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Book part
Publication date: 10 August 2018

Nan Jia, Jing Shi and Yongxiang Wang

We argue that the influence of public stakeholders (the state) and private stakeholders (nonstate social or economic stakeholders) on corporate philanthropy is…

Abstract

We argue that the influence of public stakeholders (the state) and private stakeholders (nonstate social or economic stakeholders) on corporate philanthropy is interdependent, in that satisfying the state may increase the degree of scrutiny and pressure exerted by private stakeholders on the firm, particularly in institutional environments that place few checks and balances on the power of the state – thus creating suspicion that political patronage shelters firms’ social and moral wrongdoing. To test this theory, we examine the circumstances under which politically patronized firms engage more (or less) in corporate philanthropy. Utilizing a dataset that encompasses both publically traded and unlisted private firms in China, we find that corporate philanthropy is negatively associated with political patronage among unlisted firms but positively associated with political patronage among listed firms. These results are consistent with the predictions made based on our theoretical arguments. This chapter aims to foster further discussion regarding the interdependence of the influences exerted by different stakeholders on firms.

Details

Sustainability, Stakeholder Governance, and Corporate Social Responsibility
Type: Book
ISBN: 978-1-78756-316-2

Keywords

Article
Publication date: 19 January 2022

Ying Chen and Yuanyuan Sun

This study investigates, from a resource dependence perspective, the effects of domestic private firms' political connections and economic power on their labor law…

Abstract

Purpose

This study investigates, from a resource dependence perspective, the effects of domestic private firms' political connections and economic power on their labor law compliance in China.

Design/methodology/approach

This study used data from a large-scale nationwide survey on Chinese domestic private firms, the Chinese Private Enterprise Survey collected from 2004 to 2012, to examine factors of interest that affect firms' compliance to labor laws. Hypotheses were tested using OLS regression models with robust standard errors.

Findings

The results indicate that domestic private firms' institutional political connections specified by the presence of a union or a Chinese Communist Party committee is positively related to firms' labor law compliance, and firm owners' formal political connections indicated by their membership in the People's Congress or the Chinese People's Political Consultative Conference have a somewhat negative effect. The post-hoc analysis shows that firm owners' political representation at the county and city levels is negatively related with labor law compliance, while the political representation at the national level is positively related to labor law compliance. Moreover, the economic power of a domestic private firm is related positively to its labor law compliance. Finally, although the authors did not find evidence that the 2008 Labor Contract Law increased labor contract coverage, it did increase pension coverage after 2008.

Research limitations/implications

The present study reveals a more refined relationship between domestic private firm owners’ political connections and the degree of labor law compliance. It also demonstrates that the economic power of domestic private firms has a positive effect on their labor law compliance. This implies the importance of the contribution of domestic private firms to economic and social development in China, warranting continued support of the development of the private sector in China.

Originality/value

This study adds to the sparse literature on the determinants of domestic private firms' labor law compliance in China. It also sheds light on whether political connections and the rising economic power of Chinese domestic private firms influence their compliance with labor laws.

Details

Employee Relations: The International Journal, vol. 44 no. 4
Type: Research Article
ISSN: 0142-5455

Keywords

Article
Publication date: 31 December 2021

Mahnoor Sattar, Pallab Kumar Biswas and Helen Roberts

This paper aims to examine the relationship between board gender diversity and private firm performance.

Abstract

Purpose

This paper aims to examine the relationship between board gender diversity and private firm performance.

Design/methodology/approach

The authors test the association between board gender diversity and private firm performance by estimating pooled multivariate regressions using an unbalanced panel data set of 115,253 firm-year observations.

Findings

The authors find that younger, less busy and local women directors enhance private firm performance. Firms with 40% or more women directors report triple the economic benefits compared to boards with at least 20% women directors. Considering firm size, women directors significantly increase small firm profitability, and the effect is more pronounced for high-risk firms. Greater board gender diversity enhances small firm performance as the monitoring role of women directors benefits the firm even in the presence of busy men directors. Consistent with the agency theory framework, the authors find that women directors improve small firm profitability in the presence of agency costs.

