Market Discipline, Information Processing, and Corporate Governance

The paper reviews and assesses our understanding of the notion of “market discipline” in corporate governance. It questions the wholesale appeal to this notion in policy discussion, which fails to provide an account of the underlying mechanisms in terms of theory and empirical analysis. Discipline that is provided by the “market” must be compared to discipline that is provided by other institutions, e.g., intermediaries acting as “delegated monitors”. The comparative assessment depends on (i) the information technology, (ii) the role of strategic interactions, and (iii) the disciplinary mechanism itself. Concerning (i), the question is whether the benefits of multiple sources of information exceed the costs. Concerning (ii), strategic interactions concern the free-rider problem in acquiring information that benefits all financiers, as well as distributive externalities involved in exploiting an information advantage to the detriment of other financiers. Concerning (iii), the question is whether investors have explicit intervention rights or whether “discipline” results from managerial acquiescence. As for the acquisition and aggregation of information in organized markets, positive welfare effects arise only if the information is put to productive use, either through improvements in real investment and managerial incentives, or through changes in corporate control. Necessary conditions for such benefits to arise are fairly restrictive, especially if the changes that occur are based on managerial acquiescence rather than the legal intervention rights of investors. The expansion of market-based managerial incentives in the nineties had little to do with these theoretical accounts. The experience of moral hazard that has accompanied this expansion, on the side of gate-keeping institutions as well as corporate management, confirms the predictions of theory about the potential for shortfalls in market discipline and the agency costs of equity finance through the open market.

W HEN investors purchase shares of common stock, they typically acquire the right to vote in the election of the firm's board of directors and on other major issues facing the corporation. In most corporations board members are elected through "straight voting." In straight voting each shareholder is entitled to cast votes equal to the number of shares held for each director position. If a group controls 51 percent of the vote, it can elect the entire board of directors by casting all of its votes for the candidate that it favors for each position. Some firms do not use straight voting but elect their board members through "cumulative voting" instead. In cumulative voting each share entitles the shareholder to as many votes as there are directors to be elected. A shareholder may cast all votes for a single candidate or distribute them among more than one nominee. With cumulative voting it may be possible for minority shareholders to elect some board members even if the majority of shareholders oppose their election. To elect these directors, the minority shareholders would cumu-

We are entering into a new phase in EU corporate governance. More than ever, our action plan must be focused and based on a solid assessment of actual needs of market players and investors. 1 As Ch...

EUGENE FAMA and Michael Jensen's treatment of the "Separation of Ownership and Control" is both insightful and informative. It deepens our understanding of corporate control, and the analysis of residual claimants usefully extends the economics of internal organization to include partnerships, mutuals, nonprofits, and the like. The basic argument is this: specialized governance structures arise in response to the efficiency needs of each type of organization. This is an important argument and one with which I broadly concur. They couple this, however, with a strong suggestion that these structures have reached a high degree of refinement-on which account there is not now, if indeed there ever has been, an organization control problem with which scholars and others are legitimately concerned. On this point I have grave doubts. My discussion of the paper addresses three issues: What is the relation, if any, of the hierarchical organization of the firm to economic performance? What relation, if any, does residual claimant status have to the composition and character of the board of directors? And is there now or has there ever been a corporate control problem? I deal with each of these issues in order.

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">This study proposes a corporate control hypothesis in which equity carve-outs facilitate changes in corporate control by providing an economical means to transfer control of corporate assets to bidders who will potentially create greater value.<span style="mso-spacerun: yes;">  </span>Consistent with this hypothesis, a statistically significant 16% of the equity carve-outs in this study's sample are taken over within six years.<span style="mso-spacerun: yes;">  </span>Those equity carve-outs subsequently taken over appear to be economically different from those motivated by other reasons.<span style="mso-spacerun: yes;">  </span>Parent firms of equity carve-outs subsequently taken over display a significantly greater share price reaction to the announcement of an equity carve-out than do parent firms of equity carve-outs not subsequently taken over.<span style="mso-spacerun: yes;">  </span>For those carve-outs subsequently taken over, an important factor contributing to parent firm gains is the relative size of the carve-out IPO.<span style="mso-spacerun: yes;">  </span>There appears to be an optimal retention level of 10-50% for carve-outs motivated by the intent to facilitate a change in corporate control.<span style="mso-spacerun: yes;">   </span></span></span><strong style="mso-bidi-font-weight: normal;"></strong></span></p>

