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Article
Publication date: 12 June 2009

Henry Huang, Quanxi Wang and Xiaonong Zhang

The purpose of this paper is to investigate whether managerial ownership affects the association between shareholder rights and the cost of equity capital.

Abstract

Purpose

The purpose of this paper is to investigate whether managerial ownership affects the association between shareholder rights and the cost of equity capital.

Design/methodology/approach

Prior literature has shown that strong shareholder rights are associated with a lower level of cost of equity capital. This paper empirically tests the interaction between managerial ownership and shareholder rights on affecting the cost of equity capital, using Gompers et al.'s governance score and Ohlson and Juettner‐Nauroth's estimate of cost of equity capital. To mitigate the endogeneity arising from other governance variables affecting both shareholder rights and the cost of equity capital, the paper adopts both OLS and two‐stage regression.

Findings

The results indicate that managerial ownership aligns managers' interests with those of shareholders, leading to a lesser degree of agency problems and lower cost of equity capital. Furthermore, the evidence suggests that managerial ownership could substitute for shareholder rights in affecting the cost of equity capital, making strong shareholder rights less important in a high managerial ownership setting.

Research limitations/applications

Findings in this paper suggest that firms need to consider the interaction between managerial ownership and shareholder rights in designing their governance structure to minimize their cost of equity capital.

Originality/value

This paper reveals the interaction between two major governance variables in affecting firm valuation.

Details

Corporate Governance: The international journal of business in society, vol. 9 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 1 May 2002

Doren D. Chadee

This paper investigates the foreign ownership structure of service equity joint ventures (EJVs) in China. In less than 20 years, China has emerged from a closed economy to…

Abstract

This paper investigates the foreign ownership structure of service equity joint ventures (EJVs) in China. In less than 20 years, China has emerged from a closed economy to become the second largest recipient of foreign direct investment (FDI) in the world. Now that China is a member of the World Trade Organisation, liberalisation of FDI is expected to accelerate even further. Despite the fact that an increasing proportion of FDI in China is in the form of equity joint ventures in the service sector, little is known of the ownership structure of service EJVs. Using a database of 6,430 foreign EJVs, in China from 1984 to 1996, this paper shows that foreign equity ownership differs significantly between service and manufacturing EJVs with foreign ownership generally being higher in service EJVs. The overall results also suggest that the gradual liberalisation of FDI in the service sector by Chinese authorities has had a positive effect on foreign equity ownership.

Details

International Journal of Service Industry Management, vol. 13 no. 2
Type: Research Article
ISSN: 0956-4233

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Article
Publication date: 1 March 1985

Richard Dobbins and Norman H. Cuthbert

The Growth of Institutional Shareholdings 1966–1980. Institutional investors, particularly insurance companies and pension funds, are consistent purchasers of company and…

Abstract

The Growth of Institutional Shareholdings 1966–1980. Institutional investors, particularly insurance companies and pension funds, are consistent purchasers of company and overseas securities. Of particular interest is the ownership of U.K. quoted equities, rather than ownership of debentures, preference shares and overseas securities. Ownership of the ordinary share capital is of particular interest because the votes attached to equities give the holders legal powers to influence management through general meetings. The impact of the growth of institutional shareholdings on corporate management and the London Stock Exchange will be discussed in later articles. This article demonstrates the growth of institutional ownership of British industry, comments on the concentration of institutional holdings in large companies, illustrates the avoidance of new issues by financial institutions, and comments on the future pattern of U.K. share ownership.

Details

Managerial Finance, vol. 11 no. 3/4
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 21 May 2021

Laila Mohamed Alshawadfy Aladwey

This paper aims to examine the effect of different modes of equity ownership structure in unconditional conservatism of financial reporting for non-financial listed…

Abstract

Purpose

This paper aims to examine the effect of different modes of equity ownership structure in unconditional conservatism of financial reporting for non-financial listed companies in Egypt.

Design/methodology/approach

Using a large sample of Egyptian non-financial listed companies for the period from 2011–2018, this paper used the ordinary least square regression model to test the impact of equity ownership equity on accounting conservatism based on an accrual-based measure developed by Givoly and Hayn (2000) and Ahmed and Duellman (2007).

Findings

The paper finds that, on average, Egyptian listed companies tend to demonstrate lower levels of unconditional conservatism during the period from 2011–2018. Regarding the different patterns of equity shareholding, a negative association between unconditional conservatism and managerial ownership is found. Briefly, the mild equity shareholding of managers in Egyptian listed companies is accompanied by higher demand for conservative reporting. Besides, a negative association is also reported for the relationship between concentrated ownership and unconditional conservatism in which the concentration of shareholding by a few numbers of individual investors lessen the demand for conservatism. By contrast, a non-significance relationship is reported neither for institutional shareholders nor for governmental ownership in their relationship with unconditional conservatism.

