bluuebunny/crossref_metadata_2025 huggingface dataset:
Does optimism affect corporate investment? New evidence from Taiwanese panel data
Authors: Hsu Ai-Chi , Hsiao Hsiao-Fen
Published: February 2017

We set out in this study to examine the relationship between managerial optimism and corporate investment, and demonstrate that firms with valuable investment opportunities tend to invest less than the optimal level; the classic problem of underinvestment. On the other hand, however, firms which do not have valuable investment opportunities often tend to invest more than the optimum level; a problem of overinvestment. We present evidence on the relationship between such investment behavior and managerial optimism. Within those firms that do not have valuable investment opportunities, overinvestment is more likely to occur amongst optimistic managers than non-optimistic managers; conversely, for those firms with valuable investment opportunities, underinvestment is less likely amongst optimistic managers than non-optimistic managers.
Impact of managerial ownership on capital structure: a survey of Turkish firms
Authors: Arslan Özgür
Published: February 2017

This paper investigates the relationship between insider ownership and capital structure decisions made by managers for an emerging market. Therefore, we survey managers of 103 firms listed in the Istanbul Stock Exchange (ISE). Our findings lend considerable support to our expectation that leverage, debt maturity and dividend issues reduce ability of managers to divert resources from value maximisation. However the same monitoring and disciplining tax is not observed for stock issues. Also, our findings document that managers of firms listed in the ISE do not opt to dividend smoothing policy. Finally, the results are in line with our expectation that, the more willing are the managers to reduce asymmetric information between them and shareholders, the higher their ownership level in firms.
Corporate governance, control type, and performance: the New Zealand story
Authors: Chen Jianguo , Chen Dar-Hsin , He Ping
Published: February 2017

This study investigates the ownership structure of New Zealand non-financial companies in terms of both ownership and management control and examines the effect of ownership structure on corporate governance and firms’ performance. The Berle and Mean’s hypothesis of separation of ownership and control does not find support in New Zealand. Further analysis tests the proposition that the diffusion of corporate ownership has allowed corporate managers to pursue goals other than profit maximization. The findings do provide evidence of a non-monotonic relation between managerial shareholdings and firm performance. This result indicates the complex nature of the relationship between ownership structure and firm value.
Determinants of performance of closely – held (family) firms after going public: the role of the ownership structure, economy, changes in top management, partial sale, equity concentration after the IPO and shareholders in management
Authors: Vaz Ferreira José Manuel Bernardo
Published: February 2017

When a closely-held (family) company goes public, there are very specific and particular determinants that have crucial influences on the post-going public operational, social and financial performance of those firms. We investigate why firms decline significantly their profitability, efficiency, employment and activity levels, and show an increase on sales and capital investment when there is a transition from private to public ownership. We conclude that this decrease in performance is significantly higher, when one or more than one of the following facts happen after firms going public: first, when there are not shareholders in management, what implies increased agency costs; secondly, when the level of equity concentration after going public is low; in third place, when the level of equity retention by the founding shareholder is low; fourth, when the economy health during the timing of the sale is not in good shape; and lastly, when the old CEO is changed.
Are insider trades profitable? Evidence from directors’ trade on the Australian stock exchange
Authors: Neill Bradley J. , Sadeghi Mehdi , Watts Edward
Published: February 2017

This paper argues that directors earning statistically significantly abnormal returns from trades within their own companies. Evidence is provided through the analysis of 8,053 transactions by directors on the Australian Stock Exchange during the period of January 2002 to April 2006. Specifically this paper finds directors’ sales to be more profitable than purchases, contrary to much of the existing US and UK research. Director sales exhibit a price reversal effect, in that positive abnormal returns are earned prior to the sale and negative returns after it. There is also evidence to support abnormal returns being associated with buy trades, however these returns are generally earned in the periods well after the transaction has taken place. Furthermore, the profits arising from director trades appear to be negatively related to transaction value and firm size; that is, those trades which are small in terms of dollar value, and are within small cap companies, generally generate larger abnormal returns.
Corporate governance and a program for complaints relating to accounting, auditing, and internal control
Authors: Colbert Janet L.
Published: February 2017

Complaints relating to accounting, auditing, or internal control matters may periodically be received by corporations. Such matters may be submitted by a variety of parties including employees, vendors, customers, or others. Organizations should have in place, as a part of effective corporate governance, procedures for handling complaints. The Board of Directors, specifically the Audit Committee of the Board, should oversee the program, which is encompassed within the broader overall system of internal control. Management plays an important role in a corporate complaint program and both internal and external auditors can provide the Audit Committee with valuable information as that body monitors it.
Substitution effects of internal governance mechanisms: evidence from Switzerland
Authors: Nielsen Sabina , Peck Simon , Ruigrok Winfried
Published: February 2017

