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Book part
Publication date: 1 December 2004

Elizabeth A. Gordon, Elaine Henry and Darius Palia

Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse…

Abstract

Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse and often complex, represent a corporate governance challenge. This paper initiates research in finance on related party transactions, which have implications for agency literature. We first explore two alternative perspectives of related party transactions: the view that such transactions are conflicts of interest which compromise management’s agency responsibility to shareholders as well as directors’ monitoring functions; and the view that such transactions are efficient transactions that fulfill rational economic demands of a firm such as the need for service providers with in-depth firm-specific knowledge. We describe related party transactions for a sample of 112 publicly-traded companies, including the types of transactions and parties involved. This paper provides a starting point in related party transactions research.

Details

Corporate Governance
Type: Book
ISBN: 978-0-76231-133-0

Book part
Publication date: 1 December 2004

Abstract

Details

Corporate Governance
Type: Book
ISBN: 978-0-76231-133-0

Book part
Publication date: 1 December 2004

Abstract

Details

Corporate Governance
Type: Book
ISBN: 978-0-76231-133-0

Book part
Publication date: 9 July 2010

Frank Dobbin and Jiwook Jung

Agency theorists diagnosed the economic malaise of the 1970s as the result of executive obsession with corporate stability over profitability. Management swallowed many of…

Abstract

Agency theorists diagnosed the economic malaise of the 1970s as the result of executive obsession with corporate stability over profitability. Management swallowed many of the pills agency theorists prescribed to increase entrepreneurialism and risk-taking; stock options, dediversification, debt financing, and outsider board members. Management did not swallow the pills prescribed to moderate risk: executive equity holding and independent boards. Thus, in practice, the remedy heightened corporate risk-taking without imposing constraints. Both recessions of the new millennium can be traced directly to these changes in strategy. To date, regulators have proposed nothing to undo the perverse incentives of the new “shareholder value” system.

Details

Markets on Trial: The Economic Sociology of the U.S. Financial Crisis: Part B
Type: Book
ISBN: 978-0-85724-208-2

Article
Publication date: 5 August 2014

Tae-Nyun Kim

– This paper aims to propose several factors which can explain the negative relationship between financial constraints and investment-cash flow sensitivity.

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Abstract

Purpose

This paper aims to propose several factors which can explain the negative relationship between financial constraints and investment-cash flow sensitivity.

Design/methodology/approach

The author uses traditional fixed effects model and minimum distance panel estimation by Erickson and Whited (2000) to estimate investment-cash flow sensitivity in the cash flow-augmented investment equation. In addition, principal component analysis is used to construct a financial constraints measure.

Findings

First, it was found that substitutability between cash holdings and free cash flow can partially explain why financially constrained firms do not depend on cash flow as heavily as we expect. Second, it was confirmed that the level of net external financing can also partially explain the investment-cash flow sensitivity puzzle. Furthermore, it was argued that the influence of cash holdings and external financing on investment-cash flow sensitivity is caused by the low level of internal cash flow for financially constrained firms. This argument is supported by our findings from an examination of investment-cash flow sensitivity for bank-dependent firms during the recession periods.

Originality/value

This paper contributes to the literature by suggesting possible partial explanations for the contradictory relationship between investment-cash flow sensitivity and financial constraints.

Details

Review of Accounting and Finance, vol. 13 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Book part
Publication date: 30 March 2017

Marc Steffen Rapp and Oliver Trinchera

In this paper, we explore an extensive panel data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on…

Abstract

In this paper, we explore an extensive panel data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on ownership structure and firm performance. We document a negative firm-level correlation between shareholder protection and ownership concentration. Differentiating between shareholder types, we find that this pattern is mainly driven by strategic investors. In contrast, we find a positive correlation between shareholder protection and block ownership of institutional investors, in particular when we restrict the analysis to independent institutional investors. Finally, we find that independent institutional investors are positively associated with firm valuation as measured by Tobin’s Q. The opposite applies for strategic investors. Overall, our results are consistent with the view that (i) high shareholder protection and (ii) limited ownership by strategic investors make small investors and investors interested in security returns more confident in their investments.

Details

Global Corporate Governance
Type: Book
ISBN: 978-1-78635-165-4

Keywords

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