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Article
Publication date: 16 April 2020

Feng Zhang, Lei Zhu and Liqun Wei

Whether shareholdersinvolvement in management benefits the organization’s performance remains inconclusive. The purpose of this study is to reconcile the conflicting…

Abstract

Purpose

Whether shareholdersinvolvement in management benefits the organization’s performance remains inconclusive. The purpose of this study is to reconcile the conflicting results by exploring whether and under which contexts shareholder involvement may impact firm innovation performance.

Design/methodology/approach

This study attempts to combine previous theoretical views (reactance and agency theories) to examine a curvilinear effect of shareholder involvement on firm innovation performance based on governance related to cost-benefit analysis. Drawing on data from 174 Chinese manufacturing firms, the hierarchical regressions were used to test the hypotheses.

Findings

The study finds that shareholder involvement has a U-shaped relationship with firm innovation performance. Moreover, ownership incentive strengthens the U-shaped relationship, while monitoring weakens it.

Originality/value

Examination of the U-shaped main effect of shareholder involvement and these contingent factors further explains the mixed empirical results concerning the link between shareholder activism and firm-level performance.

Details

Chinese Management Studies, vol. 14 no. 3
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 12 February 2018

Carlo Migliardo and Antonio Fabio Forgione

The purpose of this paper is to investigate the impact of ownership structure on bank performance in EU-15 countries. Specifically, it examines to what extent shareholder

Abstract

Purpose

The purpose of this paper is to investigate the impact of ownership structure on bank performance in EU-15 countries. Specifically, it examines to what extent shareholder type and the degree of shareholder concentration affect the banks’ profitability, risk and technical efficiency.

Design/methodology/approach

This study uses a sample of 1,459 banks operating in EU-15 countries from 2011 to 2015. It constructs a set of continuous variables capturing the ownership nature, the concentration and their interactions, and estimates an instrumental variable random effect (IV-RE) model. In addition, a panel data stochastic frontier analysis is conducted to estimate the time-varying technical efficiency for profitability and costs.

Findings

The empirical analysis shows that bank performance is affected by shareholder type. When regressed against the entrenchment behavior of the controlling owner hypothesis, banks with large-block shareholders are more profitable, less risky and more profit efficient. Further, ownership concentration reverts the negative effect related to the institutional, bank and industry ownership.

Research limitations/implications

The results support the hypothesis that concentrated ownership helps to overcome agency problems. They also confirm that managerial involvement in banks’ capital enhances a bank’s profit and its volatility.

Originality/value

To the best of the authors’ knowledge, this is the first study to consider the ownership nature, the concentration and their interaction using continuous variables, which allows for more precise inferences. The results provide new evidence that bank profitability, cost efficiency and risk are affected by the type of direct shareholders.

Details

Corporate Governance: The International Journal of Business in Society, vol. 18 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 10 July 2017

Maija Worek

The purpose of this paper is to examine the current state of literature concerning mergers and acquisitions (M&A) in family businesses and to highlight areas for future…

Abstract

Purpose

The purpose of this paper is to examine the current state of literature concerning mergers and acquisitions (M&A) in family businesses and to highlight areas for future research.

Design/methodology/approach

This literature review systematically analyses the findings of 41 journal articles on M&A in family businesses, identifying key thematic categories according to the main topics of the studies.

Findings

This study finds that it is important to distinguish and examine the type of governance, such as family and non-family, when studying M&A issues, because their distinctive features influence their strategic choices, business goals, and, thus, M&A behavior. Three topic areas are identified in existing research: M&A propensity, process, and performance. Furthermore, methodological and definitional issues regarding the findings are discussed.

Research limitations/implications

The findings imply that owing to their idiosyncratic nature, the use of alternative theoretical frameworks in addition to agency theory is encouraged in future studies in order to better capture the nature of family businesses. In general, further research on M&A issues in family business settings is needed, especially in the pre-merger phase, which is crucial to M&A performance.

