Multiple agency perspective,family control,and private information abuse in an emerging economy

Using a comprehensive sample of listed companies in Hong Kong this paper investigates how family control affects private information abuses and firm performance in emerging economies. We combine research on stock market microstructure with more recent studies of multiple agency perspectives and argue that family ownership and control over the board increases the risk of private information abuse. This, in turn, has a negative impact on stock market performance. Family control is associated with an incentive to distort information disclosure to minority shareholders and obtain private benefits of control. However, the multiple agency roles of controlling families may have different governance properties in terms of investors’ perceptions of private information abuse. These findings contribute to our understanding of the conflicting evidence on the governance role of family control within a multiple agency perspective.     

Who does private equity buy? Evidence on the role of private equity from buyouts of divested businesses

Research Summary: We examine the role of nonventure private equity firms in the market for divested businesses, comparing targets bought by such firms to those bought by corporate acquirers. We argue that a combination of vigilant monitoring, high‐powered incentives, patient capital, and business independence makes private equity firms uniquely suited to correcting underinvestment problems in public corporations, and that they will therefore systematically target divested businesses that are outside their parents’ core area, whose rivals invest more in long‐term strategic assets than their parents, and whose parents have weak managerial incentives both overall and at the divisional level. Results from a sample of 1,711 divestments confirm these predictions. Our study contributes to our understanding of private equity ownership, highlighting its advantage as an alternate governance form. Managerial Summary: Private equity firms are often portrayed as destroyers of corporate value, raiding established companies in pursuit of short‐term gain. In contrast, we argue that private equity investors help to revitalize businesses by enabling investments in long‐term strategic resources and capabilities that they are better able to evaluate, monitor, and support than public market investors. Consistent with these arguments, we find that when acquiring businesses divested by public corporations, private equity firms are more likely to buy units outside the parent's core area, those whose peers invest more in R&D than their parents, and those whose parents have weak managerial incentives, especially at the divisional level. Thus, private equity firms systematically target those businesses that may fail to realize their full potential under public ownership.     

Size and relatedness of units sold: An agency theory and resource-based perspective

This study tests the effects of ownership concentration, outside director equity holdings, and corporate strategy on, and the Performance implications of, the size and relatedness of units sold by parent firms. The study is based on a model that integrates agency and resource-based theories, and a sample of sell-offs by 112 Fortune 500 firms. Ownership concentration is found to be associated positively with the sale of unrelated and small units. This relationship is strengthened when outside director equity is high. In addition, the effects of corporate strategy types on the characteristics of units sold depend on ownership concentration and outside director equity. Finally, post'sell-off performance of the parent firm is associated negatively with the relatedness of the unit sold. These results suggest that the type of unit sold depends on the type of economic benefit sought by the parent firm.     

CORPORATE GOVERNANCE WITHIN THE CONTEXT OF ANTITAKEOVER PROVISIONS

This paper advances understanding of corporate governance relationships with a longitudinal study of multiple antitakeover options. Prior analyses have been primarily cross-sectional, focused exclusively on a single provision ignoring provisions which require subsequent stockholder approval. The current study uses agency theory, and broadens this perspective by examining the differential impact of institutional investors stockholding, managerial stock ownership, and corporate board characteristics on the rate of adoption of six provisions, including provisions which do and do not require stockholder approval. Results of hazard analyses of the rate of amendment adoption of 185 firms between 1984 and 1988 indicate that the impact of governance variables on antitakeover provisions differ depending on whether these actions require stockholder approval or not. The pattern of differences indicates that institutional investors use their voting power when they are given an opportunity to vote and that substitution between direct shareholder control and managerial stock ownership exists.     

Agency theory and the influence of equity ownership structure on corporate diversification strategies

We articulate the agency theory view of managerial decision making and its implications for corporate diversification strategies. From agency theory, we generate testable predictions for the relation between equity ownership structure and diversification strategies and review the existing evidence on this relation. On balance, the evidence strongly supports the view that ownership structure influences corporate strategy. Copyright © 1999 John Wiley & Sons, Ltd.     

Institutional framework,corporate ownership structure,and R&D investment: an international analysis

We combine agency theory with the law and finance approach to analyze how the legal protection of investors and the corporate ownership structure affect corporate investment in research and development (R&D). We use information from 956 firms from the five most R&D-intensive industries in 19 developed countries. Our results show that better protection of investors’ rights by the institutional environment has a positive influence on corporate R&D. We also find that corporate ownership concentration works as a substitute for legal protection. This finding means that R&D investment of the firms in the countries with poor legal protection increases as ownership becomes more concentrated. Our results also show that the identity of shareholders has a relevant effect: Whereas banks and nonfinancial institutions as shareholders result in lower R&D, institutional investors as shareholders increase corporate investment in R&D.     

