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This thesis explores whether independent directors in the USA and Canada are effective in holding management accountable by: (1) analyzing how the policy of relying on independent directors developed and operates; (2) introducing the main theoretical critiques of independent directors’ monitoring effect; and (3) examining whether empirical studies in the field of management science and financial economics support the policy in both countries of relying on independent directors as corporate monitors. Empirical evidence shows that boards with a majority of independent directors, in some circumstances, were associated with better firm performance (in the post-SOX period) and fulfilled certain board tasks effectively in the United States. Canadian studies, however, have not shown a positive association with improved firm performance. Audit committees composed entirely of independent directors have been effective in ensuring the quality of financial reporting in the United States, but this effect has not been found in Canada. Compensation committees composed fully of independent directors neither constrained the level of executive compensation nor tied CEO pay to firm performance in either country. US firms with an audit committee member who had accounting expertise, rather than financial analysis or supervisory expertise, were associated with a higher quality of financial reporting, while Canadian firms with an audit committee member who has financial expertise, instead of financial literacy, were associated with a similar effect. Studies also showed that independent directors perform better in certain circumstances. Based on empirical evidence, US regulators should consider: (1) changing the current mandatory requirements for an independent board and a completely independent compensation committee to a comply-or-explain requirement; (2) narrowing the qualification of a financial expert to an individual who has accounting expertise; and (3) recruiting independent directors who have two or fewer outside directorships, hold more of the corporation’s shares, have lower cost of acquiring corporate information, and have no social connections with the CEO. In Canada, weak evidence of the monitoring effectiveness of independent directors supports the existing comply-or-explain approach. Canadian regulators may only need to require or recommend that at least one audit committee member has financial expertise, instead of only financial literacy.

After a few considerations on the phenomenon of municipal capitalism, a trait which characterizes many local governments in Italy and Europe, the first chapter of the dissertation presents a selective survey of some important topics in regulation. The most relevant contributions on privatization, political connections and accountability are included, together with lessons on decentralization, to show how these elements can be applied in unison to deal with the issues presented in this paper. The phenomenon of municipal capitalism has been subject to many studies, but none has tried to model what this could imply for the choice of the optimal regulatory rule, nor for the vertical allocation of regulatory tasks among the various levels of government. In the second chapter a theoretical model is built. It first considers the case in which a benevolent regulator -at the central or local level- chooses the cost reimbursement rule. Then, the model is expanded in order to analyze the effects that a partisan planner has on regulation. The third chapter tries to answer to a couple of empirical questions. Which are the determinants of the choice of ownership structure for a firm providing local public services? What are the consequences of this choice on the performance of these firms? To answer these questions a unique database providing economic and financial data on 321 Italian firms born in the 2000-2008 period has been used. These data are merged with economic, political, financial and territorial data on the first municipality (for the number of shares owned) participating them. To perform the analysis and control for endogeneity, a two-stage multinomial selection model is employed, in order to identify the causal effects in the case of more than two treatments. The empirical evidence indicates that the municipality political orientation and budgetary conditions matter in the choice of ownership structure. Moreover, while for operating efficiency the computed Average Treatment Effects seem to indicate mixed ownership as a good solution, the canonical performance and employment indicators provide evidence in the opposite direction.

