Board Antecedents of CEO Duality and the Moderating Role of Country‐level Managerial Discretion: A Meta‐analytic Investigation

CEO duality reduces boards’ monitoring capacity. But governance substitution theory holds that boards of directors who can effectively monitor their CEOs are more likely to adopt the CEO duality governance structure. By examining relationships between board characteristics underlying their monitoring capacity and CEO duality, we bring evidence to bear on governance substitution theory. Further, by applying a managerial discretion theory lens to CEO duality, we extend governance substitution theory to the cross‐country context where institutional features vary in their constraints on managerial discretion. Meta‐analytic results from a dataset of 297 studies across 32 countries/regions provided support for the majority of our predictions. As predicted, board independence and certain types of board human capital were positively related to CEO duality. Unexpectedly, board ownership was negatively related to CEO duality. Additionally, country‐level managerial discretion significantly moderated the board independence‐ and human capital‐duality relationships (but not the board‐ownership‐duality relationship) as predicted.     

The Massachusetts Classified Board Law

This study investigates the impact of the Massachusetts Classified Board Law on shareholder wealth. This state law is the first law to explicitly require a change in the structure of the board of directors of every firm within the state. In addition, restrictive rules on replacing members of the board of directors enable directors to insulate themselves from takeover attempts. We find this law decreased share values by 16 percentage points for firms without anti-takeover amendments. However, firms with a golden parachute outperformed firms without golden parachutes by 23 percent. This supports the hypothesis that financial markets consider many firm characteristics when evaluating the impact of state anti-takeover legislation. The management entrenchment hypothesis is supported for firms without prior anti-takeover charter amendments. The shareholder interest hypothesis is supported for firms with golden parachutes.     

Governance practices and agency cost in emerging market: Evidence from India

In this study, we examine whether governance practices brings down agency cost. We find that board size, board attendance, and CEO duality are important governance characteristics that influence the agency cost. We also bring out systematic differences in governance practices of the business group affiliated firms and stand‐alone firms. Larger board and proportion of independent director helps in reducing the agency cost for group affiliated firms supporting monitoring hypothesis. On the other hand, the governance structure of stand‐alone firms supports commitment hypothesis where we observe that board busyness and CEO duality help in reducing the agency cost.     

CEO compensation, shareholder rights, and corporate governance: An empirical investigation

We investigate whether CEO compensation is influenced by the strength of shareholder rights. Our evidence reveals that CEOs of firms where shareholder rights are weak obtain more favorable compensation. It is also found that higher CEO pay is associated with a higher degree of potential managerial entrenchment. Additionally, CEOs of firms with governance provisions that offer them protection from takeovers enjoy more generous pay. We also examine the change in CEO compensation relative to the change in shareholders' wealth. The evidence shows that when there is an increase in shareholders' wealth, the CEO is able to obtain higher incremental compensation when shareholder rights are weak. On the contrary, when shareholders' wealth falls, there is no corresponding decline in CEO compensation when shareholder rights are weak. Given the empirical evidence, we argue that CEO compensation practices reflect rent expropriation rather than optimal contracting.     

股权集中度、董事会结构与盈余管理——来自中国资本市场的经验数据

本文通过封2005年中国沪深A股上市公司的公司治理和财务数据为基础,实证检验了股权集中度、董事会治理与盈余管理水平之间的关系。结果表明,盈余管理与董事长与CEO两职合一显著正相关,与股权集中度、董事会规模（公司法规定的合理范围内人独立董事的比例显着负相关。因此,应当改善股权结构、提高股权集中度,加强董事会的独立性和监督职能,造对于上市公司的盈余管理行为,起到有效抑制的作用。     

Pay for Talk: How the Use of Shareholder‐Value Language Affects CEO Compensation

The language that signals conformity to a prevailing norm can contribute to the appearance of managerial competency and organizational legitimacy. We argue that top corporate managers’ use of language that is congruent with a prevailing norm leads the boards of directors to evaluate the managers more favourably and to grant a higher level of compensation. We test this argument by analysing the letters to shareholders from 334 US firms and examine the CEOs’ expression of the shareholder value principle, which is a prevailing model of corporate governance in the USA. We found that the use of shareholder‐value language is significantly related to a higher level of CEO compensation and that the effect of shareholder‐value language is greater when shareholder activism is stronger.     