This paper explores the substitution effects among three governance mechanisms, board monitoring potential, incentives and ownership structure, in a sample of 176 publicly listed companies in Switzerland, a country characterised by bank-centred governance system and high degree of ownership concentration. Our results suggest that whereas ownership concentration per se does not substitute for monitoring by the board, shareholdings held by board and top management and presence of a shareholder on the board act as substitutes for board independence. Moreover, we found that substitution effects differ with the identity of the largest shareholder. Firms owned by financial institutions exhibit a negative relationship between board independence and shareholder representation on board, whereas in family controlled firms board and managerial ownership is the main substitute for board monitoring.
Corporate governance and financial markets
Authors: Subrahmanyam Avanidhar
Published: February 2017

We link corporate governance with liquidity, trading activity, and the clientele that holds the firm’s stock. On the one hand high liquidity can decrease the quality of a firm’s governance because it reduces costs of turning over a stock attracting too many short-term agents who have little vested in good governance. On the other hand, liquidity can attract more sophisticated agents and hence improve the quality of a firm’s governance. In our cross-sectional analysis, we find that high liquidity is accompanied by poorer governance and vice versa. Further, increased institutional holdings are surprisingly associated with weaker governance in the 1990s, whereas in later years, they are not significantly related to governance. The proportion of orders transacted by small (large) traders is associated with weaker (stronger) governance, supporting the notion that a clientele consisting of small, unsophisticated investors can weaken the discipline imposed by outside investors on management. Given the known relation between corporate governance and stock returns, our results establish an indirect link between security prices and liquidity as well as trading activity, which goes beyond the direct channel described in Amihud and Mendelson (1986).
Sarbanes Oxley act of 2002: implications for complying corporations
Authors: Hurley-Hanson Amy E. , Giannantonio Cristina M.
Published: February 2017

The purpose of this paper is to examine whether or not the Sarbanes-Oxley Act of 2002 has benefited corporations for the better. This paper will explore the historical background of Sarbanes-Oxley as well as its purpose and discuss divulge current implications that this legislation imposes on the public corporations that are required to comply.
Challenges facing banks in emerging countries to be Basel compliant for operational risk
Authors: Young Jackie
Published: February 2017

The New Basel Accord identified various requirements for an effective operational risk management framework. Most central banks and regulators adopted these requirements for their own banking environments. However, there are many challenges facing these banks to ensure the effective incorporation of such a framework. An end-result of establishing an operational risk management framework is to calculate and allocate a realistic capital charge for operational risk. To achieve this, various principles and methodologies must be embedded that will ensure a practical approach to operational risk management. This paper aims to identify certain critical issues and challenges for banks of emerging countries to consider when developing an operational risk management framework in order to comply with the Basel requirements.
The incorporation of corporate governance recommendations in mandatory law: the case of Spain
Authors: Iglesias-Rodríguez Pablo
Published: February 2017

Traditionally the Spanish Corporate and Securities Law did not devote much attention to corporate governance issues. This situation started to change after the publication of different corporate governance codes since the year 1997. Although the recommendations of these codes did not have mandatory character, some of them have been incorporated in the mandatory law by the legislator through different instruments. The main objective of this paper is to examine these mechanisms and the purpose of the legislator with each one. The analysis shows that in Spain, the corporate governance recommendations have had a very important role in the creation of corporate governance mandatory rules.
Ownership monitoring mechanism and corporate performance: evidence from banking firms in Asian emerging markets
Authors: Zulkafli Abdul Hadi , Samad Fazilah Abdul , Ibrahim Izani
Published: February 2017

Corporate governance is regarded as a major issue during the post-financial crisis period in Asia. These countries have implemented corporate governance reforms to enhance the protection of their shareholders and stakeholders interests. Such reforms may affect the conduct of business of all corporations in the region as it allows for greater monitoring especially by the shareholders. Unlike earlier studies which focused on non-financial firms, this study analyzes the corporate governance involving ownership monitoring mechanism of listed banking firms in nine Asian emerging markets which are Malaysia, Thailand, Philippines, Indonesia, Korea, Singapore, Hong Kong, Taiwan and India. It is found that ownership monitoring mechanisms of the banking firms in Asian emerging markets are negatively related with firm value measured by Tobin’s Q.
Un-constitutionality of asset securitization
Authors: Nwogugu Michael
Published: February 2017

Under US laws, all forms of asset securitization are unconstitutional. Securitization of many types of assets (loans, credit cards, auto receivables, insurance, intellectual property, etc.) has become more prevalent, particularly for financially distressed companies and companies with low or mid-tier credit ratings. This article analyzes critical legal and corporate governance issues.
Decisions in commercial real estate leasing in the real estate sector
Authors: Nwogugu Michael
Published: February 2017

