Corporate Governance and Pollution Externalities of Public and Private Firms*

2020 ◽  
Vol 33 (3) ◽  
pp. 1296-1330 ◽  
Author(s):  
Sophie A Shive ◽  
Margaret M Forster
Keyword(s):  
Corporate Governance ◽  
Greenhouse Gas ◽  
Ownership Structure ◽  
Mutual Fund ◽  
Negative Association ◽  
Private Firms ◽  
Firm Characteristics ◽  
Publicly Traded ◽  
Public And Private ◽  
Public Firms

Abstract The number of U.S. publicly traded firms has halved in 20 years. How will this shift in ownership structure affect the economy’s externalities? Using comprehensive data on greenhouse gas emissions from 2007 to 2016, we find that independent private firms are less likely to pollute and incur EPA penalties than are public firms, and we find no differences between private sponsor-backed firms and public firms, controlling for industry, time, location, and a host of firm characteristics. Within public firms, we find a negative association between emissions and mutual fund ownership and board size, suggesting that increased oversight may decrease externalities.

scholarly journals Three Essays on Corporate Governance in China

2021 ◽  
Author(s):  
◽  
Zonghao Chen
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
State Ownership ◽  
Independent Directors ◽  
Women Directors ◽  
Director Compensation ◽  
Public Firms ◽  
Listed Firms ◽  
Director Characteristics ◽  
Chinese Public

<p>This thesis consists of three empirical papers on corporate governance in Chinese listed firms. The first essay examines the influence of director characteristics and ownership structure on director compensation. Over the period 2005 through 2015, we find that director compensation in Chinese listed firms is influenced by both director characteristics and ownership structure. We measure director compensation by both the propensity to be paid and the level of compensation. For independent directors, we find that director busyness, tenure, and ownership concentration positively influence and state-ownership negatively influences director compensation. For non-independent directors, we find that tenure positively influences and that both state-ownership and related directors negatively influence director compensation. Lastly, our evidence suggests that women directors in China are not underpaid.  The second essay examines the influence of rookie independent directors on board functions and firm performance in Chinese public companies from 2008 to 2014. We find that rookie independent directors attend more board meetings than seasoned independent directors. Independent directors with higher board meeting attendance are more likely to remain in the firm in the following year (lower turnover rate). This influence of board attendance on re-appointment is stronger for rookie independent directors. Further, we find that boards with more rookie independent directors tunnel less to controlling shareholders, suggesting that rookie independent directors are efficient monitors. Lastly, we find that firms with more rookie independent directors are associated with higher accounting returns.  In the third essay, we investigate the influence of board networks on directors’ career outcomes in Chinese public firms from 2005 to 2014. We find that board connections increase compensation for independent directors. We find that board connections are positively associated with director turnover for non-related directors, but negatively associated with director turnover for related directors. Further, we find that board connections lead to additional future directorships. Overall, we find that board connections both directly lead to higher compensation and indirectly through labor mobility and additional board seats.</p>

Determinants of corporate social and environmental voluntary disclosure in Saudi listed firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Helmi A. Boshnak
Keyword(s):  
Corporate Governance ◽  
Firm Size ◽  
Ownership Structure ◽  
Voluntary Disclosure ◽  
Firm Characteristics ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Social ◽  
The Impact ◽  
Ifrs Implementation

Purpose This paper aims to examine firm characteristics and ownership structure determinants of corporate social and environmental voluntary disclosure (CSEVD) practices in Saudi Arabia to address the paucity of research in this field for Saudi listed firms. Design/methodology/approach The paper uses manual content and regression analyses for online annual report data for Saudi non-financial listed firms over the period 2016–2018 using CSEVD items drawing on global reporting initiative-G4 guidelines. Findings Models show that Saudi firm CSEVD has increased over time compared to previous studies to an average of 68% disclosure due to new corporate governance regulations and IFRS implementation. The models show that firm size, leverage, manufacturing industry type and government ownership are positive determinants of CSEVD, while family ownership is the negative driver of CSEVD. However, firm profitability, audit firm size, firm age and institutional ownership have no impact on the level of CSEVD. Originality/value Using legitimacy and stakeholder theories, the paper determines the influence of firm characteristics and ownership structure on CSEVD, identifying implications for firm stakeholders and providing some evidence on the impact of corporate governance regulation and IFRS implementation on such disclosure. The paper provides additional evidence on progress towards Saudi’s Vision 2030.

