Corporate Governance of International Joint Ventures

3661 Words15 Pages
Table of Content

ABSTRACT 1
1 INTRODUCTION 2
2 INTERNATIONAL JOINT VENTURES ORGANIZATIONAL STRUCTURE 3
2.1 PARENT FIRMS, IJV MANAGERS RELATION 3
2.2 PARENT FIRM’S RELATIONS 4
3 RIGHTS, FUNCTIONS OF BOD, PARENT FIRMS, IJV MANAGERS 6
3.1 PARENT FIRM’S RIGHTS, FUNCTIONS 7
3.2 BOD’S FUNCTIONS IN IJV 9
3.3 IJV MANAGER’S DUTIES 10
4 CONCLUSION 12
REFERENCES 13

Abstract

This paper figures out IJV structure and mechanisms such as principal agency problems and hold–up problem in International Joint Ventures. Thereby it is appropriated to examine the relationship between the parental firms, and how they can elaborate the operation of the Board of Directors and the Joint Venture managers. This refers to an organization of
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Additionally, the BOD has a direct relation with IJV managers. The structure of IJV helps us to understand the challenges that parent firms face in designing the contract.
2.1 Parent firms and IJV managers relation

IJV managers are promoted to the venture by the parent firms in order to represent the parent firm’s culture, goals etc. Therefore, IJV managers are working on behalf of the both parent firm’s objectives in the IJV. In this context, agency theory helps us in understanding the relationship between the IJV managers and parent firms.
“Agency theory is concerned with resolving two problems that can occur in agency relationships. The first is the agency problem that arises when (a) the desires or goals of the principal and agent conflict and (b) it is difficult or expensive for the principal to verify what the agent is actually doing.”
The cause of the agency problem between IJV and parent firm relation is that the parent firm usually lacks of measuring and controlling the behavior of the managers appropriately. That means that information is asymmetric and IJV managers have more information about the ongoing works of the IJV than their parent firms. Therefore, IJV managers generally show the tendency to satisfy their self-interest instead of the parent firm’s interest. In this context, two different kinds of agency problem arise, namely moral hazard and adverse
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