Ownership structure, corporate governance and institutional environment: Going beyond managerial opportunism and the principal‐agent framework

• Date: 01 March 2018
• Published date: 01 March 2018
• DOI: http://doi.org/10.1111/corg.12232
• Author: Alessandro Zattoni,Praveen Kumar

EDITORIAL

Ownership structure, corporate governance and institutional

environment: Going beyond managerial opportunism and the

principal‐agent framework

Building on the empirical evidence collected by Berle and Means

(1932) at the beginning of the twentieth century, the corporate

governance (CG) literature has been dominated by studies exploring

the negative consequences of ownership dispersion in large public

companies (Shleifer & Vishny, 1997). Using samples from Anglo‐

American institutional settings and building their theoretical frame-

work on agency theory, governance scholars have developed a number

of studies investigating the conflict of interests between top managers

and minority shareholders (i.e., the principal‐agent problem) and their

negative impact on firm performance (Kumar & Zattoni, 2014a).

More recently, empirical evidence collected from several countries

around the world has highlighted that—outside Anglo‐American

countries—listed companies have a concentrated ownership structure

and control is in the hands of one or few shareholders, usually a family

or the state (e.g., La Porta, Lopez‐de‐Silanes, Shleifer, & Vishny, 1998;

Zattoni & Judge, 2012). These companies are affected by a different

agency problem, namely, the conflict of interests between controlling

and minority shareholders (i.e., a principal‐principal problem) and its

potential negative impact on firm performance (Aslan & Kumar, 2012

Kumar & Zattoni, 2015).

The investigation of ownership structures and corporate gover-

nance mechanisms outside the Anglo‐American countries has allowed

scholars to understand the variety of possible configurations of these

variables. Thanks to these studies, we have matured a better view on

the role of large shareholders (Kumar & Zattoni, 2014b) and on the

complexity of ownership structures around the world. For example,

scholars analyzed and highlighted the implications of control‐

enhancing mechanisms (CEMs) (e.g., Claessens, Djankov, & Lang,

2000; Cuomo, Zattoni, & Valentini, 2013; Kumar & Zattoni, 2017; La

Porta, Lopez‐de‐Silanes, Shleifer, & Vishny, 1999) on the amount of

financial resources necessary to control corporate assets (Zattoni,

1999) and on the opaqueness of the ownership structure for investors

(Kumar & Zattoni, 2014c).

In addition, the exploration of ownership and corporate gover-

nance issues in both developed and emerging economies allowed

scholars to understand the role of the institutional environment

(Kumar & Zattoni, 2016). These studies show, in fact, that the charac-

teristics of the Anglo‐American institutional environment (e.g., high

investor protection, liquid and efficient capital markets, high corporate

disclosure) are quite unique and that, in other country settings, and

especially in emerging economies, the institutional environment

departs significantly from the US and the UK (e.g., Hall & Soskice,

2001; Whitley, 1999). A key result of this growing stream of research

is that the ownership structure, the corporate governance, and the

institutional environment may be considered as a bundle of mecha-

nisms that contribute to alleviate or to exacerbate agency problems

in listed companies (e.g. Aslan & Kumar, 2014; Schiehll, Ahmadjian, &

Filatotchev, 2014; Zattoni et al., 2017).

Despite increasing research efforts, many important issues regard-

ing ownership structure, corporate governance, and institutional envi-

ronment remain unexplored. The four papers published in this issue

help us to extend our understanding on these interrelated and impor-

tant variables. In the first paper, Qian, Cao, and Cao analyze the influ-

ence of the institutional environment (i.e., both formal institutions like

legal protection and law enforcement, and informal institutions like

trust and religion) on bank loans. They argue that formal and informal

institutions have both a direct and an interactive impact on bank loans.

The empirical setting is represented by a sample of firms from 25

emerging economies in the period between 2002 and 2009. The

results support the idea that the institutional environment affects bank

loans in emerging economies. In particular, they show that, compared

to developed economies, law enforcement is more important than

legal protection among formal institutions, the informal institutions of

religion and trust have a comprehensive impact on bank loans, and

formal and informal institutions have a substitute influence on firms'

loan financing. These findings underline the key role of both formal

and informal institutions in affecting loan conditions in emerging

economies, and invite governments to improve formal institutions in

order to promote firm financing and development.

In the second paper, Wang, Jiao, Xu, and Yang explore the role of

state investment departing from previous studies that focused on

state‐controlling stakes or aggregated stakes. Building on signaling

theory, the study argues that minority state ownership reduces initial

public offering (IPO) market performance, while founder‐CEOs and

nonexecutive directors not connected with state‐owned companies

may attenuate this negative effect. The empirical setting is represented

by 274 small and private firms going public in China between 2004 and

2009. The results show that minority state ownership reduces IPO

DOI: 10.1111/corg.12232

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