Political Influence and Corporate Governance: Evidence from Party-Building Reform in China

2019 ◽  
Author(s):  
Lauren Yu-Hsin Lin ◽  
Re-Jin J. Guo ◽  
Christopher C. Chen
Keyword(s):  
Corporate Governance ◽  
Political Influence ◽  
Party Building

scholarly journals Corporate Governance, Economic Entrenchment, and Growth

2005 ◽  
Vol 43 (3) ◽  
pp. 655-720 ◽  
Author(s):  
Randall Morck ◽  
Daniel Wolfenzon ◽  
Bernard Yeung
Keyword(s):  
Corporate Governance ◽  
Capital Investment ◽  
Corporate Control ◽  
Political Influence ◽  
Institutional Development ◽  
The United States ◽  
Firm Level ◽  
Control Structures ◽  
Resource Misallocation ◽  
Property Rights Protection

Outside the United States and the United Kingdom, large corporations usually have controlling owners, who are usually very wealthy families. Pyramidal control structures, cross shareholding, and super-voting rights let such families control corporations without making a commensurate capital investment. In many countries, a few such families end up controlling considerable proportions of their countries' economies. Three points emerge. First, at the firm level, these ownership structures, because they vest dominant control rights with families who often have little real capital invested, permit a range of agency problems and hence resource misallocation. If a few families control large swaths of an economy, such corporate governance problems can attain macroeconomic importance—affecting rates of innovation, economywide resource allocation, and economic growth. If political influence depends on what one controls, rather than what one owns, the controlling owners of pyramids have greatly amplified political influence relative to their actual wealth. This influence can distort public policy regarding property rights protection, capital markets, and other institutions. We denote this phenomenon economic entrenchment, and posit a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one possible equilibrium. The literature suggests key determinants of economic entrenchment, but has many gaps where further work exploring the political economy importance of the distribution of corporate control is needed.

Economic role of politics and corporate governance: reforms captured in Malaysia’s setting

2017 ◽  
Vol 59 (6) ◽  
pp. 839-853 ◽  
Author(s):  
Nurul Nazlia Jamil
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Political Influence ◽  
Political Agenda ◽  
The Political ◽  
Content Type ◽  
Economic Role ◽  
Corporate Governance Reforms ◽  
Governance Reforms

Purpose This study aims to examine the economic role of politics on corporate governance reforms in one of emerging market, namely, Malaysia. Design/methodology/approach The paper is based upon a literature review analysis. Findings The Malaysian economic, political and social settings have resulted in undue state and detrimental political influence on business, and yet the corporate governance reforms undertaken seemed not be able to resolve the matter. It is suggesting that it would be beneficial for Malaysia to have more independent regulatory bodies representing a wide variety of stakeholders to improve the transparency and accountability to ensure that the reforms are effectively enforced without conflicting with the political agenda. Legal institutional reforms also may be needed to improve the structure, capacity and performance of judicial system, as it is capable to capture reliance of economic role of politics and promoting accountability in Malaysia. Research limitations/implications The economic role of politics on corporate governance reforms is merely to broaden the political strategy in the corporate sector as the change in politics can improve the effectiveness of corporate governance reforms. Moreover, the economic role of politics raises the tone of the corporate governance reforms, and it implies that policymakers need to have effective corporate governance strategy in dealing with the reforms initiatives in areas that have strong political interventions. Originality/value Regulatory and judicial implications are offered as a means to improve corporate governance in Malaysia.

