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Corporate governance

About: Corporate governance is a research topic. Over the lifetime, 118591 publications have been published within this topic receiving 2793582 citations.


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TL;DR: In this article, Pinkowitz and Williamson used various specifications of the valuation regressions of Fama and French (1998) to find that the relation between cash holdings and firm value is much weaker in countries with poor investor protection than in other countries.
Abstract: Agency theories predict that the value of corporate cash holdings is less in countries with poor investor protection because of the greater ability of controlling shareholders to extract private benefits from cash holdings in such countries. Using various specifications of the valuation regressions of Fama and French (1998), we find that the relation between cash holdings and firm value is much weaker in countries with poor investor protection than in other countries. In further support of the importance of agency theories, the relation between dividends and firm value is weaker in countries with stronger investor protection. ACCORDING TO AGENCY THEORIES, THOSE who control firms do so to further their own interests. When corporate governance works well, those in control of a corporation, whom we refer to as controlling shareholders, find it more beneficial to increase shareholder wealth than to expropriate minority shareholders. In contrast, with poor corporate governance, controlling shareholders can derive substantial private benefits from control at the expense of minority shareholders (see, for instance, Dyck and Zingales (2004) and Nenova (2003)). As Myers and Rajan (1998) argue, liquid assets can be turned into private benefits at lower cost than other assets. Liquid assets therefore represent a promising opportunity to investigate the implications of agency theories. According to these theories, we would expect controlling shareholders to overinvest in liquid assets. Existing empirical evidence by Dittmar, Mahrt-Smith, and Servaes (2003) and Kalcheva and Lins (2004) is consistent with this prediction. ∗ Lee Pinkowitz and Rohan Williamson are associated with Georgetown University and Ren´ e

955 citations

Journal Article
TL;DR: For decades this question has gone unasked, as both corporate law scholars and practitioners tacitly accepted the answer given in 1932 by Adolf Berle and Gardiner Means that the separation of ownership and control stemming from ownership fragmentation explained and assured shareholder passivity as mentioned in this paper.
Abstract: What forces explain corporate structure and shareholder behavior? For decades this question has gone unasked, as both corporate law scholars and practitioners tacitly accepted the answer given in 1932 by Adolf Berle and Gardiner Means that the separation of ownership and control stemming from ownership fragmentation explained and assured shareholder passivity.' Over this decade, however, corporate law scholars have recognized that this standard answer begs an essential prior question: if ownership fragmentation explains shareholder passivity, what explains ownership fragmentation? Although the Berle and Means model assumed that largescale enterprises could raise sufficient capital to conduct their operations only by attracting a large number of equity investors, contemporary empirical evidence finds that, even at the level of the largest firms, dispersed share ownership is a localized phenomenon, largely limited to the United States and Great Britain. Not only does the latest comparative research demonstrate that concentrated, not dispersed, ownership is the dominant worldwide pattern,2 but in-depth studies of individual countries show that shareholder activism increases in direct proportion to ownership concentration.' As a result, these findings, in turn, suggest that the conventional governance nouns in the United States may be more the product of a path-dependent history than the "natural" result of an inevitable evolution toward greater ef ficiency. Propelling this new inquiry into whether the Berle/Means corporation-with its famous "separation of ownership and control"-is the inevitable and efficient endpoint of economic evolution, or only the artifact of political forces and historical contingencies, is the unavoidable reality of increased global competition in both the product and capital markets. As a result, dispersed and concentrated ownership structures not only differ, but they may be forced to compete. Although scholars have debated the relative merits of these rival models for a decade or more, this prospect of an evolutionary competition-with its implication of a Darwinian "survival of the fittest" struggle-is very new. Ultimately, the issue thus posed is which system will dominate, and why: the stock market centered-system of dispersed ownership first described by Berle and Means, or the blockholder and cross-shareholding systems that now prevail across Europe and Asia? Of course, a clear winner does not necessarily have to emerge. The more one believes that political forces are likely to constrain and override purely economic forces, the more one is likely to expect a more muddled and contextual outcome. Thus, the current debate has two levels that can often become confused: (1) Which system of corporate governance is superior?, and (2) Which set of forces-economic or political-is likely to prove more powerful? To appreciate this distinction, it is useful to understand that the current debate has progressed through several discrete stages. First, beginning eartier in this decade, a provocative new wave of law and economics scholars advanced "political" theories that explained dispersed share ownership in large American corporations as the product of political forces and historical contingencies, not economic efficiency. An undercurrent in this criticism was the theme that political constraints had produced a suboptimal system of corporate governance, with dispersed ownership implying inherently inadequate corporate monitoring. Some of these scholars argued that the Anglo-American pattern of dispersed ownership was clearly inferior to the bank-centered capital markets of Germany and Japan, because the latter enabled corporate executives to manage for the long run, while U.S. managers were allegedly forced to maximize short-term earnings 5 Still, with the burst of the "bubble economy" in Japan, the more recent Asian and Russian financial crises, and notable monitoring failures by German universal banks, the tide of opinion has lately turned against the presumed superiority of banks as monitors. …

