IDEAS home Printed from https://ideas.repec.org/a/bla/corgov/v13y2005i6p856-866.html
   My bibliography  Save this article

Alternative Internal Controls as Substitutes of the Board of Directors

Author

Listed:
  • Carlos Fernández
  • Rubén Arrondo

Abstract

Empirical literature on corporate governance often assumes independence among different control mechanisms. However, different studies in the Anglo‐Saxon context find that control mechanisms are interrelated. The Spanish corporate governance system, unlike the Anglo‐Saxon one, is characterised by the dominance of internal controls, mainly the stock ownership concentration and the board of directors. In this internal control context, we specifically analyse the possible substitution of the supervisory potential of the board outsiders by the incentive effects derived from managerial stock ownership and the supervisory role of large shareholders. Our main results show a negative relationship between the proportion of outside directors and managerial and large blockholders’ ownership stake. These findings support the substitution among internal controls and suggest that Spanish firms form an efficient conglomerate of managerial controls, in which deficiencies in a single mechanism can be compensated by the action of an alternative one.

Suggested Citation

  • Carlos Fernández & Rubén Arrondo, 2005. "Alternative Internal Controls as Substitutes of the Board of Directors," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(6), pages 856-866, November.
  • Handle: RePEc:bla:corgov:v:13:y:2005:i:6:p:856-866
    DOI: 10.1111/j.1467-8683.2005.00476.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-8683.2005.00476.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1467-8683.2005.00476.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dherment-Ferere, I. & Renneboog, L.D.R., 2000. "Share Price Reactions to CEO Resignations and Large Shareholder Monitoring in Listed French Companies," Discussion Paper 2000-70, Tilburg University, Center for Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Attiya Y. Javid & Robina Iqbal, 2010. "Corporate Governance in Pakistan : Corporate Valuation, Ownership and Financing," Governance Working Papers 22830, East Asian Bureau of Economic Research.
    2. J. Augusto Felício & Maria Purificación Galindo Villardón, 2015. "Family characteristics and governance of small and medium-sized family firms," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 16(6), pages 1069-1084, December.
    3. narjess BOUABDALLAH & jamel Eddine HENCHIRI, 2020. "L' impact des mécanismes de gouvernance interne sur le risque opérationnel bancaire," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(1), pages 151-189, June.
    4. Oliver Henk, 2020. "Internal control through the lens of institutional work: a systematic literature review," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(3), pages 239-273, September.
    5. Fodil Adjaoud & Chokri Mamoghli & Fatma Siala, 2007. "La réputation de l'audit externe et les mécanismes de gouvernement d'entreprise: Interactions et effet sur la performance," Post-Print halshs-00544896, HAL.
    6. repec:mth:ijafr8:v:8:y:2018:i:4:p:287-306 is not listed on IDEAS
    7. Isabel‐María García Sánchez & Luis Rodríguez Domínguez & Isabel Gallego Álvarez, 2011. "Corporate governance and strategic information on the internet," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 24(4), pages 471-501, May.
    8. Din, Shahab-u- & Javid, Attiya Yasmin, 2011. "Impact of managerial ownership on financial policies and the firm’s performance: evidence Pakistani manufacturing firms," MPRA Paper 37560, University Library of Munich, Germany.
    9. Wafa Hili & Habib Affes, 2013. "Diversite En Genre Dans Les Conseils D'Administration Et Persistance Des Benefices Comptables : Investigation Empirique Dans Le Contexte Franҫais," Post-Print hal-00991930, HAL.
    10. Luis Rodriguez-Dominguez & Isabel Gallego-Alvarez & Isabel Garcia-Sanchez, 2009. "Corporate Governance and Codes of Ethics," Journal of Business Ethics, Springer, vol. 90(2), pages 187-202, December.
    11. Mohammad I Azim, 2012. "Corporate governance mechanisms and their impact on company performance: A structural equation model analysis," Australian Journal of Management, Australian School of Business, vol. 37(3), pages 481-505, December.
    12. Addo, Kwabena Aboah & Hussain, Nazim & Iqbal, Jamshed, 2021. "Corporate Governance and Banking Systemic Risk: A Test of the Bundling Hypothesis," Journal of International Money and Finance, Elsevier, vol. 115(C).
    13. Peter, Zachariah & Kabir Hamid, Tahir & Ibrahim, Mohammed, 2020. "Board Attributes And Tax Planning Of Listed Non-Financial Companies In Nigeria," International Journal of Contemporary Accounting Issues-IJCAI (formerly International Journal of Accounting & Finance IJAF), The Institute of Chartered Accountants of Nigeria (ICAN), vol. 9(1), pages 130-146, March.
    14. Pascal Dumontier & Sonda Chtourou & Soumaya Ayedi, 2006. "La qualité de l'audit externe et les mécanismes de gouvernance des entreprises : Une étude empirique menée dans le contexte tunisien," Post-Print halshs-00548115, HAL.
    15. Kalelkar, Rachana, 2016. "Audit committee diligence around initial audit engagement," Advances in accounting, Elsevier, vol. 33(C), pages 59-67.
    16. Roberto Maglio & Andrea Rey & Francesco Agliata & Rosa Lombardi, 2020. "Connecting earnings management and corporate social responsibility: A renewed perspective," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 1108-1116, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wided Bouaine & Lanouar Charfeddine & Mohamed Arouri & Frédéric Teulon, 2014. "The influence of CEO departure type and board characteristics on firm performance," Working Papers 2014-87, Department of Research, Ipag Business School.
    2. Jean-Sebastien Lantz & Sophie Montandrau & Jean-Michel Sahut, 2014. "Activism of Institutional Investors, Corporate Governance Alerts and Financial Performance," Working Papers 2014-353, Department of Research, Ipag Business School.
    3. Isabelle Allemand, 2009. "Analyse des liens entre les départs de dirigeants suite à une mauvaise performance et la création de valeur: une étude menée en France," Revue Finance Contrôle Stratégie, revues.org, vol. 12(2), pages 69-90, June.
    4. Isabelle Allemand, 2009. "Analyse des liens entre les départs de dirigeants suite à une mauvaise performance et la création de valeur:une étude menée en France," Working Papers CREGO 1090101, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    5. Nera Marinda Machdar, 2019. "Does CEO Turnover Affect Stock Market Performance through Company Performance in Indonesian Companies?," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 4(1), pages 15-21.
    6. Frank Wiengarten & Chris K. Y. Lo & Jessie Y. K. Lam, 2017. "“How does Sustainability Leadership Affect Firm Performance? The Choices Associated with Appointing a Chief Officer of Corporate Social Responsibility”," Journal of Business Ethics, Springer, vol. 140(3), pages 477-493, February.
    7. repec:ipg:wpaper:2014-087 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:corgov:v:13:y:2005:i:6:p:856-866. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.