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1
Panigrahi, Shrikant Krupasindhu, Yuserrie Bin Zainuddin, and Noor Azlinna Binti Azizan. "Linkage of Management Decisions to Shareholder’s Value." International Journal of Finance & Banking Studies (2147-4486) 3, no. 1 (July 21, 2014): 114–25. http://dx.doi.org/10.20525/ijfbs.v3i1.173.
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In this paper, the author investigated the influence of management decisions like capital structure, dividend policies, remunerations, credit policy decisions and investment decisions on shareholder wealth maximization. The main objective of this paper is to increase awareness and relationship between management and shareholders of the companies. To achieve the objective, portfolio theory, capital asset pricing model and modern financial theory providing evidence on the linkage between management decisions to shareholder’s value. Shareholders are only concerned about the value of shares of the company and the amount of return in the form of dividend paid. Thus in order to meet the demands of the shareholders of the company, managers needs to increase their abilities and skills to overcome the organizational goals. Thus the main goal of this paper is to discuss on the role of management decisions towards increasing shareholder’s wealth and meet organizational goals.
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Panigrahi, Shrikant Krupasindhu, Yuserrie Bin Zainuddin, and Noor Azlinna Binti Azizan. "Linkage of Management Decisions to Shareholder’s Value: EVA Concept." International Journal of Finance & Banking Studies (2147-4486) 3, no. 1 (January 19, 2016): 114. http://dx.doi.org/10.20525/.v3i1.173.
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<p>In this paper, the author investigated the influence of management decisions like capital structure, dividend policies, remunerations, credit policy decisions and investment decisions on shareholder wealth maximization. The main objective of this paper is to increase awareness and relationship between management and shareholders of the companies. To achieve the objective, portfolio theory, capital asset pricing model and modern financial theory providing evidence on the linkage between management decisions to shareholder’s value. Shareholders are only concerned about the value of shares of the company and the amount of return in the form of dividend paid. Thus in order to meet the demands of the shareholders of the company, managers needs to increase their abilities and skills to overcome the organizational goals. Thus the main goal of this paper is to discuss on the role of management decisions towards increasing shareholder’s wealth and meet organizational goals.</p>
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Jia, Zhang, and Li Yan Han. "How Does Equity Structure Impact M&A Decision? a Model Based on Private Benefits." Advanced Materials Research 271-273 (July 2011): 742–47. http://dx.doi.org/10.4028/www.scientific.net/amr.271-273.742.
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This paper focus on the private benefit of large shareholder’s control right within the framework of Agency Theory 2 and construct a model which can illustrate how M&A decision can be impacted by acquirer’s equity structure. The model internalizes large shareholder’s private benefit as a function of the shareholding ratio and specifies the mechanism through which large shareholder’s shareholding ratio and ownership concentration impact the M&A decision. This paper provides theoretical foundation for those empirical literatures which analyze the M&As from the perspective of Agency Theory 2.
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Lukashina, Olga, Zaiga Oborenko, and Marga Zhivitere. "Extinguishing Financial Liabilities with Equity Instruments: Theory and Practice Problems." Global Journal of Business, Economics and Management: Current Issues 6, no. 1 (October 25, 2016): 35. http://dx.doi.org/10.18844/gjbem.v6i1.984.
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EU introduced “fair value” accounting rules to evaluate equity instruments issued by the debtor for creditors to extinguish financial liabilities to them. These rules are not applied if the creditor is also a direct or indirect shareholder. This paper examines approaches to the evaluation debt when the shareholder’s liabilities are capitalized. Evaluation of those debts should include an audit of the documents related to incurring of debt, followed by an analysis of the debtor’s liquid assets to secure the debt. This is necessary to prevent the use of loopholes in legislation. Then the methods of business evaluation could be applied in any private enterprise.Keywords: capitalization of debts, set-off of claims , fair value, income tax, “internal” liabilities
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Oyinloye, Lateef, Temitayo O. Olaniyan, and Bamidele O. Agbadua. "Effect of financial leverage on shareholder’s returns in a dynamic business environment." Corporate Governance and Organizational Behavior Review 4, no. 2 (2020): 40–49. http://dx.doi.org/10.22495/cgobrv4i2p4.
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Modigliani and Miller’s (1963) paper made revelations on the importance of leverage in reducing tax payment obligations. Shareholders’ return may affect the risk premium associated with the use of leverage. However, the literature on leverage and shareholder returns relationships for a dynamic business environment such as Nigeria is still growing. The one-step differenced generalised method of moments (GMM) estimator is used in analysing an unbalanced panel data of 18 insurance firms for the period 2008-2017. The data used are gleaned from the annual reports of the sampled insurance companies. Results showed that the debt ratio has a significant negative effect on shareholders’ returns. However, the results become positive and significant when debt-equity and interest coverage ratios are used as the leverage ratio. This study supports the pecking order theory. It concluded that the effect of financial leverage on shareholders’ returns depends largely on the decomposition of financial leverage; hence both theories examined are relevant. This study recommended, among other things, that there is a need for the management of insurance companies to reassess the costs and risks associated with financial leverage when financing decisions have to be made. Furthermore, high indebtedness should be trimmed to reduce its negative influence on shareholders’ returns by ensuring an appropriate finance option, which will be in accordance to maximise shareholders’ wealth.
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Miyake, Masatoshi, Mei Yu, and Hiroshi Inoue. "Mitigating risk incentives by issuing convertible bonds: A refinement to the Black–Scholes evaluation model." Journal of Financial Engineering 01, no. 03 (September 2014): 1450024. http://dx.doi.org/10.1142/s234576861450024x.
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This study employs option pricing theory to analyze the risk incentive conflict between shareholders and creditors. It evaluates the volatility of investment projects funded by borrowed money and compares their gains for the shareholder and creditor. Our analysis is based on the recognition that shareholders' and creditors' objectives may differ. We identify the shareholder's risk incentive as a source of agency cost originating with the shareholder and find that issuing a convertible bond avoids agency cost without diluting existing shareholders' ownership. Numerical examples are shown to examine it.
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Mikalonienė, Lina. "Subsidiari akcininko atsakomybė." Teisė 76 (January 1, 2010): 176–89. http://dx.doi.org/10.15388/teise.2010.0.217.
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Šiame straipsnyje nagrinėjamas akcininko atsakomybės už bendrovės prievoles dėl nesąžiningo elgesio koncepcinis pagrindimas, kuris remiasi piktnaudžiavimo teise doktrina. Analizuojamas akcininko atsakomybės pagal piktnaudžiavimo teise doktrinos ir akcininko deliktinės civilinės atsakomybės bendrųjų normų pagrindu santykis. Straipsnyje taip pat nagrinėjamas akcininko papildomos turtinės prievolės koncepcinis pagrindimas pagal Lietuvos Respublikos civilinio kodekso 2.50 straipsnio 3 dalį. This article explores dogmatic underpinning of piercing the corporate veil doctrine on the basis of theory on abuse of rights. The article also analysis relation between abuse of rights and tort, e.g. as basis for the shareholder’s liability in the veil piecing cases and as an independent legal ground for shareholder’s liability respectively. Theoretical foundation of the corporate veil piercing doctrine according to par. 3 Art. 2.50 of the Lithuanian Civil Code is under consideration.