scholarly journals Innovation Strategy of Private Firms

2017 ◽  
Vol 53 (1) ◽  
pp. 1-32 ◽  
Author(s):  
Huasheng Gao ◽  
Po-Hsuan Hsu ◽  
Kai Li
Keyword(s):  
New Technology ◽  
Equity Markets ◽  
Life Cycles ◽  
Innovation Strategy ◽  
Private Firms ◽  
Investment Horizon ◽  
Public And Private ◽  
Public Firms ◽  
Innovation Strategies ◽  
Public Equity

We compare innovation strategies of public and private firms based on a large sample over the period 1997–2008. We find that public firms’ patents rely more on existing knowledge, are more exploitative, and are less likely in new technology classes, while private firms’ patents are broader in scope and more exploratory. We investigate whether these strategies are due to differences in firm information environments, CEO risk preferences, firm life cycles, corporate acquisition policies, or investment horizons between these two groups of firms. Our evidence suggests that the shorter investment horizon associated with public equity markets is a key explanatory factor.

scholarly journals CEO Turnover–Performance Sensitivity in Private Firms

2017 ◽  
Vol 52 (2) ◽  
pp. 583-611 ◽  
Author(s):  
Huasheng Gao ◽  
Jarrad Harford ◽  
Kai Li
Keyword(s):  
Chief Executive ◽  
Ceo Turnover ◽  
Private Firms ◽  
Board Structure ◽  
Turnover Rates ◽  
Public And Private ◽  
Public Firms ◽  
Performance Improvements ◽  
Performance Sensitivity ◽  
Quality Of Accounting Information

We compare chief executive officer (CEO) turnover in public and large private firms. Public firms have higher turnover rates and exhibit greater turnover–performance sensitivity (TPS) than private firms. When we control for pre-turnover performance, performance improvements are greater for private firms than for public firms. We investigate whether these differences are due to differences in quality of accounting information, the CEO candidate pool, CEO power, board structure, ownership structure, investor horizon, or certain unobservable differences between public and private firms. One factor contributing to public firms’ higher turnover rates and greater TPS appears to be investor myopia.

Ownership structure, corporate governance and investment efficiency of Chinese listed firms

2017 ◽  
Vol 29 (3) ◽  
pp. 266-282 ◽  
Author(s):  
Naiwei Chen ◽  
Hao-Chang Sung ◽  
Jingjing Yang
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Fixed Effects ◽  
Negative Impact ◽  
Private Firms ◽  
Investment Efficiency ◽  
Governance Mechanisms ◽  
Content Type ◽  
Listed Firms ◽  
New Perspective

Purpose This paper aims to examine whether and how ownership structure and corporate governance have bearings on the investment efficiency of Chinese listed firms. Design/methodology/approach The authors measure the investment efficiency by following the work of Richardson (2006) and classify listed firms into two categories: state-owned enterprises (SOEs) and private firms. OLS regressions with both industry and year fixed effects are used to investigate the effect of ownership structure and governance mechanisms on the listed firms’ investment efficiency. Findings The authors find that ownership concentration has a negative impact on investment efficiency, and this effect is more pronounced in SOEs than in private firms. In addition, adoption of incentive-based compensation helps improve investment efficiency. Compared with other types of institutional investors, mutual funds are more likely to exert a positive effect on the investment efficiency of investee companies. Originality/value This paper examines the monitoring effect of governance mechanisms in China from a new perspective, which is the investment efficiency. Furthermore, previous studies provide minimal evidence indicating any effect of incentive-based compensation on firm performance in China. This study provides empirical evidence on this effect by using incentive-based compensation (whether CEOs have been granted stock options) as an explanatory variable in the regression models.

