Volume 1, Issues 1 & 2 (2016)
Peer-reviewed scholarly contributions examining corporate governance, equity structures, stakeholder value maximization, and financial markets in transitioning economies.
Volume 1, Issue 1 (2016)
Published: March 2016 | Pages: 1–85 | 7 Articles
Institutional Shareholding and Corporate Governance Efficiency in Emerging Eastern European Markets
Elena V. Stankova1, Marcus A. Thorne2 1Department of Finance, University of Belgrade, Serbia; 2School of Economics, Vienna University of Economics and Business, Austria
Abstract: This empirical study investigates the relationship between concentrated institutional shareholding and corporate governance efficiency across 140 publicly traded firms in emerging Eastern European markets from 2011 to 2015. Utilizing dynamic panel data estimation techniques (GMM), our findings demonstrate that foreign and domestic institutional investors exert a significantly positive influence on board accountability and transparency metrics. However, excessive ownership concentration by state-affiliated institutional funds reveals a non-linear inverted U-shaped relationship with minority shareholder protection indices. Furthermore, the analysis controls for firm size, leverage, and industry concentration, offering robust policy recommendations for regulatory authorities seeking to enhance capital market liquidity and investor confidence in transitional economies.
Minority Shareholder Rights and Dividend Payout Policies: Evidence from Regional Manufacturing Sectors
Julian H. K. Vance1, Stefan L. Broberg2 1Department of Corporate Finance, Stockholm School of Economics, Sweden; 2Faculty of Economics, University of Zagreb, Croatia
Abstract: The protection of minority shareholder rights remains a cornerstone of modern corporate finance theory. This paper examines how varying degrees of legal protection and shareholder activism influence dividend payout ratios within the regional manufacturing sector. Analyzing 95 manufacturing enterprises over a five-year window, we deploy a Tobit regression model to isolate the impact of voting rights enforcement on cash distribution stability. The findings indicate that firms operating under robust statutory minority protections exhibit significantly higher and more predictable dividend yields, mitigating agency conflicts between controlling blockholders and outside investors. Furthermore, the presence of institutional minority coalitions moderates tunneling behaviors, reinforcing investor trust and lowering cost of equity capital.
The Impact of Dual-Class Share Structures on Firm Valuation and Managerial Entrenchment
Clara Dubois1, Henrik Lindqvist2 1HEC Paris, France; 2Stockholm University School of Business, Sweden
Abstract: Dual-class share structures, which decouple cash-flow rights from voting rights, have generated intense debate among regulators, institutional investors, and corporate governance scholars. This paper evaluates the valuation consequences and degree of managerial entrenchment associated with superior-voting share classes across technology and industrial sectors in European equity markets. Utilizing a matched-sample methodology over an eight-year observation window, we find robust evidence that while dual-class configurations facilitate long-term strategic vision among founders, they simultaneously impose a valuation discount as governance safeguards weaken. The study discusses sunset provisions and index inclusion criteria as potential regulatory mechanisms to balance entrepreneurial incentives with investor protection.
Shareholder Activism and Environmental, Social, and Governance (ESG) Performance Disclosure
Amina K. Al-Mansoor1, Thomas G. O'Connor2 1Manchester Business School, University of Manchester, UK; 2Trinity College Dublin, Ireland
Abstract: In recent years, shareholder activism has evolved beyond pure financial restructuring to encompass rigorous demands regarding Environmental, Social, and Governance (ESG) transparency. This paper examines how coordinated institutional shareholder resolutions impact corporate ESG disclosure scores and carbon emission abatement trajectories in carbon-intensive industries. Applying a difference-in-differences econometric framework, we document that target firms subjected to active shareholder engagement experience a substantial upward revision in their sustainability reporting ratings within two fiscal years post-intervention. Furthermore, we investigate the moderating effect of board independence on management responsiveness to activist campaigns, highlighting the strategic role of socially responsible shareholding.
