Excess Control Rights of Controlling Shareholders and Corporate Failure

2021 ◽  
Vol 34 (3) ◽  
pp. 563-579
Author(s):  
Dong Wook Kim ◽  
Byoung Gon Kim
Keyword(s):  
Control Rights ◽  
Controlling Shareholders ◽  
Corporate Failure

DIVIDENDS, CONTROLLING SHAREHOLDERS AND FIRM PERFORMANCE: AN INVESTIGATION OF LARGE FIRMS ON THE HONG KONG STOCK EXCHANGE

2013 ◽  
Vol 08 (02) ◽  
pp. 1350011 ◽  
Author(s):  
TINA T. HE ◽  
WILSON X. B. LI ◽  
GORDON Y. N. TANG
Keyword(s):  
Hong Kong ◽  
Firm Performance ◽  
Stock Exchange ◽  
Positive Contribution ◽  
Large Firms ◽  
Control Rights ◽  
Significant Interaction Effect ◽  
Controlling Shareholders ◽  
The Impact ◽  
Hong Kong Stock Exchange

This study examines whether dividends payout has a positive contribution to firm performance while taking into account the important firm level characteristics such as the divergence between the control rights and the ownership rights of controlling shareholders and firm leverage. Investigating the large firms listed on the Main Board of Hong Kong Stock Exchange over the 1998–2007 period, we find that dividends payout has statistically significantly positive impacts on both return on assets (ROA) and Tobin's Q, particularly after controlling for the nonlinear relation between dividends and firm performance and between control rights of the controlling shareholder and firm performance. The regression results do not show significant interaction effect between dividends payout and control divergence on firm performance. But the impact of dividends payout on firm performance is different in family controlled firms versus state controlled firms and varies with institutional factors.

Controlling shareholders and financial constraints around the world

2018 ◽  
Vol 44 (1) ◽  
pp. 92-108 ◽  
Author(s):  
Jin Ho Park ◽  
Kwangwoo Park ◽  
Ronald Andrew Ratti
Keyword(s):  
Cash Flow ◽  
Financial Constraints ◽  
Generalized Method Of Moments ◽  
Legal Environment ◽  
Minority Shareholders ◽  
Control Rights ◽  
Content Type ◽  
Controlling Shareholders ◽  
Cash Flow Rights ◽  
The Given

Purpose The purpose of this paper is to examine the effect of controlling shareholders’ ownership of firms on the firms’ financial constraints in 22 economies for the 1982-2009 period. Design/methodology/approach The authors employ a generalized method of moments-based instrumental variables estimator to estimate empirical models. Findings It found that the overinvestment propensity of controlling shareholders becomes less severe with an increase in cash-flow rights. It further indicates that a higher deviation between the control rights and cash-flow rights of controlling shareholders lower their overinvestment propensity, thereby lowering the firm’s financial constraints. Originality/value The results suggest that a higher protective legal environment for minority shareholders blocks the entrenchment of controlling shareholders and thus benefitting the firm with slackened financing constraints in the given legal origin.

scholarly journals Control-Ownership Wedge and Industry Specialist Auditor

2021 ◽  
Vol 9 (1) ◽  
pp. 22-33
Author(s):  
Aree Saeed Mustafa
Keyword(s):  
Audit Quality ◽  
Minority Shareholders ◽  
Control Rights ◽  
Controlling Shareholders ◽  
Model Finding ◽  
Cash Flow Rights ◽  
Research Analysis ◽  
Suitable Environment ◽  
Industry Specialist

This study extends agency theory by explaining the client's understanding of audit quality. This study contributes to the audit literature by examining the effect of wedge control-ownership on industry specialist auditors that have not been researched in Turkey. The interests of minority and controlling shareholders are not completely compatible. The research analysis method used a logistic regression model, finding that firms that practice a larger difference between control rights and cash flow rights tend to prefer high audit quality measures by industry specialist auditors. This study encourages regulators to improve law enforcement to enhance the role of corporate governance in Turkey to address the features of ownership-control firms and offer a suitable environment for investment and minority shareholders.

scholarly journals PENGARUH KEPEMILIKAN ULTIMAT TERHADAP KEINFORMATIFAN LABA PADA PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BEI

MODUS ◽  
2016 ◽  
Vol 27 (1) ◽  
pp. 13
Author(s):  
Isabella Henny Susilowati ◽  
IPutu Sugiartha Sanjaya
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Control Rights ◽  
Public Companies ◽  
Controlling Shareholder ◽  
Controlling Shareholders ◽  
Ultimate Ownership ◽  
Earnings Informativeness ◽  
The Right ◽  
Ultimate Owners

Ultimate ownership is ownership directly and indirectly in public companies to identify the ultimate owners of public Vendor. Ultimate owner has the right greater control of cash fow rights is called the controlling shareholder. This causes problems between controlling shareholders and non-controlling shareholders, which will afect earnings informativeness. Informativeness proft is profit information that could afect stock returns. This study uses the 149 companies listed on the Stock Exchange in 2004-2009. Te data used in this study is proft and equity in the annual fnancial statements, as well as the ownership of the company. Tis test uses regression analysis moderasian with moderating variable Cash Flow Right Leverage (CFRL). CFRL is the diference between control rights to cash fow rights. The results of this study showed that the diference of control rights to cash fow rights owned by the controlling shareholders make a proft informativeness be low because shareholders can infuence policy to make accounting information, thus making proft informativeness be low.Keywords: ultimate ownership, control rights, cash fow rights, earnings informativeness.

