Divergence and convergence within anglo-American corporate governance systems: Evidence form the US and UK, 1950-2000

Business History

Volumn 47, Issue 2, 2005, Pages 267-295

  Toms, Steven ^a   Wright, Mike ^b  

^a UNIVERSITY OF YORK   (United Kingdom)

^b UNIVERSITY OF NOTTINGHAM   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

BUSINESS; CORPORATE STRATEGY; ECONOMIC DIVERSIFICATION; ENTREPRENEUR; INDUSTRIAL PRACTICE;

EASTERN HEMISPHERE; EURASIA; EUROPE; NORTH AMERICA; UNITED KINGDOM; UNITED STATES; WESTERN EUROPE; WESTERN HEMISPHERE; WORLD;

EID: 15244353331     PISSN: 00076791     EISSN: 17437938     Source Type: Journal    
DOI: 10.1080/0007679042000313684     Document Type: Review

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82. Armstrong, 'The Rise of Accounting Controls'. Investment appraisal techniques such as Discounted Cash Flow were not used anywhere in the UK economy until the mid-1960s, when they rapidly became established. This was partly due to A.M. Alfred of Courtaulds, who did much to pioneer the technique. A.M. Alfred, 'Investment in the Development Districts of the United Kingdom and Discounted Cash Flow', Journal of Accounting Research, Vol.2 (1964), pp. 174-82.
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117. See also G. Baker and G. Smith, The New Financial Capitalists: Kohlberg, Kravis and Roberts and the Creation of Corporate Value (Cambridge, 1998).
118. Mergerstat Review.
119. Centre for Management Buy-out Research.
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150. M. Wright and J. Coyne, Management Buyouts (Beckenham, 1985);
151. Wright et al., Buy-ins and Buy-outs.
152. US buy-outs in the early 1980s were accused of involving cosy deals with management. L. Lowenstein, 'Management Buy-outs', Columbia Law Review (May 1985), pp.730-84.
153. The Delaware Supreme Court ruled in the case of Revlon Inc versus MacAndrews & Forbes Holdings Inc that once sale becomes inevitable, directors should no longer be see their role as 'defenders of the corporate bastion' but as 'auctioneers charged with getting the best price for the stockholders'. D. Ridl, 'Buy-outs in the United States', in G. Sharp (ed.), The Management Buy-out Manual (London, 1993). Sterling and Wright suggest that the position is less clear in the UK, but that directors have a duty not to mislead shareholders, to provide sufficient information and advice to enable shareholders to reach a properly informed decision and not to exercise fiduciary power in a way which would prevent or inhibit shareholders from accepting the best competing offer (p.137).
154. Kaufman and Englander, 'Kohlberg, Kravis Roberts', p.82.
155. Chandler, Scale and Scope, p.624;
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162. See R. Rajan, H. Servaes and L. Zingales, 'The Cost of Diversity: The Diversification Discount and Inefficient Investment', Journal of Finance, Vol.55 (2000), pp.35-80;
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164. P. Berger and E. Ofek, 'Bust-up Takeovers of Value Destroying Diversified Finns', Journal of Finance, Vol.51 (1996), pp. 1175-200;
165. K. Lins and H. Servaes, 'International Evidence on the Value of Corporate Diversification', Journal of Finance, Vol.54 (1999), pp.2215-39.
166. Lins and Servaes, 'International Evidence'.
167. Lins and Servaes, 'The Value of Diversification'. Although it should be pointed out that recent evidence suggests that many studies have identified conglomerate discounts by mis-specification of subsidiary benchmarks. J. Graham, M. Lemmon and J. Wolf, 'Does Corporate Diversification Destroy Value?', Journal of Finance, Vol.57 No.2 (2002), p.695.
168. Lins and Servaes, 'International Evidence '
169. M. Conyon, S. Girma, S. Thompson and P. Wright, 'The Impact of Mergers and Acquisitions on Company Employment in the UK', European Economic Review, Vol.46 (2004), pp.31-49. This change in performance evidence relating to diversifying acquirers compared to evidence from the pre-1980 period suggests that such firms moved beyond a situation where diversifying acquisitions could be accommodated efficiently within a divisionalised structure, effectively becoming over-diversified.
170. G. Davis, K. Diekmann and C. Tinsley, 'The Decline and Fall of the Conglomerate Firm in the 1980s: The Deinstitutionalization of an Organizational Form', American Sociological Review, Vol.59 (1994), pp.547-70.
171. R. Whittington, M. Mayer and F. Curto, 'Chandlerism in Post-War Europe: Strategic and Structural Change in France, Germany and the UK, 1950-1993', Industrial and Corporate Change, Vol.8 (1999), pp.519-55.
172. M. Haynes, S. Thompson and M. Wright, 'The Determinants of Corporate Divestment in the UK', International Journal of Industrial Organisation, Vol.18 (2000), pp. 1201-22.
173. B. Hall, 'Corporate Restructuring and Investment Horizons in the United States, 1976-1987', Business History Review, Vol.68 (Spring 1994), pp. 110-43.
174. Based on 143 of the top 500 manufacturing companies in the UK for which data were available. Haynes et al., 'Determinants of Corporate Divestment'.
175. M. Wright and S. Thompson, 'Vertical Disintegration and the Life-cycle of Firms and Industries', Managerial and Decision Economics, Vol.7 (1986), pp. 141-4.