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Zulkafli, Abdul Hadi, and Ahmad Husni Hamzah. "Corporate contestability and corporate expropriation." Risk Governance and Control: Financial Markets and Institutions 6, no. 4 (2016): 403–9. http://dx.doi.org/10.22495/rcgv6i4c3art5.
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This paper presents evidence on the role of ownership in dealing with corporate expropriation of listed companies in Malaysia. From the perspective of expropriation, a single controlling shareholder is always associated with such behavior due to their power and control at the expense of minority shareholder. However, subsequent individual or coalition of large shareholders can be an important corporate governance tool by providing effective monitoring that would lessen the possibility of expropriation by the controlling shareholder. Relating to that, this study evaluates the role of controlling and large shareholders in dealing with corporate expropriation. It is found that there is a negative relationship between single controlling shareholders and dividend payout ratio indicating that firms with only controlling shareholder will pay a lower dividend due to possible expropriation through profit diversion by controlling shareholder. Using Herfindahl Index as a proxy for ownership contestability, the presence of large shareholders along with controlling shareholder has a positive relationship with dividend payout implying that increased contestability helps to curb the power of controlling shareholder to expropriate fund for their own benefit. In accordance with agency theory, the outcome suggests that large shareholders play a monitoring role in minimizing the Type II agency problem. It is also verifying the argument made based on the Catering Theory of Dividend that the presence of large shareholder brings benefit to all shareholders as they are able to reduce profit diversion by demanding for higher dividend.
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Marcoux, Alexei M. "A Fiduciary Argument Against Stakeholder Theory." Business Ethics Quarterly 13, no. 1 (January 2003): 1–24. http://dx.doi.org/10.5840/beq20031313.
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Abstract:Critics attack normative ethical stakeholder theory for failing to recognize the special moral status of shareholders that justifies the fiduciary duties owed to them at law by managers. Stakeholder theorists reply that there is nothing morally significant about shareholders that can underwrite those fiduciary duties. I advance an argument that seeks to demonstrate both the special moral status of shareholders in a firm and the concomitant moral inadequacy of stakeholder theory. I argue that (i) if some relations morally require fiduciary duties, and (ii) the shareholder-manager relation possesses the features that make fiduciary duties morally necessary to those relations, then (iii) stakeholder theory is morally lacking.
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Sollars, Gordon G., and Sorin A. Tuluca. "Fiduciary Duty, Risk, and Shareholder Desert." Business Ethics Quarterly 28, no. 2 (February 19, 2018): 203–18. http://dx.doi.org/10.1017/beq.2017.47.
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ABSTRACT:A common moral argument is that shareholders have a special status because of risk when considering the duties of corporate management. The privileges of this status usually include the idea that management should adopt the goal of maximizing shareholder wealth. We argue that modern financial theory demonstrates that this argument should be modified by the recognition of a principle of desert, the shareholder desert principle (SDP). Financial theory can usefully circumscribe the duty owed to shareholders and the extent to which risk bearing justifies a claim on corporate value. When combined with the SDP, the result provides management with a guideline for what is owed to shareholders before other stakeholder non-contractual claims may be satisfied. As such, our approach provides management with some guidance through the thicket of competing stakeholder claims.
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Gleason, Katherine I., and Mark S. Klock. "Is there power behind the dead hand? An empirical investigation of dead hand poison pills." Corporate Ownership and Control 7, no. 1 (2009): 370–79. http://dx.doi.org/10.22495/cocv7i1c3p4.
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Dead hand poison pills prevent potential hostile acquirers from circumventing a poison pill with a proxy contest whereby newly elected directors could redeem the pill. Dead hand provisions only permit continuing directors to redeem. Shareholder rights advocates and legal scholars have criticized dead hand poison pills as an assault on shareholder governance, but economic theory suggests potential shareholder benefits. We provide the first empirical study of dead hand poison pills. We find that adoption of dead hand poison pills leads to gains for shareholders and losses for bondholders. This supports Schwert’s (2000) conjecture that poison pills provide shareholders with better premiums rather than entrench ineffective managers.
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Sikavica, Katarina, Elise Perrault, and Kathleen Rehbein. "Who Do They Think They Are? Identity as an Antecedent of Social Activism by Institutional Shareholders." Business & Society 59, no. 6 (March 29, 2018): 1228–68. http://dx.doi.org/10.1177/0007650318762752.
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Shareholder activists increasingly pressure corporations on social policy issues; yet, extant research provides little understanding of who these activists are and how they choose their corporate targets. In this article, we adopt an activist-centered approach and rely on hybrid organizational identity theory to determine, in a two-phase analysis, how shareholder activists define their economic and social identities and whether these identities are associated with specific target characteristics and tactical strategies. Our findings form the premise of a typology of institutional shareholder activists that is empirically derived and takes into account the wide range of hybrid organizational identities that shareholders exhibit. With a sample of 735 social policy shareholder proposals filed by 104 institutional shareholders in the 2009-2010 period, our study presents one of the first empirical tests examining the heterogeneity of identities within the broad stakeholder category of “social shareholder activists.” Our empirical evidence demonstrates that these shareholders’ mix of economic and social identities is systematically related to their targets’ characteristics and tactical strategies. The implications of our new typology for research on shareholder activism and the value of our findings for managers conclude this article.
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Andersen, Jon Aarum. "How organisation theory supports corporate governance scholarship." Corporate Governance 15, no. 4 (August 3, 2015): 530–45. http://dx.doi.org/10.1108/cg-02-2014-0016.
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Purpose – This paper aims to show how organisation theory can be used to understand the controversy between the shareholder and the stakeholder perspectives. Rationalistic and open system theories may enhance research on corporate governance by offering well-defined concepts and by specifying core relationships. Design/methodology/approach – This paper applies descriptions of the two perspectives in organisation theory as a “method” for illustrating how they are linked to and support the shareholder versus the stakeholder perspectives. Findings – The controversy stems from the fact that the shareholder and the stakeholder perspectives address different relationships. The shareholder perspective captures two relationships that accord with rationalistic organisation theory: shareholders are managing the managers and the organisation, and managers are managing the corporation on behalf of the owners. The stakeholder perspective focuses on three relationships that are not concordant with system theory: managers are managing the shareholders (i.e. the symbolic management of stockholders), managers are managing the corporation (i.e. general management theory) and managers are managing the stakeholders. Research limitations/implications – Organisation theory provides suggestions for more fruitful definitions of the often-used concepts of direction, control, administration and influence. These terms may be substituted with the well-defined concepts of management, power and control. Practical implications – Proponents of organisation theory find it theoretically difficult to deal with the topic of corporate governance, if they do at all. When they do, they do it only perfunctorily. Originality/value – Organisation theory may strengthen research on corporate governance if we insist on both theoretical clarifications of major relationships and on the use of more strictly defined concepts.
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Kalicanin, Djordje. "Value-based management: Theoretical base, shareholders' request and the concept." Ekonomski anali 50, no. 165 (2005): 165–84. http://dx.doi.org/10.2298/eka0565165k.
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The pressure of financial markets, which is a consequence of shareholder revolution, directly affects the solution to the following dilemma: is the mission of corporations to maximize shareholders' wealth or to satisfy interests of other stakeholders? The domination of shareholder theory has caused the appearance of the valuebased management concept. Value-based management is a relevant concept and a process of management in modern environment. The importance of shareholder value requires transformation of traditional enterprise into value driven enterprise. This paper addresses theoretical base, shareholder revolution and the main characteristics of value-based management.
