Agency Problem Types From a Corporate Governance Perspective

2017 ◽  
pp. 175-191
Author(s):  
Nazih Khalil El-Jor
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Agency Theory ◽  
Emerging Economies ◽  
Agency Problems ◽  
Developed Countries ◽  
Third Parties ◽  
Problem Types ◽  
Governance Systems ◽  
Self Interest

Corporate Governance systems adequately address problems related to accountability and transparency in developed countries. However, in emerging economies these systems are susceptible to exploitation by self-interest-minded individuals entrusted in managing the organization in some cases, by majority shareholders in other cases and at times by third parties from outside the organization. This exploitation falls under the concept of Agency Theory which emerges as a matter of concern that should be dealt with by Corporate Governance systems. Under the Agency Theory, the author classifies the Agency related problems into three types; “Type One”, “Type Two” and “Type Three”. All three types emanate from the separation of ownership and decision making complemented by the natural reality of self-interest requiring thus internal mechanisms of control in order to mitigate the Agency problems along with all Agency related costs. The paper then deals with such mechanisms.

scholarly journals The Integration and Reliance on Technology to Enhance the Independence and Accountability of Company Directors in South Africa

2021 ◽  
Vol 24 ◽  
pp. 1-32
Author(s):  
Friedrich Hamadziripi ◽  
Howard Chitimira
Keyword(s):  
South Africa ◽  
Decision Making ◽  
Corporate Governance ◽  
Developed Countries ◽  
Short Term ◽  
Governance Systems ◽  
Company Directors ◽  
Future Potential ◽  
The Impact ◽  
Do So

The most indispensable means of change in contemporary business society is technology because it offers convenience to both businesses and their clients. Almost every business has been influenced by technology. Traditional corporate governance systems have been affected as technology has ceased to be a mere business enabler but is now a source of a company's future potential opportunities. The infusion of corporate governance and technology has been quite slow in South Africa. This may either be attributed to the fact that it is costly to do so, at least in the short term, or that company directors in South Africa do not yet trust technological measures with corporate decision-making input. Consequently, the impact of decision support technology on corporate entities and their governance has received less academic interest in South Africa than in developed countries. This article seeks to discuss the integration and reliance on technology to enhance corporate governance principles in developing countries like South Africa. The article also discusses the practical challenges and the benefits to be anticipated by directors in South Africa when they integrate technology in decision making to enhance their independence and accountability.

scholarly journals A corporate governance study on Italian family firms

2008 ◽  
Vol 5 (4) ◽  
pp. 93-103 ◽  
Author(s):  
Fabrizio Colarossi ◽  
Marco Giorgino ◽  
Roberto Steri ◽  
Diego Viviani
Keyword(s):  
Decision Making ◽  
Cluster Analysis ◽  
Corporate Governance ◽  
Agency Theory ◽  
Board Of Directors ◽  
Family Firms ◽  
Stewardship Theory ◽  
Italian Family ◽  
Governance Systems ◽  
The Board Of Directors

In this paper we investigate three corporate governance issues in 30 Italian family firms: (i) the orientation either to the Agency Theory or to the Stewardship Theory; (ii) the board of directors’ composition; (iii) the ability to involve nonfamily individuals in the company’s management and governance (Openness Index) and the decision-making quality (Extension Index) and we analyze empirical results through a cluster analysis by following the Gubitta and Gianecchini’s approach (2002). Our conclusion suggests that (i) small Italian family firms’ corporate governance systems seem to be consistent with the guidelines suggested by the Stewardship Theory and (ii) Italian family firms’ boards are characterized by a relevant presence of family members.

scholarly journals Stewardship theory: is board accountability necessary?

2017 ◽  
Vol 59 (6) ◽  
pp. 1292-1314 ◽  
Author(s):  
Andrew Keay
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Design Methodology ◽  
Agency Problems ◽  
Stewardship Theory ◽  
Content Type ◽  
General Terms ◽  
Practical Implications