The issues of this research concern the digital transformation of the governing system. The evolving digital transformation of corporate governance stands as a significant force bracing changes in corporate control and transparency and accountability in India. The integration of Artificial Intelligence, Blockchain, Big Data, and the Internet of Things into governance frameworks thus creates opportunities and hurdles. Digital technologies facilitate compliance reduction of fraud risks, and increased efficiency in decision-making; however, such digital adoption is being hindered through regulatory vagueness, cybersecurity concerns, and resistance to change. This paper critically analyses corporate governance in India, concerning how its evolution and changes are impacted by digital technologies governing stakeholder participation and legal compliance. The paper concludes by providing strategic recommendations to strengthen India's regulatory ecosystem and public-private collaboration alongside capacity-building initiatives for a smooth transition into the digital corporate governance space. This research underscores that digital transformation is not merely an option but a necessity for the future of corporate governance in India, positioning the country as a leader in corporate integrity and sustainable business practices in the digital era. India is a country with well-developed governance traditions and a high, rapidly growing economy. Accordingly, India's experience in digital governance is useful for application in the Russian Federation's governing and legal systems.

This paper examines the relation between capital markets and corporate control in France, Germany and the UK. It compares levels of takeover activity in the three countries and describes the degree to which takeovers are associated with changes in corporate control. The paper examines the influence of regulation on forms of corporate ownership and control. It compares regulation pertaining to the rights of employees, managers and shareholders in the three countries and finds that regulatory rules are related to patterns of ownership and control changes. The paper suggests that a fundamental objective of control changes is to correct managerial failure, and that takeovers are suited to the correction of particular classes of managerial failure that cannot be readily rectified by contracts. Thus, markets with low levels of takeovers may suffer from a low level of correction of managerial failure. However, by changing ownership, takeovers may give rise to an inability of owners to commit themselves to the long-term interests of managers and employees. As a consequence, financial systems with active takeover markets may be associated with inadequate investment in firm-specific assets and an unduly short-term investment horizon. There is, therefore, a tradeoff between alternative methods of correcting managerial failure. This is particularly important for European countries facing an extension of UK takeover activity to the Continent. The process is being encouraged by the European Commission which aims to harmonize regulation on a UK-style takeover code. Harmonization of regulation may have far-reaching consequences for the structure of different countries' capital markets and, in view of the tradeoff, is of uncertain merit.

