Corporate Control Structures Research Articles

Визначення ефективності корпоративного контролю в інтеграційних об’єднаннях акціонерних товариств на засадах економічної безпеки

This article aims to analyze and develop organizational and methodological tools to enhance the effectiveness of corporate control in integration associations of joint-stock companies based on ensuring economic security. Research methods include a comprehensive analysis of literary sources, theoretical modeling of corporate control structures, comparative analysis of existing practices, and developing methodological recommendations based on a systemic approach. Critical issues in corporate control of integration associations have been identified, and organizational and methodological support have been developed, which includes organizational, methodical, informational, legal, financial, and control components to enhance the effectiveness of corporate control. The scientific novelty lies in the development of the author’s definition of “organizational and methodological support for the effectiveness of corporate control in integration associations of joint-stock companies based on economic security” as a comprehensive system of managerial and methodological measures aimed at creating, implementing, and supporting an effective corporate control structure in integration associations of joint-stock companies. It also involves building a conceptual scheme for implementing organizational and methodological support for the effectiveness of corporate control in these associations based on economic security, which includes components of organizational and methodological support, methods of implementation, and expected outcomes. The practical significance of the research lies in developing approaches and recommendations that joint-stock companies can use to optimize corporate governance, enhance transparency, and reduce risks within the framework of economic security. Prospects for further research include expanding the study to an international level to analyze integration associations under various legal and cultural conditions, as well as the introduction of innovative technologies in corporate control to enhance its effectiveness. Keywords: corporate control, economic security, integration associations, joint-stock companies, organizational and methodological support, corporate management.

Corporate governance reform, and ownership, and control: perspective from Japan

ABSTRACT The direction and extent of corporate governance reforms in any country are determined by its ownership and corporate control structure. Three forms of markets in corporate control could be distinguished. The first is the external market for corporate control, closely associated with the dispersed, outsider-dominated ownership systems of the UK and the US. The second form is the insider market for the purchase and sale of blocks of shares in family-owned firms in Continental Europe and Asia. The third form, which is observed in Japan, is the internal markets in which managers reorganize their ownership structure. Under this framework, this study examines the relationship between corporate governance reforms, and ownership and control in twenty-first century Japan.

Common ownership, corporate control and price competition

We examine price competition with homogeneous products in the presence of general common ownership arrangements allowing for different corporate control structures. We show that equilibria with positive profits exist (including the monopoly outcome) when the manager places the same weight on the profit of her firm as on the average profit of all the other firms. This condition supports symmetric and asymmetric stakes and can arise as an equilibrium of a network formation game or a bargaining process.

Common Ownership, Corporate Control and Price Competition

We examine price competition with homogeneous products in the presence of general common ownership arrangements allowing for different corporate control structures. We show that equilibria with positive profits exist (including the monopoly outcome) when the manager places the same weight on the profi of her firm as on the average profit of all the other firms. This condition supports symmetric and asymmetric stakes and can arise as an equilibrium of a network formation game or a bargaining process.

Can partial horizontal ownership lessen competition more than a monopoly?

In this paper we investigate the anti-competitive effects of partial horizontal ownership in a setting where: (i) two cost-asymmetric firms compete à la Cournot; (ii) managers deal with eventual conflicting interests of the different shareholders by maximizing a weighted sum of the two firms’ operating profits; and (iii) weights result from the corporate control structure of the firm they run. Within this theoretical structure, we find that if the manager of the more efficient firm weights the operating profit of the (inefficient) rival more than its own profit, then partial ownership will lessen competition more than a monopoly when both firms produce.

Can Partial Horizontal Ownership Lessen Competition More Than a Monopoly?

In this paper we investigate the anti-competitive effects of partial horizontal ownership in a setting where: (i) two cost-asymmetric firms compete a la Cournot; (ii) managers deal with eventual conflicting interests of the different shareholders by maximizing a weighted sum of firms' operating profits; and (iii) weights result from the corporate control structure of the firm they run. Within this theoretical structure, we find that if the manager of the more efficient firm weights the operating profit of the (inefficient) rival more than its own profit, then partial ownership can lessen competition more than a monopoly.

Profit or politics? Understanding renationalizations in Russia

This study examines firm-level determinants of the government incentives to acquire controlling stakes in private companies. Using a novel hand-collected dataset of 153 largest listed and unlisted Russian companies, I investigate the methods and the rationales of a 2004–2008 wave of selected nationalizations in a post-privatization market. I find robust evidence that formerly privatized and domestically-owned companies in strategically important sectors face the highest risks of corporate control transfers from private to state hands. I also find that the corporate tax evasion is another significant determinant of a firm nationalization. Contrary to commonly held beliefs, there is little evidence that renationalizations in Russia are driven by firm profitability factors: the government neither systematically “cherry-picks” best performers nor addresses market failures by rescuing national champions in financial distress. These results contribute to t'he politics and finance literature by providing new firm-level evidence on the importance of strategic nationalism in the government's decision to intervene into the corporate control structures.