Purpose The purpose of the paper is to demonstrate that notwithstanding the fact that stewardship theory embraces things like trust of directors, their professionalism, loyalty and willingness to be concerned for the interests of others, as well as rejecting the foundations of classic agency problems that are asserted by agency theory, board accountability is as relevant to stewardship theory as it is to agency theory. Design/methodology/approach The paper applies the theory underlying board accountability in corporate governance, which is so often applied both in the corporate governance literature and in practice with agency theory in mind, to stewardship theory. Findings While the idea of accountability of boards is generally associated with an explanation and conceptualisation of the role and behaviour of directors as agents within classic agency theory, the paper demonstrates that board accountability is a necessary part of board life even if the role of directors is explained and conceptualised in terms of stewardship theory. Practical implications The paper suggests some accountability mechanisms that might be employed in a stewardship approach. Originality/value While many authors have talked in general terms about board accountability and its importance, this is the first paper that has engaged in a substantial study that links board accountability directly with stewardship theory, and to establish that accountability is necessary.

scholarly journals Classical and modern concepts of corporate governance (Stewardship Theory and Agency Theory)

Management ◽  
2015 ◽  
Vol 19 (2) ◽  
pp. 84-92 ◽  
Author(s):  
Beata Glinkowska ◽  
Bogusław Kaczmarek
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Supervisory Board ◽  
Stewardship Theory ◽  
Social Meaning ◽  
Modern Approach ◽  
Management Board ◽  
Governance Systems ◽  
Supervisory Boards ◽  
A Company

Summary The main issues in efficiency of a company as an organisation are relations between the Supervisory Board and the Management Board of a company, and the methods of functioning of Supervisory Boards in governance systems of a company. The classical and modern approach to the role, place, and importance of corporate governance presented in this article, is yet another prompt to continue searching for the optimum in the organisational, economical, and social meaning.

scholarly journals Effects of Corporate Governance Guidelines on Investors: An Experimental Examination of Bangladeshi Investors’ Decisions

2021 ◽  
Author(s):  
◽  
ATM Tariquzzaman
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Theoretical Model ◽  
Insider Trading ◽  
Emerging Market ◽  
Governance Structure ◽  
Developed Countries ◽  
Financial Condition ◽  
The Impact ◽  
Investor Decisions

<p>The main purpose of the study is to examine whether investors assign importance to corporate governance in making investment decisions. The study involves a 2x2x2 between-participant experiment on real investors that examines the effects of corporate governance structure, financial condition and insider trading on individual investor decisions. The findings of this study extend the literature on corporate board practices and investor perceptions by providing evidence from this emerging economy that strong corporate governance has a positive impact on investor decisions. The study also confirms the findings of prior literature that financial condition of a company positively influences investor decisions. Hence, the results provide insights into the effects of strengthening corporate governance guidelines and of variation in financial condition on investor decisions. The study provides evidence that the common occurrence of illegal insider trading in the emerging market of Bangladesh does not appear to impact on investor decision making, unlike in developed countries.  The results of this study also contribute to understanding of how the quality of corporate governance impacts on decision making. It appears that governance directly impacts the perceived reliability of financial reports and trust in the board and management and that these factors fully mediate the impact on investor decision making.  The theoretical model and instrument developed for this study will be useful for further studies to explore the impact of other corporate governance factors on investor decisions. Furthermore, the theoretical model and instrument will also be useful for further studies in other developed and developing countries, particularly where insider trading is regarded by investors as being a concern and to investigate the impact of other corporate governance factors on investors and financial analysts.</p>

Corporate Governance and Family-owned Companies

2018 ◽  
Author(s):  
Prem Sikka
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Ownership Structure ◽  
Agency Problems ◽  
Board Members ◽  
Socially Responsible ◽  
Shareholder Capitalism ◽  
And Control

It is often claimed that the ownership structure and the close involvement of family members alleviates agency problems and gives them a long-term orientation compared to a corporation with dispersed shareholding and control. Through a case study relating to the demise of BHS, one of the biggest UK retailers, the chapter probes these claims. BHS was an epitome of shareholder capitalism. It was owned and controlled by Sir Philip Green and his family. The control enabled the Green family to extract large amounts of cash from BHS through dividends and complex intragroup transactions, with virtually no questions from board members, regulators or auditors. The flawed corporate governance of BHS inflicted considerable hardship on other stakeholders. The demise of BHS should encourage reflections on the claims (agency theory) that an alignment of the interests of shareholders and directors somehow leads to better governance and socially responsible management.

scholarly journals Corporate Governance-Based Strategic Approach to Sustainability in Energy Industry of Emerging Economies with a Novel Interval-Valued Intuitionistic Fuzzy Hybrid Decision Making Model