基于代理理论与管家理论视角的家族企业的公司治理选择：一个理论框架

企业组织是一个非常异质性的组织，企业的不同治理选择潜在影响着企业的代理成本和管家态度。最终体现为能力和企业绩效上的重要区别。本文从代理理论与管家理论这两种不同公司治理视角，分析了家族企业公司治理的四个维度即家族所有与控制、家族领导能力、多个家族成员的广泛参与、以及家族传承计划与实际参与下的各自的代理成本和管家态度，以及对企业能力和绩效的影响。     

Outside directors and firm performance during institutional transitions

Do outside directors on corporate boards make a difference in firm performance during institutional transitions? What leads to the practice of appointing outside directors in the absence of legal mandate? This article addresses these two important questions by drawing not only on agency theory, but also resource dependence and institutional theories. Taking advantage of China's institutional transitions, our findings, based on an archival database covering 405 publicly listed firms and 1211 company–years, suggest that outsider directors do make a difference in firm performance, if such performance is measured by sales growth, and that they have little impact on financial performance such as return on equity (ROE). The results also document a bandwagon effect behind the diffusion of the practice of appointing outsiders to corporate boards. The article not only highlights the need to incorporate multiple theories beyond agency theory in corporate governance research, but also generates policy implications in light of the recent trend toward having more outside directors on corporate boards in emerging economies. Copyright © 2004 John Wiley & Sons, Ltd.     

Independent boards and the institutional investors that prefer them: Drivers of institutional investor heterogeneity in governance preferences

Institutional investors report that they prefer to invest in firms with greater board independence despite the fact that researchers have been unable to demonstrate a link between board independence and firm performance. We investigate whether differences among institutional investors affect these preferences. We find that trading strategies have some effect but that mutual funds—facing the strongest institutional pressures—have significantly stronger preferences for firms with greater board independence than do other types of institutional investors. This suggests that institutional investor preferences for independent boards are at least partially driven by institutional pressures rather than anticipated reductions in agency costs. Copyright © 2013 John Wiley & Sons, Ltd.     

Cross‐border mergers and acquisitions: The role of private equity firms

Research summary: We show that private equity ownership (“PE backing”) of the acquirer is a signal of deal quality in cross‐border takeovers. As such, PE‐backed acquirers experience higher announcement returns in cross‐border takeovers, but only if targets are in poor information environments. We show that PE backing is a positive market signal because of PE firms' experience and networks that result from prior deals in target countries. We document that the market correctly anticipates that operating performance of PE‐backed acquirers increases as a result of cross‐border mergers and acquisitions (M&A). Managerial summary: We study cross‐border acquisitions by acquirers that are partially owned by private equity firms (“PE backing”). Cross‐border acquisitions are challenging as acquirers often have little information about targets. We document that investors react positively to cross‐border deals of PE‐backed acquirers—their stock prices increase upon deal announcements. However, this is only the case if targets are in countries with poor information environments. This is because PE backing allows acquirers to access PE firms' deal experience and networks. This makes it easier to identify and evaluate good targets, making it more (less) likely that a deal eventually creates (destroys) value. Consistent with this, we find that earnings of PE‐backed acquirers increase after buying targets in poor information environments. Copyright © 2016 John Wiley & Sons, Ltd.     

Agency problems as antecedents to unrelated mergers and diversification: Amihud and Lev reconsidered

Amihud and Lev (1981) are widely cited as providing evidence that managers, unless closely monitored by large block shareholders, will attempt to reduce their employment risk through unrelated mergers and diversification. These corporate strategies, however, may not be in shareholders' interests. Reconsidering the agency assumptions underlying Amihud and Lev's study and the methodology they used, we develop hypotheses regarding the association between ownership structure, board vigilance, corporate strategy, and corporate performance from management theory and test them using Amihud and Lev's data from the 1960s and new data from the 1980s. Neither study supports the conclusions of Amihud and Lev, nor the agency theory belief that monitoring efforts by principals affect the strategic behaviors of agents or the performance of firms that they manage. © 1998 John Wiley & Sons, Ltd.     

CEO career horizon,corporate governance,and real options: The role of economic short‐termism

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments. Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.     

Does ownership matter in private equity? The sources of variance in buyouts' performance

We study the impact of ownership on firm performance in an unexplored governance context: private equity (PE) firms and the buyouts in which they invest. We employ a multiple‐membership, cross‐classified, multilevel model on a unique database of 6,950 buyouts realized by 255 PE firms between 1973 and 2008 in 77 countries. The results document a significant PE firm effect (4.6%), the importance of which grows as time passes. We then study three contingencies that increase the importance of the PE firm effect: (1) value addition vs. selection strategies; (2) developed vs. emerging economies; and (3) economic downturns. Our findings shed new light on the sources of variance in buyouts' performance. Copyright © 2014 John Wiley & Sons, Ltd.     

Frequency and directional reversal of equity ownership change in international joint ventures

Changes in equity ownership between international joint venture (IJV) partners over an IJV life-course represent an important behavioral manifestation of relational dynamics. We examine each occurrence of equity ownership change for two salient temporal properties: frequency (how often ownership change occurs) and directional reversal (when a partner buys and then sells, or vice versa, equity shares from another partner). Building on social exchange theory, we propose that initial partner equity imbalance and partners’ country’s individualism-collectivist culture has an imprinting effect on the likelihood of ownership change for both temporal properties. We developed a data set consisting of all equity changes in 200 Japanese automotive suppliers’ IJVs and found support for our hypotheses while controlling for transaction cost explanations. Our findings contribute to IJV research by shedding light on temporal aspects of equity ownership change over an IJV’s life course as well as the underlying exchange dynamics and the stability of IJV equity ownership distribution among partners.     

