Ownership, control, valuation and performance of Brazilian corporations

This paper analyzes the ownership and control structure of Brazilian companies and the effect of cash flow and voting rights on firm valuation and performance. Ownership is quite concentrated in Brazil with most companies being controlled by a single direct shareholder. We find evidence that non-voting shares and indirect control structures are largely used to concentrate control with reduced overall investment in the company. Our results support the hypothesis that firm valuation and performance are positively related to cash flow concentration, and negatively related to voting concentration and to the separation of voting from cash flow rights. Moreover, firm valuation and performance are relatively higher for firms with controlling shareholders when compared to firms without controlling shareholders.

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Controlling shareholders and corporate valuation in Brazil

Corporate Ownership and Control ◽

10.22495/cocv3i2p14 ◽

2006 ◽

Vol 3 (2) ◽

pp. 137-141

Author(s):

Ricardo P. C. Leal ◽

Andre Carvalhal da Silva

Keyword(s):

Cash Flow ◽

Ownership Structure ◽

Firm Valuation ◽

Controlling Shareholder ◽

Controlling Shareholders ◽

Corporate Valuation ◽

Large Shareholders ◽

And Performance ◽

Cash Flow Rights

This paper investigates the relation between the ownership structure, valuation and performance of Brazilian companies. The results show that large shareholders keep control while holding only a small fraction of cash flow rights. The evidence also indicates that non-voting shares and pyramiding are the main devices set to entrench the large controlling shareholder. There is some evidence that firm valuation and performance are negatively related to voting concentration, and that foreign-owned firms perform the best while government-owned firms perform the worst.

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Evolution of ownership and control in Italian IPO firms

Corporate Ownership and Control ◽

10.22495/cocv6i2c2p6 ◽

2008 ◽

Vol 6 (2) ◽

pp. 312-333 ◽

Cited By ~ 5

Author(s):

Silvia Rigamonti

Keyword(s):

Cash Flow ◽

Ownership Structure ◽

Voting Rights ◽

Set Up ◽

Cash Flow Rights ◽

And Control

This article examines the evolution of ownership of cash flow rights and control of voting rights of firms that went public in Italy over the period 1985-2005. At the IPO, the ownership structure does not evolve towards a dispersed one. Even 10 years after the flotation, the initial ultimate shareholder retains the majority of voting rights. Though control is valuable, original owners do not systematically set up structures that dissociate cash flow from voting rights.

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

Corporate Ownership and Control ◽

10.22495/cocv9i2art7 ◽

2012 ◽

Vol 9 (2) ◽

pp. 85-93 ◽

Cited By ~ 2

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.

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The Effect of Large Controlling Shareholder’s Presence and Board of Directors on Firm Value

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v3i2.4411 ◽

2013 ◽

Vol 3 (2) ◽

pp. 180

Author(s):

Aymen Jebri

Keyword(s):

Board Of Directors ◽

Cash Flow ◽

Firm Value ◽

Firm Valuation ◽

Board Structure ◽

Valuable Contribution ◽

Controlling Shareholders ◽

Negative Effect ◽

Cash Flow Rights ◽

Positive Effect

This study investigates the effect of large controlling shareholder’s presence and board of directors on firm value.The empirical results, based on a unique database of French firms, show a positive effect of cash-flow rights held by the largest controlling shareholders suggesting that an increase in cash-flow ownership makes the controlling shareholder’s interest more closely aligned with other shareholders and incited to create value.Our results also reveal that the wedge between voting and cash-flow rights of controlling shareholders have a negative effect on firm value.Finally, our empirical evidence shows a positive but not significant effect of the board structure on firm value. In fact, efficient boards should have a majority of independent directors able to monitor and advice managers since the more directors are independent the more they are likely to provide a valuable contribution to firm valuation. However, if a board appoints busy directors, controlling and advisory capabilities on managers’ decisions will be limited since there is no sufficient time. We should therefore expect to see resource diversion and decreased firm value.

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Corporate ownership and control: New evidence from Taiwan

Corporate Ownership and Control ◽

10.22495/cocv1i1p8 ◽

2003 ◽

Vol 1 (1) ◽

pp. 87-101 ◽

Cited By ~ 4

Author(s):

Yin-Hua Yeh

Keyword(s):

Cash Flow ◽

Ownership Structure ◽

Empirical Literature ◽

Corporate Ownership ◽

Control Rights ◽

Controlling Shareholders ◽

Control Power ◽

Management Participation ◽

Cash Flow Rights ◽

And Control

Recent empirical literature on corporate governance has demonstrated that companies’ shares are generally concentrated in the hands of particular families or wealthy investors. Claessens et al. (2002) analyzed the ownership structure in East Asian eight countries, but misestimated the Taiwanese condition that made them not find the positive incentive or negative entrenchment effects in Taiwan. This study tries to clear the ultimate control in Taiwan, use the detailed data to better understand the ownership structure in Taiwan and investigates the determinants for deviation of control from cash flow rights. Based on the findings, the companies’ shares are common concentrated in the hands of the largest shareholder. We find that the deviation of control from cash flow rights is greater in the family-controlled companies than other type companies. Also the controlling shareholders use more pyramids and cross shareholding to increase their control rights that accompanies with deeply management participation. On the average, the controlling shareholders hold more than half board seats and usually occupy the chairman and general manger to enhance their control power in family-controlled companies. No matter in all sample or family-controlled companies, the controlling shareholders owns significantly less cash flow rights, occupy more board seats in deviation group companies than those without deviation. Corporate valuation is significantly lower in the companies with the divergence of control from cash flow rights than non-deviation companies.

