Shareholding structure, depoliticization and firm performance

In this study we use a dataset that provides information on Chinese Communist Party grassroots organizations’ political control over decision‐making in China's listed firms. Specifically, we examine how different types of shareholders affect (1) the party's level of decision‐making power and (2) the implications of party control for firm performance. We obtain two major results. First, we find that the proportion of shares held by domestic individual shareholders is negatively related to the party's level of decision‐making power. Second, we find that the existence of large institutional investors is associated with a reduced negative performance effect of party control. Our results suggest that both the exit and the voice channels may offer mechanisms for depoliticizing China's listed firms and improving their performance. This study both addresses an important corporate governance issue relevant to China's listed firms and offers interesting information in terms of comparative studies of corporate governance and reform strategies in transitional economies.     

Ownership structure,governance, and innovation

This paper tests the impact of firms׳ ownership structure on innovation in a context featuring pronounced ownership concentration and conflicts between large and minority shareholders. Using data for 20,000 Italian manufacturers, and accounting for the possible endogeneity of ownership levels, we find that ownership concentration negatively affects innovation, especially by reducing R&D effort. Conflicts between large and minority shareholders appear to be a determinant of this effect. Moreover, risk aversion induced by lack of diversification exacerbates large shareholders׳ reluctance to innovate. Family owners support innovation more than financial institutions, but the benefits of financial institutions increase with their equity stakes.     

政治庇护与改制:中国集体企业改制研究

公有产权的政治庇护理论认为拥有公有企业控制权的政府会从公有企业的持续经营中获取政治收益(就业、税收、企业利润以及个人福利等),政府或政府代理人的收益将会影响公有企业的改制决策。本文通过1998年至2003年全国规模以上集体企业的大样本数据,检验了政治庇护理论对公有企业改制原因的预测。结果表明,当集体企业为政府或政府代理人贡献的政治收益越高,集体企业在生产投入和产品销售上越依赖于政府,集体企业相对于地方经济越重要时,集体企业越不容易发生改制。这些结果有力地支持了政治庇护理论,并为企业改制政策制定和实施提供了重要的参考依据。     

Political connections and labor investment efficiency: Evidence from China's private firms

This study investigates whether political connections affect labor investment efficiency. We test this question in the context of China's private firms, where we find that political connections are negatively associated with labor investment efficiency. We also explore the channels through which political connections reduce labor investment efficiency and provide evidence that political connections aggravate both agency problems and information asymmetry. Further tests show that the influence of political connections is more pronounced for firms with overinvestment problems or high-level political connections, and for firms from regions facing severe unemployment or loose anticorruption. Overall, our results are consistent with the “grabbing hand” argument that politicians destroy firm operational efficiency.     

机构投资者持股、政治联系与审计定价--基于民营上市公司的经验证据

以沪深两市2009—2012年661家A股主板民营上市公司为样本,对机构投资者持股、政治联系与审计定价的关系进行实证研究。研究结果表明：机构投资者持股比例越高,审计定价越高;进一步的分组研究发现有政治联系且有机构投资者持股的民营上市公司,随着机构持股比例的增加,其审计定价也越高;而没有政治联系且有机构持股的民营上市公司,随着机构持股比例的增加,审计定价越低,说明机构投资者和政治联系是审计定价过程中两个重要的影响因素。     

Families and firms: Agency costs and labor market imperfections in Sialkot's surgical industry

The family firm is generally viewed as an organizational solution to agency costs in the labor market for managers and institutional underdevelopment. Consistent with this view, this paper links the preponderance of family firms in the surgical instrument industry of Sialkot to the prevailing agency and institutional problems. However, strong dependence on family management coupled with restrictions on family size constrains the firms from optimally choosing management size. The resulting labor market distortion is manifested by a significant positive correlation between the founder's family size and the firm size such that the founders who have more brothers (a larger pool of potential managers) end up with bigger firms.     

Political connections, financing and firm performance: Evidence from Chinese private firms

This paper examines the role of affiliation with the ruling Communist Party in the operation of private enterprises in China. Using a nationwide survey of private firms, we find that the Party membership of private entrepreneurs has a positive effect on the performance of their firms when human capital and other relevant variables are controlled. We further find that Party membership helps private entrepreneurs to obtain loans from banks or other state institutions, and affords them more confidence in the legal system. Finally, we find Party membership to be more important to firm performance in regions with weaker market institutions and weaker legal protection.     

CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data

In this paper, we use unique data on China's listed firms from 1998 to 2002 to show that CEO turnover is significantly and inversely related to firm performance, although the magnitude of the relationship is modest. In addition, we find that this turnover-performance link is weaker for listed firms that are still controlled by the state and those that have a relatively weak non-state controlling shareholder. In contrast, the appointment of independent directors enhances the turnover-performance link. Moreover, the listing suspension mechanism, adopted by China's securities regulatory agency, appears to be effective in improving the turnover-performance tie. Finally, listed firms with CEOs holding additional positions among the controlling shareholders have a weaker turnover-performance link. Journal of Comparative Economics 34 (4) (2006) 796–817.     

Bank and investment fund monitoring of privatized firms in Russia1

The active monitoring of enterprises is an important aspect of the transformation of Russian firms into efficient, commercially viable entities. This paper uses detailed case study evidence to provide insights into the mechanisms and processes adopted by investment funds, as equity holders; and banks, as debt providers, to monitor the enterprises in which they invest. The findings provide evidence of the importance of direct involvement and the development of relationships to counteract the shortcomings of the legal infrastructure and financial reporting mechanisms.     

Dynamic capabilities and radical innovation performance in established firms: a structural model

The paper extends Teece’s model of dynamic capabilities (2007 Teece, D. 2007. “Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance.” Strategic Management Journal 28 (13): 1319–1350. doi: 10.1002/smj.640[Crossref], [Web of Science ®] , [Google Scholar]) into four types of capabilities: sensing, coordination, autonomy and reconfiguration capabilities. We further develop a structural model between four types of dynamic capabilities and radical innovation performance (RIP) in established firms. Based on a dataset of top 500 manufacturing established firms in Taiwan, the proposed hypotheses are tested using the structural equation models. The results reveal that four types of dynamic capabilities and RIP are positively correlated in a sequential and structural manner. This paper concludes the systemic development of dynamic capabilities can improve RIP in established firms. Finally, we point out some managerial implications for improving RIP in established firms.     

中小企业板上市公司独立董事制度研究

在不完全契约框架下,企业具有绝对的权力,这是导致企业财务管理出现诚信问题的根本原因。改变这种情况的基本路径是建立利益相关者参与企业战略的通道,以影响企业战略决策过程。独立董事制度是值得探索的方式,提升独立董事制在公司治理中的意义,根本则在于保证独立董事具有参与企业决策的主动性。     

Location,internationalization and performance of firms in Italy: a multilevel approach

Competition is increasingly global. However, location still matters: often firms cluster in the same geographic areas in order to exploit locational externalities and improve their competitiveness. This article analyses how Italian firms' performance, proxied by their propensity to export, depends both on geographical and institutional context and on individual characteristics. Using a multilevel approach, we estimate and distinguish the effect of individual (firm level) and context (province level) variables on the performance of internationalized Italian firms. We show that both firms and province heterogeneity shape the results.     

Leadership and firm value among couples in charge: Evidence from Chinese listed family firms

This study investigates how leadership by married couples affects the firm value of family businesses in the institutional context of the Chinese capital market. Marital leadership is found to significantly decrease firm value compared with other family firms, which is supported by a battery of estimation strategies. Aggravating the principal–principal problem, tunnelling behaviour and financial fraud are confirmed as potential economic mechanisms. Moreover, monitoring from the internal corporate governance and external institution environment helps marital leadership focus on shareholder wealth beyond family interest. Our findings indicate that marital leadership implies more of a collusion effect than a collaboration effect in China.     

Block trades and the benefits of control in Slovenia1

Ownership and control have been concentrating in most transition countries. The consolidation of control introduces changes in the power distribution within privatized firms and, most importantly, redirects the corporate governance problem to a conflict between large and small shareholders. In this study, we evaluate the ownership changes in Slovenian privatized firms through an analysis of stock price reactions to the entrance of a new blockholder (the shared benefits of control) and through an estimation of the premiums paid for large blocks (the private benefits of control). We provide evidence of and discuss the reasons for the failures of the privatization investment funds in implementing control over firm managers and in promoting the restructuring of firms in the first post‐privatization years.     

Politician control, agency problems and ownership reform

Using data from a recent national survey on the ownership reform of state‐owned enterprises in China, we study the effects of reducing politician control and agency problems on a number of reform outcomes. Taking into account the endogenous nature of the reform, we find that these outcome measures of the reform's success are positively affected by the lessening of politician control through increasing the firm's flexibility in labour deployment and by the mitigation of agency costs through the introduction of more effective corporate governance mechanisms such as one‐share one‐vote and shareholding‐based board structure composition. Ownership structure also matters: relative to shareholding by the state, foreign ownership has a positive effect on reform outcomes; individual (mostly employee) shareholding has a negative or insignificant effect. Somewhat surprisingly, operating autonomy (excluding labour deployment flexibility) has a negative effect on firm performance, suggesting serious agency problems in the reformed enterprises.     

