Ownership structure and dividend policy: Evidence from Italian firms

Abstract

This paper reports on empirical investigations into the relationship between dividend policy and ownership structure of firms, using a sample of 139 listed Italian companies. Ownership structure in Italy is highly concentrated and hence the relevant agency problem to analyse seems to be the one that arises from the conflicting interests of large shareholders and minority shareholders. This paper therefore attempts to test the rent extraction hypothesis by relating the firm’s dividend payout ratio to various ownership variables, which measure the degree of concentration in terms of the voting rights of large shareholders. The hypothesis that other non-controlling large shareholders may have incentives to monitor the largest shareholder is also tested. The results of the empirical analysis reveal that firms make lower dividend payouts as the voting rights of the largest shareholder increase. Results also suggest that the presence of agreements among large shareholders might explain the limited monitoring power of other ‘strong’ non-controlling shareholders.     

股权结构、动态内生性与公司代理成本

本文以716家上市公司为样本,在动态内生性的框架下,运用动态面板的系统GMM估计方法,同时考虑了三种内生性,以动态性的视角,不仅研究了当期股权结构对当期代理成本的影响,还研究了股权结构与代理成本间的跨时期相互作用。通过研究,我们发现：（1）不仅当期股权结构对当期代理成本有影响,而且前期股权结构也对当期代理成本有影响,股权结构对代理成本的影响有持续期;（2）前期代理成本对当期股权结构有反馈效应;（3）股权结构与代理成本间存在动态内生性。     

Stock Repurchase and Agency Problems: New Evidence in Taiwan's Stock Market

This paper explores stock repurchase and agency issues in an emerging market with special regulations. Using match samples, agency-related variables are investigated for pre- and postannouncement periods. Our empirical evidence demonstrates that stock repurchase is related to agency cost mitigation. Agency problems are also significantly related to the preannouncement undervaluation of stock repurchase, after controlling for the effects of growth opportunity and asymmetric information. Finally, a company with a higher ratio of expected repurchase or higher agency costs normally enjoys better market response upon announcement.     

Intangible Assets and Firms' Disclosures: An Empirical Investigation

This study examines how research and development (R&38;D) and advertising expenditures affect firms' disclosures. Generally accepted accounting principles (GAAP) mandate that these expenditures be immediately expensed in financial reports, despite the fact that they often benefit the firm for longer periods. Prior studies find, however, that investors consider intangible assets in their valuation of firms. These studies argue that current GAAP, by not recognizing the value generated by these assets, severely impairs the usefulness of accounting reports. I investigate if firms with higher levels of R&38;D and advertising expenditures place greater reliance on voluntary, and therefore more flexible, disclosures such as voluntary publications and investor relations. Using analysts' ratings of firms' disclosures, I find that firms with higher levels of intangible assets are more likely to receive significantly higher ratings for their investor relations programs or voluntary publications than for their annual reports. These findings suggest that firms with higher levels of intangible assets emphasize supplemental disclosures because mandated accounting disclosures inadequately present their financial performance. These results have important policy implications for regulators and investors since they indicate that voluntary disclosures, which are unregulated and unaudited, are an important means of disclosure for these firms.     

CEO Ownership and Discretionary Investments

Abstract:  This study investigates empirically the relationship between CEO ownership and discretionary investments such as R&D and capital expenditures. We assert that the under-investment problem is high for R&D-intensive projects, while the over-investment problem is high for capital expenditures because of differences in risk between the two types of investments. Building on the linkages between investments and investment-related agency problems, we hypothesize that the relationship between CEO ownership and investments depends on whether increasing ownership mitigates or exacerbates the under- or over-investment problem. We find a non-linear association between CEO stock ownership and R&D investments; R&D investments increase and then decline across increasing levels of ownership. Further, we find that R&D investments and CEO stock options are positively associated at high levels of option holdings. In contrast, capital expenditures do not vary with CEO ownership (stock or options). Finally, consistent with our underlying assumption, we find that the influence of R&D investments on future firm risk is significantly larger than that of capital expenditures. Our findings indicate that managerial risk aversion affects discretionary investments.     

Corporate voluntary disclosure and the separation of cash flow rights from control rights

We find that corporate voluntary disclosure is negatively associated with the separation of cash flow rights from control rights. This result is consistent with the notion that as the separation of cash flow rights from control rights increases, controlling owners have larger incentives to expropriate the wealth of minority shareholders and low corporate disclosure constitutes a mechanism to facilitate controlling owners in masking their private benefits of control. The negative association between voluntary disclosure and the separation of cash flow rights from control rights is less pronounced for firms with greater external financing needs. This result suggests that for firms with high separation of cash flow rights from control rights, those with greater external financing needs undertake higher firm-level voluntary disclosure to reduce information asymmetry. We also find that the negative association between voluntary disclosure and the separation of cash flow rights from control rights is less pronounced for firms that have a large non-management shareholder. Our result supports the role of large non-management shareholder in mitigating agency problems associated with the separation of ownership and control.