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Journal articles on the topic 'Shareholder Value Theory'
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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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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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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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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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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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CLIFTON, CLARKE, and FRIEDMAN HERSHEY H. "'MAXIMIZING SHAREHOLDER VALUE': A THEORY RUN AMOK." i-manager’s Journal on Management 10, no. 4 (2016): 45. http://dx.doi.org/10.26634/jmgt.10.4.5908.
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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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정연희. "Review of Shareholder Value Theory in the Corporation." Journal of hongik law review 15, no. 4 (December 2014): 753–77. http://dx.doi.org/10.16960/jhlr.15.4.201412.753.
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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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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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Sundaramurthy, Chamu. "Antitakeover Provisions and Shareholder Value Implications: A Review and a Contingency Framework." Journal of Management 26, no. 5 (October 2000): 1005–30. http://dx.doi.org/10.1177/014920630002600501.
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This paper reviews literatures on the two competing theoretical views of the antitakeover provisions–shareholder value relationship — managerial entrenchment and shareholder interests — and offers a contingency framework to reconcile these views. This framework, based on a broader agency theory perspective and the organizational literatures on power, incorporates two key moderators: corporate board and shareholder monitoring, and draws attention to when rather than on whether antitakeover provisions enhance or erode shareholder value.
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Lee, Soo Hee, Jonathan Michie, and Christine Oughton. "Comparative Corporate Governance: Beyond ‘Shareholder Value’." Journal of Interdisciplinary Economics 14, no. 2 (April 2003): 81–111. http://dx.doi.org/10.1177/02601079x03001400201.
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This paper serves as an introduction to the special issue on comparative corporate governance as well as providing a critical review of the literature on globalisation, comparative economic organisation and corporate governance systems. Despite the widespread rhetoric of global convergence and market-led institutional reform, we argue that national specificity and societal variance of institutional arrangements are still conspicuously resilient in reality and pertinent to issues of regulation, policy and business strategy. Our discussion focuses on the limitations of agency theory and its primary objective, shareholder value maximisation, on the one hand, and the determinants and consequences of institutional diversity across societies on the other. In particular, we suggest that the integration of the literature on employee participation and innovation systems into comparative institutional analysis will serve as a promising alternative to shareholder-centred theories and policy prescriptions while complementing the arguments based on legal and political origins of national systems. While the contributions to the special issue broadly share the basic tenets of our argument, they also address, in commendable rigour and depth, other issues, such as: trust and social relationships; societal and moral foundations of economic behaviour; institutional transferablity; and corporate control and power relations in society.
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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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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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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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Keay, A. "Getting to Grips with the Shareholder Value Theory in Corporate Law." Common Law World Review 39, no. 4 (October 2010): 358–78. http://dx.doi.org/10.1350/clwr.2010.39.4.0211.
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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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Lorne, Frank T., and Petra Dilling. "Creating Values for Sustainability: Stakeholders Engagement, Incentive Alignment, and Value Currency." Economics Research International 2012 (January 11, 2012): 1–9. http://dx.doi.org/10.1155/2012/142910.
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A shareholder theory of firm and a stakeholder theory of firm may differ in their respective evaluation method of firm performance. Both theories however recognize the importance of value creation as the economic role of firms as institutions. The New Institutional Economics (NIE) emphasizes incentives alignment, while also viewing stakeholder engagements as methods to expand the boundaries of firms. The difference in performance evaluation between the two approaches can be reduced if stakeholders, while formulating incentive alignment, also evaluate the mechanisms of establishing a common currency value. The concomitant development of stakeholder engagement, incentive alignment, and value currency creation is argued to be an evolutionary process with the efficiency implications of the two theories tending to converge.
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Liu, Weihua, Wanying Wei, Cheng Si, Dong Xie, and Lujie Chen. "Effect of supply chain strategic collaboration announcements on shareholder value: an empirical investigation from China." International Journal of Operations & Production Management 40, no. 4 (April 6, 2020): 389–414. http://dx.doi.org/10.1108/ijopm-05-2019-0368.
