Internal Control Weaknesses,Family Ownership and the Cost of Debt: Evidence from the Tunisian Stock Exchange

ABSTRACT

This study investigates the effect of internal control weaknesses (ICW) and family ownership on the cost of debt in the Tunisian setting. We document that ICW and family ownership are positively associated with the cost of debt. When testing for the moderating effect of family ownership on the association between ICW and the cost of debt, we document that the positive effect of ICW on the cost of debt is more pronounced under high family ownership in the Tunisian setting. Furthermore, the positive and significant association between ICW and the cost of debt is more prevailing for firms audited by non-Big 4 auditors and industrial companies. These findings may have policy implications for Tunisian policymakers with respect to the establishment of internal control standards.     

Ownership Differences,Auditor Reputation,and Debt Financing: Evidence from China

This research examines whether “the paradox of auditor reputation” exists in China’s private debt market. Two types of hypotheses are developed to explain the “paradox” in terms of ownership differences. Our findings suggest: (1) by retaining big name auditors, non-state-owned enterprises (non-SOEs) significantly reduce the cost of debt and lower financial constraints; (2) For the non-SOEs, the effect of auditor reputation on the cost of debt and financial constraints declines over time due to the accumulation of these firms’ own reputation; (3) SOEs are more sensitive to the interest rate of bank loans than their counterparts, implying their stronger bargaining power when negotiating with potential creditors than non-SOEs due to their government connections. However, SOEs’ government connections weaken the informational role of auditors and firm reputation on signaling debt market; and (4) Corporate governance is taken into consideration by creditors as an important indicator of solvency. Further investigation demonstrates that after controlling for firm size, operating cash flow, profitability and leverage ratio, the possibility of hiring big name auditors by the younger and median-aged group of non-SOEs is considerably higher than “elder” non-SOEs. Moreover, poor-performing SOEs have greater incentives to make use of their government connections in their bargaining for lower debt cost, as compared with their well-performing peers.     

不同成长机会下的上市公司股权结构、资本结构与公司绩效——以A股流通服务业上市公司为例

文章以我国流通服务业上市公司为研究样本,分析了上市公司资本结构和股权结构对公司绩效的影响,以及成长机会在其中的调节作用.研究结果表明流通服务业上市公司第一大股东持股比例、第二到第十大股东持股比例、长期负债资本比对公司绩效存在显著正向影响;国有股持股比例、高管持股比例、资产负债率对公司绩效存在显著负向影响.随着公司成长机会的增加,第二到第十大股东持股,非国有法人股持股对公司绩效正向影响作用增强;而第一大股东持股比例、国有股持股比例、高管持股比例、资产负债率与长期负债资本比对公司绩效的影响并不随着公司成长性的变化而变化.文章研究对于流通服务业上市公司股权结构和资本结构优化提供了有益的启示.     

Managerial Stock Ownership and Debt Diversification

In this study, we examine the impact of managerial behavior on the debt diversification decisions of firms using the agency cost of debt framework. We hypothesize that managers with higher equity ownership should favor debt diversification to avoid efficient monitoring by debt holders and thus, be able to engage in risk‐shifting behavior. Our empirical results provide strong evidence for a positive association between managerial ownership and debt diversification. This relationship is observed to be stronger for smaller firms, which are traditionally more susceptible to the moral hazard problem. Our results remain robust for an alternate measure of debt diversification.     

Black Economic Empowerment Disclosures by South African Listed Corporations: The Influence of Ownership and Board Characteristics

This study investigates the extent to which South African listed corporations voluntarily disclose information on black economic empowerment (BEE) in their annual and sustainability reports using a sample of 75 listed corporations from 2003 to 2009. BEE is a form of socio-economic affirmative action championed by the African National Congress (ANC)-led government to address historical imbalances in business participation and ownership in South Africa. We find that block ownership and institutional ownership are negatively associated with the extent of BEE disclosures, whereas government ownership, board diversity (age, education, ethnicity, nationality and occupation), board size and non-executive directors are positively related to the extent of BEE disclosures. By contrast, dual board leadership structure and gender diversity are not significantly associated with BEE disclosures. Our results are robust when controlling for firm-level characteristics, fixed-effects and alternative disclosure proxies. Our results are largely consistent with the predictions of agency, legitimacy, resource dependence and stakeholder theories.     