scholarly journals Agency costs, ownership structure, and corporate governance in pre-and post-IPO firms

2006 ◽  
Vol 3 (3) ◽  
pp. 88-95 ◽  
Author(s):  
Wallace N. Davidson III ◽  
Amani Khaled Bouresli ◽  
Manohar Singh
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Agency Costs ◽  
Board Composition ◽  
Control Mechanisms ◽  
Publicly Traded ◽  
Publicly Traded Companies ◽  
Before And After ◽  
Venture Capital Firms ◽  
The Impact

Following the approach in Ang, Cole, and Lin (2000), we estimate the impact of CEO ownership on agency costs in pre-IPO firms and again in the post-IPO period when they have become publicly traded companies. We find that CEO ownership is large in both the pre and post-IPO firms. Greater CEO ownership is associated with lower agency costs both before and after the IPO, and CEO ownership in these firms seems to dominate all other agency control mechanisms. Board composition and involvement by venture capital firms does not appear to mitigate agency costs.

scholarly journals Accruals, cash flows and earnings in european privately held firms

2013 ◽  
pp. 133
Author(s):  
Borja Amor Tapia ◽  
María Teresa Tascón Fernández
Keyword(s):  
Cash Flow ◽  
Cash Flows ◽  
Previous Literature ◽  
Private Firms ◽  
Publicly Traded ◽  
Private Companies ◽  
Public Firms ◽  
Publicly Traded Firms ◽  
Privately Held Firms ◽  
Privately Held

Este trabajo examina las propiedades de los ajustes al devengo, los flujos de caja y los resultados en las empresas europeas no cotizadas. A partir de varias hipótesis sobre la persistencia de losresultados y sus componentes, encontramos que las empresas no cotizadas parecen comportarse de forma diferente a la evidencia encontrada previamente sobre las empresas cotizadas. Lasdiferencias son significativas cuando los ajustes al devengo son extremos, dado que la persistencia del ROA y de los flujos de caja siguen patrones de comportamiento distintos a los encontrados en las empresas estadounidenses cotizadas. Pero contrariamente a nuestrashipótesis, las diferencias en la persistencia no son significativas cuando las empresas no cotizadas publican resultados positivos frente a resultados negativos.<br /><br />This paper examines the properties of accruals, cash flows and earnings in European privately held firms. We start from several hypotheses about the persistence of earnings and its components, finding that private companies seem to behave in a different manner than the publicly traded firms tested in previous literature. As hypothesized, differences are significant when accruals are extreme, though in European private firms, persistence of ROA relative to cash flow follows a different pattern than in US public firms. But contrary to our expectations, differences in persistence are not significant when companies report positive versus negative earnings.

Real earnings management in public vs private firms in the GCC countries: a risk perspective

2017 ◽  
Vol 18 (2) ◽  
pp. 242-260 ◽  
Author(s):  
Khalid Al-Amri ◽  
Saif Al Shidi ◽  
Munther Al Busaidi ◽  
Serkan Akguc
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Private Firms ◽  
Flow Management ◽  
Public And Private ◽  
Content Type ◽  
Public Firms ◽  
Cash Flow Management ◽  
Gcc Countries ◽  
Private And Public

