Disproportional ownership structure and pay–performance relationship: Evidence from China's listed firms

This paper examines the impact of ownership structure on executive compensation in China's listed firms. We find that the cash flow rights of ultimate controlling shareholders have a positive effect on the pay–performance relationship, while a divergence between control rights and cash flow rights has a significantly negative effect on the pay–performance relationship. We divide our sample based on ultimate controlling shareholders' type into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms. We find that in SOE controlled firms cash flow rights have a significant impact on accounting based pay–performance relationship. In privately controlled firms, cash flow rights affect the market based pay–performance relationship. In SAMB controlled firms, CEO pay bears no relationship with either accounting or market based performance. The evidence suggests that CEO pay is inefficient in firms where the state is the controlling shareholder because it is insensitive to market based performance but consistent with the efforts of controlling shareholders to maximize their private benefit.     

Does operating performance increase post-takeover for UK takeovers? A comparison of performance measures and benchmarks

Using several benchmarks and operating performance measures, the results from this paper suggest that takeovers completed in the UK over the period 1985 to 1993 result in modest improvements in operating performance. Using a matching procedure similar to that employed by Loughran and Ritter [J. Finance 52 (1997) 1823], in which benchmark firms are selected on the basis of several pre-takeover characteristics, the median increase in post-takeover performance for acquiring firms ranges from 0.13% per annum to a statistically significant 1.78% per annum, depending on the definition of operating performance used and choice of deflator. Using the same matching scheme in a Healy et al. [J. Financ. Econ. 31 (1992) 135] methodology, in which post-takeover performance is regressed on a combined target and acquirer pre-takeover performance, reveals larger improvements in operating performance, ranging from 0.80% to a statistically significant 3.1%, again depending on the definition of operating performance employed and deflator chosen. While there is some evidence that factors such as industrial relatedness and the removal of the target CEO have an impact on post-takeover performance, method of payment is found to have an insignificant impact.     

The impact of anti-corruption measures and risk effects on equity incentives and financial misreporting in China

This study examines the effects of anti-corruption and equity incentive risk on financial misreporting in the context of China’s unique corporate ownership structure and governance regime. Using a sample comprising 2,708 cases of financial restatement over the 2007–2017 period. Our key findings suggest that managers’ shareholdings are significantly and positively associated with their firms’ financial misreporting, and certain equity risk factors dramatically alter Chinese corporate governance. Furthermore, managers’ motivation to misreport is significantly more pronounced in non–state owned enterprises (non-SOEs), suggesting that equity incentive risk effects mitigate the “absence of ownership” problem believed to affect SOEs. Managers in highly competitive industries and firms with low institutional ownership are found to be highly motivated to misreport performance.     

Ownership and performance in Chinese manufacturing industry

The relation between various ownership types and performance measures for 1036 firms in China is examined. State owned enterprises (SOE) are consistently less profitable than mixed enterprises (ME), collective owned enterprises (COE), joint ventures (JV), and foreign owned enterprises (FOE). The SOEs and FOEs are also less productive than MEs, COEs and JVs. The surprisingly low productivity for FOEs may result from the learning curve for international investors doing business in China. Owned by local governments, COEs are more profitable and productive than the central government owned SOEs, possibly because of closer monitoring and harder budget constraints, and better employees and management. The performance of MEs, mostly newly privatized firms, is weaker when related to assets, possibly due to the anomaly that capital investments following their public offerings are not yet on line. The co-existence of economies of scale and over-employment is also evident among Chinese enterprises.     

非公有制企业党组织与企业捐赠

与公有制企业党组织受到较多关注不同,非公有制企业党组织是否真正发挥影响力是同样重要但却被学术界忽略的待研究问题。本文基于手工收集的民营上市公司党组织的相关数据,从社会捐赠这一视角研究党组织影响力对其履行社会责任的影响。结果发现:民营上市公司党组织的影响力越大,企业的社会捐赠力度越大,且显著高于同行业和同地区的平均捐赠水平;这种影响力的促进作用在民营上市公司党组织基础更加稳固的企业、管理层对党组织重视程度更高的企业和党代会时期更加明显。上述结果在控制了可能的内生性问题后依然稳健。本文的发现意味着非公有制企业党组织有助于促进其履行社会责任,这有助于评估和促进非公有制企业党组织的建设及其作用的发挥。     

Shareholder Activism by Institutional Investors: Evidence from CalPERS

This study examines firm characteristics that lead to shareholder activism and analyzes the effects of activism on target firm governance structure, shareholder wealth, and operating performance for the 51 firms targeted by CalPERS over the 1987–93 period. Firm size and level of institutional holdings are found to be positively related to the probability of being targeted, and 72 percent of firms targeted after 1988 adopt proposed changes or make changes resulting in a settlement with CalPERS. Shareholder wealth increases for firms that adopt or settle and decreases for firms that resist. No statistically significant change in operating performance is found.     