Social implications

Overlooking particular issues that may arise in the context of transactions involving family businesses may lead to problems in M&A processes. Recognizing the importance of these issues in such transactions has important value for practitioners supporting family businesses in M&A processes.

Originality/value

This study takes the first step in analyzing the literature on M&A in family businesses, establishing linkages between family business, corporate governance, and financial management literature, and structuring the existing research to highlight opportunities with relevance for both theory and practice.

Details

Journal of Family Business Management, vol. 7 no. 2
Type: Research Article
ISSN: 2043-6238

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Book part
Publication date: 27 September 2011

Gohar G. Stepanyan

Purpose – Examine the role of institutional investors in accelerating the development of capital markets and economies abroad, the determinants of their investment, both…

Abstract

Purpose – Examine the role of institutional investors in accelerating the development of capital markets and economies abroad, the determinants of their investment, both in the domestic and foreign markets, and their importance in promoting good corporate governance practices worldwide and facilitating increased financial integration.

Methodology/approach – Review and synthesize recent academic literature (1970–2011) on the process of international financial integration and the role of foreign institutional investors in the increasingly global financial markets.

Findings – Despite the concern that short-term flow of international capital can be destructive to the emerging and developing market economies, academic evidence on a destabilizing effect of foreign investment activity is limited. Institutional investors’ systematic preference for stocks of large, well-known, globally visible foreign firms can explain the presence of a home bias in international portfolio investment.

Research limitations – Given the breadth of the two literature streams, only representative studies (over 45 published works) are summarized.

Social implications – Regulators of emerging markets should first improve domestic institutions, governance, and macroeconomic fundamentals, and then deregulate domestic financial and capital markets to avoid economic and financial crises in the initial stages of liberalization reforms.

Originality/value of paper – A useful source of information for graduate students, academics, and practitioners on the importance of foreign institutional investors.

Details

Institutional Investors in Global Capital Markets
Type: Book
ISBN: 978-1-78052-243-2

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Article
Publication date: 12 January 2015

Siew Peng Lee and Mansor Isa

The purpose of this paper is to examine the association between directors’ remuneration and performance and corporate governance in the Malaysian banking sector, using…

Abstract

Purpose

The purpose of this paper is to examine the association between directors’ remuneration and performance and corporate governance in the Malaysian banking sector, using panel data for 21 banks over the period 2003-2011.

Design/methodology/approach

The authors use multivariate regression analysis to examine the relationship between directors’ remuneration and performance and corporate governance. The authors also run Granger causality test to determine the existence of causality between directors’ remuneration and performance.

Findings

The authors find clear evidence of a positive association between directors’ remuneration and performance. Further, the causality test reveals that directors’ remuneration tends to Granger-cause performance. In terms of governance variables, the authors find that directors’ remuneration is positively related to the percentage of independent directors, and negatively related to board size, but unrelated to duality and percentage of director share ownership. The authors also find that remuneration is positively related to bank size and negatively related to capital ratio. The evidence also shows that foreign banks perform better than domestic banks despite the relatively lower pay received by their directors.

Practical implications

The findings imply that high-quality directors, as implied by their remuneration packages, are a significant determinant of performance.

Originality/value

The results of this study provide new evidence concerning the relationship between directors’ remuneration and performance in the banking sector in Malaysia.

Details

Managerial Finance, vol. 41 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 11 September 2017

Effiezal Aswadi Abdul Wahab, Akmalia M. Ariff, Marziana Madah Marzuki and Zuraidah Mohd Sanusi

The purpose of this paper is to examine the relationship between political connections and corporate tax aggressiveness in Malaysia. In addition, this paper investigates…

Abstract

Purpose

The purpose of this paper is to examine the relationship between political connections and corporate tax aggressiveness in Malaysia. In addition, this paper investigates the relationship between corporate governance variables and corporate tax aggressiveness. Next, the study investigates the mitigating role of corporate governance in the relationship between political connections and corporate tax aggressiveness.

