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Principal-principal conflicts during crisis

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Abstract

This paper explores principal-principal conflicts in corporate governance during times of economic crisis. We address the question: What external and internal governance mechanisms can best protect minority shareholders? Drawing on 877 publicly listed large corporations with concentrated ownership in seven Asian countries and regions, we compare different control structures between family firms and non-family firms during crisis. We find that family firms tend to choose certain control structures associated with potential principal-principal conflicts. However, these choices can be constrained by external and internal governance mechanisms. Specifically, legal institutions and presence of multiple blockholders serve as useful external and internal governance mechanisms, respectively, to constrain potential expropriation of minority shareholders.

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Authors and Affiliations

  1. Department of Management, College of Business and Economics, California State University, East Bay, 25800 Carlos Bee Boulevard, Hayward, CA, 94542, USA

    Yi Jiang

  2. School of Management, University of Texas at Dallas, Box 830688, SM 43, Richardson, TX, 75083, USA

    Mike W. Peng

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  1. Yi Jiang
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  2. Mike W. Peng
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Correspondence to Yi Jiang.

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Jiang, Y., Peng, M.W. Principal-principal conflicts during crisis. Asia Pac J Manag 28, 683–695 (2011). https://doi.org/10.1007/s10490-009-9186-8

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  • DOI: https://doi.org/10.1007/s10490-009-9186-8

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