Session 431

Agents, Principals, and Owners

Track O

Date: Tuesday, September 23, 2014

 

Time: 17:15 – 18:30

Common Ground

Room: Estancia 307


Facilitator:

  • Brian Connelly, Auburn University

Title: Clash of the Titans: A New Perspective on the Principal-Principal Conflict

Authors

  • Zhonghui Wang, University of North Carolina-Greensboro

Abstract: This study investigates the principal-principal conflict among multiple large shareholders. The principal-principal conflict emerges in a two-blockholder firm when the larger blockholder dislikes the cumulative voting rule even if the smaller blockholder welcomes the rule and the rule is positively associated with firm value. The likelihood of firms observing the cumulative voting rule decreases when both blockholders are either inside blockholders or outside ones at the same time. Firms with different types of blockholders are more likely to follow the cumulative voting rule. When the voting power of blockholders is relatively equally distributed, the firm is more likely to have the cumulative voting rule. Relying on two-stage treatment effects models, I conduct empirical tests of these arguments on a large merged dataset.

Title: External Agency: Redefinition of Ex Ante Value in Agency Relationships

Authors

  • Oleg Petrenko, Texas Tech University
  • Federico Aime, Oklahoma State University
  • José Sagarnaga, Oklahoma State University

Abstract: In our paper we present a general model of agency that extends classical Agency Theory to model the agent-principal relationship as being embedded in a wider social context. In this context the agent is not merely in a closed contractual relationship with the principal, but also participates in a market for alternative contracts. Participation in this market for alternative contracts allows the agent to redefine his or her ex ante value via behaviors that we define as external agency - specific agentic behaviors that aim at maximizing the value appropriation from future contracts. We propose that such behaviors will be negatively associated with internal agency and positively related to availability of alternative contracts, CEO human and social capital.

Title: Heterogeneous Owner Interests and Corporate Restructuring

Authors

  • Nikolaos Kavadis, Carlos III University of Madrid
  • Xavier Castaner, University of Lausanne

Abstract: We examine the influence of different owners on corporate restructuring in large French firms with family blockholders in a period of important corporate governance changes, where the respective influence of Anglo-American institutional owners and domestic owners has been the object of debate. We contribute to corporate governance and strategy research with a contingent framework about the influence of owners in shaping restructuring and refocusing, a predominant practice in the U.S. aimed at shareholder value maximization (SVM) in a country (France) without historical association to SVM. We find that firms engage in more restructuring and refocusing as the influence of both French families and Anglo-American institutional investors increases. This challenges in part the received wisdom about the influence of domestic owners in corporatist countries at the same time that confirms the effect of Anglo-American institutional investors.

Title: Institutional Owners and Organizational Performance: The Moderating Effect of Industry’s Informational Transparency

Authors

  • Anton Diachenko, BI Norwegian Business School
  • Torger Reve, BI Norwegian Business School

Abstract: Empirical results so far have failed to provide consistent evidence about the relationship between institutional ownership and firm performance. We fill this gap by arguing that monitoring capabilities of institutional investors are contingent on the informational transparency of the industry. Institutional investors lack specific industry-based knowledge, thus information opacity makes it difficult to perform effective monitoring. Hence, the monitoring effect of institutional ownership on the performance will have positive impact only in transparent industries, where information is easily available and monitoring can be executed based on general business judgment. As monitoring by institutional investors is not efficient in the opaque industries, managerial stock ownership is proposed as a key means to align managers’ interests with other stockholders and subsequently enhance firm performance.

Title: Ownership Structures and Performance in Multi-Unit Organizations

Authors

  • Xiaoli Yin, City University of New York

Abstract: In this study, I examine the performance implications of locating units of different ownership structures in the same local market. In a multi-unit organization, individual entities of different owners tend to compete with each other. Meanwhile, localized learning and collaboration can also be more effective when units of mixed ownership coexist in the same local market. I suggest that diverse ownership structures in a multi-unit organization can both intensify competition and facilitate cooperation. I develop these ideas among sub-units of a franchising system and test the hypotheses using longitudinal data from over 6000 units within one of the biggest U.S. restaurant chains from 1991 to 1997.

Title: The Balance of Power: Equity Ownership Structure in a Component-Mixture Model

Authors

  • Colin Campbell, Miami University
  • Joanna Tochman Campbell, University of Cincinnati
  • Maria Weese, Miami University

Abstract: Using a novel methodological approach, we examine the optimal structure of firm equity ownership. Prior studies have attempted to address, with mixed results, the endogenous nature of the relationship between equity ownership and firm value. A major empirical shortcoming of this stream of research is the treatment of ownership percentages as independent. We take a markedly different approach by modeling the equity ownership structure across major parties (i.e., the CEO, top executives, directors, institutions, etc.) as components of a mixture that by definition cannot change without affecting the other components. Controlling for other firm characteristics, our results suggest a significant and complex relationship between equity structure and firm value, allowing us to contribute to both scholarship and practice.

All Sessions in Track O...

Sun: 08:00 – 09:15
Session 311: The Power of Power: The Role of Power and Politics in Strategy Processes
Session 386: Entrepreneurial Corporate Governance
Sun: 11:15 – 12:30
Session 476: The Dark Side of Strategic Leadership and Governance
Sun: 15:45 – 17:00
Session 435: What Happens After the CEO Has (Been) Gone?
Sun: 17:15 – 18:30
Session 611: Strategic Leadership and Governance IG Business Meeting
Mon: 08:00 – 09:15
Session 335: Internationalization and Strategic Decisions
Session 458: Those at the Top Matter!
Mon: 11:00 – 12:15
Session 336: CEO Roles, Frames, and Traits
Mon: 14:45 – 16:00
Session 331: CEO Compensation: What we Know, What we Need to Study
Mon: 16:30 – 17:45
Session 337: Power at the Top - The Influence of Directors
Session 411: Ownership and Governance
Tue: 08:00 – 09:15
Session 428: Managing External Dependencies
Session 467: Putting Pressure on the CEO
Tue: 11:00 – 12:15
Session 465: The Importance of Corporate Governance
Tue: 15:30 – 16:45
Session 429: Director Selection and Influence
Tue: 17:15 – 18:30
Session 431: Agents, Principals, and Owners
Session 432: Upper Echelons Revisited


Strategic Management Society

Madrid