State Ownership and Firm Performance: Evidence From the Chinese Listed Firms

Based on a sample of Chinese listed firms, this paper seeks to understand the role of state ownership on firm performance (accounting-based returns) and firm value (market-based indicators). Results show that state ownership is positively associated with firm performance. In addition, state ownership has a moderating effect on the association between firm performance and firm value. At low levels of state ownership, firm performance is negatively associated with firm value. However, at high levels of state ownership, the association becomes positive. Drawing on signaling theory, the study helps to understand the role of state ownership in the association between firm performance and firm value, an area that has received minimum attention in research.Specifically, state ownership may be a strategic asset for Chinese listed firms boosting accounting returns but perceived differently by the market.Given the current levels of state ownership in many transitional economies, this study sheds light for policy makers on the effects of high or low levels of state ownership on firm performance and value. Moreover, the study may assist would-be investors who may contemplate investing in privatized SOEs, in China or other countries with similar institutional arrangements

Neo-institutional theory and institutional change : executive share options in Germany

This study focuses on one element of corporate governance, Executive Stock Options (ESOs) in Germany. The fact that ESOs are purely an Anglo-American innovation, and are now getting adopted in Germany; a country whose corporate governance system is so much different from that of the UKlUSA, makes this study more interesting. Several studies on executive compensation have used agency theory as a theoretical lens. On the contrary, this study employs neo-institutional theory, a theoretical lens that embraces socio-economic factors within the firm's institutional and market environment. In general, early institutional theory was associated with path dependence and inertia. In international corporate governance, it has been used as an explanation for the continued divergence of national systems in certain contexts. However, recent developments in neo-institutional theory, under a combination of the New Institutional Sociology strand and the Old Institutional Economics strand identify the circumstances in which change is likely to occur, and this theory is developed to produce hypotheses in relation to governance changes. The adoption in Germany of the US practice of rewarding executives with stock options is chosen as a governance institution suitable for empirical testing. Results show significant hypothesized associations between firms' ESO adoption and institutional variables such as the presence of US investors, declared shareholder value commitments, dispersed share ownership and large block-holdings. Profits seem to act as an enabling resource for ESO adoption, rather than low profits creating a crisis and a greater willingness to adopt ESO changes. This study adds theoretical development in the study of corporate governance, especially to the debate on governance convergence. Indeed, German corporate governance is far from converging on the American system, and as shown in this study, changes in the German system suggest a 'hybrid' of firm corporate governance. With a lot of institutional changes taking place in transition economies (e.g. China and Eastern Europe), the European Union, and developing countries, this study has great relevance for policy makers and firm-level strategy.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

Women on corporate boards around the world: Triggers and barriers

One of the institutions in which the gender gap remains a contestable issue is the board of directors, where the proportion of female directors is still low. While some countries have achieved higher proportions of female directors on their corporate boards, others have not registered even a single one. Drawing on social role theory, that places emphasis on traditional gender activities, this study starts by arguing that board directorship is an agentic role and more suitable for men. The study shows that key social institutions have the potential to alleviate such stereotypical attitudes or to maintain the status quo. Employing a robust statistical technique in two-stage least squares (2SLS), this study finds that the representation of women in other key national institutions, such as in politics, positively affects the appointment of female directors on boards. On the other hand, religiosity has a negative causal effect on female board appointments

R&D investments in emerging market firms:the role of institutional investors and board interlocks

Despite the increase in institutional investor shareholdings in emerging market firms, their impact on R&D investments has received scant attention in the literature. By integrating agency and resource dependence perspectives, we examine the role of different types of institutional investors and their interactions with board interlocks in shaping their preference for R&D investment in their portfolio firms. We test our hypotheses on a sample of 2,478 Indian firm‐year observations from 2005 to 2019, using various estimation techniques. Our results indicate that different categories of institutional investors have distinct preferences for R&D investment. Specifically, we find that ownership by both foreign institutional investors and mutual fund investors negatively impacts R&D investments in firms. While board interlocks positively moderate the impact of institutional investors such as banks and financial institutions and foreign institutional investors on R&D investments in firms, this moderation is negative in the case of mutual fund investors and R&D investments in firms. We contribute to the understanding of the determinants of R&D investments in emerging market firms, with a specific focus on institutional investor ownership and add to the nascent literature on the interaction between two forms of governance, i.e., ownership and board characteristics, in shaping this firm strategy

