Discussion

The empirical analysis begins with examining whether the concentrated firms are prone to Type II agency problem. Results are consistent in depicting significant negative effect of UCOs’ excessive control on the minority shareholder wealth. Such findings reaffirm the importance of good governance. The core objective of this dissertation has been to examine the effectiveness of standardized CG policies in addressing Type II agency problem. While the findings show positive and significant impact of Board Independence, CEO-Separation, and Performance based Pay on improving firms’ valuation, interaction impacts of all the internal mechanisms remain insignificant in attenuating excessive control’s negative effect. Interaction impacts of the country level external mechanisms in implementing the formal policies also remain insignificant, where the results are mostly similar across the analyses with legal and disclosure institutions. Hence, the investigation provides support for the Embedded View based analysis, in particular for the analysis of Means-Ends Decoupling of CG. In brief, the investigation implicates that commonly recommended CG mechanisms may be effective

155

in improving firms’ valuation; however, in their current capacity, these policies are not adequate in protecting the minority shareholders and preventing the UCOs from exercising their excessive control. As the country level external mechanisms cannot generate any positive moderation impact, it can be implied that the insignificant

interaction by the internal CG is a not a result of lack in policy implementation; rather it is a result of lack in policy-goal alignment. These results are robust across the

investigations with alternative measures of Minority Shareholder Wealth, Monitoring CG, Incentive CG, and external institution.

For further investigation of the Embedded View based hypotheses, I conducted a series of ad-hoc analyses. I started with examining the family vs. non-family firms, locally-listed vs. cross-listed firms, and domestic vs. foreign firms. Majority of the closely-held firms across nations are family owned and/or family controlled where the organizational culture is mostly relational in nature (Chen & Nowland, 2010; Duran et al., 2017). In contrast to the arm’s length transactional culture of non-family firms (state, financial institution, corporation, and other), family owners tend to be closely involved in organizational governance and management. Hence, it is important to examine whether commonly recommended CG mechanisms differ in governing the UCOs of family vs non-family firms. The interaction impacts are insignificant across the sub-samples with family vs. non-family firms implicating that the suggested CG policies are ineffective in questioning all types of UCOs.

Cross-listed and foreign firms operate in an environment, where the external institutions are stricter in mandating and enforcing the formal CG policies (Coffee, 2002; Kostova & Zaheer, 1999; Useem, 1998). If the internal CG mechanisms are aligned with

156

governing the UCOs, their (internal CG mechanisms’) moderating impacts should be positive and significant in the globally driven firms. The results show insignificant interactions across the sub-samples with locally-listed vs. cross-listed firms and domestic vs. foreign firms. Such findings provide stronger support for Means-Ends Decoupling of CG. As the globally driven firms operate in an environment with advanced institutions, insignificant interactions in these firms cannot be explained by the logic of lack in policy implementation; rather such results indicate lack in policy-goal alignment. The findings remain unchanged even across the analyses with Anglo-Saxon-Crosslisted firms and Anglo-Saxon-Foreign firms.

In addition to the quality of country level legal and disclosure provisions,

International CG literature also study the importance of market and informal institutions. I examined the impact of Stock Market institution since countries’ stock exchanges play critical role in monitoring the firm level policy implementation (Coffee, 2001; Kogut & Spicer, 2002). Interaction impacts of the internal CG remain insignificant across the analyses with weak and strong Stock Market institution. Additionally, I examined the implementation of internal CG with the index of Pro-Market institution. This analysis was conducted to capture the influence of countries’ market openness. Again coefficients of the interaction terms are insignificant. Countries’ informal institutional environment is crucial for promoting self-enforced good governance (Dyck & Zingales, 2004; Jiang & Peng, 2011; van Essen et al., 2012a). The agent of social actors play powerful role in demanding corporate accountability and attaching social sanctions to the alternative courses of behaviors. To incorporate the influence of country level ethical standard and accountability by the social actors, I utilized Corruption Perception index and

157

Media/Press Freedom index respectively. Interactions by the internal CG mechanisms remain insignificant for both the sub-samples. I also tested the policy-related hypotheses by splitting the full sample into developing vs. developed economies; again the results remain mostly unchanged.

One of the core objectives of the dissertation was to examine the moderating role of external CG institutions in implementing the internal policies. In the ad-hoc analysis section, I extended the analysis by examining the ‘direct’ impact of local institutions (legal and disclosure standard) and global institutions (Crosslisting and Foreign UCOs) in addressing the P-P conflict. The findings confirm the facilitating role of the advanced institutions as they can help improving the firm level performance (Griffin et al., 2017; Jiang & Peng, 2011). While the resources of external institutions are proven to be extremely critical, their interactions are insignificant in mitigating the expropriation of minority shareholders; that is, their governance role is not powerful enough to oversee the UCOs.

In sum, the findings of the dissertation point towards the benefit of internal and external CG mechanisms in improving firms’ technical efficiency. These results support the resource based view of independent board members and separate board chair who bring knowledge, experience, and expertise to the organizational decision making (Hillman & Dalziel, 2003; van Essen et al., 2012b). However, as the outsiders within the relational network, independent board members and separate board chair often do not possess any voice/power to question the act of UCOs (Arnoldi, Chen, & Na, 2013; Chung & Luo, 2013; García-Castro et al., 2013; Keister, 1998). Results of the current study are most consistent in depicting significant positive impact by Performance based Pay on

158

firms’ valuation, which provides support for the incentive-alignment principle (Buck et al., 2008; Sanders & Tuschke, 2007). But Managerial Ownership and Performance based Pay cannot prevent expropriation by the UCOs. In the family firms, family managers frequently possess ownership stakes in the focal firms; yet there is evidence of

expropriation (Tiscini & Raoli, 2013). It is often found that managerial pay is relatively low for family managers (Gomez-Mejia, Larraza-Kintana, & Makri, 2003); that is because being the UCOs, these managers can exercise their excessive control for

rewarding themselves with alternative forms of extravagant remuneration (McConaughy, 2000; Rediker & Seth, 1995; Schulze et al., 2001; Walsh & Seward, 1990). In the non- family firms, UCOs have the strongest voice in appointing top managers (Steinfeld, 1998) and deciding their incentive packages (Kastiel, 2015). Being appointed and

incentivized by the UCOs, professional managers will seldom exercise their equity stakes to challenge their employers. In fact the findings show, Performance based Pay is often used as a means of further expropriation which indicates CEOs of the affiliated firms are colluding with the UCOs. Concentrated firms’ local institutional environment (legal and disclosure provisions) and global institutional environment (Crosslisting and Foreign UCOs) play direct role in improving organizational efficiency; however, even the advanced external institutions are proven to be inadequate in protecting the minority shareholders.