Abstract:Manuscript Type: ConceptualResearch Questions/Issues: We explore why and how the different combinations of governance practices at national level, such as the legal system, conduct codes, and capital markets, and at firm level, such as various types of controlling shareholders, enable or constrain outside directors to engage in their monitoring and resource provision roles. Building upon such analysis, we develop a new taxonomy of corporate governance systems according to the different configurations of a set … Show more
“…Family Ownership. Family owners are different from other forms of concentrated owners because families invest their own money in their business ventures and dominate the board (McGuire, Dow, & Ibrahim, 2012), which translates into a long-term business outlook and a concern for stakeholder relationships (Yoshikawa, Zhu, & Wang, 2014). There are three key theoretical explanations linking family ownership to CSR outcomes.…”
Manuscript Type: ReviewResearch Question/Issue: This study provides a systematic multi-level review of recent literature to evaluate the impact of corporate governance mechanisms (CG) at the institutional, firm, group, and individual levels on firm level corporate social responsibility (CSR) outcomes. We offer critical reflections on the current state of this literature and provide concrete suggestions to guide future research. Research Findings/Insights: Focusing on peer-reviewed articles from 2000 to 2015, the review compiles the evidence on offer pertaining to the most relevant CG mechanisms and their influence on CSR outcomes. At the institutional level, we focus on formal and informal institutional mechanisms, and at the firm level, we analyze the different types of firm owners. At the group level, we segregate our analysis into board structures, director social capital and resource networks, and directors' demographic diversity. At the individual level, our review covers CEOs' demography and socio-psychological characteristics. We map the effect of these mechanisms on firms' CSR outcomes. Theoretical/Academic Implications: We recommend that greater scholarly attention needs to be accorded to disaggregating variables and yet comprehending how multiple configurations of CG mechanisms interact and combine to impact firms' CSR behavior. We suggest that CG-CSR research should employ a multi-theoretical lens and apply sophisticated qualitative and quantitative methods to enable a deeper and finer-grained analysis of the CG systems and their influence on CSR. Finally, we call for cross-cultural research to capture the context sensitivities typical of both CG and CSR constructs. Practitioner/Policy Implications: Our review suggests that for structural changes and reforms within firms to be successful, they need to be complemented by changes to the institutional makeup of the context in which firms function to encourage/induce substantive changes in corporate responsible behaviors.
“…Family Ownership. Family owners are different from other forms of concentrated owners because families invest their own money in their business ventures and dominate the board (McGuire, Dow, & Ibrahim, 2012), which translates into a long-term business outlook and a concern for stakeholder relationships (Yoshikawa, Zhu, & Wang, 2014). There are three key theoretical explanations linking family ownership to CSR outcomes.…”
Manuscript Type: ReviewResearch Question/Issue: This study provides a systematic multi-level review of recent literature to evaluate the impact of corporate governance mechanisms (CG) at the institutional, firm, group, and individual levels on firm level corporate social responsibility (CSR) outcomes. We offer critical reflections on the current state of this literature and provide concrete suggestions to guide future research. Research Findings/Insights: Focusing on peer-reviewed articles from 2000 to 2015, the review compiles the evidence on offer pertaining to the most relevant CG mechanisms and their influence on CSR outcomes. At the institutional level, we focus on formal and informal institutional mechanisms, and at the firm level, we analyze the different types of firm owners. At the group level, we segregate our analysis into board structures, director social capital and resource networks, and directors' demographic diversity. At the individual level, our review covers CEOs' demography and socio-psychological characteristics. We map the effect of these mechanisms on firms' CSR outcomes. Theoretical/Academic Implications: We recommend that greater scholarly attention needs to be accorded to disaggregating variables and yet comprehending how multiple configurations of CG mechanisms interact and combine to impact firms' CSR behavior. We suggest that CG-CSR research should employ a multi-theoretical lens and apply sophisticated qualitative and quantitative methods to enable a deeper and finer-grained analysis of the CG systems and their influence on CSR. Finally, we call for cross-cultural research to capture the context sensitivities typical of both CG and CSR constructs. Practitioner/Policy Implications: Our review suggests that for structural changes and reforms within firms to be successful, they need to be complemented by changes to the institutional makeup of the context in which firms function to encourage/induce substantive changes in corporate responsible behaviors.
