Ownership, tax and intercorporate loans in China

2019 ◽  
Vol 27 (1) ◽  
pp. 111-129 ◽  
Author(s):  
Wei Huang
Keyword(s):  
Emerging Markets ◽  
Tax Reform ◽  
Emerging Market ◽  
Foreign Direct Investments ◽  
Governance Mechanism ◽  
Governance System ◽  
Tax System ◽  
Controlling Shareholder ◽  
Content Type ◽  
Domestic Firms

Purpose This paper aims to investigate the interconnections between corporate ownership, tax system and controlling shareholder tunneling through intercorporate loans in an emerging market setting. Design/methodology/approach China’s Enterprises Income Tax reform in 2008 abolished its previous multiple-tiers tax system under which foreign direct investment (FDI) firms enjoyed preferential tax rates than domestic firms by introducing a new unified-rate tax system. Using difference-in-differences tests, the author analyzes changes of controlling shareholders tunneling through intercorporate loans among Chinese listed companies around this reform. Findings The author documents significant reductions of intercorporate loans after the reform. More importantly, the author reveals that foreign-invested firms experienced larger reductions of intercorporate loans than domestic firms. The author also shows that state association matters for domestic firms’ response to the reform. In addition, the author documents positive stock market reaction to the tax reform announcement for firms that exhibited higher level of tunneling prior to the reform, indicating market expectation of reduced principal-principal conflict post-reform. Research limitations/implications The findings suggest effective corporate governance system is warranted to constrain intercorporate fund transfers in emerging markets where tax incentives are used for attracting inward foreign direct investments. Institutional reforms in emerging markets aimed at removing market frictions can alleviate the problem of controlling shareholder expropriations of minority interests or tunneling. Originality/value This is a pioneering study that reveals the role of tax as a public governance mechanism in weak minority investor protection environment.

The ultimate controlling owner and corporate governance in Brazil

2019 ◽  
Vol 19 (1) ◽  
pp. 120-140 ◽  
Author(s):  
Vicente Lima Crisóstomo ◽  
Isac de Freitas Brandão
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Governance System ◽  
Private Benefits ◽  
Controlling Shareholder ◽  
Content Type ◽  
Controlling Shareholders ◽  
Private Benefits Of Control ◽  
Corporate Governance System

Purpose High ownership concentration makes controlling blockholders powerful enough to use private benefits of control and able to shape the corporate governance system to favor their own interests. This paper aims to examine the effect of the nature of the ultimate firm owner on the quality of corporate governance in Brazil. Design/methodology/approach Econometric models are estimated to assess whether the nature of the ultimate controlling shareholder affects the quality of the corporate governance system. Models are estimated using panel data methodology with coefficients estimated by the generalized method of moments system estimator. Findings The results show that the absence of a controlling shareholder has a positive effect on corporate governance, whereas the presence of a controlling blockholder, or a shareholder agreement among a few large shareholders, has a negative effect. This adverse effect holds when the controlling blockholder is a family or another firm. The findings are in line with the expropriation effect given that weaker corporate governance system facilitates controlling shareholders’ ability to extract private benefits of control. The findings also give support to the substitution effect as powerful blockholders take on the management monitoring function by weakening the board. Originality value Following important previous literature, the study investigates the effect of the nature of large controlling shareholders on the adoption of good corporate governance practices. The work provides additional evidence on the effect of the nature of large controlling shareholders on the quality of the corporate governance system in Brazil, taking into account the main kinds of controlling blockholders present in that market. The findings give support to both the expropriation and substitution hypotheses highlighting the presence of the principal-principal agency model in an important emerging market, Brazil.

Corporate fraud and information asymmetry in emerging markets

2019 ◽  
Vol 26 (1) ◽  
pp. 95-112 ◽  
Author(s):  
Abdul Ghafoor ◽  
Rozaimah Zainudin ◽  
Nurul Shahnaz Mahdzan
Keyword(s):  
Emerging Markets ◽  
Information Asymmetry ◽  
Event Study ◽  
Capital Market ◽  
Emerging Market ◽  
Developed Countries ◽  
Governance Mechanism ◽  
Ols Regression ◽  
Content Type ◽  
Practical Implications

