Business Commons^™

What Accounts For The Effect Of Sustainability Engagement On Stock Price Crash Risk During The Covid-19 Pandemic—Agency Theory Or Legitimacy Theory?, Junru Zhang, Chen Zheng, Yuan G. Shan

Research outputs 2022 to 2026

In this study, we conduct a textual analysis of the third-party disclosure of corporate sustainability news focused on the Standard and Poor's 500 firms in the United States market during the first and second quarter of 2020. We find a positive relationship between corporate sustainability news release and firm-specific stock price crash risk. This finding is surprising, but it indeed aligns with agency theory. It indicates that the coronavirus disease (COVID-19) pandemic exacerbated the tendency of managers under increasing financial pressure to use the sustainability information release as a mechanism to mask and withhold bad news for extended periods at …

Good Governance, Bad Governance: A Refinement And Application Of Key Governance Concepts, Scott L. Mitchell, Mark D. Packard, Brent B. Clark

Marketing & Entrepreneurship Faculty Publications

Understanding what makes governance 'good' or 'bad' has been impeded by construct ambiguity. Contemporary governance research has struggled to define 'governance' and related constructs such as 'ownership', 'agency', and 'management' in a way that clearly separates and distinguishes them. Often, the line between governance and management is so blurred that it is impossible to say what is good or bad 'governance' versus 'management'. Here we provide a systematic classification of key governance concepts in terms of their distinct economic functions. 'Governance', for instance, is the economic function of behavioural constraint. This allows us to state what 'good' governance is and …

Two Essays On Using Data Manipulation To Justify Biased Reports, Cody Lu

Doctoral Dissertations

An important aspect of data-generated metrics is the degree to which they can be manipulated by users. Agents providing reports often (a) have incentive conflicts with principals and (b) have access to and an ability to manipulate data used in those reports. This study investigates how data manipulation affects advisors’ tendency to provide biased recommendations when incentives between advisors and advisees are misaligned and aligned. Drawing on theories in deception and persuasion, I posit that, when incentives are misaligned, advisors will provide a more biased recommendation when the evidence used to support their recommendation is more manipulable. I also predict …

Slack, Location, Diversification, Or R&D Intensity? How The Most (And Least) Innovative Firms Deploy Resources, Jamil Kreugel, Matthew Farrell, Chris H. Willis

College of Business (Strome) Posters

Firms frequently innovate by recombining knowledge components. Through bringing together diverse scientific or technological concepts, firms can reassemble these extant knowledge components into novel and useful innovations. At the same time, many of the mechanisms firms use to recombine knowledge components carry substantial agency costs. When firms conduct research and development, diversify, hold slack resources, or locate near close competitors, they become vulnerable to misappropriation of investor resources due to opportunistic actions by agents. Using patent citation data from semiconductor firms, we study how firms, which consistently produce high-quality innovations, balance the need for knowledge recombination with the need to …

Former United States Political Figures On S&P 500 Boards: Three Essays, Tyler K. Wasson

2023

Corporate political activity has been considered an increasingly important component of corporate strategy (Schuler, et al. 2019). Corporate political activity research examines how corporations interact with political officials to attempt to influence their political environment in ways that benefit their economic activity (e.g., Funk & Hirschman, 2017; Lawton, et al. 2013). In this dissertation I present three novel research studies on one area where corporate political activity research is underdeveloped, the presence and impact of government experienced directors, individuals who were either elected or appointed to work for the United States (U.S.) government and then served as a director on …

Ergonomic Safety In Supply Chains, Andrew Thompson Prior

Doctoral Dissertations and Projects

Ergonomic injuries within supply chain and logistics organizations, specifically the finished vehicle logistics realm, have become a global crisis. The only way to solve this crisis is through proactive steps to reduce the lagging indicator of incident frequency and costs. This mixed method research study demonstrates the use of wearable safety technology to lower both incident frequency and incident cost. Quantitatively, this study resulted in statistically significant results that reduced the incident frequency at one site within the United States. Qualitatively, and the studies mixed results from the leadership and hourly employee within a finished vehicle logistics organization. Leadership focused …

Payout Policy, Managerial Perquisites, And Sticky Sg&A Costs, Deborah Smith

Business Faculty Publications

Background

Sticky SG&A costs provide a novel opportunity to investigate whether payout policy serves as a remedy for management overspending on perquisites that are embedded in SG&A expenses. Payout policy, especially under strong governance, may reduce overspending. Another possibility is that management may use sales declines opportunistically to repurchase shares when sales are expected to rebound.

