Corporate Governance, Agency Problems, and Firm Performance: Empirical Evidence from an Emerging European Market

41 Pages Posted: 22 Feb 2013 Last revised: 8 Apr 2016

See all articles by Andreas Charitou

Andreas Charitou

University of Cyprus

Christodoulos Louca

Cyprus University of Technology

Ioannis Tsalavoutas

University of Glasgow - Accounting and Finance Group

Date Written: April 8, 2016

Abstract

Agency problems may arise from the separation of ownership and management (Type I) or from conflicts of interest between controlling and non-controlling shareholders (Type II). In this study, we investigate whether the relation between corporate governance and firm performance depends on the type of agency problem. Given its unique characteristics in terms ownership dispersion across the stock market’s segments, we use Cyprus as a natural experiment setting and we find a relation between governance and performance, primarily for firms more prone to Type I rather than to Type II agency problems. We interpret these findings as consistent with the view that governance effectiveness is a function of the type of agency problem. Thus, a uniform set of governance regulations, which is often applied, is unlikely to be efficient and/or optimal for all firms.

Keywords: Corporate Governance, Agency Problems, Firm Performance, Emerging Markets

JEL Classification: G34, L25

Suggested Citation

Charitou, Andreas and Louca, Christodoulos and Tsalavoutas, Ioannis, Corporate Governance, Agency Problems, and Firm Performance: Empirical Evidence from an Emerging European Market (April 8, 2016). Available at SSRN: https://ssrn.com/abstract=2221612 or http://dx.doi.org/10.2139/ssrn.2221612

Andreas Charitou

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 2 893624 (Phone)
+357 2 895030 (Fax)

Christodoulos Louca (Contact Author)

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

Ioannis Tsalavoutas

University of Glasgow - Accounting and Finance Group ( email )

Glasgow, Scotland G12 8QQ
United Kingdom

HOME PAGE: http://www.gla.ac.uk/schools/business/staff/yannistsalavoutas/

Register to save articles to
your library

Register

Paper statistics

Downloads
1,409
Abstract Views
5,407
rank
12,606
PlumX Metrics