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The Board of Directors and its Role in the Corporate Governance System - Considerations about the Control Model - A Research Note

Author

Listed:
  • Thomas Gstraunthaler

    () (Department of Accounting, Auditing and Taxation, University of Innsbruck, Austria)

  • János Lukács

    (Matthias Corvinus University, Budapest, Hungary)

  • Marcel Steller

    (Department of Accounting, Auditing and Taxation, University of Innsbruck, Austria)

Abstract

The paper examines the corporate governance mechanism of the control model (or insider control system) by looking at both the motivation for management to deviate from following their principal’s wishes and whether the supervising body, the board of directors would correct them. Some opportunistic actions deriving out of the principle-agent relation between owners and management are preventable; others are not and can only be minimized by a strong participation of the owner in the affairs of the company

Suggested Citation

  • Thomas Gstraunthaler & János Lukács & Marcel Steller, 2008. "The Board of Directors and its Role in the Corporate Governance System - Considerations about the Control Model - A Research Note," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 1(1), pages 37-54, April.
  • Handle: RePEc:tei:journl:v:1:y:2008:i:1:p:37-54
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    File URL: http://ijbesar.teiemt.gr/docs/volume1_issue1/board_of_directors.pdf
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    References listed on IDEAS

    as
    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    3. Smith, Clifford Jr. & Watts, Ross L., 1992. "The investment opportunity set and corporate financing, dividend, and compensation policies," Journal of Financial Economics, Elsevier, vol. 32(3), pages 263-292, December.
    4. Steven N. Kaplan, 1997. "Corporate Governance And Corporate Performance: A Comparison Of Germany, Japan, And The U.S," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(4), pages 86-93.
    5. Steven N. Kaplan & Per Strömberg, 2004. "Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses," Journal of Finance, American Finance Association, vol. 59(5), pages 2177-2210, October.
    6. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    7. repec:hrv:faseco:30728046 is not listed on IDEAS
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. James S. Ang & Rebel A. Cole & James Wuh Lin, 2000. "Agency Costs and Ownership Structure," Journal of Finance, American Finance Association, vol. 55(1), pages 81-106, February.
    10. John Carver, 2007. "The Promise of Governance Theory: beyond codes and best practices," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1030-1037, November.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Christiane Pott & Tobias Tebben & Christoph Watrin, 2014. "The effect of outside directors’ and auditors’ incentives on managers’ ability to manage cash bonuses," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(2), pages 505-540, May.
    2. Simeon Karafolas, 2013. "Public financial support to investments in rural areas: The case of the region of Thessaly in Greece," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 6(2), pages 81-101, September.

    More about this item

    Keywords

    Supervisory Board Effectiveness; Control Model; Incentives;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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