Design/methodology/approach

The sample of this study is based on 2,538 firm-year observations during the 2000-2009 periods. This study employs a panel least square regression with both period and industry fixed effects. The study retrieved the corporate governance variables from the downloaded annual reports, whilst the remaining data were collected from Compustat Global.

Findings

This study finds that politically connected firms are more tax aggressive than non-connected firms. Furthermore, the study finds that large board size decreases the likelihood of tax aggressiveness and a non-linear relationship exists between institutional ownership and tax aggressiveness suggesting increase in monitoring as the ownership increases. However, the study finds no evidence to suggest that corporate governance mitigates the influence of political connections in promoting tax aggressiveness behavior. The findings suggest that the impact of political connections could outweigh the benefits of changes in corporate governance in Malaysia.

Research limitations/implications

The data are not recent, but it reflects a rather longitudinal research period.

Originality/value

This paper extends the literature of tax research in Malaysia which is in its’ infancy stage. Furthermore, it investigates the role of political connections in tax-planning research.

Details

Asian Review of Accounting, vol. 25 no. 3
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 1 March 2006

Shamsul Nahar Abdullah

The purpose of this study is to investigate the extent to which firm's performance, the structure of the board of directors and ownership determine directors' remuneration

Abstract

Purpose

The purpose of this study is to investigate the extent to which firm's performance, the structure of the board of directors and ownership determine directors' remuneration in Malaysia among distressed firms.

Design/methodology/approach

The study uses publicly available data from a sample of 86 distressed firms and matched 86 non‐distressed firms for 2001 financial year.

Findings

The findings for the full sample show that directors' remuneration is not associated with firm's profitability, as measured by ROA. A negative and significant association is observed between directors' remuneration and lagged ROA. With regard to corporate governance, board independence and the extent of non‐executive directors' interests are found to have negative influence on directors' remuneration. In addition, findings also reveal directors' remuneration is positively associated with firm's growth and size. In sub‐sample analyses, a strong negative relation is observed between ROA and directors' remuneration for healthy sub‐sample.

Research limitations/implications

Future research on this area could examine period after the adoption of the Malaysian Code by the Bursa Malaysia in 2001. Further, interviews with directors and managers about the need to link remuneration and performance could be carried out.

Practical implications

There is a need for companies to link remuneration with performance, which this paper found to be lacking in practice.

Originality/value

The contribution of this paper is its examination of directors' remuneration among distressed firms. Findings of this paper would be useful to both regulatory bodies and practitioners.

Details

Corporate Governance: The international journal of business in society, vol. 6 no. 2
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 1 February 2016

Basil Al-Najjar and Erhan Kilincarslan

This paper aims to investigate the impact of ownership structure on dividend policy of listed firms in Turkey. Particularly, it attempts to uncover the effects of family…

Abstract

Purpose

This paper aims to investigate the impact of ownership structure on dividend policy of listed firms in Turkey. Particularly, it attempts to uncover the effects of family involvement (through ownership and board representation), non-family blockholders (foreign investors, domestic financial institutions and the state) and minority shareholders on dividend decisions in the post-2003 period as it witnesses the major economic and structural reforms.

Design/methodology/approach

The paper uses alternative dividend policy measures (the probability of paying dividends, dividend payout ratio and dividend yield) and uses appropriate regression techniques (logit and tobit models) to test the research hypotheses, by focusing on a recent large panel dataset of 264 Istanbul Stock Exchange-listed firms (non-financial and non-utility) over a 10-year period 2003-2012.

Findings

The empirical results show that foreign and state ownership are associated with a less likelihood of paying dividends, while other ownership variables (family involvement, domestic financial institutions and minority shareholders) are insignificant in affecting the probability of paying dividends. However, all the ownership variables have a significantly negative impact on dividend payout ratio and dividend yield. Hence, the paper presents consistent evidence that increasing ownership of foreign investors and the state in general reduces the need for paying dividends in the Turkish market.