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Cindy, David, Lilia, Santitra, and Rico. "Pengaruh Return On Assets, Debt To Equity Ratio dan Earning Per Share Terhadap Price To Book Value Pada Perusahaan Perbankan yang Terdaftar Di Bursa Efek Indonesia Pada Periode Tahun 2015-2018." Jurnal Manajemen Bisnis Eka Prasetya : Penelitian Ilmu Manajemen 6, no. 2 (September 18, 2020): 21–34. http://dx.doi.org/10.47663/jmbep.v6i2.66.
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Price to Book Value is a form of scale assessment that measures Shareholder’s wealth. The purpose of research is to test and analyze the influence of Return on Assets, Debt to Equity Ratio and Earning Per Share against Price to Book Value on Banking Company registered on Indonesia Stock Exchange on the period 2015-2018. Theory used are the theories that have a relation with Return on Assets, Debt to Equity Ratio and Earning Per Share against Price to Book Value. This research Using quantitative approaches with types of descriptive research and the nature of research Explanatory. The population of this research is 43 registered companies in IDX. Sample of This study as many as 28 companies where samples were obtained from the process purposive Sampling that meets certain criteria. Research results can be concluded that The simultaneous Return on Assets, Debt to Equity Ratio and Earning Per Share are influential Against Price to Book Value with a signed value (0.002 < 0.05). Partial Return on Assets affect Price to Book Value while Debt to Equity Ratio and Earning Per Share has no effect on Price to Book Value.
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Anderson, Ronald C., and David M. Reeb. "Board Composition: Balancing Family Influence in S&P 500 Firms." Administrative Science Quarterly 49, no. 2 (June 2004): 209–37. http://dx.doi.org/10.2307/4131472.
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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.
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Goodman, Jennifer, and Daniel Arenas. "Engaging Ethically: A Discourse Ethics Perspective on Social Shareholder Engagement." Business Ethics Quarterly 25, no. 2 (April 2015): 163–89. http://dx.doi.org/10.1017/beq.2015.8.
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ABSTRACT:The primacy of shareholder demands in the traditional theory of the firm has typically excluded marginalised stakeholder voices. However, shareholders involved in social shareholder engagement (SSE) purport to bring these voices into corporate decision-making. In response to ethical concerns about the legitimacy of SSE, we use the lens of discourse ethics to provide a normative analysis at both action and constitutional levels. By specifying three normative questions, we extend the analysis of SSE to identify a political role for shareholders in pursuit of the common good. We demonstrate the desirability for SSE to promote regulatory/institutional change to guarantee marginalised stakeholders a voice in corporate decisions that affect them. The theory of SSE we propose thus calls into question the stark separation of the political and economic spheres and reveals an underlying tension, often overlooked, within the responsible investment literature.
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Mastilo, Zoran, Vladimir Zakić, and Goran Popović. "Value Creation Concept In Stakeholder And Shareholder Economies." Applied Economics and Finance 4, no. 2 (February 6, 2017): 155. http://dx.doi.org/10.11114/aef.v4i2.2200.
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In the financial theory it is common to make distinction between two types of corporate value creation concept: shareholder value and stakeholder value. In shareholder systems, also known as Anglo-American concept, institutional investors, who usually own small percentages of companies' shares, exert significant influence over managers. In major stakeholder systems, marked as Continental concept, influence is shared between large shareholders, employees, customers and suppliers. The aim of this paper is to analyze influence of globalization processes and economic crises on value creation theory and practice.
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Mudawi, Osama Mustafa, and Elfadil Timan. "Does the Concept of Enlightened Shareholder Value Succeed in Bridging the Gap between the Shareholders and Stakeholders Value Theories?" Business and Economic Research 8, no. 2 (March 3, 2018): 56. http://dx.doi.org/10.5296/ber.v8i2.11271.
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Purpose: The purpose of this article is to explore the main theories as to the corporate governance subject, and focus first on Shareholders and Stakeholders Value theories in order to identify their shortcomings. Next, the advantages and disadvantages of Enlightened Shareholder Value; including future perspectives on Enlightened Shareholder Value in light of the UK company Act 2006.Methodology /approach: This article describes and compares the main theories with regard to the corporate governance subject. The following materials were referenced as part of this article: books, journal articles, cases, reports, legislations.Findings: Based on the outcomes of the article there are advantages and disadvantages to Shareholders and Stakeholders Value theories. The former is considered a very narrow vision because its main aim is to gain profits for shareholders, it ignores stakeholders, there is a possible risk since managers and directors may abuse their delegations, and it costs more to monitor directors. Similarly, this article has been found that there are shortcomings to the Stakeholders Value theory; for example, there is no clear hierarchy of stakeholders’ interests, there is no one goal to achieve; it seems to demand less accountability from directors. Moreover, this article highlighted that the Enlightened Shareholder theory seems a better theory at present. Apparently, the success of this theory will depend on many factors: first, how the directors will apply the discretionary power with regard to section 172 (1) of CA 2006. Secondly, the interpretation of the courts about the duty of directors. Thirdly, the role of scholars improving this theory. Fourthly, how civil society will observe the application of this theory. Finally, recommended that further study should be done according to the recent practice.Originality/value: This article contributes to increase the understanding of the theories of corporate governance and discover the best one for the time being.
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Liu, Yuhuan, Tianli Feng, and Suichuan Li. "Stakeholder Influences and Organization Responses: A Case Study of Corporate Social Responsibility Suspension." Management and Organization Review 11, no. 3 (July 15, 2015): 469–91. http://dx.doi.org/10.1017/mor.2015.4.
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ABSTRACTIn this study, we use the context of corporate social responsibility (CSR) suspension and provide a case study from China to show how conditions allowed shareholders to seize power and alter a firm's mission. We show that managers reacted to a change in shareholder power by changing their priorities to correlate with shareholder influences. Our dynamic model first highlights the importance of precipitating events that allowed shareholders to seize power. In response, managers rebalanced their priorities, paid more attention to the shareholders who demanded higher profits, and suspended ethical and discretionary responsibilities as a result. We further present evidence that CSR suspension subsequently harms relationships between stakeholders and threatens firm survival. We contribute to stakeholder theory by providing a dynamic model for interpreting stakeholder influences and managers’ subsequent responses. We add to corporate social responsibility studies by providing a more nuanced understanding of CSR suspension.
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Cragg, Wesley. "Business Ethics and Stakeholder Theory." Business Ethics Quarterly 12, no. 2 (April 2002): 113–42. http://dx.doi.org/10.2307/3857807.
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Abstract:Stakeholder theorists have typically offered both a business case and an ethics case for business ethics. I evaluate arguments for both approaches and find them wanting. I then shift the focus from ethics to law and ask: “Why should corporations obey the law?” Contrary to what shareholder theories typically imply, neoclassical or profit maximization theories of the firm can offer answers based only on instrumental justifications. Instrumental justifications for obeying the law, however, are pragmatically and normatively incoherent. This is because the modern corporation is a legal artifact. It exists because communities create the legal framework necessary for its existence. Individual corporations can therefore be said to owe their existence to a partnership (what might be called a social contract) between shareholders and governments, a partnership that is itself built on the shared though often implicit understanding that corporations have an unconditional (categorical) obligation both to obey the law and to treat their stakeholders ethically while generating wealth for their shareholders.
