Economic Consequences of Corporate Governance Disclosure: Evidence from the 2006 SEC Regulation on Related-Party Transactions

2019 ◽  
Vol 95 (4) ◽  
pp. 263-290
Author(s):  
Ole-Kristian Hope ◽  
Haihao (Ross) Lu
Keyword(s):  
Corporate Governance ◽  
Cost Of Capital ◽  
Securities And Exchange Commission ◽  
Economic Consequences ◽  
Related Party Transactions ◽  
Public Firms ◽  
Implied Cost Of Capital ◽  
Commission Regulation ◽  
Sec Regulation ◽  
Governance Disclosure

ABSTRACT This paper examines economic consequences of a 2006 Securities and Exchange Commission regulation that mandated public firms to disclose their governance policies on related-party transactions (RPTs). Employing hand-collected RPT data for S&P 1500 firms, we find that the initiation of RPT governance disclosure significantly reduces the occurrence of RPTs, and that the reduction in RPTs is negatively associated with the implied cost of capital (ICC) and positively related to Tobin's Q. These effects are more pronounced for low-monitored firms and for firms with RPTs that are more likely to be opportunistic. We further find that firms with a formal written policy, a designated committee to review and approve RPTs, or more extensive disclosure on RPT governance benefit in terms of lower ICC.

scholarly journals Related-Party Transactions, Chaebol Affiliations, and the Value of Cash Holdings

2021 ◽  
Vol 13 (2) ◽  
pp. 699
Author(s):  
Hyunjung Choi ◽  
Jungeun Cho
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Agency Problems ◽  
Governance Structure ◽  
Management Decisions ◽  
Corporate Governance Structure ◽  
Related Party Transactions ◽  
Public Firms ◽  
Extant Literature ◽  
Value Of Cash

This study examines whether related-party transactions (RPTs) impact the value of firms’ cash holdings. Using a 2011–2018 sample of Korean public firms, we find that greater RPTs lead to lower cash holdings value. In particular, this decline is more pronounced in Korean chaebol firms than in non-chaebol firms. Our findings suggest that a unique and complex corporate governance structure of chaebol firms makes it difficult for outside investors to monitor firms’ internal cash management decisions, resulting in a negative valuation of cash holdings. This study contributes to the extant literature by providing additional evidence that RPTs in chaebol firms with severe agency problems may lower the value of cash holdings.

Relationship between Code of Corporate Governance and Corporate Financial Performance (An Empirical Study of Food Companies Listed on KSE)

GIS Business ◽  
2017 ◽  
Vol 12 (4) ◽  
pp. 01-09
Author(s):  
Asma Rafique Chughtai ◽  
Afifa Naseer ◽  
Asma Hassan
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Securities And Exchange Commission ◽  
Executive Directors ◽  
Agency Conflicts ◽  
Cross Sectional ◽  
Return On Equity ◽  
Governance Practices ◽  
Code Of Corporate Governance ◽  
The Impact

The crucial role that implementation of Code of Corporate Governance plays on protecting the rights of minorities, shareholders, local as well as foreign investors cannot be denied. Companies all over the world are required to implement their respective Code of Corporate Governance for avoiding agency conflicts between companies management and stakeholders and for assuring transparency in accountability. This paper aims at exploring the impact of implementation of corporate governance practices (designed by Securities and Exchange Commission of Pakistan) have on the financial position of companies. For explanatory variables of the study, composition of the board as per the Code of Corporate Governance that comprises of presence of independent, executive and non-executive directors has been taken into consideration. Return on equity has been taken as an indicator of firms profitability i.e. the dependent variable. For this study, companies listed on food producing sector of Karachi Stock Exchange have been screened for excogitation of the relationship. It is an empirical research based on nine years data from 2007–2015. Using Hausman Test for selecting the data analysis technique between Fixed or Random, Fixed Cross Sectional Panel Analysis has been used for analysis of the data collected. Findings indicate that presence of independent, executive and non-executive directors as per the code requirements levies a significant impact on the profitability of companies indicated by return on equity. It is, thus concluded that companies should ensure compliance with code of governance practices to reduce not only the agency issues but also to increase their profitability.

The Implied Cost of Capital: Accounting for Growth

2019 ◽  
Author(s):  
Stephen H. Penman ◽  
Julie Zhu ◽  
Haofei Wang
Keyword(s):  
Cost Of Capital ◽  
Implied Cost Of Capital
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