Multiple large shareholders and controlling shareholders’ related-party M&As

2021 ◽  
pp. 1-7
Author(s):  
Yanyan Shen ◽  
Xiaotong Yang ◽  
Bing Zhu
Keyword(s):  
Controlling Shareholders ◽  
Large Shareholders

Dividends and Expropriation

2001 ◽  
Vol 91 (1) ◽  
pp. 54-78 ◽  
Author(s):  
Mara Faccio ◽  
Larry H. P Lang ◽  
Leslie Young
Keyword(s):  
East Asia ◽  
Western Europe ◽  
Agency Problem ◽  
Controlling Shareholders ◽  
Predominant Form ◽  
Large Shareholders ◽  
Crony Capitalism ◽  
Top Manager

Whereas most U.S. corporations are widely held, the predominant form of ownership in East Asia is control by a family, which often supplies a top manager. These features of “crony capitalism” are actually more pronounced in Western Europe. In both regions, the salient agency problem is expropriation of outside shareholders by controlling shareholders. Dividends provide evidence on this. Group-affiliated corporations in Europe pay higher dividends than in Asia, dampening insider expropriation. Dividend rates are higher in Europe, but lower in Asia, when there are multiple large shareholders, suggesting that they dampen expropriation in Europe, but exacerbate it in Asia. (JEL G34, G35)

scholarly journals Does Ownership Concentration Affect Profitability and Dividend Policy? Evidence from Listed Banks in Jordan

2021 ◽  
Vol 18 ◽  
pp. 1019-1027
Author(s):  
Ahmad Dahiyat ◽  
Esra Al-Nsour
Keyword(s):  
Dividend Policy ◽  
Investment Decisions ◽  
Ownership Concentration ◽  
Agency Conflicts ◽  
Return On Equity ◽  
Controlling Shareholders ◽  
Large Shareholders ◽  
Simple Regression

This paper examines how the ownership concentration affects banks’ profitability and dividend policy in Jordan. All banks listed on the Amman Exchange were selected (16 banks) over the period 2010 to 2019. Ownership concentration was defined as the percentage of ownership that equals or exceeds 5%, while profitability was defined by return on equity; dividend policy was defined by the pay-out ratio. Simple regression was utilized to examine the effect; the result revealed that ownership concentration has a positive significant impact on profitability, which means that banks with higher ownership concentration have better profitability, this result justified by the view of the power that controlling shareholders can greatly use to require management to make decisions that improve the performance. The finding showed a negative significant impact on dividend policy, which indicates that the existence of large shareholders can reduce agency conflicts; and maximize the wealth of the company. It is recommended that related parties especially investors should take the concentration of ownership as an important factor to take their investment decisions, whether related to purchasing banks’ shares for various purposes, or expectations of potential dividends.

scholarly journals Controlling shareholders and corporate valuation in Brazil

2006 ◽  
Vol 3 (2) ◽  
pp. 137-141
Author(s):  
Ricardo P. C. Leal ◽  
Andre Carvalhal da Silva
Keyword(s):  
Cash Flow ◽  
Ownership Structure ◽  
Firm Valuation ◽  
Controlling Shareholder ◽  
Controlling Shareholders ◽  
Corporate Valuation ◽  
Large Shareholders ◽  
And Performance ◽  
Cash Flow Rights

This paper investigates the relation between the ownership structure, valuation and performance of Brazilian companies. The results show that large shareholders keep control while holding only a small fraction of cash flow rights. The evidence also indicates that non-voting shares and pyramiding are the main devices set to entrench the large controlling shareholder. There is some evidence that firm valuation and performance are negatively related to voting concentration, and that foreign-owned firms perform the best while government-owned firms perform the worst.

scholarly journals Economic incentives of family controlling shareholders and the monitoring role of non-dominant large shareholders in corporate governance: Evidence from the manufacturing firms in Malaysia

2014 ◽  
Vol 17 (4) ◽  
pp. 471-483 ◽  
Author(s):  
Chin Fei Goh ◽  
Amran Rasli ◽  
Saif-Ur-Rehman Khan
Keyword(s):  
Family Firms ◽  
Stock Exchange ◽  
Market Performance ◽  
Economic Incentive ◽  
Economic Incentives ◽  
Minority Shareholders ◽  
Control Rights ◽  
Controlling Shareholders ◽  
Large Shareholders

This article explores the economic incentives of dominant controlling shareholders with regard to the expropriation of minority shareholders, on the one hand, and the monitoring role of non-dominant large shareholders in family firms, on the other. The authors argue that family controlling shareholders (or family owners) do not share common interests with other shareholders. Drawing on 141 family firms in the manufacturing sector that were listed on Bursa Malaysia (the Malaysian stock exchange) from 2003 to 2006, the article finds an inverted U-shaped relationship between excess control rights and a firm's market performance. The findings also show that both the cash flow rights (i.e. claims on cash payouts) of family controlling shareholders and the presence of non-dominant large shareholders with the ability to contest control of the firm have a positive relationship with market performance.  This study contributes to the literature by indicating that family owners are unlikely to collude with other large shareholders to expropriate minority shareholders. Furthermore, low levels of excess family-owner control rights are beneficial for market performance because firms may benefit from group affiliations and receive patronage from wealthy owners. However, high levels of excess control rights are understood to be an economic incentive for family owners to expropriate minority shareholders during non-crisis periods. 

