November 5, 2019
Eduardo Schiehll, Professor in the Department of Accounting Studies, received the Best Paper Award for a scholarly article presented at the 5th International Corporate Governance Society (ICGS) Conference, held at Essex Business School, in the United Kingdom.
The award-winning article is entitled When Is Protection Over-Protection? Symmetric Versus Asymmetric Property Rights. It was co-authored with researchers Henrique Castro Martins, Luiz Ricardo Kabbach de Castro and Paulo Rento Soares Terra.
This is a comparative study of the differences between 30 countries in the legal protection that applies to external capital suppliers, specifically minority shareholders and creditors of joint-stock companies.
The study is unique for its theoretical contribution to the level of complementarity and substitution among corporate governance mechanisms and for its managerial implications, as it informs policy makers about the impacts of certain regulatory changes.
“When it comes to governance, there is a lot of talk about increasing regulation, and what this article demonstrates is that in certain contexts, an excessive level of regulation could be detrimental to market development,” explains Professor Schiehll.
Eduardo Schiehll is a Professor in the Department of Accounting Studies at HEC Montréal. He holds a Ph.D. in business administration, with a specialization in management accounting. Prior to joining the faculty at HEC Montréal, he accumulated over 10 years of teaching experience in addition to having worked as an auditor and consultant at PricewaterhouseCoopers in Brazil.
His research and teaching activities focus on corporate governance, designing management control systems, and performance management, topics on which he has published numerous scholarly articles.
The authors delineate the multiple dimensions of the institutional capital domain through a fine-grained approach allowing them to capture the country-level property rights of capital suppliers (i.e. minority shareholders and creditors). They find evidence of the effects of time changes and within-country differences on legal protections for capital suppliers, which they label symmetric and asymmetric property rights. These differences explain cross-country variations in the financing behaviour of the firms.
The study’s results indicate that firms respond counter-intuitively to property rights strength: they rely more on internal funds for investment when shareholder and creditor protection are symmetrically strong, that is when capital supply is available and well protected. The paper also offers relevant insights for comparative institutional analysis, as it shows that the strength of property rights incites the firms to look for alternative sources of capital to reduce risk and/or external control.