scholarly journals Internal governance mechanisms, agency problems and family ownership: Evidence from Australia

2008 ◽  
Vol 6 (1-3) ◽  
pp. 385-397
Author(s):  
Lukas Setia-Atmaja
Keyword(s):  
Family Firms ◽  
Agency Problems ◽  
Family Ownership ◽  
Board Composition ◽  
Governance Mechanisms ◽  
Minority Shareholders ◽  
Internal Governance ◽  
Value Maximization ◽  
Internal Governance Mechanisms ◽  
Corporate Governance Mechanisms

This paper investigates whether family firms use dividends, board composition and debt to expropriate the wealth of minority shareholders or to mitigate agency problems. Utilising panel data on a sample of publicly traded firms in Australia over the period 2000-2005, this study provides evidence that family firms pay optimal and higher levels of dividends and debt compared with their non-family counterparts. The study also finds that family firms have significantly lower proportions of independent directors on the board, but this is consistent with the optimal (value maximization) use of board composition. These results provide evidence that family firms mitigate rather than exacerbate moral hazard problems between owners and minority shareholders in Australia. This study adds to the very limited research into the relationship between family ownership and corporate governance mechanisms in Australia.

scholarly journals Agency costs, corporate governance mechanisms and performance of public listed family firms in Malaysia

2011 ◽  
Vol 42 (3) ◽  
pp. 17-26 ◽  
Author(s):  
H. Ibrahim ◽  
F. A. Samad
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Firm Value ◽  
Agency Costs ◽  
Family Firms ◽  
Family Ownership ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Utilization Ratio ◽  
And Performance

We compare corporate governance and performance between family and non-family ownership of public listed companies in Malaysia from 1999 through 2005 measured by Tobin’s Q and ROA. We also examine the governance mechanisms as a tool in monitoring agency costs based on asset utilization ratio and expense ratio as proxy for agency costs. We find that on average firm value is lower in family firms than non-family firms, while board size, independent director and duality have a significant impact on firm performance in family firms as compared to non-family firms. We also find that these governance mechanisms have significant impact on agency costs for both family and non-family firms.

scholarly journals How banks’ internal governance mechanisms influence risk reporting

2015 ◽  
Vol 12 (3) ◽  
pp. 55-72 ◽  
Author(s):  
Mohammad Jizi
Keyword(s):  
Risk Management ◽  
Financial Crisis ◽  
Governance Mechanisms ◽  
Internal Governance ◽  
Business Operations ◽  
Internal Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Recent Financial Crisis ◽  
Management Disclosures ◽  
The Impact

Banks were the center of the recent financial crisis that results in a sharp decline in security prices and banks’ market capitalization. The content of information in general, and risk information in particular, provided to capital markets was vital to reduce the uncertainly levels left in the markets and encourage trading. Examining the impact of the internal corporate governance mechanisms on the content of risk management disclosures using a sample of US national banks in the wake of the financial crisis shows that banks having larger board size and higher proportion of independent directors are more inclined toward disclosing wider content of risk management information. The results also suggest that CEO duality impacts positively on risk management disclosures content to provide signals toward CEO objectivity and judgment in running business operations aligned with shareholders’ interest.

scholarly journals Ownership structure, internal governance and earnings management in Hong Kong

2009 ◽  
Vol 6 (3) ◽  
pp. 437-449
Author(s):  
Muhammad Jahangir Ali ◽  
Kwong San Ng
Keyword(s):  
Hong Kong ◽  
Earnings Management ◽  
Ownership Structure ◽  
Discretionary Accruals ◽  
Outside Directors ◽  
Governance Mechanisms ◽  
Minority Shareholders ◽  
Internal Governance ◽  
Big 4 ◽  
Internal Governance Mechanisms

This study examines whether ownership structure and internal governance mechanisms are associated with earnings management in Hong Kong. We hypothesize that the earnings management of a firm is associated with the ownership structure including ownership concentrations, different ownership concentration levels of family held companies and substantial institutional investors; and internal governance mechanisms including firms that are audited Big 4 auditors and proportion of outside directors. The non-discretionary accruals are measured using modified Jones model with crosssectional basis. We employ multivariate model to investigate the relationship between discretionary accruals and various independent variables. Our results show that discretionary accruals are positively associated with high/low level of family ownership and negatively related to firms that are audited by Big 4 auditor as hypothesized. Our results reveal that the controlling shareholders in family businesses can expropriate minority shareholders by accounting manipulations and that independent nonexecutive directors cannot effectively constrain opportunistic earnings management. This requires regulators and standard setters to improve the extent of investor protection and to increase the independence of outside directors on the board.

scholarly journals Corporate governance and conglomerate diversification strategy – evidence from Vietnam

2018 ◽  
Vol 13 (6) ◽  
pp. 1578-1596 ◽  
Author(s):  
Thi Xuan Trang Nguyen
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Board Composition ◽  
Governance Mechanisms ◽  
Content Type ◽  
Unrelated Diversification ◽  
Corporate Governance Mechanisms ◽  
Control Devices ◽  
Interest Alignment ◽  
The Relationship

