Document Type : Research Paper

Authors

• Reza Iranbakhsh
• Hasan Valiyan
• Mohammadreza Abdoli
• Maryam Shahri

Department of Accounting, Sha.C., Islamic Azad University, Shahrood, Iran

Abstract

The present study seeks to present a paradigmatic framework from causes to consequences to develop the phenomenon of breaking the governance entrenchments of capital market companies. The methodological nature of this study is mixed, according to which, in implementing the analytical objectives of the study, an attempt was first made through the Strauss and Corbin (1998) approach in grounded theory to identify the dimensions that can be seen in the five dimensions of the paradigmatic model through interviews and three-stage coding. The research findings in the qualitative section were derived from 12 interviews, indicated the identification of 60 propositional themes during open coding, 12 components during axial coding, and 6 structural categories during selective coding, which ultimately resulted in the presentation of the research paradigmatic model. Moreover, in the quantitative part of the present study, the research findings confirmed the generalizability of the dimensions derived from the qualitative part to the quantitative part through fitting the structural suitability of the PLS wrap in the partial least squares process.

Introduction

Corporate governance in financial market structures is known as a mechanism for protecting shareholder rights, and its most important function is often to ensure effective and transparent company performance by determining long-term strategies and macro-goals, which can greatly reduce the potential risks of violating stakeholder rights by monitoring the performance of executive managers and complying with laws and regulations. Therefore, according to the definition of the Organization for Economic Cooperation and Development (OECD), the governance system includes a set of procedures and processes according to which companies should be directed and controlled in such a way that, by distributing specific limits of authority and responsibilities to appointed managers, the possibility of managerial unaccountability is reduced and the level of competitive legitimacy of companies is increasingly strengthened. Therefore, the most important fundamental principles of corporate governance in financial markets can be sought in ensuring effective observance of shareholder rights, preventing ownership opportunism, making decisions regarding the ratio of share distribution between general shareholders and institutional shareholders, combining the structure of the board of directors from the perspective of maintaining independence and effectiveness of monitoring fair decisions, and improving the quality of information disclosure for greater transparency, thereby reducing agency costs in these markets.

Methodology

The present study should be placed, first of all, from the perspective of its purpose, among exploratory research, which, due to the novel nature of the "staggered board structuring" in the context of theoretical approaches to the capital market, does not have sufficient cognitive coherence. Therefore, this study, through the tool of interviewing experts, seeks to understand the causal aspects of the consequences of the development of the aforementioned pivotal phenomenon with the aim of breaking the corporate governance entrenchment in the field of market companies, which, due to the greater level of functional transparency in institutional supervision, makes it possible to achieve higher competitive advantages in a more sustainable manner.
In terms of the objective approach in methodology, this study should be considered as developmental research. This is because, while there are few studies focused on this phenomenon, there are no reliable foundations for a correct understanding of the structuring of the staggered board of directors, at least at the present time, and this study seeks to provide a paradigmatic model for a more coherent development of this concept in the context of capital market companies.
Finally, from the perspective of data type, the present study should be considered mixed, which, through inductive-deductive philosophical foundations, seeks to expand the areas of structuring the board of directors of Pelkan in the form of an initial abstract model to break the possibilities based on the entrenchments of the corporate governance system in the context of the capital market, so that in the quantitative part, it can be possible to evaluate the dimensions arising from the paradigmatic model based on generalization to the context of the study.
Accordingly, it is possible to implement analytical procedures to achieve the objectives of this study through data analysis based on the Strauss and Corbin (1998) approach, so that aspects related to this phenomenon can be identified and categorized into paradigms through interviews with experts in the field, through three stages of open, axial, and selective coding. Thus, the categorizations resulting from the coding of the interviews can ultimately guide the study to a theoretical framework, so that in the form of a paradigmatic model based on the five dimensions of [causal conditions], [intervening conditions], [contextual conditions], [strategies], and [consequences], it is possible to measure the identified dimensions within the framework of a structural fit of the utility model, according to an analogical approach.

Findings

In this study, an attempt has been made to identify five dimensions of the paradigmatic model: "causal conditions", "interventing conditions", "contextual conditions", "strategic conditions", and "consequences" through a mixed methodological process, first by analyzing grounded theory and the Strauss and Corbin (1998) approach, and then by interviewing experts, through three stages of open, axial, and selective coding. By determining these criteria in the grounded theory process, the research, after measuring the content validity index (CVI) and the test-retest reliability method, proceeded to present the paradigmatic model as a basis for recognizing the necessity of implementing a staggered board of directors in breaking the governance entrenchment at the capital market level. Then, in order for this framework to serve as a strategic roadmap in the Iranian capital market system to help policymakers gain a more significant understanding of the central phenomenon of the study in the corporate governance system, a paradigmatic model was developed through structural equation analysis. The findings, while confirming the number of central components according to the paradigmatic model, provided the possibility of generalizing these criteria to the study context for conducting two exploratory and confirmatory factor analyses. Through these two criteria, the structural fit coefficients were examined, and it was determined that the dimensions identified in the paradigmatic model indicate a suitable ability to be extended to the Iranian capital market.

Conclusion

The present study seeks to present a paradigmatic framework from causes to consequences to develop the phenomenon of breaking the governance entrenchments of capital market companies. The findings show that the phenomenon of staggered board structuring should be described as an obstacle to the governance entrenchments of capital market companies, which have caused corruption and financial distortions in the contemporary capital market due to possible self-interest in the appointment of directors. Therefore, periodic changes in board members based on a review of the comprehensive corporate governance system in the capital market are among the necessities that today contribute to more structured financial transparency in developing countries by adopting such mechanisms, thereby creating a higher level of accountability and, as a result, higher legitimacy of financial markets. These rules help markets become more orderly in protecting the rights of shareholders, investors, and regulators, while reducing the scope for opportunistic behavior by companies that pursue their own interests through strategic appointments in the capital market.

Keywords

• Governance Entrenchment
• Governance Oversight Legitimacy
• Staggered Board

Main Subjects

• stock exchange