The CGIO organises its research team into 3 broadly defined research units based on the interest and expertise of its researchers. The researchers are experts in their individual areas and their work appear regularly in leading and prestigious publications. Below is a selection of recent research highlights, for a complete set of publications please click go to the profiles of individual researchers here.

 

Recent Highlights

Independent Directors in Singapore Puzzling Compliance Requiring Explanation
Lan Luh Luh

Abstract

At first blush, the rise of independent directors in Singapore provides a straightforward example of a successful legal transplant from the West to Asia. In 2001, Singapore implemented a UK-inspired Code of Corporate Governance, which required the adoption of American-style independent directors on a “comply or explain” basis. Shortly thereafter, an overwhelming 98% of Singapore-listed companies reported full compliance. This, combined with Singapore’s world-leading economic success, ostensibly confirmed the Anglo-American-cum-global conventional wisdom that American-style independent directors are required for good corporate governance.

Using hand-collected data from 245 codes of corporate governance from 87 jurisdictions, this article reveals, however, that Singapore’s supposedly conventional legal transplant of American-style independent directors was, in fact, highly unconventional. We empirically demonstrate that the widely held belief that the American concept of the independent director has been transplanted around the world is a myth. We argue, however, that Singapore’s highly unconventional and seemingly illogical decision to transplant American-style independent directors into its concentrated controlling-block shareholder

   

Professor
Sea-Jin Chang

When Does Transitioning From Family To Professional Management Improve Firm Performance?
Sea-Jin Chang, Jungwook Shim

Abstract

Using long-term data on Japanese family firms, this study explores when the transition from family to professional management leads to better performance. In order to avoid endogeneity bias, we employ propensity score matching and difference-in-differences techniques. We find evidence that firms that transition from family to professional CEOs outperform those that maintain family leadership. This performance improvement is more pronounced when families maintain high ownership control but leave no family legacy behind, when the transition moves from non-founder family managers to professionals, and when professional managers graduated from elite universities.

 


Assoc. Professor
Chung Chi-Nien

Portfolios of Political Ties and Business Group Strategy in Emerging Economies: Evidence from Taiwan
Chung Chi-Nien, Hongjin Zhu

Abstract

This study examines how political ties with rival political parties can affect a firm's strategic decisions. Focusing on a firm's portfolio of ties in addition to dyadic ties, we offer a novel contingency model that specifies how the influence of political ties on strategy varies across different forms of government in democratic emerging economies. We propose that when political parties differ substantially in competitive status (i.e., under united government), a diverse portfolio could induce the dominant political party to use punitive tactics toward the focal firm and make it difficult to achieve strategic goals. However, when political parties have a similar competitive status (i.e., under divided government), a diverse portfolio could benefit the firm by producing tertius gaudens advantages and political flexibility. Such a portfolio effect of political ties tends to be mitigated by the firm's internal resources and capabilities. An investigation of how the political ties maintained by Taiwanese business groups affected unrelated diversification from 1998 through 2006 offers an initial attempt to reveal the role of ties to competing political parties in shaping firm strategy and highlights the trade-offs that politically connected firms confront when they exploit opportunities and mitigate risks arising from underdeveloped political and market institutions.

   

Professor David Mitchell Reeb

Family Controlled Firms and Informed Trading: Evidence from Short Sales
Anderson, Ronald C., Reeb, David M. and Zhao, Wanli

Abstract

We investigate the relation between family ownership and the informational content of short sales in U.S. publicly-traded firms. Our analysis indicates that family firms, in aggregate, experience a substantially higher volume of abnormal short sales prior to negative earnings shocks than nonfamily firms, suggesting extensive informed trading. Additional testing indicates that family-control characteristics, such as board involvement, seem to intensify the informed short sale results. The analysis also suggests that daily short-sale interest in family firms contains useful information in forecasting stock returns; however, we find no discernable effect in nonfamily firms. An investment strategy of buying family firms with the lowest level of short sales and shorting family firms with the highest level of short sales generates monthly abnormal returns of 61 basis points, indicating an economically profitable trading strategy. One inference is that regulations designed to limit trading by those with access to material, non-public information appear ill-suited for family firms. Although our data does not allow a specific identification of short sellers, the analysis provides compelling evidence that informed trading via short sales occurs more readily in family firms than in nonfamily firms.

   
 

Asst. Professor Huang Jiekun

Gender and Corporate Finance: Are Male Executives Overconfident Relative to Female Executives?
Huang, Jiekun and Kisgen, Darren J.

Abstract

We examine corporate financial and investment decisions made by female executives compared to male executives. Male executives undertake more acquisitions and issue debt more often than female executives. Further, acquisitions made by firms with male executives have announcement returns approximately 2% lower than those made by female executive firms, and debt issues also have lower announcement returns for firms with male executives. Female executives place wider bounds on earnings estimates and are more likely to exercise stock options early. This evidence suggests men exhibit relative overconfidence in significant corporate decision-making compared to women.

   
 

Assoc. Professor
Yupana Wiwattanakantang

Adoptive Expectations: Rising Son Tournaments in Japanese Family Firms
Vikas Mehrotra, Randall Morck, Jungwook Shim, Yupana Wiwattanakantang

Abstract

A uniquely Japanese custom of adopting male heirs into business families allows family firms in Japan to overcome the constraint of sub-optimal succession faced by family firms elsewhere. Using a very large panel of exchange-listed firms from post-war Japan, we show that heir-managed firms perform at least as well, and in most cases better than, non-family firms in Japan. We further show that adopted heirs display marginally superior performance compared with direct descendents, although both groups outperform non-family firms. Keiretsu-affiliated non-family firms stack at the bottom of the group in terms of performance as well as valuation. Adopted heirs, not surprisingly, have superior educational qualifications compared with direct descendents, who in turn are better educated than founders. The average tenure of adopted heirs is 20 years in the top executive's position, very similar to descendent heirs, and significantly longer than the tenure of professional CEOs (6 years).