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PurposeThis study empirically examines the impact of announcements on supply chain strategic collaboration (SCSC) on companies' shareholder value.Design/methodology/approachThis study analyzes changes in shareholder value of companies listed in China based on data of 208 SCSC announcements. The signaling theory is applied to determine correlation among SCSC announcements and the market. An event study is used to estimate the stock market reaction to SCSC announcements. The common market model estimates stock abnormal returns after the event. The least squares method and regression model calculate the model parameter value.FindingsThere is a positive and statistically significant relationship between SCSC announcement and shareholder value. Market reaction to product development collaboration is significantly higher than to technology-sharing collaboration, market collaboration, and other SCSC types. The market reacts more positively to suppliers and companies with greater supply chain control power than to buyers and companies with lower control power. Announcements from the service supply chain can lead to stronger market reactions than those from manufacturing supply chains.Practical implicationsThe findings provide a systematic assessment of how SCSC announcements contribute to firms' shareholder value. The result provides a benchmark of value promotion that can be expected from SCSC announcements.Originality/valueThis study fills the research gap that using secondary data to assess changes in companies’ shareholder value caused by SCSC announcements and firstly examines these changes by constructing the signaler–signal–receiver progress based on signaling theory. The research results provide a new reference and inspiration for deeper understanding of the impact mechanism of SCSC. Furthermore, this study contributes to the development of the signaling theory using an empirical study in an emerging market, China.
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Osiyevskyy, Oleksiy. "The ultimate leadership challenge: a unique corporate theory of value-creating growth." Strategy & Leadership 44, no. 5 (September 19, 2016): 47–50. http://dx.doi.org/10.1108/sl-07-2016-0063.
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Purpose The article identifies the need for an approach beyond merely maintaining competitive advantage. In the eyes of analysts, maintaining the profitable status quo is not an option for creating shareholder value. Design/methodology/approach This masterclass develops the thesis that a strategist needs a corporate theory of value creation, something that provides ongoing guidance to the selection of positions and a vast array of strategic actions. Findings Even those who take a dim view of maximizing shareholder value would likely agree that from an enlightened stakeholder perspective management must find new, unexpected ways to grow the firm to be viable in the long term.” Practical implications A well-developed corporate theory enables fruitful thought experiments such as, “If my theory accurately describes my world, then when I select this strategic choice, the following will occur.”” Originality/value The corporate theory of value structures the logic practitioners can use, repeatedly and consistently, to assess an enormous array of possible combinations of resources and activities. The logic enables strategists to define what is special about the options that are likely to create value.
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Srivastava, Rajendra K., Tasadduq A. Shervani, and Liam Fahey. "Market-Based Assets and Shareholder Value: A Framework for Analysis." Journal of Marketing 62, no. 1 (January 1998): 2–18. http://dx.doi.org/10.1177/002224299806200102.
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The authors develop a conceptual framework of the marketing–finance interface and discuss its implications for the theory and practice of marketing. The framework proposes that marketing is concerned with the task of developing and managing market-based assets, or assets that arise from the commingling of the firm with entities in its external environment. Examples of market-based assets include customer relationships, channel relationships, and partner relationships. Market-based assets, in turn, increase shareholder value by accelerating and enhancing cash flows, lowering the volatility and vulnerability of cash flows, and increasing the residual value of cash flows.
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Cabeça Serapicos, Armando Jorge, Joaquim Mendes Leite, and Paula Odete Fernandes. "Agency theory approach of the relationship between performance, compensation and value creation in the companies listed on Euronext Lisbon." Contaduría y Administración 64, no. 3 (November 5, 2018): 116. http://dx.doi.org/10.22201/fca.24488410e.2018.1693.
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The aim of the present study was to understand, in Portugal, relationships between the Chief Executive Officer (CEO) and the organizational performance, on the one hand, and relationships between the shareholder value creation and the CEO total compensation, on the other hand. This research is divided into two parts. The first part was examined whether organizational performance based on accounting measures influences organizational performance based on market measures and whether organizational performance based on accounting measures and market measures influences the CEO total compensation. The second part of the study analyses whether organizational performance, based on accounting measures and market measures, and the CEO total compensation influence the shareholder value creation. This research was based on agency theory assumptions in order to build the analysis model. The sample was composed of companies listed on Euronext Lisbon. The data analysis was performed using the structural equation modelling method. The results showed that organizational performance based on accounting measures influences organizational performance based on market measures, the CEO total compensation and the shareholder value creation.<p> </p>
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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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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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Hillier, David, Beatriz Martínez, Pankaj C. Patel, Julio Pindado, and Ignacio Requejo. "Pound of Flesh? Debt Contract Strictness and Family Firms." Entrepreneurship Theory and Practice 42, no. 2 (December 26, 2017): 259–82. http://dx.doi.org/10.1177/1042258717748933.
