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Article
Publication date: 26 September 2011

Dror Parnes

This study seeks to explore developments in corporate creditworthiness before and after ownership events.

Abstract

Purpose

This study seeks to explore developments in corporate creditworthiness before and after ownership events.

Design/methodology/approach

The paper uses the Blockholders database of Dlugosz, Fahlenbrach, Gompers, and Metrick, and three credit quantities, and deploys a standard event study methodology to examine the relation to corporate creditworthiness.

Findings

The paper discovers that ownership‐construction is generally associated with prior‐ and post‐improvement in creditworthiness, while a block‐destruction is typically surrounded by deterioration in corporate creditworthiness. The paper also finds proper evidence for a relation between the construction or destruction of managerial block and future developments in corporate creditworthiness. The paper further realizes that outside shareholders exhibit higher impact than inside block‐holders on later variations in credit risk.

Research limitations/implications

The paper is unable to conduct further robustness checks with structural credit methodologies due to the reduced number of valid observations.

Originality/value

Market participants can utilize the conclusions to better predict future trends in corporate creditworthiness.

Details

International Journal of Managerial Finance, vol. 7 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 13 September 2011

Nicholas Boone, Sisira Colombage and Abeyratna Gunasekarage

The purpose of this study is to examine whether the influence of block ownership on firm performance depends on the identity of the largest investor.

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Abstract

Purpose

The purpose of this study is to examine whether the influence of block ownership on firm performance depends on the identity of the largest investor.

Design/methodology/approach

The authors analyse the data for New Zealand companies for the period from 2002 to 2007 and develop multiple regression models which test the influence of block ownership on firm performance subject to the identity of the investor. A two‐stage least square approach is employed to test the effect of possible reverse causality between block ownership and firm performance on the relationship found in multiple regression models.

Findings

The authors find that the concentrated ownership has a positive, albeit decreasing, association with firm performance. This relationship is conditioned on the identity of the largest investor. Those companies whose block investors were financial institutions performed better than their peers. The superior influence of financial investors on corporate performance did not disappear even when the endogeneity of this relationship was accounted for.

Originality/value

The main contribution of this paper is the finding of a differential influence of various identities of block investors on firm performance. It questions the role that some domestic block investors play in the governance of New Zealand companies and the reason why the financial system has allowed corporate entities to be the main shareholders of the majority of firms when they underperform relative to their peers.

Details

Pacific Accounting Review, vol. 23 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 16 November 2015

Manel Hessayri and Malek Saihi

The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) adoption complements corporate governance factors (e.g. ownership structure) in…

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Abstract

Purpose

The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) adoption complements corporate governance factors (e.g. ownership structure) in monitoring managers’ discretional behavior in an emerging market context.

Design/methodology/approach

The paper relies on a sample of listed companies in the United Arab Emirates, Morocco, South Africa and the Philippines during an eight-year period on average (four years of pre-adoption period and four years of post-adoption period).

Findings

The authors find no evidence of lower earnings management after the switch to IFRS reporting, suggesting that managerial discretional behavior is insensitive to a firm’s IFRS adoption. However, the authors document effective monitoring role of a firm’s ownership structure on earnings management. More interestingly, institutional investors are effective in constraining earnings management when holding a high level of ownership. Moreover, the effect of blockholders and institutional blockholders varies as their ownership rises following a non-linear pattern.

Research limitations/implications

First, the assumption that discretionary accruals are adequate measure of earnings management may be criticized in different ways. Second, the findings, performed on listed companies in the United Arab Emirates, Morocco, South Africa and the Philippines, should be interpreted with caution and cannot be generalized to all emerging market countries.

Practical implications

Standards setters and market authorities should be aware of earnings management determinants to set adequate and fitting accounting standards limiting opportunistic behavior of managers and mainly to set up training programs to accounting professionals improving the IFRS implementation. Moreover, considering specific features of firms in emerging market countries related to ownership structure, international investors may rely on such criteria to evaluate firms. Finally, auditors should be aware of different incentives for earnings management in order to be able to detect eventual manipulation of accounting earnings.

