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PurposeThis paper aims to explore the effect of interlocking directorates on agency conflicts and corporate performance in the shipping industry.Design/methodology/approachThe authors use social network analysis to discover central nodes in the network of personal and corporate connections in an international sample of 110 listed shipping companies.FindingsAssessing network structure, the authors find that the network of corporate leaders is denser than the network of shipping companies. The network of shipping companies is populated with many isolated nodes; the network of shipping executives and directors is populated with many cohesive groups in which the longest distance between two corporate leaders is two companies. The authors find that interlocking corporate leadership can help resolve agency conflicts in the shipping industry, bearing a negative effect on the magnitude of agency costs. The extent of leadership overlaps is associated with board size, financial leverage and profitability. The relationship between profits and interlocks is bidirectional, implying that interlocking directorates bear a positive effect on asset returns.Originality/valueThe authors map the relational structures in the social networks of companies and company leaders in the shipping industry and discover the cross-sectional determinants of interlocks in the shipping industry. The finding about the effect of interlocks on profitability and agency costs bears policy implications for the design of corporate governance in the shipping industry.

AbstractNamesake funds provide a unique sample for studying the two agency conflicts that exist within a mutual fund. The first is between the fund management company and fund shareholders, and the second is between the fund management company and the fund manager. A typical namesake fund manager sits on his or her fund's board, frequently as the chairman, is the majority owner of the fund management company, and has significant investments in the fund he or she manages. Our results indicate that namesake funds charge higher fees, suggesting that the boards of namesake funds are less effective. We find that namesake funds are more tax efficient, consistent with the idea that managerial ownership helps align the interests of managers with those of shareholders. Because of fewer career concerns, namesake fund managers herd less while assuming greater unsystematic risk. We find weak evidence that namesake fund managers outperform their benchmarks and peers. Finally, we observe that namesake funds attract higher levels of investor cash flow.

This study explores an alternative approach to regulation for addressing corporate governance problems relating to director and executive remuneration disclosure that are often associated with corporate collapses worldwide. Drawing on the concept of collibration, an approach to managing tensions between opposing forces in a social arena through government intervention, the study explores its application to the development of a unique regulatory framework, comprised of a mix of state and self regulation for corporate governance in Australia. Thereafter the study examines the impact of mixed regulation on disclosure level of director and executive remuneration in Australian firms. The results of econometric analyses show that remuneration disclosure levels are significantly higher after the establishment of a mixed regulatory regime. After controlling for firm specific characteristics, improvement in the level of remuneration disclosure is found to be primarily driven by the establishment of remuneration committees, chairman and CEO role separation, presence of CEO on remuneration committee, number of female directors on remuneration committee and the presence of remuneration consultant – thus highlighting the key aspects of mixed regulatory initiatives influencing disclosure levels in Australia. In addition, this research examines the distinctive case of MNC-subsidiaries in Australia, by uncovering how multi-nationality can affect disclosure level of director and executive remuneration. The results suggest that, other things being equal, MNCs are less responsive to increased disclosure requirements than their local counterparts in Australia unless they have substantial interactions with Australian product markets. The study lends support to the growing body of literature which advocates collibration as a contemporary approach to reduce agency problems through government intervention. The findings demonstrate the effectiveness of collibration in facilitating the implementation of recommended self-regulatory ...

This study investigates the impact of corruption on corporate cash holdings in China. The political extraction argument predicts that firms might shelter liquid assets to avoid extraction by corrupt officials. Using data on A-shared listed firms between 2007 and 2012, we find that firms located in more corrupt regions hold less cash, supporting this hypothesis. Political resources help to diminish the risk of exploitation, reducing the extent to which liquid assets are sheltered. We find that the negative association between corruption and cash holding is more significant for non-state-owned enterprises (Non-SOEs) than for state-owned enterprises (SOEs). Moreover, the cash holdings of Non-SOEs without political connections are more sensitive to corruption than those of Non-SOEs with political connections. These findings demonstrate that expropriation by corrupt officials is an important factor driving firms to manage liquidity.

