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BUSINESS GROWTH AND FIRM VALUE CREATION: THE “IGNORED” THIRD DIMENSION OF CORPORATE GOVERNANCE

BUSINESS GROWTH AND FIRM VALUE CREATION: THE “IGNORED” THIRD DIMENSION OF CORPORATE GOVERNANCE We explore the role of the third dimension of corporate governance which is recognized as the different financial and contractual arrangements that could affect business growth and value creation of the firm. We argue that a threedimensional approach provides a better understanding of the dynamics of the corporate governance practices that we currently observe in listed corporations. We use data derived from two hand-collected data sets, that consist of (1) seventy venture capital backed companies that were involved in IPOs on US stock markets between 2011 and the first half of 2012, and (2) the top-forty of the world’s largest companies in the Financial Times Global 500 2012 List (including corporations from the United States, Europe and Asia) to show evidence in favor of controlling ownership structures that can maintain a tight post-IPO grip on control, but also allow firms, for strategic purposes, to resist the short-term attitude of the stock market. We use insights from the governance practices of Facebook and Google to show how shareholder value and long-term commitment are influenced by a firm’s growth and innovation prospects. JEL codes: G34; K22 Keywords: corporate governance; dual class shares; growth; disclosure; transparency; investor relations http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Self-Governance and Management Economics Addleton Academic Publishers

BUSINESS GROWTH AND FIRM VALUE CREATION: THE “IGNORED” THIRD DIMENSION OF CORPORATE GOVERNANCE

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Publisher
Addleton Academic Publishers
Copyright
© 2009 Addleton Academic Publishers
ISSN
2329-4175
eISSN
2377-0996
Publisher site
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Abstract

We explore the role of the third dimension of corporate governance which is recognized as the different financial and contractual arrangements that could affect business growth and value creation of the firm. We argue that a threedimensional approach provides a better understanding of the dynamics of the corporate governance practices that we currently observe in listed corporations. We use data derived from two hand-collected data sets, that consist of (1) seventy venture capital backed companies that were involved in IPOs on US stock markets between 2011 and the first half of 2012, and (2) the top-forty of the world’s largest companies in the Financial Times Global 500 2012 List (including corporations from the United States, Europe and Asia) to show evidence in favor of controlling ownership structures that can maintain a tight post-IPO grip on control, but also allow firms, for strategic purposes, to resist the short-term attitude of the stock market. We use insights from the governance practices of Facebook and Google to show how shareholder value and long-term commitment are influenced by a firm’s growth and innovation prospects. JEL codes: G34; K22 Keywords: corporate governance; dual class shares; growth; disclosure; transparency; investor relations

Journal

Journal of Self-Governance and Management Economics – Addleton Academic Publishers

Published: Jan 1, 2014

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