Liquidity versus Control: The Institutional Investor as Corporate Monitor

Coffee, John C.

doi:10.2307/1123064

Cited by 762 publications

(353 citation statements)

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“…LaPorta et al (2002) find higher firm valuation in countries with better protection of shareholders' rights. Finally, studies find that institutional owners play an important role in firm governance through their monitoring of management (e.g., see Shleifer and Vishny, 1986;Coffee, 1991;and Bhojraj and Sengupta, 2003).…”

Section: Modelmentioning

confidence: 99%

Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Management

et al. 2006

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A prime objective of the Sarbanes-Oxley Act and recent changes to stock exchange listing standards is to improve the quality of financial reporting. We examine the associations between audit committee financial expertise and alternate corporate governance mechanisms and earnings management. We find that both accounting and certain types of non-accounting financial expertise reduce earnings management for firms with weak alternate corporate governance mechanisms, but that independent audit committee members with financial expertise are most effective in mitigating earnings management. Importantly we find that alternate corporate governance mechanisms are an effective substitute for audit committee financial expertise in constraining earnings management. Finally, we find either no association or a positive association between financial expertise and real earnings management. Our results suggest that alternate governance approaches are equally effective in improving the quality of financial reporting, and that firms should have the flexibility to design the particular set of governance mechanisms that best fit their unique situations.

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Section: Modelmentioning

confidence: 99%

Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Management

et al. 2006

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“…For example, concentrated ownership may reduce market liquidity and thus reduce the ability of the investor to sell their shares (Holmstrom and Tirole, 1993)). This link between monitoring and liquidity has been addressed by a number of studies, including Coffee (1991), Bhide (1994), Maug (1998) and Kahn and Winton (1998). One view is that liquidity and control are antithetical (Coffee (1991) and Bhide (1994)).…”

Section: Theory and Evidencementioning

confidence: 99%

Institutional Investors, Corporate Ownership and Corporate Governance: Global Perspectives

Gillan¹,

Starks²

2003

Ownership and Governance of Enterprises

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We examine the role of institutional investors in financial markets and in corporate governance. In many countries, institutional investors have become the predominant players in financial markets and their influence worldwide is growing, chiefly due to the privatization and development of pension fund systems. Moreover, foreign institutional investors are becoming a significant presence, bringing their trading habits and corporate governance preferences to international markets. In fact, we argue that the primary actors prompting change in many corporate governance systems are institutional investors, often foreign institutional investors. In other countries the role of institutional investors is limited. Instead, large blockholders, often in the form of individuals, family groups, other corporations, or lending institutions are the dominant players. We present the theoretical arguments for the involvement of investors in shareholder monitoring and a brief history of institutional ownership and activism in the United States and other countries. We also discuss studies of the efficacy of such activism.We then examine differences in ownership structures around the world and the implications of the interactions of these ownership structures for institutional investor involvement in corporate governance. Although there may be some convergence in corporate governance systems across countries, because of the endogenous nature of the interrelation among the factors of corporate governance the evolution will most likely .../…

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“…Third, neither large shareholders nor bank control seem to protect managers from the possibility of being dismissed when their companies perform poorly. These results call into question the view that in bank-based regimes, such as the German one, managers may be entrenched at the expense of minority shareholders (Coffee 1991, Roe 1993. The results in the Kaplan studies are not entirely supported by the Franks and Mayer study (2001).…”

Section: Public Authoritiesmentioning

confidence: 92%

“…Third, in highly leveraged companies, a large blockholder may push management to take excessive risks -especially if the company is performing poorly and the bankruptcy costs are high. In this case, risk increasing investment projects may lead to the expropriation of debtholder wealth (Jensen and Meckling 1976;Coffee 1991). Fourth, Burkart et al (1997) and Pagano and Röell (1998) point out that even when tight control by shareholders is efficient ex post, ex ante it may constitute an expropriation threat that reduces managerial incentives to exert effort and to undertake value maximizing strategies (the so-called 'over-monitoring' effect).…”

Section: Monitoring By Blockholdersmentioning

confidence: 99%

Recent developments in German corporate governance

Goergen

Manjon

Renneboog

2008

International Review of Law and Economics

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We contrast the features of the German corporate governance system with those of other systems and discuss the recent regulatory initiatives. For example, the rules on insider trading and anti-trust have been strengthened. The Restructuring Act has been revised to prevent minority shareholders from stalling corporate restructuring via legal actions. The Takeover Act now prescribes a tender offer as soon as an investor acquires at least 30% of a fi rm's equity. However, the Act also allows anti-takeover devices. Despite the recent substantial changes, we conclude that the main characteristics of the German system are still in place.

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Liquidity versus Control: The Institutional Investor as Corporate Monitor

Cited by 762 publications

References 0 publications

Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Management

Audit Committee Financial Expertise, Competing Corporate Governance Mechanisms, and Earnings Management

Institutional Investors, Corporate Ownership and Corporate Governance: Global Perspectives

Recent developments in German corporate governance

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