This article develops analytical models for key decisions in commercial real estate leasing (the concepts and models developed in the article can also be applied to equipment leasing and other types of leasing).
Blockholders, board structure and liquidity: evidence from Tunis stock exchange
Authors: Ben Sedrine Nadia , Loukil Nadia
Published: February 2017

This paper investigates the effect of blockholders and board structure into stock liquidity in Tunisian market. We use five measures of liquidity in order to detect the multidimensionality of liquidity: immediacy cost, price impact, trading frequency, trading speed and total transaction cost. Results show that blockholders, insiders or outsiders, reduce trading speed, while ownership concentration and board characteristic effect on liquidity depend on liquidity dimension considered. Insider ownership concentration enhances price impact. Outsider ownership concentration induces a high trading activity. A large board size improve firm transparency reduces transactions cots. A high proportion of outsider directors increase trading speed.
Initial underpricing and transfer of shares on the Tunisian stock exchange
Authors: Gana Marjène Rabah , El Ammari Anis
Published: February 2017

In this empirical study, the incidence of the shares transfers by the original shareholders on the degree of the initial underpricing is studied, using a sample of Tunisian candidates companies over the 1992-2006 period. Our empirical results make it possible to confirm the existence of a significant initial underpricing of about 19% and which depends closely on the behavior of shares transfer. More precisely, the original and the controlling shareholders, in order to limit the transfer of wealth towards the new shareholders, reduce the degree of IPO underpricing.
Abnormal returns: econometric problems or psychological bias?
Authors: Hachicha Nizar , Bouri Abdelfettah , Khlifi Foued
Published: February 2017

To validate the existence of abnormal returns, the most of empirical studies use the event study methodology which examines the behavior of firms’ stock prices around corporate event. However, this methodology was been the source of several limits. Some defenders of efficiency theory assert that the abnormal returns are due to the event study methodology failures and econometric problems. However, partisans of behavioral finance demonstrate that the abnormal returns are due to psychological bias. The main purpose of this paper is to verify if the abnormal returns resulting from the event study methodology are due to econometric problems or to psychological bias generated by irrational investors’ reactions. For the econometric bias, five problems are studied: the choice of market index; the missing observations; the abnormal returns normality, joined hypothesis; and the variance volatility in the event window. Results show that abnormal returns are far from being due to the event study methodology failures and econometric bias. For the psychological problems, based on trading volumes, the results show negative and significant abnormal returns (investors’ under-reaction); a strong positive correlation between abnormal returns and abnormal trading volumes and a significant causal sense between them. So, abnormal returns are due to psychological bias.
Did culture have an impact on Tunisian corporate governance system?
Authors: Ben Mrad Douagi Fatma Wyème , Boussaada Rim
Published: February 2017

Numerous research works on corporate governance have been undertaken while only few attentions have been devoted to the study of cultural component. The aim of this research is precisely to contribute to the necessary renewal of corporate governance by attempting to highlight some crucial features and issues related to the impact of culture on Tunisian corporate governance system. Based on cultural dimensions of Hofstede (1980), we try to identify the impact of culture on Tunisian corporate governance system. We argue that the characteristics of Tunisian corporate governance system such as ownership concentration, inactivity of hostile takeover market, one–tier board system, limited transparency of information and underdevelopment of financial market, reflect the Tunisian culture.
CEO appointments and the loss of firm-specific knowledge - putting integrity back into hiring decisions
Authors: Rost Katja , Salomo Sören , Osterloh Margit
Published: February 2017

A rarely studied trend in corporate governance is the increasing tendency to fill CEO openings through external hires rather than through internal promotions: Kevin J. Murphy and Ján Zábojník (2004) show that the proportion of outside hires has doubled and their pay premium almost quadrupled over the last thirty years. Assuming that general managerial skills are becoming more important relative to firm-specific skills, the authors conclude that competition in the managerial labor market establishes optimal contracts. In our model and our empirical analysis we question this explanation by assuming that over the past decades the dishonesty of the predecessor has become relatively more important for the appointment decisions of firms. We conclude that outside hires are a suboptimal trend because external candidates even step up the regression of integrity in firms: As nobody has an incentive to invest in firm-specific knowledge, not only the performance of firms drops, but also the remaining integrity.
Does placement sequencing of the auditor’s report in Malaysian companies’ annual reports matter?
Authors: Abdullah Shamsul Nahar , Mohamad Nor Mohamad Naimi , Mohamad Yusof Nor Zalina
Published: February 2017

