scholarly journals The Impact Of Disparity Of Cash Flow Rights And Control Rights On The Capital Structure After Financial Crisis

2009 ◽  
Vol null (28) ◽  
pp. 23-40
Author(s):  
Joonhyup Song
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Cash Flow ◽  
Control Rights ◽  
Cash Flow Rights ◽  
And Control ◽  
The Impact ◽  
The Capital Structure

scholarly journals Does pyramiding have an impact on firm’s capital structure decision among Malaysian distress companies?

2005 ◽  
Vol 2 (4) ◽  
pp. 93-106 ◽  
Author(s):  
Fauzias Mat Nor ◽  
Amin Noordin Bany-Ariffin
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Ownership Structure ◽  
Direct Result ◽  
Control Rights ◽  
Financing Decisions ◽  
Pyramidal Ownership ◽  
Cash Flow Rights ◽  
And Control ◽  
The Impact

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 pyramidal holdings. 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 investigates the impact of this separation of cash flow rights from control rights resulting from these pyramidal forms of ownership structure on firm’s capital structure. In particular, our objective is to examine whether such separation affects the financing decisions among Malaysian listed distressed companies. Even though it is not conclusive our findings somewhat lend support to the leverage-increasing non-dilution entrenchment effect on corporate leverage, whereby the separation of cash flow rights and control rights leads to the increase of leverage among the distressed companies. Consequently, excessive use of leverage in order to protect ultimate owner’s dominance in these companies then leads to disastrous financial valuation.

scholarly journals Ultimate ownership structure and capital structure: evidence from Chinese listed companies

2016 ◽  
Vol 13 (4) ◽  
pp. 297-306 ◽  
Author(s):  
Xie Lingmin
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Ownership Structure ◽  
Legal Protection ◽  
State Ownership ◽  
Minority Shareholders ◽  
Chinese Market ◽  
Control Rights ◽  
Cash Flow Rights ◽  
The Impact

This study investigates the impact of the ultimate corporate ownership structure, particularly the divergence of ultimate controlling shareholder’s control rights and cash flow rights, on the capital structure decisions among firms listed in Chinese market where the legal protection for creditors and minority shareholders is weak. I find that firms with a wider divergence between the ultimate controlling shareholder’s control rights and cash flow rights have significantly higher leverage level of capital structure. I also identify factors that affect this relation, including state ownership, institutional ownership, the presence of large tradable shareholders and NTS reform. My results suggest that leverage-increasing motivation of ultimate controlling shareholders with the risk of expropriation dominates in Chinese market and raising debt is a tool for them to maintain control over resources and corporate decisions to facilitate their self-dealing expropriation

scholarly journals The impact of operating leverage on the capital structure of Johannesburg Stock Exchange-listed firms before and after the 2008 global financial crisis

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Matabane T. Mohohlo ◽  
Johan H. Hall
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
South African ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Johannesburg Stock Exchange ◽  
The Global Financial Crisis ◽  
Operating Leverage ◽  
The Impact ◽  
The Capital Structure

The financial leverage-operating leverage trade-off hypothesis states that as financial leverage increases, management of firms will seek to reduce the exposure to operating leverage in an attempt to balance the overall risk profile of a firm. It is the objective of this study to test this hypothesis and ascertain whether operating leverage can indeed be added to the list of factors that determine the capital structure of South African firms. Forty-six firms listed on the Johannesburg Stock Exchange between 1994 and 2015 are analysed and the impact of operating leverage is determined. The results are split into two periods, that is, the period before the global financial crisis (1994–2007) and after the global financial crisis (2008–2015). The impact of operating leverage during these two periods is then compared to determine whether a change in the impact of operating leverage on the capital structure can be observed especially following the crisis. The results show that the conservative nature of South African firms leading up to 2008 persisted even after the global financial crisis. At an industry level, the results reveal that operating leverage does not have a noticeable impact on capital structure with the exception of firms in the industrials sector of the South African economy.

Dual-Class Shares and Audit Pricing: Evidence from the Canadian Markets

2008 ◽  
Vol 27 (2) ◽  
pp. 199-216 ◽  
Author(s):  
Samer Khalil ◽  
Michel L. Magnan ◽  
Jeffrey R. Cohen
Keyword(s):  
Cash Flow ◽  
Positive Association ◽  
Audit Fees ◽  
Control Rights ◽  
Audit Pricing ◽  
Audit Risk ◽  
Dual Class Shares ◽  
Cash Flow Rights ◽  
Dual Class ◽  
And Control

SUMMARY: This paper investigates whether audit fees vary with the wedge between cash flow rights and control rights arising from the presence of dual-class share structures. Dual-class shares exist in firms having two or more classes of shares with disproportionate voting rights. They affect audit fees through their effect on the supply for audit services. External auditors conduct wider (narrower) scope audits depending on whether dual-class shares increase (decrease) audit risk and/or auditor business risk. Wider (narrower) scope audits are more (less) costly for the auditors and for their clients. This paper documents a positive association between audit fees and the wedge between cash flow rights and control rights in a sample of Canadian firms during 2004. It extends current research by investigating whether dominant shareholdings affect audit pricing, and by examining audit pricing in Canada over a time period that witnessed significant changes in corporate governance.