 

   

Assoc. Professor
Chung Chi-Nien

Leadership Succession and Firm Performance in an Emerging Economy: Successor Origin, Relational Embeddedness, and Legitimacy 
Chung Chi-Nien, Xiaowei Rose Luo

Abstract

We examine how leadership transition affects firm performance in emerging economies. Building upon the social embeddedness and neo-institutional perspectives, we argue for the importance of alignment betwen successor origin and social context for firm performance. We suggest that as a baseline outside successors enhance firm profitability because of the large-scale and rapid changes in emerging markets. However, this outsider premium is reduced in firms embedded in family and business group relationships, where family and inside successors can better access network resources. But the outside premium is amplified in firms embedded in a mature marked-based logic, such as high-tech or foreign-invested firms, because the perceived legitimacy of outsiders facilitates resource acquisition. Our arguments are supported through the analysis of Taiwanese listed firms between 1996 and 2005.  

 

   

Assoc. Professor
Chung Chi-Nien

Filling or Abusing the Institutional Void? Ownership and Management Control of Public Family Businesses in an Emerging Market
Chung Chi-Nien, Xiaowei Rose Luo

Abstract

Despite increased attention given to family firms in the theory of organization and management, the value of family governance in emerging markets is not clearly understood. We draw insights from agency and institutional economics perspectives to address the debate on whether family governance fills or abuses the void left by weaker market and legal institutions. We propose a dual focus on the pattern of family control and weak institutions to reconcile these opposed assessments. We analyze how various combinations of family control over ownership, strategy, and operations yield different benefits and costs for the operational performance of firms in the absence of strong market and legal institutions. The uneven development of market institutions across industries and the impact of independent directors reinforce the importance of separating different patterns of family control. We find support for our hypotheses when tested on a data set consisting of all publicly listed firms in Taiwan between 1996 and 2005. Our study contributes to a deeper understanding of family businesses in emerging markets, highlights the importance of weak institutions in shaping relative agency costs, and illuminates the differential effects of independent directors.

   

Assoc. Professor
Marleen Dieleman

Sheng Siong Supermarket: Building and Sustaining Competitive Advantage
Marleen Dieleman, Yi Rong Loh, Ye Jun Lee

Abstract

Sheng Siong was the third-largest supermarket chain in Singapore. Its chief executive officer co-founded it with his two brothers in 1985. Sheng Siong's business model was well suited to cater to the price-sensitive and more traditional customer segment in Singapore, with a dominant presence in suburban areas called "heartlands." It also had a unique corporate philosophy, which was influenced by the personal values of its founding family. However, the market became increasingly saturated, competitors were aggressive and costs were rising. The key question was whether Sheng Siong's original competitive advantage was sustainable and how it could grow. 

The full version is available for download here
   

Professor
Ruth Aguilera

Corporate Governance and Investors' Perceptions of Foreign IPO Value: An Institutional Perspective  
R.Greg Bell, Igor Filatotchev, Ruth V. Aguilera

Abstract
This article investigates stock market responses to different constellations of firm-level corporate governance mechanisms by focusing on foreign initial public offerings (IPOs) in the United States. We build on sociology-grounded research on financial market behavior and use a "nested" legitimacy framework to explore US investor perceptions of foreign IPO value. Using a fuzzy set theoretic methodology, we demonstrate how different combinations of monitoring and incentive-based corporate governance mechanisms lead to the same level of investor valuation of firms. Moreover, institutional factors related to the strength of minority shareholder protection in a foreign IPO's home country represent a boundary condition that affects the number of governance mechanisms required to achieve high value perceptions among US investors. Our findings contribute to the sociological perspective on comparative corporate governance and the dependencies between organizations and institutions.

The full version is available for download here
   

Assoc. Professor
Marleen Dieleman

Balancing Stakeholder Interests at the Indonesian Railways
Marleen Dieleman

Abstract

The chief executive responsible for the Indonesian railways, a state-owned enterprise, is under pressure to show profits, but he also needs to balance widely diverging stakeholder expectations that include inexpensive transportation and excellent customer service. The government subsidizes the railway's passenger travel segment and has capped its fare prices, which has turned the railway's mainstay into a loss-making business. The chief executive wonders how to best trade off the different stakeholder expectations. He needs to develop a plan to present to the minister for State-Owned Enterprises.

Download here

   

Assoc. Professor
Ruth Tan

Initial Public Offerings of State-Owned Enterprises: An International Study of Policy Risk
Swee Sum Lam, Ruth Seow Kuan Tan, Glenn Wee

Abstract

Policy risk, and not information asymmetry, explains the cross-sectional underpricing of privatized initial public offerings. The issuer governments of high policy-risk issues tend to retain a large equity stake and underprice more, with underpricing increasing in retained equity. While the issuer government's retained equity is an observable signal for policy risk, we find that the quality of a country's bureaucratic machinery is a more intuitive and practical measure of policy risk. Policy risk also explains the absence of a systematic relation between the initial returns on privatized and private initial public offerings.

Download here

collaboration Opportunities

At CGIO, we aim to deliver thought leadership, centred in Asia, with a global influence that contributes to organisational excellence and sustainability. As a research centre, we welcome collaboration opportunities and support from companies, trusts, foundations and individuals. If you are interested in research collaborations or funding our research efforts, please contact Ms Verity Thoi, Manager: Verity.Thoi@nus.edu.sg