Strong or Weak Owners? The Effects of Ownership on Corporate Governance Noncompliance

Abstract

Using detailed data on non-compliance behavior, collected from the annual reports of the largest 130 publicly listed firms, in the U.K., Germany and Spain in 2007, we show that greater ownership concentration at a focal firm creates a potential agency problem between majority and minority shareholders that does not fit into the traditional regulatory enactments. It is because regulatory provisions generate negative byproducts such as exacerbated compliance costs or under monitoring of managerial behavior. Therefore, differences in the amount of equity from families, corporate owners, and active and passive institutional investors, determine their influence on the board of directors when deciding on managerial monitoring strategies

Keywords: corporate governance codes, signalling theory, comparative study

JEL Classification: G30, G38, G39