David Larcker and Brian Tayan: Corporate governance matters—a closer look at organizational choices and their consequences

Excerpt

The last several years have witnessed the publication of a great many newspaper articles about the organizational failures of firms, ranging from corporate fraud and accounting scandals to excessive compensation. Many of the issues discussed in these articles, such as boards of directors, top executives, and compensation structures, are covered in Corporate Governance Matters. The authors succeed in writing a book that provides theoretical background for central corporate governance issues combined with up-to-date research and numerous real-world examples that illustrate key points of the text. In 14 chapters, Larcker and Tayan give a broad overview of governance characteristics, organizational choices, and their consequences. Various figures and tables illustrate the statistics presented. Each chapter ends with an extensive reference list that enables the reader to deepen his or her understanding and take a closer look at the studies presented. Chapter 1 contains a comprehensive introduction to the book’s topic. The authors define corporate governance and explain how corporate governance mechanisms can affect shareholders. They highlight the importance of control mechanisms and how they can be used to diminish agency costs. The first chapter closes with a section on how to interpret empirical research results. In Chapter 2, the authors focus on international governance, stressing that a company’s governance system strongly depends on the economic, legal, and cultural environment. They start by explaining which factors generally shape a firm’s governance system. To illustrate the differences in national governance structures, the authors outline the actual economic, legal, and cultural realities in the United States, the United Kingdom, Germany, Japan, South Korea, China, India, Brazil, and Russia. …