Originality/value

This paper provides a timely contribution to the continuous debate of the effect of IFRS adoption on earnings management in a poorly exploited setting, emerging market context. When investigating, additionally, the eventual non-linear effect of institutional ownership, block ownership, institutional block ownership and non-institutional block ownership on earnings management, a major contribution is that it brings to light the finding of a differential influence of ownership levels on earnings management.

Details

Journal of Economic and Administrative Sciences, vol. 31 no. 2
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 2 March 2012

Hyang Mi Choi, Wonsik Sul and Sang Kee Min

This paper seeks to explore such questions as: “What are the impacts of foreign investors and what are the channels through which foreign investors contribute to or detracts from…

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Abstract

Purpose

This paper seeks to explore such questions as: “What are the impacts of foreign investors and what are the channels through which foreign investors contribute to or detracts from firm value in Korea?” It aims to discuss how foreign investors and foreign outside directors interact to enhance firm value.

Design/methodology/approach

Using longitudinal data from the KOSPI200 index in Korea during 2004‐2007, the study examined the direct and interaction effect of foreign blockholders and foreign board members. To address the representativeness of foreign investors, the authors verified the mandates of foreign board members though telephone interviews.

Findings

Foreign block shareholders and foreign outside directors respectively provide expertise and independent monitoring over management. Foreign blockholders' management control via board membership is likely to mitigate leverage of value enhancement when foreign outside directors represent private interests of foreign blockholders. The moderating effect is also supported since foreign ownership concentration has an inverted U‐shaped relationship with value enhancement. The paper confirms that board independence reinforces the positive impact of foreign outside directors on firm value.

Research limitations/implications

This study offers a key to understanding corporate governance in that mutual monitoring and a balance among various types of stakeholders are crucial to value enhancement.

Originality/value

The paper provides clues to the extant diverse findings concerning the impact of foreign investors on firm value. It applies an integrated perspective to the empirical analyses of the impact of foreign investors by giving consideration to the agency – foreign outside directors – to implement management control on behalf of foreign blockholders.

Details

Management Decision, vol. 50 no. 2
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 19 March 2021

Bello Usman Baba and Usman Aliyu Baba

This paper aims to examine the effect of ownership structure variables on social and environmental disclosure practice in Nigeria. The paper also investigates the moderating…

Abstract

Purpose

This paper aims to examine the effect of ownership structure variables on social and environmental disclosure practice in Nigeria. The paper also investigates the moderating impact of intellectual capital disclosure on the relationship between ownership structure elements, social and environmental disclosure.

Design/methodology/approach

The paper adopted the Global Reporting Initiative (GRI) disclosure framework to extract social and environmental disclosure information from corporate social and environmental reports of 80 companies listed on the Nigerian Stock Exchange. The study spanned from 2012–2017. Management ownership, foreign ownership, block ownership and dispersed ownership are considered as determinants of social and environmental disclosure. A multiple regression analysis was used to test the relationships specified in the study.

Findings

The result of the descriptive analysis has shown evidence of a low-level disclosure of social and environmental information in corporate reports (annual reports and corporate social and environmental reports) of companies. From the regression analysis, block ownership, foreign ownership and dispersed ownership are found to enhance the disclosure of social and environmental information in the corporate report of companies. However, management ownership was found to be insignificantly related to social and environmental disclosure. The result also revealed that intellectual capital disclosure has a significant positive effect on the relationship between management ownership, foreign ownership and dispersed ownership, social and environmental disclosure. However, intellectual capital disclosure does not moderate the relationship between block ownership, social and environmental disclosure.

Originality/value

This paper is the first to empirically examine the moderating effect of intellectual capital disclosure on ownership structure variables, social and environmental disclosure. The result of the study offer researchers a better understanding of the impact of ownership structure variables on social and environmental disclosure. The findings are useful to researchers, corporate managers, policymakers and regulatory bodies.