Research limitations/implications

Due to the lack of availability of data about private firms, many factors are not directly observable. The analysis uses accounting-based performance measures that may be subject to managerial discretion. Nevertheless, the authors report highly significant results using cash-based performance measures that substantiate the overall findings.

Practical implications

The results of the present study point to the need for private firms to increase board gender diversity and consider women director busyness, age, nationality and firm size when making board director appointments.

Originality/value

This study adds to the scarce existent literature investigating private firms. The results contribute to the understanding of gender-diverse boards as well as the attributes of women directors that enhance private firm performance.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 18 February 2022

Emmanuel Adu-Ameyaw, Albert Danso, Linda Hickson and Theophilus Lartey

This study provides a large sample comparison of research and development (R&D) spending intensity in private and public firms and the extent to which these firms' unique…

Abstract

Purpose

This study provides a large sample comparison of research and development (R&D) spending intensity in private and public firms and the extent to which these firms' unique characteristics affect their R&D spending rate.

Design/methodology/approach

The study compares both private and public data from UK firms for the period 2006–2016, generating a total matched 232,029 firm-year observations, and applies a probability model technique to our large panel datasets.

Findings

The authors uncover that private firms show lower R&D spending intensity compared to their public counterparts. The authors evidence also shows that privately owned firms in the technological (non-technological) sector display higher (lower) probability of R&D spending intensity. Compared with public firms, the authors further observe that the intensity of private firms' R&D spending increases with higher internal cash flow, leverage and industry information quality. The authors results remain robust to alternative econometric models.

Research limitations/implications

Despite the findings of this study, the authors would like to point out that the use of a single country's data limits the generalisability of our findings. Thus, future studies may also consider extending this study across multiple countries.

Practical implications

A key implication of our study is that private firms are more likely to finance R&D intensity from the internally generated cash flow compared to the public ones. This stems from the fact that private firms are more likely to experience higher costs in raising external finance for innovative activities than public firms. Thus, easy access to funding for private firms is vital for enhancing R&D activities of the private firms.

Originality/value

By combining both private and public firms' datasets, the authors are able to provide new evidence to suggest that the intensity of private firms' R&D spending is dependent on internal cash flow, leverage and the industry information level. In fact, to the best of the authors’ knowledge, this is the first study that explores these relationships.

Details

Journal of Applied Accounting Research, vol. 23 no. 4
Type: Research Article
ISSN: 0967-5426

Keywords

Open Access
Article
Publication date: 17 August 2021

Esteban Lafuente and Miguel Á. García-Cestona

This paper investigates how past performance changes, prior CEO replacements and changes in the chairperson impact CEO turnover in public and large private businesses.

Abstract

Purpose

This paper investigates how past performance changes, prior CEO replacements and changes in the chairperson impact CEO turnover in public and large private businesses.

Design/methodology/approach

We analyze 1,679 CEO replacements documented in a sample of 1,493 Spanish public and private firms during 1998–2004 by computing dynamic binary choice models that control for endogeneity in CEO turnovers.

Findings

The results reveal that different performance horizons (short- and long-term) explain the dissimilar rate of CEO turnover between public and private firms. Private firms exercise monitoring patience and path dependency characterizes the evaluation of CEOs, while public companies' short-termism leads to higher CEO turnover rates as a reaction to poor short-term economic results, and alternative controls—ownership and changes in the chairperson—improve the monitoring of management.

Originality/value

Our results show the importance of controlling for path dependency to examine more accurately top executives' performance. The findings confirm that exposure to market controls affects the functioning of internal controls in evaluating CEOs and shows a short-term performance horizon that could be behind the recent moves of public firms going private or restraining shareholders' power.

Details

Journal of Economics, Finance and Administrative Science, vol. 26 no. 52
Type: Research Article
ISSN: 2218-0648

Keywords

Article
Publication date: 15 November 2021

Ronny Prabowo, Usil Sis Sucahyo, Theresia Woro Damayanti and Supramono Supramono

The research aims to investigate the moderating role of secrecy culture on the effect of tax enforcement on the likelihood that private firms hire external auditors.

