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Book part
Publication date: 26 April 2011

Bassem M. Hijazi and James A. Conover

We examine the empirical relationship between direct equity agency costs measures and corporate governance control mechanisms to control equity agency costs. We measure the three…

Abstract

We examine the empirical relationship between direct equity agency costs measures and corporate governance control mechanisms to control equity agency costs. We measure the three direct agency cost proxies commonly used in the literature: the operating expense; asset turnover; and selling, general, and administrative (SGA) ratios. Internal corporate governance control mechanisms examined are inside ownership (IO), outside ownership concentration (OC), the size of the board of directors (BODs), and the composition of the BODs (proportion of nonexecutive (NE) directors and separation of chief executive officer (CEO) and board chair). The external corporate governance control mechanism examined is the size of bank debt (short-term debt). Univariate and multivariate tests reveal that the only statistically significant relationship between corporate governance control mechanisms and direct equity agency cost measures is the negative relationship between the proportion of IO and direct agency costs. The asset utilization ratio (asset turnover) ratio is the best proxy for direct equity agency costs and can be useful for event studies of announcement period excess returns.

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Research in Finance
Type: Book
ISBN: 978-0-85724-541-0

Abstract

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Travel Survey Methods
Type: Book
ISBN: 978-0-08-044662-2

Book part
Publication date: 2 December 2003

Richard L Constand

This paper presents an empirical analysis of trade credit supplied by Japanese manufacturing firms and General Trading Companies. After reviewing major trade credit models and…

Abstract

This paper presents an empirical analysis of trade credit supplied by Japanese manufacturing firms and General Trading Companies. After reviewing major trade credit models and relevant Japanese literature, empirical tests examine the applicability of existing trade credit theories. Results indicate existing trade credit theory has little power to explain the level of trade credit supplied by Japanese firms. Instead, support is found for the information and risk sharing models in the Japanese keiretsu literature and the financial channeling process by which lending institutions supply General Trading Companies with liquidity that is, in turn, supplied to manufacturing firms.

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The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

Book part
Publication date: 21 October 2013

Hanne Søndergaard Birkmose and Therese Strand

Purpose – Institutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership strategies. This…

Abstract

Purpose – Institutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership strategies. This chapter investigates the legal prerequisites for active ownership among institutional investors in two Scandinavian countries to highlight differences in the legal framework that potentially account for apparent dissimilarities in the practice of shareholder activism.

Design/methodology/approach – Data on shareholder proposals from Danish and Swedish annual general meetings from 2006 throughout 2010 suggest that institutional investors are approximately a thousand times more active in Sweden than in Denmark.

Findings – The comparative study of the legal framework for shareholder activism shows diminutive legal distance in general, however, we find that the shareholder-based nomination committee employed in Sweden constitutes an exception. This is relevant, as such a setup transfers power from the board of directors to the owners. Presumably, this reduces the impact of free-rider and collective action problems, and increases the shareholders’ inclination to make proposals, which is also what we find. Moreover, we find other differences in the legal framework that support the transfer of power to the owners.

Research implications – We contribute to literature by investigating the importance of local governance mechanisms created by the legal framework – an area where research is scarce. The chapter discusses how two classical theoretical dilemmas – free-rider problems and collective action problems among shareholders – can be reduced by the implementation of local corporate governance elements.

Originality/value – The chapter outlines the actual practice of shareholder activism, in terms of proposals, in Denmark and Sweden, and highlights divergent legal elements which theoretically transfer power to the shareholders. Thus, regulators should be aware of the impact by local governance mechanisms, and how shareholders react under different legal prerequisites.

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Institutional Investors’ Power to Change Corporate Behavior: International Perspectives
Type: Book
ISBN: 978-1-78190-771-9

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Book part
Publication date: 17 January 2023

Chen Zheng and Zhiyue Sun

Although COVID-19 has caused a global slowdown, the magnitude of GDP losses appears to vary across countries. This study considers the question: could digital finance help to…

Abstract

Although COVID-19 has caused a global slowdown, the magnitude of GDP losses appears to vary across countries. This study considers the question: could digital finance help to mitigate the adverse impact of COVID-19 on GDP? Countries with higher levels of digital financial inclusion are found to experience less fall in GDP, whereas countries relying more on cash transactions experience a greater GDP decline. These results suggest that digital financial inclusion might play a key role in mitigating the adverse impact of COVID-19 on GDP.

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Fintech, Pandemic, and the Financial System: Challenges and Opportunities
Type: Book
ISBN: 978-1-80262-947-7

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Book part
Publication date: 5 April 2024

Emir Malikov, Shunan Zhao and Jingfang Zhang

There is growing empirical evidence that firm heterogeneity is technologically non-neutral. This chapter extends the Gandhi, Navarro, and Rivers (2020) proxy variable framework…

Abstract

There is growing empirical evidence that firm heterogeneity is technologically non-neutral. This chapter extends the Gandhi, Navarro, and Rivers (2020) proxy variable framework for structurally identifying production functions to a more general case when latent firm productivity is multi-dimensional, with both factor-neutral and (biased) factor-augmenting components. Unlike alternative methodologies, the proposed model can be identified under weaker data requirements, notably, without relying on the typically unavailable cross-sectional variation in input prices for instrumentation. When markets are perfectly competitive, point identification is achieved by leveraging the information contained in static optimality conditions, effectively adopting a system-of-equations approach. It is also shown how one can partially identify the non-neutral production technology in the traditional proxy variable framework when firms have market power.