Research limitations/implications

Because of the absence of empirical research on how ownership structure may affect dividend policy and the data unavailability for earlier periods in Turkey, the paper cannot make comparison between the pre-and post-2003 periods. Nevertheless, this paper can be a valuable benchmark for further research.

Practical implications

The paper reveals that cash dividends are not used as a monitoring mechanism by investors in Turkey and the expropriation argument through dividends for Turkish families is relatively weak. Accordingly, the findings of this paper may benefit policymakers, investors and fellow researchers, who seek useful guidance from relevant literature.

Originality/value

To the best of the authors’ knowledge, this paper is the first to examine the link between ownership structure and dividend policy in Turkey after the implementation of major reforms in 2003.

Details

Corporate Governance: The International Journal of Business in Society, vol. 16 no. 1
Type: Research Article
ISSN: 1472-0701

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Book part
Publication date: 6 November 2012

Yongli Luo and Dave O. Jackson

Purpose – This study explores the probability of expropriation of minority shareholders by controlling shareholders in the form of CEO compensation under an imperfect…

Abstract

Purpose – This study explores the probability of expropriation of minority shareholders by controlling shareholders in the form of CEO compensation under an imperfect governance institution by using a novel Chinese dataset over 2001–2010.

Design/methodology/approach – We use a direct method to gauge controlling shareholders’ tunneling and expropriation of minority shareholders, and we present a simple model to link corporate governance and the degree of entrenchment by the largest shareholder. We use both Logit and Probit models to predict the likelihood of tunneling and use two-stage least square (2SLS) regression to address the endogeneity issues.

Findings – There are significant deterioration effects between controlling shareholder's tunneling and firm performance. Firms with more tunneling activities typically have larger controlling ownership, greater evidence of state control, less balance of power among large shareholders, and weaker board characteristics.

Research limitations/implications – The positive relationship between controlling shareholders’ tunneling and executive compensation implies that the controlling shareholder might divert personal benefits from the public firms at the expense of minority shareholders.

Originality/value – We focus on the effects of corporate governance restructuring on executive compensation and controlling shareholders’ tunneling in the Chinese context, and we also investigate whether these effects are stronger with the involvement of state ownership. We empirically address the issues between executive compensation and expropriation of minority shareholders.

Details

Advances in Financial Economics
Type: Book
ISBN: 978-1-78052-788-8

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Article
Publication date: 15 March 2018

Vas Taras, Esra Memili, Zhonghui Wang and Henrik Harms

This study aims to investigate the effects of family involvement in corporations on firm performance. It remains unclear whether family-owned companies, or companies with…

Abstract

Purpose

This study aims to investigate the effects of family involvement in corporations on firm performance. It remains unclear whether family-owned companies, or companies with other forms of family involvement in the corporate governance, perform better than firms with no family involvement. Furthermore, the study focuses on family involvement in publicly traded firms, which are different from private family firms. Hence, knowledge about family firms will be enriched through a closer look at the publicly traded family firms and shed further light onto the heterogeneity among family firms.

Design/methodology/approach

The present study uses a meta-analysis of the extant research on family involvement and publicly traded family firm performance. The authors synthesize past research, identify and reconcile mixed findings and expand the understanding of the phenomenon.

Findings

Involvement of the founding family members in firm governance tends to improve firm performance, albeit the effect is rather weak. However, the effect varies greatly depending on the type of family involvement and the measure of performance. The authors also identify regional differences, as well as variations by the firm size and study design. Furthermore, under-researched areas are identified for future research.

Practical implications

The results of the study would be useful in guiding organizational design and investment decisions.

Originality/value

By using the meta-analytic approach, the present study provides a comprehensive review of the empirical evidence available on the issue so far. Most importantly, the authors were able to conduct a series of tests to assess the moderating effects of a number of factors that could not be evaluated in any individual study in the meta-analytic database.

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