Shareholder-oriented Governance Research Articles

Does Stakeholder-Oriented Governance Mitigate a Dark Side of Shareholder-Oriented Governance?

This study investigates the potential substitution effects of the stakeholder-oriented governance elements in mitigating a negative side effect of shareholder-oriented corporate governance. Especia...

Non-executive director’s motivation to continue serving on boards: a self-determination theory perspective

PurposeThis paper aims to identify distinct motivation profiles among non-executive directors and explores the reasons why non-executive directors continue to serve on boards of directors.Design/methodology/approachThe analysis is based on a multiple case study in the context of German supervisory boards. The authors develop their primary insights from semi-structured interviews with 53 non-executive directors.FindingsThe findings indicate that non-executive director motivation revolves around material incentives, reputation, meaningfulness, congruence with firm goals and enjoyment. Three distinct motivation profiles emerge from the analysis, with each profile exhibiting a set of unique reasons to continue serving on boards.Research limitations/implicationsFuture research needs to test for the statistical representativeness of the findings and their performance implications, preferably in a shareholder-oriented governance context.Originality/valueThe study introduces a psychological angle to the debate about non-executive director motivation. The contributions include going beyond a bi-polar distinction between intrinsic and extrinsic motivation and draw attention to how motivation profiles relate to non-executive director’s intention to continue serving on boards.

The Impact of a Socially Responsible Investment Index on Climate Change Management and Carbon Emissions

We examine the ability of socially responsible investment index to effect firms’ compliance with best practice regarding the management of climate change and the resultant impact on carbon emissions. We use a quasi-experimental setting involving an internationally diverse sample of public companies and show that the FTSE4Good’s engagement with the companies, reinforced by the threat of exclusion from that index, stimulates compliance. We find that the likelihood of the company adopting the required practices is positively associated with the difficulty of moving to compliance and expectations regarding the companies’ membership of the index, but adversely affected by concentrated equity ownership and by strong shareholder-oriented governance. Crucially our results offer preliminary evidence that compliance with climate change-related management practice is related to subsequent reductions in carbon emissions.

A clash of governance logics: Foreign ownership and board monitoring

We ask whether and when shareholder-oriented foreign owners are likely to change corporate governance logics in a stakeholder-oriented setting by introducing shareholder-oriented governance practices. We focus on board monitoring and claim that because the bundle of practices used in a stakeholder context does not protect shareholder-oriented foreign owners' interests, they seek to introduce their own practices. Our results suggest that board monitoring is only activated when shareholder-oriented foreign ownership is high and that the influence of foreign ownership is especially strong in firms without large domestic owners, with high levels of risk and poor performance. Our findings uncover the possibility of the co-existence of different corporate governance logics within a given country, shaped by the nature and weight of foreign owners

Alternative Banking and Theory

Abstract Unlike business models of private banks based on profit maximization and shareholder-oriented governance, alternative banks (such as cooperative banks, government savings banks, and special purpose banks) share business models based on sustainable returns with longer time horizons, corporate missions that include social and public policy goals, and stakeholder-oriented governance. Strong evidence from recent research suggests that alternative banks often equal or outperform joint-stock banks in terms of efficiency, profitability, and risk management. This counters core ideas in contemporary banking theory and expectations of regulators about the superiority of private ownership and market-based banking. Concepts and theories from banking studies help explain how alternative banks outperform private banks in core functions such as creating and managing liquidity, pooling deposits, and reducing information asymmetries and agency costs. However, heterodox theories of the firm and institutional approaches to competitive advantage broaden the scope of analysis to explain further historical, social, and organizational advantages (and risks) in alternative banking. Alternative banks therefore require, and may inspire, alternative theories of banking and new approaches to bank regulation.

The impact of corporate governance practices on R&D efforts: a look at shareholders' rights, cross-listing, and control pyramid

The article considers the impact of multiple shareholder-oriented governance practices on R&D decisions. Based on a sample of 5528 firms belonging to 110 large French listed business groups, our results substantiate the idea that shareholder-oriented governance practices and a lower position in a control pyramid are better for R&D investment. The introduction of any additional shareholder oriented practice is found to result in more R&D. We show, however, that this Anglo-Americanization of the French corporate governance system is only partial. We provide evidence of the co-existence of an old French system of corporate governance with a hybrid model of corporate governance. The lack of concrete results on complementarity among shareholder-oriented governance practices casts doubt on the stability of this hybrid model in the French context.

The Impact of Corporate Governance Practices on R&D Intensities of Firms: An Econometric Study on French Largest Companies

The paper considers the impact of multiple shareholder-oriented governance practices on R&D decisions. Based on a sample of 5,713 firms belonging to 110 large French listed business groups, our results substantiate the idea that shareholder-oriented governance practices and a lower position in a control pyramid are better for R&D investment. The introduction of any additional shareholder oriented practice is found to result in more R&D. We show however that this Anglo-Americanization of the French corporate governance system is only partial. We provide evidence of the co-existence of an old French system of corporate governance with a hybrid model of corporate governance. The lack of concrete results on complementarity among shareholder oriented governance practices casts doubt on the stability of this hybrid model in the French context.

The Role of Corporate Governance in Initial Public Offerings: Evidence from Real Estate Investment Trusts

This study analyzes the impact of corporate governance structures at the initial public offering date. We test hypotheses that firms with more shareholder-oriented governance structures receive higher valuations at the IPO stage, attract more institutional ownership, and have better long-term performance. Our IPO sample is restricted to a set of 107 real estate investment trusts (REITs) over the 1991 to 1998 time period. Using a single industry and REITs in particular reduces potentially confounding effects due to differences in risk, transparency, and growth potential. We believe this - combined with our use of IPOs - mitigates the endogeneity problem present in studies of the impact of governance on seasoned firms' valuation. Our analysis indicates that firms with stronger governance structures not only have higher initial IPO valuations, but also have better long-term operating performance than their peers.