Equity Crowdfunding and the Democratization of Shareholding: A Comparative Legal Analysis
Lucas M. Moreau1, Beatrice N. Rossi2 1Bocconi University School of Law, Milan, Italy; 2University of Geneva Faculty of Law, Switzerland
Abstract: The advent of fintech platforms and equity crowdfunding has fundamentally transformed early-stage venture financing, enabling retail investors to acquire fractional shareholdings in startup ventures. This paper offers a comparative legal and regulatory analysis of the European Union European Crowdfunding Service Providers (ECSP) framework and national legislation governing retail shareholder rights. We address critical governance challenges arising from fragmented cap tables, voting coordination failures among dispersed retail shareholders, and investor protection safeguards. The study proposes a standardized nominee shareholder structure to streamline corporate administration for high-growth enterprises while safeguarding retail investor interests.
Cross-Holdings and Market Liquidity: An Empirical Investigation of European Holding Structures
Johannes P. Weber1, Siobhan M. Gallagher2 1Frankfurt School of Finance & Management, Germany; 2University College Dublin, Ireland
Abstract: Corporate cross-holdings—where interconnected firms hold equity stakes in one another—have historically characterized industrial groups in Western and Central Europe. This research investigates the repercussions of complex cross-holding networks on free-float liquidity, bid-ask spreads, and intraday price volatility. Utilizing a comprehensive network topology model applied to listed firms between 2012 and 2016, our findings indicate that dense cross-holding architectures severely constrain stock liquidity by reducing the effective supply of shares available for public trading. Furthermore, such networks tend to entrench incumbent management teams against hostile takeovers, resulting in suboptimal capital allocation and diminished market efficiency.
Executive Compensation and Shareholder Value Creation: A Long-Term Performance Assessment
Katarina N. Milovanovic1, Liam D. Fitzgerald2 1Faculty of Economics, University of Niš, Serbia; 2Cork University Business School, Ireland
Abstract: Aligning executive remuneration structures with long-term shareholder value creation remains a paramount challenge for corporate compensation committees. This study evaluates the efficacy of performance-vested stock options and restricted stock units (RSUs) in curbing short-termist managerial myopia across 120 non-financial firms from 2010 to 2015. Using a simultaneous equation model, we analyze how equity-based compensation packages influence research and development (R&D) expenditure and total shareholder return (TSR). Our empirical findings indicate that compensation structures heavily weighted toward multi-year vesting schedules significantly enhance sustainable value creation and reduce agency costs, whereas excessive cash bonuses correlate negatively with long-term capital appreciation.
Volume 1, Issue 2 (2016)
Published: September 2016 | Pages: 86–170 | 7 Articles
Board Independence and Shareholder Wealth in Mergers and Acquisitions
Nikoletta P. Vassiliou1, Jean-Luc P. Delacroix2 1Department of Business Administration, University of Piraeus, Greece; 2ESSEC Business School, Paris, France
Abstract: Mergers and acquisitions (M&A) represent major corporate events that frequently test the diligence and oversight capacity of corporate boards. This study examines whether higher proportions of independent directors on acquiring boards safeguard shareholder wealth and mitigate value-destroying acquisition premiums. Analyzing 180 major corporate transactions across European capital markets from 2011 to 2015, we employ cumulative abnormal returns (CAR) methodology around announcement dates. The empirical evidence reveals that independent boards are significantly more effective at vetoing unprofitable diversification deals and negotiating favorable exchange ratios, thereby protecting long-term shareholder value and preventing managerial hubris-driven overpayment.
Shareholder Voting Power and Proxy Contest Outcomes in Listed Corporations
Soren H. Vestergaard1, Fiona M. Byrne2 1Copenhagen Business School, Denmark; 2Trinity Business School, Dublin, Ireland
Abstract: Proxy contests serve as a vital market-based governance mechanism enabling dissident shareholders to challenge incumbent boards and redirect corporate strategy. This paper evaluates the determinants of proxy contest success across 110 contested annual general meetings. Using Banzhaf and Shapley-Shubik voting power indices alongside logistic regression models, we analyze how ownership concentration, proxy advisory recommendations (e.g., ISS and Glass Lewis), and retail investor turnout influence voting outcomes. The findings demonstrate that proxy advisory recommendations hold decisive sway over uncommitted retail shareholdings, frequently tipping close ballots in favor of activist slates.