This study investigates whether a firm‟s management decision to locate the auditor‟s report in the financial statements is explained by information signaling theory. We posit that a firm that conveys good news is more likely to place its auditor‟s report at the beginning of the financial statements than at the end, and vice-versa. Based on 698 firms listed on the Bursa Malaysia as on December 31, 2002, we find that majority of Malaysian listed firms in Malaysia place their auditor‟s reports at the beginning rather than at the end of the financial statements. This could be a manifestation of the importance of the auditor‟s report in the financial reporting framework. However, our evidence the type of news, as measured by Tobin‟s q, ROA and EPS, does not have any association with the location of the auditor‟s report. Thus, it is concluded that information signaling theory is not supported.
Discretionary accruals, liquidity and corporate governance index in Brazil
Authors: Cardoso Ricardo Lopes , de Aquino André Carlos Busanelli , de Almeida José Elias Feres , das Neves Antônio José Barbosa
Published: February 2017

This study investigates if the level of discretionary accruals (DAs) is different for companies whose corporate governance level is certified by Bovespa compared to those ones that are not. And also for companies whose stocks negotiated at Bovespa have high liquidity compared to the ones with low liquidity. The main purpose is to comprehend the phenomenon of accounting choices (measured as DAs), its incentives and counter-incentives. In this context, the issues were: i) Is there any difference of DAs intensity between certified and non-certified companies, considering the corporate governance level?; ii) Is there any difference of DAs intensity with high liquidity stocks at Bovespa and those ones with low liquidity? This research took into consideration Jones` original model (1991), a sample with 1,791 observations collected from 1997 to 2004. Empirical results from our study show that there is no significant statistic difference in the level of DAs between the firms listed or not in the corporate governance index. This suggests the need to consider incentives and counter-incentives from the capital market to those different set of firms, in relation with accounting choices.
Roles and responsibilities for managing operational risk in a banking environment
Authors: Young Jackie
Published: February 2017

Operational risk management is one of the fastest growing management disciplines within a banking environment as a result of various disastrous international incidents. Subsequently, various global institutions got involved in order to ensure that the effect of similar events do not negatively influence the international industries, for example, the Basel Committee on Banking Supervision regarding banks. It is, however, a known fact that operational risks are difficult to manage, as it is not easy to quantify. Therefore, it is of the utmost importance to understand the concept of operational risk management and, more specifically, the actual roles and responsibilities of various role-players within an organisation. This paper aims to identify the main role-players involved in the management of operational risk in a banking environment and to identify their specific roles and responsibilities
Do poison pills increase firm risk?
Authors: Turk Thomas A. , Goh Jeremy , Ybarra Candace E.
Published: February 2017

Management scholars have argued that an active takeover market discourages risk-taking by managers and that takeover defenses serve to counter the risk-reducing pressures of an active takeover market. This study employs the Black and Scholes Option Pricing Model to determine whether or not adoption of poison pill securities increases investor perceptions of firm risk. The results provide evidence that the Option-Implied Standard Deviations of common stock returns increase significantly on the poison pill adoption date, on average. Furthermore, the implied standard deviations remained significantly above pre-adoption levels for several days after the poison pill adoption, suggesting that the perceived increase in firm risk is permanent. These results suggest the poison pills may serve a more constructive role in the governance of publicly traded firms than is generally assumed.
Factors affecting audit report lag in banks: the Egyptian case
Authors: El-Bannany Magdi
Published: February 2017

This paper investigates the determinants of the audit report lag in Egyptian banks during the year 2004. On a sample of twenty seven banks listed in the Egyptian Stock Exchange, the regression results show that external auditor type, bank size, audit complexity in terms of the number of branches, audit complexity in terms of diversity level and bank profitability, all have a significant impact on the audit report lag but the exceptional items does not.
The foundations of governance theory: a case for the resource-dependence perspective
Authors: Udayasankar Krishna
Published: February 2017

In this paper I distinguish between the justificatory and explanatory roles of theory, and propose that the justificatory role played in the literature thus far by agency theory is subject to limitations. I therefore argue for the use of resource-dependence theory as the epistemological basis of the corporate governance domain knowledge system, and present an alternate model of corporate governance. Potential contributions of this alternate model are discussed
Ownership concentration and corporate performance on the Ghana stock exchange: a panel data analysis
Authors: Bokpin Godfred Alufar
Published: February 2017