Introduction/Main Objectives: This study examines the effect of institutional ownership, proxied by government and private ownership, and bank monitoring on agency conflicts. Background Problems: The previous literature focused on agency conflicts, particularly those between managers and shareholders in developed markets, with much less evidence being presented from emerging ones. Novelty: We consider the role of creditors (the banks) in mitigating agency conflicts, and the managers' irresponsible behavior, which in previous studies has been largely under-elaborated. Research Methods: Using 1,525 observations of 305 non-financial companies that were listed in the 2011-2015 period, we employ the generalized least squares method to deal with potential econometric concern such as autocorrelation and heteroscedasticity. Finding/Results: We find that institutional ownership and bank monitoring, proxied by the number of banks and the share of their loans, are negatively related to agency conflicts. Conclusion: Banks and institutional ownership lead to lower agency conflicts. However, one should mitigate free-rider problems emanated from these relationships.

The article attempts to determine whether the increase in debt burden reduces the costs of agency conflicts in Russian public companies with various types of ownership. The subject is the relationship between the share of debt in the capital structure and the costs of agency conflicts. The main goal is to develop the ways to reduce the costs of agency conflicts in Russian companies by managing the capital structure, taking into account the ownership structure of these companies. To achieve this goal, the authors present the results of an empirical study to identify the impact of debt in Russian public companies on reducing the costs of agency conflicts, depending on the type of ownership structure. New results obtained during an empirical study of 109 Russian public companies for the period from 2016 to 2020 prove the influence of company's capital structure on the level of agency costs. Thus, it has been proven that debt has a significant negative impact on the costs of agency conflicts in companies with state, managerial and institutional types of ownership. The concentration of managerial ownership is also of high importance. The authors argue that debt is more effective at low (<25%) concentration of management ownership. In addition, the study proves a non-linear relationship between debt and the costs of agency conflicts. Accordingly, in order to increase the effectiveness of this instrument, it is necessary to find the optimal capital structure (for electric power companies, it is about 37%, while for other industries – about 25%). Finally, the authors offer recommendations regarding the management of capital structure in Russian companies in order to reduce the costs of agency conflicts. These results can be used in joint-stock companies by both shareholders and management to reduce the consequences of agency problem in companies.

ABSTRACTManuscript Type: EmpiricalResearch Question/Issue: Using the conceptual framework of Aguilera, Filatotchev, Gospel, and Jackson, this study examines the impact of principal‐principal agency problems on the quality and effectiveness of corporate governance structures in listed companies from 14 European countries between 1999 and 2003. Specifically, we develop an index on the severity of the agency conflict and investigate whether this index explains the quality of governance structures. We also examine whether, given certain environmental complementarities, this index influences the effectiveness of good governance structures.Research Findings/Insights: Using a simultaneous equations model, we find that the conflict index affects the quality and effectiveness of corporate governance. When agency conflicts are severe, the costs of installing good governance are high for the majority shareholders and the quality is low. Once installed, however, good governance structures complemented with a high‐quality disclosure environment leads to higher firm value, especially in companies with a severe agency conflict.Theoretical/Academic Implications: Our study adds to the governance literature by focusing on the costs of installing good governance. Further, it contributes to principal‐principal agency studies by examining a number of developed countries and by developing a measure for the severity of the principal‐principal conflict. Finally, our study adds to institutional theory by showing how companies' corporate governance choices are affected by the severity of agency conflicts and the way corporate governance is regulated.Practitioner/Policy Implications: Our analyses suggest that regulatory approaches to corporate governance issues should move away from a "one‐size‐fits‐all" policy toward one that takes into account the organizational and environmental context. By demonstrating that the severity of principal‐principal agency conflicts results in significant differences in the existence and effectiveness of corporate governance, our empirical evidence can guide regulators in developing new regulations or laws intended to reduce private benefits of control or improve the disclosure environment.

We examine the value implications of Jensen's free cash flow hypothesis for a sample of Australian listed companies. Consistent with the US evidence in Masulis, R, C Wang and F Xie (2009). Agency problems at dual-class companies. Journal of Finance, 64(4), 1697–1727, we find that the marginal value of corporate capital expenditures in Australian listed companies is inversely related to the magnitude of agency conflicts arising out of the use of free cash flows. Our results suggest that firms where managers have a greater ability to extract private benefits and are therefore more likely to maximize their own private benefits rather than shareholder wealth will suffer from a lower perceived valuation of their capital investments. Our findings are robust to alternative proxies for relative cash flows and growth opportunities and also hold over multiple sub-periods and industry groupings.