Shareholder Protection,Ownership, and Dividends: Russian Evidence

This article investigates the relation between corporate governance mechanisms and dividend policy in Russian firms. Using a sample of Russian listed firms over the period 1998–2003, we estimate models for dividend pay probability and payout size. We find that there has been a significant increase in dividend payout levels which coincide with improvements in legal shareholder protection. State controlled firms are more frequent dividend payers as compared to other majority owned firms. We also find that dual share firms, in which corporate charters protect minority interests, have a higher dividend pay probability; while firms reporting according to US GAAP, which may be less likely to manipulate earnings, have a lower dividend payout.     

Ownership Structure as a Determinant of Firm Value: Evidence from Newly Privatized Czech Firms

Using a sample of 988 newly privatized Czech firms, with part of the ownership structure exogenously determined prior to voucher privatization, we find that share values are positively related with the ownership stakes of foreigners, insiders, and restituents. While the findings for foreigners and insiders can be attributed to their superior ability to identify more profitable firms, we interpret the findings on restituents as evidence of the beneficial effect of blockholdings. On the other hand, we find that the ownership of the fund with the largest stake is not significantly related with share value, suggesting that the value of external blocks depends on the identity of the owner. However, when the fund is also the largest blockholder in the firm, it has an adverse effect on share value. The negative effect of the dominant block owned by a fund is mitigated when a bank sponsors the fund. Although funds are legally separated from their sponsoring institutions, bank‐sponsored funds may nevertheless have inherited a better access to the innards of these firms, and may be in a better position to monitor them.     

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.     

Stock Market Valuation of Deferred Tax Assets: Evidence from Internet Firms

Abstract:   We use the provisions of SFAS No. 109 , Accounting for Income Taxes , to examine the extent to which stock prices of Internet firms were associated with expectations of future profitability before versus after the 'market correction' in early 2000. We find that the valuation of deferred tax assets of firms with business models reliant on the level of web site traffic was significantly greater after the market correction. In our view, this evidence is consistent with pre‐correction mispricing.     

Corporate Policy and Market Value: A q-Theory Approach

In this paper, we show that Tobin's q has a significant predictive power in explaining valuation consequences of major corporate policy variables. Our empirical results reveal that, depending upon whether a firm is overinvesting or underinvesting, financial markets respond quite differently to its capital structure, dividend payout, financial slack, and R & D decisions. Overall, the empirical results suggest that both high debt ratios and greater payouts are favorably viewed by the market when firms are overinvesting. For firms with growth opportunities, however, large debt is unfavorably viewed by the market. In addition, financial slack and R & D expenditures are favorably received by the market for growth firms but not for overinvesting firms.     

Efficiency, Ownership and Market Structure, Corporate Control and Governance in the Turkish Banking Industry

Turkish banks are quite heterogeneous in terms of organizational form, ownership structure, size, age, portfolio concentration, growth prospects and attitude toward risk. They also exhibit strong variations in performance as measured by several efficiency indices. In the light of theoretical advances in corporate finance and financial institutions, this paper is an in-depth cross-sectional analysis of the Turkish banking sector, which explores the various bank, market and regulatory characteristics that may explain the efficiency variations across banks. Consistent with the related hypotheses investigated, the results indicate that a number of independent bank characteristics are significantly correlated with various efficiency measures.     

大股东控制的微观结构、激励效应与堑壕效应——国外公司治理前沿研究的新趋势

大股东控制已经成为经济学界和财务学界理论与实证研究的热点问题之一。本文回顾了公司治理领域关于大股东控制问题的最新研究成果，主要包括大股东控制存在的普遍性、大股东控制权与现金流权的分离模式、大股东控制的激励效应和堑壕效应，梳理了该领域的研究脉络，并对主要发现和结论进行总结和评论。文献研究表明，股权集中的内在机制不仅在于大股东有动力和机会增加所有股东都可以获得的共享收益，而且大股东可以通过消耗公司资源来获得小股东无法分享的控制权隐性收益，并导致企业价值的下降。最后，结合中国资本市场和公司治理结构的实际情况，提出了未来研究的新方向。     