Methods

Regression analysis is used to examine the effect of payout mechanisms (dividends, share repurchases, and combinations thereof) and shareholder rights (EIndex) to determine whether managerial overspending on perquisites is reduced through payout policy.

Results

The results indicate that dividends and share repurchases are …

Too Unsafe To Monitor? How Board-Ceo Cognitive Conflict And Chair Leadership Shape Outside Director Monitoring, Dennis B. Veltrop, Pieter-Jan Bezemer, Gavin Nicholson, Amedeo Pugliese

Research outputs 2014 to 2021

Research into boards of directors has provided mixed support for the view that outside directors' independence or leadership by an independent chair improves monitoring. In this study, we use a micro-level approach to provide a better understanding of why outside directors have difficulty in monitoring the CEO. We highlight that an important reason for this lies in the boardroom dynamics associated with (a) outside directors' cognitive conflict with the CEO and (b) the chair's leadership of the board. Our inductive analyses of video observations of board meetings in five Australian corporations revealed the importance of chair participative leadership during disagreement …

Uncovering Real Earnings Management: Pay Attention To Risk-Taking Behavior, Samar Alharbi, Md Al Mamun, Nader Atawnah

Research outputs 2014 to 2021

We examine the impact of corporate risk-taking on firm-level real earnings management. We find that firms with higher risk-taking engage in higher real earnings management. Our results are robust to a series of robustness tests, including simultaneous least squares approach, firm fixed effect, change analysis, and pseudo difference-in-difference analysis. Additional analyses reveal that the impact of risk-taking on real earnings management is more pronounced among firms that experience prior-year loss and are run by top-echelons who are risk lovers. Sarbanes-Oxley Act (SOX) regulation does not attenuate the positive effect of risk-taking on real earnings management. However, external monitoring by institutional …

Insider Ownership And The Performance Effects Of Firm Diversification In Nigeria, Ibeawuchi Ibekwe

Walden Dissertations and Doctoral Studies

Despite the preponderance of diversified firms, the diversification–performance (D–P) relationship and how insider ownership moderates it in Nigeria remains unclear and a concern for decision makers interested in the survival of firms and their contributions to society. This quantitative study was conducted to examine the D–P relationship and how it is associated with insider ownership in Nigeria. Agency theory and institution-based theory formed the theoretical foundation of this study. Four research questions that focused on how diversification is related to firm performance and how insider ownership moderates this relationship were answered using the panel design variant of correlational research. Data …

Two Essays On The Microstructure Of The Housing Market: Agents' Diffused Effort And Sellers' Behavior Bias, Zhaohui Li

Theses and Dissertations in Business Administration

For the first essay, we generalize the classic Williams [1998 RFS] brokerage model by introducing the diffused effort. That is, the agent can cross-utilize effort spending on one listing to another one. Besides, the agent can manage heterogeneous housing assets. One counterintuitive finding in Williams’ paper is the absence of the agency problem. As a special case in our model, we recover the agency problem. We examine the positive externality due to the diffused effort and show that it depends on the agent’s inventory size. Hence there exists a trade-off between agents’ effort spending on existing listings and on finding …

Management Succession In A Two-Family-Owned Business: A Case Study, Dwight D. Ham

Doctor of Business Administration (DBA)

The purpose of this paper was to examine the impact in a two-family-owned business of the management succession process to the second generation. The research explored the use and makeup of a management team in transferring the leadership of the company. The study looked at the preparation and determination of which members of the family would assume positions formerly held by the two patriarchs and who would assume executive responsibilities as president. The research endeavored to answer the following question: How is succession planning for multiple senior executive positions in a two-family-owned business accomplished in a second-generation family-executive team? The …