This dissertation is concerned with how the social capital of corporate insiders is associated with the governance and performance of publicly listed small and medium- sized enterprises (SMEs) in Canada. The premise of social capital theory is that relationships matter and that network structures have implications for outcomes. Encouraging SME growth and performance is an important part of economic policy. In Canada, going public is one way innovative SMEs can access capital for growth. This research considers the network of relationships between directors, owners and senior officers in a public corporation – i.e. the social capital of corporate insiders – to better understand corporate governance. Family-run firms, large corporate ownership and professional relationships between directors have been the subject of numerous corporate governance studies. They can also be considered networks. In this research, I assume that these various networks act to unite corporate insiders into coalitions with similar interests. I consider the implications of social capital on firm performance in terms of effective control, director independence, CEO ownership, and family control of the firm. The hypotheses, generated from the theory of internal social capital of the firm, are tested using fixed and random effects regression models on a panel of Canadian industrial SMEs that had an initial public offering between 2000 and 2010. SME performance is measured by Tobin’s Q. I find support for the idea that the structure of social capital within the firm is related to corporate governance and associated with performance. My results indicate that having multiple coalitions in the firm, as well as more independent directors, are both positively associated with performance. There are also indirect effects related to the social capital of the firm. After controlling for the structure of social capital in the firm, CEO ownership is found to have no association with firm performance, except in a few cases where the CEO owns in excess of 40 percent of the firm. Once these cases are omitted from the sample there does not appear to be a significant relationship between CEO ownership and performance. These few cases suggest the role of CEO may be important to performance outcomes in highly controlled firms. Further case-study research into this finding may be merited. Finally, I find no evidence that family-run firms have valuations that differ from other firms. The theory of internal social capital of a firm contributes to the corporate gov- ernance literature by considering how the network of relationships within the firm affects outcomes. There are also useful methodological contributions from this re- search. Theoretically grounded network measures determine: (i) a scale of effective control of a firm when there are multiple coalitions of owners, and (ii) a way to iden- tify truly independent directors. Entrepreneurs, directors and managers will find this research useful because it outlines how the structure of relationships within an SME is associated with firm valuation.

This study investigates the impacts of regional characteristics on the early-stage performance of New Technology-Based Firms (NTBFs) in catch-up regions where a mature industrial cluster has yet to be formed. It hypothesized that the average NTBF performance in a region is a function of its scientist job market conditions, cultural diversity, venture capital, academic research, industrial structure, and local entrepreneurial climate. Using the events of Initial Public Offerings (IPO) and Merger & Acquisitions (M&A) as an indicator of early-stage success of NTBFs, this study constructs a set of Zero-Inflated-Negative-Binomial (ZINB) models to predict the spatial distribution of such events in the U.S. biopharmaceutical and Information Technology (IT) service industries during the period from 1996 to 2005. Several empirical findings emerge from this study. First, the local entrepreneurial climate plays a significant and positive role on NTBF performance in both industries. Second, the positive impact of cultural diversity is more significant in the IT service industry than in the biopharmaceutical industry. Third, the scientist job market size and absolute salary level have positive impacts on NTBF performance, but the effect of relative salary level is negative. Fourth, proximity to venture capital firms has positive but non-linear effects, but the adverse effect of excess venture capital is stronger in the IT service industry. Fifth, there is little evidence of the direct effects of academic research in determining the NTBF performance in both industries. Finally, industrial specialization is significant and positive only in the IT service industry. The results suggest that promoting local entrepreneurial climate and cultural diversity are two effective policy instruments for catch-up regions to foster their NTBF growth.

This study aims to elucidate firm and performance attributes of a population of small, elite firms that assume prominent positions in their respective technological spaces and product markets. More specifically, this study addresses the role and impact of industrial agglomeration on the location and performance characteristics of serial innovator firms. The dissertation was conceived as a collection of three distinct but related essays. The first essay on the geographical location of firms with high levels of innovative prowess i.e. serial innovator firms vis-à-vis technology clusters and research universities indicates that these firms are not necessarily located in Metropolitan Statistical Areas (MSA) with higher average levels of industry clustering than non-serial innovator firms of similar size. Serial innovator firms and their less innovative counterparts appear to have the same need and capacity to absorb knowledge spillovers in technology clusters. Further analysis, however, revealed that serial innovator firms in the Pharmaceutical & Biotechnology and IT hardware industries are located in MSA's with significantly higher levels of regional specialization than non-serial innovator firms in that industry which suggests an asymmetric need for knowledge spillovers by these firms. Furthermore, serial innovator firms seem to be located in MSA's with a significantly higher number of research universities than a non-serial innovator firm although differences across industries can be noted. This again indicates an asymmetric use and need for academic knowledge spillovers and pecuniary advantages offered by these institutions. The analysis in the second essay reveals that serial innovator firms located in MSAs (Metropolitan Statistical Areas) with elevated levels of industrial clustering announce significantly more new products than their counterparts located in MSA areas with low levels of industrial clustering. However, no differences in the pace of technological progress of the technologies developed by serial innovator firms located in technology clusters and those outside of clusters was found. Finally, the research reported in the third essay indicates that the level of industrial agglomeration has a positive impact on the export performance of serial innovator firms and that these firms benefit proportionately more from technology clusters than non-serial innovator firms.

