Corporate governance or governance by corporates? Testing governmentality in the context of China's national oil and petrochemical business groups

Like other industrial sectors with significant – ‘pillar’ – importance in China's overall economy and development, oil and petrochemicals are governed by state-owned business groups. In this context, ‘corporate governance’ of these groups is of fundamental interest. This study probes corporate governance of 31 national oil and petrochemical business groups by examining their structure, development and business activities in the period from 2007 to 2011. The post-1998 restructuring of China's qiyejituan business groups, their related party transactions and related party corporate finance all yield insight into how property rights are decisive in how corporate governance based on governmentality – or the interrelation of corporate, state and social relations – is structured. This study sheds light on how China's big business policy and governance of the state-business interface progresses in a socialist market economy. It has clear implications international trade and investment as well as multinational corporations doing business with China.     

The Effectiveness of Bank Governance Reforms in the Wake of the Financial Crisis: A Stakeholder Approach

This study examines the impact of bank corporate governance reforms in the wake of the financial crisis. These reforms correspond to criticism of shareholder-focused agency-based corporate governance practices and a renewed focus on the stakeholder impact of corporate governance lapses in the financial sector. This study differs from previous studies of corporate governance in the financial sector in using performance indicators that proxy the interests of customers and the community. Drawing on data from 134 countries over an eight-year period from 2004 to 2011, we find that the post-crisis corporate governance reforms in the banking sector appear to be effective in promoting greater bank attention to non-shareholder stakeholders’ interests. This study provides a means to conceptualize measures of bank performance from a stakeholder perspective in order to test emerging ideas about governance effectiveness in the financial sector.     

Optimal vs satisfactory transparency: The impact of global macroeconomic fluctuations on corporate competitiveness

Being able to separate temporary global macroeconomic influences – caused by fluctuations in exchange rates, interest rates and inflation – from intrinsic performance – related to a superior product, production process or management – is crucial to assessing the development of a firm’s competiveness. Against that background, this paper analyzes institutions’ role in making firms supply outside shareholders with relevant information corresponding to satisfactory transparency from the shareholder perspective. Based on a sample of the 100 largest public European firms, it is found that no firm provided information to a level deemed satisfactory by the outside shareholder. One explanation may be that optimal transparency for the firm does not equal satisfactory transparency for the outside shareholder. However, the implementation of IFRS/IAS 1 in the EU as of 2005 and a company’s international cross-listing activities exhibit associations with a better supply of information and a narrowing of the gap. Shareholders in the Anglo-Saxon corporate governance system are provided with more relevant information than those in other corporate governance systems. The paper adds to the literature on the role of institutions in international corporate governance, with a particular focus on information asymmetries in an international business context.     

The Challenges of Detection and Enforcement of Insider Trading

Taking advantage of the China’s recent anti-corruption campaign, we attempt to examine the effect of public governance on a firm’s incentive to commit fraud. Using enforcement actions data from the Chinese Securities Regulatory Commission (CSRC) from 2004 to 2014, we find that, due to enhanced public governance, firms are less likely to commit fraud in the post-campaign period than in the pre-campaign period. We further show that the effect of public governance is more evident in privately held listed firms, in firms with weak legal environment, and in firms in areas with poor local economies. In addition, we find that older CEOs respond less actively to the public governance caused by anti-corruption regulations. This paper offers clear policy implications for business ethics by indicating that public governance provides external monitoring of corporate decisions.     

Thailand: Opportunities and risks in a fast‐changing business environment

Thailand's business environment is changing dramatically in the wake of the worst financial crisis and economic recession in the country's recent history. Some of these changes may be ephemeral, and Thailand will return to old business practices once the crisis eases, but many of the economic and political reforms now being implemented can make trade and investment in Thailand easier, more transparent, and less affected by corruption. Some of the reforms will not deliver the expected results. Others may increase uncertainty that will be counterproductive in the short run. But some of the constitutional changes—the restructuring of family controlled conglomerates, better regulation of the financial sector, demands for stronger corporate governance, and new incentives for private investment—can have profound impacts on the country's business climate and the way American companies do business in Thailand. © 2001 John Wiley & Sons, Inc.     

