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Corporate Governance and Strategic Resource Allocation
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The impact of corporate governance on strategicdecisions is emerging as a
key concern in contemporary businesses. In particular,governance mechanisms
such as stock ownership structure and takeover defenses have major influences on
strategicresource allocation in firms. In this paper, we empiricallyexamined a set of
relationshipsbetween corporate governance and information technology (IT)
investments. Using data from a sample of major U.S. corporations, we established a
negativerelationshipbetween IT investments and two constructs of corporate
governance, namely: (1) stock ownership structure (that includes largeor insider
shareholders); and (2) presence of takeover defenses. These results respectively
provide support for: (1) the 'monitoring hypothesis'of riskyinvestments which
purports that stock ownership could alignthe interests of managers with those of
shareholders, and (2) the 'managerialentrenchment hypothesis'of risky
investments which positsthat takeover defenses allow managers to pursue
suboptimal decisions. In addition, consistent with existingempiricalevidence, we
observed a negative relationship between stock ownership structure and takeover defense adoption.
Lawrence Loh and N. Venkatrarnan - Personal Name
1000866950
NONE
Management
English
2013
1-48
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