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Article
Publication date: 6 June 2022

Nischay Arora and Balwinder Singh

This study aims to explore the moderating impact of governance structure, that is, board characteristics including board size, board independence, board committees and…

Abstract

Purpose

This study aims to explore the moderating impact of governance structure, that is, board characteristics including board size, board independence, board committees and ownership structure like ownership concentration, on the underpricing of small- and medium-sized enterprise (SME) initial public offerings (IPOs) in the context of an emerging economy such as India.

Design/methodology/approach

Using a sample size of 403 SME IPOs listed on Bombay Stock Exchange SME platform and National Stock Exchange EMERGE, this study uses moderated hierarchical regression analysis to investigate these relationships.

Findings

The findings highlighted that board independence, board committees and ownership concentration negatively influence underpricing measured using market-adjusted excess returns. While analysing the moderating relationship, this study finds that ownership concentration positively moderates the relationship between board independence and underpricing, as well as the relationship between board committees and IPO underpricing.

Research limitations/implications

This study is limited to a single country only. Although perfectly suitable for our research inquiry, it is imperative to check the validity of the findings by extending it to other emerging countries with similar socio-economic characteristics. Furthermore, this study tested the hypotheses concerning three board characteristics only. Hence, it could be extended to explore additional governance characteristics for a more comprehensive understanding.

Practical implications

This study provides a foundation for managers to adopt a fine-grained approach to effectively design the board structure ahead of an IPO event. Additionally, the findings may assist policymakers in formulating various policies and guide regulators in regulating the limit on ownership held by various shareholders to prevent their opportunism. The results of this study may further advise potential investors interested in SME IPO firms to critically consider the ownership concentration as a driving factor when scrutinizing their investment portfolios.

Originality/value

This study is unique as it advances the debate on the importance of a governance characteristic, that is, ownership concentration, as a moderating variable in the underexplored context of IPO underpricing of small- and medium-sized firms in India.

Details

Pacific Accounting Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 2 October 2019

Yang Liu, Sanjukta Brahma and Agyenim Boateng

The purpose of this paper is to examine the effects of bank ownership structure and ownership concentration on credit risk.

Abstract

Purpose

The purpose of this paper is to examine the effects of bank ownership structure and ownership concentration on credit risk.

Design/methodology/approach

Using panel data on a sample of 88 Chinese commercial banks, with 826 observations over a period of 2003–2018, this study has applied system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. This study has used two measures of credit risk, which are non-performing loan ratio (NPLR) and loan loss provision ratio (LLPR).

Findings

The results show that ownership type (both government and private ownership) exerts a positive and significant impact on credit risk. Measuring ownership concentration using Herfindahl–Hirchmann Index, the results indicate that concentration of ownership in the hands of government has a negative and significant effect on credit risk, whereas private ownership concentration positively impacts credit risk. Overall, the findings suggest that concentration of ownership in government hands reduces risk; however, private ownership concentration exacerbates credit risks. The results are invariant to both measures of credit risk, before and after the financial crisis.

Practical implications

The findings provide useful insight to guide policy decisions in Chinese banks’ lending policies and bank ownership.

Originality/value

Using two ex post measures of credit risk, NPLR and LLPR, and one ownership concentration measure, HHI, this study deepens our understanding on the effectiveness of Chinese banks’ corporate governance reforms on managing credit risks.

Details

International Journal of Managerial Finance, vol. 16 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 2 March 2015

Mejbel Al-Saidi and Bader Al-Shammari

This paper aims to investigate the relationship between ownership structure (ownership concentration and ownership composition) and firm performance in Kuwaiti…

Abstract

Purpose

This paper aims to investigate the relationship between ownership structure (ownership concentration and ownership composition) and firm performance in Kuwaiti non-financial firms. To this end, it examines the relationship between firm performance and ownership concentration to determine whether the impact of this relationship is conditional on the nature of the large shareholders.

Design/methodology/approach

First, the relationship between ownership concentration and firm performance was tested using ordinary least squares regressions on 618 observations (103 listed firms) from 2005 to 2010; next, the ownership compositions were classified as institutional, government and individuals (families) and their impact on firm performance examined.

