Research agenda

The research agenda of the chair consists of analyzing the legal and economic aspects of corporate governance, with a particular focus on corporations in continental Europe, as this region is often underexposed in current research. 

Research on short-termism in corporate governance

More specifically, the chair conducts research into short-termism in corporate governance. For example, the chair has received funding from the Research Foundation Flanders (FWO) to conduct research into “short-termism in corporate governance: a continental European perspective”. An overview of the research that will be conducted during this research project can be found here.

Abstract: “Short-termist behavior by corporations is considered a large societal problem. Many scholars have already argued that some investors are excessively focused on the short term, and that this short-termism is transmitted to corporate management through executive compensation and shareholder activists. However, most of the academic evidence has only studied the US and the UK, ignoring the specificities of corporate governance in continental Europe. Compared with the US and the UK, more corporations have a controlling shareholder in continental Europe, and shareholder activism and share-based executive compensation is rarer. So far, the academic evidence has not analyzed the implications of these differences in corporate governance. This has not stopped European jurisdictions from adopting measures to combat short-termism in corporate governance, for example by introducing loyalty voting rights.

This research project analyzes the potential of corporate governance to discourage short-termism in two continental European jurisdictions, Belgium and France. It does so by reviewing the existing literature on short-termism in the US and the UK, comparing the US and the UK to Belgium and France, and providing new empirical evidence on Belgium and France. On the basis of this research, the proposals for corporate governance reform will be analyzed. This will help legislators and corporations take better informed decisions on combatting short-termism.”

Related to this line of research, Tom Vos has also written a paper about: “Controlling Shareholders in Corporate Governance: Cure or Cause for Short-Termism?”. This paper can be found on SSRN and can be summarized as follows:

Abstract: “Corporate short-termism, i.e., corporations sacrificing long-term value for short-term profits, has received a lot of attention in the corporate governance literature. However, the role of controlling shareholders in the short-termism debate has been largely ignored, possibly because of a focus on US and UK governance systems. This paper addresses this by comprehensively analyzing whether controlling shareholders contribute to or remedy the short-termism problem. Two conceptual models of short-termism are developed, one where short-termism originates with asset managers and institutional investors, and one where it originates with managers and directors. The paper then shows how controlling shareholders can eliminate short-termism in both models, but only if controlling shareholders themselves are not excessively short-term oriented, which depends on the presence of private benefits of control. The paper concludes with some policy implications, including with regards to loyalty voting rights and dual class share structures.”

Research on shareholder protection in share issuances

Finally, the Jean-Pierre Blumberg Chair has also funded research into shareholder protection and share issuances. An example of this is the paper by Tom Vos on “Pre-Emption Rights and Shareholder Approval of Share Issuances in Europe: An Accountability Gap?” (available on SSRN). This paper can be summarized as follows:

Abstract: In this paper, I analyze the role of shareholder approval and pre-emption rights in protecting shareholders in share issuances by listed corporations. I conclude that the protection offered by pre-emption rights and shareholder approval of share issuances in the UK, France and Belgium crucially depends on the support for these legal strategies by shareholders, as corporations are allowed to opt out of them. I also find that guidelines by proxy advisors and institutional investors signal that investors strongly support pre-emption rights and shareholder approval of share issuances. However, I provide new empirical evidence that these guidelines have less impact in France and Belgium than in the UK, especially for smaller corporations with high levels of insider ownership, which may create an accountability gap. I conclude with policy proposals that would give shareholders a larger say on the balance between flexibility and accountability with regard to share issuances.