Contents: Acknowledgements Introduction Jeremy Moon, Marc Orlitzky and Glen Whelan PART I THE EMERGENCE OF ETHICAL CORPORATE GOVERNANCE CONCERNS 1. J. Maurice Clark (1916), 'The Changing Basis of Economic Responsibility' 2. E. Merrick Dodd, Jr. (1932), 'For Whom are Corporate Managers Trustees?' 3. A.A. Berle, Jr., (1932), 'For Whom Corporate Managers Are Trustees: A Note' 4. Joseph L. Weiner (1964), 'The Berle-Dodd Dialogue on the Concept of the Corporation' PART II THE MANAGERIAL REVOLUTION 5. Adolf A. Berle (1965), 'The Impact of the Corporation on Classical Economic Theory' 6. Eugene F. Fama and Michael C. Jensen (1983), 'Separation of Ownership and Control' 7. James H. Davis, F. David Schoorman and Lex Donaldson (1997), 'Toward a Stewardship Theory of Management' PART III SHAREHOLDERS, STAKEHOLDERS AND MANAGERIAL DUTIES 8. William M. Evan and R. Edward Freeman (1988), 'A Stakeholder Theory of the Modern Corporation: Kantian Capitalism' 9. John Hendry (2001), 'Missing the Target: Normative Stakeholder Theory and the Corporate Governance Debate' 10. Ian Maitland (2001), 'Distributive Justice in Firms: Do the Rules of Corporate Governance Matter?' 11. Alexei M. Marcoux (2003), 'A Fiduciary Argument Against Stakeholder Theory' 12. Richard Marens and Andrew Wicks (1999), 'Getting Real: Stakeholder Theory, Managerial Practice, and the General Irrelevance of Fiduciary Duties Owed to Shareholders' 13. David Lea (2004), 'The Imperfect Nature of Corporate Responsibilities to Stakeholders' PART IV COMPARATIVE AND GLOBAL PERSPECTIVES 14. Ruth V. Aguilera and Gregory Jackson (2003), 'The Cross-National Diversity of Corporate Governance: Dimensions and Determinants' 15. Lori Verstegen Ryan (2005), 'Corporate Governance and Business Ethics in North America: The State of the Art' 16. Josef Wieland (2005), 'Corporate Governance, Values Management, and Standards: A European Perspective' 17. Martin Rhodes and Bastiaan van Apeldoorn (1998), 'Capital Unbound? The Transformation of European Corporate Governance' 18. David Kimber and Phillip Lipton (2005), 'Corporate Governance and Business Ethics in the Asia-Pacific Region' 19. G.J. Rossouw (2005), 'Business Ethics and Corporate Governance in Africa' 20. Mauro F. Guillen and Mary A. O'Sullivan (2004), 'The Changing International Corporate Governance Landscape' PART V ALTERNATIVE PERSPECTIVES AND NEW DIRECTIONS 21. Gerald F. Davis (2005), 'New Directions in Corporate Governance' 22. Matthias Benz and Bruno S. Frey (2007), 'Corporate Governance: What Can We Learn from Public Governance?' 23. Thomas Clarke (2007), 'The Materiality of Sustainability: Corporate Social and Environmental Responsibility as Instruments of Strategic Change?' 24. John Roberts (2001), 'Corporate Governance and the Ethics of Narcissus' 25. Amiram Gill (2008), 'Corporate Governance as Social Responsibility: A Research Agenda' 26. David Antony Detomasi (2007), 'The Multinational Corporation and Global Governance: Modelling Global Public Policy Networks' Name Index

The subject of this research is the relations emerging between the participants of corporate management and control, such as board of directors, CEO, and employees of the organization. Special attention is given to such relations with regards to administration of internal and external corporate control, as well as dual position of CEO as an object and subject of corporate control and management. The author systematizes the concepts of corporate control, as well as reveals the factors of internal corporate control. The participants of corporate management are viewed from the perspective of agent theory; the relations “agent – principal” are clarified from the position of CEO. The author’s special contribution into this research consists in simultaneous consideration of CEO as an agent and a principal in relations between the participants of corporate management and control. Balance between the roles of CEO in the corporation – as a subject and/or object determines his capacity to influence the assessment of the effectiveness of management. The conducted research systematizes the measures on reduction of opportunistic behavior between the agents of the described relations. The scientific novelty consist in acknowledgement of CEO’s dual position in the corporate management and control based on the analysis of his status as an agent and a principal.

This paper investigates the role of Venture Capital (VC) in the likelihood of delisting via mergers and acquisitions (M&A) for European companies listed in the 2004–2014 period, till 2020. Takeovers of listed companies are generally associated with underperformance, suggesting a need for a change in corporate control. In contrast, we show that VC-backed listed companies are more likely to be acquired when they exhibit higher growth rates compared to their peers. Moreover, this effect is driven by companies backed by low-reputation VCs. These VCs are known to rush their portfolio ventures to IPO and to have a limited post-IPO involvement. These conditions, combined with strong growth, may attract acquirers who perceive a need for change in corporate control. Conversely, we find no evidence of an increased likelihood of delisting by M&A in companies backed by highly reputed VCs, which tend to remain independent.

