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Research Summary: To prevent loss of control post‐IPO, founder‐CEOs can implement control‐enhancing mechanisms disconnecting ownership from voting rights. However, this decision places them in a rich versus king dilemma. If they choose to implement such mechanisms and secure the king position, they risk losing money at IPO. If they choose not to implement control‐enhancing mechanisms and adopt the rich position they risk losing control over the firm. We investigate theoretically and empirically the outcomes of this dilemma in a multi‐period setting (at IPO and post‐IPO). We found that the majority of founder‐CEOs who choose the king option recover initial wealth loss, and hence, they can reconcile the rich and king paths in the long‐run post‐IPO. Managerial Summary: Founder‐CEOs often use control‐enhancing mechanisms (CEMs), such dual class shares, pyramid control structures, and pact agreements, to maintain control over their IPO firms. In this study, we investigate the effects of these CEMs on firm value at IPO and post‐IPO using a unique hand‐collected dataset comprising all founder‐CEO led firms that went public on French regulated markets between January 1992 and December 2010. We found that most founder‐CEOs who use multiple CEMs leave considerable amounts of money on the table at IPO date but they are able to recover their initial loss 5 years post‐IPO. This result suggests that an IPO may constitute a valuable financing alternative even for founder‐CEOs who value control.

The aim of this article is to examine the relationship between stock market performance and country level governance indicators. A good quality of governance in a country ensures effective implementation of laws which can protect the investor and improve stock market performance and vice versa. Our study utilises annual stock returns and country level governance indicators for 25 developed countries from 1996 to 2018. The fixed effect estimation suggests that stock market performance and governance indicators share a positive relationship. Our findings suggest that high quality of governance is associated with higher returns on stock. Institutional quality is a preconditioned for financial developed that set the direction of change to reduce transaction costs and agency costs and make profitable projects available to firms that subsequently leads to higher demand for equity financing. These findings have significant implications for stock market policymakers and standard asset pricing models that only include market risk factors to predict future expected stock returns.

We provide new evidence on the agency theory of corporate tax avoidance (Slemrod 2004; Crocker and Slemrod 2005; Chen and Chu 2005) by showing that increases in institutional ownership are associated with increases in tax avoidance. Using the Russell index reconstitution setting to isolate exogenous shocks to institutional ownership, and a regression discontinuity design that facilitates sharper identification of treatment effects, we find a significant and discontinuous increase in tax avoidance following Russell 2000 inclusion. The tax avoidance involves the use of tax shelters, and immediate benefits include higher profit margins and likelihood of meeting or beating analyst expectations. Collectively, the results shed light on the effect of increased ownership concentration on tax avoidance.

We link the corporate governance literature in financial economics to the agency cost perspective of corporate social responsibility (CSR) to derive theoretical predictions about the relationship between corporate governance and the existence of executive compensation incentives for CSR. We test our predictions using novel executive compensation contract data, and find that firms with more shareholder-friendly corporate governance are more likely to provide compensation to executives linked to firm social performance outcomes. Also, providing executives with direct incentives for CSR is an effective tool to increase firm social performance. The findings provide evidence identifying corporate governance as a determinant of managerial incentives for social performance, and suggest that CSR activities are more likely to be beneficial to shareholders, as opposed to an agency cost.

This study explores cultural influence on corporate behavior employing the case of merchant guild culture in China and further the moderating role of Marketization. Using hand-collected data on merchant guild culture, we find that merchant guild culture is significantly negatively associated with owner-manager agency costs, suggesting that merchant guild culture in ancient China still has its continuous and remarkable effects on managerial behavior in contemporary corporations. This finding also implies that merchant guild culture motivates managers to upgrade the efficiency of controlling operating costs, reduces agency conflicts between management and shareholders, and eventually mitigates owner-manager agency costs. Moreover, provincial Marketization level attenuates the negative association between merchant guild culture and owner-manager agency costs. Above results are robust to a variety of alternative measures of merchant guild culture and owner-manager agency costs. Furthermore, our findings are still valid after controlling for the potential endogeneity between merchant guild culture and owner-manager agency costs.