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Nuhu, Mohammed, Halilu Bello Rogo, and Mohammed Umar Danladi. "Investigating the Influence of Shareholder Mechanisms on the Perceived Performance of Listed Firms in Nigeria." Review of Economics and Development Studies 4, no. 1 (June 1, 2018): 79–89. http://dx.doi.org/10.26710/reads.v4i1.283.
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The current debate on the issues of shareholder rights to firm performance has grown as a topic of research both in the developed and emerging economy. There is serious concern regarding the effectiveness of the board transparency and accountability, company image and the rights of the shareholders in recent times. This paper investigated the influence of shareholders mechanisms on the perceived performance of listed firms in Nigeria. The study is guided byagency theory and supported by the stewardship theory. The questionnaire was used as an instrument for data collection. 247 questionnaires were administered with 117 duly completed and returned. Hence, the number of completed valid questionnairesis 114. However, data were analysed using Partial Least Square Structural Equation Modeling (PLS-SEM). Empirical findings showed that board transparency/accountability and shareholder right were significantly and positively related to perceived firm performance. Whilethe company image did not show any significant link to perceived firm performance.Hence, based on the researches knowledge, this is the first of its kind to adopt primary data to investigate the influence of shareholders’ rights mechanisms on the perceived performance of listed firms in Nigeria. Therefore, the findings of this study,provide researchers, policymakers, firms, stakeholders, and the agencies of the government with a better picture of the transparency and accountability and the right of the shareholder. The study recommends that listed firms in Nigeria should adhere to professional ethics and best business practices such as financial prudence and accountability to their board of directors.
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Davis, John A., and Rita M. Herrera. "The Social Psychology of Family Shareholder Dynamics." Family Business Review 11, no. 3 (September 1998): 253–60. http://dx.doi.org/10.1111/j.1741-6248.1998.00253.x.
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Family shareholder dynamics can dramatically influence a family business, however, this has received little attention in the family business literature. To expand our understanding of family shareholder behavior, we have introduced several concepts from social psychology that help explain why family shareholders behave as they do: group cohesiveness, conformance, diffusion of responsibility, deindividuation, and social power. We have commented on the application of each theory for family companies and their consultants and have suggested directions for future research on this topic.
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Phillips, Emir. "A Bayou privateer critique’s Marcoux’s fiduciary argument against stakeholder theory." Journal of Governance and Regulation 3, no. 2 (2014): 46–60. http://dx.doi.org/10.22495/jgr_v3_i4_p5.
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This Article critique’s Alexei Marcoux’s A Fiduciary Argument Against Stakeholder Theory which set the mark for Shareholder Theory. Stakeholder Theorists sense the denouement of Shareholder Theory, but perhaps this in-depth reassessment of Marcoux’s Article may have them reconsidering. Recent corporate scandals reveal only the moral paucity of that company’s management and are not conclusive evidence of any odious qualities inherent to either shareholders or Shareholder Theory. The theory that can throw out the bathwater and keep the baby will win. This article adheres to a modified Shareholder Theory elucidated therein while admitting that the human, all-too human Shareholder Theory evinces every fiber of our moral being when injustice harms that which we most love. This Article hopefully makes clear that Stakeholder Theory is best attainable within the legal rubric of 3rd party beneficiary analysis, which is a valid extension of Shareholder Theory. One can see the power of this when applied to a 3rd party beneficiary (stakeholder), thereby generally negating any further philosophizing as to a Stakeholder Theory when the legal contract principle of 3rd party beneficiary so readily inculcates it. Thus, Stakeholder Theorists can sleep at night, 3rd party beneficiary Contract Law is operating 24/7. The contracting 1st parties need only address important contingencies likely enough to warrant the transaction costs of express provision, such as the possible subsequent inclusion of 3rd party beneficiaries. For all other contingencies, the fiduciary obligation fills the gap. And so, while presently in an awkward position, Shareholder Theory has the advantage of being right, even if it desperately needed this Article to save itself.
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Fernando, Chitru S., Mark P. Sharfman, and Vahap B. Uysal. "Corporate Environmental Policy and Shareholder Value: Following the Smart Money." Journal of Financial and Quantitative Analysis 52, no. 5 (October 2017): 2023–51. http://dx.doi.org/10.1017/s0022109017000680.
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We examine the value consequences of corporate social responsibility through the lens of institutional shareholders. We find a sharp asymmetry between corporate policies that mitigate the firm’s exposure to environmental risk and those that enhance its perceived environmental friendliness (“greenness”). Institutional investors shun stocks with high environmental risk exposure, which we show have lower valuations, as predicted by risk management theory. These findings suggest that corporate environmental policies that mitigate environmental risk exposure create shareholder value. In contrast, firms that increase greenness do not create shareholder value and are also shunned by institutional investors.
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Pichet, Eric. "Enlightened shareholder theory: Whose interests should be served by the supporters of corporate governance?" Corporate Ownership and Control 8, no. 2 (2011): 354–62. http://dx.doi.org/10.22495/cocv8i2c3p3.
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This paper questions the feasibility of corporate governance and a company’s Board Members being able to serve two masters at once: shareholders; and the many different agents inhabiting the labyrinth of the stakeholder universe. Absurdist reasoning will be used to demonstrate the theoretical impossibility of a dual legitimacy. An alternative ‘Enlightened shareholder theory’ will be proposed, inspired by Jensen’s ‘Enlightened partnership theory’ (2001). After demonstrating that a company’s interest is not synonymous with the interests of its shareholders, a proposition will be made that Board Members should always highlight social interests. The paper’s conclusion will identify the consequences of the new theoretical framework for the definition of corporate governance; Board Members’ missions; and the composition of a Board of Directors.
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Denning, Stephen. "Why maximizing shareholder value is a threat to U.S. business." Strategy & Leadership 45, no. 6 (November 20, 2017): 3–10. http://dx.doi.org/10.1108/sl-09-2017-0084.
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Purpose The article outlines the arguments by the proponents and opponents of maximizing shareholder value and identifies the true threat the concept poses to U.S. businesses. Design/methodology/approach The author quotes authorities on both side of the debate over the validity of maximizing shareholder value as a driving principle of management and points out the risks and the alternatives. He notes that many long-established public corporations in the U.S. have chosen to bow to the power of shareholders and reward them instead of attempting risky initiatives that might create new customers or enhance customer value. Findings Maximizing shareholder value is either the guiding principle of business success that provides a rightful reward for investors or a corrupting influence that thwarts investment in employee talent, sustaining innovation, product quality and customer loyalty. Practical implications Since the C-suite is hugely compensated for increases in the current stock price, decisions based on “shareholder value” tend to be decisions that boost the current stock price. Social implications As evidence the problem is being recognized, some CEOs have already spoken out against preferentially rewarding stockholders instead of investing to sustain the organization. Originality/value The author concludes that shareholder value theory has not only failed on its own narrow terms of making money for shareholders. It has been steadily destroying the productive capacity and dynamism of the entire economy.
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Mishurova, Irina, Elena Panfilova, and O. Nesterova. "SPECIFICATION OF CORPORATE CONFLICTS IN THE CONTEXT OF THE "AGENCY THEORY"." Russian Journal of Management 8, no. 2 (September 23, 2020): 36–40. http://dx.doi.org/10.29039/2409-6024-2020-8-2-36-40.
