Corporate diversification,ownership structure,and firm value: The Singapore evidence

We provide international evidence on the level and value of corporate diversification using a sample of 145 Singapore firms. We find that the level of diversification is positively related to firm size and negatively related to the equity ownership of outside blockholders. However, we find no evidence that insider ownership has a significant impact on the level of diversification. We find significant value loss from diversification only for those firms with low managerial ownership, suggesting that value-reducing diversification stems from agency problems. Outside block ownership does not have a significant impact on the value of diversification. Thus, while outside blockholders may act as a deterrent on the level of diversification, there is no evidence that they can effectively reduce the agency problems for those firms with low managerial ownership.     

Foreign institutional ownership externalities and supplier innovation

Many emerging markets allow foreign investment as a way to reform domestic markets. Extant studies have found a positive externality on innovation brought forth by foreign direct investment (FDI); however, we know very little about the externality of another form of foreign investment, ownership by foreign institutional investors (FII), on innovation. In this paper, we document one form of FII externality by showing that foreign institutional ownership of the customer firm results in higher supplier innovation. We also show that the FII externality on supplier innovation is stronger when customers have more influence on the suppliers and when the FIIs can facilitate information flow better. Our findings suggest that the real impact of FII can go beyond the underlying firms, and promoting FII may benefit firms, especially smaller firms in emerging countries that do not directly have foreign ownership.     

Family control,expropriation, and investor protection: A panel data analysis of Western European corporations

We investigate whether the value impact of family control in Western European firms depends on country-level investor protection. To this aim, we account for ownership–value nonlinearities. Supporting that the risk of expropriation increases with high ownership concentration, we find an inverted U-shape relation between family control and firm value. Family firms incur a value discount when family equity holdings exceed approximately 50%. The nonlinear effect of family control is attributable to family firms from a strongly protective environment. When investor protection is weak, family control has a positive impact on firm value regardless of the ownership concentration level.     

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.     

The use of foreign currency derivatives and firm market value

This article examines the use of foreign currency derivatives(FCDs) in a sample of 720 large U.S. nonfinancial firms between1990 and 1995 and its potential impact on firm value. UsingTobin's Q as a proxy for firm value, we find a positive relationbetween firm value and the use of FCDs. The hedging premiumis statistically and economically significant for firms withexposure to exchange rates and is on average 4.87% of firm value.We also find some evidence consistent with the hypothesis thathedging causes an increase in firm value.     

Managerial ownership dynamics and firm value

From 1988 to 2003, the average change in managerial ownership is significantly negative every year for American firms. We find that managers are more likely to significantly decrease their ownership when their firms are performing well and more likely to increase their ownership when their firms become financially constrained. When controlling for past stock returns, we find that large increases in managerial ownership increase Tobin's q. This result is driven by increases in shares held by officers, while increases in shares held by directors appear unrelated to changes in firm value. There is no evidence that large decreases in ownership have an adverse impact on firm value. We rely on the dynamics of the managerial ownership/firm value relation to mitigate concerns in the literature about the endogeneity of managerial ownership.     

Government Intervention and Investment Comovement: Chinese Evidence

This study examines whether government intervention affects corporate investment comovement, and whether this impact varies across firms with different types of ownership. We use a large Chinese sample to investigate these questions, and perform a regional as well as firm‐level analysis. We show that government intervention is positively and significantly associated with investment comovement. We also find that the impact of government intervention on investment comovement is higher and more significant for state‐owned firms than for domestic private and foreign firms. Finally, we show that investment comovement hinders corporate performance for state‐owned and domestic private firms but not for foreign firms.     

Common ownership and executive pay-for-performance sensitivity: Evidence from China

This study focuses on the impact of common ownership on executive pay-for-performance sensitivity using a sample of A-share listed firms in China from 2008 to 2020. We find common ownership significantly improves executive pay-for-performance sensitivity and plays a monitoring and governance role. Meanwhile, the impact of common ownership on executive pay-for-performance sensitivity is more significant in non-state-owned firms (non-SOEs) and when a firm faces a highly competitive product market. The mechanism tests indicate that common ownership affects executive pay-for-performance sensitivity through the information and governance mechanisms. Further analyses show that the portion of compensation explained by common ownership significantly enhances future firm performance. Overall, our findings validate the positive role of common ownership in corporate governance.     