This dissertation is concerned with how the social capital of corporate insiders is associated with the governance and performance of publicly listed small and medium- sized enterprises (SMEs) in Canada. The premise of social capital theory is that relationships matter and that network structures have implications for outcomes. Encouraging SME growth and performance is an important part of economic policy. In Canada, going public is one way innovative SMEs can access capital for growth. This research considers the network of relationships between directors, owners and senior officers in a public corporation – i.e. the social capital of corporate insiders – to better understand corporate governance. Family-run firms, large corporate ownership and professional relationships between directors have been the subject of numerous corporate governance studies. They can also be considered networks. In this research, I assume that these various networks act to unite corporate insiders into coalitions with similar interests. I consider the implications of social capital on firm performance in terms of effective control, director independence, CEO ownership, and family control of the firm. The hypotheses, generated from the theory of internal social capital of the firm, are tested using fixed and random effects regression models on a panel of Canadian industrial SMEs that had an initial public offering between 2000 and 2010. SME performance is measured by Tobin’s Q. I find support for the idea that the structure of social capital within the firm is related to corporate governance and associated with performance. My results indicate that having multiple coalitions in the firm, as well as more independent directors, are both positively associated with performance. There are also indirect effects related to the social capital of the firm. After controlling for the structure of social capital in the firm, CEO ownership is found to have no association with firm performance, except in a few cases where the CEO owns in excess of 40 percent of the firm. Once these cases are omitted from the sample there does not appear to be a significant relationship between CEO ownership and performance. These few cases suggest the role of CEO may be important to performance outcomes in highly controlled firms. Further case-study research into this finding may be merited. Finally, I find no evidence that family-run firms have valuations that differ from other firms. The theory of internal social capital of a firm contributes to the corporate gov- ernance literature by considering how the network of relationships within the firm affects outcomes. There are also useful methodological contributions from this re- search. Theoretically grounded network measures determine: (i) a scale of effective control of a firm when there are multiple coalitions of owners, and (ii) a way to iden- tify truly independent directors. Entrepreneurs, directors and managers will find this research useful because it outlines how the structure of relationships within an SME is associated with firm valuation.

Cette thèse a pour objectif d'analyser la structure du capital et la performance des entreprises familiales Françaises qui s'introduisent en Bourse. A partir d'un échantillon de 90 entreprises familiales appartenant à l'indice CAC All-Tradable de 2010 à 2013, nous constatons que la structure du capital des entreprises familiales est caractérisée par un faible niveau d'endettement avec une préférence pour l'endettement à court terme par rapport au long terme. De plus, la structure de capital des entreprises familiales vérifie les théories classiques du financement, l'hypothèse de ‘market timing', la théorie du ratio d'endettement optimal et de la théorie du financement hiérarchique. Ensuite, nous analysons les performances à court terme et à long terme des entreprises familiales françaises qui s'introduisent en Bourse. Les résultats montrent les différentes techniques d'expropriation employées par les propriétaires des entreprises familiales. A la date de l'introduction en bourse, la majorité des propriétaires des entreprises familiales sont à la fois les directeurs généraux et les présidents des conseils d'administration. Après l'introduction en bourse, les propriétaires des entreprises familiales détiennent environ 80% des droits des flux de trésorerie et nous constatons que la différence entre leurs droits aux flux de trésorerie et leurs droits de vote a augmenté. La sous-évaluation au premier jour est voisine de 2%, ce qui révèle que les entreprises familiales sont correctement évaluées lors de l'émission. Les entreprises familiales surperforment l'indice de marché dans les trois premiers mois de l'émission et après la troisième année. Nous trouvons aussi que le changement des droits de propriété