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The article describes the specification of corporate conflicts from the position of the classic line of agency problem within the framework of the "Principal- Agent" model, and in the new line of agency model "Principal - Principal" between majority shareholders and minority shareholders, including shareholder interactions with stakeholders under the Principal-Stakeholders model and board interactions with stakeholders through Agent-Stakeholders, and interactions between company management, mid-level managers and employees within the Agency-Agent model, which makes it possible to classify different characteristics of corporate conflicts. The article clarifies the content and functional specifics of corporate conflicts (gnoseological function, diagnostic, procedural, preventive, predictive), which allows you to systematize the essential characteristics of corporate conflicts and determine the adaptability of the application of various methods and methods of their management taking into account the main stages of the life cycle of corporate conflicts (stage of emergence, development and completion).
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De Wet, J. H. V. H., and E. Du Toit. "Return on equity: A popular, but flawed measure of corporate financial performance." South African Journal of Business Management 38, no. 1 (March 31, 2007): 59–69. http://dx.doi.org/10.4102/sajbm.v38i1.578.
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This article is aimed at analysing the impact of popular financial performance measures on shareholders’ wealth. It tests the strength of the linear relationships between these performance measures and shareholders’ returns, which consist of dividends and changes in the share price. The return on equity (ROE) is weighed up against the present favourite, economic value added (EVA) and the merits and flaws of each approach are discussed. Other approaches, such as a combination of performance measures and the expectations theory are also discussed briefly.The statistical tests performed found Spreads (a standardised EVA) to be slightly superior to ROE in explaining changes in shareholders’ returns. However, the use of same year data resulted in very weak linear relationships between all the performance measures tested, relative to shareholders’ returns.When 5-year medians were used in the analysis, significant correlations were obtained between current shareholders’ returns and the future results for the internal performance measures. This engenders some support for the expectations theory with its contention that the most effective positive impact on shareholders’ returns can be accomplished by managing expectations about future financial results, rather than maximising these results now. It is clear that the debate about the effectiveness of traditional accounting performance measures, as well as the search for the real drivers of shareholder value, will continue and increase in intensity.
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Swartz, Lee Mick. "Secrecy, collusion and coalition building in corporate governance." Corporate Ownership and Control 4, no. 3 (2007): 10–24. http://dx.doi.org/10.22495/cocv4i3p1.
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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.
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Wu, Wuqing, and Suning An. "Double-principal Agent: False Accounting Information, Supervision Cost and Corporate Performance." Journal of Systems Science and Information 2, no. 4 (August 25, 2014): 301–12. http://dx.doi.org/10.1515/jssi-2014-0301.
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AbstractThe game among the corporate controlling shareholder, the shareholder in power balance and the manager can lead to severe agency problems. This paper regards the shareholder in power balance as another principal and applies the latest results about double-principal agent theory in the research of manager tunneling, supervision cost and corporate performance, trying to solve the inconsistency of the above corporate governance issue researched by domestic and foreign scholars. The main conclusions are as the followings. The correlation among them depends on which one has a dominant position, the free rider effect of supervision or the positive externality effect on cash flow right. Therefore, the key to excite the positive effect of the corporate governance mechanism such as the check-and-balance of stock ownership is the degree of cooperation between shareholders.
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Uche, Chinyere, Emmanuel Adegbite, and Michael John Jones. "Institutional shareholder activism in Nigeria." Corporate Governance 16, no. 4 (August 1, 2016): 680–92. http://dx.doi.org/10.1108/cg-12-2015-0172.
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Purpose The purpose of this paper is to investigate institutional shareholder activism in Nigeria. It addresses the paucity of empirical research on institutional shareholder activism in sub-Saharan Africa. Design/methodology/approach This study uses agency theory to understand the institutional shareholder approach to shareholder activism in Nigeria. The data are collected through qualitative interviews with expert representatives from financial institutions. Findings The findings indicate evidence of low-level shareholder activism in Nigeria. The study provides empirical insight into the reasons why institutional shareholders might adopt an active or passive approach to shareholder activism. The findings suggest the pension structure involving two types of pension institutions affects the ability to engage in shareholder activism. Research limitations/implications The research study advances our understanding of the status quo of institutional shareholder activism in an African context such as Nigeria. Practical implications The paper makes a practical contribution by highlighting that regulators need to consider how the financial market conditions and characteristics affect effective promotion of better governance practices and performance through shareholder activism. Originality/value This study draws attention to the implication for shareholder activism of complexities associated with an institutional arrangement where two types of financial institutions are expected to operate and manage the private pension funds in a country.
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Vilaseca, Alvaro. "The Shareholder Role in the Family Business: Conflict of Interests and Objectives Between Nonemployed Shareholders and Top Management Team." Family Business Review 15, no. 4 (December 2002): 299–320. http://dx.doi.org/10.1111/j.1741-6248.2002.00299.x.
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This article focuses on the role of the family business shareholder. Based on Agency Theory, it examines the elements that influence the conflict of interests and objectives between nonemployed shareholders and the top management team and its impact on commitment to the family firm. Data were empirically obtained from a field study of 156 shareholders and executives of 10 Spanish family firms. Combining quantitative and qualitative data, investigation results show that the degree of commitment to the family business is negatively correlated with the number of family members on the board of directors. Nevertheless, the most robust and statistically significant correlation (positive) was found between the number of external board members and the commitment level of the nonemployed shareholders. Regarding the mechanisms and processes implemented, results depended on the attention that the family business paid to the institutional overlap of the three subsystems: ownership, family, and business.
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Ben Lahouel, Béchir, Jean-Marie Peretti, and David Autissier. "Stakeholder power and corporate social performance." Corporate Governance 14, no. 3 (May 27, 2014): 363–81. http://dx.doi.org/10.1108/cg-07-2012-0056.
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Purpose – This paper aims to explore the power of one of the primary organizational stakeholders (shareholders) in the development of a corporate social performance (CSP) score. Few research works in the CSP empirical literature have studied the relationship between stakeholder power and CSP. Design/methodology/approach – Stakeholder theory is used as a theoretical framework to explain how shareholder voting power can influence the CSP level of French publicly listed companies. Stakeholder theory is tested through the operationalization of Ullmann’s (1985) three-dimensional model. Hypotheses related to shareholder voting power, strategic posture and financial performance are formulated through a literature review. A Data Envelopment Analysis approach was presented as a strong tool to measure CSP level. Multiple linear regressions were undertaken to test the hypotheses in a sample of 129 French companies between 2006 and 2007. Findings – The results indicate that companies with dispersed ownership and high proportion of institutional shareholders record a high score of CSP. Strategic posture measured by the implementation of environmental certification standard was positively and significantly related to CSP. Financial performance does not affect significantly the level of CSP. Originality/value – This paper is the first to empirically analyse the relationship between Ullmann’s three-dimensional model and CSP level in the French context. It offers to managers a better understanding of the power that certain stakeholders can use to acquire satisfaction.
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Mejia, Santiago. "Weeding Out Flawed Versions of Shareholder Primacy: A Reflection on the Moral Obligations That Carry Over from Principals to Agents." Business Ethics Quarterly 29, no. 04 (August 27, 2019): 519–44. http://dx.doi.org/10.1017/beq.2019.18.