Findings

The overall concentration ownership by large shareholders showed no impact on firm performance. However, when the type of shareholders was introduced, only the government and individuals (families) ownership categories influenced firm performance. Therefore, certain types of shareholders are better at monitoring, and not all concentration by large shareholders is beneficial to Kuwaiti firms.

Research limitations/implications

This study examined only one important aspect of the corporate governance mechanisms, namely, ownership concentration. Thus, further study may include other mechanisms such as board variables, role of debt and shareholders rights in examining the firm performance. This study is limited to the Kuwaiti environment, and thus, next step can be very useful in case of comparing ownership concentration in the Gulf Cooperation Council (Kuwait, Bahrain, Qatar, Oman, United Arab Emirates and Saudi Arabia) or across different Arab countries.

Practical implications

The results of this study have important implications for the regulators in Kuwait in their efforts to increase the efficiency of the rapidly developing capital markets and in protecting investors and keeping confidence in the economy. They may mandate a corporate governance code to protect minority shareholders. Investors may use the findings to understand Kuwaiti companies. Such findings may assist them to diversify their investment portfolios.

Originality/value

This paper extends literature review by investigating the role of large shareholders in the context of a developing country that is characterized by high level of ownership concentration and weak legal protection for investors as well as the absence of code that organized the corporate governance practices.

Details

International Journal of Commerce and Management, vol. 25 no. 1
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 11 March 2019

Neal Arthur, Huifa Chen and Qingliang Tang

The purpose of this study is to investigate whether a country’s ownership concentration affects the financial reporting quality in a cross-country setting.

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Abstract

Purpose

The purpose of this study is to investigate whether a country’s ownership concentration affects the financial reporting quality in a cross-country setting.

Design/methodology/approach

This paper uses six accounting and auditing indicators to construct a comprehensive index to measure the country-level financial reporting quality.

Findings

The authors find a non-linear nature of the relationship between the national financial reporting quality and national ownership structure. Specifically, the relation is negative in a relatively spread ownership structure with no controlling shareholders, implying the entrenchment effects dominate. When ownership is highly concentrated, particularly with controlling shareholders whose interest is aligned with that of the firm, the relation turns to positive and alignment effects dominate.

Originality/value

The study is an important extension of prior research examining the financial reporting quality effect of ownership concentration. It enhances the understanding of the role of ownership concentration in determining a country’s financial reporting quality and has potential important policy implications for countries’ reformers and regulators who are concerned with the transparency of financial reporting and the quality of corporate governance.

Details

Journal of Financial Reporting and Accounting, vol. 17 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 28 June 2013

Abdelmohsen M. Desoky and Gehan A. Mousa

The paper aims to empirically investigate the influence of ownership concentration and identity on firm performance using a sample of 99 of the most active publicly listed…

1244

Abstract

Purpose

The paper aims to empirically investigate the influence of ownership concentration and identity on firm performance using a sample of 99 of the most active publicly listed companies on the Egyptian Exchange (EGX).

Design/methodology/approach

Firm performance of the sampled companies was measured by two different accounting measures, namely return on assets “ROA”, return on equity “ROE”, then the ordinary least square (OLS) regression analysis and the two‐stage least square (2SLS) regression analysis were employed.

Findings

OLS and 2SLS regression analyses show that ownership concentration has significant impact on firm performance when measuring by ROE. Regarding ownership identity, OLS regression analyses by both ROA and ROE show that the overall ownership identity has a significant impact on firm performance, as well as particular types of investors such as funds. Further, ownership identity and firm performance (when measured by ROA) had a significant endogeneity problem supporting the use of 2SLS as an effective analysis tool for such investigation.

Research limitations/implications

Findings of such research may not be generalizable to different countries at different stages of development, or with different business environments and cultures. Also, the sampled companies, 99 Egyptian companies, may be a small number which needs to be extended in a future research.

Originality/value

This paper provides an empirical investigation on the association between ownership structure and firm performance in the Egyptian context. It examines the role played by two aspects of ownership structure: the fraction of shares owned by the three largest shareholding interests (ownership concentration) and the fraction of shares owned by different type of shareholders (ownership identity) including seven separate groups of owners.

