Editorial

Owner Type as Emerging Area ofGovernance Research

William JudgeEditor-in-Chief

I n an earlier editorial (Judge, 2011), I argued that a globaltheory of corporate governance must consider the role of

ownership structure due its powerful impact on governancebehaviors and outcomes throughout the world. In this issue,I refine and extend that argument by considering a particu-lar aspect of ownership structure – namely, the various typesof owners, and the varying impacts that these owners bringto the global governance puzzle. Notably, each and everyone of the research articles in this general issue examines aspecific type of owner and, collectively, we learn much fromthese five empirical studies.

Our lead article is written by Dam and Scholtens, as theyseek to understand how various ownership types arerelated to corporate social responsibility ratings for firms in16 European nations. These ratings were composed of threedifferent components: (1) breadth of stakeholder orienta-tion, (2) emphasis on ethical norms and procedures, and(3) concern for the natural environment. Three types ofowners were found to be negatively related to corporatesocial responsibility ratings: specifically, the greater theemployee, corporate, or individual ownership stake, thelower the corporate social responsibility rating. Just asnotable was the fact that institutional, bank, and state own-ership stakes were unrelated to social responsibility out-comes in this European sample of firms. It is interesting tospeculate why employee, corporate, and individual ownersmight be more shareholder focused than institutional,bank, and state owners are in Europe. Clearly, we haveonly begun to scratch the surface as to how and why firmsgovern themselves.

Kuo and Hung authored our second article, and theyfocus on family ownership in Taiwanese firms. They findthat family control decreases investment cash-flow sensitiv-ity in high Q firms, but not in low Q firms. Furthermore,excess control rights exacerbated this relationship, whileboard independence dampened this relationship. In light ofthe heavy reliance on family ownership in many countries,these findings are particularly noteworthy.

Our third article focuses attention on how various ownerswithin the Korean economy influence investments in tech-nological innovation (operationalized as R&D intensity andpatent productivity). This fascinating study was authored byChoi, Park and Hong. Interestingly, Park and associates didnot find that ownership concentration is systematicallyrelated to the degree of technological innovation, but spe-cific types of owners were. Specifically, institutional andforeign ownership were both found to be positively associ-ated with technological innovation. However, state andinsider ownership were found to be unrelated. Thus, themore exposed Korean firms were to ownership influencesattuned to the global economy, the better the technologicalinnovation outcomes.

Next, Lewellyn and Muller-Kahle shift our attention tofinancial firms operating in the United States. They seek tounderstand how CEO power might influence organizationalrisk taking using a novel theoretical framework known asapproach-inhibition theory. The basic idea behind thistheory is that more powerful individuals tend to focus onpositive outcomes and take excessive risks, while less pow-erful individuals tend to focus on negative outcomes and,hence, avoid excessive risk taking. While they explore anumber of structural attributes surrounding the CEO, it isinstructive that the two ownership types that were exploredin this study yielded interesting findings. Specifically, theseauthors found that the greater the outside ownership ofthese financial firms, the lower the risk taking. However,CEO ownership was hypothesized to be positively associ-ated with risk taking, but this relationship was not signifi-cant for this particular sample and time period. Hence,outside owners of financial firms in the United States appearto suppress risk taking – a very important finding withregard to the global financial crisis.

Finally, Huyghebaert and Wang provided our fifth empiri-cal study in this particular issue. This study focuses onprincipal-principal conflicts within Chinese listed firms.Interestingly, they find that the greater the government

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ownership of Chinese firms, the higher the levels of expro-priation of minority interests. Clearly, the state plays a veryimportant role in the Chinese economy, and these findingsoffer further evidence that high levels of state ownershipyield different governance outcomes compared to firms withlower levels of state ownership. Clearly, Chinese corporategovernance, similar to Chinese capitalism, beats to a differentdrummer.

Of course, I only skimmed the surface of many of thesepioneering studies, so I encourage you to read in detail thosearticles which interest you most. Nonetheless, a global

theory of corporate governance may need to consider theunique role of various types of owners within the context oftheir specific governance environment, as evidenced bythese five studies.

REFERENCE

Judge, W. Q. 2011. Editorial: The pivotal role of ownership. Corpo-rate Governance: An International Review, 19: 505–506.

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Volume 20 Number 3 May 2012 © 2012 Blackwell Publishing Ltd