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ABSTRACT:The distinction between what I call nonelective obligations and discretionary obligations, a distinction that focuses on one particular thread of the distinction between perfect and imperfect duties, helps us to identify the obligations that carry over from principals to agents. Clarity on this issue is necessary to identify the moral obligations within “shareholder primacy” (i.e., “shareholder theory”), which conceives of managers as agents of shareholders. My main claim is that the principal-agent relation requires agents to fulfill nonelective obligations, but it does not always require (and sometimes actually prohibits) discharging discretionary obligations. I show that the requirement to fulfill nonelective obligations is more far-reaching than has been acknowledged by most defenders and critics of shareholder primacy. But I also show that managers are not bound by certain discretionary obligations like charity, showing that their moral obligations are more circumscribed than the obligations that apply to human beings in general.
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Anderson, Helen, Michelle Welsh, Ian Ramsay, and Peter Gahan. "THE EVOLUTION OF SHAREHOLDER AND CREDITOR PROTECTION IN AUSTRALIA: AN INTERNATIONAL COMPARISON." International and Comparative Law Quarterly 61, no. 1 (January 2012): 171–207. http://dx.doi.org/10.1017/s0020589311000595.
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AbstractThis article is part of a larger international investigation of the effects of a country's legal origins on the style of business regulation. We employ an innovative ‘leximetric’ methodology to numerically code the protective strength of Australian corporate law for both shareholder and creditor protection for the period 1970 to 2010. This leximetric methodology has been used in a prominent international debate concerning the development of legal rules and the effects of different styles of regulation on a range of economic outcomes—the legal origins debate. Drawing on similar data compiled by Armour, Deakin, Lele and Siems in five other countries (France, Germany, India, the UK and the US) for the period 1970 to 2005, we compare changes in the level of protection afforded to Australian shareholders and creditors with developments in other countries. Our analysis finds that in Australia there was a sustained upward trend in shareholder protection, but not in the case of creditor protection. Compared to the five other countries, the level of protection afforded to shareholders under Australian law was relatively high, and this was the case for the level of protection afforded to creditors as well. We also examine the extent of convergence and divergence in shareholder and creditor protection among the countries in the study. We find persistent divergence in shareholder protection, with the extent of divergence in 2005 similar to that in 1970. For creditor protection, we find increasing divergence among the countries over the period of study. Our findings are not supportive of legal origins theory.
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Merendino, Alessandro, and Rob Melville. "The board of directors and firm performance: empirical evidence from listed companies." Corporate Governance: The International Journal of Business in Society 19, no. 3 (June 3, 2019): 508–51. http://dx.doi.org/10.1108/cg-06-2018-0211.
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PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.
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García-García, Laura, Macarena Gonzalo Alonso-Buenaposada, M. Elena Romero-Merino, and Marcos Santamaria-Mariscal. "Ownership structure and R&D investment: the role of identity and contestability in Spanish listed firms." Academia Revista Latinoamericana de Administración 33, no. 3/4 (August 3, 2020): 405–26. http://dx.doi.org/10.1108/arla-01-2019-0013.
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PurposeThe purpose of this paper is to analyze the relationship between the ownership structure and the investment in research and development (R&D) for a sample of listed Spanish companies.Design/methodology/approachFollowing the agency theory and the socioemotional wealth (SEW) perspective, the authors propose that R&D investment is affected by ownership structure, specifically by the identity of the controlling owner (family firms and firms with an institutional investor) and the level of contestability by other shareholders. In order to test these hypotheses, the authors build an original database identifying, at a 10% threshold, the ultimate shareholders of a sample of 96 Spanish firms listed during 2008–2018 (1,002 obs).FindingsThe results show that there is no significant relationship between the ownership concentration and the R&D investment. Only when the authors consider the nature of the main shareholder, the authors find that in family firms there is an inverted U relationship between ownership and R&D, so that at low levels of ownership, the R&D increases, while at high levels of ownership (that we compute around 54%) the R&D decreases. Also, when the main shareholder is an institutional investor, the greater its ownership, the higher the R&D investment. Finally, the authors test that, contrary to what mainstream suggests, contestability in family firms is higher when ownership in the hands of other family shareholders increases.Originality/valueThe work uses an original database to test a nonlinear relationship between ownership and R&D investment in family firms. Also, the study addresses a topic hardly ever discussed in the literature about R&D as it is the role of the contestability by other controlling shareholders.
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Mohanadas, Nirmala Devi, Abdullah Sallehhuddin Abdullah Salim, and Suganthi Ramasamy. "A Theoretical Review on Corporate Tax Avoidance: Shareholder Approach versus Stakeholder Approach." GATR Journal of Finance and Banking Review 4, no. 3 (December 23, 2019): 82–88. http://dx.doi.org/10.35609/jfbr.2019.4.3(1).
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Objective - Although corporate tax avoidance is a widely discussed topic in the literature, conflicts do emerge when it is analyzed through the context of primary corporate duty. Should companies, in managing their taxes, solely honor their obligation to increase shareholders' wealth or should they cater to the interests of all their stakeholders? Such conflicts are especially evident in the inconsistent empirical observations on how corporate tax avoidance relate to corporate social responsibility (CSR), which makes the dearth of theoretical analysis on this issue even more conspicuous. Taking into account the socio-political nature and human elements in corporate tax avoidance, theoretical analyses from social sciences' perspectives are becoming markedly crucial. Methodology/Technique – This paper critically reviews the extant literature for discussions on how corporate tax avoidance is influenced by the dissenting approaches towards primary corporate duty. Findings – By allowing an insight into how people act and the world they live in, these analyses form a constructive tool to rationalize and foretell managerial actions towards shareholders and stakeholders alike. Novelty – It focuses particularly on the theories that are widely used to lend supports for such approaches. These theories are the agency theory, stakeholder theory, and legitimacy theory. Type of Paper - Review. Keywords: Corporate Tax Avoidance; Corporate Social Responsibility (CSR); Theoretical Analysis; Shareholder Approach; Stakeholder Approach; Agency Theory; Stakeholder Theory; Legitimacy Theory. JEL Classification: G30, G32, G39.
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Yun, Eugene, and Buss Burdett Pak. "Fuzzy Ownership: A Theory of Corporate Governance and Evidence from Korea." International Studies Review 7, no. 2 (October 8, 2006): 1–16. http://dx.doi.org/10.1163/2667078x-00702001.
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This paper presents a model with “fuzzy ownership rights” for explaining corporate governance. The purpose of this model is to capture the theoretical underpinnings of corporate governance in real-world situations, which emphasize social, economic and cultural networks. The existence of strong fuzzy ownership rights affects corporate governance in many important ways, beginning with the firm being forced to go beyond solving the shareholder interest maximization problem: instead, the firm attempts to solve a more complex problem, which is to maximize the interests of other fuzzy ownership right-holders as well. In the wake of the Asian financial crisis in 1997, many countries in Asia were encouraged to adopt western-style corporate governance reforms. Although systemic changes are being adopted, with particular emphasis placed on strengthening minority shareholders’ legal rights, these reforms fail to remove fuzzy ownership rights. This paper predicts that the reform effort will be ineffectual since it leaves the behavior of the firm and its corporate governance structure fundamentally unchanged. This paper challenges the proposition that globally disparate corporate governance systems in the long run will converge to the Anglo-Saxon shareholder primacy model. Fuzzy ownership rights holders can be expected to protect and refuse to surrender their rights when targeted by corporate reform efforts. The vested interests, which are personal to the holders because they arise from the holder’s position in the economy or in relation to the firm, present a high barrier to convergence toward a global standard based on the shareholder primacy model.