Corporate governance is linked to corporate performance. The study examines the effect of ownership concentration on corporate performance on the Ghana Stock Exchange. Panel data covering a period from 2001 to 2006 for 28 firms were analyzed within the framework of both the fixed and random effects techniques. The results indicate that the effect of ownership concentration on corporate performance varies with the performance measurement variable. The results indicate a significant positive relationship between ownership concentration and return on assets and Tobin’s Q, whilst there is negative insignificant relationship with return on equity. We also document that insider system of corporate governance is practiced on the Ghana stock exchange as shareholding is highly concentrated in the hands of a few individuals or institutional investors. Other governance features such as board size, board composition and CEO duality are all essential in predicting corporate performance. The results of the study generally support existing literature on the impact of ownership concentration on corporate performance
Governance quality and the pricing of discretionary accruals: American field study
Authors: Dhahbi Afef , Courteau Lucie , Triki Mohamed Wajdi
Published: February 2017

The aim of this paper is to examine the relationship between efficient governance structure and the information content of discretionary accruals. To determine governance scores, Data Envelopment Analysis is applied to a sample of 149 American firms for the period 1998 to 2003. The findings indicate that the association between stock return and discretionary accruals is greater for firms having a good corporate governance structure
Effect of auditor quality on auditor auditee negotiation outcomes
Authors: Hadriche Sahnoun Manel , Zarai Mohamed Ali
Published: February 2017

The purpose of this paper is to study the impact of some attributes of auditor quality such as: auditor tenure, auditor industry specialist, auditor experience and the audit firm size on auditor auditee negotiation outcomes. For the entire sample of 81 Tunisians firms, our results indicate positive and significant relationship between auditor tenure, auditor experience and the extent to which the auditee agreed with the auditor over the financial reporting issues. On the other hand, the results indicate a positive but non-significant relationship between the auditor industry specialist and the negotiation outcome. For the audit firm size, we find that auditees are more likely to agree with big 4 audits firms. Indeed, we find no significant relationship between importance, size and performance of the auditee and auditor auditee negotiation outcome
The extent of compliance of corporate governance disclosure: evidence from Indian banking companies
Authors: Hossain Mohammed
Published: February 2017

The study examines the compliance of mandatory corporate governance disclosure of the Indian banking companies. The Securities and Exchange Board of India (SEBI) made it mandatory for all listed firms to provide a Corporate Governance Report in a separate section in the Annual Report. The paper has empirically identified the level of compliance of the mandatory disclosure in the corporate governance reporting under the suggested list provided by SEBI and also assessed whether the corporate attributes affect the levels of corporate governance disclosure. The study covered all the 38 banks in India that are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange(NSE). We have identified 46 items of information as mandatory and for inclusion in the disclosure index, and run a linear regression model to examine the relationship between disclosure index and various corporate attributes. The findings revealed that a high level of compliance existed in the Indian banks and that the variables of size, ownership, board composition, and profitability, have significant impact in the corporate governance disclosure
Bartlett and Chandler eleven years on: private investors at the annual general meeting.
Authors: Johed Gustav
Published: February 2017

This paper reports from a field-level study of 67 annual general meetings conducted between 2004 and2008. The focus is on private shareholders and the questions they pose to company representatives at the annual general meetings. By comparing these results with earlier research, the study concludes that this group of investors asks questions mostly about the company’s operations followed by questions concerning the income statement and corporate governance. The latter finding is not consistent with earlier studies showing a low interest in financial accounting and corporate governance. One plausible explanation to account for the current finding is that the annual general meeting enables shareholders to be active in their roles as shareholders
”The good, the bad, and the ugly” private benefits of control and their regulatory implications
Authors: Pacces Alessio M.
Published: February 2017

This paper attempts to shed a new light on the economics and the law of corporate governance. It so does by taking stock of the weaknesses of the standard account of how law ‘matters’ for separation of ownership and control. This account fails to explain comparative corporate governance. Both the ownership structure and the functioning of the market for corporate control do not seem to depend entirely on the strength with which non-controlling shareholders are protected by corporate law. Without claiming that legal protection of minority shareholders does not matter in corporate governance, this paper shows that protection and exchange of corporate control is at least as important and so are the legal institutions that support them. This result is derived by introducing a third category of private benefits of control (idiosyncratic PBC), which supplements the more traditional specifications as inefficient consumption of control perquisites (distortionary PBC) or outright expropriation of shareholder value (diversionary PBC).The implications for corporate law are broader than those of the ‘law matters’ framework. Even though legal institutions effectively constrain expropriation of non-controlling shareholders, they may still make corporate governance inefficient when they fail to provide entitlements to uncontested control in dependently of how much ownership is retained by corporate controllers. Likewise, regulation may undermine the takeover process when it restricts side payments that ultimately support efficient bargaining upon the value of corporate control
Foreign exchange risk in stock pricing: a further study of Asian markets
Authors: Liau Yung-Shi , Yang Jack J. W.
Published: February 2017