Investor Protection and the Mode of Acquisition: Implications for Ownership Dilution and Formation of Pyramids

This paper examines the influence of investor protection on the form of M&A transaction and its subsequent impact on ownership dilution and creation of corporate pyramids. In a large sample of acquisitions around the world, I find that (stock-based) mergers are more likely in countries with good investor protection, while (cash-based) control transactions are more prevalent in countries with low investor protection. Repeated acquisitions in common law countries results in substantial dilution of proportional ownership especially in U.S. but not in civil law countries. In contrast, series of acquisitions in civil law countries linked through firms that are bidders in one acquisition but targets in another tend to generate a corresponding series of inter-corporate control links, while this correspondence is much weaker in common law countries. These results suggest that differences in acquisition modes could be one potential channel through which investor protection affects corporate control structures around the world.

Rent-seeking incentives, corporate political connections, and the control structure of private firms: Chinese evidence

We examine how the rent-seeking incentives of local government motivate private firms 1 1 In this paper “private firms” refers to listed non state-owned-enterprises, the ultimate controlling shareholder of which is an individual. listed in China to establish political connections, and whether such connections lead to more concentrated corporate control structures. Our results show that such firms are more likely to establish political connections in regions in which the local economy is less market-oriented or in which the government has more discretion in allocating economic resources. This is consistent with the notion that the presence of incentives for government officials to engage in rent seeking motivates private firms to look for alternative safeguards through political connections. We also find that the controlling owners of politically connected firms tend to concentrate their shareholdings and dominate the board of directors by occupying the position of either chairman or CEO, which supports the conjecture that a concentrated control structure facilitates rent seeking through political connections and allows the controlling owner to retain all of the benefits arising from connections with politicians.

Control structures and payout policy

PurposeThis paper seeks to examine whether or not divident policy is influenced by the firm's corporate control structure, investigating the relationship between the dynamics of earnings payout and the voting power enjoyed by different types of shareholders. This allows one to test a set of hypotheses derived from agency and pecking order theories.Design/methodology/approachA large panel of UK firms for the 1990s and is analyzed that the payout policy is significantly related to control concentration. The problem of control measurement is addressed and the use of Banzhaf indices advocated as a relevant measure of voting power in the analysis of corporate policy choices. The traditional framework proposed by Linter is extended and an econometrically sound approach to modeling the dynamics of the total payout suggested. Where most – even recent – studies on payout policy show some methodological flaws, state‐of‐the‐art dynamic panel data estimation procedures are applied.FindingsExpectedly, profitability is a crucial determinant of payout decisions, but the presence of strong block holders or block holder coalitions weakens the relationship between the corporate earnings and the payout dynamics. Block holders appear to realize that an overly generous payout may render the company liquidity constrained, and, consequently, result in suboptimal investment policy.Practical implicationsThe results challenge some of the implications of the agency theories of payout, and favor a pecking‐order explanation for the observed patterns. The analysis of payout dynamics reveals also that companies adjust payout policies to changes in earnings only gradually, which is consistent with “dividend smoothing”. In fact, the results suggest a presence of a more general phenomenon of the “total payout smoothing”.Originality/valueAccording to one's bet knowledge, this is the first study employing those game theory‐based concepts in the context of corporate payout policies.

Environnement juridique et systèmes de gouvernance

Résumé Dans cet article, nous nous intéressons à l’hétérogénéité des systèmes de gouvernance européens et à ses déterminants. Au moyen d’une analyse en composante principale et d’une classification hiérarchique, nous cherchons à évaluer le rôle joué dans ce domaine par le système juridique, relativement à d’autres facteurs tels que la structure du système productif, les caractéristiques de l’offre de fonds et l’organisation du marché du travail. Nous montrons que l’importance du cadre juridique dans l’explication de l’hétérogénéité des systèmes de gouvernance européens doit être relativisée. D’une part, le degré de protection des apporteurs de fonds ne contribue que faiblement à la définition de la typologie des systèmes de gouvernance. D’autre part, il s’avère que l’origine du système juridique reflète moins le degré de protection des apporteurs de fonds que le jeu des interactions qui s’établissent entre les structures de gouvernance des firmes, l’organisation du marché du travail, les caractéristiques de l’offre de fonds et celles du système productif.

