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New Issue of the Corporate Ownership and Control Journal is Published

The recent issue of the journal Corporate Ownership and Control pays attention to issues of capital structure, profitability dual class, loans, debt covenants, global finance etc. More detailed issues are given below.

Kudzai Raymond Marandu and Athenia Bongani Sibindi investigate the relationship between capital structure and profitability within the context of an emerging market of South Africa. They conduct multiple linear regressions on time series data of big South African banks for the period 2002 to 2013 and establish a strong relationship between the ROA (profitability measure) and the bank specific determinants of capital structure, namely capital adequacy, size, deposits and credit risk. The relationship exhibits sensitivity to macro-economic shocks (such as recessions), in the case of credit risk and capital but is persistent for the other determinants of capital structure.

Nilanjan Basu and Ming Qiu examine the manner in which debt issuance by dual class firms differs from that issued by comparable single-class firms. Using the comprehensive sample of dual class firms compiled by Gompers, Ishii, and Metrick (2010), authors find that dual class firms tend to borrow at lower interest rates and for longer maturities but face more covenants, especially performance based covenants. The results are robust to corrections for the endogenous choice of dual class share structures. They also find that the returns earned by the stocks of these dual class firms have lower volatility.

Lemonakis Christos, Vassakis Konstantinos, Garefalakis Alexandros and Michailidou Despoina focuse on the role of business cooperation and firms’ exporting activity as the determinants of Greek manufacturing SMEs’ innovative extend use, contributing to the existing empirical literature. This study opens the floor for a greater perspective in managerial and financial firms’ characteristics; Firms should take initiatives to promote collaborative networks for innovation and create trade associations that represent SMEs, in order to facilitate social interaction. Also, government should offer incentives to SMEs with high innovation potential (e.g. tax allowances) and invigorate linkages between universities, research centers and the private sector by creating effective institutional arrangements.

Santanu K. Ganguli investigates the characteristics and performance of the persistent high liquidity firms in India in the backdrop of ownership concentration. Empirical evidence reveals that the persistent high liquidity firms consistently post superior performance, have better growth prospect and resort to less debt financing. Ownership structure has no influence on the performance of such firms. Consistent with trade off theory we find that persistent cash holding as a policy beyond a certain period may hinder performance. Industry-and- size matched comparison firms with non-persistent liquidity tend to overinvest having a negative impact on performance. Ownership concentration adversely impacts performance of such firms.

Ghada Tayem, Mohammad Tayeh and Adel Bino examine how ownership concentration influences the relation between stock liquidity and asset liquidity. In the absence of investor protection, concentrated ownership allows shareholders with large ownership stakes to exercise control over the firm and hence may result in increasing the uncertainty of assets in place. The uncertainty regarding the usage of liquid assets in cash-rich firms leads to greater uncertainty regarding the firm’s cash flows and hence lower stock liquidity. The findings of this study show evidence that as ownership concentration increases asset liquidity becomes negatively related to stock liquidity.

Manas Mayur examines the relationship between post-IPO performance of 306 Indian firms and the changes in insiders’ ownership around their IPOs? The results illustrated a curvilinear relationship between ownership and performance. Whereas the negative relationship was found for low and very high ownership level and positive relationship was found for intermediate level. This is an attention-grabbing outcome as it contrasts with earlier studies on curvilinear relationship between ownership and performance, where the negative relationship was found for intermediate level and positive relationship was found for both very low and very high ownership level.

Mireille Chidiac El Hajj, Richard Abou Moussa, Maha Akiki and Anthony Sassine study governance practices in non-financial enterprises in Lebanon, and it is the first time that such enterprises are studied in the Lebanese context. Only three non-financial institutions are listed in the Beirut Stock Exchange (BSE), which constitute the whole population of this research. Built on Principles, Governance is based on transparency and on accurate, relevant, and timely information in order to support the Board members’ decision-making (OECD, 2015). Balanced between Jensen and Meckling’s (1976) agency theory and Donaldson and Davis’ (1991) Stewardship theory, the results of Qualitative study showed that the main problems faced by the enterprises are not in the quality of information but rather in its selection and filtering, which opens doors to “Governance Myopia”. Face-to-face interviews showed that the primary conflict in our case is between the non-financial enterprises and the BSE, since the BSE is controlled by the enterprises and is not controlling them.

Merwe Oberholzer develops a data envelopment analysis (DEA) model with two stages. The first provides a best practice frontier to benchmark segments of CEO compensation against determiners thereof, including firm-, CEO- and governance characteristics. Firms with different strategies will then position themselves differently to the best practice frontier. Irrespective of the strategy chosen at the first stage, the second stage estimates how efficient firms are to convert the above-mentioned determiners into multiple performance measures. The contribution of the study is that employing such a model may change the philosophy of how firms look at CEO compensation, for example firms whose CEOs are at the bottom half are not necessarily below average or underpaid, but signal that their CEOs are compensated according to best practices.

C.F. van Dreven and H.M. Koolma elaborate, supported by literature on trust, a framework for corporate governance that might overcome lacunas in the classical frameworks of the principal agency theory and the stewardship theory. A historical analysis of the development of corporate governance in the context of the Dutch semi-public housing management shows that a mixture of principal agency and stewardship approach of semi-public managers proves to be contradictory and toxic. A discourse analysis and factor analysis report on the search of actors for a more effective corporate governance. The findings are only indicative, due to the explorative stage of the research.

Francesco Grimaldi investigates the relationship between ownership structures and turnaround processes in the Italian context. In fact, with the exception of the analysis of individual business cases - relating to incidents of fraud, bankruptcy and failure to rehabilitate the business, it does not seem to have been made, at the time, specific theoretical and empirical studies on the relationship between ownership structure and processes turnaround / crisis in Italian listed companies, in which the reference model is the family business, even in large companies.

F.G. Grandis and G. Mattei analyse the different types of organizational models, identifiable in the Public sector when considering, simultaneously, two different variables: 1.the distribution of power between politicians and managers; 2. the nature of the manager’s employment contracts. In Italy, by the reform, the “traditional” period ended to make way for a “modern” governance model which invaded the organizational aspect of public Administrations. Now, more than 25 years since the principle of distinction was introduced, it is time to understand if the innovations are really applied.

Daniela M. Salvioni, Simona Franzoni and Francesca Gennari consider how the social responsibility and the role of the leaders (CEOs, Board of Directors, managers, etc.) can determine a governance approach directed to the growth of sustainable value over time. This is possible through the exploitation of opportunities and the economic and social risk management with which the companies should compete. The achievement of sustainability leadership requires significant changes in the operational guidelines and critical factors for company’s success and it imposes the improvement of the internal control systems intended to provide essential support for responsible governance. Therefore, leadership aiming at sustainability (regardless of the corporate governance system) requires CSR to be transferred from top management to the entire organisation, increasing the ability to manage complexity with respect to articulated goals. So, the corporate social responsibility, if properly realized, tends to be a factor of substantial convergence between the different existing systems of corporate governance.

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