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1 – 10 of 53Hang Thu Nguyen and Hao Thi Nhu Nguyen
This study examines the influence of stock liquidity on stock price crash risk and the moderating role of institutional blockholders in Vietnam’s stock market.
Abstract
Purpose
This study examines the influence of stock liquidity on stock price crash risk and the moderating role of institutional blockholders in Vietnam’s stock market.
Design/methodology/approach
Crash risk is measured by the negative coefficient of skewness of firm-specific weekly returns (NCSKEW) and the down-to-up volatility of firm-specific weekly stock returns (DUVOL). Liquidity is measured by adjusted Amihud illiquidity. The two-stage least squares method is used to address endogeneity issues.
Findings
Using firm-level data from Vietnam, we find that crash risk increases with stock liquidity. The relationship is stronger in firms owned by institutional blockholders. Moreover, intensive selling by institutional blockholders in the future will positively moderate the relationship between liquidity and crash risk.
Practical implications
Since stock liquidity could exacerbate crash risk through institutional blockholder trading, firm managers should avoid bad news accumulation and practice timely information disclosures. Investors should be mindful of the risk associated with liquidity and blockholder trading.
Originality/value
We contribute to the literature by showing that the activities of blockholders could partly explain the relationship between liquidity and crash risk. High liquidity encourages blockholders to exit upon receiving private bad news.
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This paper aims to examine the relationship between different types of shareholders that command share ownership, family, institutions or external blockholders and earnings…
Abstract
Purpose
This paper aims to examine the relationship between different types of shareholders that command share ownership, family, institutions or external blockholders and earnings management. In addition, it examines the effect of company size on earnings management.
Design/methodology/approach
The sample includes 67 companies listed in the Mexican Stock Exchange for the period 2005-2015. The sample composition is quite industry-balanced. A cross-sectional version of the Jones model (1991) is to measure the earnings management. The GMM (generalized method of moments) model is also estimated.
Findings
The results show that family and institutional ownership reduce the earnings management, but the impact is different depending on the company size.
Research limitations/implications
The results show that there is a clear relationship between increasing participation of family and institutional investors and a reduction in earnings management. This is consistent with the literature that establishes that ownership is an effective regulatory mechanism that limits earnings management through closer supervision and involvement in management.
Practical/implications
For companies’ corporate governance and regulatory authorities, the results of this study may serve to improve the decision-making.
Originality/value
This study shows that ownership structure can provide corporate governance in Mexican listed companies with different monitoring and control capacities to influence companies’ strategies, particularly in relation to the discretion of earnings management.
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Tariq H. Ismail, Mohamed Samy El-Deeb and Raghda H. Abd El–Hafiezz
This study examines the correlation between ownership structure (OS) and financial reporting integrity (FRI), with emphasis on the impact of earnings quality (EQ) in the Egyptian…
Abstract
Purpose
This study examines the correlation between ownership structure (OS) and financial reporting integrity (FRI), with emphasis on the impact of earnings quality (EQ) in the Egyptian context.
Design/methodology/approach
The study uses data from 472 firm-year observations of Egyptian publicly listed companies between 2014 and 2021 and carried out descriptive statistics, correlation tests, multiple regression analysis and two-stage least squares (2SLS) to test the hypotheses.
Findings
The results revealed that blockholders and institutional ownership significantly enhance reporting integrity through effective oversight and monitoring. The findings underscore the vital role of concentrated OS in overseeing reporting practices and mitigating managerial opportunism, thereby improving the transparency and reliability of financial disclosures in Egypt.
Practical implications
The findings enrich the literature on corporate governance and financial reporting quality and have important implications for policymakers, regulators and corporate stakeholders.
Originality/value
This work contributes valuable insights on how OS and EQ can bolster FRI, offering crucial information for combating financial crises and facilitating smooth business operations in Egypt.
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The objective of this study is to assess the level of corporate governance (CG) compliance and identify determinants of high compliance in Indonesian publicly listed corporations…
Abstract
Purpose
The objective of this study is to assess the level of corporate governance (CG) compliance and identify determinants of high compliance in Indonesian publicly listed corporations including family and nonfamily firms. The country uses a voluntary disclosure approach to enforce its regulations; thus, it is important to identify the factors affecting compliance.
Design/methodology/approach
Employing a logistic regression model, this paper analyzes the CG index of high-compliance vs. poor-compliance companies and emphasizes factors that contribute to better governance compliance. The CG index of high-compliant firms is almost twice as high as that of low-compliant firms.
Findings
The study explores factors that contribute to high CG in an emerging market like Indonesian corporations. The study's findings indicate that family-owned businesses predominate in the low-compliance group. High-compliance firms are older and larger with higher financial performance, free float and leverage, as well as a positive influence of the founder's great leadership. The results support theoretical arguments that concentrated ownership and excessive majority shareholder control are key factors in determining the likelihood of good governance practices by firms. Hence, the market and regulators should devise effective strategies to encourage and reward high compliance.
