Corporate Governance versus Business Group Governance, Part 2

2021 ◽  
pp. 121-134
Author(s):  
Luis Alfonso Dau ◽  
Randall K. Morck ◽  
Bernard Yeung
Keyword(s):  
Corporate Governance ◽  
Business Group

Market distance and insider-ownership strategies: a resource-dependence perspective

2019 ◽  
Vol 57 (11) ◽  
pp. 2958-2977
Author(s):  
Wen-Ting Lin
Keyword(s):  
Corporate Governance ◽  
Host Country ◽  
Resource Dependence ◽  
International Market ◽  
Resource Dependence Theory ◽  
Business Group ◽  
Foreign Direct Investments ◽  
Content Type ◽  
Market Distance ◽  
Managerial Level

Purpose Ownership issues are an important feature of corporate governance when firms focus on global expansion in multiple and diverse regions. Drawing on resource dependence theory (RDT), the purpose of this paper is to address the phenomenon regarding the extent to which international market distance affects equity stakes in group-affiliated firms held by business group headquarters. Design/methodology/approach This study uses longitudinal data on foreign direct investments by 106 business groups (BGs), including 561 group-affiliated firms, from Taiwan over a five-year period from 2006 to 2010. Findings The results show that the equity stakes of the BG headquarters in the group-affiliated firms in foreign markets were positively associated with the geographic distance between the country of the BG headquarters and the host country of the foreign group-affiliated firms, the cultural distance between the country of the BG headquarters and the host country of the foreign group-affiliated firms and institutional distance between the country of the BG headquarters and the host country of the foreign group-affiliated firms. Research limitations/implications Most studies of corporate governance and international business are based on a transaction cost economics approach, a resource-based perspective and agency and institutional theories. In contrast, this study, by using RDT, provides an alternative explanation regarding the factors that affect the equity stakes of parent firms in group-affiliated firms. Practical implications This study presents two basic pieces of advice for consideration. First, at the managerial level, group-affiliated firms should develop their own resources and capabilities in order to become more autonomous in pursuing advantageous international activities that the parent firms may not foresee. Second, and again at the managerial level, business group headquarters should adopt a strategy to balance the dependency relationship between group-affiliated firms and business group headquarters. Originality/value This study provides the most finely grained analysis, to date, regarding how international market distance affects business group headquarters from newly industrialized economies in terms of diverse equity stakes in foreign affiliates, the unique attributes of BGs and international market distances’ relationship with both the operations and the expansion opportunities of BGs.

A comparative study of corporate governance practices of Indian firms affiliated to business groups and industries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pitabas Mohanty ◽  
Supriti Mishra
Keyword(s):  
Corporate Governance ◽  
Business Groups ◽  
Principal Component ◽  
Past Research ◽  
Business Group ◽  
Hierarchical Regression ◽  
Group Affiliation ◽  
Content Type ◽  
Governance Index ◽  
Governance Practices

Purpose This paper aims to study the corporate governance practices followed by the listed companies in India to find out if industry and business group affiliation of firms influence their corporate governance practices. Design/methodology/approach The authors have created a corporate governance index for India using 15 of the variables used in past research. Hierarchical regression has been used in the study to control for possible inter-firm correlation in governance scores. Findings Using principal component analysis, the authors derive five factors for the corporate governance index – board composition, shareholder responsibility, ownership, responsible board behavior and fair executive compensation. Using the random intercept mixed-effects model, the authors find that corporate governance behaviors of firms affiliated to business groups are more similar within business groups than within industries. Practical implications Regulatory authorities generally target individual firms to enforce good corporate governance practices. As companies affiliated with the same business group exhibit similar governance practices, regulators can also set norms for business groups in addition to individual firms. Originality/value Scant research has studied the corporate governance behavior of firms affiliated with business groups. By making business groups (and industries) the unit of analysis, the authors have studied the corporate governance behavior of firms as a cluster in the context of an emerging country, India.

Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China

2018 ◽  
Vol 45 (7) ◽  
pp. 2685-2720 ◽  
Author(s):  
Daphne W. Yiu ◽  
William P. Wan ◽  
Yuehua Xu
Keyword(s):  
Corporate Governance ◽  
Transition Economies ◽  
Strategic Alliances ◽  
Business Group ◽  
Financial Fraud ◽  
Group Affiliation ◽  
Government Ownership ◽  
Governance Mechanisms ◽  
Institutional Conditions ◽  
Business Group Affiliation