et de contrôle avant et après l'introduction en Bourse explique les performances à court et à long terme contrairement aux mécanismes de gouvernance. / This thesis aims to analyze the capital structure and performance of French family firms going public. From a sample of 90 family firms belonging to CAC All-Tradable from 2010 to 2013, we find that the capital structure of family firms is characterized by a low level of debt with a preference for short-term debt relative to long-term debt. Moreover, the capital structure of family firms is in line with the classical theories of financing, the hypothesis of market timing, the theory of optimal debt ratio and the pecking order theory. Then we analyze the short-term and long-term performance of French family firms going public through Initial Public Offerings. The results show the different expropriation techniques employed by the family firms' owners. On the initial public offering date, the majority of family firms' owners are simultaneously CEOs and Chairmen of boards of directors. After going public, the family firms' owners hold around 80% of the firms' cash flow rights and we observe that the difference between their cash flow rights and their voting rights has increased. First-day underpricing is around 2% which shows that family firms are almost fairly priced upon issuance. The family firms outperform the market index in the first three months of issuance and after the third year. We also find that the ownership and control rights change from pre- to post-IPO date explains the short-term and long-term performance unlike governance mechanisms.

In 2006 the Kingdom of Saudi Arabia (KSA) introduced new legislation related to corporate governance (CG). Initial evaluation by the World Bank three years later showed relatively modest implementation of the regulations. This thesis investigates the extent to which this has been adopted over the past ten years. Saudi business has become more globalized, and a more standardised approach to CG is naturally expected by international partners and investors who must themselves justify investment. This research expands the existing literature on CG by examining the progress of countries with developing economies and relatively weak or new histories of regulated CG. This thesis explores the extent and form of the uptake of the newest generation of CG regulations, the existing roadblocks and the general current attitudes to corporate governance in KSA, examining the extent of KSA company compliance with KSA corporate governance regulations, the reasons for non-compliance when that exists, and any relevant deficits in the 2006 legislation with respect to international best practice. This is investigated through the use of a series of interviews and surveys with major Saudi organizations, as well as analysis of secondary information. The mixed method approach of quantitative and qualitative data analysis was selected as providing a means to generate both benchmarking data (i.e. quantitative) and further insight as to obstacles for further adoption (i.e. qualitative). As the basis for the investigation, questions are structured around four basic pillars of corporate governance: transparency; stakeholder value; responsibility; and fairness. This linkage of these factors with organisational structure, decision-making and the overall image of the firm within the industry is combined with an examination of how CG affects Saudi business expansion and investments, particularly in relation to how parties from other countries perceive the governance of a company. This perception of governance may condition their views concerning, for example, partnering with and investing in that company. The secondary data relates to The Saudi Arabian Monetary Agency (SAMA), Sanabil Investments and Saudi Arabia Basic Industries Corporation (SABIC). The qualitative data analysis was taken from interviews conducted from fifteen top managers of large-scale organisations. The quantitative data was collected from three organisations: Almarai, Saudi Aramco and Albaik. The overall results of the qualitative analysis and the secondary analysis showed that CG plays a vital role in business development. Quantitative analysis supported the idea that transparency, stakeholder value and corporate image are the main attributes of CG in a Saudi context, with statistical analysis indicating that both are essential to company access to private investment and market liquidity The overall findings indicate KSA’s need to improve its CG standards further, and taht whilst benchmarking of government-supported institutions such as SAMA and SABIC would be of assistance, the KSA government could play a pro-active role in encouraging businesses to expand best international corporate governance practices.

