Shareholder Value Minimization? How Some US Corporations Avoid Institutional Pressures

Abstract

US corporations currently orient their activities to perform to the expectations of financial markets and maximize shareholder value. Corporations actively manage their earnings and accumulate financial assets to make their performance more easily quantifiable for markets. This emphasis on performing to the expectations of financial markets is a relatively modern phenomenon, and many studies have illustrated how corporations transformed as they increasingly focused on maximizing shareholder value. The collection of studies presented here expands this work by examining how some types of corporations have avoided the pressures of shareholder maximization. I analyze a panel of recent quarterly financial reports from S&P 1500 companies and supplemental data from multiple other sources to investigate how the extent of shareholder value orientations differs across US corporations. Using linear regression models for panel data, I find that (1) employee-owned companies manipulate their accruals and (2) real activities less than non-employee-owned companies, and (3) the degree a company stockpiles financial assets is partially a function of its board interlocks. Combined, these studies show that the extent corporations adhere to shareholder value orientations is partially dependent on corporate ownership structure and interorganizational relations.