Does the Governed Corporation Perform Better? Governance Structures and Corporate Performance in Germany

Lehmann, Erik E.; Weigand, Jürgen

doi:10.1023/a:1009896709767

Cited by 299 publications

(52 citation statements)

References 70 publications

(11 reference statements)

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“…Similar to controlling shareholders, by holding a substantial voting block, other large shareholders would also have the power and incentives to monitor insiders (i.e., controlling shareholders and their affiliated managers), therefore restricting insiders' opportunistic behaviors (Maury & Pajuste, 2005). For instance, Lehman and Weigand (2000) find evidence that the presence of a strong second largest shareholder is positively related to firm profitability in German listed companies (also see Faccio et al, 2001;Maury & Pajuste, 2005). These findings indicate that multiple large shareholders would be an effective governance mechanism to balance the control of controlling shareholders and would restrict their tunneling in firms with concentrated ownership.…”

Section: Multiple Large Shareholdersmentioning

confidence: 99%

The private benefits of control in Chinese listed firms: Do cash flow rights always reduce controlling shareholders’ tunneling?

2010

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This study measures the size of private benefits of control (PBC) and explores the impact of ownership structure and board independence on controlling shareholders' tunneling. Using data of Chinese listed companies between 2003 and 2006, we find that the average size of PBC, as measured by the price premium of block share transactions, is approximately 10.66% in Chinese listed companies. Also, firms with more independent directors on the board and firms with multiple large shareholders have a smaller size of PBC. Therefore, they experience a lower level of expropriation of minority investors by controlling shareholders. We particularly find evidence of a nonlinear U-shaped relationship between controlling shareholders' PBC and their cash flow rights. On the left half of the nonlinear Ushaped curve, consistent with the interest-alignment effect of increased ownership concentration, increased cash flow rights appear to be effective in reducing controlling shareholders' tunneling. However, on the right half, increased cash flow rights would exacerbate controlling shareholders' expropriation of minority investors, which is the entrenchment effect of increased ownership concentration.

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Section: Multiple Large Shareholdersmentioning

confidence: 99%

The private benefits of control in Chinese listed firms: Do cash flow rights always reduce controlling shareholders’ tunneling?

2010

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“…ROA is a preferred measure to examine the relation between performance and corporate governance because it is not affected by leverage, extraordinary items and other discretionary items (Core, Guay, & Rusticus, 2006). In coherence with this finding, we found numerous studies examining corporate governance where ROA was used as a performance measure (Balabat, Teylor & Walter, 2004;Brown & Caylor, 2009;Haniffa & Hudaib, 2006;Christensen, Kent, & Stewart, 2010;Kiel & Nicholson, 2003;Lehmann & Weigand, 2000). The financial data were acquired from official annual reports.…”

Section: Methodsmentioning

confidence: 55%

Corporate Governance Against Recommendations: The Cases of the Strong Executive and the Strong Ownership

Král¹,

Tripes²,

Pirožek³

et al. 2012

JOC

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There are several basic configurations of corporate governance according to the separation of ownership and control ( Jensen's theory). Effective governance is described as a situation when an owner (or group of owners) keeps the right to ratify and monitor strategic decisions while management has the right to initiate and implement those decisions. There are two particular situations how this recommendation is partially broken and both situations are linked to CEO duality. The first case happens when an owner loses or does not exercise the right to monitor management of the organization and is termed as the strong executive. The second case is called the strong ownership and is distinguished by an owner taking over implementations of the decisions. The focus of the study was to explore particularly configurations of the strong executive and the strong governance. A mixed method research design was chosen to explore the differences between the basic governance configurations. The sample was chosen by purposive sampling and covered a hundred for-profit organizations of all size and from all sectors of economy. The data were collected through interviews with representatives, mainly members of top management. We revealed that both of these configurations can bear good corporate performance but also bigger risks. The strong executive is typical for organizations with dispersed ownership or a publicly owned organization and the performance of the organization is fully dependent on competencies but also personalities of managers. This configuration contains a high risk of misuse of authority. The strong ownership is effective in small organizations while in a larger organization leads to an overexertion of owners and low performance because they usually face problems to keep focus on the strategic issues of the organization.

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“…In contrast, McConnell and Servaes (1990) and Thomsen and Pedersen (2000) show a positive relation between performance and ownership concentration. Mudambi and Nicosia (1998) in the UK and Lehmann and Weigand (2000) in Germany indicate a negative linear relationship between ownership concentration and firm performance. They believe that expropriation behaviour of block owners negatively affects firm performance, because block owners try to have benefits on minority shareholders' costs.…”

Section: Literature Reviewmentioning

confidence: 96%

Global Financial Crisis and Role of Ownership Structure on Cost of Capital

Rad¹,

Locke²,

Reddy³

2013

AJFA

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This paper explores the relationship between ownership structure and cost of capital. Prior studies have established links between ownership structure, firm performance and cost of capital but their results are mixed and inconclusive. As ownership structure is one of the important issues faced by corporates, especially in listed companies, the objective of this study is to explore the relationship between ownership structure and cost of capital in listed companies. In addition, the role ownership structure plays is regarded as important; the expectation of managers and shareholders is to determine the optimal ownership structure that protects companies in normal and in crisis situations as well. Therefore, this study ISSN 1946-052X 2013 www.macrothink.org/ajfa 397 explores the role ownership structure plays in determining the cost of capital during and after the financial crisis period. After employing the panel regression method, we report a negative relationship between the ownership structure and cost of capital during a global financial crisis. Asian Journal of Finance & Accounting

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Does the Governed Corporation Perform Better? Governance Structures and Corporate Performance in Germany

Cited by 299 publications

References 70 publications

The private benefits of control in Chinese listed firms: Do cash flow rights always reduce controlling shareholders’ tunneling?

The private benefits of control in Chinese listed firms: Do cash flow rights always reduce controlling shareholders’ tunneling?

Corporate Governance Against Recommendations: The Cases of the Strong Executive and the Strong Ownership

Global Financial Crisis and Role of Ownership Structure on Cost of Capital

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