State-Owned Enterprises As Bribe Payers: The Role Of Institutional Environment, Noman Shaheer, Jingtao Yi, Sali Li, Liang Chen

Research Collection Lee Kong Chian School Of Business

Our paper draws attention to a neglected channel of corruption—the bribe payments by state-owned enterprises (SOEs). This is an important phenomenon as bribe payments by SOEs fruitlessly waste national resources, compromising public welfare and national prosperity. Using a large dataset of 30,249 firms from 50 countries, we show that, in general, SOEs are less likely to pay bribes for achieving organizational objectives owing to their political connectivity. However, in deteriorated institutional environments, SOEs may be subjected to potential managerial rent-seeking behaviors, which disproportionately increase SOE bribe propensity relative to privately owned enterprises. Specifically, our findings highlight the importance of fostering …

New Sheriff In Town: Antecedents And Consequences Of Effective Lead Independent Directors, Dinesh Hasija

Graduate Theses and Dissertations

This paper examines a relatively new form of board leadership structure, the Lead Independent Director (LID), that has not received much attention in the corporate governance literature. This role was adopted in 2003 by most large US firms as a result of stock exchange mandates and pressure from institutional investors. From an agency theory perspective, this new form of leadership structure was designed to give additional control to independent directors, thus enhancing the monitoring function of the board. However, according to symbolic management theory, firms may adopt such a structure merely as a response to institutional pressures, thus making no …

Does Institutional Ownership Affect Information Sharing With Independent Board Members?, Deborah D. Smith, Heidi H. Meier, Pervaiz Alam

Business Faculty Publications

Research Question This is an investigation of board independence to determine whether management shares information with the board, or withholds information to retain autonomy. A key contribution is to examine the interaction of institutional ownership with the main test variables to determine whether institutional governance influences the information environment as board independence is increased. Research Findings The results show that information asymmetry decreases internally and increases externally as board independence increases, yet institutional ownership appears to moderate or reverse this relationship. The following variables are used to explain why managers of firms are likely to have more information than outsiders: …

Multi-Principal Collaboration And Supplier’S Compliance With Codes-Of-Conduct, Emanuela Delbufalo, Marko Bastl

Management Faculty Research and Publications

Purpose

The purpose of this paper is to articulate propositions on how collaborating multi-national corporations (MNCs) can manage their supplier base in order to reduce the risk of suppliers’ non-compliance with shared codes-of-conduct.

Design/methodology/approach

The study utilises a conceptual theory development approach. In doing so, it utilises key tenets of agency theory that are applied in a multi-principal–supplier relationship context and synthesised in a series of propositions.

Findings

The study shows that MNCs have a variety of mechanisms for reducing the risk of suppliers’ non-compliance by decreasing information asymmetry, increasing their bargaining power and simultaneously use of both rewards/sanctions, and …

The Political Landscape: A New Approach To Understanding Corporate Political Activity, Michael Greiner

Wayne State University Dissertations

Despite the fact that Corporate Political Activity (CPA) is an area of research generating increasing interest among both academics and practitioners, there has been relatively little empirical research in the field, and what research has been done has often been inconclusive. In this dissertation, I argue that prior research has been hampered by a theory that relies upon a market analysis to understand this non-market activity. Instead, I describe and test a model of CPA in which business interests negotiate three factors in their efforts to convince politicians to support their positions: the ideology of the politician, the politician's relationships, …

Relationship Between Federal Compliance Complexities And Internal Control Infraction, Laurence Richard Brown

Walden Dissertations and Doctoral Studies

In the nonprofit industry, lapses in internal controls and low levels of accountability have resulted in many organizations becoming insolvent. Grounded in the agency theory, the purpose of this correlational study was to examine the relationship between federal compliance requirement, executive compensation, nonprofit size, nonprofit type, and internal control infraction. Archival data were collected from 144 nonprofit organizations in the southeast United States. The results of the multiple regression analyses indicated the model was able to predict the relationship between federal compliance requirement, executive compensation, nonprofit size, nonprofit type, and internal control infraction, F(7, 136) = 6.559, p < .001, R2 = .252, with non-profit type (hospitals), (β = -9.392, t = 7.191, p <0.050), accounting for a higher contribution to the model than executive compensation, (β = -0.049, t = 1.96, p <0.050). Federal compliance requirement and nonprofit size did not explain any significant variation in internal control infraction. The implications for positive social change included the potential for a better understanding by nonprofit managers of the importance of internal controls, leading to the effective and efficient provision of goods and services needed by members of society.

