Zeitoun, Hossam and Pamini, Paolo (2015) Corporate ownership structure and top executives’ prosocial preferences : the role of relational and external blockholders. Corporate Governance: An International Review, 23 (6). pp. 489-503. doi:10.1111/corg.12111

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Abstract

Manuscript Type: Empirical

Research Question/Issue: The relationships between corporations and their stakeholders are often based on incomplete contracts, which are difficult to enforce in courts. Corporate managers play a key role in safeguarding incomplete contracts with stakeholders. This role requires a strong prosocial motivational orientation. Although the managers’ motivational orientation is invisible, stakeholders can make inferences about it from managers’ choices and behavior. Based on these ideas, this paper asks whether the managers’ motivational orientations vary according to the firms’ ownership structures, i.e., ownership by relational and external blockholders.

Research Findings/Insight: Results show that ownership by relational blockholders is associated with more prosocially oriented managers, whereas ownership by external blockholders is related to more self-interested managers. This study adopts an unobtrusive measure to infer the managers’ motivational orientation. This measure reflects the managers’ willingness to pay taxes and can be assessed systematically in the Swiss empirical context. The results are corroborated using multivariate regression analysis and profile deviation analysis.

Theoretical/Academic Implications: This paper joins incomplete contract theory and behavioral economics to analyze how the shareholder primacy model and the stakeholder model fit with different types of managers. Based on the idea of profile deviation, we suggest that corporate ownership structure is an important factor influencing the degree to which firms approximate these two corporate governance models, and thereby their fit with the respective manager type.

Practitioner/Policy Implications: The theoretical arguments and the empirical evidence suggest that the fit between corporate ownership structure and managerial motivation merits consideration. When selecting managers, boards need to pay attention not only to their skills and competencies, but also to their motivational orientation in order to capitalize on the strengths of alternative corporate governance models.

Item Type:	Journal Article
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Warwick Business School > Strategy & International Business Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Corporate governance, Stock ownership, Decision making -- Social aspects, Social ethics, Social responsibility of business, Stockholders
Journal or Publication Title:	Corporate Governance: An International Review
Publisher:	Wiley-Blackwell Publishing Ltd.
ISSN:	0964-8410
Official Date:	November 2015
Dates:	Date Event November 2015 Published 28 April 2015 Available 6 February 2015 Accepted 7 April 2013 Submitted
Date of first compliant deposit:	28 July 2016
Volume:	23
Number:	6
Page Range:	pp. 489-503
DOI:	10.1111/corg.12111
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
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