Corporate Governance in Emerging and Developed Economies
This dissertation investigates (1) chief executive officer (CEO) compensation, (2) board of directors, and (3) firm ownership and control, three widely studied topics in the corporate governance domain. With three chapters, I delve deeper into each topic by exploring a relatively unique aspect within each stream of research. In Chapter 1, I investigate CEO compensation with a gender focus. This chapter asks whether there is a gender pay gap at the CEO position, and if a pay gap exists, whether there are gap-narrowing mechanisms. Theoretically grounded in role congruity theory and empirically tested with 5,416 firm-year observations, Chapter 1 finds that female CEOs are paid less than male CEOs. Nevertheless, the gender pay gap among CEOs can be narrowed when female CEOs are more risk-seeking or when female CEOs work in female dominated industries. Overall, Chapter 1 provides important insights into the CEO compensation literature by elevating the gender issue at the top executive position. Chapter 2 examines the acquisition implications of board of directors with a focus on directors’ multiple board appointments, or board interlocks. This chapter integrates the dominant, positive view that board interlocks are sources of information and resources, with an emerging, negative view that interlocks may breed board inefficiencies. I propose that more board interlocks in acquiring firms may help identify more target firms, reflected in acquisition announcements. However, more interlocks in acquiring firms may be less conducive to successfully closing each announced acquisition, because acquirers’ boards are increasingly less effective to channel firm resources to minimize deal-inhibiting uncertainties and internalize each identified target firm. The hypotheses find support with 2,786 firm-year and 911 deal-year observations. Overall, Chapter 2 calls for a balanced view towards board interlocks by considering both their positive and negative strategic implications. In Chapter 3, I probe into firm ownership and control with a focus on inter firm ownership structure, or specifically, corporate pyramids. This chapter investigates the innovation implications of firms in the ownership chain in the context of Chinese state-owned enterprises (SOEs), which are owned and controlled by the state, an owner typically eschewing risky innovation strategies. Leveraging an institutional logics perspective, Chapter 3 proposes that SOEs that are controlled lower in the ownership chain are more innovative. That is because such SOEs experience reduced institutional grip of the state owner, and when institutions transition from a state logic to a market logic, they are more likely to shift towards a market logic that embraces an innovation strategy. Empirically testing with 2,144 firm-year observations, I find support that SOEs positioned lower in the ownership chain are more innovative compared with those that are more closely owned and controlled by the state. Overall, Chapter 3 contributes to the ownership and control literature by shedding a positive light on the hierarchical ownership structure. In summary, this dissertation covers important topics in the corporate governance domain and endeavors to contribute to the knowledge building within each topic.