Economic policy uncertainty and corporate inventory holdings: evidence from China

We investigate the impact of economic policy uncertainty (EPU) on corporate inventory holdings in China over the period 2007–2017. We find that EPU leads firms to significantly reduce inventory holdings and this effect is particularly pronounced among non-state-owned enterprises. The adjustment of inventory holdings enhances firms’ operating and market performance consequently. In addition, firms with greater financial constraints or stronger external governance are more affected by EPU. Further exploration shows that EPU induces high precautionary cash holdings, which crowds out inventories. Our results illustrate that firms reallocate between inventories and cash to cope with uncertainty associated with economic policy changes.     

Ownership and Performance in a Lightly Regulated Environment

This article examines the relation between ownership and performance for New Zealand electricity lines firms over the period 1998 to 2006. The sample is of interest because it represents all firms within a single product industry (local electricity distribution), which is a natural monopoly subject to a light‐handed regulatory regime. Thus we are able to examine the theories of ownership on performance, while controlling for regulation, industry, product market competition, accounting methods and other factors that might impact profitability, such as network reliability and network density. The results suggest that listed firms have similar profitability to council‐owned firms and both listed and council‐owned firms outperform trust‐owned firms. The likely reason for the poorer performance of trust‐owned firms is that they have different agency costs than listed and council‐owned firms and the trustees have lower responsibility than directors. Hence, they have lower incentives to be profitable.     

Ownership and the Value of Political Connections: Evidence from China

Research has found that political connectedness can have both positive and negative effects on firm value. To resolve these mixed findings, we investigate the impact of political ties conditional on ownership for a sample of Chinese firms over the period 1999–2006. We find that private firms with politically connected managers have a higher value and obtain more government subsidies than those without connected managers, whereas local state‐owned enterprises with connected managers have a lower value and employ more surplus labour than those without connected managers. Our results indicate that the effect of political ties is subject to firm ownership.     

Long-term performance following mergers of Japanese companies: The effect of diversification and affiliation

This paper examines the long-term operating performance following 69 mergers of manufacturing firms traded on the Tokyo Stock Exchange during 1969 to 1999. We find evidence of improvements in operating performance for the entire sample, and that the pre- and post-merger performance is highly correlated. Moreover, the long-term performance is significantly greater following mergers of firms operating in different industries. Increases in employment surrounding the mergers are positively related to post-merger performance among diversifying mergers and mergers completed before the peak of the equity bubble in 1989. The results suggest that the primary beneficiaries of consolidation are firms that expand the scope of business of the acquiring company. Finally, existing relationships among merging firms and mergers with distressed targets are not related to post-merger performance.     

Managerial foreign experience and corporate risk-taking: Evidence from China

This study investigates the relationship between managerial foreign experience and corporate risk-taking. We find that foreign experienced managers in Chinese firms are positively associated with corporate risk-taking and that this mainly exists in private firms rather than in state owned enterprises (SOEs). In privately owned firms, the degree of corporate internationalization and operating leverage are potential channels through which foreign experienced managers affect corporate risk-taking. Moreover, the positive association is more pronounced for managers' practical, rather than educational foreign experience and for managers who gain their foreign experience from countries or regions with advanced management practices and better corporate governance. Short-term visits overseas has no impact on corporate risk-taking. Additionally, the relationship is more persistent among private firms with better corporate governance and those operating in weak local economy. Finally, we find evidence that the risk-taking behaviour from foreign experienced managers is an important mechanism for companies to enhance their value.     

Does operating performance really improve following corporate acquisitions?

Previous research indicates that operating performance improves following corporate acquisitions relative to industry-median firms. Such performance results are likely to be biased because acquiring firms undertake acquisitions following a period of superior performance and they are generally larger than industry-median firms. Using firms matched on performance and size as a benchmark, I find no evidence that operating performance improves following acquisitions. I also analyze if performance is higher in cash acquisitions as suggested by various studies. The results indicate that cash flows increase significantly following acquisitions that are made with cash, but decline for stock acquisitions.     

The long-run performance of acquiring firms in mergers and acquisitions: Does managerial ability matter?

This paper examines the association between the managerial ability of acquiring firms and their long-term performance after mergers and acquisitions (M&As). Based on M&A data for U.S. firms from 2000 to 2012, we find that acquiring firms with higher managerial ability achieve better long-term operating performance and stock returns. We also find that the positive effect of managerial ability on long-term performance is more pronounced when acquirers and target firms belong to the same industry. The result suggests that managers who have higher ability to manage their firms, i.e., to generate higher revenues for given resources, are more capable of achieving higher synergy benefits and better post-acquisition performance in same-industry acquisitions than in cross-industry acquisitions.     