This study applies a two-factor asset pricing model (market and foreign exchange) to examine the stock pricing behaviors in export-oriented Asian markets (Hong Kong, Malaysia, the Philippines, South Korea, Taiwan and Thailand) for the period 1994-2005. The three foreign exchange risk factors are Japanese yen, US dollar and EURO. GMM test results indicate only the US dollar exchange risk factor is priced in Asian stock markets, i.e., the appreciation/depreciation of the US dollar should affect investors’ buying/selling decision to some extent. The empirical results are valid for both subperiods as well as the whole period
Relationship between firm ownership and performance: the mediating role of internal governance mechanisms
Authors: Ngui Kwang Sing , Voon Mung Ling , Seng Ee Yaw , Lim Ai Ling
Published: February 2017

This paper explores the role of selected internal governance mechanisms as mediators of the relationship between ownership and firm performance. Data from 2004 and 2005 was gathered from 177 firms listed on Bursa Malaysia. Structural equation modelling was used as the primary statistical analysis approach. Insiders and blockholders were found to compete for board dominance. Selected internal governance mechanisms mediate the effect of ownership on performance, suggesting that these were used to advance the investment interests of insiders/ blockholders. The paper provides empirical support for the interest-alignment hypothesis, arguing that the use of governance mechanisms that align the interest of managers and shareholders are more effective than monitoring mechanisms
Corporate governance and firm performance: evidence from the Chinese stock markets
Authors: Chi Jing , Zeng Guang
Published: February 2017

In this paper, we investigate how ownership structure affects the market performance of the Chinese publicly listed companies. The sample consists of all firms listed in the Shanghai and Shenzhen Stock Exchanges from 1998 to 2001. We find that a firm’s market performance is positively related to the proportion of legal person shares but negatively related to the proportion of shares owned by the state. Using cross-sectional regressions, we further find that corporate value decreases with a firm’s increasing leverage and size, while surprisingly foreign ownership does not increase a firm’s market performance. Moreover, ST (Special Treatment) firms are used to test the effectiveness of corporate governance in China, and our results show that the change of ownership structure cannot improve the firm performance of Chinese listed companies
Ownership control and rights offerings in Chinese listed firms
Authors: Lin Yi-Hua , Chen Yenn-Ru , Chiou Jeng-Ren
Published: February 2017

Most Chinese listed companies were transformed from state-owned enterprises (SOEs). Institutional transformation results in an ownership structure that is characterized by highly concentrated ownership and state-owned shares, which may exert an influence on corporate finance. In China, listed companies rely heavily on equity for capital needs, but the government blockholders often subscribe to no shares or to partial shares; they tunnel seasoned offering equity (SEO) capital to their nonprofit units through related party transactions. Therefore, we examine large shareholders’ rights offering behavior and firms’ subsequent operating performance. The results reveal that with a higher ratio of state-owned shares, large shareholders tend to give up all preemptive rights for new shares of stock. Evidence confirms a predicted positive relation between large shareholders’ full rights subscription behavior and firms’ subsequent operating performance
Does managerial ownership reduce agency cost in Taiwan? A panel threshold regression analysis
Authors: Lin Feng-Li , Chang Tsangyao
Published: February 2017

Two agency theories have dominated the corporate ownership debate, the convergence of interest and the entrenchment hypothesis. Following the work of Ang et al. (2000) and Sing and Davidson (2003) to a panel of 266 Taiwanese listed companies for the 1996-2006 period, we adopt an advanced panel threshold regression model to determine whether managerial ownership reduces agency costs. We find when managerial ownership is less than 36.55% or greater than 59.06%, consistent with the entrenchment hypothesis, a 1% increase in the managerial ownership decreases asset utilization efficiency by 0.32% and 0.5%, respectively. However, managerial ownership is between 51.35% and 59.06%, consistent with the convergence of interest hypothesis, a 1% increase in the managerial ownership increases asset utilization efficiency by 0.21%
Corporate ownership and mutual fund performance: evidence from Taiwan
Authors: Li Chun-An , Lai Hung-Cheng
Published: February 2017

We examine the relationship between corporate ownership and fund performance in Taiwan. Using the panel regression after controlling for fund attributes, the proportional share held by foreign institutional investors is positively correlated with fund performance. Furthermore, we also find a negative relationship between the number of board members and the return gap measure of fund performance, but ownership concentration are not effect on fund performance. Our results imply that foreign institutional shareholders are now playing a significant monitoring role of fund companies in Taiwan
Rationale of securities and covenants in venture capital contracts: an application to South Africa
Authors: Huyghebaert Nancy , Mostert Frederik J.
Published: February 2017

