The Impact of the Ownership Discrepancy Between Cash-Flow Rights and Voting Rights on Firms’ Soft Asset Investment Decisions: Evidence from Large Business Groups in South Korea

2014 ◽  
Vol 24 (3) ◽  
pp. 429-450 ◽  
Author(s):  
Pyung K. Kang ◽  
Yoo Chan Kim
Keyword(s):  
South Korea ◽  
Cash Flow ◽  
Business Groups ◽  
Investment Decisions ◽  
Voting Rights ◽  
Cash Flow Rights ◽  
The Impact

scholarly journals Pyramiding effect on firm’s investment decision among Malaysian distress companies

2005 ◽  
Vol 3 (1) ◽  
pp. 163-172
Author(s):  
Fauzias Mat Nor ◽  
Amin Noordin Bany-Ariffin
Keyword(s):  
Cash Flow ◽  
Ownership Structure ◽  
Investment Decisions ◽  
Direct Result ◽  
Control Rights ◽  
Investment Activity ◽  
Pyramidal Ownership ◽  
Cash Flow Rights ◽  
The Impact ◽  
Retained Earnings

It is documented by La Porta, Lopez and Shleifer (1999) that ultimate owners, around the world usually control an array of affiliated companies through hierarchical intermediary corporations forming a Pyramidal Ownership Structure. A direct result of this pyramidal ownership structure is divergence of cash flow rights from control rights in the hand of the largest shareholders (Claessens, Djankov and Lang 2000). This paper investigate the impact of this separation of cash flow rights from control rights resulting from this pyramidal forms of ownership structure on firm’s investment decisions. In particular, our objective is to examine whether such separation affects the investment decisions among Malaysian listed distress Companies. Our findings lends support to the over investment problem, where by the separation of cash flow rights and control rights have led to the increase of inefficient investment among the distress companies. The main source of financing for this inefficient investment activity is the firm’s retained earnings. Consequently, the exploitation of such firm’s resources in order to finance these inefficient investment activities of the ultimate owner’s then lead to negative market valuation.

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.

The impact of macroeconomic condition on investment-cash flow sensitivity of Indian firms

2019 ◽  
Vol 9 (1) ◽  
pp. 19-42
Author(s):  
Gaurav Gupta ◽  
Jitendra Mahakud
Keyword(s):  
Cash Flow ◽  
Economic Condition ◽  
Investment Decisions ◽  
Group Affiliation ◽  
Content Type ◽  
Flow Sensitivity ◽  
Macroeconomic Condition ◽  
Gdp Growth Rate ◽  
Cash Flow Sensitivity ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of the macroeconomic condition on investment-cash flow sensitivity (ICFS) of Indian firms and examine whether the effect of macroeconomic condition on ICFS depends on the size and group affiliation of the firm. Design/methodology/approach An empirical investigation is conducted using a dynamic panel data model or more specifically system generalized method of moments (GMM) estimation technique. Findings Empirical findings postulate that the availability of cash flow influences the investment decisions which depicts that Indian manufacturing firms are internally as well as externally financially constrained. This study finds that good economic condition (period of high GDP growth rate) reduces the ICFS, although this effect is stronger for small-sized and standalone firms than the large-sized and business group affiliated firms. The authors find that macroeconomic condition has a positive and significant effect on investment decisions. Research limitations/implications This study has considered only the non-financial sector. The future research could explore the effect of macroeconomic condition on ICFS might be affected by firm other characteristics such as firm age and firm capital structure. Social implications The government should provide loan on the low rate to the small-sized firms and standalone firms because it is very difficult for these firms to finance their investment during the bad economic condition (period of low high GDP growth rate). Originality/value This study contributes to the existing literature by analyzing the impact of the macroeconomic condition on ICFS as well as investment decisions of the Indian manufacturing firms, which is an unexplored issue from an emerging market perspective. To the best of my knowledge, this is a first-ever study which explores the effect of macroeconomic condition on investment decisions with respect to business group affiliation and firm size.

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

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