Competition and Agency Problems Within Banks: Evidence from Insider Lending

2021 ◽  
Author(s):  
Mattia Girotti ◽  
Federica Salvadè
Keyword(s):  
Agency Problems ◽  
Competitive Pressure ◽  
Private Benefit ◽  
Bank Profitability ◽  
Agency Conflict ◽  
Interstate Branching

This paper studies whether greater competition can mitigate agency problems within banks. We measure the intensity of the agency conflict within a bank by the volume of loans that the bank lends to its insiders (e.g., executives). We first check that these loans are a form of private benefit. By exploiting interstate branching deregulation, we then show that banks react to greater competition by reducing insider lending, especially when the entry of new competitors may more strongly affect bank profitability. Results are robust to using various identification approaches and alternative indicators of agency conflict. We conclude that competitive pressure reduces managerial self-dealing. This paper was accepted by Gustavo Manso, finance.

Information Shocks and Corporate Cash Policies

2020 ◽  
Vol 19 (1) ◽  
pp. 5-28
Author(s):  
C. S. Agnes Cheng ◽  
Yuan Huang ◽  
Xiao Li
Keyword(s):  
Insider Trading ◽  
Cash Holdings ◽  
Agency Problems ◽  
Information Environment ◽  
Precautionary Savings ◽  
Difference In Differences ◽  
Private Benefit ◽  
Mandatory Adoption ◽  
Cash Policies ◽  
Jel Classifications

ABSTRACT We examine how information environment affects corporate cash policy by examining the change in cash holdings around two events that lead to exogenous change in information environment, namely the initial enforcement of insider trading laws (ITLs) and the mandatory adoption of IFRS in European Union (EU) countries. Using a difference-in-differences approach, we find that firms decrease their cash holdings after both events. The decrease in cash holdings is more pronounced for firms with higher precautionary savings demand and with more severe agency problems. Additional tests show that the sensitivity of investment to cash holdings declines after the two events, consistent with the notion that the benefit of cash holdings in mitigating underinvestment and the private benefit of overinvesting cash holdings reduce after the events. Overall, our findings provide evidence that information environment improvements have real decision effects. JEL Classifications: M41; M48; G31.

Corporate Governance in China: A Survey*

2020 ◽  
Vol 24 (4) ◽  
pp. 733-772 ◽  
Author(s):  
Fuxiu Jiang ◽  
Kenneth A Kim
Keyword(s):  
Corporate Governance ◽  
Agency Problems ◽  
Future Research ◽  
Minority Shareholders ◽  
Controlling Shareholder ◽  
Controlling Shareholders ◽  
Agency Conflict ◽  
Concentrated Ownership ◽  
The Usa ◽  
Corporate Social

Abstract This article surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the USA to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.

Principal–principal agency conflicts, product market competition and corporate payout policy in China

2020 ◽  
Vol 14 (3) ◽  
pp. 265-279
Author(s):  
Amjad Iqbal ◽  
Xianzhi Zhang ◽  
Muhammad Zubair Tauni ◽  
Khalil Jebran
Keyword(s):  
Market Competition ◽  
Agency Problems ◽  
Payout Policy ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Firm Level ◽  
Content Type ◽  
Agency Conflict ◽  
Concentrated Ownership ◽  
Country Level

Purpose The purpose of this paper is to examine the interaction between competition and corporate payout policy and more specifically to answer the question that whether competition mitigates the principal–principal agency conflicts and influences firms to distribute dividends to shareholders in Chinese corporations. Design/methodology/approach This research models measures of competition with scaled measures of dividends and analyzes a sample of 16,730 firm-year observations from Chinese-listed manufacturing firms for the period spanning 2003 to 2016. Further, this research uses the Tobit model (a censored regression) to empirically test the proposed hypotheses. Findings This research finds that intense competition not only mitigates agency problems and forces firms to disgorge cash but also increases a firm’s likelihood to pay dividends and weakens the negative association between agency conflicts and dividends. Practical implications The results show an important policy implication for the industry. As the principal–principal agency conflict restrains the dividends, the regulatory authorities could encourage a competitive environment and a more diverse ownership structure to induce a higher dividend rate and protect the minority shareholders. In addition, this study also has implications for other emerging markets characterized by concentrated ownership and principal–principal agency problems. Originality/value This study adds to the literature related to the disciplinary role of competition and identifies competition as a significant determinant of corporate payout policy. Furthermore, this research extends earlier research on corporate payout decisions that besides firm-level corporate governance and country-level legal system, industry-level competition also influences corporate payout decisions, significantly.