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Masulis, Ronald W., Cong Wang, and Fei Xie. "Employee-Manager Alliances and Shareholder Returns from Acquisitions." Journal of Financial and Quantitative Analysis 55, no. 2 (January 15, 2019): 473–516. http://dx.doi.org/10.1017/s0022109019000036.
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We examine the potential for management-worker alliances when employees have substantial voting rights, and how such alliances affect the balance of power between managers and shareholders. We find that substantial employee voting rights exacerbate the manager-shareholder conflicts. Specifically, they entrench incumbent managers and allow them to pursue value-destroying acquisitions by undercutting the disciplinary influence of the corporate control market. Importantly, employee support for managers is conditional on favorable treatment of employees. Our findings are consistent with Pagano and Volpin’s theory of worker-management alliances and highlight the potential risks associated with large employee voting power.
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Aluchna, Maria, and Bogumil Kaminski. "Ownership structure and company performance: a panel study from Poland." Baltic Journal of Management 12, no. 4 (October 2, 2017): 485–502. http://dx.doi.org/10.1108/bjm-01-2017-0025.
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Purpose The purpose of this paper is to investigate the links between company ownership structure and financial performance in the context of the largest Central European stock market. Using the framework of agency theory, the authors address the question of the expropriation effect by dominant owners and the effect of collusion between shareholders of different types on company performance. Design/methodology/approach The authors test hypotheses on the relations between ownership concentration and the involvement of different shareholders (state, CEO, industry and financial investors) vs return on assets (ROA). The authors adopt the panel model controlling for endogeneity and sector of operation and analyze the data from the unique sample of 495 Polish non-financial firms listed on the Warsaw Stock Exchange in years 2005-2014 with a total of 3,203 observations. Findings The authors identify a negative correlation between ownership concentration by the majority shareholder and ROA, which corresponds with the expropriation rationale of blockholders. The authors also observe negative effects due to ownership concentration by the second largest shareholder, supporting the notion of collusion. The results show that ownership by industry investors is associated with a higher ROA. Ownership by the CEO, state and financial investors proves to have no statistically significant effect on performance. Originality/value The paper further develops the nature of ownership-performance relations in the specific economic context of a post-transition, emerging European stock market, weak external corporate governance mechanisms, insufficient investor protection and significant concentration of share ownership. The results add to the understanding of monitoring vs expropriation effects by large owners and the collusion between different types of shareholders.
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Kraft, Brandon. "Shedding Light on Stakeholder Power in a Regulated Market: A Study of Variation in Electric Utilities’ Climate Change Disclosures." Organization & Environment 31, no. 4 (July 6, 2017): 314–38. http://dx.doi.org/10.1177/1086026617718429.
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Extant theory posits that corporations disclose environmental information to maintain economic and legitimacy resources. Frequently, studies find that corporations prioritize the maintenance of economic resources when formulating their disclosure strategies. These studies generally assume competitive markets. Many polluting industries, however, do not operate in competitive markets. Accordingly, current assumptions of competitiveness may obscure potential explanations of disclosure. To remedy this oversight, I investigate how utilities vary their climate disclosures in response to regulatory, movement, and shareholder pressures within more monopolistic and oligopolistic markets. By using a mixed-effects model, I find that embeddedness in regulatory processes and movement targeting correlate to an increase in substantive disclosures. Interestingly, within monopolistic electricity markets, shareholder pressures do not lead to variation in substantiveness. As markets become more competitive, I find that shareholders resume their position of power. I argue these findings demonstrate that competition influences corporations’ perceptions of stakeholder power–implicating disclosure strategy.
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Zejnullahu, Njomëza. "Principal-agent problems in publicly owned enterprises: The failure of the shareholder." Journal of Governance and Regulation 10, no. 4 (2021): 70–83. http://dx.doi.org/10.22495/jgrv10i4art6.
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The presence of principal-agent problems in publicly owned enterprises is highlighted by many scholars. Unfortunately, such problems are present in publicly owned enterprises (POEs) in Kosovo too. Capture, rent-seeking, moral hazard, information asymmetry, and adverse selection are some of the agency problems that POEs in Kosovo are facing, negatively impacting their performance and citizens’ welfare. Recently, one of the POEs that used to be the most profitable is on the verge of bankruptcy with bank accounts blocked. This paper aims to explore the relevance of principal-agent problems in the governance of publicly owned enterprises and the failure of the shareholder to play its role and pursue the best interest of POEs. The paper also questions the applicability of the principal-agent model in POEs when the shareholder fails to play its role as a principal by concluding that the lack of “real” principal in publicly owned enterprises undermines the applicability of principal-agent theory and there is a need to make the Government more responsible by taking some measures such as the inclusion of private sector as a shareholder. The paper concludes that the Government must act as a responsible shareholder and exercise its role properly while also raises the opportunity of the inclusion of the private sector as minority shareholders in POEs, which may help in increasing the responsibility of the shareholder in the oversight of the management of POEs. Conclusions of the paper may be relevant for further studies regarding the corporate governance and structure of publicly owned enterprises from the perspective of the agency theory and hence exploring possibilities of reducing principal-agent problems in POEs.
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Wangui, Wamweya Shelmis, and Dr J. O. Aduda. "THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE AND CORPORATE TAXES FOR COMPANIES LISTED IN THE NAIROBI SECURITIES EXCHANGE." International Journal of Finance and Accounting 1, no. 3 (November 10, 2016): 18. http://dx.doi.org/10.47604/ijfa.176.
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Purpose: The purpose of this study was to analyze the relationship between capital structure and corporate taxes for companies listed in the Nairobi securities exchangeMethodology: The study used descriptive survey research design. This study used Secondary data sourced from annual audited financial statement of the firms listed on Nairobi Securities Exchange. The population of the study consisted of companies listed on the NSE. Purposive sampling was used to select respondents from the sampling frame. A sample size of 46 listed companies for the year 2001 to 2011 were selected through random sampling. Data was analyzed using Statistical Packages for Social Sciences (SPSS) to derive descriptive results.Results: Finding indicated that the relationship between debt equity ratio and taxes profit ratio was negative and significant and that debtequityratio has a significant effect on taxesprofitratio.The findings pointed out that the existence of tax shield in a perfect capital market conditions cannot be reached, in an imperfect financial market, the capital structure changes will affect the company's value. The findings also pointed that firm which follows the trade-off theory sets a target debt to value ratio and then gradually moves towards the target. Accordingly, the findings agreed pointed that the value of the firm will increase or the cost of capital will decrease with the use of debt due to tax deductibility of interest charges. Findings also pointed that a firm facing a low enough tax rates would also use equity, because investors pay more taxes on debt interest than on equity income. In conclusion, the findings pointed that the more profitable the firm the lower is the debt ratio.Unique contribution to theory, practice and policy: The study is recommended for commercial banks to issue corporate bonds as this would form a cheap source of finance and also the use of corporate bonds entails the enjoyment of the interest tax shield and consequently improving the shareholder’s wealth. The study also recommended that commercial banks should engage strategic investors. Further to that, the study recommended that the equity share holder should be substituted for debt shareholding in future, this is because an increase in debt shareholding arising out of substitution would be beneficial to the commercial bank because it will result into interest tax saving.