Research limitations/implications
The findings of the research offer several implications for the academic community and policymakers. Improving CG at the firm level is a viable goal, even though the agenda to reform minority investor protection laws and increase judicial quality is challenging and may take a long time to show significant results. Moreover, this study has some limitations that could be addressed in future research. The study focuses on a single-country setting, Indonesia. There are cultural aspects and governance settings that may be unique in the Indonesian context, which may limit the applicability of the findings to other countries with their own cultural settings and institutional legal framework.
Originality/value
The study investigates the factors that influence high governance compliance in specific CG regulations designed for the emerging Indonesian market. The study also discovers evidence that the crisis period has a favorable impact on the firm's decision to comply with governance provisions.
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Zhuo (June) Cheng and Jing (Bob) Fang
This study examines the effect of stock liquidity on the magnitude of the accrual anomaly.
Abstract
Purpose
This study examines the effect of stock liquidity on the magnitude of the accrual anomaly.
Design/methodology/approach
This paper examines the relation—both time-series and cross-sectional—between stock liquidity and the magnitude of the accrual anomaly and use the 2001 minimum tick size decimalization as a quasi-experiment to establish causality.
Findings
There is both cross-sectional and time-series evidence that stock liquidity is negatively related to the magnitude of the accrual anomaly. Moreover, the extent to which investors overestimate the persistence of accruals decreases with stock liquidity. Results from a difference-in-differences analysis conducted using the 2001 minimum tick size decimalization as a quasi-experiment suggest that the effect of stock liquidity on the accrual anomaly is causal. The findings of this study are consistent with the enhancing effect of stock liquidity on pricing efficiency.
Originality/value
The study's findings are well aligned with the mispricing-based explanation for the accrual anomaly, suggesting that the improvement in market-wide stock liquidity drives the contemporaneous decline in the magnitude of the accrual anomaly, at least to a great extent.
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Marco Botta and Luca Vittorio Angelo Colombo
It is widely believed that deviating from the “one share-one vote” principle leads to corporate inefficiencies. To measure the market appraisal of this potential inefficiency…
Abstract
Purpose
It is widely believed that deviating from the “one share-one vote” principle leads to corporate inefficiencies. To measure the market appraisal of this potential inefficiency, this study aims to analyse the market reaction to a change from the “one head-one vote” to the “one share-one vote” mechanism by means of a quasi-natural experiment: a 2015 Italian reform forcing all listed cooperative banks to transform into joint-stock companies.
Design/methodology/approach
To investigate the market reaction around the regulatory change, this study uses both a traditional event study and a novel methodology based on the synthetic control method as well as on Bayesian statistical techniques.
Findings
This study estimates the market valuation of the effects of the governance change around the event date being equal to a cumulative average increase in market value of about 14 per cent using an event study methodology, and of about 13 per cent using Bayesian techniques.
Originality/value
This study provides evidence on the fact that the voting mechanism significantly affects the market values of companies. The study also introduces a novel statistical technique that can be extremely useful in analysing single-firm event studies.
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Giacomo Morri, Rachele Anconetani and Luciano Pistritto
Corporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can…
Abstract
Purpose
Corporate governance principles are living a positive momentum in light of the megatrends reshaping the world. An effective company based on sound governance principles can prevent issues and corporate scandals as the company ensures greater transparency and accountability. Accordingly, this paper aims to investigate the relationship between shareholder-oriented corporate governance mechanisms, value and performances in the real estate sector.
Design/methodology/approach
This paper investigates the relationship between corporate governance mechanisms, performance and value in a sample of 111 USA real estate firms. After collecting data from 2014 to 2018, this paper tests the research hypothesis using the linear fixed-effect model.
Findings
The results demonstrate a positive impact of shareholder-oriented corporate governance mechanisms on performance and value. In particular, firms with no chief executive officer (CEO) duality and staggered board mechanisms and recognizing excess variable compensation to the firms' executive have a significantly higher Tobin's Q, return on assets (ROA) and price-to-book performance.
Practical implications
The implications are twofold: on the one hand, this motivates shareholders to establish new corporate control mechanisms to maximize value, attract more capital and improve operating performance. On the other hand, this allows investors to direct the investors' resources toward real estate firms with effective corporate governance mechanisms that may return higher performance and value.
Originality/value
Focusing on the real estate industry, where governance is expected to have a lower impact due to solid regulation, especially in real estate investment trusts (REITs), the research allows the formulation of industry-specific inferences that may be generalized for the general market.
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Nasaré Vieira Nogueira and Luiz Ricardo Kabbach de Castro
The purpose of this study is to examine the effects of ownership structure on merger and acquisition (M&A) decisions of Brazilian listed companies.
