CORPORATE GOVERNANCE AND MANAGEMENT OPPORTUNISTIC BEHAVIOUR
Abstract
The theoretical paradigm on the principal-agent relationship stipulates that management should use organizational resources in a manner that benefits all parties of the firm. However, the failure of some corporate giants has been traced to the opportunistic behavior of management, wherein managers abuse their power by controlling the release of corporate information to satisfy their own objectives. Corporate governance mechanisms have therefore been suggested as an approach to mitigating managerial opportunism. This study examined the link between corporate governance mechanisms and the mitigation of managerial opportunism through the use of a performance related executive compensation scheme as an aspect of corporate governance, modelling opportunistic behaviour as asymmetric information proxied by analysts following the firm. Using primary data from a sample of 125 randomly selected top executives in Nigerian firms, and applying OLS regression, the paper found that the CEO benefits and bonuses ratio, and executive benefits and bonuses, could reduce managerial opportunism. On the other hand, CEO long-term mix was found to increase opportunistic behaviour contrary to apriori expectation. It is recommended that the CEO benefit ratio and executive bonuses be employed by Nigerian firms to check opportunistic behaviour by management.
Downloads
References
Ajina, A., Sougne, D., & Laouiti, M. (2013). Do board characteristics affect information asymmetry? International Journal of Academic Research in
Business and Social Sciences, 3(12),660-675.
Akerlof, G. A. (1970). The market for ‘lemons’: quality uncertainty and the market mechanism. Quarterly Journal of Economics,84(3), 488-500.
Boujelbene, Y., & Besbes, L. (2012). The determinants of information asymmetry between managers and investors: a study on panel data. IBIMA Business Review,2,1-11.
Brennan, M., & Subrahmanyam, A.(1995). Investment analysis and price formation in securities
Chae, J. (2005). Timing information, information asymmetry, and trading volume. The Journal of Finance, 61(1),413-442.
Chatterjee, S., & Hadi, A. S. (2006). Regression analysis by example, fourth edition, John Wiley & Sons, New Jersey.
Chen, C., & Liu, V. W. (2013). Corporate governance under asymmetric information: theory and evidence. Economic Modelling, 33, 280-291.
Cheng, W., Chung, H., Lee. C., & Liao, W. (2007). Corporate governance and equity liquidity analysis of S&P transparency and disclosure rankings. Corporate Governance: An International Review, 15, 644-660.
Devers, C. E., Cannella, A. A., Reilly, G. P., & Yoder M. E. (2007). Executive compensation: A multidisciplinary review of recent developments. Journal
of Management. 33(6). 1016-1072.
Elbadry, A., Gounopoulos, D., & Skinner, F. (2015). Governance quality and information alignment. Financial Markets, Institutions and Instruments,
(2-3), 127-157.
Fehle, F. (2004). Bid-ask spread and institutional ownership. Review of Quantitative Finance and Accounting, 22, 275-292.
Florackis, C., & Ozkan, A. (2009). The impact of managerial entrenchment on agency cost: an empirical investigation using UK panel data. European
Financial Management, 15(3), 497-528.
GarciaLara, J. M., GarciaOsma, B., & Penalva, F. (2014). Information consequences of accounting conservatism. European Accounting Review, 23(2), 173-198.
Goh, B. W., Lee, J., Ng, J., Owyong, K. (2016). The effect of board independence on information asymmetry. European Accounting Review, 25(1), 155-182.
Gray, P., Koh, S., & Tong, H. (2009). Accrual quality, information risk and cost of capital: evidence from Australia. Journal of Business Finance and Accounting, 36(1-2), 51-72.
Hassasyeganeh, Y. (2006). Corporate governance in Iran. Auditor Journal, 32,40-52.
Holm, C., Balling., M. & Poulsen, T. (2014). Corporate governance ratings as a means to reduce asymmetric information. Cogent Economics & Finance, 2,1-16.
Ismail, S.B., Yabai, N. V., & Hahn, L.J. (2014). Relationship between CEO pay and firm performance: Evidences from Malaysia listed firms. IOSR Journal of Economics and Finance. 3(6),14-31.
Jan-Erik, L. (2017). Opportunistic behaviour. Applied Economics and Finance, 4(4), 1-16.