欧债危机对中国地方政府债务的警示

近年来,我国地方政府债务的总体规模出现了较大幅度的上升,尽管这个规模尚处于可控范围之内,但决不能忽视地方政府债务不断累积,欧元区国家主权债务危机的警示在于:由于债务是延迟的税收,政府必须不断地在短期与长期内努力平衡其收益与支出。因此,必须积极寻找相应对策,化解地方政府债务的潜在风险。     

共享单车押金性质探析

共享单车企业向消费者收取押金的性质与线下交易之押金性质不同,应被认定为债之关系,消费者在交付押金后无法保有其所有权,仅享有对共享单车企业的债权返还请求权,因而其只能向共享单车企业主张返还,不可任意穿透债的相对性原理而及于第三人。在此前提下,倘若企业破产后消费者仍无法追回其全部押金,除可适用公司法人人格否认制度向股东追偿等少数情形之外,该损失应依私法自治原则,由消费者个人承担。     

Determinants of corporate hedging and derivatives: A revisit

Although the primary purpose of hedging is to reduce earnings volatility, corporate hedging may also increase firm value. Using publicly-available data, we found that hedging reduces the probability of financial distress, reduces the agency costs of debt, and reduces some agency costs of equity. However, we found no support for the hypothesis that hedging increases firm value by reducing expected tax liability. In addition, we suggest that corporate ownership structure may affect the desirability of hedging. We also found that large firms have a stronger tendency to hedge, firms with a larger percentage of value derived from growth opportunities are more likely to hedge, and convertible debt serves as a substitute for corporate hedging. With a dummy variable for multinational corporations as a proxy for operational hedging, we found that operational hedging and derivative hedging are complements rather than substitutes.     

Board Effectiveness and Cost of Debt

Does the board of directors influence cost of debt financing? This study of a sample of Spanish listed companies during the period 2004?C2007 provides some evidence about the question. The results suggest that two board attributes ?C director ownership and board activity ?C appear to influence in the risk assessment of debtholders because of their ability to reduce agency cost and information asymmetry. We also find a non-linear relationship between board size and cost of debt, suggesting that from certain levels the benefits of large boards may be outweighed by the cost of poorer communication and increased decision-making time.     

跨国公司在华研究与开发投资区位选择的实证研究

本文选取我国吸引跨国公司研究与开发机构最多的前10位省份或直辖市的横截面数据,对跨国公司在华研究与开发投资区位选择的影响因素做实证分析。研究结果表明,跨国公司在华研究与开发机构的区位分布与区域的劳动力成本、通讯设施水平、市场规模、科技实力以及对知识产权的保护和重视程度等因素呈正相关关系。     

Family firms and debt: Risk aversion versus risk of losing control

This study examines the effect of family management, ownership, and control on capital structure for 523 Colombian firms between 1996 and 2006. The study finds that debt levels tend to be lower for younger firms when the founder or one of his heirs acts as manager, but trends higher as the firm ages. When family involvement derives from direct and indirect ownership, the family–debt relationship is positive, consistent with the idea that external supervision accompanies higher debt levels and reduces the risk of losing control. When families are present on the board of directors (but are not in management), debt levels tend to be lower, suggesting that family directors are more risk-averse. The results stress the tradeoff between two distinct motivations that determine the capital structure of family firms: risk aversion pushes firms toward lower debt levels, but the need to finance growth without losing control makes family firms to prefer higher debt levels.     

Corporate Governance and the Cost of Capital: An International Study

This study shows that firms with good corporate governance are consistently associated with both lower cost of equity and cost of debt capital in an international setting. The association between corporate governance and the cost of equity is more pronounced in countries with strong legal systems, extensive disclosure practices, and good government quality. However, the relation between corporate governance and the cost of debt is stronger in countries characterized by weak legal protection, low transparency, and poor government quality. The differential relations can be attributed to asymmetric payoffs received by creditors and shareholders.     

Effects of Foreign Institutional Ownership on Foreign Bank Lending: Some Evidence for Emerging Markets

Despite the large literature on developed countries, little is known about the interactions between corporate governance, foreign ownership, and foreign bank lending in developing countries. Using data from five Latin American countries from 2001 to 2008, we provide one of the first pieces of evidence of how foreign ownership affects the loan cost of borrowers in emerging markets. We find that in terms of foreign bank lending, the cost of debt financing is significantly higher for firms whose largest shareholder is a foreign institutional one. The results support the hypothesis that because of potential agency conflicts between shareholders and creditors, having block institutional shareholders tend to increase the borrowers’ debt burden. There is further evidence supporting this agency conflict hypothesis as we find that the effects of large institutional shareholders on borrowing costs become larger (smaller) when the conflicts are aggravated (mitigated).     

Multinationals and Income Shifting by Debt

Existing literature studies debt shifting and transfer pricing separately. In practice, however, the choice of debt-to-asset ratios in affiliates and the interest rate on internal debt are interrelated management decisions that are also mutually affected by government regulation. Therefore, this paper models these strategies as simultaneous decisions made by the management. We find that the tax sensitivity of the corporate tax base depends on whether debt shifting and transfer pricing are cost complements or substitutes. A second result is that stricter regulation of debt shifting and transfer pricing may have the effect of fostering such activities.     