Privatisation, corporate control and employment growth: Evidence from a panel of large Polish firms, 1996–2002

Using data on Polish firms this paper examines the relationship between corporate control structures, sales growth and the determinants of employment change. Privatised and de novo firms are the main drivers of employment growth; in the case of de novo firms, it is foreign ownership which underpins the result. Being privatised has a positive impact on employment but this is concentrated within a range of 3–6 years after privatisation. There are no systematic differences in employment response to negative sales growth across the ownership categories. Employment in state firms is less responsive to positive sales growth. From these results we infer that the behaviour of state firms is affected by both insider rent sharing and binding budget constraints.

Does Bank Affiliation Mitigate Liquidity Constraints? Evidence from Germany's Universal Banks in the Pre‐World War I Period

This paper compares two similar samples of mining and steel corporations in pre‐World War I Germany: one sample consists of corporations that were affiliated to one or more of the German “Universal Banks”, and the second sample consists of companies that had to rely on other sources of finance. Statistical analysis conducted in the framework of a linear fixed effects model indicates that the non‐affiliated companies were liquidity constrained. The paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current German dual board system, as well as the origins of several other aspects of the institutions that tied the German banking system to industrial concerns.

Does Bank Affiliation Mitigate Liquidity Constraints? Evidence from Germany's Universal Banks in the Pre-World War I Period

This paper compares two similar samples of mining and steel corporations in pre-World War I Germany: one sample consists of corporations that were affiliated to one or more of the German Universal Banks, and the second sample consists of companies that had to rely on other sources of finance. Statistical analysis conducted in the framework of a linear fixed effects model indicates that the non-affiliated companies were liquidity constrained. The paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current German dual board system, as well as the origins of several other aspects of the institutions that tied the German banking system to industrial concerns.

DYNAMIC PANEL DATA ESTIMATIONS IN CORPORATE CONTROL SYSTEMS

In this paper a dynamic model of the firm's corporate control structure and its influence on the firm's market value is presented. The model takes account of the influence of unobservable individual or firm effects and of the endogeneity of the firm's corporate control structure, when analyzing how a firm's monitoring mechanisms may influence managerial opportunistic behavior. The results suggest the dynamic behavior of firm's corporate control structures.

Merger activity: solutions to Japan’s economic downturn?

Economic downturn in Japan has brought about an urgent need for Japanese companies to restructure. Throughout the postwar period of economic growth corporate Japan has been dominated by organizational structures based on relational ties, which have protected implicit contracts with employees and acted as a barrier to takeovers. The current disintegration of traditional business networks has brought about restructuring through merger activity, often with foreign firms, resulting in more market‐oriented corporate control structures. The success of these mergers will depend on incorporating market considerations, while retaining the advantages of alliance structures.

Varieties of capitalism in the twentieth century

Of the world's multiple national variations on a basically capitalist system, the paper compares the century's history of the British and American, the two 'pioneers' whose institutions and economic behaviour patterns most closely confirm to, and those of Germany and Japan whose institutions most significantly deviate from, the prescriptions of neo-classical textbooks. There is no obvious story of a long and steady process of gradual convergence-capitalist rationality slowly washing out the effects of differing cultural traditions. All four societies have changed in key respects; finance and corporate control structures were arguably more similar in the 1920s than later. By the end of the post-war golden age, there were signs of convergence on similar forms of managerial capitalism. The crucial, and for us unpredictable, question is how far the transition to shareholder capitalism in Britain and America over the last two decades will be duplicated in Germany and Japan.

Does corporate ownership structure affect its strategy towards diversification?

We claim that there is a link between corporate control structure and managers’ strategy towards unrelated mergers and risk diversification. Companies with greater ownership concentration are less diversified. Evidence also shows that corporate diversification generally results in value loss while focussing is value increasing. This highlights the potentially detrimental effect of agency problems on corporate strategy. Copyright © 1999 John Wiley & Sons, Ltd.

An evaluation of corporate ownership structures on employee, management and shareholder compensation for JSE companies

Where corporate ownership and control are separated, the actions of employees and managers are not completely observable by shareholders, because it is virtually Impossible for a diverse group of shareholders (the principals), to monitor the behaviour of employees and managers (the agents), Conflicts of interest between principals and agents may thus arise. Agency Theory, which deals with the analysis of the control of incentive conflicts in contractual relations, provides arguments both for and against the notion that the separation of ownership and control in organisations has important implications for the manner in which companies are operated. This study investigates the effect of alternate corporate control structures on compensation levels in a South African setting, and interprets the results in the context of the agency issue.