Do Internal Governance Mechanisms Impact on Firm Performance? Empirical Evidence from the Financial Sector in China

The financial sector plays an important intermediary role in the Chinese economy. However, there has been very limited research concerning improvement in corporate governance within this sector. Using an unbalanced data set of 139 firm-year observations covering 1999 to 2009, this study examines the impact of internal governance mechanisms on the performance of Chinese listed financial institutions. Findings suggest that state ownership, legal person ownership, board size, and supervisory board meetings are negatively related to the profitability of these institutions, whereas factors including ownership concentration, foreign ownership, independent directors, board meetings, and supervisory board size have no impacts.     

Intragroup Transactions,Corporate Governance,and Corporate Philanthropy in Korean Business Groups

This study examines how the corporate philanthropy decisions of group-affiliated firms in Korea (Chaebol firms) are made. Based on the attention-based view, we argue that when corporate decision makers at group-affiliated firms focus their attention more (less) on internal markets than external stakeholders because of the firm’s high (low) reliance on intragroup transactions, the firm will decrease (increase) its level of corporate philanthropy. We further argue that the relationship will be stronger when governance mechanisms focus on the instrumental value of corporate philanthropy. Using a panel sample of group-affiliated firms in Korea from 2011 to 2015, we find that as intragroup sales increase, the level of corporate philanthropy decreases, and such a negative relationship is stronger when outside director representation and foreign investor ownership are high. Our study suggests that internal dependence and corporate governance mechanisms jointly affect the level of corporate philanthropy at firms in a business group. Thus, this study contributes to the literature on corporate philanthropy, business group, and corporate governance.     

Market Risk Disclosures and Board Gender Diversity in Gulf Cooperation Council (GCC) Firms

We investigate the impact of board gender diversity on corporate risk reporting for Gulf Cooperation Council (GCC) financial firms. Recent developments and improvements of corporate governance in the GCC markets suggest that firms in the GCC have become more transparent with less information asymmetry. However, we find that the presence of female directors in the boards of financial institutions suppresses the positive association between corporate governance and market risk disclosures for the period between 2007 and 2011. These findings suggest that culture and conservatism nature of GCC societies persist in the GCC business environment. Our results are robust to alternative specifications and endogeneity tests.     

险资入市促进了公司创新吗

随着国家政策的放开,保险公司持股上市企业的现象剧增,保险机构投资者逐渐成为中国资本市场中的重要角色,对企业经营决策发挥了重大作用。在此背景下,本文考察了险资入市对企业创新活动的影响。研究发现:一方面,保险机构投资者持股公司的研发投入和专利产出更少;另一方面,保险机构投资者持股公司的CEO强制变更概率更高,经营业绩更差。本文还讨论了保险公司影响企业创新背后的理论机理。本文研究表明,险资持股带来了过度监督效应,抑制了企业创新。本文有助于市场加深对保险机构的认识,丰富企业创新的相关研究,为改善公司治理提供建议。保险机构投资者是中国资本市场改革的重要力量,政府监管部门需合理引导保险机构投资者,使其发挥积极的外部治理作用。     

Multiple influences on corporate governance practice in Nigeria: Agents,strategies and implications

The literature on the convergence of corporate governance systems across different institutional contexts has often taken the role of ‘agents of convergence’ for granted. Against this background, we examine the influences of three major agents – international organisations, rating agencies, and local institutions – on the development of corporate governance practices in Nigeria. Findings indicate that the understanding and practice of corporate governance in Nigeria are in a flux and being pulled in multiple directions by the agents studied. This paper provides one of the very few studies utilising sub-Saharan African (Nigerian) data in international business governance research.     

