Search results

The purpose of this paper is to study how CEO power impact corporate tax avoidance. In particular, this paper aims to empirically examine the moderating impact of institutional ownership on the relationship between CEO power and corporate tax avoidance.

The multivariate regression model is used for hypothesis testing using a sample of 308 firm-year observations of Tunisian listed companies during the 2013-2019 period.

The results show that CEO power is negatively associated with corporate tax avoidance and that institutional ownership significantly accentuates the CEO power’s effect on corporate tax avoidance. This implies that CEOs, when monitored by institutional investors, behave less opportunistically resulting in less tax avoidance.

Our findings have significant implications for managers, legislators, tax authorities and shareholders. They showed that CEO duality, tenure and ownership can mitigate the corporate tax avoidance in Tunisian companies. These findings can, hence, guide the development of future regulations and policies. Moreover, our results provide evidence that owning of shares by institutional investors is beneficial for reducing corporate tax avoidance. Thus, policymakers and regulatory bodies should consider adding regulations to the structure of corporate ownership to promote institutional ownership and consequently control corporate tax avoidance in Tunisian companies.

This study differs from prior studies in several ways. First, it addressed the emerging market, namely the Tunisian one. Knowing the notable differences in institutional setting and corporate governance structure between developed and emerging markets, this study will shed additional light in this area. Second, it proposes the establishment of a moderated relationship between CEO power and corporate tax avoidance around institutional ownership. Unlike prior studies that only examined the simple relationship between CEO power and corporate tax avoidance, this study went further to investigate how institutional ownership potentially moderates this relationship.

The purpose of this paper is to investigate the contrasting moderating effect of a firm’s exploration on the relationship between the two types of long-term incentives (stock options/stock ownership) for the chief executive officers and a firm’s long-term performance. Even though the two types of incentives are designed to improve long-term performance, the degrees of impact on long-term performance differ. Based on behavioral agency theory, this study theoretically and empirically examines the role of a firm’s exploration on the above relationship.

This study used three archival sources to obtain data on stock options, stock ownership, patents and exploration, financial measures, and others. Based on a sample of 1,963 firms in various industries from 1995 to 2006, this study tested the moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s performance.

This study reveals the contrasting moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s long-term performance: a positive moderating effect on the relationship between stock options and performance and a negative moderating effect on the relationship between stock ownership and performance. In addition, empirical evidence was added on the inverted U-shaped relationship between stock ownership and a firm’s long-term performance.

There is little research on a firm’s internal characteristics that strengthen or weaken the effects of stock options and stock ownership on firm performance. This study demonstrates the differential moderating effects of exploration on the relationship between stock options/stock ownership and long-term performance. Such effects of exploration come from the different risk features of stock options and stock ownership. The key implication is that stock options could be more effective than stock ownership to enhance a firm’s long-term performance when a firm has a strong exploration orientation.

The main purpose of this paper is to examine the relationships among chief executive officer (CEO) compensation, ownership and firm value. In addition, the determining factors of CEO compensation are examined.

This model is applied to data of the Taiwan stock market for 1995‐2004. The paper applies a two‐stage least squares regression for the panel data model and implements an F‐test, LM test and Hausman test to determine the best statistical method (that is, ordinary least squares method, fix effects model or random effects method).

The results offer some important insights that show CEO compensation, CEO ownership and firm value are interdependent. Firm size, board size, firm value, institution ownership and CEO ownership are positively associated with CEO compensation while firm age, research and development expenditure rates and firm risk are negatively associated with CEO compensation.

The on‐going expansion in the scale of the firm depends on managers having specialized knowledge. In particular, managers are responsible for the firm's entire operational conditions and future investment strategy. Providing an incentive compensation package can reduce agency costs between managers and shareholders. These findings also provide Taiwanese listed companies with a lesson, which suggests that the existence of the monitoring system can reduce the need for incentive alignment.

The study relies on data from publicly traded Taiwan firms, covering a ten‐year period. This study uses a simultaneous equation estimation procedure to investigate the relations among CEO compensation, CEO ownership and firm value. Two proxies for effective monitoring – board size and institutional ownership – are used. The paper attempts to discuss the influence on CEO compensation from the existence of the monitoring system.

The purpose of this study is to explicitly focus on the roles of ownership concentration, ownership by the board, the chief executive officer (CEO) and the chairperson in the involvement and capabilities of chairpersons and other governors in their work.

In this study, the authors investigate the impact of the concentration of ownership, the ownership of the board, the CEO and the chairperson on the chairperson’s activity when the roles of the chairperson and the CEO are separated The empirical analysis of this study is based on a survey sent to Nordic listed firms.