PurposeThe purpose of this study is to examine changes in firms’ level of information asymmetry in emerging market of Malaysia for the period of 2000-2016. Specifically, the study focuses on changes in the quoted spread and quoted depth following the fraud announcement.Design/methodology/approachThe study uses a unique set of fraud sample using enforcement action releases (EARs) identified from the Security Commission of Malaysia and Bursa Malaysia. To estimate the result, the authors use event study methodology, OLS regression and simultaneous model on a set of 67 fraudulent firms.FindingsThe results of event study, OLS regression and simultaneous equation models suggest that information asymmetry increases on fraud discovery. The authors also use the analysis on subsamples classified by the type of regulator (who issued the enforcement release) and type of fraud committed. However, the authors find no evidence of a difference in information asymmetry across these groups. Overall, the results support the reputational view of fraud that it damages the firms’ reputation and increases uncertainty in the capital market.Research limitations/implicationsThese findings provide valuable insights into understanding the information asymmetry around fraud announcements, especially for Malaysia, where the majority of the public-listed companies are family-controlled and under significant state control. The results of this study call for the active role that regulators can play to achieve a transparent and liquid capital market.Practical implicationsThe research has practical implications. Specifically, for Malaysia, fraud is the primary area for National Results Areas (NKRA) in the Government Transformation Program (GTP). Therefore, for regulators and policymakers to ensure a liquid and transparent capital market, identifying the factors that elicit the fraudulent behavior and improving the related governance mechanism are necessary steps to prevent the fraudulent practices.Social implicationsDue to increased information asymmetry on fraud announcements, the demand for equity decreases that may affect not only the fraudulent firms but also results in negative externality for non-fraudulent firms, thus impairing their ability to fund equity.Originality/valueA significant majority of studies have focused on corporate frauds in developed countries such as the USA that is characterized by dispersed ownership system and a strong capital market. One of the vocal critics of the agency theory is that it neglects the social and institutional framework within which companies operate. In emerging markets, such as Malaysia, the published academic papers on fraud and information asymmetry are very limited. As emerging markets practice different cultures, corporate governance mechanisms and market regulations, the study is significant to investigate the behavior of investors in such markets.

Earnings management and ownership structure in emerging market

2017 ◽  
Vol 43 (10) ◽  
pp. 1117-1136 ◽  
Author(s):  
Naima Lassoued ◽  
Mouna Ben Rejeb Attia ◽  
Houda Sassi
Keyword(s):  
Emerging Markets ◽  
Earnings Management ◽  
Ownership Structure ◽  
Audit Quality ◽  
Emerging Market ◽  
Middle Eastern ◽  
Convincing Evidence ◽  
Loan Loss ◽  
African Countries ◽  
Content Type

Purpose The purpose of this paper is to investigate whether ownership structure affects earnings management in the banking industry of emerging markets. Design/methodology/approach The empirical study is conducted using a sample of 134 banks from 12 Middle Eastern and North African countries. Econometrically speaking, the study used a panel data regression analysis. Findings The authors found convincing evidence that banks with more concentrated ownership use discretionary loan loss provisions to manage their earnings. The authors also found that state and institutional owners encourage earnings management, while family owners reduce this practice. Practical implications The findings would be valuable for investors since they should take into account ownership structure in order to reach a better investment decision. Moreover, regulatory reforms in emerging markets should push for more transparency about ownership structure, high levels of supervision, and external audit quality. Originality/value This study presents international evidence on the prominent role of owners in earnings management in emerging markets with weak shareholder rights protection.

Measuring the service gaps in the roles of quantity surveyors in the emerging market

2016 ◽  
Vol 23 (5) ◽  
pp. 1111-1131 ◽  
Author(s):  
AbdulLateef Olanrewaju
Keyword(s):  
Emerging Markets ◽  
Construction Industry ◽  
Design Methodology ◽  
Emerging Market ◽  
Supply And Demand ◽  
The Other ◽  
Primary Data ◽  
Content Type ◽  
Practical Implications ◽  
Survey Questionnaires

Purpose – The opportunities that the emerging markets present to the players in the construction industry means that the players need to expand on the scope and size of their responsibilities and duties to the stakeholders. Each of the professionals now demands more specialised and sophisticated services from one another. The other players in the construction industry now require more emerging responsibilities and duties from the quantity surveyors. The purpose of this paper is to examine the roles that “modern” quantity surveyors play by measuring the gaps that exist in the services that the quantity surveyors provide. Design/methodology/approach – Primary data are collected through survey questionnaires. In total, 23 roles played by modern quantity surveyors are identified and addressed to the respondents to rank the rate at which quantity surveyors provide these “emerging” services. The collected data were analysed statistically. Findings – The results of the findings led to the conclusion that the quantity surveyors were not meeting the expectations of other players. Therefore, for competitiveness, quantity surveyors need to better meet demand expectations. Research limitations/implications – This findings of this research are constrained to the services or functions that the quantity provide in the construction industry. Practical implications – This knowledge is valuable to academic institutions that offer quantity surveying programmes, to practicing quantity surveyors, governments, and other players in the construction industry. It will allow quantity surveyors to reconcile supply and demand expectations. Originality/value – There is no known conclusive empirical study on services offered by quantity surveyors in any emerging markets. Therefore, the findings offer a fresh understanding on the services of quantity surveyors not only in Nigeria but elsewhere. While some of the services are common, others are peculiar to emerging markets.

