Firm Governance Research Articles

Exploring the socioemotional dimensions of corporate governance in family firms: a systematic and bibliometric review

Exploring the socioemotional dimensions of corporate governance in family firms: a systematic and bibliometric review

From Vilified Queen to Political Strategist: Re-evaluating the Role and Image of Bona Sforza. The Queen’s 1537 Response to Her Critics

This study examines the contrasting historical narratives surrounding Queen Bona Sforza, focusing on her 1537 response to her accusers amidst the noble rebellion. Bona’s tenure as queen consort, notably marked by economic consolidation and assertive political engagement, presents a rich case for examining the dynamics of female leadership in a male-dominated sphere. The significance of this topic lies in its potential to enrich understanding of gender roles, power dynamics, and historical narrative construction within the field ofearly modern European history. Despite considerable scholarship on Bona, there remains a gap in research specifically addressing how her own communications – particularly the 1537 letter to royal secretary Samuel Maciejowski – counter contemporary and later historical portrayals, and what this reveals about gendered perceptions of power and authority. This study aims to interrogate these aspects, posing the question: How does this re-reading of Bona’s self-representation in her response to accusations during the 1537 rebellion illuminate the complexities of female rulership and challenge existing historical narratives? In the epistolary analysis this research adopts a gendered lens to assess the juxtaposition between Bona’s portrayal by contemporaries and her own articulation of her role and actions. The findings reveal that Bona’s communications asserted her competence and dedication to statecraft. This analysis challenges the pejorative characterisations ofthe queen’s actions, suggesting a conscious effort to navigate and contest the gendered constraints imposed upon her rulership. Her management of economic resources, engage-ment in diplomatic and legal affairs, and the cultivation of a narrative of benevolent yet firm governance emerge as key themes. These findings are significant as they contribute to a nuanced understanding of Bona’s leadership, offering insights into the strategies employed by female rulers to assert authority and influence historical narratives. Moreover, this study highlights the importance of examining communion strategies of historical figures to challenge and expand upon established historical interpretations, enriching the discourse on gender, power, and historiography in the early modern period.

The Social Embeddedness of Socioemotional Wealth: A Review and Future Research Agenda

ABSTRACTResearch Questions/IssuesScholarly interest in family firm governance and its strategic decision‐making has increased since the invention of socioemotional wealth (SEW). However, the widespread use of the SEW concept raises concerns on its reification and tautology. To address these concerns, we propose analyzing the social embeddedness of family firms to shed light on SEW‐driven governance practices and decision‐making.Research FindingsOur two‐step method reviewed 85 papers utilizing social network perspectives, institutional theory, and SEW concepts. Our analysis demonstrates that integrating social embeddedness into SEW can help clarify the origins of SEW and its impact on decision‐making and governance and practices within family firms. Nonetheless, our analysis also highlights research gaps that future studies should address.Theoretical ImplicationsBy integrating the social embeddedness perspective with SEW, we offer a novel framework that systematically illustrates the social rationales underpinning diverse SEW‐driven behaviors and the evolution of governance practices in family firms. This framework, drawing from social network and institutional theory, elucidates the formation of SEW as driven by multidimensional social motivations, thus reconciling mixed findings from previous SEW research. Furthermore, our review provides a comprehensive research agenda for future studies in family business and corporate governance, encouraging exploration of multiple institutional logics, social networks, and their confounding effects on the SEW of family businesses.Practical ImplicationsOur findings guide financial investors and nonfinancial stakeholders to better comprehend family firms' economic and noneconomic concerns, their distinct strategic behaviors from other firms, and their hybrid governance practices. Our discussion suggests practitioners incorporating social context of controlling families into decision.

