Corporate Governance and Firm Value: the Impact of the 2002 Governance Rules

Chhaochharia, Vidhi; Grinstein, Yaniv

doi:10.2139/ssrn.556990

Cited by 127 publications

(74 citation statements)

References 27 publications

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“…Recent studies also find that the introduction of new CG regulations such as the Sarbanes-Oxley Act in the US can be counterproductive for some companies' valuation (Chhaochharia & Grinstein, 2007;Wintoki, 2007). Moreover, over-governance costs can be related, in outsider systems, to corporate expenses associated with routine compliance with governance rules and regulations such as cash expenditures on recruitment and remuneration of executive and independent directors, over-allocation of stock options to managers (Frey & Osterloh, 2005), and costs of external disclosure systems, including external reporting.…”

Section: Propositions Developmentmentioning

confidence: 99%

Bundles of Firm Corporate Governance Practices: A Fuzzy Set Analysis

García‐Castro

Aguilera

Ariño

2013

Corporate Governance

140

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Manuscript Type Empirical Research Question/Issue We explore how the combinations of firm‐level corporate governance (CG) practices embedded in different national governance systems lead to high firm performance. Research Findings/Insights Using fuzzy set/qualitative comparative analysis, we uncover a variety of findings. First, we show that within each of the stylized national CG models, there are multiple bundles of firm‐level governance practices leading to high firm performance (i.e., equifinality). Second, we provide evidence of complementarity as well as functional equivalence between CG practices. Finally, we demonstrate that there can be heterogeneity (“differences in kind”) in firm governance practices within each stylized model of CG. Theoretical/Academic Implications We build on the configurational and complementarity‐based approaches to make the following theoretical claims. First, governance practices within firm bundles do not always relate to each other in a monotonic and cumulative fashion as this entails higher costs and possibly over‐governance. Second, practices in bundles do not need to be aligned toward the insider or the outsider model (“similar in kind”). We argue that non‐aligned practices can also be complementary, creating hybrid governance forms. Third, we predict functional equivalence across bundles of CG practices which grants firms agency on which of the practices to implement in order to achieve high performance. Practitioner/Policy Implications We contribute to comparative CG research by demonstrating that there are multiple governance paths leading to high firm performance, and that these practices do not always belong to the same national governance tradition. Therefore, our findings alert of the perils of “one size fits all” governance solutions when designing and implementing CG policies.

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Section: Propositions Developmentmentioning

confidence: 99%

Bundles of Firm Corporate Governance Practices: A Fuzzy Set Analysis

García‐Castro

Aguilera

Ariño

2013

Corporate Governance

140

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“…Surprisingly, very little effort has been made to determine whether corporate governance affects the propensity of firms to comply with regulatory regimes. 1 The arrival of the Sarbanes-Oxley Act has motivated researchers to examine the role of regulation on corporate behavior and performance (Canary and Jennings, 2008;Chhaochharia and Grinstein, 2007;Cunningham, 2003;De Franco et al, 2005;Romano, 2004;Zhang, 2007). However, the US is unusual in that recent enforcement of punishments relating to non-compliance have diligently been implemented.…”

Section: Introductionmentioning

confidence: 99%

The Determinants of Regulatory Compliance: An Analysis of Insider Trading Disclosures in Italy

et al. 2009

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“…Zhang (2005) reports that the Act had an overall negative impact on the U.S. stock market. By contrast, Chhaochharia and Grinstein (2005), Jain and Rezaee (2005), and Li, Pincus and Rego (2006) report that the Act had an overall positive effect. Moreover, even the studies that report the same overall effects of the Act, reach different conclusions on the cross-sectional effects of the new legislation.…”

Section: The Sarbanes-oxley Actmentioning

confidence: 97%

“…Due to this uncertainty in determining the specific timing of the market reaction, Chhaochharia and Grinstein (2005) used a lengthy window from November 2001 to October 2002 to capture all of the news related to the regulation. By contrast, Jain and Rezaee (2005), Li, Pincus and Rego (2006), and Zhang (2005) determine the key dates on which the market became aware of the regulation, although these studies differ as to what these key dates are.…”

Section: The Sarbanes-oxley Actmentioning

confidence: 99%

“…Moreover, even the studies that report the same overall effects of the Act, reach different conclusions on the cross-sectional effects of the new legislation. For example, Jain and Rezaee (2005) report that the Act tended to enhance the value of the firms already in compliance with the mandates of the Act, while Chhaochharia and Grinstein (2005) report that the Act increased the value of the firms that were not in compliance with the Act.…”

Section: The Sarbanes-oxley Actmentioning

confidence: 99%

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