Book part
Publication date: 4 November 2003

Gerry E Hendershot, Lisa J Colpe and Peter C Hunt

This article presents an application of survey non-response theory to a specific population with disabilities. From 1994 to 1997 the U.S. National Health Interview Survey (NHIS…

Abstract

This article presents an application of survey non-response theory to a specific population with disabilities. From 1994 to 1997 the U.S. National Health Interview Survey (NHIS) did a special, two-phase study of disability. This survey format allowed for response patterns of the disabled population to be operationalized into contact, cooperation and proxy/assisted versus self-response categories. Using these data, the authors investigated the effects of severity of activity limitation at first interview on response patterns at second interview, with statistical controls for other characteristics related to the response outcome. The statistical results of the study show that respondents with moderate or severe activity limitation are more likely than those with mild activity limitation to be contacted and to cooperate, yielding higher response rates. However, respondents with a higher degree of activity limitation are also more likely to have proxy/assisted responses at re-interview. Barriers to self-response in household surveys are discussed in the concluding remarks.

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Using Survey Data to Study Disability: Results from the National Health Survey on Disability
Type: Book
ISBN: 978-0-76231-007-4

Book part
Publication date: 25 September 2020

Konrad Farrugia, Matthew Attard and Peter J. Baldacchino

This study delves into the determinants and praxis of derivative hedging instruments (DHIs) usage of Malta, a small island state. Empirical evidence is also provided in relation…

Abstract

This study delves into the determinants and praxis of derivative hedging instruments (DHIs) usage of Malta, a small island state. Empirical evidence is also provided in relation to the impact of DHI usage and the adoption of a hedge accounting (HA) model in entities’ financial statements. A mixed methodology design is deployed involving: (1) a series of statistical models and tests and (2) seven semi-structured interviews with senior professionals.

The data collected comprise proxy variable values collected from the financial statements of 568 firm-years from 107 Maltese entities between the years 2009 and 2014. Greater likelihood of financial distress, decreasing investment efficiency and increased levels of gearing, are identified as being significant determinants for the use of DHIs. Although DHI usage is low in comparison to larger states, it has been increasing over the period under study.

HA is evidenced to be less popular in Malta, but the study evidences correlation between certain DHIs and HA usage. The quantitative statistical model results in evidence with no significant earnings volatility (EV) or cash flow volatility (CFV) reduction effects through the application of HA. Albeit, the study finds a significant CFV reduction effect emanating from DHI usage, but no corresponding EV reduction effect.

Better education and dissemination of the HA treatment by auditors and regulatory bodies could help propagate the HA treatment, potentially enhancing the EV reduction effectiveness of DHI use. This research provides empirical evidence to substantiate the rationale behind utilising DHIs in smaller island states, especially when coupled with a sound risk management culture.

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Uncertainty and Challenges in Contemporary Economic Behaviour
Type: Book
ISBN: 978-1-80043-095-2

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Book part
Publication date: 19 May 2009

Christopher J. Skousen, Kevin R. Smith and Charlotte J. Wright

This study empirically examines the effectiveness of Cressey's (1953) fraud risk factor framework adopted in SAS No. 99 in detection of financial statement fraud. According to…

Abstract

This study empirically examines the effectiveness of Cressey's (1953) fraud risk factor framework adopted in SAS No. 99 in detection of financial statement fraud. According to Cressey's theory pressure, opportunity and rationalization are always present in fraud situations.

We develop variables which serve as proxy measures for pressure, opportunity, and rationalization and test these variables using publicly available information relating to a set of fraud firms and a matched sample of no-fraud firms. We identify five pressure proxies and two opportunity proxies that are significantly related to financial statement fraud. We find that rapid asset growth, increased cash needs, and external financing are positively related to the likelihood of fraud. Internal versus external ownership of shares and control of the board of directors are also linked to increased incidence of financial statement fraud. Expansion in the number of independent members on the audit committee, however, is negatively related to the occurrence of fraud. Further testing indicates that the significant variables are also effective at predicting which of the sample firms were in the fraud versus no-fraud groups.

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Corporate Governance and Firm Performance
Type: Book
ISBN: 978-1-84855-536-5

Book part
Publication date: 25 August 2022

Dipankar Ghosh and Lori Olsen

Financial analysts' forecasts serve as a proxy for market earnings expectations, and research provides mixed evidence of the relation between financial analysts' expertise and…

Abstract

Financial analysts' forecasts serve as a proxy for market earnings expectations, and research provides mixed evidence of the relation between financial analysts' expertise and forecast accuracy. The judgment and decision-making (J/DM) literature suggests that those with more expertise will not perform better when tasks exhibit either extremely high or extremely low complexity. Expertise is expected to contribute to superior performance for tasks between these two extremes. Using archival data, this research examines the effect of analysts' expertise on forecasting performance by taking into consideration the forecasting task's complexity. Results indicate that expertise is not an explanatory factor for forecast accuracy when the forecasting task's complexity is extremely high or low. However, when task complexity falls between these two extremes, expertise is a significant explanatory variable of forecast accuracy. Both results are consistent with our expectations.

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-80382-802-2

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