Agency Theory And Corporate Governance In China: A Meta-Analysis, Canan C. Mutlu, Marc Van Essen, Mike W. Peng, Sabrina F. Saleh

Faculty and Research Publications

Do agency theory-based “good corporate governance” principles indeed apply to China? A straightforward answer to this question is lacking, because evidence is inconclusive across studies. We endeavor to fill this gap by conducting the first meta-analysis on the China literature with two focuses. First, we assess the impact of (i) board independence, (ii) board leadership structure, and (iii) managerial incentives on firm performance, as these elements have been central to both agency theory as well as to Chinese corporate governance reforms. Second, we extend current theorizing by showing support for the temporal hypothesis, which states that over time, with the …

The Interactive Effect Of Monitoring And Incentive Alignment On Agency Costs, Geoffrey P. Martin Dr, Robert M. Wiseman Dr, Luis R. Gomez-Mejia Dr

Geoffrey P Martin

Credit Risk And Corporate Governance, Olivier Mugisho Mudekereza

Theses and Dissertations

Is the executive’s compensation structure influenced by the credit rating assigned to his company? I analyze a panel of U.S. public firms using the random-effects and fixed-effects estimations. Compared to firms with lower credit risk, I find that firms facing higher probability of default provide more incentives for their CEOs.

The Association Of Hospital Governance With Innovation In Taiwan, Chen-Wei Yang, Yu-Hua Yan, Shih-Chieh Fang, Noorein S. Inamdar, Hsiencheng Lin

Research Collection Lee Kong Chian School Of Business

Hospitals in Taiwan are facing major changes and innovation is increasingly becoming a critical factor for remaining competitive. One determinant that can have a significant impact on innovation is hospital governance. However, there is limited prior research on the relationship between hospital governance and innovation. The purpose of this study is to propose a conceptual framework to hypothesize the relationship between governance mechanisms and innovation and to empirically test the hypotheses in hospital organizations. We examine the relationship between governance mechanisms and innovation using data on 102 hospitals in Taiwan from the Taiwan Joint Commission on Hospital Accreditation and Quality …

The Impact Of Social Capital On Crowdfunding Performance, Lady Aprilia, Sigit S. Wibowo

The South East Asian Journal of Management

This study aims to analyze the effects of social capital—namely structural, relational, and cognitive dimensions—on crowdfunding performance using Kitabisa.com as a case study for 2013-2015. Using robust ordinary least squares methods, we find two important results. Structural dimension, which is measured by Facebook friends owned by an entrepreneur, affects crowdfunding success. The cognitive dimension, which is measured by the number of words that are written by entrepreneurs in the platform, also affects crowdfunding opportunities in order to wage a successful campaign. Using logistic regression technique, this study finds the same result, namely that the structural dimension and cognitive dimension have …

Competitive Repertoire Complexity: Governance Antecedents And Performance Outcomes, Brian L. Connelly, Laszlo Tihanyi, David J. Ketchen Jr., Christina Matz Carnes, Walter J. Ferrier

Department of Management: Faculty Publications

Research summary: Past inquiry has found that implementing complex competitive repertoires (i.e., diverse and dynamic arrays of actions) is challenging, but firms benefit from doing so. Our examination of the antecedents and outcomes of complex competitive repertoires develops a more nuanced perspective. Data from 1,168 firms in 204 industries reveal that complexity initially harms performance, but then becomes a positive factor, except at high levels. We use agency and tournament theories, respectively, to examine how key governance mechanisms—ownership structure and executive compensation—help shape firms’ competitive repertoires. We find that the principals of agency theory and the pay gap of tournament …

