Shareholder structure and compliance with the board best practice: econometric analysis
The article examines compliance with corporate governance best practice in the post-transition economy addressing the heterogeneity of interests of different shareholders. On the basis of agency theory we suggest that in the concentrated ownership environment the principal-principal conflict results in lower compliance with the corporate governance code. More specifically, since compliance with best practice requires introducing independent directors and in that sense shifts control from shareholders to the board, we hypothesize that companies characterized by concentrated ownership and the dominant position of the founder / individual investor are reluctant to comply with board best practice. To evaluate our hypothesis we explore compliance with board best practice with respect to the presence of independent directors, formation of audit committee and other specialized board committees (remuneration, risk, strategy). We test the link between the compliance with the code and the ownership structure. Our analysis supports the principal-principal conflict argument and shows that companies with concentrated ownership and founder control do not comply with the board best practice. (original abstract)
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