scholarly journals Investor Protection and Agency Theory in Corporate Governance in Pakistan

2021 ◽  
Vol 3 (1) ◽  
pp. 12-21
Author(s):  
Imtiaz Ahmed Khan ◽  
Altaf Hussain Abro ◽  
Farooque Ahmed Leghari
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Agency Cost ◽  
Corporate Structure ◽  
Minority Shareholders ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
Global Trend ◽  
The Cost ◽  
Very High

The paper discusses the minority shareholders’ protection under the quantumof agency cost in corporate governance in Pakistan. The agency theory statesthat in most of the cases, the controlling shareholders and the topmanagement are normally involved in expropriating the funds of the company.This phenomenon increases the agency cost. The agency cost is directlyproportional to the cost of functioning of the company. In other words, theagency cost is inversely proportional to the profit of the company. Accordingto the agency theory, if the agency cost is decreased, the profit for investorincreases. The Pakistani corporate sector is dominated by the businessfamilies, the state and an opportunity to get the private benefits at the cost ofother stakeholders. There are the different mechanisms as discussed andapplied around the world to minimize the agency cost so as to make companyfinancially strong and better profit for the investors. In Pakistan, the agencycost is very high. Hence, there is a need to revamp the corporate governancemechanism to reduce the agency cost in order to provide a better protection tominority shareholders in a particular in the context of the global trend keepingin the view of the nature of corporate structure in Pakistan.

scholarly journals ”The good, the bad, and the ugly” private benefits of control and their regulatory implications

2008 ◽  
Vol 5 (4) ◽  
pp. 477-491 ◽  
Author(s):  
Alessio M. Pacces
Keyword(s):  
Corporate Governance ◽  
Corporate Control ◽  
Legal Protection ◽  
Corporate Law ◽  
Legal Institutions ◽  
Minority Shareholders ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
The Law

This paper attempts to shed a new light on the economics and the law of corporate governance. It so does by taking stock of the weaknesses of the standard account of how law ‘matters’ for separation of ownership and control. This account fails to explain comparative corporate governance. Both the ownership structure and the functioning of the market for corporate control do not seem to depend entirely on the strength with which non-controlling shareholders are protected by corporate law. Without claiming that legal protection of minority shareholders does not matter in corporate governance, this paper shows that protection and exchange of corporate control is at least as important and so are the legal institutions that support them. This result is derived by introducing a third category of private benefits of control (idiosyncratic PBC), which supplements the more traditional specifications as inefficient consumption of control perquisites (distortionary PBC) or outright expropriation of shareholder value (diversionary PBC).The implications for corporate law are broader than those of the ‘law matters’ framework. Even though legal institutions effectively constrain expropriation of non-controlling shareholders, they may still make corporate governance inefficient when they fail to provide entitlements to uncontested control in dependently of how much ownership is retained by corporate controllers. Likewise, regulation may undermine the takeover process when it restricts side payments that ultimately support efficient bargaining upon the value of corporate control

Majority and Minority Shareholders

2020 ◽  
pp. 119-174
Author(s):  
Paul Davies
Keyword(s):  
At Risk ◽  
High Risk ◽  
Small Group ◽  
Company Law ◽  
Minority Shareholders ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
The Third ◽  
Wide Range ◽  
A Company

Where a company has a controlling or a small group of controlling shareholders, the non-controlling shareholders are at risk that the controllers will extract private benefits of control at the expense of the non-controllers. UK company law contains a wide range of techniques for addressing this issue, some more effective than others. This chapter begins by examining the various ways in which well-advised investors can contract for protection before they enter the company and how the law protects the agreements reached. The second part discusses rights to exit the company upon the occurrence of certain events. The third part discusses disclosure rights, designed to bring self-dealing transactions into the open. The fourth focuses on ways of structuring the board or shareholder body when the decision before it carries a high risk of self-dealing. The final part considers cases where the courts review the substantive fairness of the controllers’ conduct, notably, but not only, the provisions on ‘unfair prejudice.

5. Majority and Minority Shareholders

2020 ◽  
pp. 119-174
Author(s):  
Paul Davies
Keyword(s):  
At Risk ◽  
High Risk ◽  
Small Group ◽  
Company Law ◽  
Minority Shareholders ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
The Third ◽  
Wide Range ◽  
A Company

Where a company has a controlling or a small group of controlling shareholders, the non-controlling shareholders are at risk that the controllers will extract private benefits of control at the expense of the non-controllers. UK company law contains a wide range of techniques for addressing this issue, some more effective than others. This chapter begins by examining the various ways in which well-advised investors can contract for protection before they enter the company and how the law protects the agreements reached. The second part discusses rights to exit the company upon the occurrence of certain events. The third part discusses disclosure rights, designed to bring self-dealing transactions into the open. The fourth focuses on ways of structuring the board or shareholder body when the decision before it carries a high risk of self-dealing. The final part considers cases where the courts review the substantive fairness of the controllers’ conduct, notably, but not only, the provisions on ‘unfair prejudice.