共享审计可以提高并购绩效吗？——来自中国A股上市公司的经验证据

以2004—2016年我国A股上市公司的并购事件为样本，研究并购双方共享审计师对并购绩效的影响，并考察了信息不对称程度对两者之间关系的调节作用。结果表明并购双方共享审计师能显著提高并购方及目标方的并购绩效；对于信息不对称程度更大的跨行业、跨地域并购事件，共享审计对并购绩效的正向影响更为显著。进一步检验发现共享审计可以显著降低并购双方之间的信息不对称程度，进而导致较低的并购溢价。     

Gender and management on Spanish SMEs: an empirical analysis

Few studies have investigated the presence of women on the boards of directors of companies. Those that have been done have focused on large firms. In this study we analyzed the gender diversity of a sample of Spanish small and medium enterprises. These firms are of great importance in terms of their number, the employment they provide, and their sales. Furthermore, there is an open debate in Spain about gender equality after the passing of several laws against gender discrimination. We found that women's presence on boards generates a negative impact on firm performance and this result may be due to less risky strategies implemented by women directors. This finding is interesting because it sheds light on how women can affect the functioning of a board. We also found that family firms and firms with a financial institution as the main shareholder tend to have more women on the board. Finally, we show that firms with less debt, more assets, and larger boards have more women as directors.     

Fusionen und Übernahmen im Licht der Hybris – Überblick über den Forschungsstand

Although corporate acquisitions are ubiquitous a large number of M&A fails. One explanation for such failure is the hubris hypothesis for corporate takeovers. A decision maker affected with hubris (or overconfidence) will overestimate his abilities in raising potential synergies and is likely to make investment decisions destroying shareholder wealth. The growing literature on CEO hubris proposes various ways to measure hubris. We present these indicators and discuss possible advantages and drawbacks. (71 words)     

What have we learnt about board gender diversity as a business strategy? The appointment of board subcommittees

This paper explores whether a board's gender diversity influences the voluntary formation of its board subcommittees. Female board directorship may become a business strategy for firms if it affects the appointment of board subcommittees. We hypothesize that the voluntary creation of board subcommittees is affected by the presence of female directors on boards; the presence of independent, executive, and institutional female directors; and the proportion of shares held by female directors on boards. Board gender diversity has been measured as a proportion and with Blau's index. The results show that independent female directors are positively associated with the likelihood of voluntarily setting up all or some of the committees and a supervision and control committee. The presence of executive female directors negatively influences the probability of forming all or some of the committees, an executive committee and a supervision and control committee. The percentage of shares held by female directors has a positive effect on the voluntary creation of an executive committee. The findings also report that women directors and institutional female directors do not contribute to the voluntary creation of board subcommittees. Our evidence shows that female board directorship impacts the demand of internal control mechanisms such as board subcommittees, suggesting that firms should take it into account as a business strategy. The main implications derived from this research are relevant for Spanish policymakers and researchers because board gender diversity may play a significant role in the decision‐making processes of firms and may influence firms' outcomes.     

Supply chain integration and shareholder value: Evidence from consortium based industry exchanges

Recent trade and academic literature point to the importance of supply chain integration among partners as a key determinant of value creation. This paper analyzes the shareholder value effects of setting up industry exchanges, a prominent mechanism used to achieve supply chain integration. Shareholder value effects are estimated by measuring the stock market reaction (abnormal returns) associated with announcements to form or join industry exchanges. We find that abnormal returns from participation in industry exchanges are positive but only marginally significant in the whole sample of 144 firms in 18 exchanges formed during 2000–2001. In the sub-sample of 88 exchange founders who were part of the original announcements to form the exchange, the abnormal market reaction is about 1% and significant. We also find that firms with greater bargaining power and higher process efficiency benefit more from participation in industry exchanges.     