Research limitations/implications

The paper does not take into account the modifications conducted on the Egyptian accounting standards according to decree number 69 for the year of 2019 because they were not valid until the publishing of this paper. It considers only non-conditional conservatism.

Practical implications

First, the paper provides clear empirical evidence that Egyptian listed companies are adopting less-conservative accounting policies in their financial reporting during a high-tension period that witnessed several radical political and economic events. This evidence should stimulate regulators and policymakers to revisit the reporting standards to improve the quality of financial information and should also guide investors’ decisions because it helps in clarifying their interpretation of figures and trends reported in financial statements. Second, the paper would direct the attention of the Egyptian government to the importance of increasing their investment in the stock market to enhance its regulatory role. Third, it gives some implications to investors and policymakers toward the shape of the relationship between accounting conservatism and each pattern of equity shareholding in Egypt.

Originality/value

This paper visualizes an image toward the current state of equity ownership structure for listed companies in Egypt within a period that witnessed critical vulnerabilities and irregularities. In addition, it addresses how the accounting conservatism would be shaped according to the different types of equity shareholdings in Egypt.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 7 August 2009

Xu Yuehua, Hu Songhua and Fan Xu'ang

The purpose of this paper is to clarify the influence of country risk (CR) and cultural distance (CD) on transnational equity investments. It also tries to find out the…

Abstract

Purpose

The purpose of this paper is to clarify the influence of country risk (CR) and cultural distance (CD) on transnational equity investments. It also tries to find out the international equity investment patterns of enterprises from developing countries like China.

Design/methodology/approach

From the perspectives of internalization theory, transaction cost theory, etc. this paper tries to explain the relationships between country‐level factors and transnational investment. Based on the data collected from overseas listed companies, it also empirically analyses the impacts of CR and CD on Chinese enterprises' ownership pattern in transnational equity investment.

Findings

The empirical results of this paper indicate that both the risk of host country and CD between host country and home country have significant and negative impacts on the level of ownership equity, but insignificant impacts on ownership status.

Research limitations/implications

As there are still some doubts about the existence of country culture, especially when dealing with a huge country like China, the use of Hofstede's instrument may be one of the limitations of this paper. Also, by focusing on Chinese enterprises, the research results may lack generalisability. Therefore, researchers are encouraged to test the proposed propositions when they study enterprises from other developing countries.

Practical implications

The paper sheds light on international investment activities of Chinese enterprises, and also provides insights for the decision making on equity arrangement in transnational investment.

Originality/value

This paper is one of the first to analyse the international equity investment activities of Chinese enterprises and it provides new evidence on how the country‐level factors influence transnational equity investment decisions.

Details

Chinese Management Studies, vol. 3 no. 3
Type: Research Article
ISSN: 1750-614X

Keywords

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Article
Publication date: 7 July 2021

Lenore Palladino

The mainstream framework for corporate governance is that all corporate activity should be directed towards shareholder wealth maximization. This article posits that…

Abstract

Purpose

The mainstream framework for corporate governance is that all corporate activity should be directed towards shareholder wealth maximization. This article posits that public policy should move away from shareholder primacy and instead recognize employees as key contributors to corporate value-creation. One way to implement this approach is to require the creation of Employee Equity Funds (EEFs) at large corporations, which would pay employees dividends alongside external shareholders and establish a collective employee voice in corporate governance. EEFs may reduce economic inequality while improving firm performance and macroeconomic stability. This article provides an original estimate of average employee dividends, illustrating the potential of employee equity funds.

Design/methodology/approach

Analysis of employee dividends for Employee Equity Funds at large U.S. corporations, using publicly available corporate finance data.

Findings

Based on historic dividend payments and employee counts in public 10-K filings, I find that, if EEFs held 20% of outstanding equity, the average employee dividend across this sample would be $2,622 per year, while the median is $1,760. This indicates that employee dividends can be a small but meaningful form of redressing wealth inequality for the low-wage workforce, though it should emphatically not be seen as a replacement for fair wages.

Originality/value

Original data analysis of a proposed policy reform to increase the benefits of employee equity in the United States.

Details

Journal of Participation and Employee Ownership, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2514-7641

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Article
Publication date: 1 January 2013

Lisa M. Victoravich, Pisun Xu and Huiqi Gan

The purpose of this paper is to examine the association between institutional investor ownership and the compensation of executives at US banks during the financial crisis period.

Abstract

Purpose

The purpose of this paper is to examine the association between institutional investor ownership and the compensation of executives at US banks during the financial crisis period.

Design/methodology/approach

This paper uses a linear regression model to examine the association between institutional ownership and the level of executive compensation at US banks.

