When does internal governance make firms innovative?

Using managerial risk-taking as a lens to explore firm innovativeness, this study addresses the risk alignment effects of firm-level governance and its context-dependent nature. On the basis of the contrasting theoretical predictions of agency and stakeholder theories, the investigation shows how internal governance, in terms of managerial ownership and board competence, shapes the performance of new product introduction in a sample of 194 Taiwanese firms. These relationships are also conditioned separately by industry-wide technological opportunity and within-firm resource slack. This study enriches the body of knowledge in the strategic outcomes of corporate governance by demonstrating the general efficacy of two distinct governance arrangements and their contingent value when subject to different environmental and organizational munificence.     

Does corporate governance risk at home affect investment choices abroad?

Disparity between control and ownership rights gives rise to the risk of tunneling by the controlling shareholder, and is prevalent in many emerging market economies and present in some developed countries. At the same time, international investors come from different countries whose home markets are characterized by varying degrees of control–ownership disparity. This paper studies whether this difference in investors' home countries affects their portfolio choice in an emerging market. It combines two unique data sets on ownership and control in business groups, and investor-stock level foreign investment in Korea. A key finding is that investors from low-disparity countries disfavor high-disparity stocks in Korea, but investors from high-disparity countries are indifferent. Moreover, investors from low-disparity countries became averse to disparity only after the Asian financial crisis. These results suggest that the nature of corporate governance in international investors' home countries affects their portfolio choice abroad, and therefore these investors should not be lumped together in the analyses of their portfolio choice.     

On ‘creative cities’ governance models: a comparative approach

The implementation of ‘creative cities’ projects all over the world in recent years has been characterised by a great diversity of institutional frameworks and governance mechanisms.

Departing from the contemporary debates on ‘creative industries’ and ‘creative cities’, this article aims to discuss this diversity of regulatory mechanisms and forms of governance. Some tentative typologies of case studies and governance mechanisms are drawn in order to improve the understanding of those dynamics, to build up knowledge on suitable ‘creative cities’ governance models, and to develop ideas to support a strategy for public intervention in the Portuguese case.     

Does good governance matter for FDI inflows? Evidence from Asian economies

This paper examines the effects of the six components of good governance on foreign direct investment (FDI) inflows in 15 Asian economies for the period 1996–2007 using a fixed effect model for panel data with heteroskedasticity corrected standard errors. The study also employs the feasible general least square (FGLS) and Prais-Winstein panel estimation methods in order to check the consistency of the results with the fixed effect model. The empirical results reveal that of the six components of good governance, political stability and absence of violence, government effectiveness, rule of law, and control of corruption are the key determinants of FDI inflows, as they exhibit consistent results under different models. However, the study finds no significant evidence with voice and accountability and regulatory quality in FDI inflows. The study reveals that human capital, infrastructure, lending rate, and GDP growth rate also have a significant influence on FDI inflows. We conclude that a country which can enhance its governance environment in general is likely to attract more foreign direct investment despite offsetting deficiencies in other dimensions of good governance such as voice and accountability and regulatory quality.     

Revisiting low price guarantees: Does consumer versus retailer governance matter?

Retailers often use low price guarantees (LPG) as a signal to attract consumers and increase sales. Consumers interpret LPGs as a signal that a particular retailer is committed to low prices. However, if more and more retailers employ LPGs, their effectiveness as a price signal wears off. As a result, retailers adapt increasingly extreme guarantees to get an advantage over the competition. Retailers, for instance, are experimenting with taking on the responsibility of looking for lower prices and automatically refunding consumers when a competitor offers a lower price for the same product. This research shows that automatic price protection of this sort might backfire under certain conditions. Three studies show that LPGs alone are not enough to signal low prices and that retailers combining large refunds with a retailer-enforced LPG obtain less favorable reactions than those implementing other types of LPGs.     

Alignment or entrenchment? Corporate governance and cash holdings in growing firms

This study contends that the association between corporate cash holdings and corporate governance is subject to the investment environments that firms face. For example, firms with an abundance of investment opportunities have a strong incentive to hold cash in order to maintain their competitive positions. Shareholders accept high levels of cash holdings in such growing firms if corporate governance can protect their interests. This study examines the effects of corporate governance on cash holdings for a sample of high-tech firms. The results show that CEO ownership, the directorship of venture capitalists (VCs), and independent directors play critical roles in corporate cash policy. In addition, the boards are more effective when the firms' CEOs are also their founders or when VCs hold a large stake of company shares. The effects of corporate governance are more significant in younger firms while the effects of firm-specific economic variables are more significant in older firms in the sample.     

Global corporate governance: On the relevance of firms’ ownership structure

This article addresses reviews research on corporate governance of the modern corporation around the world, with particular attention to the key variable of ownership structure. We first review the evolution of ownership studies from the early days of the Berle and Means to more contemporary research on how ownership has defined the various corporate governance systems around the world. We maintain that concentrated and family ownership structures in emerging economies, the role of the diverse type of large blockholders, and the evolution to more dispersed structures can help to inform broader questions around corporate governance and its relationship to economic development and the role of institutions in these economies. We propose that future research should draw on micro data on firm specific ownership structures and their corporate governance practices to better understand the cross-national diversity of governance and its meanings and consequences. We close by identifying some fruitful areas of future research.     

