Beyond shareholder primacy? Reflections on the trajectory of UK corporate governance.

Core institutions of UK corporate governance, in particular the City Code on Takeovers and Mergers, the Combined Code on Corporate Governance and the law on directors’ duties, are strongly orientated towards the norm of shareholder primacy. Beyond the core, however, stakeholder interests are better represented, in particular at the intersection of insolvency and employment law. This reflects the influence of European Community laws on information and consultation of employees. In addition, there are signs that some institutional shareholders are redirecting their investment strategies, under government encouragement, away from a focus on short-term returns, in such a way as to favour stakeholder-inclusive practices by firms. On this basis we suggest that the UK system is currently in a state of flux and that the debate over shareholder primacy has not been concluded

Systemic risk and macroeconomic fat tails

We propose a mechanism for shock amplification that potentially can account for fat tails in the distribution of the growth rate of national output. We argue that extreme macroeconomic events, such as the Great Depression and the Great Recession, were preceded by significant turmoil in the banking system. We have developed a model of bank network formation and presented numerical simulations that show that, for the benchmark case, aggregate credit follows a random walk. When we introduce fire sales the model does not only produce larger variations in the growth of aggregate credit but also shows that there is an asymmetry between booms and busts that is also consistent with empirical evidence

Parties, promiscuity and politicisation: business-political networks in Poland

Research on post-communist political economy has begun to focus on the interface between business and politics. It is widely agreed that informal networks rather than business associations dominate this interface, but there has been very little systematic research in this area. The literature tends to assume that a politicised economy entails business-political networks that are structured by parties. Theoretically, this article distinguishes politicisation from party politicisation and argues that the two are unlikely to be found together in a post-communist context. Empirically, elite survey data and qualitative interviews are used to explore networks of businesspeople and politicians in Poland. Substantial evidence is found against the popular idea that Polish politicians have business clienteles clearly separated from each other according to party loyalties. Instead, it is argued that these politicians and businesspeople are promiscuous. Since there seems to be little that is unusual about the Polish case, this conclusion has theoretical, methodological, substantive and policy implications for other post-communist countries

Corruption in migration management: a network perspective

This paper explores the relation between networks as an emerging mode of public governance and corruption. Adopting the theoretical lens of actor-network theory (ANT), the paper investigates an Italian episode of corruption related to the awarding of government contracts for the management of the Mineo’s CARA, the Europe's largest reception centre for migrants. The analysis shows that a governance network may turn corruption itself into a network where abuse of power can proliferate thanks to the opacity resulting from the multiplicity of actors, interactions, and fragmentation characterizing the governance system

Corporate governance compliance and disclosure in the banking sector: using data from Japan

Using regression model this study investigates which characteristics of a bank is associated with the extent of corporate governance disclosure in Japan. The findings suggest that on average 8 banks out of a sample of 46 disclose optimal corporate governance information. The regression model results reveal in general that non-executive directors, cross-ownership, capital adequacy ratio and type of auditors are associated with the extent of corporate governance disclosure. Of these four variables, non-executive directors have a more significant impact on the extent of disclosure contrary to total assets and audit firms of banks in the context of Japan. The findings of this paper are relevant for corporate regulators, professional associations and developers of corporate governance code when designing or updating corporate governance code

Multiple agency perspective, family control, and private information abuse in an emerging economy

Using a comprehensive sample of listed companies in Hong Kong this paper investigates how family control affects private information abuses and firm performance in emerging economies. We combine research on stock market microstructure with more recent studies of multiple agency perspectives and argue that family ownership and control over the board increases the risk of private information abuse. This, in turn, has a negative impact on stock market performance. Family control is associated with an incentive to distort information disclosure to minority shareholders and obtain private benefits of control. However, the multiple agency roles of controlling families may have different governance properties in terms of investors’ perceptions of private information abuse. These findings contribute to our understanding of the conflicting evidence on the governance role of family control within a multiple agency perspectiv

Risk-shifting Through Issuer Liability and Corporate Monitoring

This article explores how issuer liability re-allocates fraud risk and how risk allocation may reduce the incidence of fraud. In the US, the apparent absence of individual liability of officeholders and insufficient monitoring by insurers under-mine the potential deterrent effect of securities litigation. The underlying reasons why both mechanisms remain ineffective are collective action problems under the prevailing dispersed ownership structure, which eliminates the incentives to moni-tor set by issuer liability. This article suggests that issuer liability could potentially have a stronger deterrent effect when it shifts risk to individuals or entities holding a larger financial stake. Thus, it would enlist large shareholders in monitoring in much of Europe. The same risk-shifting effect also has implications for the debate about the relationship between securities litigation and creditor interests. Credi-tors’ claims should not be given precedence over claims of defrauded investors (e.g., because of the capital maintenance principle), since bearing some of the fraud risk will more strongly incentivise large creditors, such as banks, to monitor the firm in jurisdictions where corporate debt is relatively concentrated

Security analyst networks, performance and career outcomes

Authors' draft. Final version to be published in The Journal of Finance. Available online at http://onlinelibrary.wiley.com/Using a sample of 42,376 board directors and 10,508 security analysts we construct a social network, mapping the connections between analysts and directors, between directors, and between analysts. We use social capital theory and techniques developed in social network analysis to measure the analyst’s level of connectedness and investigate whether these connections provide any information advantage to the analyst. We find that better-connected (better-networked) analysts make more accurate, timely, and bold forecasts. Moreover, analysts with better network positions are less likely to lose their job, suggesting that these analysts are more valuable to their brokerage houses. We do not find evidence that analyst innate forecasting ability predicts an analyst’s future network position. In contrast, past forecast optimism has a positive association with building a better network of connections