Details

Journal of Accounting in Emerging Economies, vol. 3 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 20 April 2015

Omar Farooq

This paper aims to document how does ownership concentration, a proxy for agency conflicts, affect capital structure of firms in emerging markets. Agency relationship…

1784

Abstract

Purpose

This paper aims to document how does ownership concentration, a proxy for agency conflicts, affect capital structure of firms in emerging markets. Agency relationship between insiders and outsiders has the potential to influence corporate decision-making which, in turn, impacts firm characteristics such as leverage.

Design/methodology/approach

This paper uses pooled regression analysis to document the effect of ownership concentration on capital structure in the Middle East and North Africa (MENA) region (Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait and Bahrain), during the period between 2005 and 2009.

Findings

The authors show that ownership concentration negatively affects capital structure. The results also show that for a given level of ownership concentration, the proportion of debt in capital structure goes up as information asymmetries decrease. Finally, the results show that for a given ownership concentration, it is the growth firms with low information asymmetries that have a higher proportion of debt in capital structure.

Research limitations/implications

The authors argue that information asymmetries associated with ownership concentration minimize the ability of firms to raise debt, thereby resulting in a negative relationship between ownership concentration and capital structure. Furthermore, reluctance on the part of controlling shareholders to accumulate excess leverage to minimize non-diversifiable risk also negatively influences capital structure.

Originality/value

Most of the prior studies on the relationship between ownership concentration and capital structure have been conducted in relatively more developed markets. An important market that has failed to attract attention regarding this issue is the MENA. This paper is an attempt to fill this gap by documenting the relationship between the two in the MENA region.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 8 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 12 August 2022

Shaojun Fan, Juan Chen and Hong Han

The authors expand the connotation of the research on the accounting information quality characteristics, provide empirical evidence for the factors of consistency and…

Abstract

Purpose

The authors expand the connotation of the research on the accounting information quality characteristics, provide empirical evidence for the factors of consistency and also help to deepen further their understanding of the economic consequences of ownership concentration and other ownership structures.

Design/methodology/approach

Using financial data of Chinese listed companies as samples, coupled with a method to calculate the consistency of the sample enterprises on the corporate level in the 2007–2019 period, the authors studied its impact of ownership concentration on consistency.

Findings

The study finds that after controlling other factors, ownership concentration could significantly reduce accounting information consistency. Further research finds that when the executives' shareholding is higher, the reduction effect of ownership concentration on consistency is weaker. After the robustness test, the conclusion remains basically unchanged.

Research limitations/implications

First, maybe there is a limitation of De Franco et al. (2011) method the authors use in China. As some scholars pointed out, the systematic component of returns variation is large in emerging markets (Morck et al., 2000), so it is hard to determine to what extent market stock returns will capture the net effect of earnings. As is mentioned above, there are multiple methods for measuring comparability and consistency, but it is not easy to judge which way is the best. Maybe the authors will have a perfect process in the future. Second, in addition to the factors mentioned in this study's hypotheses, there should be other factors (these include internal factors and external factors) that play moderating role in the impact of ownership concentration on accounting information consistency. The authors have not thoroughly studied the effect of those factors. These limitations all need to be further explored in the future.

Originality/value

The study finds that after controlling other factors, ownership concentration could significantly reduce accounting information consistency, but the reduction will be affected by some other factors related to corporate governance. The new insights from these advances are that the conclusions provide a technical path for management of companies to improve corporate governance efficiency and the quality of accounting information, and also provide more reference and empirical evidence for information users to identify the company's accounting information quality, which contributes to creating a prerequisite for the usefulness of accounting information.

Details

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

Keywords

Article
Publication date: 2 March 2021

Changjun Yi, Yun Zhan, Jipeng Zhang and Xiaoyang Zhao

This study investigates the effect of ownership structure – ownership concentration and firm ownership – on outward foreign direct investment (OFDI) by emerging market…

Abstract

Purpose

This study investigates the effect of ownership structure – ownership concentration and firm ownership – on outward foreign direct investment (OFDI) by emerging market multinational enterprises (EMNEs), and further explores the moderating effects of international experience and migrant networks on this relationship.

Design/methodology/approach

Data of Chinese MNEs listed on Shenzhen and Shanghai stock exchanges between 2005 and 2016 are used. The empirical analysis is based on the negative binomial regression model.