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While past work finds support for both higher and lower cost of debt among family firms, whether lower shareholder–creditor agency conflicts in family firms translate into greater ex-ante contracting efficiency (i.e., lower debt contract strictness) remains unexplored. Drawing on a shareholder–creditor agency framework and costly contracting theory, creditors, expecting firm value maximization rather than shareholder value maximization from family firms, may offer less strict debt contracts to increase contracting efficiency. We find in a sample of 716 publicly traded U.S. firms (2001–2010) that family firms have less strict debt contracts, which are even less strict when family firms have higher asset tangibility. Although increases in R&D investments could lead to more pronounced shareholder–creditor agency conflicts, given family firms' preferences for lower risk and growth, debt contract strictness among family firms is not positively associated with higher R&D intensity.
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Wong, Chee, Heather Skipworth, Janet Godsell, and Nemile Achimugu. "Towards a theory of supply chain alignment enablers: a systematic literature review." Supply Chain Management: An International Journal 17, no. 4 (June 15, 2012): 419–37. http://dx.doi.org/10.1108/13598541211246567.
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PurposeThe importance of supply chain alignment has been discussed since the birth of supply chain management (SCM). Yet it remains a major challenge for supply chains. This paper aims to systematically review the cross disciplinary literature on supply chain alignment in order to identify, and develop constructs for enablers to alignment, and an associated set of hypotheses.Design/methodology/approachA systematic approach has been taken to the literature review, which ensures it is auditable and repeatable. The selection criteria are clearly aligned with the review question ensuring all literature pertinent to the question is identified and reviewed. Relevant information is extracted from the selected papers and synthesised into a set of hypotheses.FindingsSix main constructs for the enablers of alignment are identified and defined: organisational structure, internal relational behaviour, customer relational behaviour, top management support, information sharing and business performance measurement system. While the literature is disparate, across different disciplines there is good support for these enablers. The relationships between supply chain alignment and shareholder and customer value are also argued with the support of the literature. Although each of the enablers is argued to positively affect shareholder and customer value, their interactions with one another are not well supported in the literature, either theoretically or empirically, and therefore this could be an area for further research.Research limitations/implicationsWhile the hypotheses remain theoretical, it is now possible to test them and understand the relative significance of the various enablers to alignment.Practical implicationsThe significance of shareholder and customer alignment on the delivery of shareholder and customer value can be examined, thus moving towards a theory of supply chain alignment. This is needed since in practice companies are struggling with supply chain alignment.Originality/valueThe existing literature on supply chain alignment is disparate and multi‐disciplinary as this descriptive analysis shows, with 72 papers published in 43 different journals. Moreover, most of the papers focus on particular enablers, while this paper brings together six key enablers from the literature to produce a set of hypotheses.
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Yan, Jinghua. "Merger Waves: Theory and Evidence." Quarterly Journal of Finance 01, no. 03 (September 2011): 551–606. http://dx.doi.org/10.1142/s201013921100016x.
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This paper presents a model that incorporates product market competition into the standard neoclassical framework. The model explains why value-maximizing firms conduct mergers that appear to lower shareholder value. In a Cournot setting, the model demonstrates a prisoners' dilemma for merging firms in a merger wave. Consistent with the model's implications, the paper empirically documents that horizontal mergers are followed by substantially worse performance when they occur during waves. Moreover, further empirical tests show that the empirical relation between performance and merger waves is independent of the method of payment and increasing in the acquirer's managerial ownership. These findings are difficult to reconcile with alternative interpretations from existing theories.
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Nel, George Frederick, and Pieter Van Aardt Van der Spuy. "Strategic stakeholder management: investor relations in South Africa." Journal of Accounting in Emerging Economies 11, no. 3 (March 19, 2021): 431–48. http://dx.doi.org/10.1108/jaee-12-2019-0233.
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PurposeThe study explores the use of professional investor relations (IR) practices in South African (SA) listed companies to understand which theories may be responsible for IR's adoption and growth in South Africa, an emerging economy. Therefore, this study evaluates shareholder value maximisation, stakeholder and legitimization theory and institutional isomorphism theory as possible theories to explain professional IR behaviour in SA listed companies.Design/methodology/approachThe study design is qualitative and exploratory, based on a questionnaire developed and sent to all companies listed on the Johannesburg Securities Exchange (JSE).FindingsThe results indicate evidence of isomorphic spread to SA environments from practices observed in the UK and the USA, which we find are mostly performed to promote shareholder interests. The data suggest some evidence that the communication needs of black economic empowerment and environmental, social and governance (ESG) investors are given priority, suggesting the utility of professional IR to obtain legitimisation from society. Contrary to expectation is that social media communication channels are not extensively used.Practical implicationsThe descriptive nature of this study may be valuable to IR practitioners to improve SA IR practises, while neglected legitimisation opportunities with regard to the needs of ESG and black economic empowerment shareholders may be fruitfully addressed by practitioners.Originality/valueThis study innovates in its use of legitimisation theory and isomorphism theory to develop the study's expectations. Social problems provide contextual elements unique to SA which provides a good opportunity to test the expectation of legitimisation theory's influence on professional IR practices.