Refinancing, Debt for Equity Agreements and Takeover Bids Under Spanish Law

This chapter discusses corporate governance; they promote governance as a system by which companies and organizations are directed and controlled. Good governance involves a number of aspects that occur in the process of governing. Corporate governance policies and practices define the performance of an organization. The main pillars of corporate governance are accountability, transparency, fairness, and disclosure. The performance of companies and organizations in relation to these pillars determines their overall evaluation in terms of good governance. The definitions of governance and good governance are now folded into a discussion of corporate and nonprofit governance. The boards of directors play a significant role in the overall management and control of corporations and organizations. A corporate board of directors is generally the oversight body that ensures the company’s performance meets the owners’ or stakeholders’ expectations and helps manage/resolve disputes in the process.

Since the proxy fights of the 1950s, commentators have debated the welfare implications of corporate takeovers. Although observers such as Manne (1965), Jensen and Meckling (1976), Fama (1980), and Jensen and Ruback (1983) argue that the market for corporate control promotes efficiency and enhances wealth, some critics, such as managers of firms subject to hostile takeover attempts, contend that takeovers destroy firm value. The critics frequently assert that takeover pressure forces managers to sacrifice profitable, but slowyielding, long-term investments in favor of less productive short-term investments that offer immediate returns. While the evidence supporting takeover-induced shortsightedness is largely anecdotal, a recent paper by Stein (1988) develops a formal

This paper identifies ‘weak corporate governance’ as the major cause of crises in Nigerian banking institutions. It contends that corporate governance is an innovative alternative banking practice that caters appropriately for the needs of all stakeholders in sharp contrast to the conventional banking, which often marginalizes most of the essential stakeholders, as well as vitiates their corporate control. The paper argues that the existing banking reforms, though potentially worthwhile, may even be harmful if corporate governance and control principles are misplaced or misapplied. It therefore cautions that in today’s borderless economy, purposeful corporate governance is not an option but a necessity; and recommends that regulations should fill in the existing slit to synchronize diversity, dissent and differences in corporate governance for a robust banking sector

PurposeThe purpose of this study is the development of an integrated framework between corporate governance and sustainability, based on the advancements within the field of contemporary governance leading to a renewed focus on sustainable development.Design/methodology/approachIn this paper, the authors provide succinct summary of the evolution of corporate governance over the past century from an historical perspective: starting with the early work of Berle and Means – which focuses on the legal separation of ownership and control – and the subsequent challenges within this framework – all the way to analyzing the major impact of Nobel Laureate Milton Freidman’s work on corporate goals and governance. The authors' approach identifies the key transformation of corporate goals and corporate goals' paradigm shift in progression and focus within corporate houses over time, including how these are approached in the present day by integrating the concept of primacy of all stakeholders. The authors relate this to contemporary developments in the Business Round table and the United Nations’ adoption of the 2030 Agenda for Sustainable Development Goals. The authors also identify specific corporate governance themes within global economic forums, as well as the critical interlinkages needed by all global corporations to achieve sustainable growth.FindingsThe primary objectives of the corporate governance themes adopted by global economic forums this decade are in the best interest of all stakeholders – including customers, employees, regulators, local communities, and shareholders. This applies both during periods of relative stability and during crises. A review of the good corporate governance relies on internal mechanisms such as the structure of a board and incentives for management, and on external mechanisms such as institutions that demand accountability. All these mechanisms are important as the mechanisms form the core of how (and for whom) corporations generate value. Ultimately, optimal corporate governance can help deliver both economic gains and societies that value all.Practical implicationsWith globalization, the public has higher expectations from corporate CEOs than in the past. Corporate leaders have the ultimate responsibility for creating an organizational culture that supports trust and ensures that corporate leaders' management and employees embody and act on the stated values and mission of their organization. Areas of increased social expectations that require the attention of boards of directors include diversity, transparency, equal opportunity, and eliminating all forms of harassment.Originality/valueThis study identifies a viable agenda for global corporations based on concurrent developments to achieve sustainable development and growth. The recent related research work is also presented.