Underpaid and Corrupt Executives in China’s State Sector

This study examines the role of executive compensation in public governance. We collect data on corruption cases that involve top-level executives in Chinese listed state-controlled firms. We find a significant positive relationship between underpayment of executives and the likelihood of an investigation into corrupt behavior. We also show that corruption is positively associated with firm performance and that the relationship between underpayment of executives and corruption is influenced by firm performance, suggesting that top managers are more likely to engage in illicit behavior if they are compensated poorly while the firms under their control perform well. Finally, we find that pay-performance sensitivity decreases when top executives are involved in corruption investigations, indicating a lack of pecuniary incentives. Our empirical findings point toward an important relationship between executive compensation and corrupt behavior, thus providing valuable input to the understanding of executive pay and its effects in China’s state sector.     

Corporate Governance and Corporate Social Responsibility Disclosures: Evidence from an Emerging Economy

We examine the relationship between corporate governance and the extent of corporate social responsibility (CSR) disclosures in the annual reports of Bangladeshi companies. A legitimacy theory framework is adopted to understand the extent to which corporate governance characteristics, such as managerial ownership, public ownership, foreign ownership, board independence, CEO duality and presence of audit committee influence organisational response to various stakeholder groups. Our results suggest that although CSR disclosures generally have a negative association with managerial ownership, such relationship becomes significant and positive for export-oriented industries. We also find public ownership, foreign ownership, board independence and presence of audit committee to have positive significant impacts on CSR disclosures. However, we fail to find any significant impact of CEO duality. Thus, our results suggest that pressures exerted by external stakeholder groups and corporate governance mechanisms involving independent outsiders may allay some concerns relating to family influence on CSR disclosure practices. Overall, our study implies that corporate governance attributes play a vital role in ensuring organisational legitimacy through CSR disclosures. The findings of our study should be of interest to regulators and policy makers in countries which share similar corporate ownership and regulatory structures.     

Engaging informal institutions through corporate political activity: Capabilities for subnational embeddedness in emerging economies

This study examines how multinational enterprises (MNEs) organize internally to enhance subnational institutional fit in new frontier developing economies. We consider how corporate political activity (CPA) can facilitate local embeddedness by engaging informal institutions and nonmarket stakeholders at local community level. We apply an exploratory, qualitative, multi-case study approach to six MNEs in Uganda’s electricity generation sector. The findings suggest that in markets like Uganda, MNEs depend on being bridged with subnational informal institutions such as tribal, social, and religious norms and grassroots political networks. Such bridging in turn positions these MNEs to contribute to developmental processes by integrating recognizable informal institutions into grassroots projects.Drawing on institutional theory and an organizational capabilities perspective, we identify the diverse bridging capabilities that enable MNEs to successfully embed locally, thereby simultaneously pursuing business objectives and achieving societal relevance.     

Law,politics and the governance of English and Scottish joint-stock companies, 1600–1850

This article examines the impact of law on corporate governance by means of a case study of joint-stock enterprise in England and Scotland before 1850. Based on a dataset of over 450 company constitutions together with qualitative information on governance practice, it finds little evidence to support the hypothesis that common-law regimes such as England were more supportive of economic growth than civil-law jurisdictions such as Scotland: indeed, levels of shareholder protection were slightly stronger in the civil-law zone. Other factors, such as local political institutions, played a bigger role in shaping organisational forms and business practice.     

Bending the rules,breaking the rules: How corruption and lobbying affect the investment market selection of Swedish firms

There is stark evidence that many policies which influence firm gains from engaging in FDI (such as tax and trade policies) are targeted by lobbying groups and that corruption can be an important determinant of market attractiveness. The scarce research that exists on firm behaviour, corruption and lobbying shows that these activities can be regarded as alternative, and interdependent, influence forms. This paper provides the novel contribution of investigating how the market infiltration of corruption and lobbying affects the firm's investment decision. We identify the interdependent effects using census data for Swedish manufacturing firms that allows a complete identification of the firm's market selection. Our results reveal that these private–public sector links influence the firm's investment decision differently, as market selection is deterred by corruption and stimulated by lobbying, and that they function as substitutes. We show that the stimulating lobbying effect largely can be attributed to its interdependency with corruption, which suggests that firms are more shielded from corruption in lobbying environments. Further investigation reveals that the corruption and lobbying effects are not always representative of larger firms: The largest firms are undeterred by corruption in markets where lobbying forms an integral part of the business environment and larger firms are not stimulated by lobbying in markets largely void of corruption.     