Political connections,tax benefits and firm performance: Evidence from China

This paper investigates the different effects of political connections on the firm performance of state-owned enterprises (SOEs) and privately owned enterprises. Using data on Chinese listed firms from 1999 to 2007, we find that private firms with politically connected managers outperform those without such managers, whereas local SOEs with connected managers underperform those without such managers. Moreover, we find that private firms with politically connected managers enjoy tax benefits, whereas local SOEs with politically connected managers are prone to more severe over-investment problems. Our study reconciles the mixed findings of previous studies on the effect of political connections on firm performance.     

An empirical investigation of mergers and acquisitions by Chinese listed companies, 1997–2007

We examine 136 M&A deals from 1997 to 2007 initiated by Chinese companies listed on the Shanghai and Shenzhen Stock Exchanges, where the acquirer gains complete control of the target. Our data shows that the Chinese M&A market is dominated by domestic deals with unlisted targets that are either stand-alone private firms or wholly owned subsidiaries. Acquirers experience significant positive abnormal stock returns around the announcement date and over the three years after the acquisition. These results are largely driven by state-owned firms, cash acquirers and firms that acquire related targets. Cross-sectional tests show that announcement period returns are related to the acquirer's ownership status, industry relatedness of the acquirer and target, capital structure changes of the acquirer and the nature of the unlisted target. We find no change in operating performance from the pre to the post acquisition period for the acquirers.     

The Performance of State–Owned Enterprises Revisited

Many theoretical and empirical studies look at the ownership–performance relationship. So far, the literature in finance and in accounting mainly refers to the property rights, agency and public choice theories. Despite the fact that the results of these studies are more or less conclusive, it is usually considered that the private enterprise performs better than the state–owned enterprise. In this article, we argue that these studies suffer from one major limitation. They do not recognize that the goals of the state–owned enterprise are different from the ones espoused by the private firm. Using a sample of state–owned entreprises and private firms for the period 1976–1996, we present empirical evidence that the state–owned enterprises, when their main goal is to maximize profit, perform as well as the privately owned enterprises. Therefore, the alleged under–performance of the state–owned enterprises may only be the result of pursuing other goals while the poor quality of public managers may be another urban myth.     

Corporate Multinationality and Acquirer Returns

This paper provides evidence on how corporate multinationality from the perspective of acquiring firms relates to M&A returns. Using multivariate regressions and a large dataset of over 6,000 M&As (both cross-border and domestic) by UK firms during 1987 to 2014, the paper finds multinationality to be associated with significantly higher short-run announcement returns and long-run operating performance. While the multinationality premium (higher M&A returns for multinationals) persists over time, it seems to be restricted to firms with superior resource/managerial capabilities and minimal agency problems. Finally, the multinationality premium appears to be driven by foreign acquisitions into advanced economies. The results are robust to correcting for sample selection bias and controlling for several firm and deal characteristics, as well as accounting for firm-, industry-, and year-fixed effects. Collectively, the findings imply that multinationality could be a source of value creation for acquiring firms, particularly in foreign acquisitions, which tend to be complex, and, thereby, require superior managerial capabilities to succeed.     

Mandatory CSR disclosure,monitoring and investment efficiency: evidence from China

This study investigates the effect of mandatory corporate social responsibility (CSR) disclosure on firms’ investment efficiency in China. Using the CSR regulation that mandates a group of listed firms to disclose stand‐alone CSR reports after 2008 as a natural experiment, we find that firms subject to the mandatory CSR regulation have decreased investment inefficiency subsequent to the mandate, especially in cases of overinvestment. This effect is more pronounced for firms with a control‐ownership wedge, state‐owned enterprises (SOEs), and firms having lower institutional ownership. Further analyses find that the reduction of overinvestment is much more significant in industries with high pollution and that the reduction in investment is not due to the CSR spending siphoning off capital used in other projects. We argue that mandatory corporate social responsibility disclosure improves monitoring over firms in China, especially when firms are characterised as having severe agency problems.     

Performance and Policy of Foundation‐owned Firms in Germany

This paper compares performance and policy of foundation‐owned firms and of listed corporations in Germany. Foundations have no owners so that there exist no individuals with financial ownership claims on firms which are wholly owned by foundations. This suggests weaker outside control of foundation‐owned firms implying lower profitability. The empirical findings show a slightly better performance of foundation‐owned firms compared to corporations. Foundation‐owned firms display higher labour intensity, lower labour productivity, and lower salary levels. This policy promotes job security without endangering the viability of foundation‐owned firms.     

Why Do Firms Switch Banks? Evidence from China

This article uses a sample of matched firms-banks data in China over the period 1999–2012 to determine the drivers of firms switching behavior from one bank relationship to another. The results show that the principal driver of a switching action is the credit needs of the firm. The binding force of the Communist Party in state-owned banks and enterprises would suggest that switching should be a rare phenomenon in Chinese commercial relations. But switching occurs. The findings support the extant literature that transparent firms are able to switch more readily than opaque firms. The results also suggest that banks that develop their fee income services are more effective in locking-in their borrowers and that firms tend to switch from state-owned banks to smaller non-state owned banks. However, in other areas switching does not conform with the mainstream explanations.