The results show that the ownership characteristics of a company are important in determining the chairperson’s working hours, the chairperson’s communication with the CEO and the performance of governance activity. In addition, the authors found that while the ownership of the chairperson and the board of directors and ownership concentration improve governance activity, CEO ownership may undermine governance activity.

The primary implication of the study is that both ownership by internal governors and ownership concentration play an important role in determining the involvement of internal corporate governors.

The study provides unique evidence that ownership by the chairperson, concentrated ownership and ownership by the board can potentially mitigate the costs of separating the roles of the chairperson and the CEO.

The role played by corporate governance mechanisms on corporate deleveraging policies has not been clarified. Empirical evidence is confined to developed economies, even with conflicting and inconclusive results. This paper aims to examine the role of corporate governance mechanisms, such as ownership structure, board composition and CEO dominance, in explaining corporate deleveraging policies.

Using a sample of listed Pakistani firms between 2010 and 2022, this study resorts to binary response models to examine the effects of governance mechanisms on firms’ decision to go debt-free.

A greater ownership concentration, institutional ownership and family ownership increase the propensity for zero leverage. Board gender diversity decreases the propensity for deleveraging policies, which seems to indicate that the presence of females reinforces the monitoring function of the board. Finally, lower managerial ownership or CEO dominance decreases the propensity toward zero leverage (interest convergence hypothesis), but higher managerial ownership or CEO dominance increases the propensity toward zero leverage (managerial entrenchment hypothesis).

Risk-averse managers who prefer to control a firm using little or no debt will find it easier to implement these financing policies in firms with greater ownership concentration and where institutional holders have a substantial stake. For shareholders, this study suggests that investing in firms with females on board reduces the risk of corporate deleveraging policies being adopted for entrenched reasons.

The presence of females on board seems to decrease the propensity of managers to adopt opportunistic actions and may also contribute to enhancing human welfare and society in developing countries.

To the best of the authors’ knowledge, this is the first study considering the effect of board diversity on zero leverage. Another singularity is that this study exhibits a nonlinear relationship between managerial ownership and corporate deleveraging policy.

The purpose of this paper is to investigate the effect of ownership concentration on CEO compensation and firm performance relationship in New Zealand.

The paper applies regression analysis to data from New Zealand listed companies from 2001 to 2005.

The study finds a non‐linear effect of ownership concentration on CEO compensation‐firm performance relationship, that is CEO compensation is negatively (positively) related to firm performance in firms with high (low) concentrated ownership structure respectively.

Results provide evidence for the proposition that ownership concentration at a high level in New Zealand does not constrain excessive management power, but exacerbates agency problems associated with executive pay. A highly concentrated ownership structure provides potential explanation for the misalignment between CEO compensation and firm performance in New Zealand. The positive effect of a low ownership concentration level on CEO compensation‐firm performance relationship suggests that monitoring the efficiency of large shareholders works better at a low ownership concentration level.

By exploring the non‐linear interaction between two governance mechanisms – CEO compensation and ownership concentration – the findings of the study make contributions to the current compensation and ownership literature mainly in two ways: although the non‐linearity between ownership concentration and firm value has attracted extensive research interest, little attention is given to the non‐linear effect of large shareholding on the CEO compensation contract in prior studies; and, in the context of a developed country with a small financial market, there are low regulatory “drag” and virtual absence of a litigation threat to organisations, as in New Zealand. This study suggests concentrated ownership as an underlying explanation for the misalignment between CEO compensation and firm performance.

The purpose of this paper is to investigate the effect of long horizon institutional ownership on CEO career concerns to meet the short-term earnings benchmark.

Using a sample of 10,565 firm-year observations in the USA, the paper examines the extent to which long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast.

After controlling for the general performance-turnover relation, this paper finds that long horizon institutional investors mitigate the positive relation between CEO turnover and missing the quarterly consensus analyst forecast. This finding is stronger when CEOs focus on long-term value creation and do not sacrifice long-term value to boost current earnings and is stronger when the monitoring intensity by long horizon institutional investors is greater.

The results suggest that long horizon institutional investors serve a monitoring role in alleviating CEO career concerns to meet the short-term earnings benchmark.

This paper contributes to the literature on the relation between long horizon institutional ownership and attenuated managerial short-termism. The literature is silent about why long horizon institutional investors alleviate managerial short-termism. This paper fills this void in the literature by documenting that long horizon institutional investors mitigate CEO career concerns for managerial short-termism. Moreover, this paper contributes to the literature on the monitoring role of institutional investors by documenting the incremental effect of institutional ownership on CEO career concerns to meet the short-term earnings benchmark.

This paper seeks to investigate the holding of non‐executive directorships by CEOs in a sample of 387 large UK companies. The main objective of the paper is to ascertain whether the holding of additional directorships by CEOs is influenced by the governance and ownership characteristics of their companies.

