A Configurational Approach to Comparative Corporate Governance

We seek to bring to the core of the study of comparative corporate governance analysis the idea that within countries and industries, there exist multiple configurations of firm level characteristics and governance practices leading to effective corporate governance. In particular, we propose that configurations composed of different bundles of corporate governance practices are a useful tool to examine corporate governance models across and within countries (as well as potentially to analyze over time changes). While comparative research, identifying stylized national models of corporate governance, has been fruitful to help us think about the key institutional and shareholder rights determining governance differences and similarities across countries, we believe that given the financialization of the corporate economy, current globalization trends of investment, and rapid information technology advances, it is important to shift our conceptualization of governance models beyond the dichotomous world of common-law/outsider/shareholder-oriented system vs. civil law/insider/stakeholder oriented system. Our claim is based on the empirical observation that there exists a wide range of firms that either (1) fall in the "wrong" corporate governance category; (2) are a hybrid of these two categories; or (3) should be placed into an entirely new category such as firms in emerging markets or state-owned firms. In addition, as Aguilera and Jackson (2003) argue, firms, regardless of their legal family constraints, their labor and product markets, and the development of the financial markets from which they can draw, have significant degrees of freedom to chose whether to implement different levels of a given corporate governance practice. That is, firms might chose to fully endorse a practice or simply seek to comply with the minimum requirements without truly internalizing the governance practice. An illustrative example of the different degrees of internalization of governance practices is the existing variation in firms' definition of director independence or disclosure of compensation systems. We first discuss the conceptual idea of configurations or bundles of corporate governance practices underscoring the concept of equifinal paths to given firm outcomes as well as the complementarity and substitution in governance practices. We then move to the practice level of analysis to show how three governance characteristics (legal systems, ownership and boards of directors) cannot be conceptualized independently, as each of them is contingent on the strength and prevalence of other governance practices. In the last section, we illustrate how different configurations are likely to playout across industries and countries, taking as the departing practice, corporate ownership.

Do internal capital markets in business groups mitigate firms' financial constraints?

We develop a new rationale for capital allocation in business groups’ internal capital markets. We show that productivity and pledgeable income jointly drive capital allocation within an internal capital market. In financially constrained business groups, an efficient internal capital market can allocate marginal funds to firms that have high pledgeability of income because of a multiplier effect: a dollar of internal funds generates a bigger increase in investment. This result has important implications for the business group affiliation strategy. Whether or not a financially constrained but highly productive firm will benefit from group affiliation depends on its borrowing capacity vis-à-vis other affiliates

Corporate Governance in Emerging Markets

The turning to the XXI century has been marked by reforms in corporate governance practices around the world. Whether due to shocks caused by the economic crisis in East Asia, Russia and Latin America, or by financial scandals in the United States and Europe, the fact is that the way of doing business has changed in terms of demands for greater corporate transparency and accountability, shifts in control of ownership, empowerment of new types of owners and so on. Consequently, countries and firms have adapted their corporate governance policies and practices to this new governance environment. In this chapter, we discuss the foundation of corporate governance, that is, corporate ownership. In particular, we explore the current patterns of the ownership structure of publicly listed firms in six emerging countries. To do so, we have collected firm ownership data for listed firms in Brazil, Chile, South Korea, Czech Republic, Hungary, and Poland during the first decade of the XXI century, and we compare our data with existing ownership research of these countries in the late 1990s. We conclude that although concentration of corporate shareholdings continues to be a common denominator among these emerging countries, the processes and structures controlling firms across countries is remarkably different. For instance, the privatization process in the 1990s, in spite of having different motivations and goals in Latin American and Eastern Europe shaped much of the corporate ownership transformations. Our chapter offers a comparative analysis of the corporate ownership changes in emerging markets.