The effects of the global financial crisis on the capital structure of EPRA/NAREIT Europe index companies

2015 ◽  
Vol 8 (1) ◽  
pp. 3-23 ◽  
Author(s):  
Giacomo Morri ◽  
Andrea Artegiani
Keyword(s):  
Financial Crisis ◽  
Real Estate ◽  
Capital Structure ◽  
Global Financial Crisis ◽  
Pecking Order ◽  
Trade Off ◽  
Content Type ◽  
The Global Financial Crisis ◽  
The Impact ◽  
The Capital Structure

Purpose – The purpose of this paper is to test whether the financial crisis has affected the capital structure of real estate companies in Europe and whether these impacts can be studied utilizing the variables traditionally used by the trade-off and pecking-order theories to explain the capital structure of companies. Design/methodology/approach – The study uses a fixed-effect panel regression analysis and a sample composed of companies included in the EPRA/NAREIT Europe Index. The effect of the financial crisis has been accounted for within the model by means of a dummy variable. Findings – The global financial crisis did have an impact on the capital structure of companies and the main variables traditionally used by the trade-off and pecking order theories proved to be suitable in explaining the capital structure of real estate companies. Real estate investment trusts are, on average, more leveraged than traditional real estate companies due to their special regulatory status. Research limitations/implications – The study is limited to the European market and UK companies in particular account for a large part of the sample. In addition, major regulatory differences between the various European countries are not taken into account in the model. Originality/value – Similar studies have been performed for the US and Australian market. However, the impact of the global financial crisis has not been traditionally considered in these studies.

scholarly journals Corporate governance and performance: Evidence from Chinese private listed companies based on cash flow rights and control rights

2012 ◽  
Vol 9 (2) ◽  
pp. 85-93 ◽  
Author(s):  
Hu Dan Semba ◽  
Haiyan Zheng
Keyword(s):  
Firm Performance ◽  
Cash Flow ◽  
Listed Companies ◽  
Negative Influence ◽  
Independent Directors ◽  
Control Rights ◽  
Ownership Structures ◽  
And Performance ◽  
Cash Flow Rights ◽  
And Control

This paper investigates the relationship between control rights, cash flow rights, and firm performance across a sample of 276 China’s private listed companies (CPC) from 2003 to 2008. This paper finds that the performance of firms with pyramid ownership structures (POS) is lower than that of firms with direct controlling ownership structures (DOS). The separation of control rights and cash flow rights, which is the main characteristic of POS, is negatively related to the firm performance. Furthermore, in order to reduce the negative influence of control rights, this paper proposes the following countermeasures: cash flow rights should be increased because it has a positive effect on the firm performance; the supervisory powers of shareholders meeting (SM) should be strengthened because it helps improve firm performance and overrule invalid decisions taken by independent directors in China. This is proved by the findings that show a positive correlation between the attendance rate at shareholders’ meetings and firm performance; moreover, there is no positive relationship between independent directors and firm performance.

Separation of cash flow rights and control rights and debt among Malaysian family firms

2015 ◽  
Vol 5 (2) ◽  
pp. 184-201 ◽  
Author(s):  
Norhidayah Abdullah ◽  
Wee Ching Pok
Keyword(s):  
Cash Flow ◽  
Family Firms ◽  
Equal Proportion ◽  
Control Rights ◽  
Content Type ◽  
Shareholder Protection ◽  
Cash Flow Rights ◽  
Minority Interests ◽  
And Control ◽  
Debt Policy

Purpose – The purpose of this paper is to examine the relationship of separation of cash flow rights (CFR) and control rights (CR) and debt policy of Malaysian listed family firms. Design/methodology/approach – The sample of this study consists of 256 observations from companies listed in the Main Board of Bursa Malaysia for the period between year 2005 and 2009. The multivariate ordinary least square regressions have been conducted in order to examine the relationships between separation of CFR and CR and debt. Findings – The study reveals that the separation of CFR and CR does not lead to the increase of debt policy among Malaysian listed family-owned firms. Thus, the results suggest there is no expropriation of minority interests in Malaysian family-owned firms. The plausible reason is that Malaysia has better investor or shareholder protection laws compared to other emerging markets such as Indonesia, Thailand and Philippines. Research limitations/implications – The first limitation is the underestimation of CFR and CR because the affiliated business of unlisted firms and foreign companies are excluded. The second limitation is the presence of 100 percent ownership in firms controlled by family-owned firms or in firms that are controlled by another firms which are under the controlled of family-owned firms, or both, will lead to equal proportion of CFR and CR. Thus, the degree of separation of CFR and CR of such firms are indeterminable. Originality/value – This paper investigates the expropriation of minority interests by Malaysian family-owned firms on which has not been explored.

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