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Does digitalization mitigate or intensify the principal-agent conflict in a firm?

Author

Listed:
  • Ilya Ivaninskiy

    (HSE University)

  • Irina Ivashkovskaya

    (HSE University)

  • Joseph A. McCahery

    (Tilburg University)

Abstract

In this article, we analyse the impact of business digitalisation on the principal-agent conflict. While there are several studies of impact of digitalization on corporate governance, the empirical evidence has so far been relatively scarce. We examine the principal-agent conflict from several angles: the number of shareholder-sponsored proposals submitted for the shareholder meetingsб the level of support for management-sponsored proposals and the frequency of proxy contests. As a proxy for the active digitalisation of a firm, we use the blockchain technology that has the potential to fundamentally change the distribution of power within an organisation, potentially mitigating the principal-agent conflict. We analyze a sample of 2813 NYSE, Nasdaq and AMEX-traded firms for the year 2018, during which rapid blockchain adoption was exhibited. Our results suggest that firms active in business digitalisation overall have a lower level of principal-agent conflict. We find that such firms generally have shareholders that are more active, which indicates an environment less prone to the principal-agent conflict. While on average, proposals submitted by the management receive less support during voting, the share of approved proposals does not change for the digitising firms. Proxy contests appear relatively rare among the firms active in digitalisation, however, there is not yet enough data to confirm this.

Suggested Citation

  • Ilya Ivaninskiy & Irina Ivashkovskaya & Joseph A. McCahery, 2023. "Does digitalization mitigate or intensify the principal-agent conflict in a firm?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(3), pages 695-725, September.
    • Handle: RePEc:kap:jmgtgv:v:27:y:2023:i:3:d:10.1007_s10997-021-09584-8
    DOI: 10.1007/s10997-021-09584-8
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    1. Chen, Meian & Zhao, Ke & Jin, Wei, 2024. "Corporate digital transformation and tax avoidance: evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Corporate governance; Blockchain; Digital transformation; Corporate voting; Proxy contest; Shareholder activism;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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