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Paul, Karen, B. Elango, and Sumit Kundu. "Social responsibility skepticism: shareholder and stakeholder perspectives." Social Responsibility Journal 16, no. 4 (September 28, 2019): 521–35. http://dx.doi.org/10.1108/srj-08-2018-0194.
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Purpose The purpose of this paper is to introduce the notion of social responsibility skepticism (SRS) and demonstrate its importance to the existing social responsibility literature. Stakeholder-emphasizing perspective (STEP) and shareholder-emphasizing perspective (SHEP) are tested as independent constructs that both serve to reduce skepticism. SHEP, STEP and SRS are shown to be interrelated but independent ideas. Design/methodology/approach The study is based on a primary questionnaire survey of managers. Multivariate regression analysis is used for analysis, level of management is a moderating variable and age and gender are control variables. Findings Managers who accept either the shareholder emphasis or the stakeholder emphasis have lower social responsibility skepticism. STEP and SHEP appear to be two independent constructs that both serve to reduce skepticism, although STEP is slightly more effective. The relationship is stronger for STEP managers and for higher level managers. Research limitations/implications Findings may be influenced by the existing political or business milieu. Findings on the moderating effect of level of management and age may reflect generational differences. Changes in gender roles may also affect findings. Practical implications Acceptance of management theories oriented either toward a stakeholder perspective or a shareholder perspective is associated with less skepticism. The legitimacy and value of each perspective should be acknowledged. Social implications Managers require support for decisions taking social responsibility into account. This study demonstrates that grounding in stakeholder theory or shareholder theory can reduce SRS. Originality/value This study introduces the new concept of SRS and provides a scale to measure this new variable. New scales are also provided for SHEP and STEP. Both perspectives negate tendencies toward SRS.
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Stratling, Rebecca. "The legitimacy of corporate social responsibility." Corporate Ownership and Control 4, no. 4 (2007): 80–88. http://dx.doi.org/10.22495/cocv4i4p6.
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Based on deliberations on the legitimacy of CSR from the perspective of stakeholder and legitimacy theory on the one hand and the more critical view of Milton Friedman and Michael Jenson on the other hand, this paper analyses how major energy companies legitimise their CSR activities in their Annual Reports and their CSR reports. The research indicates that managers recognise the potential contribution of CSR to long-term financial performance of firms as well as the need to socially legitimise the firm’s operations. A surprisingly limited number of the companies in the sample take a very explicit strategic approach to CSR by stressing long-term shareholder value maximisation. The CSR policies therefore appear not to focus solely on a strategic stakeholder approach geared towards maximising shareholder value but to reflect considerations raised by legitimacy theory
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Siciński, Jędrzej. "NEGATIVE EXTERNALITIES OF SHAREHOLDER VALUE ORIENTATION AND ITS IMPACT ON GLOBAL FINANCIALIZATION." Acta Scientiarum Polonorum. Oeconomia 19, no. 2 (June 26, 2020): 71–78. http://dx.doi.org/10.22630/aspe.2020.19.2.19.
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Value-based management (VBM), also often known as and connected to shareholder value (SHV), is the most popular management paradigm of the 21st century. This concept, despite bringing many improvements to companies, has opened the door to a discussion of its negative overall economic effects, especially regarding its impact on the strengthening of the financial sector. The main hypothesis states that SHV orientation is a financialization accelerator – it contributes to the increase in the size and importance of a country’s financial sector relative to other parts of the economy. The study was based on a comprehensive analysis of the literature on the subject. The research method involves a theory-synthesis and general desk research, based on integrative review. Performed studies confirmed the main hypothesis and reveal that an SHV mindset contributes to the increase of global financialization. It is caused, among others, by reinterpretation of the original assumptions, which has paved the way for further, unsustainable corporate practices.
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Teti, Emanuele, Francesco Perrini, and Linda Tirapelle. "Competitive strategies and value creation: a twofold perspective analysis." Journal of Management Development 33, no. 10 (October 7, 2014): 949–76. http://dx.doi.org/10.1108/jmd-08-2012-0100.
