International Review of Finance 

About: International Review of Finance is an academic journal published by Wiley-Blackwell. The journal publishes majorly in the area(s): Stock market & Volatility (finance). It has an ISSN identifier of 1369-412X. Over the lifetime, 537 publications have been published receiving 9778 citations.

Corporate Governance in Asia: A Survey

Abstract: Corporate governance has received much attention in recent years, partly due to the Asian financial crisis. We review the literature on corporate governance issues in Asia to develop region-specific and general lessons. Much attention has been given to poor corporate sector performance, but most studies do not suggest that Asian firms were badly run. The literature does confirm the limited protection of minority rights in Asia, allowing controlling shareholders to expropriate minority shareholders. Agency problems have been exacerbated by low corporate transparency, associated with rent-seeking and relationship-based transactions, extensive group structures and diversification, and risky financial structures. The controlling shareholder bears some of agency costs in the form of share price discounts and expenditures on monitoring, bonding and reputation building. The Asian financial crisis further showed that conventional and alternative corporate governance mechanisms can have limited effectiveness in systems with weak institutions and poor property rights. Overall, the understanding of the determinants of firm organizational structures, corporate governance practices and outcomes remains limited, however.

How Has CEO Turnover Changed

Abstract: We study CEO turnover – both internal (board driven) and external (through takeover and bankruptcy) – from 1992 to 2007 for a sample of large US companies. Annual CEO turnover is higher than that estimated in previous studies over earlier periods. Turnover is 15.8% from 1992 to 2007, implying an average tenure as CEO of less than 7 years. In the more recent period since 2000, total CEO turnover increases to 16.8%, implying an average tenure of less than 6 years. Internal turnover is significantly related to three components of firm stock performance – performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market. The relations are stronger in the more recent period since 2000. We find similar patterns for both forced and unforced turnover, suggesting that some, if not most, turnover labeled as unforced is actually not voluntary. The turnover-performance sensitivity is modestly related to block shareholder ownership and board independence.

Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India

Abstract: Most of the existing evidence on the effectiveness of large shareholders in corporate governance has been restricted to a handful of developed countries, notably the UK, US, Germany and Japan. This paper provides evidence on the role of large shareholders in monitoring company value with respect to a developing and emerging economy, India, whose corporate governance system is a hybrid of the outsider-dominated market-based systems of the UK and the US, and the insider-dominated bank-based systems of Germany and Japan. The picture of large-shareholder monitoring that emerges from our case study of Indian corporates is a mixed one. Like many of the existing studies, while we find blockholdings by directors to increase company value after a certain level of holdings, we find no evidence that institutional investors, typically mutual funds, are active in governance. We find support for the efficiency of the German/Japanese bank-based model of governance; our results suggest that lending institutions start monitoring the company effectively once they have substantial equity holdings in the company and that this monitoring is reinforced by the extent of debt holdings by these institutions. Our analysis also highlights that foreign equity ownership has a beneficial effect on company value. In general, our analysis supports the view emerging from developed country studies that the identity of large shareholders matters in corporate governance.

Family Control and Corporate Governance: Evidence from Taiwan

Abstract: A recent stream of literature shows that family control is central in most countries of the world, but little research exists regarding family control and corporate governance. This paper analyses family control and corporate governance using a sample of Taiwanese firms. The results suggest that family control is even more prevalent than previously suggested and that a non-linear relation exists between family control and relative firm performance. Family-controlled firms that have low levels of control have lower relative performance than both family-controlled firms with high levels of control and widely held firms. This is consistent with the conflict of interest between majority and minority shareholders being the greatest when the majority shareholder’s level of control is high enough to influence a firm’s decision-making process but ownership is low enough that the benefits of expropriation outweigh the costs. Furthermore, a positive valuation effect exists when controlling families hold less than 50% of a firm’s board seats. Taken together, the results in this paper suggest that when family control is central, high levels of family ownership and low levels of family board representation are effective ways of mitigating the separation of cash flow rights and control and, thus, decreasing the conflict of interest between majority and minority shareholders.

A Trust Crisis

Abstract: We conjecture that the changes in economic activity from late 2008 to early 2009 is due to a drop in trust. We present new survey evidence consistent with this hypothesis. I. INTRODUCTION If a modern Rip Van Winkle had fallen asleep 2 years ago and woken up in January 2009, he would have wondered what had happened to the US economy. In 2007, we were in the middle of an economic boom. Banks were eager to lend even at the cost of forgoing important covenants and corporate America (and the entire world) was producing at full steam, so much so that commodities prices were rising in anticipation of a future scarcity. By 2009, we were quickly sliding into a deep recession. Banks were not lending and com- modity prices were plummeting in expectation of a dramatic slowdown of production throughout the world. Neoclassical economic models cannot explain this dramatic change. There was no apparent shock to productivity or a clear slowdown in innovation. The government had kept taxes low. The Federal Reserve had kept interest rates low and cut them even further. What happened? Everyone agrees that this crisis originated in the financial system. When Lehman Brothers defaulted and AIG had to be rescued by the government in September 2008, the economy was still doing all right. The rate of growth during the second quarter was still a comfortable +2.8%. How could the default of an investment bank, with very limited lending to the real economy, have had such a disastrous effect?