Abstract The laws and financial structure of a country can affect firm decisions and outcomes by affecting financial constraints and agency problems. Power theories of credit suggest that the legal rights of creditors, such as the ability to grab collateral in bankruptcy, increase the willingness of lenders to extend credit. Shareholder protection can reduce information asymmetry and agency problems by mandating quality disclosures, stipulating approval procedures for potentially conflicted transactions and facilitating the private litigation process. The bank-based financial structure can reduce moral hazard by alleviating the free-rider problem in monitoring. This dissertation contains various novel results. The first essay presents evidence of an inverse relation between creditor rights and the value of cash. This is consistent with financial constraints increasing the marginal value of cash, and creditor rights alleviating financial constraints. The second essay suggests that the bank-based financial structure improves the operating performance of large investments especially for diffusely held firms, consistent with the less prevalent free-rider problem in monitoring. The third essay shows that shareholder protection raises investment hazard for the smallest firms. This is consistent with the notion that shareholder protection alleviates those asymmetric information-related problems that delay investment, such as cash flow diversion by corporate insiders. In addition to contributing to the scientific literature, the results of this dissertation can have practical implications for companies, suppliers of finance and policymakers. A value-maximizing company should take into account its legal environment when deciding on cash holdings. Suppliers of finance should consider the interplay between financial structure and ownership structure when evaluating the profitability of investments. Policymakers often encourage investments due to their effect on employment and tax income. The results of this dissertation show that investor protection increases the frequency of large investments and their profitability. / Tiivistelmä Maan lait ja rahoitusrakenne voivat vaikuttaa yrityksen päätöksentekoon rahoitusrajoitteiden ja agenttiongelmien kautta. Velkojien vaikutusvaltaan perustuvien teorioiden mukaan velkojan oikeudet, kuten oikeus vakuuteen konkurssin yhteydessä, lisäävät velanantajan lainaamishalukkuutta. Osakkeenomistajia suojaavat lait voivat puolestaan vähentää yrityksen ja sijoittajien välistä epäsymmetristä informaatiota ja agenttiongelmia esimerkiksi vaatimalla laadukkaita ilmoituksia ja hyväksymisprosesseja koskien potentiaalisesti eturistiriitoja sisältäviä transaktioita sekä mahdollistamalla yksityisen kanteen nostamisen. Lisäksi maan pankkiperusteinen rahoitusrakenne voi vähentää moraalikatoa lievittämällä vapaamatkustajaongelmaa yritysjohdon monitoroinnissa. Tämä tutkielma sisältää useita uusia tuloksia. Ensimmäisessä esseessä havaitaan käänteinen yhteys velkojien oikeuksien ja kassan arvon välillä. Johdonmukainen selitys tälle havainnolle on, että rahoitusrajoitteet lisäävät kassan marginaaliarvoa ja velkojien oikeudet lieventävät rahoitusrajoitteita. Toisen esseen tulosten mukaan pankkiperusteinen rahoitusrakenne parantaa suurten investointien vaikutusta operatiiviseen tulokseen eritysesti hajaantuneen omistusrakenteen omaavien yritysten osalta. Tämä voi johtua pankkiperusteisen rahoitusjärjestelmän vapaamatkustajaongelmaa vähentävästä vaikutuksesta. Kolmannen esseen tulosten mukaan osakkeenomistajansuoja kohottaa suurten investointien hasardifunktiota pienimpien yritysten osalta. Tämä puolestaan voi johtua siitä, että osakkeenomistajansuoja lievittää investointeja hidastavia epäsymmetrisen informaation ongelmia, kuten yrityksen sisäpiiriläisten mahdollista taipumusta ohjata yrityksen kassavirtoja heitä itseään hyödyttäviin kohteisiin. Tieteellisen kontribuution lisäksi tutkimustuloksia voidaan hyödyntää yritysten, rahoittajien ja politiikkojen päätöksenteossa. Yrityksen arvoa maksimoivan johtajan tulisi kassan suuruutta päättäessään ottaa huomioon maassa vallitseva lakiympäristö. Rahoittajien tulisi puolestaan huomioida maan rahoitusrakenteen ja yrityksen omistusrakenteen vaikutus investointien kannattavuuteen. Politiikkojen yleinen tavoite on lisätä yritysten investointeja, koska ne parantavat työllisyyttä ja synnyttävät verotuloja. Tämän tutkielman mukaan sijoittajansuoja lisää suurten investointien frekvenssiä ja kannattavuutta.