Advances in Economics, Management and Political Sciences

- The Open Access Proceedings Series for Conferences


Proceedings of the 7th International Conference on Economic Management and Green Development

Series Vol. 43 , 10 November 2023


Open Access | Article

Assessment of Salient Problems Associated with the Separation of Ownership and Control of Modern Cor-porations: Evaluation of Solutions and Their Effectiveness

Chen Zeyu * 1 , Huang Ziyuan 2
1 Guangzhou College of Technology and Business
2 Wens Foodstuff Group Co., Ltd.

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 43, 156-164
Published 10 November 2023. © 2023 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Chen Zeyu, Huang Ziyuan. Assessment of Salient Problems Associated with the Separation of Ownership and Control of Modern Cor-porations: Evaluation of Solutions and Their Effectiveness. AEMPS (2023) Vol. 43: 156-164. DOI: 10.54254/2754-1169/43/20232149.

Abstract

This paper examines the salient problems related to the separation of ownership and control of modern corporations, as discussed in the books ‘The Wealth of Nations’ and ‘The Modern Corporation and Private Property’. It qualitatively analyzes past empirical studies and evaluates the effectiveness of various solutions aimed at alleviating the separation between ownership and control. The analysis reveals that the agency relationship between shareholders and organizational managers underpins the phenomenon of ownership and control separation in modern companies. This separation offers several benefits, including ensuring business sustainability through professional management, efficient decision-making, and maximizing physical capital. Additionally, numerous mechanisms have proven effective in managing these issues. The paper explores management ownership and incentives, independent ownership, and institutional ownership as solutions that they have been found to reduce institutional problems and manage risk avoidance.

Keywords

separation, cause of separation, salient problem, empirical finding, effectiveness analysis

References

1. Jeet, D. (2022) ‘Ownership pattern and firm performance: corporate governance in In-dian firms’, International Journal of Innovation and Sustainable Development, 16(2), pp. 135-154.

2. Berle, A., & Means, G. (1932) The Modern Corporation and private property. New York: Harcourt, Brace & World.

3. Marks, S. G. (1999) ‘The separation of ownership and control. V Encyclopedia of law and economics, ur’, Boudewijn Bouckaert in Gerrit Geest, pp. 692–710.

4. Kostyuk, A., Mozghovyi, Y., & Govorun, D.(2018) ‘Corporate governance, ownership and control: A review of recent scholarly research’, Corporate Board: Role, Duties and Composition, 14(1), pp. 50-56.

5. Chua, M. S., & Ab Razak, N. H. (2018) ‘The Impact of Board of Directors’ Characteris-tics and Remuneration on Companies’ Performance in Malaysia’, Indian Journal of Public Health Research and Development, 3, pp.1-22

6. Gonzalez-Ricoy, I. (2020) ‘Ownership and control rights in democratic firms–a republi-can approach’, Review of Social Economy, 78(3), pp. 411-430.

7. Fama, E. F., & Jensen, M. C. (1983) ‘Agency problems and residual claims’, The jour-nal of law and Economics, 26(2), pp. 327-349.

8. Stout, L. A. (2007) ‘The mythical benefits of shareholder control’, Virginia Law Re-view, pp.789-809.

9. Smith, A. (2010) The Wealth of Nations: An inquiry into the nature and causes of the Wealth of Nations. Harriman House Limited.

10. Jensen, M. C., & Meckling, W. H. (1976) ‘Theory of the firm: Managerial behavior, agency costs and ownership structure’, Journal of financial economics, 3(4), pp. 305-360.

11. Shapiro, S. P. (2005) ‘Agency theory’, Annu. Rev. Sociol., 31, pp. 263-284.

12. Bag, S. (2018) Economic Analysis of Contract Law: Incomplete Contracts and Asym-metric Information. Springer.

13. Chod, J., & Lyandres, E. (2021) ‘A theory of icos: Diversification, agency, and infor-mation asymmetry’, Management Science, 67(10), pp. 5969-5989.

14. Guiso, L., & Paiella, M. (2008) ‘Risk aversion, wealth, and background risk’, Journal of the European Economic association, 6(6), pp. 1109-1150.

15. Agrawal, A., & Knoeber, C. R. (1996) ‘Firm performance and mechanisms to control agency problems between managers and shareholders’, Journal of financial and quanti-tative analysis, 31(3), pp. 377-397.

16. Trong, N. N., & Nguyen, C. T. (2020) ‘Firm performance: The moderation impact of debt and dividend policies on overinvestment’, Journal of Asian Business and Econom-ic Studies,

17. Abor, J., & Biekpe, N. (2006) ‘An empirical test of the agency problems and capital structure of South African quoted SMEs’, South African Journal of Accounting Re-search, 20(1), pp.51-65.

18. Harvey, C. R., Lins, K. V., & Roper, A. H. (2004) ‘The effect of capital structure when expected agency costs are extreme’, Journal of financial economics, 74(1), pp. 3-30.

19. Mao, C. X. (2003) ‘Interaction of debt agency problems and optimal capital structure: Theory and evidence’, Journal of Financial and quantitative Analysis, 38(2), pp. 399-423.

20. Ganiyu, Y. O., Adelopo, I., Rodionova, Y., & Samuel, O. L. (2019) ‘Capital structure and firm performance in Nigeria’, African Journal of Economic Review, 7(1), pp. 31-56.

21. Huu Nguyen, A., Thuy Doan, D., & Ha Nguyen, L. (2020) ‘Corporate governance and agency cost: Empirical evidence from Vietnam’, Journal of Risk and Financial Man-agement, 13(5), pp. 103.

22. Rashid, A. (2016) ‘Managerial ownership and agency cost: Evidence from Bangladesh’, Journal of business ethics, 137(3), pp. 609-621.

23. Mustapha, M., & Ahmad, A. C. (2011) ‘Agency theory and managerial ownership: evi-dence from Malaysia’, Managerial Auditing Journal, 26 (9), pp. 419-436.

24. Allam, B.S. (2018) ‘The impact of board characteristics and ownership identity on agency costs and firm performance: UK evidence’, Corporate Governance, 18 (6), pp. 1147-1176.

25. Wardhana, L. I., & Tandelilin, E. (2011) ‘Institutional ownership and agency conflict controlling mechanism’, Journal of Indonesian Economy and Business (JIEB), 26(3), pp. 389-406.

26. Ajay, R., & Madhumathi, R. (2015) ‘Institutional ownership and earnings management in India’, Indian Journal of Corporate Governance, 8(2), pp. 119-136.

27. Burns, N., Kedia, S., & Lipson, M. (2010) ‘Institutional ownership and monitoring: Ev-idence from financial misreporting’, Journal of Corporate Finance, 16(4), pp. 443-455.

28. Zajac, E. J., & Westphal, J. D. (1994). The costs and benefits of managerial incentives and monitoring in large US corporations: When is more not better?. Strategic manage-ment journal, 15(S1), 121-142.

29. Schäuble, J. (2018) ‘The impact of external and internal corporate governance mecha-nisms on agency costs’, Corporate Governance: The International Journal of Business in Society, 8, pp. 12-33

30. Alessandri, T. M., Mammen, J., & Eddleston, K. (2018) ‘Managerial incentives, myopic loss aversion, and firm risk: A comparison of family and non-family firms’, Journal of Business Research, 91, pp. 19-27.

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:

1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.

2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.

3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).

Volume Title
Proceedings of the 7th International Conference on Economic Management and Green Development
ISBN (Print)
978-1-83558-107-0
ISBN (Online)
978-1-83558-108-7
Published Date
10 November 2023
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/43/20232149
Copyright
© 2023 The Author(s)
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated