Session Details: Session 1105

Governance Perspectives

Track F

Date: Tuesday, October 14, 2008

 

Time: 14:30 – 15:45

Common Ground

Room: Salon 4


Facilitator:
Zeki Simsek, Clemson University

Title: Business and Politics: How Political Beliefs Influence Volume and Performance of Leveraged Buyouts

Authors

  • Oliver Gottschalg, HEC-Paris
  • Aviad Pe'er, New York University

Abstract: This paper explores the relationship between political views and the volume and performance of leveraged buyout investments. We analyze 10,746 buyout investments in 4,633 distinct target companies made by 2,396 different funds managed by 1,300 different PE Firms from 1980 to 2003 and find strong support for the hypothesis that ‘Republican’ political views are positively related to both the volume of buyout activity and performance for these buyouts. Furthermore we find that situations in which the dominant political view recently shifted from ‘Republican’ to ‘Democratic’ lead to particularly low levels of activity and performance. Similarly, in cases in which the dominant political shifted from ‘Democratic’ to ‘Republican’ shortly after the focal point in time, we observe a particularly high level of activity and performance.

Title: Firm-Level Contingencies and the Settling Up of Compromised Directors

Authors

  • Jeremy Marcel, University of Virginia
  • Amanda Cowen, University of Virginia

Abstract: Recent literature on the settling up of corporate elites has focused on the individual-level factors that affect the extent to which a given executive is stigmatized and penalized by the labor market following a corporate failure. However, there has been relatively little attention given to the organizational contingencies that explain variance in firms’ responses to such compromised individuals. In this study, we develop theory which addresses why some firms are more sensitive than others to whether their outside directors have been associated with past governance failures. We suggest that a firm’s governance regime, as well as social considerations such as its legitimacy and accountability to external audiences, will influence whether it chooses to dismiss directors that have been associated with fraudulent reporting at other firms.

Title: Governance in Small and Medium-Sized Entrepreneurial Firms: The Case for Team Production Theory

Authors

  • Robert Hoskisson, Rice University
  • Morten Huse, University of Witten Herdecke
  • Jonas Gabrielsson, Lund University
  • Rob White, Iowa State University

Abstract: Although theory and research regarding corporate governance has established a broad and significant literature regarding large publicly traded firms, only recently has such an emphasis been emerging regarding more entrepreneurial, small and medium-sized enterprises (SMEs). The predominant literature on corporate governance focuses on monitoring of managers (agents), especially through boards and significant owners through agency theory. Research has also focused on the resource provision tasks of boards, especially through the lens of resource dependence theory. However, in this paper, we argue that team production theory (Blair & Stout, 1999) may be a better alternative than either agency theory or resource dependence theory because its tenets may allow for more value creation than either agency theory or resource dependence theory alone.

Title: Governance Predictors of Board Declassification

Authors

  • Karen Schnatterly, University of Missouri
  • Richard Johnson, University of Missouri
  • Chris Tuggle, University of Nebraska-Lincoln
  • Christopher Bradshaw, University of Missouri

Abstract: Board declassification involves changing the election process such that each director is up for election each year. In this paper we argue that board declassification may be due to shareholder pressure rather than manager’s choice. We suggest that managers of firms that declassify will have entrenched themselves in other ways so as to reduce shareholder pressure. In effect, firms may be declassifying because they want to appear to be more responsive. This study, grounded in institutional and agency theories, examines entrenchment mechanisms as predictors of board declassification. Hypotheses are tested using a sample of 105 firms that declassified between 1998 and 2006 and were then matched to firms that did not declassify based on industry, year and firm size.

Title: Managing Stock Market Value: The Case of Share Repurchase by Diversified and Specialized U.S. Firms

Authors

  • Guilhem Bascle, Catholic University of Louvain

Abstract: This paper advances that while both specialized and diversified firms will be more valuable when they repurchase their shares, investors will reward specialized firms significantly more than diversified firms. Similarly, while specialized firms can stop repurchasing without affecting their value, diversified firms will experience a dramatic drop in their value when they stop repurchasing. These arguments are tested on the share repurchase behavior of U.S. publicly traded diversified and specialized firms in the 1997-2005 period. State-of-the art econometrics methods are used to adequately control for endogeneity. Results support our arguments and thus show that specialized firms have more leeway to conform to investors’ expectations and that diversified firms have no choice but always making more efforts than specialized firms to be similarly rewarded by investors.

Title: The Governance Path Toward Valuable Human Capital

Authors

  • Hossam Zeitoun, University of Warwick
  • Paolo Pamini, ETH Zurich

Abstract: The importance of firm-specific human capital for a company’s competitive advantage is well established in the knowledge-based theory of the firm. However, there has been limited empirical research on the impact of corporate governance on firm-specific human capital investments. Using the Workplace Employment Relations Survey 2004, we examine the relationship between corporate governance and the presence of valuable human capital as a proxy for firm-specific human capital. The corporate governance arrangements are clustered into two groups: the “employees’ voice” factors, relating to employees’ participation in management’s decision-making, and the “implicit contracts” factors, relating to protections against capital market pressure. Our preliminary results indicate that the “employees’ voice” factors have a greater power in explaining the presence of valuable human capital than the “implicit contracts” factors.

All Sessions in Track F...

Mon: 11:15 – 12:30
Session 1089: Make, Ally or Buy
Session 1096: Executive Compensation
Mon: 15:30 – 16:45
Session 1086: Alternative Views of Value Creation
Session 1090: CEO Pay
Session 1107: Executive and External Forces in Strategy
Mon: 17:00 – 18:15
Session 1091: Impression Management
Session 1098: Social Networks
Tue: 11:15 – 12:30
Session 1093: Succesion and Team Dynamics
Session 1103: Social and Human Capital
Tue: 14:30 – 15:45
Session 1095: Diversification
Session 1105: Governance Perspectives
Wed: 10:00 – 11:15
Session 1104: Managing Alliance Relationships
Session 1106: New Corporate Strategy Perspectives
Wed: 11:30 – 12:45
Session 1088: Acquisitive Growth Strategies
Session 1092: Dynamic Strategies and Resources


Strategic Management Society

Cologne Conference