Housing boom,real estate diversification,and capital structure: Evidence from China

By exploiting the unique situation in China that numbers of listed firms diversified into the real estate industry during the recent housing boom period, we find that firms' real estate diversification positively influences their subsequent leverage ratios. Further investigations suggest that such an increase in leverage mainly comes from short-term debt instead of long-term debt. We also find that housing price growth and state ownership are underlying mechanisms through which real estate diversification stimulates leverage. Last, we find that firms with real estate diversification enjoy less financing cost deterioration and less market value deterioration when they raise more debt.     

Capital Structure,Management Ownership and Large External Shareholders: A UK Analysis

This paper examines empirically the effects of management ownership and ownership by large external shareholders on the capital structure of the firm from an agency theory perspective. The paper extends the US literature on the topic by examining the effect of interactions between management ownership and ownership by large external shareholders on the capital structure of UK firms. For a sample of UK firms, the paper provides empirical evidence that suggests the debt ratio is positively related to management ownership and negatively related to ownership by large external shareholders. Furthermore, the presence of a large external shareholder acts to negate the positive relationship between debt ratios and management ownership; in the presence of a large external shareholder, no significant relationship between debt ratios and management ownership exists. These findings are consistent with the hypothesis that the presence of large external shareholders affects the agency costs of debt and equity.     

Capital structure decision making: A model for family business

Most theoretical and empirical studies of capital structure focus on public corporations. Only a limited number of studies on capital structure have been conducted on small-to-medium size enterprises (SMEs), and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners.Theory indicates that there is a complex array of factors that influence SME owner-managers' financing decisions. Recent family business literature suggests that these processes are influenced by firm owners' attitudes toward the utility of debt as a form of funding as moderated by external environmental conditions (e.g., financial and market considerations).A number of other factors have been shown to influence financing decisions including culture; entrepreneurial characteristics; entrepreneurs' prior experiences in capital structure; business goals; business life-cycle issues; preferred ownership structures; views regarding control, debt–equity ratios, and short- vs. long-term debt; age and size of the firm; sources of funding for growth; attitudes toward debt financing; issues relating to independence and control; and perceived risk and attitudes toward personal risk.Although these factors have been identified, until now there does not appear to have been any attempts to develop empirically-based models that show relationships between these factors and family business owners' financing decisions. Utilizing theories derived from divergent disciplines, this study develops an empirically tested structural equation model of financing antecedents of family businesses. Participants of our study involved a random sample of 5000 business owners who were mailed a 250-item Australian Family and Private Business questionnaire developed specifically for this investigation.Notably, our findings reveal that firm size, family control, business planning, and business objectives are significantly associated with debt. Small family businesses and owners who do not have formal planning processes in place tend to rely on family loans as a source of finance. However, family businesses in the service industry (e.g., retailers and wholesalers) are less likely to use family loans as are those owners who are planning to achieve growth through new products or process development. Use of capital and retained profits is likely for family businesses planning to achieve growth through an increase in sales but less is likely for family businesses in the manufacturing sector and lifestyle firms. In addition, debt and family loans are negatively related to capital and retained profits. Equity is a consideration for owners of large businesses, young firms, and owners who plan to achieve growth through increasing profit margins. However, equity is less likely to be a consideration for older family business owners and owners who have a preference for retaining family control.Our findings suggest that the interplay between multiple social, family, and financial factors is complex. In addition, our findings indicate the importance of utilizing theories that also help to explain behavioral factors (e.g., owners' needs to be in control) that affect financial structure decision-making processes. Practitioners and researchers should consider the dynamic interplay among business characteristics (e.g., size or industry), behavioral aspects of business financing (e.g., business objectives), and financial factors (e.g., gearing levels) when working with and researching family enterprises.     

公司治理结构与国有资产监管

与私人资产委托代理关系形成的所有权与控制权的分离问题类似,在国有资产委托代理关系下存在着国有资产全民所有权与政府控制权的分离以及政府享有的所有权与企业经营者拥有的经营权的分离问题.借鉴公司治理结构中的股东会、董事会、监事会、经理人之间的相互制衡的结构设计原则,按照国有资产的三层委托代理关系,本文构建了国有资产监管的政治委托层次、行政委托层次和经济委托层次的三重治理结构模式.     

ARE FISCAL SUSTAINABILITY AND STABLE BALANCED GROWTH EQUILIBRIUM SIMULTANEOUSLY ATTAINABLE?

This paper presents an examination of the sustainability of national debt and economic growth, and the growth effects of government debt and income taxation. Results show sustainability of national debt and economic growth under the primary surplus rule. Fiscal policy and balanced growth are compatibly sustainable if and only if the government sets a long‐run target debt/GDP (gross domestic product) ratio within a reasonable range. Results also show that a rise in the long‐run debt/GDP ratio reduces the balanced growth rate. Based on these two results, the long‐run debt/GDP ratio is greater than zero if the government aims to maximize the balanced growth rate.