Corporate governance

I examine the relationship between environmental regulation stringency and the extent of voluntary environmental disclosures by firms. The study draws on theoretical frameworks including legitimacy theory, stakeholder theory, and information asymmetry, to explore how different mechanisms influence firm behavior in the context of environmental transparency.
My empirical analysis shows a positive relationship between the stringency of environmental regulations and the level of voluntary environmental disclosures. This relationship is weakened by factors such as board independence and institutional ownership. I further confirm the positive effect of national level of environmental regulation stringency on the environmental voluntary disclosure. However, I fail to find supporting evidence on the positive moderating role of national level of environmental regulation stringency and corporate governance. In contrast, I find evidence that external institutional ownership and independent directors, who represent interests of external blockholders, have a preventive and monitoring effect on the main relationship to reduce the threat of misleading voluntary information and proprietary cost.

I investigate the effects of requiring the audit engagement partner (EP) signature and individual EP’s quality on information asymmetry, analysts’ forecast errors and forecast dispersion. I predict and find that, ceteris paribus, there is a significant decline in information asymmetry, analysts’ forecast errors and forecast dispersion from the pre- to post-EP signature period in the UK over both of short-term (e.g., 2008-2010) and long-term (e.g., 2004-2014). These findings hold when using a control sample approach and a different proxy for the information asymmetry, which indicate that my results are not likely due to the effect of concurrent events and correlated omitted variables. These findings provide timely and important empirical evidence to the ongoing debate about whether the Public Company Accounting Oversight Board should pass a similar requirement in the U.S.

My work investigates the effects of founding conditions for organizational
founders on the eventual satisfaction founders have with the financial and social
outcomes of their organization. First, I introduce two new constructs, social salience and
economic salience, which represent the intended social or economic goals of the founder
for their organization when they found the new organization. I then utilize organizational
imprinting theory to argue that the social and economic salience, along with founders’
previous work experience, influence the structure of the new organization via the legal
form. I then argue that the legal form influences the specific capabilities that the
organization will acquire or create early in the organization’s life. Finally, I argue that the
capabilities established at founding will influence the eventual satisfaction founders currently have with their organizations’ social and financial outcomes as the capabilities
endure over time.
Based on a sample of 150 organizational founders that are still actively managing
their organizations, my results support the idea that founding conditions for individual
founders influence the capabilities that their organizations create or acquire. Further,
founders’ current level of satisfaction with the financial and social performance of their
organizations is significantly related to these capabilities. These results largely support
the process based model of imprinting effects on organizational outcomes, and suggest
that founders play a critical role in setting the original imprint of an organization that will
endure via organizational inertia, perhaps long after the imprint’s originally designed
purpose.

I empirically investigate the managements’ decision to voluntarily disclose strategic information. While carrying a benefit of reduced information asymmetry, strategic information disclosure carries a cost of investors disagreeing with managements’ strategy and thus refusing to provide funding to the firm. Using a hand- collected sample of information releases, I identify firm characteristics that affect the likelihood of strategic information disclosure.

I investigate the effect of shareholder rights and information asymmetry on
option-related repurchase activity. Prior research shows that the dilution effect of the
exercise of the employee stock options on earnings per share (EPS) decreases the value of
stock options. Thus, managers tend to use stock repurchases rather than dividends to
return cash to shareholders (the dividend substitution effect). I document that the
executive stock option incentives to repurchase stock as a substitute for dividends are
stronger when firms have weak shareholder rights and the level of information
asymmetry positively influences managerial stock option incentives to repurchase stock.
Furthermore, prior research indicates that information asymmetry is positively associated
with stock repurchases. I also provide evidence indicating that the relationship between
information asymmetry and stock repurchases is stronger when firms have weaker shareholder rights.

The Big 4 global networks (Deloitte, Ernst & Young [E&Y], KPMG, and
PricewaterhouseCoopers [PwC]) market themselves as providers of worldwide seamless services and consistent audit quality through their members. Under the current environment in which these auditors operate, there are three types of global network members: inspected non-U.S. affiliates (inspected affiliates, hereafter), non-inspected non-U.S. affiliates (non-inspected affiliates, hereafter), and inspected U.S. offices (U.S. offices, hereafter). The recent suspension of the China-based Big 4 affiliates from auditing U.S.-listed companies calls into question whether these global networks can deliver the same level of audit quality across all their members and whether those located in jurisdictions denying access to the Public Company Accounting Oversight Board (PCAOB or Board, hereafter) to conduct inspections may benefit from such inspections. This study examines the effect of being an affiliate and the effect of PCAOB inspections on perceived audit quality. I use earnings response coefficients (ERCs) as a proxy for perceived audit quality.