scholarly journals Effect of corporate governance on expropriation practices with family ownership as moderation variable

2021 ◽  
Vol 8 (3) ◽  
Author(s):  
Gladys Bella Novenna Rettob ◽  
Imam Subekti ◽  
Endang Mardiati
Keyword(s):  
Corporate Governance ◽  
Sampling Method ◽  
Stock Exchange ◽  
Research Data ◽  
Family Ownership ◽  
Control Rights ◽  
Controlling Shareholders ◽  
The Family ◽  
Governance Practices ◽  
Cash Flow Rights

The practice of expropriation is one of the accounting frauds committed by controlling shareholders because of their control rights that exceed cash flow rights. This study aims to examine and analyze the effect of corporate governance on the practice of expropriation and the existence of family ownership as a moderating variable. This research was conducted at companies in all sectors of the Indonesia Stock Exchange. Based on the purposive sampling method, the sample of this study was 78 companies with 312 observations. The research data were analyzed using multiple regression analysis. The results of this study indicate that the practice of expropriation in Indonesia can be minimized by implementing adequate corporate governance. The results of this study also prove that companies whose shareholding structures are dominated by the family will maintain control in the company through their management so that they have an impact on limiting governance practices in reducing expropriation practices.

scholarly journals Economic incentives of family controlling shareholders and the monitoring role of non-dominant large shareholders in corporate governance: Evidence from the manufacturing firms in Malaysia

2014 ◽  
Vol 17 (4) ◽  
pp. 471-483 ◽  
Author(s):  
Chin Fei Goh ◽  
Amran Rasli ◽  
Saif-Ur-Rehman Khan
Keyword(s):  
Family Firms ◽  
Stock Exchange ◽  
Market Performance ◽  
Economic Incentive ◽  
Economic Incentives ◽  
Minority Shareholders ◽  
Control Rights ◽  
Controlling Shareholders ◽  
Large Shareholders

This article explores the economic incentives of dominant controlling shareholders with regard to the expropriation of minority shareholders, on the one hand, and the monitoring role of non-dominant large shareholders in family firms, on the other. The authors argue that family controlling shareholders (or family owners) do not share common interests with other shareholders. Drawing on 141 family firms in the manufacturing sector that were listed on Bursa Malaysia (the Malaysian stock exchange) from 2003 to 2006, the article finds an inverted U-shaped relationship between excess control rights and a firm's market performance. The findings also show that both the cash flow rights (i.e. claims on cash payouts) of family controlling shareholders and the presence of non-dominant large shareholders with the ability to contest control of the firm have a positive relationship with market performance.  This study contributes to the literature by indicating that family owners are unlikely to collude with other large shareholders to expropriate minority shareholders. Furthermore, low levels of excess family-owner control rights are beneficial for market performance because firms may benefit from group affiliations and receive patronage from wealthy owners. However, high levels of excess control rights are understood to be an economic incentive for family owners to expropriate minority shareholders during non-crisis periods. 

Agency Costs of Controlling Shareholders' Share Collateral with Taiwan Evidence

2007 ◽  
Vol 10 (02) ◽  
pp. 173-191 ◽  
Author(s):  
Anlin Chen ◽  
Lanfeng Kao ◽  
Yi-Kai Chen
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Legal Regulation ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Control Rights ◽  
Controlling Shareholders ◽  
Corporate Governance Mechanism ◽  
Cash Flow Rights ◽  
And Control

Controlling shareholders' share collateral is a new source of the deviation of cash flow rights and control rights leading to minority shareholder expropriation. However, controlling shareholders' share collateral is not forbidden and has not received particular restriction leading to its popularity in the capital markets. Neglecting the potential agency costs resulting from controlling shareholders' share collateral would hurt the interests of creditors and minority shareholders. We need legal regulation on controlling shareholders' share collateral to reinforce corporate governance mechanism to protect the interests of creditors and minority shareholders.

scholarly journals Corporate ownership and control: New evidence from Taiwan

2003 ◽  
Vol 1 (1) ◽  
pp. 87-101 ◽  
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.

scholarly journals Ownership Structure, Corporate Governance, and Firm Value: Evidence from Ghana

2019 ◽  
Vol 4 (6) ◽  
Author(s):  
Kong Yusheng ◽  
Samuel Asubonteng ◽  
Alex Antei-Adje
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Cash Flow ◽  
Ownership Structure ◽  
Firm Value ◽  
Minority Shareholders ◽  
Control Rights ◽  
Controlling Shareholders ◽  
Percentage Points ◽  
Investment Opportunities

We use a sample of 100 firms in Ghana to study the effect of ownership structure on value during the region's financial crisis. The crisis negatively impacted firms' investment opportunities, raising the incentives of controlling shareholders to expropriate minority investors. Crisis period stock returns of firms in which managers have high levels of control rights, but have separated their control and cash flow ownership, are 10-20 percentage points lower than those of other firms. The evidence is consistent with the view that ownership structure plays an important role in determining whether insiders expropriate minority shareholders.

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