Mapping the business systems of 61 major economies: a taxonomy and implications for varieties of capitalism and business systems research

Efforts to build a universal theory of the world’s business systems require empirical grounding in an understanding of the variety that need explaining. To support such theorizing, we analyzed the institutional structures of 61 major economies, accounting for 93.5% of 2013 world GDP at purchasing power parity. We found nine main types of business systems: Highly Coordinated, Coordinated Market, Liberal Market, European Peripheral, Advanced Emerging, Advanced City, Arab Oil-Based, Emerging, and Socialist Economies. Our findings illustrate the need to go beyond the Varieties of Capitalism and Business Systems frameworks; provide empirical support for the CME versus LME dichotomy for part of the OECD; identify some of the business systems proposed recently as sub-types of larger clusters; indicate that institutional diversity may increase with development level; and cast doubt on the notions of state-led and family-led capitalism as types of business systems. Our discussion further suggests numerous avenues for theory development and empirical research

Cross-border and domestic minority acquisitions and financial constraints: Reaping big benefits from small shareholders

Research Question/Issue Do the motivations of cross-border minority acquisitions differ from those of domestic minority acquisitions? We examine and compare the underlying motivations for and consequences of domestic and cross-border minority acquisitions by analyzing data from transactions that took place across 31 countries over a 13-year period. Research Findings/Insights Using a sample of 11,926 domestic and cross-border minority acquisitions, we show that the interplay of financing and country-level governance motives is the main driver of such deals in both settings. We find that financially constrained firms are more likely to engage in both domestic and cross-border minority acquisitions, even in the face of higher information asymmetry and transaction costs that international transactions entail. In the wake of either domestic or cross-border deals, financially constrained firms' long-term debt increases; their short-term debt, cash holdings, and equity decrease. The greater likelihood of minority acquisitions of financially constrained firms is explained by the degree of corporate governance institutions in the country in which the targeted firm is based and by differences in levels of creditor and shareholder protections between the home countries of the targeted and acquiring firms involved. Our results remain robust after controlling for alternative explanations such as the contracting motive, the gravity model of foreign transactions, economic development levels, and differences in tax and exchange rates. Theoretical/Academic Implications Our results extend prior literature on mergers and acquisitions that have focused solely on control transfers or domestic deals. We provide empirical evidence for the importance of jointly considering financing and governance motivations in seeking to explain domestic and cross-border minority acquisitions and their consequences in alleviating financial constraints. We provide new evidence on how firm- and country-level characteristics interact to affect minority acquisitions. Practitioner/Policy Implications Our results offer valuable insights for business policy by highlighting how firms can circumvent financial constraints through partial integration, especially in cross-border settings. The results also offer evidence of beneficial ex post outcomes for targeted firms' leverage and liquidity. In terms of public policy, the results show that minority shareholder protections improve the equity market and provide a positive externality to the debt market through a certification effect

