Agency vs. stewardship: Performance, strategic flexibility and risk

Abstract

With taxpayers subsidizing the survival of publicly traded firms, questions of corporate governance, including the steward versus agency design of the firm, are now public policy issues. We use publicly traded insurance firms in the United States to study the value and risk relationship of agency versus stewardship firms. We find that stewardship and agency firms have different timing-related performance perspectives, have different degrees of strategic flexibility, and manage short term, or operational risk, and longer term risk differently. Our findings are consistent with the predictions of corporate governance theory.