How corporate governance mechanisms function in transition economies is a key topic for corporate governance researchers and policy makers. We propose that alternative governance mechanisms are in place to mitigate corporate fraudulent behaviors in the fluid state of transition economies where the establishment and enforcement of corporate governance legislation are presently insufficient. Drawing on the twin set of institutional logics—the institutional embeddedness logic and the institutional substitution logic—we posit that three salient types of prevailing alternative governance mechanisms (relational, administrative, and foreign governance) play important roles in transition economies because they are complementary to the institutional conditions at the time of the transition process. Conducting a bivariate probit analysis of a matched sample of corporate financial fraud cases in China, we find that strategic alliances, business group affiliation, nontradable state shares, local government ownership, use of foreign auditors, and foreign listing can deter corporate financial fraud, while foreign listing is also effective in detecting fraud. We also find that the deterrence effects of strategic alliances and business group affiliation become weaker as law development improves, while foreign listing and legal governance are completely substitutive. Our study provides a contextualized view of corporate governance that connects its effectiveness with institutionalization and the institutional state of a country. Our study also enriches our understanding of some unfamiliar forms of governance mechanisms that are in place and complementary to a country’s institutional conditions.

Corporate governance, firm performance, and business group affiliation: evidence from India

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Neeti Khetarpal Sanan ◽  
Dinesh Jaisinghani ◽  
Sangeeta Yadav
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Empirical Evidence ◽  
Emerging Economies ◽  
Chief Executive ◽  
Business Group ◽  
Independent Directors ◽  
Group Affiliation ◽  
Content Type ◽  
Business Group Affiliation

Purpose The purpose of this paper is to investigate whether, in emerging economies, the relationship between a firm’s corporate governance (CG) and its performance is associated with firm’s affiliation to a business group. Design/methodology/approach A total of 209 publicly listed firms in India during a 10-year period from 2007 to 2016 were studied, and the random effects model was employed for analysis. Findings Empirical evidence showed that board size and institutional shareholding positively impacted firm performance, whereas the proportion of independent directors negatively impacted performance. In group-affiliated firms in emerging economies, chief executive officer duality negatively impacted, whereas institutional shareholding positively impacted performance. These results are consistent with the principal–principal agency theory. The study found no discernible impact of proportion of independent directors on firm performance in group-affiliated firms. Originality/value In analyzing the governance–performance relationship and its association with business groups, this study extends current understanding by connecting business group research in emerging economies with CG and firm performance research. In examining firms from several industries over a long period of time after controlling for firm size, capital structure and spends on research and development and marketing, the results of this study offer rich empirical evidence that contributes to the extant literature on the nature of the governance–performance relationship.

scholarly journals Efficacy of corporate social responsibility in corporate governance structures of family owned business groups in India

2018 ◽  
Vol 2 (1) ◽  
pp. 52-68 ◽  
Author(s):  
Raveena Naz
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Family Business ◽  
Family Firms ◽  
Business Groups ◽  
Business Group ◽  
Governance Structures ◽  
The Family ◽  
Corporate Social

The concept of ‘Corporate Social Responsibility’ (CSR) has often relied on firms thinking beyond their economic interest despite the larger debate of shareholder versus stakeholder interest. India gave legal recognition to CSR in the Companies Act, 2013. CSR in India is believed to be different for two reasons: the dominance of family business and the history of practice of social responsibility as a form of philanthropy (mainly among the family business). This paper problematises the actual structure of business houses in India and the role of CSR in a context where the law identifies each company as a separate business entity while the economics of institutions emphasizes the ‘business group’ consisting of a plethora of firms as the institutional organization of business where capital owned or controlled by the family group is spread across the firms through the interlocked holding structures. Within this framework, the largest family firms, which are part of family owned business groups, top the CSR expenditure list. The governance structure of family firms allows family owned business group to show mandatory compliance of CSR even when they actually spend much less than what is prescribed by law. This aspect of the family firms is not addressed by the CSR legislation in particular or corporate governance legislation in general in India. The paper illustrates this with an empirical study of one of the largest family owned business group in India Reliance Industries Limited (RIL), which is well acclaimed for its CSR activities. The paper demonstrates how the business group through these series of shareholding network reduces its legally mandated CSR liability. The paper thus indicates the inadequacy of CSR legislation in India because the unit of compliance is an individual firm and it assumes that each firm is independent and only connected to each other through market dealings. The law does not recognize the inter-connections of firms (through common ownership and control) in corporate governance structures of family owned business group and hence is inadequate in its design to effect the threshold level of CSR expenditure. This is the central argument of the paper.

Corporate Governance versus Business Group Governance, Part 1

2021 ◽  
pp. 103-120
Author(s):  
Luis Alfonso Dau ◽  
Randall K. Morck ◽  
Bernard Yeung
Keyword(s):  
Corporate Governance ◽  
Business Group
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