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Purpose – The purpose of this paper is to investigate whether the implementation of a defined competitive strategy – differentiation or cost leadership – brings about different value creation levels, where “value” is defined in a twofold perspective as “shareholder value” vs “stakeholder value” and “social capital”. Design/methodology/approach – A sample of 169 European companies is investigated. Simple linear regressions and t-tests for the equality of means are conducted. Findings – While no significant differences are found in the creation of value for the shareholders, firms following differentiation strategies generate considerably higher value for all the stakeholder groups than companies pursing cost leadership strategies. Results also show that size and reputational considerations play a significant role in explaining the different stakeholder value performances. Research limitations/implications – Some data such as off-balance sheet items could have influenced the calculation of the discriminant values for strategy classification. Practical implications – Although the two groups manage to achieve comparable levels of profitability, the differentiators, presumably because of their structural outward-facing orientation, seem to be better positioned to meet the challenges of the next wave of growth, which resides in the substantial interconnection between economic and societal value. Companies need a better understanding of how the stakeholder value theory and social capital can influence value creation and long-term success. Originality/value – In light of the importance of competitive strategy as a value-creation tool, the paper sheds new light on the relationship between competitive strategies and value creation.
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Maia, Jonas Lucio, and Luiz Carlos Di Serio. "Strategy financialization: an effort to map its development by means of bibliometric research." Revista Ibero-Americana de Estratégia 15, no. 2 (June 1, 2016): 38–59. http://dx.doi.org/10.5585/ijsm.v15i2.2223.
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With the development of a financial theory of the firm, the concept of Shareholder Value Generation has developed and consolidated. This concept advocates that the main purpose of the firm is to maximize shareholder´s wealth, and its consequences lead to a process of strategy financialization in which business strategies are impacted by such financial rationality. The goal of this paper is to carry out bibliometric research to explore the field of Strategy Financialization, producing an initial overview of the scientific production in the area, to support future research in the field. The results indicate that (1) there is a significant amount of scientific literature on the subject that has not been published under the label of financialization ; (2) although the financialization process has its roots in previous economic theory , the study of Strategy Financialization is relatively recent ; (3) the issue of Shareholder Value Creation seems to be the central theme in research related to Strategy Financialization; (4) research in the area seems to be quite scattered, once that it has not identified an author or group of authors, that are extremely significant in the area and (5) the main publication vehicles are also dispersed, including not only typical finance and strategy journal, but also marketing journals.
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Terblanche, Nic. "Reconsidering the measures of shareholders value: a conceptual overview." Corporate Ownership and Control 5, no. 4 (2008): 9–14. http://dx.doi.org/10.22495/cocv5i4p1.
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Economic and finance theory dictates that the major purpose of a firm is to create value. Value can be considered from different points of view. Advances in two distinctly different functional areas of business, namely marketing and financial management, initiated a reconsideration of our understanding of what constitutes a firm’s value. On the one hand marketing was called upon to become more financially accountable and at the same time intangible assets on balance sheets require that the asset or group of assets should be separately identifiable, protected, transferable and enduring. Brands represent a significant fraction of the intangible, and hence, total value of many firms. This situation made various researchers call for the integration of the disciplines of marketing and finance. The blend of empirical customer research and financial measures to produce measures such as, for instance, CLV holds a great deal of promise to support our understanding of value creation in firms and how that translates into shareholder value
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Maevskaya, Elena. "Theory of Cost Approach to Industrial Enterprise Management." Scientific Research and Development. Economics 8, no. 1 (March 12, 2020): 10–21. http://dx.doi.org/10.12737/2587-9111-2020-10-21.
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The article discusses the theoretical aspects of managing the value of industrial enterprises based on models that have become as wide-spread as possible, such as economic value added — EVA (Economic Value Added), MVA (Market Value Added), Equity value added — SVA (Shareholder Value Added), monetary value added — CVA (Cash Value Added), RCF (Resident Cash Flow) and Balanced Scorecard (BSC). The given models were chosen from a large number of proposed instruments in the works of domestic and foreign scientists, as the later concepts only developed the theory of their application. The purpose of the article was to share the determinants of the increase in the cost of industrial enterprises. The study is based on the theory of VBM (Value-Based Management) — valuebased management. The formation of this theory and the above-mentioned models in the historical aspect taking into account the factors of their occurrence are considered. The characteristic features of each model in terms of their application to cost management of modern domestic industrial enterprises were assessed. On the basis of the conducted study, the determinants of the increase in the cost of industrial enterprises and the methodology of their management have been determined.