Abstract

Purpose

The research aims to investigate the moderating role of secrecy culture on the effect of tax enforcement on the likelihood that private firms hire external auditors.

Design/methodology/approach

The study generates more than 70,000 observations from 83 country-years from the World Bank Enterprise Survey 2018 dataset. Because the study focuses on private firms in emerging countries, data on publicly listed firms and firms from OECD (Organisation for Economic Co-operation and Development) countries are deleted. The secrecy culture data are generated from Hofstede's website. The data are then analyzed with logit analyses because the dependent variable is binary.

Findings

The results demonstrate that tax enforcement increases the likelihood that private firms hire external auditors. Further, secrecy culture weakens the relationship between tax enforcement and audit demand.

Practical implications

Governments in emerging countries need to encourage private firms to hire external auditors by intensifying tax enforcement because private firms often do not appreciate the importance of high-quality financial statements. However, secretive national culture may reduce tax enforcement's effectiveness in motivating private firms to hire external auditors. Hence, governments of highly secretive countries need to address this issue and find alternative ways to promote audited financial statements.

Originality/value

Audit demand of private firms in emerging countries is relatively understudied, especially concerning tax enforcement. Furthermore, the research also focuses on the moderating role of national culture (secrecy) in explaining the relationship between tax enforcement and audit demand.

Details

Journal of Accounting in Emerging Economies, vol. 12 no. 3
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 12 November 2018

Steve O’Callaghan, John Ashton and Lynn Hodgkinson

The purpose of this paper is to investigate two related questions. First, is earnings management behaviour in private firms related to managerial ownership and if so, what…

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Abstract

Purpose

The purpose of this paper is to investigate two related questions. First, is earnings management behaviour in private firms related to managerial ownership and if so, what form does the relationship take. Second, is there evidence of opportunistic earnings management behaviour in private firms.

Design/methodology/approach

This study uses univariate and multivariate (regression) methodologies to examine the association between managerial ownership and earnings management in private firms. The study employs a data set of 1,223 large private UK firms.

Findings

Evidence is presented indicating opportunistic earnings management behaviour in private firms. Specifically, firms with low managerial ownership appear to engage in more earnings management when faced with poor performance. Further, when firms report income-increasing discretionary accruals, the magnitude of abnormal accruals varies non-linearly with managerial ownership.

Research limitations/implications

This study is limited by availability of data on sample firm ownership. This study uses cross-sectional data due to these limitations. Further research could investigate the relationships between earnings management and classes of shareholders other than managers in private firms.

Practical implications

Policy implications of this work suggest that non-managing shareholders in private firms face considerable agency costs, in particular where managerial ownership is very low or very high.

Originality/value

Pervasiveness of earnings management in private firms compared to public firms is well documented in the literature. There is limited extant research on the relationship between ownership structure and earnings management in private firms. The novel aspect of this study is to present findings on the association between this behaviour, managerial ownership and firm performance in private firms.

Details

Journal of Applied Accounting Research, vol. 19 no. 4
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 18 December 2019

Chun-Keung (Stan) Hoi, Jun Xiong and Hong Zou

Taking advantage of the 2008 Sichuan Great Earthquake as a natural experiment, the purpose of this paper is to examine the motives and effects of corporate donations by…

Abstract

Purpose

Taking advantage of the 2008 Sichuan Great Earthquake as a natural experiment, the purpose of this paper is to examine the motives and effects of corporate donations by focusing on how firm ownership identity as the first-order governance mechanism affects the motives and effects of disaster relief donations.

Design/methodology/approach

The authors conduct regressions and market event studies, and use matching to address the confounding effects of differences in firm characteristics.

Findings

The authors hypothesize that private firms that are better governed than state-owned enterprises (SOEs) are more likely to donate for value maximization. Consistent with this, the authors find that private firms are more likely to donate to the 2008 Sichuan earthquake and donate more than SOEs. The effects of secondary governance variables in the donation determinant models (e.g. board independence and managerial ownership) are more consistent with the value maximization argument. While short-term market reaction to donation announcement is not significant for private firms, it is lower when SOEs make a large donation. Consistent with the hypothesis, the authors find that over the 24–36 months following the donation, private donors realize a higher abnormal stock return.