Family Ownership Concentration and Firm Financial Performance: A Threshold Regression Approach
Matteo C. Rossi1, Valeria G. Moretti2 1Department of Economics and Management, University of Florence, Italy; 2Luiss Guido Carli University, Rome, Italy
Abstract: Family-controlled enterprises represent the predominant ownership model across continental European economies. However, the precise non-linear dynamics linking family shareholding concentration to accounting profitability and market valuation remain subject to ongoing debate. This study applies Hansen's threshold regression methodology to a panel of 230 family-owned corporations between 2011 and 2015. Our results identify optimal ownership thresholds where agency alignment effects dominate expropriation risks. Specifically, moderate family concentration levels (between 25% and 55%) maximize Tobin's Q and return on assets (ROA), whereas extreme super-majority concentration triggers entrenchment penalties and reduces operational agility.
Shareholder Litigation Rights and Earnings Management: A Cross-Country Comparative Study
Astrid L. Jørgensen1, Henrik P. Møller2 1Department of Accounting, Copenhagen Business School, Denmark; 2Aarhus University, Denmark
Abstract: Legal enforcement mechanisms designed to protect minority shareholders play a pivotal role in constraining opportunistic managerial behavior. This paper investigates whether robust shareholder litigation rights deter discretionary accruals and earnings management practices across 300 publicly listed firms in six European jurisdictions. Utilizing the Modified Jones Model to measure abnormal accruals, our cross-country empirical findings indicate that stringent class-action provisions and accessible derivative suit frameworks significantly curb financial misreporting. The study underscores the complementarity between statutory litigation rights and independent external auditing in preserving financial statement integrity.
The Role of Sovereign Wealth Funds as Shareholder Activists in Domestic Equity Markets
Tariq Z. Al-Hashimi1, David R. Sinclair2 1Dubai School of Government, UAE; 2Edinburgh Business School, Heriot-Watt University, UK
Abstract: Sovereign Wealth Funds (SWFs) have traditionally functioned as passive, long-term asset allocators. However, recent strategic mandates have transformed major SWFs into active institutional shareholders exerting direct pressure on portfolio companies. This article examines the governance impact of state-backed equity interventions on operational efficiency and capital expenditure discipline in strategic sectors. Analyzing transaction data from 2011 to 2016, we evaluate how SWF active shareholding stimulates productivity gains, improves environmental compliance, and prevents managerial entrenchment without destabilizing market liquidity or inducing political interference concerns.
Shareholder Value Maximization vs. Stakeholder Theory: A Re-Evaluation of Corporate Purpose
Giselle M. Laurent1, Bruno F. Morelle2 1Sorbonne Business School, University of Paris 1 Pantheon-Sorbonne, France; 2University of Geneva, Switzerland
Abstract: The enduring philosophical and economic debate pitting Milton Friedman's shareholder primacy doctrine against R. Edward Freeman's stakeholder theory has taken on renewed urgency amid contemporary ecological and social crises. This paper critically re-evaluates the normative and instrumental foundations of corporate purpose in modern jurisprudence. We argue that strict adherence to short-term shareholder wealth maximization often generates negative externalities that ultimately erode long-term equity value. By introducing an integrated relational model of corporate governance, we demonstrate that balancing employee, community, and customer interests serves as a prerequisite for sustainable shareholding value creation.
Institutional Shareholding Networks and Systemic Risk Propagation in Global Financial Markets
Damian K. Kowalski1, Zofia P. Wisniewska2 1Warsaw School of Economics, Poland; 2Jagiellonian University in Kraków, Poland
Abstract: Modern institutional investors often hold diversified equity portfolios across multiple interconnected financial institutions, creating complex webs of common ownership. This study investigates how institutional shareholding networks contribute to systemic risk propagation and financial contagion during market downturns. Constructing a multi-layered bipartite network of institutional holdings across 500 major European and global financial firms from 2011 to 2016, we apply DebtRank and conditional value-at-risk (CoVaR) stress testing algorithms. The findings reveal that overlapping institutional portfolios significantly amplify systemic vulnerability, as distress in a single core institution triggers coordinated asset fire sales across common shareholders.