The structure of ownership and corporate acquisition strategies

In this study, we examine in an agency‐theoretic context the influence of executive equity stakes upon corporate strategy and firm value. We argue that beneficial, risk‐increasing corporate strategies may initially be emphasized but non‐value‐maximizing, risk‐reducing strategies may subsequently be emphasized as managers expand their stock ownership. We alternatively contend that stock options may have a consistently positive impact on firm risk taking and acquisition returns. The empirical findings are supportive of our expectations. Copyright © 2002 John Wiley & Sons, Ltd.     

Is family leadership always beneficial?

There has been much debate concerning the performance of family firms and the drivers of their performance. Some scholars have argued that family management is to blame when family firms go wrong; others claim that family management removes costly agency problems and encourages stewardship. Our thesis is that these disagreements can only be resolved by distinguishing among different types of family firms. We argue that family CEOs will outperform in smaller firms with more concentrated ownership and underperform in larger firms with more dispersed ownership; they will do neither where firms are smaller and ownership is more dispersed or firms are larger and ownership is more concentrated. Copyright © 2012 John Wiley & Sons, Ltd.     

上市公司治理结构对信息性盈余管理的影响研究

为了有效监督公司内部利害关系各方的行为,有效降低基于各种委托代理关系的代理成本,在阐述国内外盈余管理文献的基础上,假设拥有健全公司治理结构的上市公司管理者更愿意进行信息性盈余管理,通过构建合理的并可度量的信息性盈余管理衡量方法,使用沪、深两市全部A股上市公司2014—2016年公司季度财务数据,实证研究了信息性盈余管理视角下公司治理对盈余管理的影响。结果表明,市场监管者和投资者需要关注两种不同的盈余管理行为,投机性盈余管理更倾向于误导投资者,信息性盈余管理则是通过盈余管理的手段向投资者传递有用的内部信息。股权制衡对上市公司的信息性盈余管理行为具有明显促进作用,促使管理层进行信息性盈余管理,就要优化股权结构,形成产权多样化的股东制衡机制,实现股权结构的合理优化。拥有健全公司治理结构的上市公司管理者更愿意进行信息性盈余管理,公司治理结构对管理者进行信息性盈余管理具有积极的影响,健全的公司治理结构能够提高财务报告透明度和盈余信息含量。因此,保障财务报告的真实性和可靠性,以信息性盈余管理为动机探究公司治理对盈余管理的影响具有现实意义。     

Who should own it? An agency‐based explanation for multi‐outlet ownership and co‐location in plural form franchising

Plural forms exist when managers use two owners to perform one activity. Franchising is a plural form explained by agency theory, however, the theory is unable to explain two franchisor actions: 1) allowing franchisees to own multiple outlets and 2) co‐locating company‐owned and franchised outlets. We use research that describes a symbiosis between company‐owned and franchised outlets to extend agency theory and explain these actions. Our investigation of ownership patterns among 4,339 outlets of 16 plural form franchisors is consistent with our theory that multi‐outlet franchising is cost efficient and that co‐location occurs when franchisors fill market gaps left by franchisees. Copyright © 2011 John Wiley & Sons, Ltd.     

Inside Ownership, Risk Sharing and Tobin's q-Ratios: Evidence from REITs

We investigate relations among inside ownership, managerial expenses, risk sharing and equity valuations. Our engine of analysis—Real Estate Investment Trusts (REITs)—provides a unique and rich framework for analysis since we can calculate extremely accurate measures of asset replacement costs, and hence relative valuation (Tobin's q ). Further, the nature of the financial statements allows us to examine the impact of insider ownership on agency costs since we can accurately measure the costs of the entire management team. Our results show that firms with greater insider holdings tend to invest in assets with lower systematic risk and use less debt in their capital structure. At the same time, managerial expenses are lower as inside ownership increases. Finally, higher levels of insider ownership are associated with higher relative valuation as measured by both higher premiums to net asset value and higher multiples of cash flows. The results have implications for the design of optimal management contracts for both REITs and firms in general.     

Red and Blue: the relationship between the institutional context and the performance of leveraged buyout investments

This paper advances the debate concerning the relationship between politics and business conduct by investigating the influence of the institutional context on leveraged buyout investments. We propose that the formal and informal institution context in ‘red’ states (those dominated by the U.S. Republican Party) is more aligned with the principal strategies through which leveraged buyout investors create value than such a context is in ‘blue’ states (those dominated by the Democratic Party). Therefore, according to institutional theory, one would expect, ceteris paribus, a higher likelihood of buyout transactions in red states and vice versa. We analyze a sample of 10,746 U.S. buyout investments in 4,633 distinct target companies made by 2,396 different funds managed by 1,300 private equity firms from 1980 to 2003. The results indicate strong evidence of a positive association between a more aligned institutional context and both the volume of buyout activity and different measures of performance for these buyouts. Copyright © 2011 John Wiley & Sons, Ltd.