure and corporate control, while firm performance is measured by return on assets, return on equity, net profit margin and Tobin’s Q. Findings The empirical results show that ownership concentration and female representation on board have a positive impact on performance. Although the results revealed no evidence to support the impact of board size and audit committee size on performance, there is significant evidence to support the fact that independent directors and audit committee frequency both adversely affect firm performance. Research limitations/implications The scope of this paper can be expanded to include non-listed firms. In addition, other corporate governance mechanisms could be considered to broaden the scope of the paper. Originality/value This paper contributes to the scarce literature on corporate governance and firm performance in developing countries, especially in sub-Saharan Africa. The paper provides useful information that is of great value to policymakers, academics and other stakeholders.

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

2020 ◽  
Vol 20 (5) ◽  
pp. 939-964
Author(s):  
Mohammad A.A Zaid ◽  
Man Wang ◽  
Sara T.F. Abuhijleh ◽  
Ayman Issa ◽  
Mohammed W.A. Saleh ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Business Environment ◽  
Board Structure ◽  
Content Type ◽  
Financing Decisions ◽  
The Impact

Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

scholarly journals The board of directors and firm performance: empirical evidence from listed companies

2019 ◽  
Vol 19 (3) ◽  
pp. 508-551 ◽  
Author(s):  
Alessandro Merendino ◽  
Rob Melville
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Agency Theory ◽  
Ownership Structure ◽  
Listed Companies ◽  
Independent Directors ◽  
Board Structure ◽  
Board Size ◽  
Ceo Duality ◽  
Content Type

PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.

The Economic Consequences of Financial Restatements: Evidence from the Market for Corporate Control

2014 ◽  
Vol 90 (1) ◽  
pp. 1-29 ◽  
Author(s):  
Amir Amel-Zadeh ◽  
Yuan Zhang
Keyword(s):  
Corporate Control ◽  
Economic Consequences ◽  
Economic Resources ◽  
Data Availability ◽  
Matched Sample ◽  
Market For Corporate Control ◽  
Financial Restatements ◽  
Main Driver ◽  
Takeover Bids ◽  
Jel Classifications

ABSTRACT This paper investigates whether and how financial restatements affect the market for corporate control. We show that firms that recently filed financial restatements are significantly less likely to become takeover targets than a propensity score matched sample of non-restating firms. For those restating firms that do receive takeover bids, the bids are more likely to be withdrawn or take longer to complete than those made to non-restating firms. Finally, there is some evidence that deal value multiples are significantly lower for restating targets than for non-restating targets. Our analyses suggest that the information risk associated with restating firms is the main driver of these results. Overall, this study finds that financial restatements have profound consequences for the allocation of economic resources in the market for corporate control. JEL Classifications: D82; G14; G34; M41. Data Availability: Data are available from sources identified in the paper.

scholarly journals Corporate Governance and Innovation: Theory and Evidence

2014 ◽  
Vol 49 (4) ◽  
pp. 957-1003 ◽  
Author(s):  
Haresh Sapra ◽  
Ajay Subramanian ◽  
Krishnamurthy V. Subramanian
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Empirical Support ◽  
Innovation Theory ◽  
Private Benefits ◽  
Private Benefits Of Control ◽  
Market For Corporate Control ◽  
Ex Post ◽  
Corporate Governance Mechanisms ◽  
Ex Ante

AbstractWe develop a theory to show how external and internal corporate governance mechanisms affect innovation. We predict a U-shaped relation between innovation and external takeover pressure, which arises from the interaction between expected takeover premia and private benefits of control. Using ex ante and ex post innovation measures, we find strong empirical support for the predicted relation. We exploit the variation in takeover pressure created by the passage of antitakeover laws across different states. Innovation is fostered either by an unhindered market for corporate control or by antitakeover laws that are severe enough to effectively deter takeovers.

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