Corporate social responsibility in emerging markets: the role of reciprocity in business-government relations

PurposeDespite the rapid growth of corporate social responsibility (CSR) in emerging markets, there remains a need in the current literature for deeper insights into the factors influencing CSR practices in these contexts. This study aims to address this research gap and enhance the discourse on CSR in emerging markets by exploring the reciprocal relationship between business and government and its potential role in driving firms’ CSR efforts in these burgeoning economies.Design/methodology/approachThe study is grounded in the theory of reciprocity and integrates insights from existing literature to posit that, within a reciprocal relationship, firms respond positively to government regulatory support by actively participating in CSR initiatives. To test this hypothesis, data from prominent sources, including the CSRHub database, the World Bank’s Ease of Doing Business, and the International Country Risk Guide, are gathered, yielding a sample of nearly 1,500 firms operating in diverse emerging markets. A series of empirical tests are then conducted to validate the existence of the reciprocal relationship and its influence on firms’ CSR efforts.FindingsThe findings reveal strong evidence of a reciprocal relationship between business and government in emerging markets. When the government provides favorable regulatory support, firms tend to reciprocate by shouldering greater responsibility in promoting societal well-being, specifically through active participation in CSR initiatives directed toward the well-being of the community in which they operate. These findings are robust across various estimation methods.Research limitations/implicationsThe study advances the understanding of CSR in emerging markets and provides valuable insights into the role of reciprocity in promoting CSR in real-world settings. This offers promising avenues for future theoretical and empirical research in the field of CSR.Practical implicationsPolicymakers are urged to recognize the significance of business-government relations in fostering CSR. Developing a supportive regulatory environment can motivate firms to invest in CSR, benefiting both businesses and the communities they serve. For businesses, aligning CSR initiatives with community needs can foster a mutually beneficial relationship with the government, leading to greater social benefits and competitive advantages.Originality/valueTo the best of the authors’ knowledge, this study pioneers the application of the reciprocity theory to explain the interplay between business and government in shaping firms’ CSR endeavors in emerging markets.

Internal Control Quality and Boardroom Backscratching.

In modern firms, conflicts may arise between the chief executive officer and board of directors due to the separation of ownership and operations. Such conflicts may weaken listed companies' performance in the short term or affect their development in the long term. Using data on Shanghai and Shenzhen A-share listed companies from 2013 to 2022, this study empirically examines the impact of internal control quality on boardroom backscratching. We find that internal control quality significantly mitigates boardroom backscratching by reducing agency costs and increasing analyst attention. This effect is more significant in firms where the management holds less power and the product market is highly competitive. Furthermore, the mitigating effects of internal control quality on boardroom backscratching effectively reduce the risk of the company's share price collapsing. Overall, this study enriches the literature on boardroom backscratching and internal control quality, and provides valuable references for stakeholders, including listed companies, to improve firm governance efficiency and, thus, maintain the stability of capital markets.

Did ESG Affect the Financial Performance of North American Fast-Moving Consumer Goods Firms in the Second Period of the Kyoto Protocol?

Many agreements and protocols in the global framework call on industries and businesses to respond to threats related to climate change. New terminologies such as environmental, social, and governance (ESG) scores address this issue and responsibility. This study investigates the impact of sustainability (environment (ENV), social (SOC), governance (GOV), and ESG) on the financial performance of firms in the fast-moving consumer goods industry from 2013 to 2020, the second commitment period of the Kyoto Protocol (SCKP). The study sample covers 113 firms in the North American region (the USA and Canada did not participate in SCKP). The results showed that ESG is not an influencer of financial performance, while ENV and SOC components negatively affect financial performance. On the other hand, GOV is the most significant influencer that positively impacts financial performance. Based on these findings, ESG and its components are not conducive to promoting financial performance during the SCKP period. However, fast-moving consumer goods are ahead of other sectors in terms of sustainability disclosure. Moreover, the highest positive impact of GOV is attributed to the advanced system with rules, standards, and regulations that foster the better and more efficient governance of firms from developed countries.

Family-governed businesses and successful equity crowdfunding: The moderating role of sustainability orientation

Crowdfunding has arisen as a prominent alternative to more traditional forms of financing, with equity crowdfunding (EC) becoming increasingly significant for its economic relevance and unique dynamics. While previous research has explored various factors contributing to EC campaign success, the role of firm governance, particularly family governance – i.e., the involvement in management and/or ownership of members of the same family - remains underexplored. Therefore, this study tackles this gap by examining the influence of family governance on EC success. Family-governed businesses, known for their long-term orientation and more conservative risk behavior, may inspire greater trust from investors, hence enhancing their campaign success. Additionally, the growing importance of business and campaign sustainability orientation in investors’ decision-making suggests it could further strengthen the positive relationship between family-governed businesses and EC success. Using data collected on 500 EC campaigns from leading Italian platforms, we find support for our hypotheses. This study contributes to the EC literature and family business research and has important implications for family-governed businesses seeking to optimize their EC campaigns.