Abstract This article intends to review the theoretical aspects and empirical evidences made on agency theory. It is aimed to explore the main ideas, perspectives, problems and issues related to the agency theory through a literature survey. It discusses the theoretical aspects of agency theory and the various concepts and issues related to it and documents empirical evidences on the mechanisms that diminish the agency cost. The conflict of interest and agency cost arises due to the separation of ownership from control, different risk preferences, information asymmetry and moral hazards. The literatures have cited many solutions like strong ownership control, managerial ownership, independent board members and different committees can be useful in controlling the agency conflict and its cost. This literature survey will enlighten the practitioners and researchers in understanding, analysing the agency problem and will be helpful in mitigating the agency problem.

We investigate whether a firm’s social capital and the trust that it engenders are viewed favorably by bondholders. Using firms’ environmental and social (E&S) performance to proxy for social capital, we find no relation between social capital and bond spreads over the period 2006–2019. However, during the 2008–2009 financial crisis, which represents a shock to trust and default risk, high-social-capital firms benefited from lower bond spreads. These effects are stronger for firms with higher expected agency costs of debt and firms whose E&S efforts are more salient. During the crisis, high-social-capital firms were also able to raise more debt, at lower spreads, and for longer maturities. We find no evidence that the governance element of ESG is related to bond spreads. The gap between E&S performance of firms in the bottom and top E&S terciles has narrowed since the financial crisis, especially in the year prior to accessing the bond market.

Objective: The objective of this study is to investigate how voluntary disclosure of information can contribute to achieving the objectives of good governance and performance of SOEs in the Moroccan context.   Theoretical Framework: The main concepts and theories that drive the research are presented in the first part and deeply related to some corporate governance theories.   Method: The methodology adopted for this research comprises [concisely describe the study design, including approach, participants, instruments, procedures, etc.]. Data collection was carried out through literature review and analysis of documents and studies to explore the impacts of voluntary disclosurein the context of SOEs reform.   Results and Discussion: The Documentary explorations in relation to the research area have shown a strong need for informative disclosure for SOEs, particularly in the context of a reform aimed at improving governance and performance.   Research Implications: Given the context and objectives of the research, the results obtained may provide a starting point for a better understanding of the role, content and frequency of voluntary disclosure in order to help achieve the goals of SOE reform in Morocco.   Originality/Value: The originality of this research is linked above all to its topicality. In fact, it takes account of very recent data and a significant effort has been made to integrate all the data relating to current developments in SOEs in the Morocan context.

Digital transformation has emerged as a powerful force in reshaping the business landscape and enabling organizations to enhance their capabilities. One critical aspect of this change is how it impacts an enterprise’s innovation ability. To explore this question, we select data regarding China’s A-share listed enterprises from 2007 to 2021 as the research sample. We employ crawler technology to gather keywords related to “digital transformation” from annual reports, portraying detailed journeys of enterprises’ digital transformation. Through descriptive statistics and multiple covariance tests, a linear relationship is established between digital transformation and innovation ability. Benchmark regression is conducted and a robustness test is utilized to determine the robustness of the benchmark regression. The mechanism, heterogeneity, and moderating effects of this study are also tested. The results reveal that digital transformation makes a significant positive contribution to the innovation capability of enterprises. Meanwhile, among different types of enterprises, the impact of digital transformation on enterprise innovation capability shows heterogeneity. In terms of the impact mechanism, digital transformation can enhance the innovation output of enterprises by reducing the agency cost and improving the risk-taking level of enterprises, so as to further improve the innovation capability of enterprises. The research results of this paper provide essential theoretical support for the digital transformation of enterprises and the government’s formulation of enterprises’ digitalization strategies. More profoundly, it provides significant reference for how to further promote the digital transformation of Chinese enterprises.

Prior literature has demonstrated that religiosity is associated with a reduced acceptance of unethical business practices and financial reporting irregularities. On this premise, we examine whether religiosity, conceptualized as the degree of adherence to religious norms in the geographical area where a firm's headquarters is located, has an impact on audit firms' pricing decisions in the US. We measure the intensity of religiosity by the number of adherents relative to the total population in a county and demonstrate that increased religious adherence operates as an institutionalized monitoring mechanism that decreases audit risk and audit costs, which is, in turn, reflected in reduced audit pricing. Additional tests suggest that the impact of religiosity on auditors' pricing decisions is not differentiated by levels of auditor expertise but that audit fees are determined by an auditor's relative location in a market sector and religious adherence. We conclude that religious adherence reduces the need for shareholders to bear the costs of monitoring agents, a finding which could be of importance for market participants and regulators.