Liquidity and corporate governance: evidence from family firms

2016 ◽  
Vol 15 (2) ◽  
pp. 144-173 ◽  
Author(s):  
Yin Yu-Thompson ◽  
Ran Lu-Andrews ◽  
Liang Fu
Keyword(s):  
Corporate Governance ◽  
Family Firms ◽  
Generalized Method Of Moments ◽  
Liquidity Risk ◽  
Agency Problems ◽  
Type I ◽  
Stock Liquidity ◽  
Content Type ◽  
Corporate Liquidity ◽  
Agency Conflict

Purpose This paper aims to perform empirical analysis to test whether less severe agency conflict between managers and controlling shareholders may improve family firms’ corporate and stock liquidity, compared to non-family firms. Design/methodology/approach The authors use the ordinary least square and two-stage generalized method of moments regression analyses. They also use match-paired design for robustness check. Findings Focusing on Standard & Poor’s 500 firms, the authors find that family firms are more conservative by hoarding more corporate liquid assets (as measured by accounting balance sheet liquidity ratios) than their peer non-family firms to prevent underinvestment from external costly finance. These family firms also exhibit higher level of stock liquidity and lower liquidity risk as measured by effective bid–ask spread than non-family firms. The results are consistent with the motivation that organizations (i.e. family firms in this study) whose shareholders can efficiently monitor that their managers are associated with higher level of corporate liquidity and stock liquidity, and lower level of liquidity risk. Originality/value This study contributes to the literature on liquidity (both corporate liquidity and stock liquidity) and ownership structure, more broadly corporate governance. It provides insights into corporate and stock liquidity within a unique ownership context: family firms versus non-family firms. Family firms in the USA are subject to both Type I (agency problems arising from the separation of ownership and control) and Type II agency problems (agency conflict arising between majority and minority shareholders). It is an ongoing debate whether family firms suffer more or less agency problems from one type versus the other than non-family firms. The finding that family firms have higher corporate and stock liquidity is consistent with that family firms being subject to less severe agency conflict due to separation of ownership from control.

scholarly journals A Teoria dos Stakeholders na perspectiva jurídica da Teoria da Agência: um ensaio teórico

Revista Foco ◽  
2018 ◽  
Vol 11 (2) ◽  
pp. 207
Author(s):  
Jose Elenilson Cruz
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Stakeholder Theory ◽  
Organizational Theory ◽  
Business Management ◽  
Agency Problems ◽  
Central Problem ◽  
Agency Conflict ◽  
Organizational Theories

Permeando a questão que trata de quais interesses a administração deve privilegiar na condução de uma organização está o conflito de agência (HILL; JONES, 1992; JENSEN; MECKLING, 1976) e os recentes questionamentos feitos por Lan e Heracleous (2010); Heracleous e Lan (2012) e Wiseman, et al., (2012). Segundo Heracleous e Lan (2012), as soluções discutidas por eles para o conflito de agência reconhecem os interesses dos stakeholders. O presente texto foi elaborado por meio de uma revisão bibliográfica e articulação teórica entre três teorias organizacionais: a) teoria dos stakeholders, teoria da agência e teoria da governança corporativa, tendo por objetivo identificar se os pressupostos da teoria dos stakeholders são reforçados pelas soluções propostas por Heracleous e Lan (2012) para o conflito de agência. As soluções propostas não são inovadoras no campo da teoria organizaconal e não abordam o problema central da teoria dos stakeholders. Não obstante, suas propostas instigam pesquisadores a buscar novos mecanismos capazes de oferecer soluções consistentes para os problemas de agência e contribuem para legitimar questões defendidas pela teoria dos stakeholders. The agency conflict is present in the debate about what interests the management should privilege in business management (HILL; JONES, 1992; JENSEN; MECKLING, 1976) and the recent questions posed by Lan and Heracleous (2010); Heracleous and Lan (2012) and Wiseman et al., 2012). According to Heracleous and Lan (2012), the solutions they discuss to the agency conflict recognize the interests of stakeholders. this article makes a bibliographical review and theoretical articulation of three organizational theories: a) the theory of the stakeholders, agency theory and theory of corporate governance, aiming to identify if the assumptions of the theory of the stakeholders are reinforced by the solutions proposed by Heracleous and Lan (2012) for the agency conflict. The proposed solutions are not innovative in the field of organizational theory and do not address the central problem of stakeholder theory. Nonetheless, its proposals instigate researchers to seek new mechanisms capable of offering consistent solutions to agency problems and contribute to legitimizing the issues advocated by stakeholder theory.