Research limitations/implications

The study contributes to the debate over the merits/costs of corporate donations and helps better understand how SOEs and private firms (particularly family-owned firms) differ in their governance and financial decision-making.

Practical implications

Both managers from private firms and SOEs can use the findings of this study to better guide their donation and other philanthropic decisions.

Originality/value

This study is the first to examine both the motives and effects of corporate donations by both private and SOEs taking advantage of the 2008 Sichuan, thereby significantly extending prior related studies.

Details

China Finance Review International, vol. 10 no. 2
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 6 November 2017

Gaoliang Tian, Yi Si and M.M Fonseka

In China, private equity placement (PEP) has become the most important equity refinancing method because most listed firms issue new stocks in this method. However…

Abstract

Purpose

In China, private equity placement (PEP) has become the most important equity refinancing method because most listed firms issue new stocks in this method. However, previous literature has not paid much attention to the impact of political connections on PEP. In this paper, the authors aim to focus on the effect of ultimate ownership types and political connections on approval, approval time, approval results and proceeds of PEP. Besides that the authors also explore the influence of different types and levels of political connections on PEP.

Design/methodology/approach

This study investigates the impact of ultimate ownership and political connections of private firms on the approval of PEPs. The authors obtain a final sample of 1,651 private placement events of Chinese-listed firms. To test the hypothesis that the authors developed in this paper, the authors use empirical models from the existing literature about political connections and corporate finance. They establish multiple linear regressions to test Hypothesis 1 and 3 and introduce a logit model to test Hypothesis 2.

Findings

First, this study documents that state-owned firms have significant advantages over private firms in approval procedure. Second, political connections seem to help private firms obtain approval of placements from China Securities Regulatory Commission. Third, political connections through government officers are not useful for firms to obtain refinance resources, whereas the connections of being members of Chinese People’s Political Consultative Conference and People’s Congress are the two valuable types of political connections to help private firms obtain approval.

Originality/value

This paper has three main contributions to the previous literature. The first contribution is to provide an evidence for the relation between political connections and PEP approval procedures. The second contribution is to provide a comparison between government officer’s connection and social title’s connection. The third contribution of this paper is to reveal the influence of non-disclosed political connection on PEP approval. All the three contributions are important for understanding the relation between political connections and firm refinancial policy.

Details

Nankai Business Review International, vol. 8 no. 4
Type: Research Article
ISSN: 2040-8749

Keywords

Article
Publication date: 6 March 2017

Pascal Nguyen, Nahid Rahman and Ruoyun Zhao

This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s…

Abstract

Purpose

This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s shareholders than acquisitions of publicly listed firms.

Design/methodology/approach

The authors analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets over the period 1990-2011. The analysis controls for a wide range of bidder, deal and target country characteristics that are likely to correlate with the target’s listing status and acquirer abnormal returns. The authors also use a selection model to address the endogenous choice of the target’s listing status.

Findings

The results indicate that bidders experience significantly higher abnormal returns of about 1.7 per cent in the 11-day event window when the target is a private firm. The authors show that this result is broad-based and persistent. It does not appear to depend on whether the target is small or large; whether it is related or unrelated to the bidder’s industry; whether it is in the resources sector; and whether the transaction is domestic or cross-border. They find some evidence that bidder returns might be stronger for larger acquisitions, for unrelated targets, and in poor market conditions such as in the wake of the recent global financial crisis.

Research limitations/implications

The research would benefit from the inclusion of the bidding firm’s ownership and governance characteristics.

Practical implications

The results support the view that market frictions contribute to make private firms attractive targets.

Originality/value

The analysis confirms the pervasiveness of the listing effect in a market characterized by a lesser degree of competition, higher search costs and the significance of the natural resources sector.

Details

Studies in Economics and Finance, vol. 34 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

1 – 10 of over 75000