Management entrenchment and the valuation discount of dual class firms

Prior studies provide empirical evidence that dual class firms are discounted compared to single class firms due to the extraction of private benefits. This study examines the link between managerial entrenchment and the dual class discount. Using propensity score matching and conditioning for past underperformance, the paper shows that investors apply a greater discount to the value of dual class firms as the degree of managerial entrenchment increases. The impact of entrenchment on dual class discount is more pronounced when the CEO is the controlling shareholder compared to when the controlling shareholder is a director or the chairman of the board.     

Investor protection and value creation in cross‐border M&As by emerging economies

Previous research investigating cross‐border M&As (CBM&As) by emerging economies (EEs) provided contrasting evidence on the value enhancement role of investor protection rules. We conduct a new empirical study to address the issue with an accurate sample selection of bidders from more homogeneous developing countries and transactions on developed countries only. Our analysis over the 1997–2012 period on a sample of M&A deals by companies from Brazil, Russia, India, China, and South Africa (BRICS) does not provide evidence that better institutional standards in the destination country are rewarded by the local stock market. We find that foreign governance quality is not associated with positive excess stock returns around the announcement date. Rather, these returns are affected by firm‐specific and deal‐specific factors, such as the relative deal size, the listed status of the target company, and the acquirer size. Comparison with other studies on excess returns for emerging markets (including BRICs) suggests that the results could be driven at least partially by country choice.     

Government Regulation,Corporate Board,and Firm Value: Evidence from China

This paper investigates the determinants of board composition and its consequences on firm value in China by focusing on the impact of ultimate owner type and financial needs under the institution environment with government intervention and weak investor protection. We find that State‐Owned Enterprises (SOEs) are more likely to choose politically connected directors without professional backgrounds, but non‐SOEs are more likely to have independent directors, or politically connected directors with professional business backgrounds. Appointment of independent directors has no effect on firm value. Due to weak legal investor protection in China, a dominant shareholder can easily remove independent directors, as there is no mature market for directors. Politically connected directors without professional business backgrounds are negatively associated with a firm's value. Although such directors can help a company establish relationships with the government, their firms may suffer due to inferior professionalism.     

Keeping Their Cards Close to Their Chests: How Non‐Delegating CEOs Avoid Forced Career Ends

It is a common belief that CEOs must delegate to be successful. We hesitate to support this generalization and investigate how the distribution of responsibility within top management teams (TMTs) can influence the likelihood of a CEO’s dismissal. Consistent with an agency theory perspective, our results indicate that CEOs may choose not to delegate their responsibilities to other executive TMT members, so as to benefit from an increased information asymmetry vis‐à‐vis the board of directors. Taking the resource‐based view as a complementary theoretical perspective, we find that non‐delegating CEOs benefit from their greater firm‐specific knowledge, which the board of directors considers as a valuable resource that should be retained. Our work also demonstrates that a more intense CEO–TMT interaction weakens the relation between non‐delegation and the likelihood of CEO dismissal. In sum, our research shows that the CEO’s delegation decision does not necessarily lead to a competence distribution that is in the firm's best interest; rather, it reflects a complex interplay between the potentially opportunistic career interests of the CEO, the involvement of other TMT members and the board of directors. © 2015 Wiley Periodicals, Inc.     

The impact of reshoring decisions on shareholder wealth

Interest in reshoring, defined as the return of manufacturing and service operations from previously offshored locations to the U.S., has gained momentum recently. Yet, there is no academic evidence on the shareholder value implications of reshoring decisions. This paper analyzes the shareholder wealth effects of 37 reshoring decisions announced by U.S. firms during 2006–2015. Our results indicate that reshoring announcements result in positive abnormal stock returns. Mean (median) abnormal stock returns on reshoring announcements are 0.45% (0.29%), corresponding with a mean (median) market value change of $322.57 million ($31.60 million). Our findings imply that the benefits associated with the reshoring tend to outweigh the costs. This finding is relevant for firms faced with the decision of whether to move business activities from offshore to domestic locations. It is also of interest to policy makers who may seek to further stimulate the reshoring phenomenon.     