Venture capitalists are investing their money in portfolio enterprises and hence are putting their capital at risk. As portfolio enterprises may pursue different objectives than those of their financiers, venture capitalists may perceive agency problems as an important risk factor. Venture capitalists can limit the scope of these risks by specifying the form of financing that they provide to portfolio enterprises and/or by inserting particular covenants in their financial contracts. This paper first briefly reviews the various contractual provisions that can be used to decrease the extent of venture capitalists’ exposure to agency problems. Next, the importance of various securities and covenants is examined in the context of South Africa, where the venture capital market is still relatively young, but growing. Overall, it is concluded that venture capitalists in South Africa limit their exposure to risk, but in a different manner than is typically done in the USA
Moral governance and stakeholder management: are politicians too powerful?
Authors: Di Betta Paolo , Amenta Carlo
Published: February 2017

We investigate upon the influences on the Board exerted by politicians concerning strategic management and corporate governance, an invasive activity which we characterize as moral governance. We present a list of actions through which politicians and other outside parties who intervene in the political arena show power in influencing corporate policies. We analyze three Italian clinical cases some of which can be considered reluctant forms of privatization. At crossroads between corporate governance and stakeholder management, our model could be used as a guideline and checklist for insiders to interact with politicians, for cross-country comparisons of business environment, and for assessing transparency of companies in developed and developing countries.
Top executive compensation in Portuguese family firms
Authors: Pereira Ivo Nuno , Esperança José Paulo
Published: February 2017

Performance based compensation is considered a decisive tool in the co-alignment of interest between owners and managers. The solution to agency problems in public corporations hinges critically on the use of variable compensation mechanisms. Empirical analysis of this phenomenon is exiguous and the background theory has been suffering developments, like the introduction of family firm agency problems. This study confirms the larger use of variable compensation by public firms but shows that the potential for using variable compensation in second or third generation family firms is particularly high due to higher potential form conflict emergence between the different stakeholders. The framework used in this paper has the potential to encompass a wide range of phenomena where conflict can emerge and incentives can be used to co-align interests between the different transacting parties
Board governance and IPO performance in the short-run and long-run
Authors: da Silva Rosa Raymond , Izan Izan H.Y. , Lin Michelle Ching-Yi , Lin Suzanne Ching-Fang
Published: February 2017

In light of the best practice recommendations released by the Australian Stock Exchange (ASX) in March 2003, this study tests the relationship between initial public offering (IPO) firm performance and board governance quality, captured by board size, board leadership, board composition, and director’s share ownership. Based on a sample of Australian IPO firms that lodged prospectuses with ASX between 1994 and 1999, we do not find evidence that links underpricing to board structures at the time of IPO. IPO firms’ board structures are insignificant in explaining the level of IPO underpricing, and board size is the only board governance variable significant in explaining long-run after market performance, after controlling for the size of the firm. That is, IPO firms with larger boards at the time of issuance perform better in the long-run, consistent with the resource dependence theory. Thus, we conclude that ASX’s best practice recommendations are likely to distort the market-driven practice salready in place, and our findings lead us to question the role played by the board of directors in signalling firm quality.
The effects of corporate governance on capital structure in Taiwanese corporations after controlling for the heterogeneity of industries and firm size
Authors: Wang Lie-Huey , Kuo Hsien-Chang
Published: February 2017

Since the MM theory, scholars have discussed capital structure issues from the perspectives of agency problems in corporate governance. Corporate governance has been seen as the means to reducing the agency costs produced by aligning the interests of management and shareholders, and the incentive for the management to engage in opportunistic behavior has been influenced by the firm’s ownership and board of director structures. Previous studies, however, focus on traditional financial factors and neglect the debt and equity agency problems triggered by corporate governance and their possible influences on capital structure decisions. The sample used in this study consists of 317 firms listed on the Taiwan Stock Exchange from 1998 to 2007. By controlling for the heterogeneity of industries and firm size, our models incorporate the cash flow rights-voting rights-seat control divergence, the ownership structure, and the structure of the board of directors to examine the effects of corporate governance on the firm’s capital structure. The results show that, when the divergence between cash flow rights and seat control is lower or when the divergence between voting rights and seat control is higher, the controlling shareholders can either control the board of directors to better monitor the firm or exhibit a preference for debt financing based on entrenchment motives. Further analysis indicates that blockholders prefer lower debt financing and do not expropriate minority shareholders. Financial institutional shareholders function through their provision of monitoring and the certification of debt for technological firms and can decrease the firms’ debts. The management in the technological industry firms prefers debt financing in order to obtain agency-related benefits. While directors in traditional industries or large firms might use personal or firm debt to tunnel the firm’s assets, the function of independent directors in technological firms or large firms of lowering debts in order to reduce the firm’s bankruptcy risks is more evident
A meta-analysis of the association between earnings management and audit quality and audit committee effectiveness
Authors: Hwang Mark I. , Lin Jerry W.
Published: February 2017

