Ownership concentration, separation of voting rights from cash flow rights, and earnings management: an empirical study in Canada

2008 ◽  
Vol 25 (1) ◽  
pp. i-xv ◽  
Author(s):  
Yves Bozec
Keyword(s):  
Empirical Study ◽  
Earnings Management ◽  
Cash Flow ◽  
Voting Rights ◽  
Ownership Concentration ◽  
Cash Flow Rights

scholarly journals Monitoring function of the board and audit fees: contingent upon ownership concentration

2017 ◽  
Vol 25 (1) ◽  
pp. 70-90 ◽  
Author(s):  
Richard Bozec ◽  
Mohamed Dia
Keyword(s):  
Cash Flow ◽  
Group Analysis ◽  
Voting Rights ◽  
Audit Fees ◽  
Ownership Concentration ◽  
Controlling Shareholder ◽  
Content Type ◽  
Publicly Traded Companies ◽  
Panel Regressions ◽  
Cash Flow Rights

Purpose The aim of this paper is to revisit the board independence–audit fees (BI–AF) relationship while taking into account the ownership structure of the firm. Two effects are unfolding along the ownership concentration spectrum: separation of ownership and control (principal–agent problems) and separation of voting and cash flow rights (principal–principal problems). Design/methodology/approach The study is conducted over a seven-year period (2002-2008) using panel regressions on a sample of Canadian publicly traded companies. The authors use a moderated regression analysis incorporating two-way interactive terms (ownership × BI) and a sub-group analysis. Findings The results show a positive and significant relationship between BI and AF when ownership is concentrated in the hands of a dominant/controlling shareholder. The higher the gap between voting and cash flow rights of the ultimate owner, the stronger the relationship between BI and AF. Overall, evidence supports both the demand-based perspective on AF and the expropriation effect argument. Practical implications Results support a one-size-fits-all approach to governance despite growing concerns from academics and interest groups about the appropriateness of pursuing such strategy when ownership is concentrated in the hands of a dominant/controlling shareholder. Originality/value By taking the excess voting rights into account (difference between voting rights and cash-flow rights of the ultimate owner), the authors propose a refined classification of the sample firms along the ownership concentration spectrum.

scholarly journals Evolution of ownership and control in Italian IPO firms

2008 ◽  
Vol 6 (2) ◽  
pp. 312-333 ◽  
Author(s):  
Silvia Rigamonti
Keyword(s):  
Cash Flow ◽  
Ownership Structure ◽  
Voting Rights ◽  
Set Up ◽  
Cash Flow Rights ◽  
And Control

This article examines the evolution of ownership of cash flow rights and control of voting rights of firms that went public in Italy over the period 1985-2005. At the IPO, the ownership structure does not evolve towards a dispersed one. Even 10 years after the flotation, the initial ultimate shareholder retains the majority of voting rights. Though control is valuable, original owners do not systematically set up structures that dissociate cash flow from voting rights.

Earnings and dividend informativeness when cash flow rights are separated from voting rights

2005 ◽  
Vol 39 (2) ◽  
pp. 329-360 ◽  
Author(s):  
Jennifer Francis ◽  
Katherine Schipper ◽  
Linda Vincent
Keyword(s):  
Cash Flow ◽  
Voting Rights ◽  
Cash Flow Rights

Ownership structure and firm performance: evidence from the subprime crisis period

2018 ◽  
Vol 18 (2) ◽  
pp. 206-219 ◽  
Author(s):  
Mamduh M. Hanafi ◽  
Bowo Setiyono ◽  
I Putu Sugiartha Sanjaya
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Cash Flow ◽  
Ownership Structure ◽  
Learning Process ◽  
Ownership Concentration ◽  
Subprime Crisis ◽  
Control Rights ◽  
Content Type ◽  
Cash Flow Rights