The Effect of Cross‐Border Mergers and Acquisitions on Earnings Quality: Evidence from China

Despite the fruitful research on the motives and outcomes of cross‐border mergers and acquisitions (M&As) of Chinese multinational corporations (MNCs), there has been scant research on the impact of cross‐border M&As on corporate governance. In this article, we fill the research gap by exploring whether cross‐border M&As may lead to an improvement in corporate governance of Chinese acquirers. In particular, we examine the impact of cross‐border M&As on earnings quality of Chinese MNCs. We find that the acquisition of a target firm from a developed country leads to a significant improvement on the acquirer's earnings quality. In comparison, the acquisition of a target from an emerging market does not have such an impact. Our results are robust to various corporate governance measures, alternative econometric methods, and controls of relevant firm characteristics and macroeconomic variables. Finally, we show that the effect of cross‐border M&As on earnings quality is more pronounced in non‐state‐owned enterprises (non‐SOEs) that have conducted large M&A deals. Our article offers new insight to the international business literature on latecomer perspective and liability of foreignness. © 2016 Wiley Periodicals, Inc.     

Service strategy to improve operational capabilities in the public sector

ABSTRACT

Public institutions, such as emergency services, face unique operational challenges because they do not have a clear profit motive, operate in a political system as opposed to a market system, and have a fragmented authority structure. This study applies traditional operations and service strategy theory to the not-for-profit, public sector context. Synthesizing research from these theoretical domains, a contingency framework is developed to determine the effect of environmental uncertainty and strategic choices on operational capabilities in emergency services under different governance structures. Operations strategy research traditionally uses survey-based measures, while emergency services research focuses on mathematical modeling techniques. In contrast, this study analyzes archival data with 9800 emergency incidents using hierarchical regression. The results support that in the public not-for-profit context, strategic choices mediate the impact of environmental uncertainty on operational capability. Furthermore, governance structure moderates the impact of environmental uncertainty and strategic choices.     

Both Sides of the Coin: Motives for Corruption Among Public Officials and Business Employees

The aim of this study is to better understand why public officials and business employees engage in corruption. Insight into individual-level explanations for corruption was obtained with the aid of a self-report survey. The results suggest that the most indicative factors of whether or not individuals are corruption-prone are as follows: the moral conviction they have to refrain from corruption; perceptions of whether their colleagues approve of and engage in corruption; and difficulties experienced in complying with the rules on corruption. This result pattern was identical for public officials and business employees alike, and as a consequence, for both sides of corrupt acts. The latter indicates that the same motives may not only underlie corruption in both private and public sectors, but also the act of corruption in its active and passive forms. The results of the current study do not provide strong support for the assumption that economic considerations—expected costs and benefits—are crucial in predicting corruption. Based on the findings that norms and the perceived opportunity to comply are dominant factors in explaining corruption, this article focuses on the practical implications for the development of anti-corruption strategies within both public and private sectors.     

Does the Quality of Institutions Limit the MENA's Integration in the World Economy?

Using a large sample of countries over the 1990s, this paper examines the extent to which institutions’ functioning disables a greater participation of the Middle East and North Africa (MENA) in the world economy. It focuses on the impact on manufactured exports and FDI attractiveness and considers a broad index of political risk as well as indices targeted toward specific aspects of governance (corruption, government effectiveness and the rule of law). The results are robust to different econometric approaches and lend strong support to the hypothesis that the functioning of institutions may disable the participation of MENA countries in the world economy. They suggest that the impact of an improvement in the quality of institutions may result in a sensitive increase of FDI inflows and manufactured exports. That increase is comparable to the one resulting from liberalisation policies. Hence, although institutional reforms can take time, they deserve the necessary efforts given their outcomes as compared to other reforms.