Restrictive bond covenants: Evidence from family firms in China

Researchers and regulatory authorities are paying growing attention to the protection of creditors' interests against potential infringement by major shareholders in the Chinese bond market. In particular, family firms have come under increased scrutiny given the typically large, concentrated ownership position of the controlling family members. While family firms have been well-examined in most Western countries, there is little research to date on family firms in China – a research gap that is concerning given the growing importance of China's debt markets on a global stage and the recent bankruptcy wave surrounding Chinese bond issues. This study aims to close this gap by examining the impact of family control on the number of restrictive covenants in corporate bond contracts issued by Chinese companies. Based on a sample of over 1100 bonds issued between 2009 and 2021, we find that corporate bonds issued by Chinese family firms contain a larger number of restrictive covenants than those issued by non-family firms – a result that is in contrast with previous findings for the United States. Furthermore, the impact of family control on the number of restrictive covenants is more pronounced in bonds issued by companies with higher social capital control, lower investment efficiency, and higher financing constraints. A mechanism analysis reveals that relative to non-family firms, the shareholders and managers of family companies are more prone to collusion and exhibit a higher degree of separation of rights; this increases the risk to creditors' financial interests and raises their requirement for restrictive covenants. Finally, we present evidence to suggest that improving the level of internal governance and external supervision of firms can help to reduce the impact of family control on the number of restrictive covenants.

Corporate Board Characteristics of Family-Managed Firms and it’s Impact on Firm Performance

Well-balanced and active corporate boards ensure effective corporate governance in family firms. Studies in the area of corporate governance across the globe made considerable effort to study the composition of corporate boards and their effectiveness. The present study is an effort to evaluate the impact of board characteristics on the performance of selected Indian family-managed firms. The paper encompasses how various board parameters such as board size, board independence, the duality of the chairman, gender diversity, and inclusion of foreign directors in the board impact a firm's market and accounting performance measures. The data is collected from the CMIE PROWESS Database, consisting of 173 family-managed firms belonging to 11 macro-industrial sectors selected. The panel data used for the study consist of 2076 observations for 12 years, from 2010-11 to 2021-22. The study uses regression analysis to evaluate the impact of board characteristics on performance measure indicators Tobin’s Q and ROA of the firms.

Capital market liberalization, internal control and corporate diversification: Evidence from China

Using a sample of Chinese listed firms, we examine the effect of capital market liberalization on corporate diversification in the host country. Our findings show that after the opening of the capital market, corporate diversification significantly reduces. Moreover, we show that improving the quality of internal control is an important mechanism for capital market liberalization to reduce corporate diversification. Heterogeneity tests show that the effect of capital market liberalization on corporate diversification is more significant in firms with dual CEOs and low board diligence. Overall, capital market liberalization enhances the corporate governance of firms in a host country.

Boardroom Dynamics: Exploring the Intersection of Corporate Governance and Firm Performance

The requirement for strong corporate governance in the modern economy is becoming more widely acknowledged in the framework of accounting for growth. Although corporate governance is seen as the pinnacle in today's economies, it is crucial for a company's entire development and progress. The ancient economies of India and Greece are where corporate governance first emerged. The study on the relationship between corporate governance and firm performance is examined in-depth in this article. The information were taken from Scopus's online databases. The performance of the firm has been shown to benefit from good corporate governance, and this has a favorable impact on national economic growth This article highlights the key conclusions and offers suggestions for further research into the relationship between effective corporate governance and firm performance. The study also presents intriguing conclusions about the relationships between corporate governance and performance of firms, and it also offers potential directions.