953 citations

Journal ArticleDOI
TL;DR: In this paper, the authors test if "at least three women" could constitute the desired critical mass by identifying different minorities of women directors (one woman, two women and at least three men).
Abstract: Academic debate on the strategic importance of women corporate directors is widely recognized and still open. However, most corporate boards have only one woman director or a small minority of women directors. Therefore they can still be considered as tokens. This article addresses the following question: does an increased number of women corporate boards result in a build up of critical mass that substantially contributes to firm innovation? The aim is to test if ‘at least three women’ could constitute the desired critical mass by identifying different minorities of women directors (one woman, two women and at least three women). Tests are conducted on a sample of 317 Norwegian firms. The results suggest that attaining critical mass – going from one or two women (a few tokens) to at least three women (consistent minority) – makes it possible to enhance the level of firm innovation. Moreover, the results show that the relationship between the critical mass of women directors and the level of firm innovation is mediated by board strategic tasks. Implications for both theory and practice, and future research directions are discussed.

950 citations

Journal ArticleDOI
TL;DR: In this paper, the authors argue that smart city governance is about crafting new forms of human collaboration through the use of ICTs to obtain better outcomes and more open governance processes.
Abstract: Academic attention to smart cities and their governance is growing rapidly, but the fragmentation in approaches makes for a confusing debate. This article brings some structure to the debate by analyzing a corpus of 51 publications and mapping their variation. The analysis shows that publications differ in their emphasis on (1) smart technology, smart people or smart collaboration as the defining features of smart cities, (2) a transformative or incremental perspective on changes in urban governance, (3) better outcomes or a more open process as the legitimacy claim for smart city governance. We argue for a comprehensive perspective: smart city governance is about crafting new forms of human collaboration through the use of ICTs to obtain better outcomes and more open governance processes. Research into smart city governance could benefit from previous studies into success and failure factors for e-government and build upon sophisticated theories of socio-technical change. This article highlights that sma...

947 citations

Journal ArticleDOI
TL;DR: In countries with a weak legal system and a high level of corruption, it has been shown that political connections are valuable to a corporation as mentioned in this paper, which is also true in the U.S., which has well-developed financial markets as well as a strong legal system.
Abstract: In countries with a weak legal system and a high level of corruption it has been shown that political connections are valuable to a corporation. This paper explores whether political connections are also important in the U.S., which has well-developed financial markets as well as a strong legal system. The paper uses an original hand-collected data set on the political connections of board members of S&P 500 companies to sort companies into those connected to the Republican Party and those connected to the Democratic Party. An analysis of the stock price response to the announcement of the board nomination of a politically connected director shows a positive abnormal stock return. The paper also analyses the stock price response to the Republican win in the 2000 Presidential Election and finds that companies connected to the Republican Party increase in value while companies connected to the Democratic Party decrease in value. The results further suggest that these effects are more pronounced for larger corporations. Finally, the paper controls for political donations by corporations prior to the 2000 election and finds that, unlike board connections, donations do not predict industry-adjusted abnormal post-election returns.

945 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20251
202415
20239,644
202219,289
20215,513
20206,174