Separation of Ownership from Control and Acquiring Firm Performance: The Case of Family Ownership in Canada

Abstract:   This study investigates the relationship between ownership structure and acquiring firm performance. A large proportion of Canadian public companies have controlling shareholders (families) that often exercise control over voting rights while holding a small fraction of the cash flow rights. This is achieved through the concurrent use of dual class voting shares and stock pyramids. Many suggest that these ownership structures involve larger agency costs than those imposed by dispersed ownership structures and that they distort corporate decisions with respect to investment choices such as acquisitions. We find that average acquiring firm announcement period abnormal returns for our sample of 327 Canadian transactions are positive over the 1998–2002 period. Cash deals, acquisitions of unlisted targets and cross‐border deals have a positive impact on value creation. Governance mechanisms (outside block‐holders, unrelated directors and small board size) also have a positive influence on the acquiring firm performance. Further, the positive abnormal returns are greater for family firms. We do not find that separation of ownership and control has a negative impact on performance. These results suggest that, contrary to other jurisdictions offering poor minority shareholder protection or poor corporate governance, separation of control and ownership is not viewed as leading to value destroying mergers and acquisitions, i.e., market participants do not perceive families as using M&A to obtain private benefits at the expense of minority shareholders. We do find a non‐monotonic relationship between ownership level and acquiring firm abnormal returns. Ownership of a majority of the cash flow rights has a negative impact on announcement returns. This is consistent with the view that large shareholders may undertake less risky projects as their wealth invested in the firm increases.     

Do shareholders really matter for firm performance? Evidence from the ownership characteristics of Italian listed companies

This paper studies the impact of the features of the shareholder base on the performance of a large sample of Italian listed firms between 2007 and 2019, both within and across firms. We expand the empirical evidence on the relation between shareholder type and different dimensions of firm performance by dividing shareholders into six categories, and further differentiating between domestic and foreign investors. We provide extensive evidence on the relation between firm performance and different types of shareholders, showing how diverse performance metrics are correlated with the voting rights of specific types of shareholders. Consistent with previous studies, the picture that emerges from our analysis shows that the ownership structure of Italian listed companies is characterized by a high degree of concentration. In this context, we find that ownership concentration or the presence of a controlling shareholder is in general associated with better performance. Moreover, a positive relation exists between diverse firm performance metrics and the voting rights of family shareholders, founders and foreign investors, while government ownership is detrimental in the short-term.     

Multiple blockholders,power, and firm value

Using a comprehensive sample of US firms we show that most of them have multiple blockholders whose presence and ownership stakes lead to a significant difference between ownership and power. This difference matters. First, we find that insider power (ownership) is negatively (positively) related to firm value. Second, we show that outsider power is positively related to firm value. Our direct blockholder-level measure of power explains firm value over and above the explanatory power of firm-level measures used in the literature (such as the number of blockholders and the dispersion of their ownership stakes).     

中小企业板上市公司股权结构、公司治理与企业绩效:基于随机前沿生产函数的分析

本文通过构建深圳中小企业板上市公司股权结构影响企业绩效的复合随机前沿生产函数,利用2006—2008年面板数据对中小企业的股权结构和企业绩效的关系进行了经验研究,结果表明中小企业的股权集中度与企业绩效之间显著正相关,这与国内文献中对大公司的经验研究结果一致,表明当前上市公司的股权集中有利于公司治理改善和企业绩效的提高。但是第一大股东持股比率却与绩效负相关,这与对大公司的研究结论相反,表明在中小企业中存在较为明显的"隧道挖掘"现象,"一股独大"在中小企业中并不利于公司治理。研究结果还表明,国家、法人、外资或个人对公司治理的绩效无显著差异;流通股比重、高管持股、研发人员投入等都与企业绩效不相关;中小企业具有较强的股权融资倾向,不符合"啄食顺序"的资本结构理论。     

Ownership and ownership concentration: which is important in determining the performance of China’s listed firms?

This article investigates the impact of ownership and ownership concentration on the performance of China’s listed firms. By recognizing the differences between ownership and ownership concentration and between total ownership concentration and tradable ownership concentration, we find that ownership concentration is more powerful than any category of ownership in determining firm performance; tradable ownership concentration has a more significant and positive influence on firm performance than total ownership concentration; the highest level of firm performance is approached when a firm is characterized by both total ownership concentration and tradable ownership concentration. Thus, we propose a conclusion that ownership concentration enhances firm performance regardless of who the concentrated owners are.     

Do CEOs gain more in foreign acquisitions than domestic acquisitions?

This paper examines the impact of domestic and foreign acquisitions on chief executive officer (CEO) compensation packages using a sample of 147 completed bids by UK companies from 1999 to 2005. We find that foreign acquisitions lead to higher CEO compensation than domestic acquisitions. Overall, our findings suggest that CEOs have strong incentives to do foreign acquisitions rather than domestic acquisitions since they receive larger compensation following a foreign acquisition regardless of how poor firm performance is. Furthermore, we observe a positive and significant relation between CEO compensation and firm size during the pre-acquisition period for firms involved in foreign acquisitions, thus their CEOs would expect to increase their compensation package through foreign acquisitions. However, our results show that there is no significant link between firm size and CEO compensation during the pre-acquisition period for firms involved in domestic acquisitions.     