The approach takes the form of an empirical analysis of the holding of non‐executive directorships by 387 CEOs of large UK companies.

The study finds that 101 CEOs (26 per cent) hold at least one non‐executive directorship but the most any single CEO holds is three with the vast majority holding one other directorship. CEOs who also serve as chairman are more likely to hold non‐executive directorships while CEOs in companies with greater concentration of external ownership are less likely to hold other directorships. The study finds no evidence that either non‐executive representation or managerial ownership (including CEO ownership) influences the holding of additional directorships. The holding of additional directorships is positively related to company size, suggesting that the more complex environment in which CEOs of large companies operate leads to the offer of additional directorships.

The findings are important as they key into an ongoing debate on whether the holding of additional directorships by CEOs is consistent with good governance practice. The evidence presented here provides mixed information for governance regulators. While a significant majority of CEOs do not hold additional directorships, there is evidence that weaker board and external ownership monitoring is associated with a greater likelihood that CEOs will sit on other boards.

Purpose – This paper aims at re-examining the predictions of agency theory with regard to the negative association between CEO duality (i.e. the Chief Executive Officer, CEO, serves also as the board chairman) and corporate performance. It also examines the role of other corporate governance mechanisms (board size, top managerial ownership and institutional ownership) as moderating variables in the relationship between CEO duality and corporate performance.

Methodology/approach – This paper uses the financial statements for the year 2006 of most actively traded Egyptian companies to examine these predictions of agency theory. Moderated Regression Analysis is used to analyse the empirical data.

Findings – The findings indicated that the hypothesized relationships between CEO duality, the moderating variables and corporate performance have changed. For companies characterized by large boards and low top management ownership, corporate performance is negatively affected by CEO duality and positively impacted by institutional ownership.

Research limitations/implications – A limitation of this study is the use of accounting-based performance measures because of the expected earnings management behaviours by CEOs.

Practical implications – The Egyptian Capital Market Authority should adopt a reform programme to encourage Egyptian listed companies to modify their governance structures by increasing top management ownership and reducing board sizes before incorporating the new governance rules into the listing requirements.

Originality/value of paper – The paper contributes to the literature on corporate governance and corporate performance by introducing a framework for identifying and analysing moderating variables that affect the relationship between CEO duality and corporate performance.

This study investigated the impact of board gender diversity on initial public offering (IPO) underpricing in Indonesia. Additionally, the moderating role of Chief Executive Officer (CEO) ownership on the relationship between female executives and IPO underpricing was examined.

A sample of 384 IPO firms listed on the Indonesian stock exchange from 2010 to 2022 was used. Board gender diversity was measured using three approaches: the presence of female executives, percentage of female executives and number of female executives on the management board. CEO ownership was a dummy variable measured as 1 if the CEO owned shares of the company and 0 otherwise. IPO underpricing was measured as the ratio of the difference between the closing price and offer price to the offer price. This study used moderated multiple linear regression analysis.

The presence and number of female executives on the board of management were significantly and negatively associated with IPO underpricing. The moderating effect of CEO ownership on the relationship between IPO underpricing and board gender diversity was significant, as measured by the presence, percentage and number of female executives. Robustness checks were performed and the results were consistent with those of the main analysis.

Recommendations for future studies include further exploration by comparing the nexus between board gender diversity and IPO underpricing in different sectors (nonfinancial IPO firms versus financial IPO firms). Nonfinancial IPO firms are less regulated compared with financial IPO firms so the degree of IPO underpricing between them may be quite different. Additionally, future research can use endogeneity tests such as instrumental variables (IVs) and propensity score matching. Endogeneity means that a regression is misspecified in a way that makes identifying a causal effect between two economic variables difficult, if not impossible. IVs are used to control for confounding and measurement errors in observational studies. Like propensity scores, IVs can adjust for both observed and unobserved confounding effects.

Managers and shareholders can adequately classify board gender diversity levels to improve a firm’s financial performance. Specifically, more gender-diverse boards can reduce IPO underpricing so that the firms can generate more cash when they sell their shares in the primary market. Policymakers and regulators can specify governance mechanisms to promote diversity on the management board because board diversity can carry the information, capabilities and experience of diverse group members, which will ultimately boost firm performance.

The role of women in society may be boosted if such initiatives are taken to increase their representation in top jobs in society.

To the best of the authors’ knowledge, this study is among the first to investigate the moderating role of CEO ownership on the relationship between board gender diversity and IPO underpricing. This study increases the research on diversity in corporate governance by synthesizing various indicators for female executives into a single study to determine their relationships with IPO underpricing. Moreover, this study adds to the body of knowledge on signaling theory by providing empirical evidence on the relationship between female executives on management boards and IPO underpricing.