Session 231

Institutions and Agents

Track F

Date: Tuesday, October 13, 2009

 

Time: 14:30 – 15:45

Paper

Room: Meeting Room 3


Session Chair:
Robert Wiseman, Michigan State University

Title: Employee Interests and CFO Dismissal: An Empirical Analysis

Authors

  • Ansgar Richter, University of Surrey
  • Diedrich Bremer, WHU - Otto Beisheim School of Management
  • Jan-Philipp Lüdtke, WHU - Otto Beisheim School of Management
  • Utz Schaeffer, WHU - Otto Beisheim School of Management

Abstract: We analyze the respective influence of employee and shareholder interests on the dismissal of Chief Financial Officers (CFOs) for a sample of 89 replacement cases in major German companies between 1999 and 2006. Drawing on stakeholder-agency theory and legitimacy theory, we argue that employees wield sufficient power to affect executive replacements. We show that the provision of job security as a proxy for employee interests has a significant effect on the likelihood of CFO dismissal. This effect is independent of the fulfillment of shareholders’ objectives, which show a significant effect as well. We conclude that stakeholder groups beyond shareholders exert influence on corporate governance, too. Hence, we argue that executives need to respond to several stakeholder groups simultaneously.

Title: Extensive Competitor Profiling: Opportunistic Behavior and Collusive Activity

Authors

  • Keith Brouthers, King's College London
  • Ronald Anderson, American University
  • David Reeb, National University of Singapore

Abstract: Using agency theory we investigate and find evidence to support the notion that conflicts of interests amongst managers, shareholders, and corporate creditors explain variations in competitor profiling. The results also indicate that shareholders discount firms that devote substantial attention to competitor profiling. One interpretation is that competitor profiling is influenced by stakeholders who seek to limit firm-specific risk at the expense of diversified shareholders. We then explore areas where competitor profiling is likely to improve shareholder value, such as in R&D intensive firms and those with greater opportunities for collusive activity. We find that competitor profiling is positively related to shareholder value for firms in concentrated markets, suggesting that competitor profiling can be a mechanism to resolve the informational costs of collusive agreements.

Title: The Impact of Mechanisms Disconnecting Cash Flow Rights From Voting Rights on IPO Valuation

Authors

  • Asma Fattoum, Copenhagen Business School
  • Zied Guedri, EMLYON Business School

Abstract: This paper investigates two research questions. First, does the adoption of mechanisms such as dual share classes, pyramid structures, cross-equity holdings and voting pacts agreements impact venture IPO valuation? Second, does the strength of this impact, if any, depends upon some firm specific and founder specific characteristics? Building upon agency theory, we suggest that these mechanisms, often adopted by founder CEOs to disconnect their cash flow rights from voting rights, are negatively related to venture IPO valuation. Moreover, we propose that the strength of this negative impact increases with firm size and age. Conversely, the strength of the negative impact decreases with founder’s human and social capital as well as the amount of shares he/she detains after the IPO.

Title: Toward an Institutional Agency Model: Considering Institutional Influences on Moral Hazard Within Principal-Agent Relations

Authors

  • Robert Wiseman, Michigan State University
  • Gloria Cuevas, Pablo de Olavide University
  • Luis Gomez-Mejia, Notre Dame University

Abstract: A primary criticism of agency theory is that it fails to consider the institutional context surrounding the principal-agent (P-A) relation. In answer, we draw on a variety of theories using an institutional perspective to explore how principal-agent relations vary across different institutional contexts. Specifically, we argue that problems of agency are universal, but that the manifestation of these problems (in particular moral hazard risk) varies across institutional contexts. By giving formal recognition to how specific institutional arrangements influence principal-agent relations our predictions go beyond inductive comparative analyses that simply describe idiosyncratic principal-agent relations across different institutional configurations. Instead we take a deductive approach that explores how distinct institutional dimensions may influence the nature of agency.

All Sessions in Track F...

Sun: 10:00 – 11:30
Session 260: Writing Workshop for Doctoral Students and Junior Faculty
Sun: 13:00 – 14:30
Session 261: Shareholder Primacy and Corporate Policy
Sun: 15:00 – 16:30
Session 262: The Role of Government in M&A Activity
Sun: 16:30 – 17:30
Session 310: Corporate Strategy & Governance, IG Meeting
Mon: 12:45 – 14:00
Session 198: Perspectives on CEO Succession
Session 228: Business Groups, Alliances, and Contracts
Mon: 15:45 – 17:00
Session 229: Alliances and Corporate Strategy
Session 230: Ownership Determinants and Consequences
Mon: 17:15 – 18:30
Session 194: CEOs and Top Management Teams
Session 197: Diversity, Identity, and Corporate Governance
Session 233: Top Executives and Directors in Organizational Dynamics
Tue: 10:00 – 11:15
Session 199: Executive Compensation
Session 200: Social Psychological Perspectives of CEOs
Tue: 11:30 – 12:45
Session 195: Competitive Dynamics of Business Groups
Session 234: Constraints and Catalysts on Corporate Growth
Tue: 14:30 – 15:45
Session 226: Relatedness, Dominant Logics, and Other Diversification Logics
Session 231: Institutions and Agents
Wed: 10:00 – 11:15
Session 227: Corporate Strategy & Diversification
Session 232: Stakeholders in the Corporate Governance Equation
Wed: 11:30 – 12:45
Session 196: Behavioral Perspectives on Boards of Directors
Session 225: Acquisitions and Corporate Strategy


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