Ownership Structure, Firm Performance and Top Executive Change: An Analysis of UK Firms

The results of this paper reveal a significantly negative relationship between the equity stake owned by a senior executive and the likelihood that this executive will be removed from office. We also establish the existence of a strong positive relationship between poor company performance and the likelihood that the top managers responsible will be forced out of their firms; this forced departure only tends to occur when the managers' stake in the firm is less than 1%; as the level of ownership rises, managers become increasingly entrenched in their posts. The stock market reaction to management change is greatest (a) when the departure is unexpected and (b) when the dismissed executive owns more than 5% of the equity of his company. This study also examines the influence of other aspects of ownership structure and board composition upon the likelihood of a top executive dismissal.     

Earnings Behaviour of Financially Distressed Firms: The Role of Institutional Ownership

Using a sample of 859 U.S. bankruptcy-filing firms over the period 1986–2004, we examine the earnings behaviour of managers during the distressed period by looking at sources of abnormal accruals prior to the bankruptcy-filing year. Results show that managers of highly distressed firms shift earnings downwards prior to the bankruptcy filing. We test and provide evidence in support of two potential contributing factors. First, top-level management turnover among distressed firms leads new managers to earnings bath choices during the distressed period. Second, qualified audit opinions exert pressure on managers to follow more conservative earnings behaviour during the distressed period. Evidence is also provided that the management of distressed firms with lower (higher) institutional ownership has greater (lesser) tendency to manage earnings downwards. Results also show that higher institutional ownership mitigates the negative abnormal returns of firms with top management turnover. To the authors' knowledge, this is the first study that attempts to examine whether institutional ownership relates to market reaction in conjunction with a top management turnover or a qualified audit opinion during the distressed period. Prior studies focused on the investigation of earnings management or institutional ownership (separately) during the distressed period, but did not examine if the effect of institutional ownership on earnings behaviour also influences subsequent returns. Thus, the results of this study should be of interest to analysts, standard setters and regulatory bodies since our results show that management turnover, qualified audit opinions and firm governance mechanisms affect the quality of earnings and the level of abnormal returns.     

Market Valuation and Equity Ownership Structure: The Case of Agency Conflict Regimes

This paper provides further evidence on the link between the firm's performance and the distribution of the common shares between insiders, blockholders and institutions. We endogenize the functional form of the market valuecommon equity structure relationship by using a switching regression methodology. This allows us to observe four distinct ownership structure types that constitute different agency conflict regimes. We provide evidence that supports the notion that investors recognize the existence of such regimes and assess market values differently depending on the type of agency regime the firm operates in. We find that firms with low insider stakes and low blockholder stakes and firms with high insider stakes and high blockholder stakes have the highest agency costs of free cash flow. We also find that the effect of the ownership variables on market values differs across regimes and that there are differences in the monitoring effectiveness of institutional holders and blockholders.     

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.     

Ownership Structure and Control: Property-Casualty Insurer Conversion to Stock Charter

We examine 98 property-casualty insurance companies that convert to stock charter from a mutual or reciprocal form of organization. Our evidence shows converting firms have low surplus, significant growth in premium income, and draw down on their non-financial assets in years prior to conversion. Following conversion there is significant growth in assets and the number of States licensed. We also show by examining evidence on the riskiness of firms' operations that converting companies began operating like stock companies prior to conversion. Thus, our evidence suggests there can be important costs associated with the operation of a mutual or reciprocal insurance company. These costs can include the opportunity costs associated with foregone investments arising because of higher incremental capital costs inherent in the mutual or reciprocal forms of ownership. There also is a cost disadvantage if a mutual or reciprocal is operating in activities more appropriate for the stock ownership form. These costs can in particular circumstances offset the advantage mutual ownership affords in controlling incentives to transfer wealth from policyholders to equityholders.     

