Managerial Empire Building, Corporate Governance, and the Asymmetrical Behavior of Selling, General, and Administrative Costs

2008 ◽  
Author(s):  
Clara Xiaoling Chen ◽  
Hai Lu ◽  
Theodore Sougiannis
Keyword(s):  
Corporate Governance ◽  
Empire Building ◽  
Administrative Costs

Corporate governance mechanisms and corporate investments: evidence from India

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Samridhi Suman ◽  
Shveta Singh
Keyword(s):  
Corporate Governance ◽  
Dynamic Model ◽  
Capital Expenditure ◽  
Agency Problem ◽  
Agency Problems ◽  
Static Model ◽  
Capital Expenditures ◽  
Content Type ◽  
Empire Building ◽  
The Impact

PurposeThe purpose of this paper is to empirically investigate the influence of corporate governance variables relating to the board of directors, audit and ownership on the agency problems that inflict a firm's investments in capital and research and development (R&D) expenditures. This study posits that the R&D investments are inflicted by the agency problem of “quiet life” whereas “empire-building” agency problem affects capital expenditure decisions.Design/methodology/ approachThis study analyses the investment behaviour of non-financial and non-utility firms listed on NIFTY 200 from FY 2009 to FY 2018 using a static and dynamic model.FindingsThe results from the static model suggest that ownership concentration mitigates the agency problem of the “quiet life” that affects R&D expenditures. However, no corporate governance attribute has a significant impact on R&D investments under the assumption of the dynamic model. In respect of capital expenditures, the analysis of static model yields that audits by large auditor firms and usage of non-audit services ameliorate the agency problem of “empire-building”. The results from the dynamic model show that independent boards worsen it. They also continue to provide empirical evidence in favour of large auditors.Originality/valueThis paper contributes to the literature on the corporate governance-investment association by simultaneously examining the impact of multiple corporate governance attributes on the agency problems of “quiet life” and “empire-building” that affect R&D and capital expenditures, respectively, in a static and dynamic context for a sample of Indian firms.

scholarly journals Corporate Fraud, Governance, and Auditing

2012 ◽  
Vol 1 (1) ◽  
pp. 109-133 ◽  
Author(s):  
Marco Pagano ◽  
Giovanni Immordino
Keyword(s):  
Corporate Governance ◽  
Audit Quality ◽  
Managerial Compensation ◽  
Private Benefits ◽  
Firm Level ◽  
Corporate Fraud ◽  
Internal Governance ◽  
Empire Building ◽  
Country Level ◽  
Internal Governance Mechanisms

We analyze corporate fraud in a setting in which managers have superior information but are biased against liquidation because of their private benefits from empire building. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To curb fraud, shareholders optimally design corporate governance by jointly choosing audit quality and managerial compensation. We analyze how country-level rules affect these firm-level choices. Our analysis underscores that different country-level governance provisions have different effects on firm-level governance: Some act as substitutes of internal governance mechanisms, whereas others enhance their effectiveness and therefore complement them. (JEL G28, K22, M42)

International Real Estate Review

2014 ◽  
Vol 17 (3) ◽  
pp. 301-357
Author(s):  
Julan Du ◽  
◽  
Charles K. Leung ◽  
Derek Chu ◽  
◽  
...  
Keyword(s):  
Corporate Governance ◽  
Real Estate ◽  
Lower Degree ◽  
Future Research ◽  
Financial Constraint ◽  
Research Directions ◽  
Empire Building ◽  
Corporate Real Estate ◽  
Future Research Directions ◽  
The Impact

No, we find no evidence for a return-enhancing role for corporate real estate holdings, which is consistent with the previous literature. Instead, our study based on a sample of U.S. listed corporations suggests that corporate real estate holdings are a form of managerial ¡§empire building¡¨. Corporations with weaker corporate governance and a lower degree of financial constraint tend to have higher real estate holdings, whereas higher real estate holdings are associated with lower returns to shareholders. The impact of corporate governance on corporate real estate holdings seems to be stronger in manufacturing-related industries. Implications and future research directions are discussed.

scholarly journals Financial Markets, Industry Dynamics and Growth

2019 ◽  
Vol 129 (621) ◽  
pp. 2192-2215 ◽  
Author(s):  
Maurizio Iacopetta ◽  
Raoul Minetti ◽  
Pietro F Peretto
Keyword(s):  
Corporate Governance ◽  
Financial Markets ◽  
Market Structure ◽  
Growth Model ◽  
Industry Dynamics ◽  
Compensation Contracts ◽  
Empire Building ◽  
Advanced Economies ◽  
Endogenous Market Structure ◽  
Product Improvement

Abstract This article introduces corporate governance frictions into a growth model with endogenous market structure. Managers engage in corporate resource diversion and empire building. Shareholders discipline managers with incentive compensation contracts. A reform that mitigates corporate governance frictions boosts firms’ entry and, for a given market structure, has an ambiguous impact on incumbents’ return to product improvement. However, as the market structure adjusts, becoming more diffuse, incumbents invest less in product improvement. Calibrating the model to U.S. data, we find that a reform of the kind recently enacted in several advanced economies can lead to a welfare loss.

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