Ownership structure dynamics and firm governance quality: Panel regression evidence from Sub-Saharan Africa

Ownership structure dynamics and firm governance quality: Panel regression evidence from Sub-Saharan Africa

How Green Transformational Leadership and Green Entrepreneurial Orientation Contribute to Firm Sustainable Performance: The Role of Green Innovation and Environmental Concerns

The prime aim of the quantitative study is to explore the impact of green transformational leadership and green entrepreneurship orientation on firm sustainable performance within the manufacturing sector of Saudi Arabia. In addition, the current research also examined the moderating effect of environmental concerns and the mediating impact of green innovation. For analysis, the current study adopted PLS-EM. From the findings, green transformational leadership and green entrepreneurship orientation significantly impact green innovation, leading to a sustainable firm's performance in the Saudi Arabia manufacturing industry. The same is statistically significant in enlightening the firm's sustainable performance. Green innovation has played a substantial role in mediating the impact of the correlation among transformational leadership and green entrepreneurship on firm sustainable performance. The present research further extends evidence showing that environmental concern has significantly moderated the relationship among green entrepreneurship orientation, green transformational leadership and firm sustainable performance. The findings provide implications for progress in the sustainable performance of manufacturing firms, specifically in Saudi Arabia. Hence, the emerging green transformational leadership and entrepreneurial orientation are integrating environmental concerns in firm governance and establishing promising strategies to enhance the manufacturing industry's sustainable performance in Saudi Arabia.

Behind closed doors: unveiling earnings management in private subsidiaries of public firms

PurposeThis study examines the earnings quality of private-subsidiary firms using a large sample data from India.Design/methodology/approachThe impact of parent–subsidiary relationship on earnings quality is examined using two common proxies. Findings are robust to alternative research designs, including different earnings quality proxies, endogeneity and matching techniques.FindingsThe study finds that private firms that are subsidiaries of listed firms tend to have lesser (greater) earnings quality (manipulation). Further, the study reports that this relationship is more pronounced when the parent firm is relatively larger than the subsidiaries. The study finds no evidence that Big 4 affiliation of the parent company improves earnings quality among private subsidiaries; instead, it exacerbates earnings manipulation in some cases. Finally, the authors document that subsidiary firms use tax management, as proxied by book tax differences, to engage in income-increasing earnings manipulation.Research limitations/implicationsThis study examines how affiliation with a listed entity as a subsidiary impacts the earnings quality of private companies. Future research could investigate the financial reporting practices of both private subsidiary firms and standalone private firms, comparing them in similar or differing regulatory environments across various countries.Practical implicationsThe findings of this study will help investors, bankers, creditors and regulators to understand the financial reporting of private firms. The study calls for enhanced audit quality at the subsidiary level by making the auditor of the parent firm responsible for auditing a subsidiary, a practice that is currently absent in India.Originality/valueThe results contribute to the existing debate on how firms manage earnings using data of private firms in a large emerging market setting. Previous research has not paid enough attention to the earnings quality of private subsidiaries. The study also emphasizes the necessity for a more robust system of governance and supervision for private firms, particularly in India and generally in other countries.

Multi-Founding Family Firms: Effects on Firm Governance, Innovation, and Performance

Multi-Founding Family Firms: Effects on Firm Governance, Innovation, and Performance

Supply chain chronic losses and risk interdependencies: a Bayesian Belief Network approach

ABSTRACT Supply Chain Risk Management (SCRM) has become integral to firm governance, and risk interdependencies, despite limited attention, significantly impact risk analysis and mitigation. Recurrent risks, resulting from consistent disturbances, generate chronic losses and are critically affected by other related risks. This work enhances the assessment of chronic losses with interdependent risks, building upon an existing Bayesian Belief Network (BBN) approach for risk interdependencies in SCRM, combining expected utility theory to address the complex, interconnected nature of risks. This work advocates a change in existing approaches to properly evaluate chronic losses often underestimated due to decision makers’ expectations. The research shows that the impact of recurrent risks may be underestimated by other approaches based on their frequency, undermining confidence in mitigation strategies. This work not only presents a novel approach to risk assessment but also highlights the importance of studying causal interdependencies, and emphasises the need to consider low-probability and high-impact risks but also recurrent, seemingly minor risks in SCRM processes.