Earnings management is of great concern to corporate stakeholders. While numerous studies have investigated various determinants of earnings management relating to corporate governance and audit quality, empirical evidence on their effects is rather inconsistent. Employing meta-analysis techniques, this research integrates and evaluates results from 27 prior studies. All eleven variables examined show a significant effect on earnings management. Researchers are encouraged to build on our results to continue this important research stream.
Directorship, collateralized shares, risk, and performance of Taiwan banking industry
Authors: Chen Yi-Kai , Kao Lan-Feng , Wang Alan T. , Hsieh Ming–Hsuan
Published: February 2017

In recent years, considerable concerns have arisen over the issue of corporate governance in banks’ supervision. One of the major issues has been investigated whether the sound mechanism of corporate governance benefits bank risk management and performance. The collateralized shares, serving stocks as collaterals, are one of financial leverage approaches and it is likely to be an incentive for block shareholders to misapply assets due to the deviation between the controlship and the ownership. The objective of this study is to examine whether the attitude of the board of directors toward risk will affect the bank risk and performance. Quarterly data of commercial banks listed either on the Taiwan Stock Exchange or GreTai Securities Market from 1999 to 2007 are examined in this study. The results show that the collateralized shares may have contributed to a lower return due to a higher risk and they are in line with previous studies our results are in line with previous researches. In conclusion, the monitoring mechanism should enforce relatively regulations more strictly to avoid the agency problems. Especially to the insiders of influence such as board of directors or block shareholders, more strictly regulations and the disclosure of relatively information should be necessary. The result will be expected to lead to better understanding of the nature of the collateralized shares and laying the groundwork for realizing that is the collateralized shares worth monitoring. It may provide policy implication for the regulators in the later monitoring requirement
nternal control and fraudulent litigation prediction: application of neuro fuzzy system
Authors: Chen Hsueh-Ju , Huang Shaio Yan , Lin Chin–Shien
Published: February 2017

Since a leading conceptual model for the detection of management fraud was initially presented in Loebecke and Willingham (1988), different methods including cascaded logit models, fuzzy systems, neural networks (NNs) model have been applied to promote detection ability of fraud. However, those methods have their inherent limits. Therefore, this study tries to construct a hybrid approach combining the functionality of fuzzy logic and the learning ability of neural network to establish a prior alarm system for fraud lausuits which result from the defective internal controls. The results show that neuro fuzzy with a more accurate prediction not only turns out to be a support system for auditors’ daily practice, it also proposes an assumption foundation for future research through its comprehensive explanation about mapping function among variables.
Partnership versus corporation: untangling the governance dilemma of corporate venture capital
Authors: Gianfrate Gianfranco , Zanetti Laura
Published: February 2017

This brief research note discusses the role of organizational and governance design in a specific sector, namely the Corporate Venture Capital (CVC). This specific segment of the venture capital industry has so far proved to be at least as successful as venture capital investments carried out by “independent” or “pure” players, but corporate-sponsored initiatives tend to be more short-lived, cyclical and unstable. Unlike traditional venture capital funds, CVC established by corporations usually seek both financial returns and “strategic” benefits. We discuss the dilemma faced by corporations setting-up CVC programs in terms of governance design and ownership arrangements, showing that strategic and financial performances are unlikely to be conjointly maximized, thus leading to the inherent instability of such programs.
Market discipline and deposit insurance: evidence from some Middle Eastern banks
Authors: Omet Ghassan , Ibrahim Saif , Yaseen Hadeel
Published: February 2017

Financial intermediaries (banks) and market (stock markets) can play an important role in economic growth. They facilitate a more efficient mobilization of savings, spread risk, and provide liquidity. Given the high costs of banking crises, regulators have always sought the means that promote greater levels of prudence in the behaviour of banks. Indeed Pillar 3 of the Basel Accord relies on enhancing bank disclosure to strengthen market discipline. In other words, Basel II introduces mechanisms to ensure effective governance in financial institutions. The primary objectives of this research are to provide answers to two questions. First, do depositors discipline Jordanian, Kuwaiti, Omani, and Saudi banks? Second, the fact that the Kuwaiti and Saudi deposits are 100 percent insured explicitly and implicitly respectively, while the Jordanian and Omani deposits are insured up to $14,000 and $50,000 respectively, does this difference in the deposit insurance design have any bearing on market discipline. Based on a sample of listed Jordanian, Kuwaiti, Omani, and Saudi banks during the time period 1997 – 2006, the overall results clearly indicate the absence of market discipline in Kuwait, Oman, and Saudi Arabia. In other words, market discipline is at work only in Jordan.