Details

Journal of Global Responsibility, vol. 12 no. 2
Type: Research Article
ISSN: 2041-2568

Keywords

Article
Publication date: 9 August 2011

Jaakko Niskanen, Jussi Rouhento and Heidi Falkenbach

The relationship between ownership structure and firm value has long been of interest in the academic society. The purpose of this paper is to study the relationship between…

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Abstract

Purpose

The relationship between ownership structure and firm value has long been of interest in the academic society. The purpose of this paper is to study the relationship between European real estate investment trusts' (REITs) ownership structure and the observed firm value as measured by market‐to‐book (M/B) ratio. In addition, the potential effects of differing REIT ownership structures on other financial ratios, such as return on equity (ROE) and return on assets (ROA), are analyzed. Finally, the potential impact of strategic/insider ownership on REITs is assessed.

Design/methodology/approach

Several “difference between means” tests are run. In each test, the studied group of REITs is divided into three groups according to set criteria. Then, the potential differences observed between the groups are documented, analyzed and reported. Finally, statistical significance of the potential differences among groups is tested.

Findings

First, consistent with the previous studies, this study shows that increasing REIT block ownership results in lower M/B ratios as well as decreased dividend yield, ROE and ROA. In other words, the results suggest that, in terms of M/B ratio, the markets value REITs with low block holdings slightly higher than those with more block holders. However, the relationship is not totally explicit. Second, the relationship between strategic/inside ownership and firm value (and other financial measures) is somewhat obscure. The effects of strategic ownership are an interesting topic, also in terms of potential future research.

Practical implications

One of the fundamental ideas behind REIT legislation is to provide investors with a liquid means of investing in indirect real estate by regulating the ownership structure of the vehicle. The results of this study suggest that the more dispersed the shareholder structure, the higher the firm value, potentially due to increased stock liquidity. This finding could serve as an indication to lawmakers that the REIT ownership regulations not only work in theory but in practice, too.

Originality/value

For the first time in an academic context, the relationship of European REIT ownership structures and firm value is studied in‐depth. Proven scientific methods are employed to discern potential, yet unrevealed patterns between REIT ownership and firm value.

Details

Journal of European Real Estate Research, vol. 4 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 27 July 2018

Bahaaeldin Samir Allam

This paper aims to provide a twofold empirical comparison: first, a comparison between the impact of corporate governance mechanisms on agency costs proxies and firm performance…

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Abstract

Purpose

This paper aims to provide a twofold empirical comparison: first, a comparison between the impact of corporate governance mechanisms on agency costs proxies and firm performance measures, and second, this comparison was used before and after the 2008 financial crisis, capturing two different economic states.

Design/methodology/approach

Panel regression methods were applied to two data sets of non-financial firms incorporated in the FTSE ALL-Share index over the period 2005-2011.

Findings

The results provide evidence that not all mechanisms lead to lower agency conflicts and/or higher firm performance. Ownership identity has a significant impact and the role of the governance mechanisms changes with the changes in the economic conditions surrounding the firm.

Research limitations/implications

The results lend support to the notion that forcing a certain code of practice on firms to follow could compel them to move away from conflict reduction governance structures.

Originality/value

To the best of the authors’ knowledge, this is the first paper to provide a comparison of empirical evidence for the impact of board characteristics and ownership identity on agency costs and firm performance by using a comprehensive set of corporate governance mechanisms. This comparison challenges the prior studies that use performance as an indirect proxy for lower agency costs. Additionally, it compares the impact of the governance mechanisms during two different economic conditions.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 6
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 1 March 2005

Chander Shekhar and Violet Torbey

We examine the relationship between value, ownership, and governance structures for a set of acquisitions by Australian companies over the period of 1994–2001. We find that the…

Abstract

We examine the relationship between value, ownership, and governance structures for a set of acquisitions by Australian companies over the period of 1994–2001. We find that the propensity to diversify increases with the equity ownership of firms' directors, whereas the composition of the board, the presence of block holders and their ownership does not materially affect the decision to diversify. Board size has a positive but weak impact on the tendency to diversify. We also find no significant negative wealth effects for the shareholders of diversifying firms, although in comparison the shareholders of non‐diversifying acquirers experience significantly positive upward revisions of firm values. Although method of payment influences acquirer returns, ownership and governance do not have any impact on announcement period returns. Our results support the notion that capital markets may consider the ownership and governance structures as exerting enough influence to overcome any costs imposed by diversification strategies, hence limiting value loss to the shareholders.