Accounting conservatism, corporate governance and political connections

2017 ◽  
Vol 25 (2) ◽  
pp. 288-318 ◽  
Author(s):  
Nor Farizal Mohammed ◽  
Kamran Ahmed ◽  
Xu-Dong Ji
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Political Influence ◽  
Ordinary Least Squares ◽  
Accounting Conservatism ◽  
Political Connections ◽  
Board Independence ◽  
Political Connection ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between accounting conservatism, corporate governance and political connection in listed firms in Malaysia where political influence plays a significant role in the capital market and in many business dealings. Design/methodology/approach By utilizing 824 firm-year observations comprising large listed companies over a period of four years from 2004, this study uses ordinary least squares regression models to investigate the relationship between accounting conservatism, corporate governance and political connections in Malaysia. Multiple measures of conservatism developed by Basu (1997) and Khan and Watts (2009) are employed. Findings The results show evidence of accounting conservatism (bad news being recognized earlier than good news) in Malaysia. Further, the results reveal that better corporate governance structure in terms of board independence is positively associated with accounting conservatism while management ownership is negatively associated with it. However, political connection has a negative moderating effect on the positive relationship between accounting conservatism and board independence. The results also suggest political connections have a positive association with firm’s future performance. Originality/value This study is the first in investigating the effect of political connections on accounting conservatism in Malaysian context and how political connections negatively affect the monitoring role of the corporate boards. By directly measuring political connection and controlling for various corporate governance mechanisms and firm-specific attributes, this study contributes to enhance the authors’ understanding of the political influence in financial reporting quality and firm performance in an emerging market setting.

The Volatility of Sovereign Wealth Funds

2009 ◽  
Vol 9 (3) ◽  
pp. 1850172 ◽  
Author(s):  
Thomas J. Grennes
Keyword(s):  
Corporate Governance ◽  
Political Influence ◽  
The United States ◽  
Relative Importance ◽  
Energy Prices ◽  
Sovereign Wealth Funds ◽  
The Past ◽  
Global Recession ◽  
Steady Growth ◽  
Recent Developments

This paper evaluates sovereign wealth funds in light of the extreme volatility of energy prices and the severe global recession that began in 2008. A recent paper by Das characterized the assets of funds as showing steady growth in the past and likely increased importance in the future. However, recent developments have reduced the relative importance of funds and have demonstrated the sensitivity of the funds to energy prices and world business cycles. Investments by sovereign wealth funds have the potential to introduce political influence into corporate governance, but this potential is much smaller than the interventions into corporate governance by governments of the United States and elsewhere connected to corporate bail-outs during the recession. Lack of transparency remains a problem for certain sovereign wealth funds, but anti-recession interventions by governments have been characterized by extreme lack of transparency.

scholarly journals Corporate Governance And A Paradigm Strategy By Multinational Enterprises In Emerging Markets

2021 ◽  
Vol 06 (11) ◽  
Author(s):  
Obianuju Anyachebelu ◽  
Keyword(s):  
Corporate Governance ◽  
Emerging Markets ◽  
International Business ◽  
Multinational Enterprises ◽  
Multinational Enterprise ◽  
Political Influence ◽  
Qualitative Investigation ◽  
Information Asymmetries ◽  
Interest Management ◽  
Skilled Workforce

This qualitative investigation meticulously identified challenges to corporate governance in operations of Multinational Enterprises (MNEs) in diverse situational positions in emerging markets. These challenges are weak macro institutions, strict government interest and influence, over formalized institutional structure, and overbearing political influence and the obvious; information asymmetries. A flexible mixed allegiance paradigm strategy was identified. It provides alignment of diversities and equilibrium based on micro operational efficacies of the multinational enterprise which are experienced and skilled workforce, related to locality of interest, management of loyalty, trust and negotiation hinged on acceptable agreements to member countries. Trust is emphasized as important for international business.

scholarly journals Campaign finance and corporate governance: The case of Brazil

2006 ◽  
Vol 3 (2) ◽  
pp. 125-136
Author(s):  
Andre Carvalhal da Silva ◽  
Flavia Mourao Graminho
Keyword(s):  
Corporate Governance ◽  
Campaign Finance ◽  
Political Influence ◽  
Political Campaigns ◽  
Political Contributions ◽  
Firm Level ◽  
Corporate Governance Mechanisms ◽  
Governance Practices ◽  
Ownership Rights ◽  
And Control

Corporate governance mechanisms, such as transparency, accounting standards, responsibility, accountability, fairness, business ethics, efficient shareholder controls, and ownership rights are key tools in combating corruption. This paper investigates on a firm-level basis the relation between corporate governance practices and campaign finance in Brazil. We interpret campaign finance as a proxy for political influence by interest groups. Our results indicate that family-owned firms contribute significantly more for political campaigns, both in terms of proportion of firms and total amount spent to finance the candidates. Higher concentration of capital and the separation of ownership and control are positively related to campaign donations, while better corporate governance is negatively related to political contributions.

