Hypotheses - Effects of decision systems on performance and other incentive mechanisms in corporate governance

Table: Hypotheses - Effects of decision systems on performance and other incentive mechanisms in corporate governance

Click here to see an exhibition on these issues and their relation to other hypotheses in corporate governance.

5) From decision system to financial performance

5A: The separation of control between a team of executives and a board of directors may increase financial performance by mitigating the possibility of self-dealing among the firms’ top management (Fama and Jensen [1983a, 1983b]). More information.

14) From decision system to remuneration system

14A: The presence of an independent remuneration committee in the board of directors may help to improve the efficiency of the remuneration system by minimizing the risk of self-dealing among managers.

25) From decision system to capital structure

25A: Decisions regarding capital structure may matter because it could be used as an instrument to discipline the management. For instance, managers may prefer less leverage than the board of directors or the owners would prefer.

34) From decision system to market for corporate control

34A: The existence of differential voting rights and staggered boards may prevent the market for corporate control from functioning smoothly.

26) From decision system to market for management services

26A: The presence of an independent recruitment committee in the board of directors may help to improve the efficiency of the market for management services.