Form versus substance: The effect of ownership structure and corporate governance on firm value in Thailand

We examine the relation between the quality of corporate governance practices and firm value for Thai firms, which often have complex ownership structures. We develop a comprehensive measure of corporate governance and show that, in contrast to conventional measures of corporate governance, our measurement, on average, is positively associated with Tobin’s q. Furthermore, we find that q values are lower for firms that exhibit deviations between cash flow rights and voting rights. We also find that the value benefits of complying with “good” corporate governance practices are nullified in the presence of pyramidal ownership structures, raising doubts on the effectiveness of governance measures when ownership structures are not transparent. We conclude that family control of firms through pyramidal ownership structures can allow firms to seemingly comply with preferred governance practices but also use the control to their advantage.     

The impact of M&A and joint ventures on the value of IT and non-IT firms

This paper aims to study and provide empirical evidence on the impact of mergers and acquisitions (M&A) and joint ventures on the value of IT and non-IT firms. Using the event study methodology, we investigate the effect of such strategic alliance announcements on firm value in a sample of 170 firms. The results show that such strategic alliance announcements create significant gains in firm value. When the sample is divided into IT and non-IT firms, we find stronger support for positive impact on gains in firm value among non-IT firms than among IT firms. We also find that the smaller strategic alliance partners perform better than their larger partners. However, we fail to find any significant difference in impact on firm value between merger/acquisition and joint venture announcements. This work was supported by the research fund of Hanyang University (HY-2004). JEL Classification L1 · G14 · G34     

融资约束与中国企业的进口行为

本文采用贸易四元边际的分析框架,实证分析了融资约束对企业进口行为的影响,并对比了非金融危机、金融危机背景下融资约束对企业进口行为影响的差异性。主要发现:(1)融资约束对企业进口决策存在显著的抑制作用,融资约束会显著抑制企业的进口行为,包括进口规模、进口来源国数量、进口产品种类。(2)相对于外资企业,内资企业的进口行为更容易受融资约束的影响;相对于一般贸易,企业的加工贸易进口更容易受融资约束的影响;相对于只进口的企业,同时具有进口和出口行为的企业更容易受到融资约束的影响。另外,不同行业的企业、不同地区的企业受融资约束的影响也具有较大的差异。(3)不同的外部金融环境导致融资约束对企业进口行为的影响存在显著差异。金融危机导致企业的进口行为对融资约束表现出更强的敏感性,高融资约束企业与低融资约束企业在进口四元边际上的差距被进一步拉大。     

Foreign ownership in Australian firms

This paper constructs free float adjusted foreign ownership measure for Australian firms over the period 2001–2009 and explores the determinants of foreign ownership. Foreigners prefer investing in large Australian firms, value firms with high book to market ratios, firms which are listed abroad and firms with domestic cross holdings. Foreign institutions are found to have significant holdings in Australian firms. Results are robust to various econometric estimation techniques.     

Zero-leverage policy and stock price crash risk: Evidence from Korea

This study examines the difference in stock price crash risk between zero-leverage and non-zero-leverage firms. We find that zero-leverage firms have a significantly higher future stock price crash risk than non-zero-leverage firms. Next, we find that the positive relation between zero-leverage policy and future stock price crash risk is more pronounced when firms have higher controlling shareholders' ownership and foreign ownership. We also find that the positive relation is more pronounced for firms with low cash holdings than for those with high cash holdings. Further, we find that the positive relation is stronger for dividend-paying firms than non-dividend-paying firms. Our results are robust to alternative estimation specifications and endogeneity concerns. Overall, our findings shed light on the extent to which extreme corporate financial policy has an impact on future stock price crash risk. Our empirical evidence also provides meaningful implications for how stakeholders (especially investors) predict stock price crash risk in the context of extremely conservative capital structure.     

On the role of foreign directors: Evidence from cross-listed firms

We examine the determinants of appointment of U.S. independent directors (USIDs), and their impact and effectiveness, on the boards of cross-listed foreign firms versus non-cross-listed firms. For non-cross-listed firms, significant determinants of USID presence include factors related to both advising and monitoring roles, whereas for cross-listed firms, appointment of USIDs are related to monitoring factors. We find that USIDs have a significantly positive impact on cross-listed firms’ value, especially for firms from countries that are culturally and institutionally different from U.S. and countries with weak investor protection. The positive value effect is strongest for firms in which USIDs serve on governance committees. We also find that cross-listed firms with UISDs are better at acquiring both domestic and cross-border targets and have higher CEO turnover sensitivity. For non-cross-listed firms, USIDs have negative or no impact on value.