The ultimate controlling owner and corporate governance in Brazil

2019 ◽  
Vol 19 (1) ◽  
pp. 120-140 ◽  
Author(s):  
Vicente Lima Crisóstomo ◽  
Isac de Freitas Brandão
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Governance System ◽  
Private Benefits ◽  
Controlling Shareholder ◽  
Content Type ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
Corporate Governance System

Purpose High ownership concentration makes controlling blockholders powerful enough to use private benefits of control and able to shape the corporate governance system to favor their own interests. This paper aims to examine the effect of the nature of the ultimate firm owner on the quality of corporate governance in Brazil. Design/methodology/approach Econometric models are estimated to assess whether the nature of the ultimate controlling shareholder affects the quality of the corporate governance system. Models are estimated using panel data methodology with coefficients estimated by the generalized method of moments system estimator. Findings The results show that the absence of a controlling shareholder has a positive effect on corporate governance, whereas the presence of a controlling blockholder, or a shareholder agreement among a few large shareholders, has a negative effect. This adverse effect holds when the controlling blockholder is a family or another firm. The findings are in line with the expropriation effect given that weaker corporate governance system facilitates controlling shareholders’ ability to extract private benefits of control. The findings also give support to the substitution effect as powerful blockholders take on the management monitoring function by weakening the board. Originality value Following important previous literature, the study investigates the effect of the nature of large controlling shareholders on the adoption of good corporate governance practices. The work provides additional evidence on the effect of the nature of large controlling shareholders on the quality of the corporate governance system in Brazil, taking into account the main kinds of controlling blockholders present in that market. The findings give support to both the expropriation and substitution hypotheses highlighting the presence of the principal-principal agency model in an important emerging market, Brazil.

scholarly journals Corporate Governance and Dividend Policy in the Presence of Controlling Shareholders

2020 ◽  
Vol 13 (8) ◽  
pp. 162
Author(s):  
Ricardo Rodrigues ◽  
J. Augusto Felício ◽  
Pedro Verga Matos
Keyword(s):  
Corporate Governance ◽  
Data Analysis ◽  
Panel Data ◽  
Agency Theory ◽  
Dividend Policy ◽  
Panel Data Analysis ◽  
Free Cash Flow ◽  
Governance Mechanisms ◽  
Controlling Shareholders ◽  
Listed Firms

Based on agency theory, we focused on the influence of corporate governance in the dividend policy of large listed firms with headquarters in continental Europe countries. Previous research focused on the influence of corporate governance on the performance and risk of listed firms, but the influence of corporate governance on the dividend policy has rarely been addressed despite the importance of dividends for shareholders and the implications on the free cash-flow, whose application may be a source of conflicts between managers and shareholders. In this paper, we study the influence of a set of governance mechanisms on the dividend policy over 12 years (2002 to 2013). The results, based on a panel data analysis, support the importance of governance mechanisms toward the protection of shareholders’ interests, and reveal that the decisions on whether to pay dividends and how much to pay are grounded on different antecedents.

scholarly journals Biaya Keagenan, GCG, dan Kinerja Perusahaan Keluarga

MBIA ◽  
2021 ◽  
Vol 19 (3) ◽  
pp. 331-342
Author(s):  
Kusmawati Kusmawati
Keyword(s):  
Corporate Governance ◽  
Data Processing ◽  
Agency Theory ◽  
Secondary Data ◽  
Agency Cost ◽  
Family Firm ◽  
Chi Square ◽  
Good Corporate Governance ◽  
Saturation Method ◽  
And Performance

This research according to agency theory, especially conflict between principal and agent in family firm. The purpose of this study was to examine empiricallly differences agency cost, GCG, and performance in family firm and not family firm. proxy chosen in describing the agency cost are operational expense ratio on revenue, performance of the firm is return on asset, and top 50 biggest market cap and mid cap of public listed companies in IICD for the GCG measurement. The population used in this study is company in 100 kompas index, during the period 2017-2019. The sample collected by saturation method and secondary data obtained from a IDX.co.id database.  In this study, the data collected were 28 family firm and 43 non family firm.  The statistically method are used Mann Whitney U and Chi Square with using IBM SPSS 23.0 for data processing. The first result of this research showed that there are differences in agency cost and Good Corporate Governance among family with non family firm. The second result are showed that there are not difference in Return On Asset among family with non family firm.   Abstrak Penelitian ini adalah penelitian tentang teori keagenan, khususnya konflik antara pemilik dan agen di perusahaan keluarga. Tujuan dari penelitian ini adalah untuk menguji secara empiris perbedaan antara biaya keagenan, GCG, dan kinerja antara perusahaan keluarga dan bukan perusahaan keluarga. Proksi yang dipilih untuk menggambarkan biaya keagenan adalah rasio beban operasi atas pendapatan, ukuran kinerja adalah laba bersih atas aset, dan perusahaan yang masuk dalam 50 perusahaan dengan market kapitatalisasi besar dan menengah untuk ukuran dari GCG. Populasi yang digunakan dalam penelitian ini adalah perusahaan yang masuk dalam index kompas 100 selama periode 2017-2019. Sampel dipilih dengan menggunakan metode sampel jenuh dan data sekunder yang digunakan adalah berasal dari database idx.co.id. dalam penelitian ini, data yang dikumpulkan terdiri dari 28 perusahaan keluarga dan 43 perusahaan non keluarga. Metode statistik yang digunakan adalah Mann Whitney U dan Chi Square dengan menggunakan SPSS IBM versi 23 untuk pengolahan datanya. Hasil penelitian menunjukkan bahwa terdapat perbedaan biaya keagenan dan GCG antara perusahaan keluarga dan perusahaan non keluarga. Hasil penelitian berikutnya menunjukkan bahwa tidak terdapat perbedaan kinerja ROA antara perusahaan keluarga dan non keluarga. Kata Kunci: Biaya Keagenan, GCG, ROA.

