Abstract
In this paper, we discuss how corporate governance affects a transport firm’s value. We derivate the optimal firm value Q* and compute the observed Q value; we then explain the shortfall (Q* − Q). To our knowledge, this is the first study that explains the distortion on transport firm value by internal governance mechanisms. Departing from 64 public road transport operators from 18 countries publicly traded during 2000–2011 using a parametric method, we empirically demonstrate that size of the board, board independence, CEO duality and CEO ownership can largely explain the distortion on transport firm value. The paper also provides an optimal corporate governance structure that can avoid such distortions.
Similar content being viewed by others
References
Aggarwal, R., Erel, I., Stulz, R., & Williamson, R. (2009). Differences in governance practices between U.S. and foreign firms: measurement, causes, and consequences. Review of Financial Studies, 22, 3131–3169.
Battese, G. E., & Coelli, T. J. (1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20, 325–332.
Baysinger, B. D., & Hoskisson, R. R. (1990). The composition of boards of directors and strategic control: effects on corporate strategy. Academy of Management Review, 15, 72–87.
Ben Fatma, E., Ben Mohamed, E., & Boudabbous, S. (2015). Does entrepreneur dispositional optimism bias affect small firms’ technical efficiency. Int. J. Enterpren. Small Bus, 24(3), 302–321.
Ben Mohamed, E., Jarboui, S., Baccar, A., & Bouri, A. (2015). On the effect of CEOs personal characteristics in transport firm value? A stochastic frontier model. Case Studies on transport Policy, 3(2), 176–181.
Ben Mohamed, E, Jarboui, S, Baccar, A, Bouri, A, (2013). Do CEOs personal characteristics matter on firm value? A stochastic frontier approach. IEEE publisher
Brickley, J. A., Coles, J. L., & Jarrell, G. A. (1997). Leadership structure: separating the CEO and chairman of the board. Journal of Corporate Finance: Contracting, Governance and Organization, 3(3), 189–220.
Chaganti, R. S., & Mahajan, S. S. (1985). Corporate board size, composition, and corporate failures in retailing industry. Journal of Management Studies, 22, 400–417.
Coelli,T. J. (1996). A guide to frontier version 4.1: a computer program. Armidale, Australia: University of New England.
Dallas, L. L. (2001). Developments in U.S. boards of directors and the multiple roles of corporate boards. Working Paper, University of San Diego.
Dalton, D. R., Daily, C. M., Ellstrand, A. E., & Johnson, J. L. (1998). Meta-analytic review of board composition, leadership structure, and financial performance. Strategic Management Journal, 19, 269–290.
Deakin, S., & Hughes, A. (1997). Comparative corporate governance: an interdisciplinary agenda. Journal of Law and Society, 24(1), 1–9.
Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: causes and consequences. Journal of Political Economy, 93, 1155–1177.
Dharwardkar, R., George, G., & Brandes, P. (2000). Privatization in emerging economies: an agency perspective. Academy of Management Review, 25(3), 650–669.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301–349.
Fuerst, O., & Kang, S. (2000). Corporate governance, expected operating performance, and pricing. Working paper, Yale School of Management.
Gertner, R., & Kaplan, S. (1996). The value-maximizing board. Working Paper: University of Chicago and NBER.
Goldstein, J., Gautam, K., & Boecker, W. (1994). The effects of board size and diversity on strategic change. Strategic Management Journal, 15, 241–250.
Habib, M. A., & Ljungqvis, A. P. (2005). Firm value and managerial incentives. Journal of Business, 78(6), 2053–2094.
Hermalin, B. E., & Weisbach, M. S. (2003). Boards of directors as an endogenously determined institution: a survey of the economics literature. Economic Policy Review, 9(1), 7–26.
Hermalin, B. E., & Weisbach, M. S. (1998). Endogenously chosen boards of directors and their monitoring of the CEO. American Economic Review, 88, 96–118.
Himmelberg, C., Hubbard, R., & Palia, D. (1999). Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics, 53, 353–384.
Jarboui, S., Forget, P., & Boujelbene, Y. (2012). The efficiency of public road transport: a literature review via the classification scheme. Public Transport, 4(2), 101–128.
Jarboui, S, Forget P, Boujelbene, Y, (2013). Efficiency evaluation in public road transport: a stochastic frontier analysis. Transport. doi: 10.3846/16484142. 2013. 785019.
Jarboui, S., Forget, P., & Boujelbene, Y. (2013b). Public road transport efficiency: a stochastic frontier analysis. Journal of Transportation Systems Engineering and Information Technology, 13(5), 64–71.
Jarboui, S., Forget, P., & Boujelbene, Y. (2014). Inefficiency of public road transport and internal corporate governance mechanisms. Case Studies on Transport Policy, 2(3), 153–167.
Jensen, M. (1993). The modern industrial revolution, exit, and the failure of internal control systems. Journal of Finance, 48, 831–880.
Jensen, M., & Meckling, W. (1976). Theory of the firm managerial behavior, agency costs and capital structure. Journal of Financial Economics, 3, 305–60.
Karlaftis, M. G., & Tsamboulas, D. (2012). Efficiency measurement in public transport: are findings specification sensitive? Transportation Research Part A, 46, 392–402.
Keasey, K., Thompson, S., & Wright, M. (1997). Introduction: the corporate governance problem-competing diagnoses and solutions. In K. Keasey, S. Thompson, & M. Wright (Eds.), Corporate governance: economics, management, and financial issues. Oxford, UK: Oxford University Press.
Lipton, M., & Lorsch, J. W. (1992). A modest proposal for improved corporate governance. Business Lawyer, 48(1), 59–77.
Mayer, F. (1997). Corporate governance, competition, and performance. In S. Deakin & A. Hughes (Eds.), Enterprise and community: new directions in corporate governance. Oxford, UK: Blackwell Publishers.
McConnel, J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of financial economics, 27.
Morck, R., Shleifer, A., & Vishny, R. (1988). Management ownership and market valuation: an empirical analysis. Journal of Financial Economics, 20, 293–315.
Pawlina, G., Luc, D. R., & Renneboog. (2005). Is investment-cash flow sensitivity caused by agency costs or asymmetric information? Evidence from the UK. European Financial Management, 11(4), 483–513.
Rechner, P. L., & Dalton, D. R. (1991). CEO duality and organizational performance: a longitudinal analysis. Strategic Management Journal, 12, 155–160.
Renneboog, L. (2000). Ownership, managerial control and the governance listed on the Brussels Stock Exchange. Journal of Banking and Finance, 24(12), 1959–1995.
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. The Journal of Finance, 52, 737–783.
Sridharan, U. V., & Marsinko, A. (1997). CEO duality in the paper and forest products industry. Journal of Financial and Strategic Decisions, 10(1), 59–65.
Stulz, R. M. (1988). Managerial control of voting rights: financing policies and the market for corporate control. Journal of Financial Economics, 20, 25–54.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Ezzeddine, B.M., Jarboui, S. Do Corporate Governance Mechanisms Affect Public Transport Firm Value?. J Knowl Econ 8, 916–928 (2017). https://doi.org/10.1007/s13132-015-0302-3
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s13132-015-0302-3