The Effects of Corporate Governance on the Relationship between Innovative Efforts and Performance1

Abstract

The purpose of this study is to examine the effects of managerial share ownership, CEO duality and board independence on the relationship between innovative efforts and performance. The study is motivated by the observation that despite the widely held belief that innovative efforts are crucial to firms' survival, previous studies were unable to provide any evidence in support of this belief. It addresses this incongruity by focusing on the effects of corporate governance on the relationship between innovative efforts and performance. Specifically, this study predicts and finds that managerial share ownership has a positive effect on this relationship while CEO duality has a negative effect. Contrary to the hypothesis, this study finds that board independence also has a negative effect on the relationship between innovative efforts and performance. This contradictory result is, however, consistent with the managerial-incentive theory, which proposes that inside directors are in a better position than outside directors to motivate managers to undertake profitable projects because they have superior access to firms' specific information.     

The Roles of Chinese CEOs in Managing Individualistic Cultures in Cross-border Mergers and Acquisitions

The individualism-collectivism culture represents an important and well-researched distinction across cultures. Yet research is less clear about how the different levels of individualistic cultures in host countries affect the success of an increasingly important firm strategy – cross-border mergers and acquisitions (CBMAs). This study addresses this key research question in the context of Chinese firms’ CBMAs, as Chinese firms are increasingly acquiring targets outside of China in the New Normal global business landscape. This study further theorizes and tests how the Chinese acquirer CEOs’ characteristics moderate the wealth creation relationship. In an analysis of 404 Chinese firms’ CBMAs, we found that an individualistic culture in the host country is negatively associated with Chinese acquirers’ CBMA wealth creation. We also demonstrate that Chinese CEOs’ exposure to foreign culture and female gender weaken that negative relationship, while CEO duality strengthens this negative relationship. Our research thus suggests that culture in host countries can negatively affect acquirers’ CBMA performance, but CEOs may be able to manage the effects of the culture to increase their CBMA performance.     

Ownership Structure and the Cost of Debt

This paper examines the impact on the cost of debt by ownership concentration and shareholder identity; that is, whether the shareholders are banks, non-financial firms, the state, institutional investors or the board of directors. Our analysis suggests that directors who own shares tend to be aligned with external shareholders, that firms with government ownership enjoy lower cost of debt and that banks effectively monitor management, so reducing the agency costs of debt.     

The impact of governance characteristics on the stock price of cross listed companies

The study examines the relationship between the country-specific governance characteristics of the origination country and the post-listing returns of cross-listed firms. In addition, the study researches the relative impact of those governance indicators on the abnormal returns of cross-listed stocks following the passage of the Sarbanes-Oxley (SOX) Act. The positive abnormal returns experienced by foreign companies around their listing in the U.S. are shown to be driven by the governance indicators of their home countries, i.e., the worse the governance characteristics of the origination country are, the higher the abnormal return for a cross-listed firm is. The governance indicators that influence abnormal returns to the highest degree are director liability, rule of law, control of corruption, political and economic development, and the integrity of the legal system. The abnormal returns generated by cross-listed foreign firms after the adoption of SOX are higher than those experienced by cross-listed foreign firms in the pre-SOX period. This outcome is pronounced for companies which score the worst on the combined set of country-specific governance characteristics. Thus, the main implication of the study is that foreign companies with a specific set of governance characteristics should consider listing on the U.S. stock markets. To be specific, companies from countries with lower governance standards, as reflected in low scores on director liability and control of corruption, are likely to derive the highest benefits from cross- listing on the NYSE or NASDAQ exchanges.