Politically Connected Firms and Earnings Informativeness in the Controlling Versus Minority Shareholders Context

The objective of this study is to provide empirical evidence as to how corporate ownership structure in Canada affects earnings informativeness, as measured by the earnings-return relationship. Like those in many countries around the world, Canadian publicly traded companies are characterized by both concentrated ownership and divergence between voting rights and cash-flow rights. Like those in many other countries, their main agency problem resides in the conflict between large controlling blockholders and minority shareholders. These large dominant shareholders, with their imposing block of voting rights, are likely to influence accounting-information reporting. In this paper, we test whether large dominant shareholders are perceived to report low quality earnings. We show that earnings informativeness depends directly on the ownership structure of publicly traded firms. Furthermore, we show that investors perceive reported earnings as least credible when a controlling blockholder has both the power and impetus to expropriate minority shareholders, which suggests a non-monotonic relationship between earnings informativeness and ownership structure

Download Full-text

Politically Connected Firms and Earnings Informativeness in the Controlling versus Minority Shareholders Context: European Evidence

Corporate Governance An International Review ◽

10.1111/corg.12064 ◽

2014 ◽

Vol 22 (4) ◽

pp. 330-346 ◽

Cited By ~ 39

Author(s):

Carolina Bona-Sánchez ◽

Jerónimo Pérez-Alemán ◽

Domingo Javier Santana-Martín

Keyword(s):

Minority Shareholders ◽

Earnings Informativeness

Download Full-text

Split share structure reform and earnings informativeness in China

Corporate Ownership and Control ◽

10.22495/cocv10i1c5art2 ◽

2012 ◽

Vol 10 (1) ◽

pp. 499-514 ◽

Cited By ~ 2

Author(s):

Haiyan Jiang ◽

Ahsan Habib

Keyword(s):

Agency Problems ◽

Market Place ◽

Minority Shareholders ◽

Earnings Informativeness ◽

Split Share Structure Reform ◽

Split Share Structure ◽

Regulatory Commission ◽

Cash Flow Rights ◽

Share Structure ◽

The Impact

This paper investigates the impact of split share structure reform on earnings informativeness in China. A unique institutional feature of China was the co-existence of two types of share that endowed all shareholders with equal voting and cash flow rights but different tradability. This split share structure significantly constrained the tradability of shares held by the state and ‘legal persons’ and has been the alleged cause of severe agency problems between controlling shareholders and minority shareholders. In order to overcome these agency problems, the Chinese Securities Regulatory Commission (CSRC) mandated the conversion of non-tradable shares (NTS) into tradable shares (TS) from 2006 onwards. Although the regulation did not directly address the issue of the effect of this reform on the informativeness of earnings, we believe that the emphasis given by the CSRC to the concept of ‘price discovery’ during reform has relevance for testing earnings informativeness. NTS holders can sell their shares gradually in the market with a 12 month lock-up period. This provides an opportunity for TS holders with more time to better evaluate corporate governance and firm performance of reforming companies which is expected to encourage NTS holders to provide better quality accounting information into the market place. We find support for increased earnings informativeness hypothesis in the post reform period.

Download Full-text

Minority Shareholders' Remedies

10.1017/cbo9780511494741 ◽

2002 ◽

Cited By ~ 11

Author(s):

A. J. Boyle

Keyword(s):

Minority Shareholders

Download Full-text

Board Effectiveness: An Evaluation based on Corporate Governance Score

Think India ◽

10.26643/think-india.v18i1.7802 ◽

2015 ◽

Vol 18 (1) ◽

pp. 16-23

Author(s):

Hitesh Shukla ◽

Nailesh Limbasiya

Keyword(s):

Corporate Governance ◽

Good Governance ◽

Sustainable Growth ◽

Governance Mechanism ◽

Minority Shareholders ◽

Effective Governance ◽

Performance Orientation ◽

Corporate Governance Mechanism ◽

And Performance ◽

Ethical Governance

Growth, progress, and prosperity of any country depend highly on the corporate governance mechanism of that country. Good governance of a country helps it to sustainable growth and consistency in progress. The good governance should contribute towards the improvement in transparency, ethics, morality, and disclosure. The principles of good governance stand on honesty, trust, integrity, openness, and performance orientation. Our honorable Prime Minister Narendra bhai Modi had given the three E for good governance during his speech on Independence Day i.e. Effective Governance, Electronic Governance, and Ethical Governance. The fundamental concern of corporate governance mechanism is to ensure the protection of minority shareholders/owners of specific firms. Mechanism of a corporate governance specifies the relations among the shareholders, board of directors, and managers. The present paper is an attempt to evaluate the effectiveness of the board by calculating the corporate governance score. The mandatory and non-mandatory guidelines have been considered while assigning points to specific parameters of the corporate governance.

Download Full-text