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The Paradox of Transparency, Short‐Termism and the Institutionalisation of Australian Capital Markets
Author(s) -
Nicholson Gavin,
Cook Zoie
Publication year - 2009
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.2009.00066.x
Subject(s) - transparency (behavior) , corporate governance , corporation , institutionalisation , shareholder , accounting , business , institutional investor , agency (philosophy) , investment (military) , capital market , capital (architecture) , market economy , finance , economics , law , political science , philosophy , archaeology , epistemology , politics , history
As the ultimate corporate decision‐makers, directors have an impact on the investment time horizons of the corporations they govern. How they make investment decisions has been profoundly influenced by the expansion of the investment chain and the increasing concentration of share ownership in institutional hands. By examining agency in light of legal theory, we highlight that the board is in fact sui generis and not an agent of shareholders. Consequently, transparency can lead to directors being ‘captured’ by institutional investor objectives and timeframes, potentially to the detriment of the corporation as a whole. The counter‐intuitive conclusion is that transparency may, under certain conditions, undermine good corporate governance and lead to excessive short‐termism.