Abstract
Purpose
The purpose of this study is to examine the effects of ownership structure on merger and acquisition (M&A) decisions of Brazilian listed companies.
Design/methodology/approach
This paper is an applied and explanatory research based on secondary data. The sample is comprises non-financial companies listed on the BM&FBovespa between 1998 and 2007. Considering that the dependent variable is binary, the authors estimate panel data logistic regression models. Considering the existence of conflicts of interest among those who have the decision-making power and the supplier of capital for M&A transactions, they draw upon the Agency Theory to develop the theoretical hypotheses.
Findings
The results show that, for a sample of Brazilian non-financial companies listed on the BM&FBovespa (B3), from 1998 to 2007, Brazilian firms present, on average, a highly concentrated ownership structure and the major controlling shareholders are families or the State. These characteristics are negatively related to the likelihood of M&A transactions, as most of these controlling shareholders are reluctant to adopt mechanisms that reduce their control.
Research limitations/implications
With regard to the limitations, this study considered only the M&A definitions as stated by the Bureau van Dijk database. In this sense, future studies may analyze the effects of ownership structure based on other M&A definitions and typologies. In addition, the study is limited to the period from 1998 to 2007, which is prior to the international financial crisis. Future studies may extend the analysis period to include the post-crisis period (2008) to check if there are differences in M&A strategies before and after the crisis.
Practical implications
From a managerial perspective, the results show that minority shareholders have little or no influence over an M&A decision, so they cannot decide on the use of resources for fast growth and access to new markets through M&A. Thus, the investment decision must take into account the nature and the quality of the controlling shareholder.
Social implications
This study shows a significant and negative effect of ownership concentration on the likelihood of M&A transactions. In part, this result demonstrates the importance of understanding the behavior of controlling shareholders before inferring on other key aspects that the M&A literature tends to make fundamental in explaining M&A decisions in publicly traded companies, particularly, in an environment of low minority shareholder protection.
Originality/value
Previous studies have partly found that the M&A decision is motivated by individual advantages obtained from increasing the size of the firm, or from managerial hubris. The results show that these hypotheses do not hold in the Brazilian context. Moreover, the results indicate that M&A decisions are associated with the characteristics of the controlling shareholder, their level of ownership concentration and their typology, contributing to the agency debate on whether the incentive or the entrenchment effect prevails in the context of the agency problem between controlling and minority shareholders, particularly, in an institutional environment of low shareholder protection.
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Luis Otero, Rafat Alaraj and Ruben Lado-Sestayo
The purpose of this paper is to explore the relationship between corporate governance and risk-taking behaviour of banks operating in the Middle East and North African (MENA…
Abstract
Purpose
The purpose of this paper is to explore the relationship between corporate governance and risk-taking behaviour of banks operating in the Middle East and North African (MENA) countries.
Design/methodology/approach
In doing so, the authors use a data set covering 165 banks located in 13 MENA countries over the period 2005–2012 and apply dynamic panel data methodology.
Findings
The results show that good governance acting in the interests of shareholders could lead to excessive risk taking; in this sense, a conflict of interest between the stakeholders, interested in the solvency of the financial system, and shareholders, trying to maximise their benefit, may occur. The greater risk can be reinforced by the governance of the country and a strong macro governance framework can incentivise a higher risk exposure in banks, showing the influence of bank regulation and law enforcement on the risks taken by banks.
Originality/value
To the best of the authors’ knowledge, this is the first paper showing that corporate governance is relevant for explaining risk taking at the country and bank levels in MENA countries.
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Giovanna Gavana, Pietro Gottardo and Anna Maria Moisello
The aim of this paper is to examine the effect of structural and demographic board diversity as well as board tenure on family firms' environmental performance, by analyzing the…
Abstract
Purpose
The aim of this paper is to examine the effect of structural and demographic board diversity as well as board tenure on family firms' environmental performance, by analyzing the differences between family and non-family businesses and within family firms.
Design/methodology/approach
Tobit regressions are applied to investigate the effect of independent directors, CEO non-duality, board gender diversity and board tenure on environmental performance. The study also controls for other board and firm characteristics, as well as for time, industry and country-fixed effects. In doing so, the authors rely on a sample of non-financial listed firms from France, Germany, Italy, Spain and Portugal over the period 2014–2021.
Findings
The authors find that women on the board positively influence environmental performance and this effect is significant only in family firms, although board tenure negatively moderates the relationship. Board independence significantly affects environmental performance only in non-family firms. A strong presence of family directors has a negative effect on family firms' environmental performance, especially when directors' turnover is low.
Originality/value
This paper examines the unexplored relationship between structural board diversity and environmental performance in family companies. This study provides empirical evidence on the association between gender diversity and family firms' environmental performance focusing for the first time on a European setting. Moreover, this study provides evidence of a different effect of board tenure in family and non-family businesses.
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