Does diversification add firm value in emerging economies? Effect of corporate governance

Using 205 Taiwanese firms spanning five years, this research examines how corporate governance factors specific to emerging economies determine the extent of diversification and moderate its performance. The analyses reveal that controlling family ownership is significantly associated with a greater extent of diversification, which impairs firm value. Conversely, domestic bank ownership significantly decreases diversification, which in turn increases diversification performance. These findings present the evidence of controlling family entrenchment through diversification and the significant role domestic banks play in the principal–principal corporate governance framework.     

Do founders matter? A study of executive compensation,governance structure and firm performance

This study compares founder-CEOs and professional CEOs in newly public firms in terms of executive compensation, governance structure, and firm performance. The paper applies a series of decomposition methods to separate founders' extrinsic characteristics from their intrinsic endowments. The paper finds that founder CEOs tend to earn smaller incentive compensation and smaller total compensation than professional CEOs. Founder-managed firms are associated with higher financial performance and are more likely to survive than professional managed firms. Firms with founder-CEOs are associated with even higher financial performance when the position of CEO and chairperson of the board is combined.     

Can minority state ownership influence firm value? Universal and contingency views of its governance effects

Drawing on the literature of corporate governance and privatization, this study explores the elusive roles of a specific owner identity, namely, state ownership in its minority. With a sample of 68 Taiwanese companies with 5 to 49% state ownership during 1999-2003, the study examines the value-shaping effects of minority state ownership (MSO) and, furthermore, seeks to establish a contingency perspective suggesting that the internal and external contexts may moderate the influence of MSO on firm value. Using first-order autoregressive models to mitigate the problems of endogeneity, the study shows that the governance effect of MSO associates not only in a curvilinear relationship with firm value but also strengthened by corporate ownership ties and market competition. The non-monotonic performance effect and the context-dependent nature of MSO yield significant implications for government investments in the private sector.     

Do Chinese corporations take their governance practices abroad? Evidence from Chinese mining subsidiaries in Australia

Directors of firms are theorized to fulfil control, service and resource dependence roles. However, the ways in which directors’ of Chinese MNCs govern their foreign subsidiaries, and perform these roles remains unclear. Building on the institutional logics perspective, this study explores the roles enacted by the boards of directors eight Chinese‐controlled companies in Australia to gain an appreciation of their governance practices. In depth semi‐structured interviews with insider and independent directors, consultants and market analysts were undertaken. A content analysis of company annual reports and web sites complimented primary sources of data on board functions. Findings reveal that control is the most dominant role played by these boards, rather than service or resource dependence. It also appears that the dominant logics of Chinese institutions influence the corporate governance of Chinese MNCs as they internationalize. These findings extend our understanding of corporate governance practices in China and abroad.     

Did corporate governance safeguard investor interest in the global financial crisis? Evidence from Hong Kong SAR

The global financial crisis of 2008 aroused renewed interest in the effectiveness of corporate governance mechanisms to safeguard investor interests. In this paper, we measure the effects of the crisis from 2008 to 2009 on the share performance of 976 companies listed on the Hong Kong Stock Exchange in the Hong Kong SAR and examine the link between share performance and corporate governance mechanisms. Our results present evidence that firms with a higher proportion of independent directors and a greater concentration of ownership had lower share performance, but lower price volatility, during the global financial crisis. These results suggest that no single corporate governance mechanism is fit for all economic environments and time frames. To strengthen investors' confidence, companies should enhance the efficiency and adaptability of their governance mechanisms in turbulent times.     

Deadlock in corporate governance: Finding a common strategy for private telephone companies, 1978–1998

This paper looks at how a group of small, incumbent private telephone companies complied with the international convergence of market structures. The existing research has mainly focused on large national incumbents, assuming a transition to multinational enterprise. This development process is often associated with privatisation policies and various institutional factors. The article tests these assumptions using a case study of the network of Finnish local telephone companies. It looks at the development of an interfirm network, its perspectives on the different phases of the deregulation process, and how the network tried to regenerate itself but failed to form a unified corporate structure capable of mounting a common business strategy. The reason for this failure resembles the idea of governance inseparability: private telecom companies were committed to the objectives and form of a tried and trusted cooperation model, which no longer met the requirements of the competitive and increasingly liberalised business environment of the 1990s. This case demonstrates that the significance of both corporate governance and organisational development are, above all, related to the firm’s ability to regenerate itself.     

East meets west—Corporate governance in Asian emerging markets: A literature review and research agenda

This review examines how corporate governance mechanisms in the Asian emerging markets (AEMs) context affect firm-level outcomes. Literature about characteristics of the main corporate governance actors (boards and owners), their effects on firm-level outcomes, and contingency factors in AEMs offers interesting first insights. I synthetize these results and develop a research agenda that proposes how AEM corporate governance research should extend (but not ignore) agency theory, how AEM research about firm effects of corporate governance could take a stakeholder-oriented perspective, and how research could utilize the AEM institutional context to model contingency factors and extend our theoretical understanding of corporate governance.     

‘To invite disappointment or worse’: governance,audit and due diligence in the Ferranti–ISC merger

Mergers and acquisitions frequently destroy shareholder value, and UK companies have a particularly poor record in US deals. But outcomes are rarely as calamitous as in the case of the British electronics group Ferranti which in 1987 entered into a significant merger with the US company International Signal and Control Group (ISC). The combined group had collapsed by 1993. Our analysis of the case, seen in the light of more recent corporate failures such as the Royal Bank of Scotland (RBS), leads us to question whether the UK’s ‘idiosyncratic mix’ of corporate governance mechanisms can ever effectively constrain the flawed and dictatorial decision-making of dominant individuals.