176. Haynes et al., 'The Determinants of Corporate Divestment'.
177. See M. Wright, B. Chiplin and S. Thompson, 'The Market for Corporate Control: Divestments and Buy-outs', in M. Bishop and J. Kay (eds), European Mergers and Merger Policy (Oxford, 1993) for a review.
178. C. Markides, 'Consequences of Corporate Refocusing: Ex Ante Evidence', Academy of Management Journal, Vol.35 (1992), pp.398-412;
179. K. John and E. Ofek, 'Asset Sales and Increase in Focus', Journal of Financial Economics, Vol.37 (1995), pp. 105-26.
180. K.A. Afshar, R.J. Taffler and P.S. Sudarsanam, 'The Effects of Corporate Divestment on Shareholder Wealth: The UK Experience', Journal of Banking and Finance, Vol.16 (1992), pp. 115-35.
181. B. Saadouni, R. Briston, C. Mallin and K. Robbie, 'Security Price Reaction to Divestments by Healthy and Financially Distressed Finns: The Case of MBOs', Applied Financial Economics, Vol.6 (1996), pp.85-90. These findings are in contrast to US evidence.
182. M. Haynes, S. Thompson and M. Wright, 'The Impact of Divestment on Firm Performance: Empirical Evidence from a Panel of UK Companies', Journal of Industrial Economics, Vol.50 (2002), pp. 173-96. These findings are consistent with US studies using cross-section data (C. Markides, Diversification, Refocusing and Economic Performance (Cambridge, 1995)), but have the advantage of taking into account the effects of corporate restructuring programmes spread over a period of time.
183. F. Lichtenberg and D. Siegel, 'The Effects of Leveraged Buyouts on Productivity and Related Aspects of Firm Behavior', Journal of Financial Economics, Vol.27 (1990), pp. 165-94.
184. S. Bhagat, A. Shleifer and R. Vishny, 'Hostile Takeovers in the 1980s: The Return to Corporate Specialization', Brookings Papers on Economic Activity: Microeconomics (1990), pp.1-72.
185. M. Jensen, 'The Agency Cost of Free Cash Flow, Corporate Finance and Takeovers', American Economic Review, Vol.76 (1986), pp.323-29.
186. R. Harris, D. Siegel and M. Wright, 'Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom', paper presented at the North American Productivity Workshop at Union College, Schenechtady, New York, 20-22 June 2002.
187. For the US, see, for example, P. Phan and C. Hill, 'Organizational Restructuring and Economic Performance in Leveraged Buyouts: An Ex Post Study', Academy of Management Journal, Vol.38 (1995), pp.704-40.
188. Lazonick and O'Sullivan, 'Finance and Industrial Development', p.29.
189. H. Short, K. Keasey, M. Wright and A. Hull, 'Corporate Governance: From Accountability to Enterprise', Accounting and Business Research, Vol.29 (1999), pp.337-52;
190. M. Ezzamel and R. Watson, 'Market Comparison Earnings and the Bidding-up of Executive Cash Compensation: Evidence from the United Kingdom', Academy of Management Journal, Vol.41 (1998), pp.221-32.
191. J. Barney, M. Wright and D. Ketchen, 'The Resource-based View of the Firm: Ten Years After 1991', Journal of Management, Vol.27 (2001), pp.625-42.
192. Wright et al., Management Buy-ins and Buy-outs; R. Coff, 'When Competitive Advantage Doesn't Lead to Performance: The Resource-based View and Stakeholder Bargaining Power', Organization Science, Vol.10 (1999), pp.119-33;
193. R. Castanias and C. Helfat, 'The Managerial Rents Model: Theory and Empirical Analysis', Journal of Management, Vol.27 (2001), pp.661-78.
194. M. Wright, R. Hoskisson and L. Busenitz, 'Firm Rebirth: Management Buy-outs and Wealth Creation', Academy of Management Executive, Vol.15 (2001), pp. 111-25.
195. Principally the Treadway (known as the Report of the National Commission of Fraudulent Financial Reporting) and Committee of Sponsoring Organizations (COSO) Reports.
196. Short et al., 'Corporate Governance: From Accountability to Enterprise';
197. I. Demirag, S. Sudarsanam and M. Wright, 'Corporate Governance: Overview and Research Agenda', British Accounting Review, Vol.32 (2000), pp.341-54;
198. M. Maclean, 'Corporate Governance in France and the UK: Long-Term Perspectives on Contemporary Institutional Arrangements', Business History, Vol.41 (1999), pp.88-116.
199. Kaufman and Englander, 'Kohlberg, Kravis Roberts'.
200. Subsequent developments in US corporate governance have been encompassed in statement by the California State Pension funds (Calpers), the US Council of Institutional Investors Policies on Corporate Governance and the TIAA-CREFF Policy Statement on Corporate Governance.
201. For a discussion, see the special issue of Hume Papers on Public Policy on Corporate Governance and the Reform of Company Law, Vol.8 (2000).
202. Short et al., 'Corporate Governance: From Accountability to Enterprise'.
203. C. Nobes, 'Financial Reporting in the USA: Why and How It Differs', Management Accounting, Vol.65 (May 1987), pp. 16-17. Executives exploiting strict rules about the definition of subsidiaries to facilitate off balance sheet transactions have accentuated recent corporate scandals in the US.
204. M. Jensen, 'The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems', Journal of Finance, Vol.48 (1993), pp.831-80;
205. M.E. Porter, 'Capital Disadvantage: America's Failing Capital Investment System', Harvard Business Review, Vol.70 (1992), pp.65-83.