Essays in international and comparative corporate governance

El gobierno corporativo se refiere a como los proveedores de recursos de las empresas pueden tener un retorno de su inversión. En este sentido, Aoki (2001) define el gobierno corporativo como una “estructura que organiza los derechos y responsabilidades de las partes interesadas en la empresa,” esto incluye no solo los proveedores de recursos financieros (Shleifer y Vishny, 1997), pero también otros grupos e individuos que puedan afectar o ser afectados por la creación y transferencia de valor de la empresa (Freeman et al., 2010). Entre estos proveedores están los “accionistas,” personas - individuos u otras empresas - que comparten dos derechos fundamentales. En primer lugar, el derecho al flujo de caja (o derecho económica). Este se refiere al derecho de los accionistas tienen de apropiarse de las ganancias residuales de la empresa. En segundo lugar, el control o derecho político, que está asociado con los derechos de voto y, en última instancia, con el control de la empresa y, por lo tanto, es el derecho residual a la toma de decisiones. Aunque se reconoce la importancia e implicaciones de los accionistas con respecto a las prácticas de gobierno corporativo y la estrategia corporativa (Shleifer y Vishny, 1997), hay por lo menos dos cuestiones no resueltas en la literatura de gobierno corporativo. En primer lugar, los factores que determinan las diferencias entre los patrones de la estructura de propiedad en diferentes países. En otras palabras, qué factores determinan las decisiones de los propietarios en que derechos (p.ej., derecho de voto o derecho al flujo de caja) deben para concentrar su riqueza, quiénes son y de dónde vienen, y en última instancia, ¿cuáles son sus intereses en las empresas? En segundo lugar, ¿cuáles son las consecuencias de estos modelos de propiedad de las empresas en las prácticas de gobierno tales como la estructura, funciones y comportamiento de los consejos de administración? Investigadores de diferentes disciplinas han intervenido con el objetivo de responder a estas preguntas, incluyendo los de ciencia política (Gourevitch, y Shinn, 2005), derecho (Gilson, 2006; Hansmann, 1996), economía (Demsetz y Lehn, 1985), finanzas (Shleifer y Vishny, 1997 ) y estrategia (Folta, 1998; Pedersen y Thomsen, 1997), pero no han llegado a una conclusión unificada. Por otra parte, la mayor parte de esta literatura se ha centrado en empresas de Estados Unidos y Reino Unido. Por lo tanto, el objetivo de esta tesis es explorar los antecedentes y consecuencias de la estructura de la propiedad. Tres ensayos componen esta disertación sobre Gobierno Corporativo Internacional y Comparado, en busca de un mejor entendimiento de la estructura de propiedad en empresas cotizadas, sus patrones y consecuencias, en diferentes contextos. Para eso, nos alejamos del contexto anglo-americano para incorporar los mercados emergentes de América Latina y las economías de Europa Occidental a lo largo de diferentes períodos de tiempo. En esencia, los tres capítulo se basan en la teoría agencia y la teoría institucional como base teórica sobre la cual se desarrollan las hipótesis de estudio.Corporate governance relates to the ways in which firms’ suppliers of resources may have a return on their investment. Therefore, Aoki (2001) defines corporate governance as a “structure of rights and responsibilities among the parties with a stake in the firm,” which includes parties such as suppliers of finance (Shleifer & Vishny, 1997) and other groups and individuals who can affect or be affected by the firm’s value creation and transfer (Freeman et al., 2010). Among these suppliers are the “owners” of the firm, persons – individuals or other firms - who share two fundamental rights. First, the cash flow (or economic) rights give to the owners the right to appropriate the residual earnings. And second, the control (or political) rights are associated with the voting rights and ultimately with the control of the firm and the residual claim to the decision-making. Even though it is well understood that owners have important implications for other corporate governance practices and for corporate strategy (Shleifer & Vishny, 1997), there are at least two unresolved questions in the corporate governance literature. First, what factors determine cross-national differences in corporate ownership patterns. In other words, what determine owners’ decisions toward which rights (i.e., voting or cash flow) to concentrate their wealth, who are they and where they come from, and ultimately, what are their interests on firms. Second, what are the consequences of these corporate ownership patterns on other governance practices such as the structure, functions and behaviour of the board of directors. Scholars from different disciplines have stepped in to answer these questions, including politics (Gourevitch, & Shinn, 2005), law (Gilson, 2006; Hansmann, 1996), economics (Demsetz & Lehn, 1985), finance (Shleifer & Vishny, 1997) and strategy (Folta, 1998; Pedersen & Thomsen, 1997) but have not reached a unified conclusion. Moreover, most of this literature has focused on U.S. and U.K. firms. Therefore, the purpose of this study is to explore the antecedents and consequences of ownership structure. Three essays compose this dissertation on International and Comparative Corporate Governance, seeking to better understands corporate ownership, their patterns and consequences, across multiple countries - we move away from the Anglo-American context to incorporate emerging markets in Latin America and Western European economies - and over time. In essence, all of them bring into play the Agency and Institutional Theory as primarily background in which the hypotheses are developed

Perceived value as a decision support tool: an application in hospitality industry through conjoint analysis

Este trabalho de pesquisa apresentará uma aplicação metodológica para a medida do valor percebido na prestação de serviços de hospedagem. Conhecido o valor percebido, será possível compará-lo com os custos do serviço, bem como com os preços ofertados e, a partir daí, fornecer ao administrador uma base para o planejamento das ações de melhoria e para a priorização das atividades que oferecem maior valor, segundo a visão de cliente. O modelo pretende estimar o valor percebido que os consumidores formam no ambiente de serviços; focado no desempenho dos serviços e considerando valor um constructo relacionado com os atributos característicos do serviço que influenciam a preferência, e, como conseqüência, a escolha do consumidor. A modelagem proposta será ilustrada por meio de um estudo de caso contemplando um hotel de categoria econômica no interior de São Paulo, devendo ser tratado segundo o método de análise conjunta, técnica de estatística multivariada de análise de dados. Esta técnica busca atribuir a importância relativa que os consumidores (hóspedes) associam a um conjunto de características particulares na prestação de serviços, e o grau de utilidade percebida de diferentes níveis destes atributosThis study presents a methodology application for perceived value in hospitality industry. The knowledge of perceived value will help managers to compare these consumer preferences with operational costs, and also with price strategies, and then will give the managers a tool to their improvement actions planning, and also to choice the most important attributes to improve value for customers. This model intends to get the perceived values from a qualitative and quantitative research in service industry, focused on the services performance, considering value as a construct of attributes that explain service and influence the customer stated preference, and customers choice as a consequence. The empirical research will take place in a budget-hotel, located in the countryside of São Paulo State, and based on a multivariate conjoint analysis. This technique aims to give the relative importance which consumers (guests) associate to a group of particular characteristics in hospitality industry, and the degree of perceived utility of different levels of those attribute