Purpose The purpose of this paper is to examine the impact of internal corporate governance mechanisms, including interest alignment and control devices, on the unrelated diversification level in Vietnam. Additionally, the moderation of free cash flow (FCF) on these relationships is also tested. Design/methodology/approach The study is based on a balanced panel data set of 70 listed companies in both stock markets, Ho Chi Minh Stock Exchange and Hanoi Stock Exchange, in Vietnam for the years 2007–2014, which gives 560 observations in total. Findings The results show that if executive ownership for CEOs is increased, then the extent of diversification is likely to be reduced. However, the link between unrelated diversification level and executive stock option, another interest alignment device, cannot be confirmed. Among three control devices (level of blockholder ownership, board composition and separation of CEO and chairman positions), the study finds a positive connection between diversification and blockholder ownership, and statistically insignificant relations between the conglomerate diversification level and board composition, or CEO duality. Additionally, this study discovers a negative link between diversification and state ownership, although there is no evidence to support the change to the effect of each internal corporate governance mechanism on the diversification level of a firm between high and low FCF. Practical implications The research can be a useful reference not only for investors and managers but also for policy makers in Vietnam. This study explores the relationship among corporate governance, diversification and firm value in Vietnam, where the topics related to effectiveness of corporate governance mechanisms to public companies has been increasingly attractive to researchers since the default of Vietnam Shipbuilding Industry Group (Vinashin) happened in 2010 and the Circular No. 121/2012/TT-BTC on 26 July 2012 of the Vietnamese Ministry of Finance was issued with regulations on corporate governance applicable to listed firms in this country. Originality/value This research, first, enriches current literature on the relationship between corporate governance and firm diversification. It can be considered as a contribution to the related topic with an example of Vietnam, a developing country in Asia. Second, the research continues to prove non-unification in results showing the relationship between corporate governance and conglomerate diversification among different nations. Third, it provides a potential input for future research works on the moderation of FCF to the effects of corporate governance on diversification.

Board Composition: Balancing Family Influence in S&P 500 Firms

2004 ◽  
Vol 49 (2) ◽  
pp. 209-237
Author(s):  
Ronald C. Anderson ◽  
David M. Reeb
Keyword(s):  
Family Firms ◽  
Balance Of Power ◽  
Family Influence ◽  
Independent Directors ◽  
Family Ownership ◽  
Board Composition ◽  
Public Firms ◽  
Founding Family ◽  
Board Representation ◽  
Balance Family

We examine the mechanisms used to limit expropriation of firm wealth by large shareholders among S&P 500 firms with founding-family ownership. Consistent with agency theory, we find that the most valuable public firms are those in which independent directors balance family board representation. In contrast, in firms with continued founding-family ownership and relatively few independent directors, firm performance is significantly worse than in non-family firms. We also find that a moderate family board presence provides substantial benefits to the firm. Additional tests suggest that families often seek to minimize the presence of independent directors, while outside shareholders seek independent director representation. These findings highlight the importance of independent directors in mitigating conflicts between shareholder groups and imply that the interests of minority investors are best protected when, through independent directors, they have power relative to family shareholders. We argue that expanding the discussion beyond manager-shareholder conflicts to include conflicts between shareholder groups provides a richer setting in which to explore corporate governance and the balance of power in U.S. firms.

An investigation of the relation between ownership structure and management control in professional service organisations

2019 ◽  
Vol 15 (1) ◽  
pp. 147-168 ◽  
Author(s):  
Robyn King ◽  
Peter Clarkson
Keyword(s):  
Ownership Structure ◽  
Empirical Support ◽  
Professional Services ◽  
Management Control ◽  
Professional Service ◽  
Governance Mechanisms ◽  
Internal Governance ◽  
Content Type ◽  
High Performing ◽  
Internal Governance Mechanisms

PurposeThis study aims to examine the interplay between ownership structure (organisational form) and management control system (MCS) design as governance structures within Australian primary health-care organisations (PHOs), seeking support for the suggestion that professional services will be most efficiently and effectively provided in organisations that have internal governance that is matched to their ownership form.Design/methodology/approachThe analysis is based on a series of in-depth investigations into the MCS choices made by seven Australian PHOs. Arguing that the degree of information impactedness is inversely related to the level of general practitioner (GP) ownership, organisations where more than 50 per cent of the GPs working within the practice are owners are classified as “high ownership” (“low information impactedness”). The adoption by high-performing organisations of their predicted MCS archetype according to Speklé’s development is then interpreted as representing empirical support.FindingsThe findings provide uniform support for the importance of the match between ownership structure and internal governance mechanisms. As predicted, the two high-performing, high member-owned organisations reported MCS resembling exploratory archetypes, the three high-performing, low member-owned organisations reported MCS consistent with a boundary archetype and the two low-performing organisations reported little emphasis on any control.Research limitations/implicationsThis study provides evidence of the importance of the appropriate match between ownership structure and internal governance mechanisms for PHOs.Practical implicationsThis study has potential to assist managers, owners and advisors to optimise MCS design in professional services organisations where there is heterogeneous ownership by professionals.Originality/valueThis study is one of the few attempts to provide empirical support for the assertion of the importance of a match between ownership structure and MCS design. It also represents one of the few attempts to provide empirical support for Speklé’s (2001) control archetypes, here the boundary and exploratory archetypes, archetypes that are applicable within important sectors of the economy, notably the professional services sector.

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