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Yu, Minna, and Ronald Zhao. "Sustainability and firm valuation: an international investigation." International Journal of Accounting and Information Management 23, no. 3 (August 3, 2015): 289–307. http://dx.doi.org/10.1108/ijaim-07-2014-0050.
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Purpose – This paper aims to examine whether capital market rewards firms with good corporate sustainability practices in an international setting by using the Dow Jones Sustainability Index (DJSI hereafter) as an integrated measure of firm sustainability performance. Design/methodology/approach – There are two alternative theories regarding the impact of sustainability on firm value. The value-creating theory predicts that integration of environmental and social responsibility into corporate strategies and practices reduces firm risk and promotes long-term value creation. The value-destroying theory on sustainability suggests that managers may engage in socially responsible activities at the expense of shareholders. To perform empirical tests, we use a large international sample for a period of 13 years between 1999 (the first year when DJSI became available) and 2011. To control for self-selection bias and simultaneity, the authors use lagged values of sustainability performance in a robustness check. Findings – The authors find a positive relation between sustainability performance and firm value, after controlling for variables that have been found to affect firm value in the existing literature. The test results are consistent with the value enhancing theory (as opposed to the shareholder expense theory) regarding the role of sustainability engagement in firm valuation. Furthermore, the positive impact of sustainability engagement on firm value is primarily driven by countries with strong investor protection and with high disclosure levels. Research limitations/implications – A positive impact of sustainability performance on firm value supports the value-creating theory and rejects the value-destroying theory. Test results also suggest a more pronounced market response to corporate sustainability in countries with stronger shareholders protection and higher requirement for financial transparency. Practical implications – Given the growing international capital market and intensifying global competition, the valuation implications of sustainability in an international context is of practical interest to management, investors and regulators worldwide. Originality/value – First, it is an initial attempt to test an integrated measure of the “triple-bottom-line” definition of sustainability in an international setting. Second, our paper studies the international variation in market valuation of firm sustainability performance in terms of the value enhancing versus shareholder expense theories on sustainability. The authors explore the relevance of sustainability performance in relation to the investor protection and the reporting environment across countries.
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Kershnar, Stephen. "Shareholder Theory in Academia." Business and Professional Ethics Journal 36, no. 3 (2017): 359–82. http://dx.doi.org/10.5840/bpej20179863.
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de Jong, Abe, Marieke van der Poel, and Michiel Wolfswinkel. "The changing relation between CEOs and shareholders." Journal of Management History 23, no. 4 (September 11, 2017): 375–400. http://dx.doi.org/10.1108/jmh-04-2017-0021.
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Purpose This paper aims to present case study evidence on the changes in the relations between chief executive officers (CEOs) of large firms and shareholders in the past three decades of the twentieth century. In line with insights from agency theory, the CEOs have experienced increased scrutiny from their principals, the shareholders. This development has affected financial communication and investor relations as well as stock market prices. Design/methodology/approach The Dutch electronics firm Royal Philips NV in the transition period of 1971-2001 has been studied using publicly available disclosures and stock market prices. A descriptive case study approach is combined with event study methodology. Findings It was observed that the increased emphasis on shareholder interests has affected the interactions between Philips’ respective CEOs and the shareholders’ reactions to strategic decisions as measured by stock price changes. Around the beginning of the twenty-first century, clarity and openness in CEO communication was the norm and deviations were punished with volatile stock prices. Research limitations/implications The study relies on publicly available data. Originality/value The case study of Philips can be extrapolated to other exchange-listed firms in the late twentieth century, which faced changed expectations about the role of the CEO, investor relations and the CEO’s accountability toward shareholders. This transition is relevant not only as a historical observation, but also as a background to studies in finance and management about top management and financial markets.
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Nogueira, Nasaré Vieira, and Luiz Ricardo Kabbach de Castro. "Effects of ownership structure on the mergers and acquisitions decisions in Brazilian firms." RAUSP Management Journal 55, no. 2 (December 6, 2019): 227–45. http://dx.doi.org/10.1108/rausp-11-2018-0124.
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Purpose The purpose of this study is to examine the effects of ownership structure on merger and acquisition (M&A) decisions of Brazilian listed companies. Design/methodology/approach This paper is an applied and explanatory research based on secondary data. The sample is comprises non-financial companies listed on the BM&FBovespa between 1998 and 2007. Considering that the dependent variable is binary, the authors estimate panel data logistic regression models. Considering the existence of conflicts of interest among those who have the decision-making power and the supplier of capital for M&A transactions, they draw upon the Agency Theory to develop the theoretical hypotheses. Findings The results show that, for a sample of Brazilian non-financial companies listed on the BM&FBovespa (B3), from 1998 to 2007, Brazilian firms present, on average, a highly concentrated ownership structure and the major controlling shareholders are families or the State. These characteristics are negatively related to the likelihood of M&A transactions, as most of these controlling shareholders are reluctant to adopt mechanisms that reduce their control. Research limitations/implications With regard to the limitations, this study considered only the M&A definitions as stated by the Bureau van Dijk database. In this sense, future studies may analyze the effects of ownership structure based on other M&A definitions and typologies. In addition, the study is limited to the period from 1998 to 2007, which is prior to the international financial crisis. Future studies may extend the analysis period to include the post-crisis period (2008) to check if there are differences in M&A strategies before and after the crisis. Practical implications From a managerial perspective, the results show that minority shareholders have little or no influence over an M&A decision, so they cannot decide on the use of resources for fast growth and access to new markets through M&A. Thus, the investment decision must take into account the nature and the quality of the controlling shareholder. Social implications This study shows a significant and negative effect of ownership concentration on the likelihood of M&A transactions. In part, this result demonstrates the importance of understanding the behavior of controlling shareholders before inferring on other key aspects that the M&A literature tends to make fundamental in explaining M&A decisions in publicly traded companies, particularly, in an environment of low minority shareholder protection. Originality/value Previous studies have partly found that the M&A decision is motivated by individual advantages obtained from increasing the size of the firm, or from managerial hubris. The results show that these hypotheses do not hold in the Brazilian context. Moreover, the results indicate that M&A decisions are associated with the characteristics of the controlling shareholder, their level of ownership concentration and their typology, contributing to the agency debate on whether the incentive or the entrenchment effect prevails in the context of the agency problem between controlling and minority shareholders, particularly, in an institutional environment of low shareholder protection.
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Schoenemann, Andreas. "Executive Remuneration in New Zealand and Australia - Do Current Laws, Regulations and Guidelines Ensure "Pay for Performance"?" Victoria University of Wellington Law Review 37, no. 1 (May 1, 2006): 31. http://dx.doi.org/10.26686/vuwlr.v37i1.5558.
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This article undertakes an examination of the current corporate governance frameworks relating to the remuneration of executives, and particularly executive directors, of listed companies in New Zealand and Australia. The theoretical background of the article builds on agency theory and managerial power theory. On this basis, performance-related remuneration is identified as crucial in aligning the divergent interests of shareholders and executives. Theories also suggest that the board of directors alone is not a sufficient mechanism to ensure that performance-related pay is implemented in practice. Examination of substantive remuneration rules regarding the structure and form of remuneration agreements finds that in both New Zealand and Australia the relevant problems are only sparsely addressed in enforceable law. More emphasis is put on procedural remuneration rules. Particularly in the fields of disclosure and shareholder involvement, Australia is a step ahead of New Zealand.