When two tribes go to work: Board political diversity and firm performance

A substantial literature has studied how increased diversity in terms of gender, age, education, and race amongst members of firms' boards affects decisions and performance. This paper studies whether ideological diversity in the boardroom affects firm performance. We find that whilst a board with a broader range of political opinions and beliefs is correlated with better performance ceteris paribus, that the causal impact of such an increase in diversity is negative and substantial. This negative effect is still present when diversity is measured excluding top management, and when diversity is defined in terms of the difference between firms' management and non-executive directors. In conclusion we consider the implication of these findings given the recent growth in both political polarization and ideological segregation.     

Entry of foreign firms and the R&D behaviour: a panel data study of domestic and foreign firms in China's manufacturing sector

Rapid globalization has resulted in increased competitive pressures. The entry of foreign firms in a host economy increases the level of competition faced by not only the domestic firms but also the existing foreign firms. We argue that domestic firms, especially in developing countries, respond to this situation by increasing their research and development (R&D) spending, whereas the foreign firms decrease their R&D spending. By making use of firm-level panel data from China's manufacturing sector, over the period 2005–2007, this paper investigates the impact of the entry of foreign firms on R&D behaviour of domestic and foreign firms. Empirical analysis, based on Tobit and Instrumental Variables Tobit regression, reveals that foreign entry increases the R&D intensity of domestic firms but its impact on R&D intensity of foreign firms is negative. The estimated results are found to be robust across balanced and unbalanced panels.     

Firm performance,corporate governance and executive compensation in Pakistan

This study examines the effects of firm performance and corporate governance on chief executive officer (CEO) compensation in an emerging market, Pakistan. Using a more robust Generalized Method of Moments (GMM) estimation approach for a sample of non-financial firms listed at Karachi Stock Exchange over the period 2005–2012, we find that both current- and previous-year accounting performances has positive influence on CEO compensation. However, stock market performance does not appear to have a positive impact on executive compensation. We further find that ownership concentration is positively related with CEO compensation, indicating some kind of collusion between management and largest shareholder to get personal benefits. Inconsistent with agency theory, CEO duality appears to have a negative influence, while board size and board independence have no convincing relationship with CEO compensation, indicating board ineffectiveness in reducing CEO entrenchment. The results of dynamic GMM model suggest that CEO pay is highly persistent and takes time to adjust to long-run equilibrium.     

Ownership structure and investment finance in transition economiesA survey of evidence from large firms in Hungary and Poland1

Using survey data on 157 large private Hungarian and Polish companies this paper investigates links between ownership structures and CEOs’ expectations with regard to sources of finance for investment. The Bayesian estimation is used to deal with the small sample restrictions, while classical methods provide robustness checks. We found a hump‐shaped relationship between ownership concentration and expectations of relying on public equity. The latter is most likely for firms where the largest investor owns between 25 percent and 49 percent of shares, just below the legal control threshold. More profitable firms rely on retained earnings for their investment finance, consistent with the ‘pecking order’ theory of financing. Finally, firms for which the largest shareholder is a domestic institutional investor are more likely to borrow from domestic banks.     

Political accountability and public service delivery in decentralized Indonesia: Incumbency advantage and the performance of second term mayors

To what extent do voters hold local elected leaders accountable for public service delivery in fiscally and politically decentralized environments, as theory suggests should be the case? We examine political accountability and service delivery in subnational Indonesia, through the lens of mayoral incumbency advantage. We apply regression discontinuity methods to a unique data set on local elections to identify the causal impact of incumbency on election outcomes and relate those effects to changes in citizen access to local public services. We find that voters in Indonesia are, in general, very willing to return incumbents to office compared to their counterparts in other countries. We also determine that the incumbent advantage is conditional on advances in local service provision: as service access expands more quickly, voters are more likely to vote incumbents back into office. Finally, we find that electorally successful incumbents—second term mayors—spend substantially less on education and health and more on infrastructure, manage their budgets less prudently, and deliver public services neither more nor less effectively than their first term equivalents. We conjecture that term limits and the attendant lack of electoral incentives leads to the disappointing second-term mayor performance.