The Global Financial Crisis,Family Control,and Dividend Policy

Using newly collected data on the ultimate ownership structure of publicly traded firms in nine East Asian economies, we find that family control is negatively related to the dividend payout ratio. Family firms are less (more) likely to increase (omit) dividends than non‐family firms. These negative associations between family firms and dividend policy are more pronounced during the recent global financial crisis, suggesting that controlling families have incentives to expropriate more firm resources during crises than in normal times.     

The role of state and foreign owners in corporate risk-taking: Evidence from privatization

Using a unique database of 381 newly privatized firms from 57 countries, we investigate the impact of shareholders' identity on corporate risk-taking behavior. We find strong and robust evidence that state (foreign) ownership is negatively (positively) related to corporate risk-taking. Moreover, we find that high risk-taking by foreign owners depends on the strength of country-level governance institutions. Our results suggest that relinquishment of government control, openness to foreign investment, and improvement of country-level governance institutions are key determining factors of corporate risk-taking in newly privatized firms.     

International Cross‐Listings and Subsequent Security‐Market Choices: Evidence from ADRs

We study the link between the attributes of American depositary receipt (ADR)‐listed firms and their post‐listing security‐market choices. We find that developed market firms are more likely to issue equity and debt than their emerging market counterparts. Furthermore, we find that large firms are more likely to issue debt and less likely to issue equity. When we examine locations where ADR firms raise their capital, we find that firms originating from countries where the protection of minority shareholders is weak are more likely to issue debt on their home markets and less likely to issue debt on international markets (excluding U.S. markets). Furthermore, ADR firms originating from developed (emerging market) countries are more (less) likely to issue their equity on their domestic markets and less (more) likely to issue equity on international markets (excluding U.S. markets).     

Corporate dividend policy in practice: Evidence from an emerging market with a tax-free environment

Several theories have been proposed to explain why companies pay dividends. However, as of today, the dividend policy remains a puzzle as no convincing explanation has been given as to why firms pay cash dividends to their shareholders. This paper contributes to this debate by examining the dividend policy in an emerging market that has a tax-free environment. Specifically, we follow Brav et al. (2005) and examine this issue using survey and field interviews, in the particular context of the United Arab Emirates. Our results provide support for the proposition that dividend policy is conservative. We also find that dividends in the UAE are considered by managers as a residual cash flow, and are determined after investment decisions are made. When examining the determinants of dividend policy, we find that taxes are not important, that institutional investors are expected to play a role in disciplining managers, and that dividends may play a disciplinary role as well in controlling agency conflicts.     

The choice of ADRs

We study the determinants of a firm’s decision to issue one of the four available ADR programs (Level I, Level II, Level III, and Rule 144A). We find that the firm’s attributes (size, income, asset growth, leverage, privatization, ownership structure, and country-of-origin) and the firm’s home-country institutional variables (accounting rating and legal protection of minority shareholders) condition this choice. We also examine the issuing activity and the determinants of the ADR choice before and after the enactment of the Sarbanes–Oxley (SOX) Act. Following this structural change, we provide evidence of a reallocation between ADR programs. Compared to the pre-SOX period, firms from emerging markets, and those from countries with weak legal protection of minority shareholders, are more likely after SOX to choose Rule 144A and Level III, respectively.     

Control/ownership structure,creditor rights protection,and the cost of debt financing: International evidence

We explore the effect of governance on bond yield-spreads and ratings in a multinational sample of firms. We find strong evidence that ultimate ownership (i.e., the voting/cash-flow rights wedge) and family control have a positive and significant effect on bond yield-spreads, and a negative and significant effect on bond ratings. Control in the hands of widely held financial firms has a positive effect on bond ratings only, while State control has no effect on either bond yield-spreads or ratings. We also find that a higher protection of debtholders’ rights generally reduces bond yield-spreads and increases bond ratings. Our results additionally show that, for both bondholders and rating agencies, the enforcement of debt laws is crucially important. Finally, we document a negative effect of debt covenants on debt costs when there is a high expropriation risk and poor creditor rights protection.     

The political economy of residual state ownership in privatized firms: Evidence from emerging markets

We investigate the political determinants of residual state ownership for a unique database of 221 privatized firms operating in 27 emerging countries over the 1980 to 2001 period. After controlling for firm-level and other country-level characteristics, we find that the political institutions in place, namely, the political system and political constraints, are important determinants of residual state ownership in newly privatized firms. Unlike previous evidence that political ideology is an important determinant of privatization policies in developed countries, we find that right- or left-oriented governments do not behave differently in developing countries. These results confirm that privatization is politically constrained by dynamics that differ between countries.     

Consolidation and value creation in the insurance industry: The role of governance

We examine the long run performance of M&A transactions in the property–liability insurance industry. We specifically investigate whether such transactions create value for the bidders’ shareholders, and assess how corporate governance mechanisms, internal and external, affect such performance. Our results show that M&A create value in the long run as buy and hold abnormal returns are positive and significant after 3 years. While tender offers appear to be more profitable than mergers, our multivariate evidence does not support the conjecture that domestic transactions create more value than cross-border transactions. Furthermore, positive returns are significantly higher for frequent acquirers and in countries where investor protection is weaker. Internal corporate governance mechanisms, such as board independence, and CEO share ownership, are also significant determinants of the long run positive performance of bidders.     

Liberalization, corporate governance and the performance of privatized firms in developing countries

This paper seeks to provide an answer to the following question: when and how does privatization work? Using a sample of 230 firms headquartered in 32 developing countries, we document a significant increase in profitability, efficiency, investment and output. Our analysis shows that the changes in performance vary with the extent of macro-economic reforms and environment, and the effectiveness of corporate governance. In particular, economic growth is associated with higher profitability and efficiency gains, trade liberalization is associated with higher levels of investment and output, while financial liberalization is associated with higher output changes. Further, control relinquishment by the government is a key determinant of profitability, efficiency gains and output increases. Finally, we find higher improvements in efficiency for firms in countries in which stock markets are more developed and where property rights are better protected and enforced. These results for a sample of developing countries differ from those reported in a contemporaneous study by D'Souza et al. [D'Souza, J., Megginson, W.L., Nash, R.C., 2001. Why do privatized firms improve performance? Evidence from developed countries. Unpublished working paper. University of Oklahoma] which focuses on developed countries. These diverging findings suggest that privatization in developing countries indeed obeys to particular constraints and has a dynamic of its own.     

Corporate Governance and Issues From the Insurance Industry

In this article, we review the literature and empirical research on the nature and consequences of corporate governance. We particularly assess the impact of corporate governance on firm performance and risk taking. While the article analyzes the general literature on corporate governance in publicly listed firms, we also discuss issues pertaining to the insurance industry. The article identifies avenues for future research.