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Byrka-Kita, Katarzyna, Mateusz Czerwiński, Agnieszka Preś-Perepeczo, and Tomasz Wiśniewski. "CEO succession puzzle in the Polish capital market." Baltic Journal of Management 13, no. 4 (October 1, 2018): 582–604. http://dx.doi.org/10.1108/bjm-08-2017-0238.
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Purpose The purpose of this paper is to analyse the market reaction to the appointments of chief executive officers (CEOs) in companies listed on the Warsaw Stock Exchange. The authors focussed on the relationship between the characteristics of a newly appointed CEO and the shareholders’ reactions to the appointment of a CEO. Design/methodology/approach To measure shareholder reaction, the authors apply an event study methodology. The determinants of reaction are identified on the basis of multi-regression analysis. Findings The results reveal a negative market reaction to all CEO appointments, both new appointments and reappointments. Investor reaction is driven more by the financial condition of the company, the company’s market performance and the free float, than by the characteristics of a newly appointed CEO. Neither the origins and generation (age) nor the gender of a CEO influence share prices. The relationship between the educational background of a CEO and shareholders’ reactions is mixed. Furthermore, the appointment of an inexperienced CEO seems to be preferred by investors. Research limitations/implications The study is restricted by certain limitations related to the adopted measures, the single-market research, data gaps and the selection of variables for regression analysis. A further cross-country study including Central and Eastern Europe and/or the transition economies of the Baltic Region is recommended. The relationship between the operating performance of a firm and its internal control mechanisms could be explored. Practical implications The findings might influence the decisions made by company owners and supervisory boards when appointing top executives, and might contribute to a better understanding of how CEO appointments can affect shareholder value creation. The results also provide important guidelines for institutions that oversee the financial system. Originality/value The findings of this study are expected to the findings are expected to contribute to the literature on the empirical analysis of the shareholder wealth effect, on signalling theory, on the phenomenon of information asymmetry and on corporate governance. The study covers a full economic cycle of the capital market, including the financial crisis and financial bubbles, and it fills a gap in the research regarding emerging markets and transition economies in Europe.
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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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M’rabet, Rachid, and Wiame Boujjat. "The Relationship Between Dividend Payments And Firm Performance: A Study Of Listed Companies In Morocco." European Scientific Journal, ESJ 12, no. 4 (February 28, 2016): 469. http://dx.doi.org/10.19044/esj.2016.v12n4p469.
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Many theories have been documented on the relevance and irrelevance of dividend policy. Authors continue to come up with various conclusions with regard to dividend policy from their empirical studies. This paper sought to examine the relationship between dividend policies and financial performance of selected listed firms in Morocco. Data were sourced through secondary means from the annual reports of the sampled quoted firms and was analyzed using panel data regression model. Two models were developed in an attempt to provide a theoretical explanation on the birds-in-hand dividend relevance theory and the Modigliani and Miller’s (MM) dividend irrelevance theory. The findings indicated that Dividend policy is an important factor affecting firm performance. Their relationship was also strong and positive. This therefore showed that dividend policy was relevant. It can be concluded, based on the findings of this research that dividend policy is relevant and that managers should devote adequate time in designing a dividend policy that will enhance firm performance and therefore shareholder value. Management of companies should also invest in projects that give positive Net Present Values, thereby generating huge earnings, which can be partly used to pay dividends to their equity shareholders.
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Clarke, Thomas. "Dangerous frontiers in corporate governance." Journal of Management & Organization 20, no. 3 (May 2014): 268–86. http://dx.doi.org/10.1017/jmo.2014.37.
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AbstractThe historical evolution of corporate governance is considered, highlighting the different eras of governance, the dominant theoretical and practical paradigms, the reformulation of paradigms and counter paradigms. Two alternative and sharply contrasting theorizations, one collective and collaborative (the work of Berle and Means), the other individualistic and contractual (agency theory and shareholder value) are focused upon. The explanatory potential of Blair and Stout's team production theory is elaborated, and its conception of the complexity of business enterprise, with a mediating hierarch (the board of directors) securing a balance between the interests of different stakeholders. The potential for reform of corporate purpose, corporate governance and directors’ duties is examined with reference to the UK Modern Company Law Review. The impact of the intensification of the financialization of corporations is analysed, with the increased emphasis upon short-termism. The origins of the global financial crisis in shareholder value orientations and the continuing reverberations of the crisis are explored. Finally, the imperative of the advance of sustainable enterprise is argued, and the critical changes necessitated in corporate purpose and directors’ duties.
