Does Board Monitoring Substitute for External Corporate Governance? Evidence from Private Firms

2013 ◽  
Author(s):  
Huasheng Gao ◽  
Zhongda He ◽  
Jun-Koo Kang
Keyword(s):  
Corporate Governance ◽  
Private Firms ◽  
Board Monitoring

Ownership structure, corporate governance and investment efficiency of Chinese listed firms

2017 ◽  
Vol 29 (3) ◽  
pp. 266-282 ◽  
Author(s):  
Naiwei Chen ◽  
Hao-Chang Sung ◽  
Jingjing Yang
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Fixed Effects ◽  
Negative Impact ◽  
Private Firms ◽  
Investment Efficiency ◽  
Governance Mechanisms ◽  
Content Type ◽  
Listed Firms ◽  
New Perspective

Purpose This paper aims to examine whether and how ownership structure and corporate governance have bearings on the investment efficiency of Chinese listed firms. Design/methodology/approach The authors measure the investment efficiency by following the work of Richardson (2006) and classify listed firms into two categories: state-owned enterprises (SOEs) and private firms. OLS regressions with both industry and year fixed effects are used to investigate the effect of ownership structure and governance mechanisms on the listed firms’ investment efficiency. Findings The authors find that ownership concentration has a negative impact on investment efficiency, and this effect is more pronounced in SOEs than in private firms. In addition, adoption of incentive-based compensation helps improve investment efficiency. Compared with other types of institutional investors, mutual funds are more likely to exert a positive effect on the investment efficiency of investee companies. Originality/value This paper examines the monitoring effect of governance mechanisms in China from a new perspective, which is the investment efficiency. Furthermore, previous studies provide minimal evidence indicating any effect of incentive-based compensation on firm performance in China. This study provides empirical evidence on this effect by using incentive-based compensation (whether CEOs have been granted stock options) as an explanatory variable in the regression models.

Information Asymmetry and Corporate Governance

2015 ◽  
Vol 05 (03) ◽  
pp. 1550014 ◽  
Author(s):  
Jie Cai ◽  
Yixin Liu ◽  
Yiming Qian ◽  
Miaomiao Yu
Keyword(s):  
Corporate Governance ◽  
Asymmetric Information ◽  
Information Asymmetry ◽  
Pay For Performance ◽  
Market Discipline ◽  
Monitoring Cost ◽  
Sarbanes Oxley ◽  
Ceo Pay ◽  
Board Monitoring ◽  
The Impact

We examine the impact of a firm’s asymmetric information on its choice of three mechanisms of corporate governance: The intensity of board monitoring, the exposure to market discipline, and CEO pay-for-performance sensitivity. We find that firms facing greater asymmetric information tend to use less intensive board monitoring but rely more on market discipline and CEO incentive alignment. These results are consistent with the monitoring cost hypothesis. In addition, we find that high information-asymmetry firms that have to substantially increase board monitoring intensity after the Sarbanes–Oxley Act suffer poor stock performance. Our evidence therefore suggests that regulators should use caution when imposing uniform corporate governance requirements on all firms.

scholarly journals Privatization Is Transition—Or Is It?

1996 ◽  
Vol 10 (2) ◽  
pp. 67-86 ◽  
Author(s):  
Josef C Brada
Keyword(s):  
Corporate Governance ◽  
Private Sector ◽  
Transition Economies ◽  
Economic Liberalization ◽  
Private Firms ◽  
Start Ups

Various means of creating a private sector have been used in transition economies, including restitution, privatization of state firms through sales or voucher schemes, and start-ups of new private firms. The privatization of state-owned firms raises questions regarding the viability of future corporate governance but, in combination with economic liberalization, it has induced state-owned firms to react to their new environment. Differences in the extent of privatization among countries reflect largely differences in the privatization of state-owned firms. Qualitative differences reflect differences in who the new owners of these firms are.

scholarly journals Listing status, family firm and the cost of bank loan financing.

2012 ◽  
Vol 9 (2) ◽  
pp. 56-66
Author(s):  
Wan-Ying Lin
Keyword(s):  
Corporate Governance ◽  
Family Firms ◽  
Lower Cost ◽  
Good Governance ◽  
Bank Loans ◽  
Bank Loan ◽  
Cost Of Debt ◽  
Private Firms ◽  
Financing Cost ◽  
The Impact