AI-driven corporate governance: a regulatory perspective

ABSTRACT The use of AI-driven or AI-assisted systems in corporate compliance is a novel topic in the business and management literature, only marginally considered by legal academia. While some scholarly pieces have explored the use of artificial intelligence (AI) systems to support compliance in the financial sector (eg, for anti-money laundering purposes), the legal implications of deploying AI systems to fulfil corporate compliance tasks has not yet received the attention it deserves. This article approaches the use of AI in corporate compliance and governance through the eyes of a regulator. Its aim is to present how the use of AI compliance systems within corporations can be leveraged by the entities tasked with ensuring the good governance of firms. Concretely, it explores a not-too-distant future, where some of the regulation of corporations can be driven by a mandate to systematically deploy Automated Compliance Management Systems (ACMS) within corporations as a way to enforce and monitor good governance. The article suggests that several of the limitations that regulators are currently facing to ensure the prevention of fraud, corruption or other forms of corporate non-compliance, could be addressed if regulators offered firms the possibility of being continuously monitored by an automated AI-driven system which systematically tracks the corporation’s data footprint. We then explore what is required for such a regulatory approach to be feasible and effective. In our view, regulators must first establish the standards of reliability for those systems (ie, the legal meaning of ‘red flags’ issued by the system of potential violations) and, second, actively supervise how companies react to the outputs of those systems (ie, what companies do when a red flag is raised by the system). In the final part of the article, we offer a more concrete example to the reader. We suggest it could be possible to test such an approach in Australia through regulatory sandboxes for the mining sector, concretely, to monitor compliance with antibribery obligations overseas.

The Chinese metaverse: An analysis of China's policy agenda for extended reality (XR)

AbstractThis paper explores China's strategic embrace of extended reality (XR) technologies within its digital economy policy framework. Through a content analysis of 45 Chinese government documents, we show how China has positioned XR—which encompasses augmented reality (AR), virtual reality (VR) and mixed reality (MR)—within the nation's innovation for economic growth strategy. Our findings reveal that China's policy agenda for XR is strikingly ambitious, with expected applications across a range of sectors, from medicine to manufacturing. Understanding China's policy agenda for XR broadens current knowledge of the global XR economy, which has, in Western scholarship, predominantly focused on the activities, interests and governance of large US firms. Our analysis also elucidates what is arguably an under‐appreciated aspect of China's digital sovereignty agenda, with important implications for the future of digital geopolitics and a variety of stakeholders—from policymakers to end‐users.

Putting the Politics Into Corporate Political Activity: A Variance Decomposition Analysis of Firm–Government Interactions Across Political Contexts

Despite the wealth of theorizing about the relationship between business and government, research on corporate political activity (CPA) has yet to comprehensively consider how political context (e.g., party ideology and the degree of united or divided party government control) may shift the salience of how CPA materializes across industry-, firm-, and executive-level factors, which can shed light on the level of effects that appear to matter more (or less). To advance our understanding, we conducted a variance decomposition analysis on U.S. public firms (2001–2019), exploring the relative effect of each level on firm (lobbying expenditures and campaign contributions) and government actions (government contracts), and parsing our sample based on whether key government branches are Democrat- or Republican-controlled. We generally found that firm effects explain the most variance, followed by industry, while executive effects explain the least. However, this pattern shifts notably when considering political context across our sample period. As such, our findings have important implications for future CPA research and theorizing.

Do female directors of companies appoint audit firms with women in high-level positions?

PurposeThis paper aims to investigate whether female directors of companies are more likely to appoint audit firms (AFs) with women in high-level positions adopting monitoring, reputation and homophily theories.Design/methodology/approachThe paper uses ordinary least square to test the hypotheses using a unique hand-collected data set obtained from various sources. To mitigate potential endogeneity and selection bias issues, system generalized method of moments (GMM) and Heckman two-stage procedures are used. Additionally, alternative independent and dependent variables are created to strengthen the validity of main results.FindingsThe findings show that female directors are more likely to appoint AFs with women in high-level positions. Non-independent female directors, compared to independent ones, are particularly inclined to do so. These results are supported by further analyses using system GMM, Heckman two-stage procedures and alternative variables.Originality/valueThis study examines how female directors influence companies’ choices of AFs with women in high-level positions. It introduces unique audit firm governance proxies and variables specific to developing countries. The study also controls for various corporate governance, company and audit firm characteristics.