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Clarke, Thomas. "The impact of financialisation on international corporate governance: the role of agency theory and maximising shareholder value." Law and Financial Markets Review 8, no. 1 (March 31, 2014): 39–51. http://dx.doi.org/10.5235/17521440.8.1.39.
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Subramanian, S. "Stewardship Theory of Corporate Governance and Value System: The Case of a Family-owned Business Group in India." Indian Journal of Corporate Governance 11, no. 1 (June 2018): 88–102. http://dx.doi.org/10.1177/0974686218776026.
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Stewardship theory of corporate governance is a normative alternative to agency theory. This article argues that the stewardship behaviour of managers results in exemplary corporate governance practices when the espoused values of the firm are aligned with the enacted values. The case study method is used to prove this argument by studying corporate governance practices in a family-owned business group in India. The Murugappa Group is a 100-year-old family-owned business group, known for their ethical practices and currently managed by the fourth-generation family members, without undergoing any split. The espoused as well enacted values of the group are studied and corporate governance practices of the group firms analysed in this article. The article focuses on the governance structure of the group, its succession planning practices and the ownership structure. The analysis indicates that aligning the enacted values with the espoused value helped the group to adapt itself to the changing external economic environment and continue creating shareholder value, the essence of corporate governance.
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Abernathy, John, Tom Kubick, and Adi Masli. "The Economic Relevance Of Chief Marketing Officers In Firms Top Management Teams." Journal of Business & Economics Research (JBER) 11, no. 12 (November 29, 2013): 555. http://dx.doi.org/10.19030/jber.v11i12.8263.
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Management theory suggests that the presence of the Chief Marketing Officer in the Top Management Team reflects a corporate emphasis on marketing and customer relations. Finance theory suggests that this emphasis should translate into additional shareholder wealth. However, prior research has failed to document such a relationship. Using performance attribution analysis, the authors construct a long-short portfolio that buys (sells) stocks of firms with (without) a Chief Marketing Officer in the Top Management Team and find this investment strategy would have earned risk-adjusted excess returns of approximately 3%. Additional analyses suggest the value of having a Chief Marketing Officer in the Top Management Team manifests primarily among firms with high operating margin, low asset turnover, high profitability, high R&D intensity and high advertising expenses. The authors conclude that having a Chief Marketing Officer in the Top Management Team has a positive impact on shareholder wealth.
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Leavy, Brian. "Lord John Browne: beyond CSR – why business needs to engage more radically with society." Strategy & Leadership 44, no. 4 (July 18, 2016): 32–40. http://dx.doi.org/10.1108/sl-06-2016-0040.
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Purpose This interview with petroleum executive John Browne, lead author of Connect: How Companies Succeed by Engaging Radically with Society, discusses sustainability practices that could be more successful than those of the Corporate Social Responsibility (CSR) movement. Design/methodology/approach Lord Browne, a British peer, was CEO of BP (British Petroleum) from 1995 to 2007 and is currently executive chairman of L1 Energy, He was interviewed by Prof. Brian Leavy, an S&L contributing editor Findings Connected leadership means integrating societal and environmental considerations into core business strategy at every level of the company. Practical implications The key lesson for business leaders in the wake of …accidents and scandals is that reputation is an outcome of your core business activity, not something constructed alongside it. Social implications Shareholder value, as a theory, presents a false tension between serving stakeholders and shareholders. Originality/value Browne was the first Big Oil chief executive to acknowledge the link between man-made carbon emissions and global warming. His insights into integrating social responsibility and corporate strategy are cutting edge.
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Christiaens, Tim. "Performing Agency Theory and the Neoliberalization of the State." Critical Sociology 46, no. 3 (March 22, 2019): 393–411. http://dx.doi.org/10.1177/0896920519826646.
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According to Streeck and Vogl, the neoliberalization of the state has been the result of political-economic developments that render the state dependent on financial markets. However, they do not explain the discursive shifts that would have been required for demoting the state to the role of an agent to bondholders. I propose to explain this shift via the performative effect of neoliberal agency theory. In 1976, Michael Jensen and William Meckling claimed that corporate managers are agents to shareholding principals, which implied that their main task was the procurement of shareholder value. Agency theory subsequently prescribes a series of measures to ensure the alignment of principal and agent interests in corporations. The diffusion of agency theory, however, moved beyond corporate governance to reconfigure the state. Due to its reliance on capital markets, the state supposedly likewise becomes an agent of the investment public and should procure bondholder value.