In December 2009, the Securities Exchange Commission (SEC) approved enhanced proxy disclosure rules requiring companies to disclose the board’s leadership
structure and the board’s role in risk oversight. Apart from general business risks, boards
are increasingly interested in Information Technology (IT) risks as it affects all aspects of
the organization (PricewaterhouseCoopers [PwC], 2013). Since the effectiveness of IT
risk management depends on senior managers’ actions, this dissertation attempts to
answer the question of whether the maturity of IT risk management practices (the extent
to which management performs particular activities to identify, assess, monitor and
respond to IT-related risks) in organizations depends on the Chief Information Office
(CIO) reporting structure and the board’s leadership structure.

My objective in this dissertation was to understand the processes leading to incompletion of the high profile cross-border deals. A conceptual framework was
developed which suggests that announcement of a cross-border merger and acquisition
(M&A) deal starts a string of institutional processes that leads to incompletion of the bid.
I proposed that less powerful host country actors threatened by the MNC’s bid proposal
politicize the transaction turning the deal into a transgression. These actors publicize this transgression, initiating a scandal, to gather support of multiple audiences in their
attempts to thwart the threat that the MNC poses. Thanks to their efforts in appealing to
audiences and publicization of the deal as a transgression, these actors mobilize
audiences who reveal hostile reaction against the MNC and the proposed bid. Such
mobilization and hostile reaction, in turn, lead to proposed bid’s incompletion.
Qualitative analysis results based on a sample of seven high profile cross-border transactions provided support for the conceptualized processes, namely politicization,
scandal, mobilization and hostile reaction, while indicating a different order of process
progression compared to the linear one conceptualized. I found that in all cases the
process of scandal subsumed the other processes that kept scandal alive. In turn, scandal fed these processes giving more leverage to the mobilization efforts and/or increasing the hostility of the actors opposing the deal. The findings revealed that these processes happened simultaneously and that in cases where mobilization did not emerge, hostile reaction substituted for the lack of mobilization. Additionally, analysis showed that not only less powerful actors but also powerful actors, elites, sought to initiate a scandal when the host country political, legal or bureaucratic processes did not work for them in thwarting the deal. This dissertation by examining social construction, power and politics within the host country institutional environment in the context of high profile cross-border deals, presented a framework that explained how and why the hostility leading to deal incompletion emerges in the host country. In so doing, this dissertation strengthens institutional theory, theory of scandal, social movements theory and elite theory as powerful perspectives in international strategic -management.

The corporate form of business organization has associated with it potentially significant agency costs. These costs arise principally from the separation of ownership and control interests in the firm. While it is widely believed that multinational corporations (MNCs) with substantial foreign market exposure face higher agency costs than less-exposed MNCs or domestic firms, empirical evidence in support of this contention is largely absent from the literature. This dissertation uses capital market data to empirically examine the theory that multinational corporations with substantial exposure to foreign markets incur greater agency costs than less-exposed MNCs or domestic corporations. Using the agency cost perspective of common shareholders, this study tests for evidence of a differential agency cost effect for MNCs by examining the market reaction to a series of events that should tend to signal a change in the level of agency costs for all firms. If MNCs with significant foreign market exposure experience higher agency costs than less-exposed MNCs or domestic corporations, then events that tend to reduce (increase) agency costs in all firms should have greater positive (negative) wealth effects for highly exposed MNCs. An event-study methodology is used to measure the abnormal returns associated with the announcements of four separate events: (1) debt offerings; (2) equity offerings; (3) organizational restructurings; and (4) takeover defenses. The observed abnormal returns are then examined cross-sectionally to test whether various firm-specific factors (primarily degree of foreign market exposure) are influential in explaining the pattern of returns. When taken together, the results of the four event-studies and their associated cross-sectional analyses support the main hypothesis of this dissertation that multinational corporations with substantial foreign market exposure experience greater levels of agency costs than less-exposed MNCs or domestic corporations. The strength of these findings depends upon the extent to which the underlying events represent effective proxies for changes in agency costs across firms.

This dissertation investigates the antecedents and consequences to pay disparity between the CEO and non-CEO executives from an equity-based perspective. While the principles of agency theory suggest that CEOs are granted higher compensation packages to better align their motives to those of the firm's shareholders, empirical research has not supported a positive relationship between rising CEO pay and firm performance. Some results even suggest a negative relationship. This dissertation argues that if organizational outcomes are determined by the integrated skills and talents of its dominant coalition, and if the management of a firm's trajectory is a shared process, then, the disparity in rewards between the CEO and those that work closest to him becomes an important area of study.