Asymmetric information and inside management trading in the Chinese market

Insider trading incentives have been widely examined in stock markets, but mainly in developed countries. Given the fact that the volatility of stock exchange markets in emerging economies is typically even higher, there is a need for research to explore the extent to which information asymmetry plays a role in management trading incentives in emerging economies. To address this research need, this study examines management trading incentives in relation to investment efficiency in Chinese listed firms on the main board and on the small- to medium-enterprises (SME) board in the period 2006 to 2017. We find that executives buy shares when firms’ investments are more efficient. The frequency of management buying also increases with investment efficiency. However, managers do not sell their shares according to firms’ investment efficiency. Moreover, executives of firms listed on the main board trade more on the asymmetric information of investment efficiency than those on the SME board.     

The Moderating Effect of CEO Power on the Board Composition–Firm Performance Relationship*

abstract Prior studies of the relationship between the composition of boards of directors and firm performance offer equivocal results. Drawing on agency and power circulation theories, we attempt to reduce this equivocality by asserting that CEO power moderates the relationship. Specifically, an outside director dominated board is needed to check a powerful CEO, but monitoring by other executives provides sufficient constraints on CEOs with low power. We used event study methodology to test the effects of the interaction between board composition and CEO power on stock market reaction to 73 unexpected CEO deaths. We found support for our theorizing among two of three sources of CEO power. Thus, although regulatory trends increasingly support outside director dominated boards, our findings indicate that this may not always benefit shareholders and that CEO power should be considered when constructing boards.     

Director co-option and future market share growth

This paper examines the effect of director co-option on product market outcomes. We find that future market share growth declines as executives co-opt more of the board. Co-opted directors also inhibit the product market benefits from cash reserves. These findings hold in a variety of robustness tests, sustaining the view that director co-option reduces product market performance. Our results further show that co-option leads to lower market share gains among firms whose industry rivals intensely change products and have higher borrowing capacity. Compared to their competitors, firms with more co-opted directors also allocate less internal resources to potential product differentiation strategies, but award executives more cash-based pay. Overall, our findings support the agency theory supposition that firms with co-opted boards lose market share ex-post.     

Environmental performance,sustainability, governance and financial performance: Evidence from heavily polluting industries in China

This study seeks to contribute to the existing business strategy and the environment literature by examining the effect of governance structures on Chinese firms' environmental performance, and consequently ascertain the extent to which the financial performance–environmental performance nexus is moderated by governance mechanisms. Using a sample of Chinese companies from heavily polluting industries over a 5-year period, our baseline findings suggest that, on average, board size and governing board meetings are positively associated with Chinese firms' environmental performance, whilst board independence and gender diversity have positive, but insignificant association with firms' environmental performance. Our evidence suggests further that the examined internal governance mechanisms have a mixed moderating effect on the link between financial performance and environmental performance. Our findings have important implications for company executives, environmental activists, policy-makers, and regulators. Our results support insights drawn from agency, resource dependence, stakeholder, and legitimacy theories.     

Too Good to be True: Board Structural Independence as a Moderator of CEO Pay‐for‐Firm‐Performance

Whether voluntary or mandatory in nature, most recent corporate governance codes of best practice assume that board structural independence, and the application by boards of outcome‐based incentive plans, are important boundary conditions for the enforcement of Chief Executive Officer (CEO) pay‐for‐firm‐performance; that is, for optimal contracting between owners and executive agents. We test this logic on a large Australian sample using a system Generalized Method of Moments (GMM) approach to dynamic panel data estimation. We find that Australian boards exhibiting best practice structural arrangements – those chaired by non‐executives and dominated by non‐executive directors at the full board and compensation committee levels – are no more adept at enforcing CEO pay‐for‐firm‐performance than are executive‐dominated boards. These findings suggest that policy makers' faith in incentive plans and the moderating influence of structural independence per se may be misplaced. Our findings also hold significant implications for corporate governance theory. Specifically, the findings lend further support to a contingency‐based understanding of board composition, reward choice and monitoring; an approach integrating the insights afforded by behavioural approaches to Agency Theory and by social‐cognitive and institutional understandings of director outlook, decision‐making and behaviour.     