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Gao, Weiwei, Wanli Li, and Zhen Huang. "Do family CEOs benefit investment efficiency when they face uncertainty?" Chinese Management Studies 11, no. 2 (June 5, 2017): 248–69. http://dx.doi.org/10.1108/cms-03-2016-0052.
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Purpose This paper aims to investigate whether family CEOs benefit investment efficiency under uncertainty with Chinese family firms and to test the moderating effect of ownership structure, including family ownership, the separation of family control from family ownership and the multiple large shareholder structure. Design/methodology/approach Fixed-effects models are designed for a sample of 5,734 firm-year observations for Chinese family firms from 2009 to 2014. Findings The results show that investment efficiency is low under uncertainty, and having family CEOs can reduce this negative relationship. Further analysis reveals that for firms with family CEOs, the negative effect of uncertainty on investment efficiency is weaker when the family has higher ownership, when family control is less separated from family ownership, or when family firms have multiple large shareholder structures. Research limitations/implications The authors do not distinguish founder-CEOs and descendant-CEOs. Most of Chinese family firms are still managed by founders, so the authors cannot explore the generation effect although different generations manage firms differently. Because family succession is becoming a more and more important problem in China, further research may be able to explore the generation effect. Practical/implications This paper suggests that in emerging economies with weak investor protection, outside minority shareholders can avoid expropriation from family owners by investing in firms with large family ownership, little separation of family control from ownership or multiple large shareholder structure. In addition, policymakers can encourage institutional investors to participate in family business to improve corporate governance. Originality/value Drawing on both Type I and Type II agency theory perspectives, the authors argue that although family CEOs can generally benefit firms’ investment efficiency, the benefits vary with firms’ ownership structure. In other words, family CEOs are not absolute agents or stewards but some extent of combination of both.
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Taskinsoy, John. "Relevancy of Corporate Financial Policies and the Profit Maximization View of Islamic Banks." Journal of Social and Development Sciences 3, no. 6 (June 15, 2012): 184–93. http://dx.doi.org/10.22610/jsds.v3i6.702.
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This paper examines relevancy of corporate financial policies and documents similarities and/or differences of how profit maximization goal is viewed by Islamic banking institutions (IBIs). Management of the firm is ultimately responsible for maximizing profits and increasing shareholder value, however this challenging task may get plagued by agency problems as well corporate financial policy conflicts. Agency problem is real and it is assumed to occur in most companies worldwide. However, the theory’s controversial nature and its narrow focus have not really convinced many scholars whether agency theory in fact provides any broad benefits to firm’s stakeholders or not. Scholars seem to be divided into two camps on agency theory. Some authors think that agency theory pays too much attention to short-term goal of share price valuation and it hardly provides any real answers to firm’s real problems. On the other hand, some proponents of this theory believe agency theory’s useful impact on capital markets.
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Miller, Leon Monroe. "A theoretical and methodological framework for social economic value theory." International Journal of Social Economics 44, no. 2 (February 13, 2017): 169–80. http://dx.doi.org/10.1108/ijse-12-2014-0257.
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Purpose The purpose of this paper is to contribute to research on the impact that the creation of value theory has on professional, organizational, and economic performance. However, a special emphasis is on explicating the theoretical foundation of the concept. Design/methodology/approach This paper is based on a hermeneutic study of the relationship between value creation and managing economic resources. The paper traces the value creation concept to its roots from the foundation of Western Civilization through the value theory of Adam Smith and up to recent technological age advancements in value theory. Findings Since its emergence the value concept has been explicated in an abundance of literature. However, there has been very little in regards to explanations detailing the theoretical underpinnings of the concept. According to John Stuart Mill, attempts to apply value theory will fail (due to misinformation or inaccurate information) without inclusiveness of the full scope of what is relevant for social science and social economic research. Research limitations/implications Although studies on organizational behavior encompass the economic aspects of research economic research tends to be narrower in scope making it difficult to verify some value claims in economic terms. This is especially true in terms of making claims in regards to the connection between economic value theory, social value theory, the Philosophy of Economics, and the Philosophy of Science. Practical implications The study introduces a theoretical framework for integrating the value added and value creation concepts as a strategy for increasing shareholder benefits, stakeholder capital, and social capital. Social implications The paper explains how the value creation concept contributes to an increase in wealth, prosperity, flourishing by drawing from a technological age approach to value creation. Originality/value The paper fills the void in the literature regarding the theoretical framework of the concept thus undergirds claims about its practical benefits by clarifying its theoretical framework.
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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.