Can Small Shareholders Protect Their Interests from Expropriation: The Case of a Chinese Bank

2019 ◽  
Vol 16 (1) ◽  
pp. 139-168
Author(s):  
Mahmoud Ezzamel ◽  
Jason Zezhong Xiao ◽  
Rongli Yuan
Keyword(s):  
Collective Action ◽  
Shareholder Activism ◽  
Convertible Bonds ◽  
Network Density ◽  
Controlling Shareholders ◽  
Principal Problem ◽  
Large Shareholders ◽  
Identity Based ◽  
Small Shareholder

ABSTRACTThis article examines how small shareholders protected their interests from large shareholders’ expropriation by forming an alliance and taking collective action to block a convertible bonds issue by a Chinese bank that they considered harmful. Forming an alliance strengthened small shareholders’ network density, enhanced their salience (power, legitimacy, and urgency), and reduced the bank's centrality. This enabled small shareholders to change their strategy from being a subordinator to a compromiser and forced the controlling shareholders and their representatives to change their strategy from a commander to a compromiser. Apart from interest-based motives, the alliance provided small shareholders with identity-based incentives to persistently oppose expropriation by controlling shareholders. This article enriches the literature on small shareholder activism and principal-principal problem.

scholarly journals Collusions In Chinese Family Firms: An Informal Institution-Based View Of Multiple Large Shareholders

2015 ◽  
Vol 31 (4) ◽  
pp. 1531 ◽  
Author(s):  
Huaili Lv ◽  
Wanli Li
Keyword(s):  
Family Firms ◽  
Theoretical Perspective ◽  
Agency Problems ◽  
Informal Institutions ◽  
Chinese Family ◽  
Informal Institution ◽  
Controlling Shareholders ◽  
Large Shareholders ◽  
Contingent Condition ◽  
Prior Literature

Informal institutions such as culture is contingent condition affecting opportunism in large shareholders' relationships (Sauerwald and Peng, 2013). Using the data from 2003 to 2012 of Chinese family firms, our research finds that the collusions of multiple large shareholders (MLS) caused by Chinese family-oriented collectivism culture lead to firms investment inefficiency, including overinvestment and underinvestment. Unlike prior literature focusing merely on the agency problems of management or controlling shareholders, this study provides evidence of the agency problems of MLS. From examining the relations and allocations of shareholders ownership, we provide shareholders collusions, a new theoretical perspective to explain the investment inefficiency in Chinese family firms.

scholarly journals Multiple large shareholders and corporate fraud: evidence from China

2021 ◽  
Vol 15 (1) ◽  
Author(s):  
Xibo Zhao ◽  
Dan Yang ◽  
Zhengguang Li ◽  
Lynda Song
Keyword(s):  
Information Disclosure ◽  
Listed Companies ◽  
Corporate Fraud ◽  
Internal Governance ◽  
Controlling Shareholders ◽  
Mediating Role ◽  
Chinese Listed Companies ◽  
Large Shareholders ◽  
Control Right ◽  
The Relationship

AbstractThis study tests the effect of multiple large shareholders on the level of corporate fraud using the data of Chinese listed companies from 2010 to 2018. We find lower probabilities and lower corporate fraud frequencies when there are multiple large shareholders in Chinese listed companies, indicating that their presence plays a supervisory role in internal governance. These results persist after we control for endogeneity. Moreover, the effect of multiple large shareholders on corporate fraud is strengthened with the separation of control right and cash flow right. Further analyses reveal that companies with multiple large shareholders experience considerably reduced information disclosure fraud but no reduction in operating or leader frauds. Additionally, information asymmetry and the capital occupation of controlling shareholders both play a mediating role in the relationship between multiple large shareholders and the level of corporate fraud. This study enriches the literature on the determinants of corporate fraud and the effects of multiple large shareholders. Our findings also provide implications for companies and regulators regarding ways to reduce fraud.

scholarly journals Corporate contestability and corporate expropriation

2016 ◽  
Vol 6 (4) ◽  
pp. 403-409
Author(s):  
Abdul Hadi Zulkafli ◽  
Ahmad Husni Hamzah
Keyword(s):  
Negative Relationship ◽  
Type Ii ◽  
Herfindahl Index ◽  
Controlling Shareholder ◽  
Dividend Payout ◽  
Controlling Shareholders ◽  
Power And Control ◽  
Large Shareholders ◽  
And Control

This paper presents evidence on the role of ownership in dealing with corporate expropriation of listed companies in Malaysia. From the perspective of expropriation, a single controlling shareholder is always associated with such behavior due to their power and control at the expense of minority shareholder. However, subsequent individual or coalition of large shareholders can be an important corporate governance tool by providing effective monitoring that would lessen the possibility of expropriation by the controlling shareholder. Relating to that, this study evaluates the role of controlling and large shareholders in dealing with corporate expropriation. It is found that there is a negative relationship between single controlling shareholders and dividend payout ratio indicating that firms with only controlling shareholder will pay a lower dividend due to possible expropriation through profit diversion by controlling shareholder. Using Herfindahl Index as a proxy for ownership contestability, the presence of large shareholders along with controlling shareholder has a positive relationship with dividend payout implying that increased contestability helps to curb the power of controlling shareholder to expropriate fund for their own benefit. In accordance with agency theory, the outcome suggests that large shareholders play a monitoring role in minimizing the Type II agency problem. It is also verifying the argument made based on the Catering Theory of Dividend that the presence of large shareholder brings benefit to all shareholders as they are able to reduce profit diversion by demanding for higher dividend.

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