Purpose The purpose of this paper is to examine the use of real earnings management by private and public firms in a unique institutional setting, which is the Gulf Cooperation Council (GCC) countries. The paper also compares the level of real earnings management between public and private firms in the GCC area. Design/methodology/approach The GCC area is a unique setting to investigate the use of real earnings management because of the low enforcement of reporting standards and supervisory rules, lack of sophisticated financial analysis, specialized media tools and high concentration of capital ownership. The authors use different models of real earnings management proposed by Roychowdhury, 2006, cash flow management, productions cost management and discretionary expenses management to examine the use of real earnings management. Findings The paper documents evidence consistent with private and public firms using real earnings management to influence their earnings figures. The paper also shows that the level of real earnings management is higher for private firms compared to public firms when cash flow management and discretionary expenses management models are used. The production cost model results show evidence consistent with public firms only engaging in real earnings management through production cost reduction. Research limitations/implications The results of this study might not be applicable to other emerging markets. Practical implications The findings of this study should promote a general understanding of firms’ behavior in unique environment such as GCC countries. Regulators in the GCC region should be aware that real earnings management techniques have been used by firms and that extra caution is required when auditing or analyzing the financial information of private and public firms in the GCC market. Originality/value This paper contributes to the literature in many aspects. First, it provides additional evidence on the use of earnings management in unique market contexts outside the USA and Europe. The GCC markets share many common characteristics that make them interesting settings to be investigated. Second, this paper adds more evidence on the use of earnings management between public and private firms. In this regard, the paper adds additional evidence in the discussions proposed by Ball and Shivakumar (2005) and Givoly et al. (2010) who use two competing perspectives to investigate earnings quality in public and private firms: the demand hypothesis and the opportunistic behavior hypothesis.

Do Public and Private Firms Behave Differently? An Examination of Investment in the Chemical Industry

2019 ◽  
Vol 55 (8) ◽  
pp. 2530-2554 ◽  
Author(s):  
Albert Sheen
Keyword(s):  
Chemical Industry ◽  
Agency Problems ◽  
Private Firms ◽  
Demand Shock ◽  
Public And Private ◽  
Public Firms ◽  
Commodity Chemicals ◽  
Public Firm ◽  
And Control ◽  
The U.S

I compare the U.S. capacity expansion decisions of public and private producers of 7 commodity chemicals from 1989 to 2006. I find that private firms invest differently than public firms. Private firms are more likely than public firms to increase capacity prior to a positive demand shock (an increase in price and quantity) and less likely to increase capacity before a negative demand shock. Potential mechanisms include public firm overextrapolation of past demand shocks and agency problems arising from greater separation between ownership and control.

Mutual fund trading around mergers and fund performance

2019 ◽  
Vol 16 (1) ◽  
pp. 1-20
Author(s):  
Margarita Kaprielyan ◽  
Md Miran Hossain ◽  
Charles Armah Danso
Keyword(s):  
Mutual Fund ◽  
Predictive Power ◽  
Fund Performance ◽  
Wealth Creation ◽  
Publicly Traded ◽  
Public And Private ◽  
Content Type ◽  
Fund Managers ◽  
Portfolio Holdings ◽  
Subsequent Risk

Purpose The purpose of this paper is to investigate whether mutual funds (MFs) take positions in companies that subsequently engage in M&As and whether fund managers adjust portfolio holdings in the same direction as wealth creation from mergers. Further, the study is the first to examine the relation between active trading surrounding M&As and risk-adjusted performance in MFs. Design/methodology/approach The sample includes mergers conducted by publicly traded acquirers of public and private targets over 2003–2016. Several measures of MF managerial activeness in M&As are introduced: merger trading intensity (proportional change in fund’s holdings of M&A stocks), active merger weight (deviation of the fund’s actual weights in M&A stocks and value weights) and active merger trading (deviation of the fund’s actual weights in M&A stocks from the average weights in M&A stocks across the funds within the same Center for Research in Security Prices objective). Findings Fund managers who are more vested in the firms engaged in M&As and who are more active in their trades of M&A firms generate higher contemporaneous and subsequent risk-adjusted performance, indicative of managerial skill. Active M&A trading effect on performance is economically meaningful. Originality/value This is the first study to examine whether previously documented predictive power of active institutions regarding M&As’ profitability leads to higher risk-adjusted returns for MF investors. The study introduces several measures to gauge how actively fund managers trade companies engaged in M&As and contributes to the literature on MF managers’ ability to pick stocks.

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