AGENCY PROBLEM DALAM PENERAPAN PEMBIAYAAN AKAD MUDHARABAH PADA PERBANKAN SYARIAH

ALQALAM ◽  
2016 ◽  
Vol 33 (1) ◽  
pp. 46
Author(s):  
Aswadi Lubis
Keyword(s):  
High Risk ◽  
Asymmetric Information ◽  
Human Resources ◽  
Moral Hazard ◽  
Adverse Selection ◽  
Agency Problem ◽  
Agency Problems ◽  
Islamic Banking ◽  
The Public

The purpose of writing this article is to describe the agency problems that arise in the application of the financing with mudharabah on Islamic banking. In this article the author describes the use of the theory of financing, asymetri information, agency problems inside of financing. The conclusion of this article is that the financing is asymmetric information problems will arise, both adverse selection and moral hazard. The high risk of prospective managers (mudharib) for their moral hazard and lack of readiness of human resources in Islamic banking is among the factors that make the composition of the distribution of funds to the public more in the form of financing. The limitations that can be done to optimize this financing is among other things; owners of capital supervision (monitoring) and the customers themselves place restrictions on its actions (bonding).

Konkurrenz zwischen Stieleiche und Buche auf Lothar-Sturmflächen | Competition between pedunculate oak and European beech on Lothar windthrow areas

2009 ◽  
Vol 160 (5) ◽  
pp. 114-123 ◽  
Author(s):  
Daniel Otto ◽  
Sven Wagner ◽  
Peter Brang
Keyword(s):  
Large Scale ◽  
Early Stage ◽  
Tree Height ◽  
European Beech ◽  
Threshold Value ◽  
Test Methods ◽  
Permanent Plots ◽  
Pedunculate Oak ◽  
Competitive Pressure ◽  
Competition Index

The competitive pressure of naturally regenerated European beech (Fagus sylvatica) saplings on planted pedunculate oak (Quercus robur) was investigated on two 1.8 ha permanent plots near Habsburg and Murten (Switzerland). The plots were established with the aim to test methods of artificial oak regeneration after large-scale windthrow. On both plots, 80 oaks exposed to varying levels of competitive pressure from at most 10 neighbouring beech trees were selected. The height of each oak as well as stem and branch diameters were measured. The competitive pressure was assessed using Schütz's competition index, which is based on relative tree height, crown overlap and distance from competing neighbours. Oak trees growing without or with only slight competition from beech were equally tall, while oaks exposed to moderate to strong competition were smaller. A threshold value for the competition index was found above which oak height decreased strongly. The stem and branch diameters of the oaks started to decrease even if the competition from beech was slight, and decreased much further with more competition. The oak stems started to become more slender even with only slight competition from beech. On the moderately acid beech sites studied here, beech grow taller faster than oak. Thus where beech is competing with oak and the aim is to maintain the oak, competitive pressure on the oak must be reduced at an early stage. The degree of the intervention should, however, take the individual competitive interaction into account, with more intervention if the competition is strong.

Determinants of Islamic Bank Profitability: Evidence from Indonesia

2020 ◽  
Vol 5 (1) ◽  
pp. 1-13
Author(s):  
Puji Sucia Sukmaningrum ◽  
Kashan Pirzada ◽  
Sylva Alif Rusmita ◽  
Fatin Fadhilah Hasib ◽  
Tika Widiastuti ◽  
...  
Keyword(s):  
Interest Rate ◽  
Quality Management ◽  
Banking Industry ◽  
External Factors ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Return On Assets ◽  
Internal Factors ◽  
Bank Profitability ◽  
Islamic Bank

Objective – Islamic Banks have a distinct advantage that is not only conduct a commercial operation, but to also conduct social operations. Therefore, Islamic Banks plays an important role in developing the Indonesian economy. The aim of this study is to investigate the impact of internal and external factors that affect the profitability of Islamic Banks in Indonesia. Methodology/Technique – The methodology of this research is multiple regression. The object of this research is the Islamic banking industry in Indonesia. Internal factors include size, liquidity, asset quality, management, and efficiency ratio. External factors include interest rate and inflation. Return on Assets is used to measure profitability. The monthly data is collected from the financial reports of Islamic Banks between 2011 to 2016. Findings – The findings show that size, liquidity, assets quality, management ratio, interest rate and inflation lead to a greater Return on Assets (profitability) in Islamic Banks in Indonesia. Efficiency however does not have a significant effect on profitability of Islamic Banks in Indonesia. Novelty – Based on the results of this research, it can be concluded that the Islamic banking industry can use those variables to improve the profitability of Islamic banks in the future. In addition, there are two variables that affect the profitability of Islamic banking industry. For the Islamic banking industry should anticipate the movement of inflation and interest to improve the profitability of Islamic banks. Type of Paper: Empirical paper. Keywords: Islamic Banks; Profitability; Internal Factors; External Factors; Indonesia. Reference to this paper should be made as follows: Sukmaningrum, P.S; Pirzada, K; Rusmita, S.A; Hasib, F.F; Widiastuti, T; Hendratmi, A. 2020. Determinants of Islamic Bank Profitability: Evidence from Indonesia, J. Fin. Bank. Review, 5 (1): pp. 01 – 13 https://doi.org/10.35609/jfbr.2020.5.1(1) JEL Classification: G21, G24.

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