Publication Type

Journal Article

Publication Date

5-2016

Abstract

This article examines the determinants of allocation of decision rights between the parent company and its subsidiaries, and the economic consequence of suboptimal power structure. Based on China’s unique double disclosure for the parent company and the whole group, we construct a decentralization index to measure how decision rights are allocated within the group companies. We find a more decentralized (centralized) power structure for the groups with more uncertain (certain) external environment and with poorer (better) internal information quality. We also show that the groups with suboptimal power structure have weaker future performance.

Keywords

Decentralization, Power Structure, External Environmental Uncertainty, Internal Information Quality, Performance

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Journal of Accounting, Auditing and Finance

ISSN

0148-558X

Identifier

10.1177/0148558X16648032

Publisher

SAGE Publications (UK and US)

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1177/0148558X16648032

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