Findings

The empirical results reveal a significant inverted-U relationship between ownership concentration and OFDI by EMNEs. State ownership is found to have a positive effect on OFDI by EMNEs. Both international experience and migrant networks strengthen the inverted-U relationship between ownership concentration and OFDI as well as the positive effect of state ownership on OFDI by EMNEs.

Practical implications

EMNEs need to maintain a moderate ownership concentration when conducting OFDI, and they are supposed to make full use of their own international experience and focus on migrant networks of the host country. Policy-makers in emerging economies need to better create a fair business environment for enterprises.

Originality/value

Combining agency theory and the resource-based view, this study integrates ownership structure, firm-level heterogeneous resources – international experience and country-level heterogeneous resources – migration networks into a framework to study OFDI by EMNEs, which expands the scope of research in international business.

Article
Publication date: 26 July 2019

Mohammad Omar Farooq, Fouad Meer and Basit Iqbal

An important Islamic imperative is prevention of concentration of wealth among a few so that wealth circulates widely to enhance shared prosperity. In contemporary…

Abstract

Purpose

An important Islamic imperative is prevention of concentration of wealth among a few so that wealth circulates widely to enhance shared prosperity. In contemporary economic discourse, inequality and concentration of wealth have emerged as among key causes of instability and crisis. Unfortunately, although Islamic finance has emerged as a Shari’ah-compliant industry, it does not seem to be connected with the Islamic concern about inequality and concentration of wealth. This paper aims to explore the issues of inequality and concentration of wealth in the context of Islamic finance.

Design/methodology/approach

This paper addresses a number of queries: Are Islamic banks, as the dominant component of the industry, helping to improve inequality and concentration of wealth and thus offer a better framework to deal with instability and crisis? Is the ownership structure of Islamic banks conducive to meeting the Islamic imperative regarding inequality and concentration of wealth? Using secondary data, this research illuminates the pertinent issues in light of the experience of Bahrain as one of the hubs of Islamic banking and finance.

Findings

The paper finds that the ownership pattern of Islamic banks in Bahrain lends credence to the entrenched, not-so-unexpected concentration of wealth.

Research limitations/implications

This study is based on data of one country. Further studies on other countries will help illuminate the relevant patterns and issues.

Practical implications

Inequality and concentration of wealth are among central economic issues in contemporary economic discourse. Because of the significant impact of such inequality and concentration, societies need to be more aware of these impacts and devise ways to address it.

Social implications

Inequality and concentration of wealth have fundamental social implications, as the issues of poverty, deprivation, exploitation, etc. are inseparable from concentration of wealth (accompanied by concentration of power), and widening wealth gap can cause or induce major socio-political upheaval.

Originality/value

Although inequality and concentration of wealth are robust fields of inquiry, this might be the first work addressing the issue of concentration of wealth in the context of Islamic finance in general and Islamic banking in particular.

Details

International Journal of Ethics and Systems, vol. 35 no. 3
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 3 August 2015

Carmen Galve-Górriz and Alejandro Hernández-Trasobares

– This paper aims to clarify the relationship between institutional framework, concentration of ownership in family firms and results.

Abstract

Purpose

This paper aims to clarify the relationship between institutional framework, concentration of ownership in family firms and results.

Design/methodology/approach

Data comprises two samples of family firms from eight Latin American countries and Spain in the year 2010. The first sample contains the largest 20 corporations from each country. The second comprises the 20 largest listed family corporations in each country. To test the hypothesis, the study uses ordinary least squares.

Findings

First, firms located in countries with a higher than average quality of the institutional and regulatory frameworks are less concentrated in ownership than firms located in countries with lower than average quality and development of institutional and regulatory framework. Second, the influence of the concentration of the ownership in the performance is more important in countries with higher developed institutional and regulatory frameworks. Finally, first-generation large family firms obtain higher results than large family firms in second generation or beyond.

Research limitations/implications

The study is limited to one year and there are few family firms in Latin American countries. The study only considers some features of ownership, and there is no information about board of directors ' composition.

Practical implications

Institutional framework determines concentration of ownership in family firms and the influence of concentration of ownership in performance.

Originality/value

The study provides new evidence in areas of corporate governance and family firms, analysing a sample of Latin American and Spanish firms, representatives of the civil legal system and a weaker institutional framework. The study uses the corruption perception index like a control variable.

Details

Corporate Governance, vol. 15 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

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