Party Building or Noisy Signaling? The Contours of Political Conformity in Chinese Corporate Governance

2019 ◽  
Author(s):  
Lauren Yu-Hsin Lin ◽  
Curtis J. Milhaupt
Keyword(s):  
Corporate Governance ◽  
Party Building

Party Building or Noisy Signaling? The Contours of Political Conformity in Chinese Corporate Governance

2021 ◽  
Vol 50 (1) ◽  
pp. 187-217
Author(s):  
Lauren Yu-Hsin Lin ◽  
Curtis J. Milhaupt
Keyword(s):  
Corporate Governance ◽  
Party Building

scholarly journals Alitalia airline: A business case of bad corporate governance

2019 ◽  
Vol 17 (1) ◽  
pp. 264-277
Author(s):  
Maurizio La Rocca ◽  
Francesco Fasano ◽  
Gian Marco Napoli
Keyword(s):  
Corporate Governance ◽  
Economic Value ◽  
Political Influence ◽  
Business Case ◽  
Business Success ◽  
Managerial Skills ◽  
High Performing ◽  
Long Time ◽  
Lead Management ◽  
Airline Company

Corporate governance, allocating rights and responsibilities inside the firm, provides worthwhile guidelines that lead management to valuable processes and activities, which are the core of business success for the interests of all stakeholders. This paper provides evidence of an interesting business case in which many corporate governance rules were disregarded. In Alitalia airline company, the management, ignoring corporate governance aspects, strongly disrupted economic value. The study is based on the analysis of managerial profiles of Presidents and CEOs of Alitalia, evidencing their relationship with corporate governance issues. Moreover, we deeply investigated the story of Alitalia and the governments’ political influence on the airline company. We found the absence of a proper mix of authority and responsibility, conflicts of interests and agency costs, poor monitoring activities, lack of managerial skills and scarce managerial effort, jointly with ineffective incentive mechanisms. The consequence was that past bad governance has compromised the ability of the company to create new value. We conclude that when governance principles are disregarded for a long time, even a high performing and cash-rich company can lose its competitive advantage, damaging its chances of a turnaround.

scholarly journals THE RELATIONSHIP BETWEEN AUDIT COMMITTEE, POLITICAL INFLUENCE AND FINANCIAL REPORTING QUALITY: MALAYSIAN EVIDENCE

2019 ◽  
Vol 18 (2) ◽  
pp. 193
Author(s):  
AZIATUL WAZNAH GHAZALI ◽  
NUR AIMA SHAFIE
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Political Influence ◽  
Business Environment ◽  
Financial Reporting Quality ◽  
Pool Data ◽  
The Relationship

This paper examines the relationship between audit committee, political influence and financial reporting quality of Malaysian listed companies. This study uses pool data consisting of 3,255 firm-year observations listed on the Main Board of Bursa Malaysia from year 2010 to 2014. The findings are robust after controlling for the endogeneity. The current findings indicates that audit committee’s independence and the frequency of audit committee meetings are effective in controlling for both real earnings management and accounting misstatements. Nonetheless, in terms of audit committee size and audit committee’ audit expertise, the relationships are still insignificant. It is important to note that there is some improvement after the corporate governance reforms since studies prior to the reforms found audit committee’s variables are ineffective towards a higher quality of financial reporting. Meanwhile, political influence is still relevant in a Malaysian business environment with regard to financial reporting quality, however, the aggressiveness of the influence may have been diluted by the improvement of recent corporate governance reform.

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