Personal Decision Factors Considered By Information Technology Executives: Their Impacts On Business Intentions And Consequent Cloud Computing Services Adoption Rates, Marcus Lee Smith Jr

Theses & Dissertations

During its infancy, the cloud computing industry was the province largely of small and medium-sized business customers. Despite their size, these companies required a professionally run, yet economical information technology (IT) operation. These customers used a total value strategy whereby they avoided paying for essential, yet underutilized, resources (e.g., full-time IT personnel and computing equipment with excess capacity) by outsourcing most, if not all, of their entire IT function. Since that time, the cloud industry has expanded the breadth of its service offerings greatly and the economies of scale have reduced the unit price point. In addition, research suggests other …

A Field Study Of The Impact Of A Performance-Based Incentive Plan, Rajiv D. Banker, Seok-Young Lee, Gordon S. Potter

Gordon Potter

Much management accounting research focuses on design of incentive compensation contracts. A basic assumption in these contracts is that performance-based incentives improve employee performance. This paper reports on a field test of the multi-period incentive effects of a performance-based compensation plan on the sales of a retail establishment. Analysis of panel data for 15 retail outlets over 66 months indicates a sales increase when the plan is implemented, an effect that persists and increases over time. Sales gains are significantly lower in the peak selling season when more temporary workers are employed.

Social Capital, Informal Governance, And Post-Ipo Firm Performance: A Study Of Chinese Entrepreneurial Firms, Jerry X. Cao, Yuan Ding, Hua Zhang

Research Collection Lee Kong Chian School Of Business

Social capital can serve as informal governance in weak investor-protection regimes. Using hand-collected data on entrepreneurs' political connections and firm ownership, we construct several original measures of social capital and examine their effect on the performance of entrepreneurial firms in China after their initial public offerings. Political connections or a high percentage of external investors tend to enhance firm performance, but intragroup related-party transactions commonly lead to performance decline. These forms of social capital have a strong influence on the performance of Chinese firms, whereas formal governance variables such as board size or board independence have little effect. Although social …

An Empirical Examination Of The Impacts From Termination Of A Performance-Based Incentive Plan, Rajiv D. Banker, Seok-Young Lee, Gordon S. Potter, Dhinu Srinivasan

Gordon Potter

This paper reports on the financial impacts from the termination of a pay for performance plan for the salesforce at a retail establishment. Using monthly panel data spanning more than eight years for 15 outlets of a major retailer, this study documents that store-level sales and operating profits decrease after the incentive plan is terminated. Individual performance data are then investigated to help identify the role of effort and selection effects in explaining the documented decrease. The analysis of the individual employee sales data reveals that virtually all of the declining store level sales can be explained by selection effects.

The Role Of Corporate Governance In Preventing Bank Failures In Zimbabwe., Bernard Chidziva

Walden Dissertations and Doctoral Studies

The 2008-2009 global financial crisis resulting in some banks collapsing has raised questions about the corporate governance of financial institutions. Some bank managers lack an understanding of the role of corporate governance in preventing bank failures. In this multiple case study, data were collected through interviews and triangulated with annual reports to explore the strategies some bank managers need to improve their understanding of the role of corporate governance in preventing bank failures in Zimbabwe. The 7 study participants were purposefully recruited from a larger population of 19 bank managers responsible for corporate governance and compliance operating in Zimbabwe between …

A State-Stewardship View On Executive Compensation, Hao Liang, Luc Renneboog, Sunny Li Sun

Research Collection Lee Kong Chian School Of Business

We take a state-stewardship view on corporate governance and executive compensation in economies with strong political involvement, where state-appointed managers act as responsible ‘stewards’ rather than ‘agents’ of the state. We test this view on China and find that Chinese managers are remunerated not for maximizing equity value but for increasing the value of state-owned assets. Managerial compensation depends on political connections and prestige, and on the firms’ contribution to political goals. These effects were attenuated since the market-oriented governance reform. In a social welfare perspective, such compensation stimulates not the maximization of shareholder value but the preservation of the …