scholarly journals Secrecy, collusion and coalition building in corporate governance

2007 ◽  
Vol 4 (3) ◽  
pp. 10-24 ◽  
Author(s):  
Lee Mick Swartz
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Negative Impact ◽  
Agency Cost ◽  
Coalition Building ◽  
Role Of Information

This paper studies secrecy in voting and the role of information on coalition building in corporate governance. It finds evidence that supports the coalition building hypothesis and, in part, rejects the agency cost hypothesis. The conditions for insiders and large outsiders to form coalitions are examined. The results are consistent with insiders and large outsiders cooperating and voting as a block to maintain power, this imposes costs on other shareholders. Consistent with the agency theory and the coalition building theory, management initiated amendments have a more negative impact than shareholder initiated amendments. The Vote Your Conscience theory is rejected.

scholarly journals Ownership structure and corporate governance code: The case of family business enterprises in Germany

2009 ◽  
Vol 6 (4) ◽  
pp. 382-390 ◽  
Author(s):  
Marion Weissenberger-Eibl ◽  
Patrick Spieth
Keyword(s):  
Corporate Governance ◽  
Family Business ◽  
Ownership Structure ◽  
Family Businesses ◽  
Minority Shareholders ◽  
Controlling Shareholders ◽  
Corporate Governance Code ◽  
Business Enterprises ◽  
And Control

Ownership of corporations in Germany is today highly concentrated in the hands of families and other companies. Theses ‘insider’ systems often result in core conflict tends to be between controlling shareholders and sometimes between strong stakeholders and weak minority shareholders. The aim of this paper is to research the characteristics of ownership and control in family business and point out the role of Family Business Governance in securing an appropriate control of the owning families. The authors give suggestions how to implement the German Governance Code recommendations in family businesses.

Agency problem in management as a challenge for the corporation accounting system

2019 ◽  
pp. 103-115
Author(s):  
Vasyl Tsaruk
Keyword(s):  
Corporate Governance ◽  
Institutional Theory ◽  
Agency Theory ◽  
Agency Problem ◽  
Corporate Management ◽  
Accounting System ◽  
Corporate Structure ◽  
Governance System ◽  
Advantages And Disadvantages ◽  
Corporate Governance System

Introduction. Corporate governance, as a basis for ensuring the efficient use of corporate resources, can be built on a range of models that have both advantages and disadvantages. Neo-institutional theory, in particular its separate component is agency theory. It is one of the theories that allows to substantiate the reasons for the decline in the quality of implemented corporate governance systems and to formulate ways to improve it, in particular, taking into account the role of accounting in ensuring the effectiveness of their functioning. Purpose. The aim of the article is to monitor essence and peculiarities of manifestation of agency problem in corporate governance and substantiation of place of accounting in its solution. Methods. The range of research methods related to the solution of the agent problem in the corporate governance system is applied. Dialectical method of cognition and the systematic approach to the interpretation of corporate governance, the monographic method for monitoring the positions of scientists in the sphere of solving the agent problem, the abstract and logical method for theoretical generalizations and formulation conclusions are used in the research. Results. The necessity of accounting development in solving the agency problem in corporate management is substantiated. The peculiarities of the development of neo-institutional theory as a theoretical basis of corporate governance are revealed. The necessity to study agency theory as a means of solving problems in corporate governance is substantiated. The essence of agency problem in corporate structures is revealed and the causes of its occurrence are identified. The theoretical principles of agency problem in corporate structures are highlighted. Cases of manifestation of agency problem in corporate structures are analyzed. The basic directions of improvement of the accounting system of the corporate structure with the purpose of minimizing consequences of occurrence of agency problem are highlighted. Discussion. It is advisable to focus on optimizing specific elements of the corporate accounting system in further research in order to avoid agency issues in the corporate governance system.

Corporate Governance in China: A Survey*

2020 ◽  
Vol 24 (4) ◽  
pp. 733-772 ◽  
Author(s):  
Fuxiu Jiang ◽  
Kenneth A Kim
Keyword(s):  
Corporate Governance ◽  
Agency Problems ◽  
Future Research ◽  
Minority Shareholders ◽  
Controlling Shareholder ◽  
Controlling Shareholders ◽  
Agency Conflict ◽  
Concentrated Ownership ◽  
The Usa ◽  
Corporate Social

Abstract This article surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the USA to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.

Sign in / Sign up

Export Citation Format

Share Document