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Ownership and control structure, corporate governance and income smoothing in Brazil

Corporate Ownership and Control ◽

10.22495/cocv8i4c1p4 ◽

2011 ◽

Vol 8 (4) ◽

pp. 180-192

Author(s):

Damiana Torres ◽

Adriano Leal Bruni ◽

Antonio Lopo Martinez ◽

Miguel Angel Rivera-Castro

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Control Structure ◽

Stock Exchange ◽

Income Smoothing ◽

General Category ◽

Control Structures ◽

And Control ◽

Nonfinancial Firms ◽

Majority Shareholder

Income smoothing is a longstanding practice under the more general category of earnings management. As the name suggests, it consists of smoothing out the fluctuations of the income series. This article examines the association between the ownership and control structure, level of corporate governance and origin of capital (foreign or domestic) of Brazilian companies on their propensity to smooth income. Using a sample of nonfinancial firms with shares traded on the São Paulo Stock Exchange (Bovespa) at the end of 2007, we performed covariance analysis based on data from the preceding ten years, where the dependent variable was the index proposed by Eckel, an empirical proxy for smoothing. The results indicate that the more concentrated the shareholding and control structures of Brazilian firms are, both according to overall capital and voting capital, the more intensely they tend to smooth earnings to favor the interests of the majority shareholder. The results also show that this effect is less pronounced for firms with enhanced corporate governance levels and those with foreign capital.

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Impact of Mode of Payment and Insider Ownership on Target and Acquirer's Announcement Returns in India

Vikalpa The Journal for Decision Makers ◽

10.1177/0256090920090405 ◽

2009 ◽

Vol 34 (4) ◽

pp. 51-66 ◽

Cited By ~ 8

Author(s):

Bikram Jit Singh Mann ◽

Reena Kohli

Keyword(s):

Stock Market ◽

Cash Flow ◽

Value Added ◽

Group Company ◽

Controlling Shareholders ◽

Acquisition Period ◽

Tunnelling Effect ◽

Maximum Value ◽

Announcement Returns ◽

Cash Flow Rights

This paper examines the effect of mode of financing employed in mergers and acquisitions on the announcement period returns of the acquiring and the target companies' shareholders in India. The study is divided into two sections. The first section analyses the announcement returns of both the acquiring as well as the target companies� shareholders with the help of market model. It has been found that maximum value has been created for the shareholders of the target companies engaged in cash offers followed by the shareholders of acquiring companies engaged in cash offers, target companies engaged in stock offers, and lastly, for acquiring companies engaged in stock offers. However, in contrast to the results of prior research, the study shows that the within-group stock offers have created positive wealth for acquiring companies� shareholders that have generally lost value in stock offers. To discern the probable reasons for the positive value being created in within-group stock offers especially for the acquiring companies� shareholders, the second section analyses the interaction between the announcement returns of the acquiring and the target companies engaged in stock offers and insiders'/promoters' ownership level. This is so because the review of literature highlights two views regarding value creation in within-group stock offers. One view relates to the tunnelling effect whereas the other relates to the value added effect. The tunnelling effect states that within group acquisitions by the acquiring companies with controlling shareholders are aimed at shifting the resources from one group company where the acquiring company has lower cash flow rights to another group company where it has higher cash flow rights or to itself for maximizing the benefits of the controlling shareholders at the expense of minority shareholders. The value added view states that within-group acquisitions by the acquiring companies with controlling shareholders are aimed at creating various financial and economic synergies by pooling the resources of both the companies in the post- acquisition period. The analysis reveals that the within-group stock offers have created value with increase in level of ownership with maximum value being created when controlling shareholders' ownership reaches the highest level (the category OWN> 49%). Likewise, not only acquiring companies' but the target companies' shareholders have gained positive returns. It means the stock market has reacted positively to the news of stock offers when these are undertaken by companies belonging to the same group as well as when the ownership is concentrated in the hands of promoters. Thus, we deduce that in India, within-group stock offers are not aimed at tunnelling of resources by the acquiring companies; rather these are aimed at creating value by providing an internal market where the group companies can pool their resources and hence can create various kinds of synergies in the post-acquisition period. Hence, the results are in consonance with the value added view. Thus, in the world of information asymmetry, the mode of financing along with ownership structures are the signals through which the stock market assesses the value creating potential of an acquisition.

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