Mutual funds, tunneling and firm performance:evidence from China

© 2019, The Author(s). In contrast to US companies, Chinese firms have concentrated ownership with the effect that the central agency problem emanates from controlling shareholders expropriating minority shareholders, a phenomenon referred to as ‘tunneling’. This study examines the monitoring effect of mutual funds on the tunneling behavior of controlling shareholders. Due to the distinctive institutional settings in China, including a high level of ownership concentration, underdeveloped legal system in the stock markets and weak governance mechanisms in the mutual fund industry, we find that an increase in mutual fund ownership effectively mitigates the tunneling behavior of controlling shareholders thus improving firm performance. Nonetheless, after the mutual fund ownership reaches a certain threshold, an increase in concentrated mutual fund ownership is associated with heavier tunneling and lower firm performance. This may suggest that concentrated mutual funds collude with controlling shareholders in order to preserve their private interests. Moreover, the above effects are found to be more pronounced for firms with heavier tunneling activities. Our finding of the non-monotonic monitoring role of mutual funds brings attention to the private interest theory for mutual funds, an aspect that has been largely ignored in previous studies on mutual funds

Top executive compensation, regional institutions and Chinese OFDI

Integrating agency and institutional theories, this paper examines the impact of top-executive compensation and regional institutions on the outward FDI(OFDI) of a sample of Chinese-listed firms. The results show that top-executive cash pay and equity ownership have a positive association with OFDI. Differing from previous studies focusing on cross-country institutional variances, we take variations in within-country institutions into account and find that regional institutions in terms of product markets, factor markets and legal systems play an important role in OFDI and positively moderate the governance role of managerial equity ownership

Board meeting attendance by outside directors

Outside directors’ regular board meeting attendance is important in improving the effectiveness of a governance system. Such attendance is evidence of their commitment to the firm as key other players in monitoring and decision making. Using a unique dataset for Korean firms, and three-level random coefficients models, we find that, foreign outside directors, an independent appointment process, professional knowledge of business operations and accumulated firm-specific knowledge are important factors that affect outside directors’ attendance of board meetings. The results also confirm that both outside directors’ personal characteristics and the social context are crucial in understanding their board meeting attendance. Further analysis shows that a positive corporate environment that supports the outside director system encourages outside directors’ attendance at board meetings.Griffith Business School, Department of International Business and Asian StudiesFull Tex

The perspective of corporate governance reformation from the lens of institutional theory

The purpose of this conceptual paper is to address the importance of examining the link between corporate governance and foreign equity investment through the right theoretical lens. The paper focuses on the discussion of corporate governance reformation in Malaysia that gradually converged towards Anglo-American model at the pinnacle of Asian financial crisis 1997/1998. By embracing institutional theory, the actions taken by majority of organizations in Malaysia in the aftermath of the crisis are justified and the reactions of foreign investors towards the corporate governance recuperation in Malaysia’s institutional corporate setting are explained. This paper also provides in depth explanation of the applied theory, which under the scope of neo-institutional theory that accentuated on legitimacy. Besides, this paper claims the relevant use of this theory with the subject discussed, thus argues the significant importance of theoretical aspects of the institutional context to the study of governance change and institutional dynamic setting in emerging country like Malaysia. In summary, the use of apt lens of theory to justify the reactions and actions taken by the actors is imperative as an essence to convey a period of momentous changes in the storyline of the governance change from the perspective of the foreign investors