GCGC (2): Towards an Understanding of Asian Governance Practices
The Global Corporate Governance Colloquia (GCGC) is a global initiative to bring together the best research in law, economics and finance relating to corporate governance at a yearly conference held at 12 leading universities in the Americas, Asia and Europe. The 2019 event was hosted by the Research Center SAFE (Sustainable Architecture for Finance in Europe) at the House of Finance and Goethe University. This article is the second in a four-part summary of the conference which seeks to highlight some of the interesting new work and research questions that were addressed at the event.
Redefining "Family Firms" in Japan
Research presented at the conference by Prof. Yupana Wiwattanakantang (National University of Singapore) examined the evolution of ownership and control in Japanese firms. Based on the history of publicly traded firms in Japan, the paper challenges the conventional view that family control loosens as firms grow larger over time. It further documents that families, in general, keep control over board and management even when their ownership stake is largely diluted, noting that a large number of Japanese families control their firms with little or no ownership. It finds that family ownership is high if the firm is profitable and if it did not raise public equity too often. Family ownership is also high if family assets are high. Among the questions raised by these findings is whether evidence in the paper is unique to Japan.
What happens when politically connected independent directors are removed from boards in China?
The anti-corruption campaign initiated in 2013 by China’s Communist Party, mandated the departure of politically connected independent directors 'PCID's (current as well as recently retired government officials) from corporate boards of directors. Research by Chang Zhang (University of Warwick) examines the effect of their exclusion from boards of Chinese firms on the firm’s performance. The paper finds that State-Owned Enterprises’ (SOEs) as well as non-SOEs’ operating performance appear to be unaffected by the event. However, non-SOEs’ political risk decreases, resulting in a surge in firm values. Additionally, the corporate governance of treated firms improves. It was noted that companies included in the treatment group were de facto affected by two separate events: the announcement of Regulation No. 18 as well as the subsequent departure of PCIDs.
Remuneration, disclosure, evasion in Korea
In 2013, Korea introduced a new disclosure regime requiring publicly traded companies to disclose the compensation of each executive by name, but with limited coverage. The disclosure is only mandatory for registered board members whose yearly pay exceeds 500 million Korean won (approximately worth 500 thousand U.S. dollars) in the prior fiscal year. A study by Prof. Woochan Kim (Korea University Business School) found that the rule’s restrictive coverage, led a large fraction of executives to evade disclosure through deregistration (i.e., stepping down from the board) or pay-cuts. It also found that such evasion was mostly carried out by family executives in firms with high executive-to-worker pay ratios. If the original pay level was close to the threshold, it was found that family executives often chose pay-cuts over deregistration, as their preferred means of evasion. The paper also studied reactions to a subsequent bill that passed in 2016 which expanded the mandatory pay disclosure coverage so that the firms’ five highest paid executives, irrespective of whether they are members of the board, are affected. The study found that out of 28 family directors, which registered after the 2013 change, four re-registered in the aftermath of the change introduced in 2016.
The next GCGC Conference will take place on 12-13 June 2020 at Seoul National University, South Korea. Submissions are now being accepted (deadline 13 September). Click here for details.
"Who is the Boss? Family Control without Ownership in Publicly-traded Japanese Firms" Morten Bennedsen, Vikas Mehrotra, Jungwook Shim, Yupana Wiwattanakantang (2019)
"Value of Politically Connected Independent Directors: Evidence from the Anti-Corruption Campaign in China" Chang Zhang (2019)
Ra, Jinhyeok and Kim, Woochan, Perils of Limiting the Coverage of Mandatory Pay Disclosure: The Korean Experience (September 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 572/2018. Available at SSRN: https://ssrn.com/abstract=3234163 or http://dx.doi.org/10.2139/ssrn.3234163
GCGC Conference Hosts by year:
2015 – Stanford University, USA
2016 – Swedish House of Finance, Sweden
2017 – University of Tokyo, Japan
2018 – Harvard University, USA
2019 – Frankfurt University, Germany
2020 – Seoul University, Korea
2021 – Yale University, USA
2022 – University of Oxford, UK
2023 – Peking University, China
2024 – Columbia University, USA
2025 – Imperial College London, UK
2026 – National University of Singapore
GCGC Secretary General
Professor Marco Becht
About the Global Corporate Governance Colloquia (GCGC)
The Global Corporate Governance Colloquia (GCGC) is a conference series, which, for an initial period of 12 years, brings together the best research in law and finance relating to corporate governance each year. The conferences, which are organised by the ECGI, are held in turn at 12 major universities that are leaders in the fields of law and finance in the Americas, Asia and Europe.
These conferences attract invited and contributed research papers of the highest scholarly quality. It includes at least one session devoted to the region or country where the conference takes place. These events are primarily “academic to academic” conferences with a few high profile participants from industry and the public sector.
The launch conference was held at Stanford University in June 2015, and since then has also convened in Stockholm, Tokyo, Harvard and Frankfurt. Each University partner of the series will host the conference once in a 12 year period.
The 12 hosting institutions are:
Columbia University, Goethe University Frankfurt, Harvard University, Imperial College London, National University of Singapore, Peking University, Seoul National University, Stanford University, Swedish House of Finance, University of Oxford, University of Tokyo and Yale University.
The aim of the conference series is to attract current research papers of the highest scholarly quality in the field of corporate governance. The conferences are primarily 'academic to academic' events with some participants from industry and the public sector including the practitioner partners of GCGC and other invited panelists. The current practitioner partners are Zurich Insurance Group, and Japan Exchange Group (JPX) and others may be considered.
About the European Corporate Governance Institute
The ECGI is an international scientific non-profit association which provides a forum for debate and dialogue between academics, legislators and practitioners, focusing on major corporate governance issues and thereby promoting best practice.
Its primary role is to undertake, commission and disseminate research on corporate governance. Based upon impartial and objective research and the collective knowledge and wisdom of its members, it can contribute to the formulation of corporate governance policy and development of evidence based best practice.
In seeking to achieve the aim of improving corporate governance, ECGI acts as a focal point for academics working on corporate governance in Europe and elsewhere, encouraging the interaction between the different disciplines, such as economics, law, finance and management.