Kamau, S., & Basweti, K. (2013). The relationship between corporate governance and working capital management efficiency of listed firms at
the Nairobi Securities Exchange. Research Journal of Finance and Accounting, 4(19), 190-199.
Kang, S., Kumar, P., & Lee, H. (2006). Agency and corporate investment: the role of executive compensation and corporate governance. Journal of
Business, 79(3), 1127-1147.
Krishnaswami, S., & Subramaniam, V. (1999). Information asymmetry, valuation and corporate spin-off decision. Journal of Financial Economics, 53, 73-112.
Kyle, A. S (1985). Continuous auctions and insider trading. Econometrica, 53, 1315-1335.
Lang, M., & Lundholm, R. (1996). Corporate disclosure policy and analyst behaviour. The Accounting Review, 71(1), 467-492.
Lang, M., Lins, K., Miller, D. (2004). Concentrated control, analyst following and valuation: Do analysts matter most when investors are protected? Journal of Accounting Research, 42, 589-623.
Molyneux, P., Nguyen, L. H., & Zhang, X. (2014). Executive compensation, board independence and bank efficiency in China: the effects of the financial crisis. Working Paper. University of St Andrews.
Nazir, M. S., & Afza, T. (2018). Does managerial behaviour of managing earnings mitigate the relationship between corporate governance and firm
value? evidence from an emerging market. Future Business Journal4(1),139-156.
OECD (2011). The role of institutional investors in promoting good corporate governance. OECD Publishing. Ogbeide, S., & Akanji, B. (2016). Executive
remuneration and the fiscal performance of quoted firms: The Nigerian Experience. Management and Economic Review, 1(2), 229-242.
Piotroski, J., & Roulstone, D. (2004). The influence of analysts, institutional investors, and insiders on the incorporation of market, industry, and
firm-specific information into stock prices. The Accounting Review 79, 1119-1151.
Pourali, M., & Partoo, K. (2013). The relationship between corporate governance and information asymmetry with listed companies in Tehran Stock
Exchange. Journal of Basic and Applied Scientific Research, 3(4), 826-833.
Rosser, A. (2003). Coalitions, convergence and corporate governance reform in Indonesia. Third World Quarterly Journal of Emerging Areas, 24, 319-337.
Saidu, K., Bello, M., & Jubril, R. (2017). Executive compensation and financial performance; industry sensitivity test. Saudi Journal of Business and
Management Studies, 2(8), 732-736.
Saka, R.O. (2018). Executive compensation and organizational structure: evidence from selected multi-product firms in Nigeria. International Journal of Economics, Commerce and Management, 6(3), 672-686.
Salehi, H., Rezaie, H., & Ansari, F. (2014). Corporate governance and information asymmetry. Management Science Letters, 4, 1829-1838.
Shin, R., & Shiah, H. (2016). The effect of analyst coverage on CEO compensation structure: evidence from the S&P 1500. Managerial Finance, 42(3), 191-211.
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52(1), 737-783.
Skinner, D. J. (1994). Why firms voluntarily disclose bad news. Journal of Accounting Research, 32(1), 38-60.
Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 87(3),355-374.
Stiglitz, J. (1975). The theory of screening, education and the distribution of income. American Economic Review, 65, 283-300.
Tucker, J. W. (2010). Is silence gold? Earnings warnings and subsequent changes in analyst following. Journal of Accounting, Auditing and Finance, 25,
-456.
Watts, R. (2003). Conservatism in accounting- part 1: explanation and implications. Accounting Horizons, 17(3), 207-221.
Wruck, K. (1993), Stock-based incentives and investment decisions. Journal of Accounting and Economics, 16(1-3),373-380.
Yassin, M., Ali, Y., & Hamdallah, M. (2015). The relationship between information asymmetry and stock return in the presence of accounting conservatism. International Journal of Business and Management,10(5), 126-133.
Copyright (c) 2020 National Research Council of Thailand (NRCT)

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
The article published and information contained in this journal such as text, graphics, logos and images is copyrighted by and proprietary to the National Research Council of Thailand.
The article will be published under a CC-BY-NC-ND license (https://creativecommons.org). This license means that anyone may freely read, download, distribute and make the article available to the public (in printed and electronic form), provided that the author and the journal as the source are acknowledged, whereas no commercial use is allowed and the work may not be altered, transformed or serve as the basis for a derivative work.