Purpose This paper aims to compare the effect of ownership on firm performances in the 1997 and 2008 financial crises. More specifically, it investigates the effect of cash flow rights, control rights and cash flow rights leverage on firm performance. Two conditions motivated the study. First, the 2008 financial crisis happened quickly, so it was endogenous for firms. This setting is ideal to deal with endogeneity problems in a study that involves ownership and performance. Second, during the 2000s, awareness and implementation of corporate governance increased significantly. The authors believe that the markets learn these changes and incorporate them into prices, as suggested by an efficient market hypothesis. Design/methodology/approach The paper investigates and compares the effect of ownership structure on firm performance in the 2008 subprime crisis period to that in the 1997 financial crisis. Both crises happen unexpectedly, so the authors can expect that the crises are exogenous to firms. The authors use cash flow rights, control rights and cash flow right leverage for the ownership structure dimension. They also study time-series data to investigate the effect of ownership on a firm’s value. Findings The study finds that cash flow right and cash flow right leverage did not affect stock performance during the subprime crisis of 2008. It also finds that cash flow right leverage and cash flow right affected stock performance during the financial crisis of 1997. The study attributes this finding to the learning process and improvement of corporate governance during the period of the 2000s. Using time-series data, it finds that cash flow rights positively affect firm performance, suggesting an alignment effect. Ownership concentration improves firm performance. When the study split its sample, it found that the effect ownership on firms’ value is stronger for large firms. Research limitations/implications The study’s main limitation is that it does not test directly the learning process hypothesis. The study contributes to the current literature by presenting more recent evidence on the effect of ownership structure on firm performance in a developing country. The authors argue that markets learn the improvement of corporate governance and incorporate this development into prices. Extending this research to other markets will provide confirmation whether the learning process is an international phenomenon. Practical implications The awareness and implementation of corporate governance should be maintained at least at this level. The positive relationship between ownership concentration and firm performance suggests that concentrated ownership performs monitoring more effectively. Investors should pay attention to ownership concentration. Social implications The finding that prices already reflect corporate governance may suggest that market is monitoring this issue. This seems to be a good finding. Markets can be expected to discipline companies in the implementation of corporate governance. The awareness and implementation of corporate governance should be maintained at least at the current level. Originality/value The study contributes to the current literature by presenting additional evidence on the effect of ownership (using cash flow rights, control rights and cash flow right leverage) on firms’ performance in a more recent period and in a developing country. This period is characterized by a significant increase in awareness and the implementation of good corporate governance.

The effect of ownership-control disparity on the Chinese firm’s real activity earnings management

2018 ◽  
Vol 30 (4) ◽  
pp. 482-499 ◽  
Author(s):  
Sang Ho Kim ◽  
Yohan An
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Capital Markets ◽  
Chinese Firms ◽  
Real Activity ◽  
Content Type ◽  
Controlling Shareholders ◽  
Cash Flow Rights ◽  
The Impact ◽  
Ownership Control

Purpose This paper aims to investigate the impact of the separation between control and cash flow rights (control-ownership disparity) on the earnings management practices of Chinese firms. The notable features of Chinese firms are those of concentrated ownership and the severe disparity that exists between the control and cash flow rights of controlling shareholders. Design/methodology/approach This study measures the level of Chinese firms’ earnings management by adopting two different methods of measurement: accrual-based earnings management (AEM) and real activity earnings management (REM). The authors also consider the possible trade-off effects between these two types of measurements. The data set in this study encompasses over 2,000 Chinese firms, using data from 2003 to 2015. Findings The results indicate that controlling shareholders are more likely to engage in AEM as their cash flow rights are more concentrated, while they are less likely to use REM as the disparity of control-cash flow rights increases. Further, this inverse relationship between REM and control-cash flow rights disparity becomes more pronounced in the case of a low cash flow rights group. As REM generally causes distortions in firms’ operations, it is possible that the controlling shareholders are more likely to constrain the use of REM as the disparity is perceived to grow. This result may indicate a reduced agency problem between controlling and minority shareholders due to the developing and/or existing ownership dispersions, which are mainly driven by recent reforms applied to Chinese capital markets. However, we do not entirely exclude the possibility of other types of expropriations by the controlling shareholders. It appears that the controlling shareholders are still able to exert a significant level of control, even following a substantial ownership dispersion, and they may seek alternative expropriation methods, including but not limited to intercorporate loan or related party transactions as the disparity of control-cash flow rights increases. Originality/value Although the Chinese economy is experiencing a series of reforms to infuse market forces into capital markets, little has been known about the effects of ownership-control disparity in Chinese firms. Our findings highlight the importance of the country specific context in this vein of research.

The Interdependency of Cash Flow Rights and Voting Rights on Post-acquisition Value

2017 ◽  
Vol 2017 (1) ◽  
pp. 10122
Author(s):  
I-Chen Wang ◽  
Bari Bendell ◽  
Ryoichi Kubo ◽  
Ezekiel Masao Leo
Keyword(s):  
Cash Flow ◽  
Voting Rights ◽  
Cash Flow Rights

scholarly journals The interdependency of cash flow rights and voting rights on post-acquisition value

2020 ◽  
Vol 25 (3) ◽  
pp. 177-187
Author(s):  
I. Kim Wang ◽  
Bari L. Bendell ◽  
Ryoichi Kubo ◽  
Ezekiel Leo
Keyword(s):  
Cash Flow ◽  
Voting Rights ◽  
Cash Flow Rights
Sign in / Sign up

Export Citation Format

Share Document