新疆上市公司治理结构与绩效的相关性研究

以2001～2005年新疆上市公司为样本,综合考察了股权结构、董事会特征与高管激励对公司绩效的影响,发现股权集中度与公司绩效正相关,董事长与总经理两职合一与公司绩效正相关,董事会规模与绩效成倒U型关系,独立董事比例与绩效成负向关系;高管激励不论是采用年薪的方式还是采用股权激励都未通过显著性检验。考虑到公司内部治理结构与绩效的互动关系,还检验了治理结构的内生性问题,Granger因果关系检验发现公司治理结构对绩效有促进作用,但未发现绩效对治理机制的反馈作用。     

Boards of directors in small and medium-sized industrial firms: examining the effects of the board's working style on board task performance

Increased attention towards the role of the board makes demands on reforms in the boardroom. In many countries, even small and medium-sized firms are experiencing the challenges of creating well functioning boards. In this paper the authors examine the importance of structures and processes in the boardroom of 302 small and medium-sized industrial firms in Sweden. The contribution of the paper is not only that it tries to explore the relationship between processes in the board and board performance, but also that it pays attention to the working structures that exist to maximize the board's task performance. In this study board task performance is measured as the performance of various control and service roles. There are two main findings. (1) The board members' involvement, and (2) the board's formal structures are important for the board's ability to perform its tasks effectively. The findings empirically support the arguments about the importance of a good and clearly defined working style in the board.     

Women on the board and executive tenure

The participation of women in top‐level corporate boards is subject to intense public debate. Countries are considering binding quotas to increase the share of women on boards or have already implemented such rules. Although research on board diversity suggests positive effects on corporate governance and firm performance, the mechanisms through which these benefits materialize remain mostly speculative. This study focuses on boards of directors in a large sample of listed companies in 15 European countries and finds that female representation on nonexecutive boards is associated with reduced turnover, an increase in tenure, and also a higher performance‐turnover sensitivity of executives.     

上市公司高管薪酬的激励效果及影响因素研究

作为一种重要的激励方式,高管薪酬通过促进其管理能力的发挥,进而影响企业业绩。但实证研究表明,我国上市公司高管薪酬水平与企业业绩不相关,上市公司的薪酬激励效果有限,需要进一步完善。影响上市公司高管薪酬水平的主要因素有:公司规模、第一大股东比例、国有股比例、流通股比例、董事会规模、总经理权限和公司所处的经济地理位置。     

Similarities and differences in employee motivation viewed by Korean and Japanese executives: empirical study on employee motivation management of Japanese-affiliated companies in Korea

This study examines similarities and differences in employee motivation management between Korean and Japanese executives of Japanese-affiliated companies in Korea, based on questionnaire surveys. The respondents' views of employee motivation factors were analysed, by contrast with motivational factors and hygiene factors (maintenance factors) developed by Herzberg. The survey results reveal that both Korean and Japanese executives realize the importance of employee motivation management, and that Japanese executives have a stronger awareness of it than Korean executives. Both recognize it for the sake of high corporate performance, employee job satisfaction and customer satisfaction. Seeing motivation factors: the majority of Korean and Japanese executives regard ‘wage and bonus increases’ as a strong motivational factor; ‘employment stability’ is recognized as a motivational factor by Korean executives; and ‘clarifying company policy and job objectives’ is the most important motivational factor to Japanese executives. Their views of these three factors are not consistent with Herzberg's theory. We also found a recognition gap between Korean and Japanese executives: ‘esteem and praise for job performance’ is a hygiene factor to Korean executives but a motivational factor to Japanese executives.     

