An integrated system of corporate governance: Regulation, internal control and managerial attributes

The dissertation studies corporate governance as an integrated system under the influence of the legal and regulatory environment, the internal control mechanism, and managerial attributes. The dissertation uses a firm's internal control mechanism as a central point to lay out the framework. It aims at addressing three issues: Whether there exists managerial power in executive compensation decisions; What are the sources of managerial power; Whether these exists one best governance design for all types of managers. The dissertation has three essays. First, a theoretical model shows the impact of regulation stringency, monitoring efficiency, managerial discretion, risk-aversion, and ethics on the optimal governance design and a firm's capability to constrain managerial power and mitigate managerial diversion. Second, an empirical paper investigates the link between lockup policies at the initial public offerings and executive compensation and incentives. This essay finds that lockup existence and lockup length are negatively associated with executive total compensation and positively associated with executive equity incentives. Third, another empirical paper compares founder-CEOs with non-founder CEOs in newly public firms with respect to executive compensation, board structure, financial performance and firm survival. This essay finds that founder-CEOs earn smaller incentive compensation and smaller total compensation than professional CEOs. Founder-managed firms are associated with better financial performance and are more likely to survive. In addition, a founder-CEO is associated with even better firm performance when the position of CEO and chair is combined.