Effects of ownership structure on the mergers and acquisitions decisions in Brazilian firms

Ownership structure, Mergers and acquisitions, Agency theory, Emerging economyPurpose – The purpose of this study is to examine the effects of ownership structure on merger and acquisition (M&A) decisions of Brazilian listed companies. Design/methodology/approach – This paper is an applied and explanatory research based on secondary data. The sample is comprises non-financial companies listed on the BM&FBovespa between 1998and 2007. Considering that the dependent variable is binary, the authors estimate panel data logistic regression models. Considering the existence of conflicts of interest among those who have the decisionmakingpower and the supplier of capital for M&A transactions, they draw upon the Agency Theory to develop the theoretical hypotheses. Findings – The results show that, for a sample of Brazilian non-financial companies listed on the BM&FBovespa (B3), from 1998 to 2007, Brazilian firms present, on average, a highly concentrated ownershipstructure and the major controlling shareholders are families or the State. These characteristics are negatively related to the likelihood of M&A transactions, as most of these controlling shareholders are reluctant to adoptmechanisms that reduce their control. Research limitations/implications – With regard to the limitations, this study considered only the M&A definitions as stated by the Bureau van Dijk database. In this sense, future studies may analyze theeffects of ownership structure based on other M&A definitions and typologies. In addition, the study is limited to the period from 1998 to 2007, which is prior to the international financial crisis. Future studies mayextend the analysis period to include the post-crisis period (2008) to check if there are differences in M&A strategies before and after the crisis. Practical implications – From a managerial perspective, the results show that minority shareholders have little or no influence over an M&Adecision, so they cannot decide on the use of resources for fast growthand access to new markets through M&A. Thus, the investment decision must take into account the nature and the quality of the controlling shareholder. Social implications – This study shows a significant and negative effect of ownership concentration on the likelihood of M&A transactions. In part, this result demonstrates the importance of understanding the behavior of controlling shareholders before inferring on other key aspects that the M&A literature tends to make fundamental in explaining M&A decisions in publicly traded companies, particularly, in an environment of low minority shareholder protection. Originality/value – Previous studies have partly found that the M&A decision is motivated by individual advantages obtained from increasing the size of the firm, or from managerial hubris. The results show thatthese hypotheses do not hold in the Brazilian context. Moreover, the results indicate that M&A decisions are associated with the characteristics of the controlling shareholder, their level of ownership concentration andtheir typology, contributing to the agency debate on whether the incentive or the entrenchment effect prevails in the context of the agency problem between controlling and minority shareholders, particularly, in aninstitutional environment of low shareholder protection. &nbsp

EFEITOS DA VINCULAÇÃO DE CONSELHEIROS AO ACORDO DE ACIONISTAS NO VALOR DA FIRMA

This study analyzes the effect of shareholders’ agreement binding provisions on firm value. Using a database of 181 publicly listed firms from the special segments of the BM&FBovespa, between 2008 and 2012, we analyze the effect of the inclusion of generic and specific clauses into the shareholder agreement bind director’s vote to the agreement on firm value. The results indicate a negative effect of the shareholders’ agreement on firm value. This effect is higher in the presence of generic clauses and lower in the presence of specific clauses, even after controlling for the endogeneity of the shareholders’ decision to adopt shareholder agreements. The results allow us to conclude that controlling shareholders use the shareholder agreements as a mechanism to enhance control at the expense of firm value (entrenchment effect). This article contributes to the literature on governance and corporate finance to reveal practices that weaken the role of one of the main pillars of governance, the board of directors