Doing more and doing better are two different entities: Different patterns of family control and environmental performance

Family firms bear two types of agency costs, including type I and type II agency problems, in corporate environmental practices: (1) Outside executives at family firms hesitate to engage in environmental strategies, which can lead to drops in profits; (2) Controlling families employ opportunistically environmental management to achieve their interests. We argue that a primary cause for the agency problems lies on ineffective internal corporate governance at family firms, which can cause loss of managerial (or power) balance between outside executives and family executives. Our findings show that family firms with ownership and strategic control (FSC), which family executives and outside executives monitor and constrain each other, can achieve the highest environmental performance. Moreover, external controls, including product market competition and provincial environmental regulations, substitute effective internal control of FSC. The environmental performance premium of FSC is more prevalent when the production market competition is lower. Family firms with ownership, operational, and strategic control (FOSC) can achieve higher environmental performance within a province with more stringent environmental regulations.     

Board Efficiency and Internal Corporate Control Mechanisms

We analyze the interactions between internal and external control mechanisms in a framework in which the board selects the CEO and then decides whether to retain or dismiss him after observing a signal regarding his ability. The novel aspect of our paper is that we consider both the hiring and the firing of the CEO by the board. The type of board is defined by its ability to select a good CEO, so that the quality of the CEO depends on the type of board. Then, the dismissal-retention decision provides information not only on the quality of the CEO but also on the board's type. We show that the board's behavior depends on the pressure from the takeover market and on whether its type is publicly known. When the pressure from the takeover market is high and the type of board is private information, the board prefers not to dismiss the manager even if it has received a very low signal regarding his quality. Hence, our model endogenously derives a collusion between board and CEO in which the board does not fire a bad CEO. This behavior emerges as an attempt to hide the board's inability to accomplish the first task, CEO selection, by distorting the second task, the CEO retention-dismissal decision.     

Executive Turnover and Outside Directors on Two‐Tiered Boards

This paper examines the determinants of executive turnover on two‐tiered boards, emphasizing the monitoring role of supervisory board members with simultaneous outside directorships. Based on a unique sample of executives from large German firms, we find that outside supervisory board members generally increase executive turnover at the firms they monitor. This influence is especially pronounced when outside supervisory board members are simultaneously active as managers themselves and capital control is rather weak. These results suggest that external managers on supervisory boards enhance the monitoring intensity and substitute for weak capital control in the absence of large shareholders. Copyright © 2013 John Wiley & Sons, Ltd.     

The impact of appointment-based CEO connectedness on firms’ performance and profitability

This paper investigates whether the performance variables of newly added intangible capital elements give the appointment relationship a deeper impact on the firms’ performance and profitability. We document that after correcting for endogeneity, when considering intangible capital, Total Q is a better proxy than Tobin’s Q for explaining the effect of appointment-based CEO connectedness on firm performance and profitability. Furthermore, we show that the influence of directors on company performance and profitability is more important than that of executives or managers. We also find that the stronger the appointment relationship, the worse the company’s performance and profitability. We further provide a series of alternative interpretations and robustness test evidence showing that intangible capital is more important for high technology and internet firms than industrial firms. Further, we find that the greater the number of executives appointed by the CEO, the better the firm’s research and development, but the worse the firm’s investment policy.     

Multi-level considerations in executive organizational transfer

Although executive mobility has been the subject of considerable scholarly attention, its drivers and outcomes remain conspicuously under-explored and under-theorized, despite anecdotal evidence that board members, employees, shareholders, customers, suppliers, policy-makers, and media pundits all closely track and critically assess the movement of executives. Cognizant of the disconnect between the perceived importance of executives by stakeholders and the relative lack of explanatory frameworks, this paper takes important steps to identify and define the challenges associated with executive organizational transfer (EOT). Our multi-level analysis of EOT enhances and extends human-capital theory by building an explanatory model for the manner in which stakeholders' beliefs about the transferability of individual-level and firm-level reputation, attractiveness, and power impact the inter-organizational movement of executives. Critical to this process is the moderating effect of political skill, which executives can employ to manage the complex web of stakeholder relationships. Our framework offers a much-needed integration of the varied mechanisms that influence successful or unsuccessful EOT and offers a roadmap for future research.     