Details

Review of Accounting and Finance, vol. 4 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 31 July 2023

Dinesh Ramdhony, Saileshsingh Gunessee, Oren Mooneeapen and Pran Boolaky

This study examines the bi-directional relationship between corporate social responsibility disclosure (CSRD) and ownership structure through a dynamic empirical framework in an…

Abstract

Purpose

This study examines the bi-directional relationship between corporate social responsibility disclosure (CSRD) and ownership structure through a dynamic empirical framework in an emerging economy context.

Design/methodology/approach

Data over 10 years are used to investigate the response of disclosure to ownership structure variables and vice versa. Dynamic bi-directional relationships are hypothesised and empirically investigated using a panel vector autoregressive (PVAR) model. The ownership structure variables used are government ownership, block ownership and director ownership, while CSRD is constructed as a score through content analysis.

Findings

A bi-directional negative relationship between CSRD and government ownership is found, revealing a preference for the state to invest in companies with opaque disclosure. CSRD is found to respond negatively to block ownership, albeit weakly. Results also show that directors prefer to own shares in the company they manage when there are low levels of CSRD.

Research limitations/implications

The current empirical set-up of using a small emerging economy may not carry to the context of larger emerging economies where the institutional context may differ. Thus, future research could use this dynamic empirical approach to re-examine the questions raised in this paper using data from other emerging economies. The use of a longer time series makes it feasible to explore further analysis what was not possible in this study, such as an impulse response analysis examining the reaction of the variables of interest, CSRD and ownership variables for a specific time horizon to particular changes or shocks associated with one of the endogenous variables in the PVAR.

Practical implications

A major implication is that expecting disclosure practices to improve due to government and director initiatives would be less likely in emerging economies. State and director shareholders prefer to invest in opaque companies because they may purposely choose to keep the minimum disclosure levels. The paper calls for a transparent process and ethical guidelines to guide government investment in firms.

Originality/value

The study investigates the bi-directional relationship between ownership structure and CSRD in contrast to the existing literature's presupposed one-way relationship between these variables by demonstrating that bi-directionality does matter. This paper also contributes to the CSRD literature in the emerging economy context. The bi-directional negative relationship between CSRD and government ownership calls for a transparent selection process of board members as representatives of the state in those companies where the government has an ownership stake. It also calls for a transparent process and ethical guidelines to guide government investment in firms.

Details

Journal of Applied Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 15 May 2007

Salim Chahine

While advantageous, the role of family control is under‐explored in finance. Family ownership can help guarantee stability of business and long‐term planning. The purpose of this…

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Abstract

Purpose

While advantageous, the role of family control is under‐explored in finance. Family ownership can help guarantee stability of business and long‐term planning. The purpose of this study is to examine whether block‐holder ownership differentially affects the long‐term performance of initial public offerings (IPOs), and verifies whether this effect differs between family and non‐family IPOs.

Design/methodology/approach

Using a sample of 163 French IPOs from 1996 to 2000, this paper examines the links between family control and the first‐year market performance. It focuses on IPOs where both families and Venture Capitalists (VCs) are engaged to lock‐in their shareholdings for a period of one year following the IPO date, and are thus expected, at least in the case of families, to provide an effective monitoring during this period.

Findings

The main findings bring support to the entrenchment hypothesis and show a negative, but weak, relationship between block‐holder ownership and the first year market performance (p=10 per cent). Moreover, there is cubic relationship between family ownership and post‐listing market performance where the first‐year buy‐and‐hold first decreases, then increases, and finally reverts to decline.

Originality/value

While most of prior research focuses on the association between ownership and governance effects on firms’ performances in publicly‐owned firms, this study demonstrates links between family control and performance in issuing firms operating in France, where family‐controlled IPOs are a common model of corporate governance.

Details

Managerial Finance, vol. 33 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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