“…Hence, rigorous national governance structures tend to demand mandatory information disclosure and regulate market intermediaries, thereby alleviating information asymmetries. Also, they place the board of directors and managers under larger pressure to implement their regulatory responsibility (Yoshikawa et al, 2014). Collectively, rigorous national governance structures can serve as a valuable external governance instrument to protect shareholders and influence accountability and disclosure quality.…”
Section: National Governance Quality and Rdpsmentioning
We examine the relationships among religious governance, especially Islamic governance quality (IGQ), national governance quality (NGQ), and risk management and disclosure practices (RDPs), and consequently ascertain whether NGQ has a moderating influence on the IGQ-RDPs nexus. Using one of the largest data sets relating to Islamic banks from 10 Middle East and North Africa (MENA) countries from 2006 to 2013, our findings are threefold. First, we find that RDPs are higher in banks with higher IGQ. Second, we find that RDPs are higher in banks from countries with higher NGQ. Finally, we find that NGQ has a moderating effect on the IGQ-RDPs nexus. Our findings are robust to alternative RDP measures and estimation techniques. These results imply that the quality of disclosure depends on the nature of the macro-social-level factors, such as religion that have remained largely unexplored in business and society research, and, therefore, have important implications for policy makers.
“…The authors argue that optimal governance structure may be determined by the cost-benefit analysis of different bundles of mechanisms. In a similar vein, Aguilera, Filatotchev, Gospel, and Jackson (2008) and Yoshikawa, Zhu, and Wang (2014) suggest that a particular governance standard or practice may show only an imperfect picture of the firm's internal monitoring mechanisms and that its effect is likely to vary across firms. Our study sheds further light on whether the firm's internal governance mechanisms are related to the market for corporate control (i.e., external governance) using a comprehensive measure of governance quality.…”
Manuscript Type: EmpiricalResearch Question/Issue: This paper examines the relation between internal corporate governance and the market for corporate control by analyzing how firms' internal governance mechanisms are related to states' antitakeover statutes (ATS). Specifically, we test two competing hypotheses concerning the effect of ATS on internal governance: the substitution hypothesis and the complementarity hypothesis. Research Findings/Insights: We provide evidence that is consistent with the complementarity hypothesis that exposure to a possible takeover increases rather than decreases the need for better internal governance mechanisms. Specifically, firms that are exposed to takeover threats (i.e., firms in states without ATS or firms that opt out of states' ATS) have stronger internal governance mechanisms (i.e., adopt a greater number of governance standards) than do firms that are not exposed to takeover threats (i.e., firms in states with ATS). In a similar vein, firms adopt more internal governance standards when states abolish existing ATS. Theoretical/Academic Implications: Although prior research suggests that exposure to takeover threats reduces managerial entrenchment through its disciplinary effect, our study provides evidence that exposure to a possible takeover could exacerbate the managerial myopia problem and that firms mitigate this problem through internal governance mechanisms. The results of the present study suggest that certain governance mechanisms (e.g., state-level ATS) are more effective in addressing the agency problem in the presence of other complementary governance mechanisms (e.g., firm-level governance standards), contributing to the growing literature that calls attention to the importance of viewing various governance mechanisms from a bundle perspective. In addition, our study contributes to the literature with a new identification strategy. Our identification strategy makes use of the fact that firms would not be subject to the same shock from the abolition of ATS if they had already opted out, which enables us to analyze the relation between ATS and internal governance mechanisms more accurately. This identification strategy may benefit future studies that consider state-level changes in ATS to be exogenous shocks. Practitioner/Policy Implications: Our study provides empirical evidence concerning the complex ramifications of states' antitakeover statutes for corporate governance that policymakers and market regulators should consider in their decision-making. The complementarity, particularly between state-level laws and firm-level board functions, may deserve better attention from policymakers, regulators, and corporate managers.
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