Home country underdevelopment and internationalization

2017 ◽  
Vol 27 (3) ◽  
pp. 217-230 ◽  
Author(s):  
Alvaro Cuervo-Cazurra ◽  
Ravi Ramamurti
Keyword(s):  
Emerging Markets ◽  
Comparative Advantage ◽  
Home Country ◽  
Emerging Market ◽  
Content Type ◽  
Emerging Market Multinationals ◽  
Economic Underdevelopment ◽  
Conceptual Paper ◽  
Practical Implications ◽  
At Home

Purpose The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization. Design/methodology/approach This paper is a conceptual paper. Findings We argue that the home country’s institutional and economic underdevelopment can influence the internationalization of firms in two ways. First, emerging-market firms may leverage innovations made at home to cope with underdeveloped institutions or economic backwardness to gain a competitive advantage abroad, especially in other emerging markets; We call this innovation-based internationalization. Second, they may expand into countries that are more developed or have better institutions to escape weaknesses on these fronts at home; we call this escape-based internationalization. Research limitations/implications Comparative disadvantages influence the internationalization of the firm differently from comparative advantage, as it forces the firm to actively upgrade its firm-specific advantage and internationalize. Practical implications We explain two drivers of internationalization that managers operating in emerging markets can consider when facing disadvantages in their home countries and follow several strategies, namely, trickle-up innovation, self-reliant innovation, improvisation management, self-reliance management, technological escape, marketing escape, institutional escape and discriminatory escape. Originality/value We explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.

Conditional stock liquidity premium: is Warsaw stock exchange different?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Szymon Stereńczak
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Exchange ◽  
Emerging Market ◽  
Market Liquidity ◽  
Investment Horizon ◽  
Liquidity Premium ◽  
Stock Liquidity ◽  
Content Type ◽  
Bear Market

Purpose This paper aims to empirically indicate the factors influencing stock liquidity premium (i.e. the relationship between liquidity and stock returns) in one of the leading European emerging markets, namely, the Polish one. Design/methodology/approach Various firms’ characteristics and market states are analysed as potentially affecting liquidity premiums in the Polish stock market. Stock returns are regressed on liquidity measures and panel models are used. Liquidity premium has been estimated in various subsamples. Findings The findings vividly contradict the common sense that liquidity premium raises during the periods of stress. Liquidity premium does not increase during bear markets, as investors lengthen the investment horizon when market liquidity decreases. Liquidity premium varies with the firm’s size, book-to-market value and stock risk, but these patterns seem to vanish during a bear market. Originality/value This is one of the first empirical papers considering conditional stock liquidity premium in an emerging market. Using a unique methodological design it is presented that liquidity premium in emerging markets behaves differently than in developed markets.

scholarly journals Evaluating the impact of corporate logos towards corporate reputation

2017 ◽  
Vol 20 (2) ◽  
pp. 158-180 ◽  
Author(s):  
Pantea Foroudi ◽  
Khalid Hafeez ◽  
Mohammad M. Foroudi
Keyword(s):  
Emerging Markets ◽  
Cultural Values ◽  
Attribution Theory ◽  
Corporate Reputation ◽  
Emerging Market ◽  
Corporate Image ◽  
Customer Relationship ◽  
Corporate Communications ◽  
Content Type ◽  
The Impact

Purpose This paper aims to examine the impact of corporate logos on corporate image and reputation in creating competitive advantage in the context of Persia and Mexico as emerging markets. The paper provides an extensive links between corporate logo and its dimension and internal stakeholders’ attitudes towards advertisement, familiarity and recognisability as intermediaries to corporate image and reputation. Design/methodology/approach A qualitative exploratory approach was undertaken, comprising 12 face-to-face interviews and 14 skype in-depth interviews with graphic designers, design, communication and marketing consultant in Mexico and Persia based on attribution theory. Findings The study posits that the more favorable the name, colour, typeface and design of the company logo, the more favorable the attitude Mexican consumers have towards the corporate logo, corporate image and reputation. However, in comparison for Persia these factors have less effect on customers’ judgment and behaviour, towards the corporate logo, corporate image and reputation. The research findings suggest that the selection of colour in a corporate logo is related to its marketing objectives, cultural values, desired customer relationship levels with the organisation and organisation’s corporate communications. Originality/value Corporate logo has received little attention in marketing literature and rarely researched in the context of emerging market. This is the first research of its kind to find the effect of the compound logo in emerging markets of Persia and Mexico. Therefore, this research makes significant contribution towards the corporate visual identity literature by developing of the sphere of influence of the corporate logo and its antecedents and consequences (corporate image and corporate reputation).