2020 ◽  
Vol 12 (8) ◽  
pp. 3307 ◽  
Author(s):  
Wenhao Qi ◽  
Zhixiong Huang ◽  
Hasan Dinçer ◽  
Renata Korsakienė ◽  
Serhat Yüksel
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Emerging Economies ◽  
Sustainable Energy ◽  
Sustainable Production ◽  
Energy Industry ◽  
Intuitionistic Fuzzy ◽  
Strategic Approach ◽  
Decision Making Model ◽  
Interval Valued

The sustainability in energy industry is one of the most prominent issues in emerging economies because of needs for the long-term growth of production and managerial capacity. Accordingly, corporate governance could lead to develop the sustainable production of energy industry. The purpose of this study is to define a set of criteria and dimensions for analyzing the corporate governance-based strategic approach to sustainability in the energy industry of emerging economies. For this purpose, this study provides several novelties by extending a hybrid decision making model with interval-valued intuitionistic fuzzy sets (IVIF) and defining the related criteria and dimensions of corporate governance-based strategic approach with the supported literature. IVIF decision making trial and evaluation laboratory (DEMATEL) is constructed for measuring the relative importance of criteria and dimensions. IVIF VlseKriterijumska Optimizacija I Kompromisno Resenje (VIKOR) is applied for ranking the corporate governance-based performance of sustainable energy industries in emerging economies. Sensitivity analysis is also used for understanding the coherence of ranking results. Analysis results illustrate that the energy industry could provide more sustainable results than the conventional managerial policies by considering the social capital of board members. Additionally, mass-economies are closely related to the sustainable production capacities of energy industry and have the best performance results for the corporate governance-based sustainable energy production strategies. The results are discussed to provide the policy recommendations by comparing analysis results of emerging economies for further studies.

scholarly journals Special Issue on Family Entrepreneurship in Transition and Emerging Economies

2021 ◽  
Author(s):  
AISDL
Keyword(s):  
Family Business ◽  
Emerging Economies ◽  
Human Resources Management ◽  
Developed Countries ◽  
Special Issue ◽  
Business Growth ◽  
Resources Management ◽  
Management Culture ◽  
Governance Systems ◽  
Family Entrepreneurship

The aim of this special issue is to broaden discussions on family entrepreneurship in transition and emerging economies. These economies have advanced in terms of their market orientated governance systems that incorporate infrastructure necessary for business growth (Dabić et al., 2015; Hoskisson et al., 2013). Many authors suggest that family business behaviour differs between transition, emerging and developed countries, but little research has focused on the rationale for these differences (Palalic, 2017; Vuong et al., 2016; Wright et al., 2014). The main focus of this special was innovations, intellectual capital, quality management, human resources management, culture influences on socioemotional wealth (SEW), conflict management in family business.

scholarly journals Special Issue on Family Entrepreneurship in Transition and Emerging Economies

2020 ◽  
Author(s):  
AISDL
Keyword(s):  
Family Business ◽  
Emerging Economies ◽  
Human Resources Management ◽  
Developed Countries ◽  
Special Issue ◽  
Business Growth ◽  
Resources Management ◽  
Management Culture ◽  
Governance Systems ◽  
Family Entrepreneurship

The aim of this special issue is to broaden discussions on family entrepreneurship in transition and emerging economies. These economies have advanced in terms of their market orientated governance systems that incorporate infrastructure necessary for business growth (Dabić et al., 2015; Hoskisson et al., 2013). Many authors suggest that family business behaviour differs between transition, emerging and developed countries, but little research has focused on the rationale for these differences (Palalic, 2017; Vuong et al., 2016; Wright et al., 2014). The main focus of this special was innovations, intellectual capital, quality management, human resources management, culture influences on socioemotional wealth (SEW), conflict management in family business.

Why Credit Ratings Serve a Greater Role in Emerging Economies than Industrial Nations

2016 ◽  
pp. 115-133
Author(s):  
Marianne Ojo
Keyword(s):  
Corporate Governance ◽  
Emerging Economies ◽  
Credit Ratings ◽  
Agency Problem ◽  
Agency Problems ◽  
Ownership Structures ◽  
Concentrated Ownership ◽  
Governance Tools ◽  
Dispersed Ownership

The agency problem attributed to dispersed ownership is also principally regarded as being that of the control over powerful management. Whilst there are conflicting views in respect of the degree of agency problems which arise under dispersed and concentrated ownership structures, it appears that additional or greater agency problems will eventually necessitate the need for greater monitoring. In recommending the external auditor's expertise as appropriate for addressing agency problems, this chapter draws attention to the audit committee's roles, presenting them both as vital and complementary corporate governance tools.

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