Findings

Institutional investors influence executive compensation at banks with the impact being most pronounced for the CEO. Ownership by the top five investors is associated with greater total compensation. Active investors have the strongest impact on executive compensation as evidenced by a positive association between active ownership and both equity compensation and total compensation. As well, active ownership is negatively associated with bonus compensation. The paper also finds that passive and grey investors influence compensation but to a less significant extent than active investors.

Research limitations/implications

The results suggest that the monitoring role of active and passive institutional investors is different in the banking industry. As well, institutional investors were likely a driving factor in shaping the compensation packages of the top executive team during the financial crisis period.

Practical implications

Stakeholders at banks should be aware that not all types of institutional investors act as effective monitors over issues such as controlling the amount of executive compensation paid to the highest paid executive, the CEO. Prospective investors should consider the type of institutional investor that owns large blocks of equity when making an investment decision. Namely, the interests of existing institutional investors may differ from their own interests.

Originality/value

This paper provides a new perspective on the monitoring roles played by different types of institutional investors. Furthermore, it provides a more comprehensive analysis by investigating the role of institutional investors in shaping the compensation packages of CEOs and other top executives including chief financial officers (CFOs) who play a vital role in risk management at banks.

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Article
Publication date: 1 March 1985

Richard Dobbins and Norman H. Cuthbert

A comprehensive review of UK share ownership during the 1966–1980 period, with particular reference to the work of Revell and Moyle at the Department of Applied Economics…

Abstract

A comprehensive review of UK share ownership during the 1966–1980 period, with particular reference to the work of Revell and Moyle at the Department of Applied Economics, Cambridge.

Details

Management Research News, vol. 8 no. 3
Type: Research Article
ISSN: 0140-9174

Keywords

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Article
Publication date: 4 October 2011

Christine Whitehead and Sarah Monk

The purpose of this paper is to explore the role of affordable home ownership in the light of the recent global financial crisis.

Abstract

Purpose

The purpose of this paper is to explore the role of affordable home ownership in the light of the recent global financial crisis.

Design/methodology/approach

The paper draws on recent research conducted by the authors and others which included analysis of secondary data and policy documents and interviews with key stakeholders including housing associations and developers. The theoretical scope of the paper is outlined in the first section which looks at the principles behind the two main approaches to providing affordable home ownership: shared equity and shared ownership. Given continuing aspirations on the part of most households in England to become home owners, the key comparison is with the attributes of full ownership.

Findings

The paper finds that the main products share many of the attributes of full home ownership while remaining more affordable. The economic situation post‐2007 made both shared ownership and shared equity more difficult. The crisis and its aftermath also suggest that there is a need to develop a more robust and longer term market in equity sharing. This could be of real significance into the longer term, especially if the availability of mortgage finance remains constrained for many years to come. The paper concludes that in the longer term, developing a range of partial tenures which provide most of the benefits of owner‐occupation but which reduce risks to individual households and improve affordability in the early years is a desirable strategy.

Practical implications

There are clear implications for policy makers in other countries, notably the benefits from developing an intermediate tenure market which includes institutional equity and risk taking rather than continued large‐scale reliance on debt finance.

Originality/value

Given stated governmental ambitions to meet housing aspirations, this paper clarifies how it is possible to meet an identified need for affordable home ownership products to fill the growing “gap” between first‐time buyers who can purchase with parental help and those who have no means of achieving home ownership, even though they have the income to support such a choice.

Details

International Journal of Housing Markets and Analysis, vol. 4 no. 4
Type: Research Article
ISSN: 1753-8270

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Book part
Publication date: 23 November 2017

Desislava Dikova, Ahmad Arslan and Jorma Larimo

We investigate the effect of distance – political, economic, cultural and spatial, on developed-economy multinational enterprises’ (MNEs’) ownership decisions in…

Abstract

We investigate the effect of distance – political, economic, cultural and spatial, on developed-economy multinational enterprises’ (MNEs’) ownership decisions in cross-border (CB) acquisitions. We start with the premise that distance discourages full and majority ownership in CB acquisitions, and further investigate the moderating role of distance-reducing factors. We examine how the relationship between distance and acquisition ownership decision is moderated by firm-specific characteristics, such as firm size, general international experience, and specific host country experience. Our data sample consists of 1,041 CB acquisitions under taken by Finnish MNEs in 58 countries during the time period 1990–2010. We find substantial support for all our hypotheses and conclude that the negative effects of distance on CB acquisition equity stake are positively moderated by the three firm-specific resources but their individual importance is conditional on the host country type (developed or emerging).

Details

Distance in International Business: Concept, Cost and Value
Type: Book
ISBN: 978-1-78743-718-0

Keywords

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