Does the famine experience of board chair hamper innovation?

This study examines whether and how the famine experiences of board chairs influence the innovation of their firms. Results using a sample comprising 8882 firm-year observations from Chinese firms during the period 2003 to 2017 reveal that the board chair's famine experience has a negative effect on innovation. This negative effect is strengthened by famine intensity and high uncertainty. The obtained results are robust to alternative measures, endogeneity issues, omitted variables, and sample selection bias. Additional analyses showed that the relationship between board chair's famine experience and innovation is mediated by cash holdings and R&D investment. The overall results contribute to imprinting theory by explaining that early-life famine experiences of board chairs create survival threat imprints among them, eventually affecting their later-life behaviors. The findings also provide implications by highlighting how the early-life traumatic experiences of executives adversely influence their firms outcomes.     

Executives and shareholders: A shift in the relationship

This article suggests that a shift has developed in the ongoing relationship between executives and shareholders with shareholders gaining more power over executives. The power shift has been driven by institutional investors and hostile takeovers and is visible in changing patterns of succession. More executives are being dismissed for poor performance and are being dismissed more quickly following the onset of poor performance. Two potential negative outcomes are a decreased willingness of executives to undertake risky strategies and a decreased ability of executives to build long-term, trusting relationships with stakeholders, even when these actions would be beneficial to shareholders. © 1995 by John Wiley & Sons, Inc.     

The role of returnee executives in improving green innovation performance of Chinese manufacturing enterprises: Implications for sustainable development strategy

Environmental problems in China have attracted global attention. Grafting returnee executives' green resources to Chinese manufacturing enterprises is an effective way to solve China's sustainable development problems. This paper focuses on the impact of returnee executives and the heterogeneity of returnee and local executives on green innovation performance and the moderating effects of environmental regulation and managerial ties. The paper builds on data from 276 Chinese manufacturing enterprises. The results show that returnee executives tend to achieve sustainable development through green innovation. However, not all kinds of heterogeneity between returnee and local executives can promote green innovation performance. In addition, environmental regulation and managerial ties, as two important external moderation variables, have different impacts and different extents of impact on the relationship between returnee executives and four aspects (R&D, manufacturing, marketing, and management) of green innovation performance, that is, environmental regulation positively moderates the relationship between returnee executives and green manufacturing and management innovation performance but negatively moderates the relationship between returnee executives and green R&D and marketing innovation performance. These findings have clear management implications for Chinese manufacturing enterprises.     

The relationship between board characteristics and performance of bank holding companies: before and during the financial crisis

We examine the relationship between performance of the bank holding company and several board characteristics. We find that board size, CEO tenure and board tenure enhance bank performance. However, we find no evidence that board structure or CEO power influences bank performance. More importantly, we show that the effect of board characteristics during the crisis is quite different. During the crisis, board size has a negative effect on Tobin’s Q and the non-performing asset ratio, which supports Jensen’s (1993) argument that large boards are less likely to function effectively. Further, we report that the non-performing asset ratio decreases with board independence during the crisis.     

Managing sourcing team effectiveness: The need for a team perspective in purchasing organizations

To meet today’s high demands on the purchasing function, sourcing teams have become the standard in contemporary corporate purchasing organizations. Sourcing teams are often started with high expectations. However, after making a promising start many of these teams appear to be unable to operate effectively and to meet management expectations. This study shows that sourcing team effectiveness is particularly hindered by a lack of team perspective in many purchasing organizations. In this paper, the results of a large-scale, cross-sectional survey to address the success factors for sourcing teams are discussed. We aim to clarify the factors behind sourcing team performance, taking into account the specific task and organizational context. It is concluded that purchasing executives should shift their focus towards employee involvement and team processes, to enable teams to actually meet and even surpass the expectations placed on them.