CSR engagement and values in a pre-emerging and emerging country context

2018 ◽  
Vol 13 (5) ◽  
pp. 1251-1272 ◽  
Author(s):  
Virginia Munro ◽  
Denni Arli ◽  
Sharyn Rundle-Thiele
Keyword(s):  
Developing Countries ◽  
Social Identity ◽  
Emerging Markets ◽  
Social Identity Theory ◽  
Emerging Market ◽  
Content Type ◽  
Employee Values ◽  
Emerging Country ◽  
Csr Strategy ◽  
Employee Identification

Purpose Internationalization has witnessed rapid growth of multinational enterprises (MNEs) in emerging markets, requiring reflection on how to operate within these markets. The purpose of this paper is to assist MNEs to adapt to these markets, and adopt corporate social responsibility (CSR) strategy with social initiatives (SIs), relevant to stakeholders, including their employees and the communities they reside in. The current paper does this by examining the relationships between employee identification with the organization’s SIs (SI-I) and their engagement in them (SI-E), alongside their perspective on the general importance of CSR (ICSR) and employee values to help with CSR (VCSR). The findings will better prepare managers in pre-emerging and emerging markets to design CSR strategy and SIs relevant to these markets and their communities. Design/methodology/approach Guided by social identity theory, this paper examines local employee identification of SI (SI-I) and engagement in SI (SI-E), in two MNE subsidiaries across varying emerging market levels in developing countries, utilizing a quantitative survey design. Structural equation modeling is utilized to analyze responses of N=544 employees in two South East Asian countries, namely, Indonesia (as an emerging country) and Vietnam (as a pre-emerging country), to determine any differences that may exist between the two countries. Findings The findings reveal that SI identification (SI-I) has a strong effect on employee engagement in SIs (SI-E) and also the importance they attach to organizations conducting CSR (ICSR). However, employee values to help with CSR activities (VCSR) has an effect on Vietnamese employees but not Indonesian employees. Likewise, SI-I mediates the effect between ICSR and SI-E for Vietnamese employees but not for Indonesian, suggesting differences exist between these two developing countries where the less developed country, Vietnam, is defined as pre-emerging and Indonesia as an emerging market (MSCI, 2016). Practical implications An awareness of the differences that may exist across employees in emerging markets will assist managers to design CSR strategy relevant to the level of market emergence of the host country, allowing for better CSR SIs identification and engagement in these countries. Originality/value The research model for this analysis utilizes constructs based on past Identification literature, while including new constructs for this study adapted from past literature, and underpinned uniquely by social identity theory in an International Business setting. The findings indicate differences between emerging and pre-emerging markets for particular constructs, which suggests the importance of considering the market level when implementing MNE CSR strategy. Limited research has been conducted examining the differences between emerging and pre-emerging markets, so further research is required to replicate these findings and provide insight into the differences that may exist for CSR SIs in emerging markets.

Audit committee effectiveness and financial reporting timeliness

2018 ◽  
Vol 9 (1) ◽  
pp. 34-55 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Emerging Market ◽  
Listed Companies ◽  
Audit Committees ◽  
Future Research ◽  
Governance System ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence. Design/methodology/approach Empirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013. Findings Multivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness. Research limitations/implications The audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness. Practical implications Findings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness. Originality/value This study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

Emerging markets are now more resilient to US tapering

2021 ◽  
Keyword(s):  
Emerging Markets ◽  
Emerging Market ◽  
Bond Market ◽  
Oil Price ◽  
Inflation Expectations ◽  
Content Type ◽  
Dramatic Decline ◽  
Equity Funds

Significance The rise in yields is stirring memories of the 2013 ‘taper tantrum’, which led to a dramatic decline in emerging market (EM) currencies and local bonds, prompting three years of net outflows from EM debt and equity funds. Investor fears of US tightening have risen with growth and inflation expectations. Impacts If the trade-weighted dollar index rises further, this will threaten EM currencies, especially those with large dollar-denominated debts. The Brent oil price has gained 70% since November to USD68 per barrel but further upside is limited, with no commodities ‘supercycle’ ahead. Recent moves fuel fears of the normally staid US bond market becoming volatile; stable ten-year Chinese yields are being seen as a haven.

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