Enhancing Firm Sustainability Through Governance
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Enhancing Firm Sustainability Through Governance

The Relational Corporate Governance Approach

Francesco de Zwart

This important book presents a fresh perspective on corporate governance and how the relationship between governance mechanisms, processes and variables should be understood through a new unifying theory: the relational corporate governance approach. The approach acts as a tool for analysing the governance health of individual companies and suggests the actions required to remedy sub-optimal governance arrangements. A wide selection of articles, empirical studies and literature have been translated into an original theory which complements existing law and economics models of the firm.
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Chapter 8: Empirical studies Key Field No 4 (Part 2): Board factors II and other firm-specific variables

Francesco de Zwart


The aims and approach of this Chapter 8 mirror those of Chapter 7 which considered the effectiveness of governance variables drawn from Part 1 of Key Field No 4 – National Shareholder Protection Regime and Board Factors I. In Chapter 8, the effectiveness of firm-specific governance variables will again be assessed principally by studies with measures of firm operating performance and firm value as proxies for the long-term efficiency and sustainability of the firm. Chapter 8 continues with the process of examining empirical studies as follows:● Board Factors II – Board Size and Outside Board Positions; ● Anti-Takeover Mechanisms and the Market for Corporate Control –‘Whole’ Board and ‘Staggered’ Board Elections; ● Audit Sub-Committee – Presence, Independence and Expertise; ● ‘Block’ and Institutional Shareholdings; and ● Division in the CEO/Chairperson Roles. Again, a relational effect path for each variable will be constructed from relevant empirical studies and the Shareholder Primacy Interrelationship cheme in Figure 2.6. This means that the greater the number of governance factors affected by a governance variable in either direction, then the greater is its ‘relational proximity rating’ and its effect on agency costs and the sustainability of the firm.

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