This research examines the impact of firm’s listing status on the relationship between corporate governance and cost of bank loans. The analysis yields four major findings after controlling for firm characteristics and prime interest rate. First, the financing cost of debt is higher for private firms. This result confirms that information risk is higher for private firms. Second, family firms enjoy lower cost of debt. The result found is consistent with the literature that family firms are related to a lower cost of debt financing. Third, that family firms having lower cost of debt is only found in listed firms. This evidence supports the prediction based on the lack of market perspective which suggests that the family effect requires a capital market to make it substantiate. Finally, strong corporate governance helps reduce financing cost of debt. However, these governance effects are not affected by the listing status. In other words, commercial lenders in this study price indifferently for good governance mechanisms regardless of public or private firms.

scholarly journals Enhancing Board Monitoring Tasks: The Effect of Minority-Elected Directors

2020 ◽  
Vol 15 (7) ◽  
pp. 85
Author(s):  
Sara De Masi ◽  
Andrea Zorzi
Keyword(s):  
Corporate Governance ◽  
Best Practice ◽  
Corporate Boards ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Controlling Shareholder ◽  
Agency Relationship ◽  
Management Behaviour ◽  
Board Monitoring ◽  
Board Directors

In companies with a controlling shareholder the agency relationship between controlling shareholders and minority shareholders poses significant issue. Managers may pursue, rather than the interests of the company as a whole, the interest of the controlling shareholder. When there is a controlling shareholder, independent directors may not prove sufficient to monitor the management behaviour, given that they are ultimately appointed by the same controlling shareholder whose possible opportunistic behaviour they are meant to constrain. Therefore, minority shareholders may be given appointment rights to the board: directors elected by minority shareholders may work as a corporate governance mechanism that fosters the board’s willingness and ability to monitor managers’ behaviour, on the assumption that managers are appointed by the controlling shareholder. This paper examines empirically whether having a minority-elected director on corporate boards increases the ability of the board to monitor management behaviour. Using a sample of the largest listed Italian companies in years 2008-2017, we find that minority-elected directors have a positive and statistically significant effect on board monitoring tasks. We also document that this effect is higher when they are elected by institutional investors. Our results have important implications for policy makers and, more generally, corporate governance best practice in all contexts in which companies have a concentrated ownership structure.

scholarly journals Ineffective corporate governance: busyness of internal board monitoring committees

2016 ◽  
Vol 13 (3) ◽  
pp. 309-325 ◽  
Author(s):  
Khamis H. Al-Yahyaee ◽  
Ahmed Al-Hadi
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Board Members ◽  
Financial Firms ◽  
Board Monitoring ◽  
Risk Committee

We examine whether the voluntary formation of a Risk Committee (RC) compromises the effectiveness of other monitoring duties carried out by the board members. We argue that adding more monitoring committees increases the board’s internal busyness, which reduces the effectiveness of monitoring by the Audit Committee (AC). Using a sample of financial firms over the period 2007 to 2011 from the Gulf Cooperation Countries (GCC), we find that voluntarily adopting a risk committee impairs the effectiveness of the audit committee, which in turn reduces financial reporting quality. Our findings suggest that multiple layers of monitoring capacity viz-a-viz the existence of both an audit and risk committee may weaken the quality of monitoring provided by the audit committee.

Corporate Governance and Its Impact on Cost of Capital: Empirical Insights from Indian Listed Firms

GIS Business ◽  
2018 ◽  
Vol 13 (1) ◽  
pp. 27-37
Author(s):  
Showkat Busru Ahmad Busru
Keyword(s):  
Corporate Governance ◽  
Cost Of Capital ◽  
Empirical Support ◽  
Multiple Regression Model ◽  
Cost Of Debt ◽  
Board Structure ◽  
Governance Mechanism ◽  
Listed Firms ◽  
Board Characteristics ◽  
Board Monitoring

To perpetuate in stiff competition of corporate race role of corporate governance in creating value for shareholders has got amplified thus has become the subject of intense interest in corporate finance research. The main objective of our study is to examine the effect of corporate governance mechanism on cost of capital in listed Indian firms and to determine vital areas in corporate governance which directly or indirectly contribute towards reducing capital cost of sample Indian listed firms. From sample of 270 NSE listed Indian firms for period of nine years ranging from 2007–08 to 2015–16, using OLS multiple regression model. The empirical support to the understanding that corporate governance reduce firms cost of finance is consistent in Indian weak legal corporate setting also. However, Board characteristics has been found ineffective in causing overall cost of capital and debt and equity as well. Moreover, board characteristics have also failed to significantly affect the cost of debt. Governance effectiveness in reducing cost of capital through board structure, activities and disclosures are supporting the argument that potential investors in equity and debtholders favor monitoring mechanisms that are likely to limit managerial opportunism and consider board monitoring effectiveness as a source of greater assurance and confidence boosting mechanism among suppliers of finance and other stakeholders as well.

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