Governance Mechanisms and Ownership in an Emerging Market: The Case of Turkish Banks

This study investigates the relations of board structure, ownership concentration, and ownership type with the performance of banks operating in Turkey from an agency theory and resource-dependency perspective. We use financial ratios and established measures of board characteristics and ownership structure. Our results indicate that board size and duality do not significantly influence the returns on assets of Turkish banks. On the other hand, the tenure of board members is negatively related to performance. Our analysis of board composition reveals a curvilinear relationship with banks' performance, implying that boards composed of a majority of either insiders or outsiders enjoy high performance. Also, ownership concentration and ownership type do not influence firm performance. The results of the financial variables are robust in all models.     

Minority Stockholders' Protection in a New Corporate Control Law: Market Implications in an Emerging Economy

This paper analyzes the effect of a new corporate governance law in the emerging capital market of Chile to determine if capital markets perceived the intended protection of minority stockholders against wealth expropriation as effective. The unique nature of the new law allowed for voluntary adoption during the initial three-year period, after which it became mandatory. We find no evidence of superior abnormal returns for those firms voluntarily adopting the new law versus those forced to accept the new law as it became mandatory. Trading volume also increased for those not adopting and declined for those that did voluntarily adopt. These results indicate that the capital markets did not perceive voluntary adoption of the new law as effective protection for minority shareholders. We also find a greater presence of institutional investors in the ownership structure of those firms not voluntarily adopting the new law, indicating their monitoring role by investing in firms with better corporate governance practices. Our results suggest that, in the Chilean case, the presence of strong institutional investors is as effective a corporate governance mechanism as is the new law.     

Future Stock Performance of Oil and Gas Firms Conditional on the Imputed Value of Reserves

Review of Quantitative Finance and Accounting - Harris and Ohlson (1990) provide evidence suggesting market inefficiencies in the pricing of oil and gas firms in the 1979–1984 period. This...     

A Reduced Form Coefficients Analysis of Executive Ownership, Corporate Value, and Executive Compensation

Most simultaneous equations studies analyze the coefficients from the structural forms of the models, which provide estimates of the direct effects of independent variables on the dependent variables in each equation, but ignore the indirect effects these independent variables have on dependent variables in other equations. This paper modifies the work of Chung and Pruitt (1996) by extending the model to include board composition and institutional ownership variables and then estimating the structural and derived reduced form coefficients for the extended model. The signs and significance of the reduced form coefficients differ in several material respects from the results of the structural form coefficient analysis, which suggests that analysis of only the structural form coefficients is incorrect and potentially misleading.     

国有产权、会计稳健性与权益资本成本——来自中国证券市场的证据

以2007～2008年上市公司为样本,实证检验了会计稳健性和权益资本成本的关系,以及国有所有权对二者关系的影响。结果表明:会计稳健性与权益资本成本负相关,而国有所有权则削弱了会计稳健性在降低权益资本成本方面的作用。     

The Effects of Ownership Structure and Intragroup Loans on Leverage: Evidence from Family Firms in Chile

This article examines the effects of family control and pyramidal ownership on firms’ capital structure decisions. After studying a sample of listed family and nonfamily firms in Chile, we find that families take a conservative approach to debt and financial risk exposure. We test the hypothesis that family firms restrict the use of debt in order to avoid the monitoring role of creditors, which could limit their enjoyment of the private benefits of control. In keeping with this hypothesis, we find a U-shaped relationship between leverage and the degree of pyramidal ownership that is more pronounced among family firms than nonfamily firms. We do not find any evidence that is consistent with the hypothesis that family-controlled firms have low leverage ratios due to their access to internal capital markets. In fact, conversely, we find that listed family firms provide more loans to related companies than comparable nonfamily firms.     

The Value-relevance of Earnings and Book Value, Ownership Structure, and Business Group Affiliation: Evidence From Korean Business Groups

Abstract:  We investigate the quality of two primary accounting summary measures, i.e., earnings and book value, provided by firms belonging to Korean business groups (chaebols). We find that the value-relevance of earnings and book value is significantly smaller for firms affiliated with business groups. We also find that cross-equity ownership (a proxy for the agency problem between controlling and minority shareholders) negatively affects value-relevance, while foreign equity ownership (a proxy for the monitoring effect) positively affects value-relevance. This evidence is consistent with the view that the poor quality of earnings and book value provided by chaebol-affiliated firms is due to the inherently poor governance structure of chaebols.