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.

Ownership structure and firm performance: evidence from the subprime crisis period

2018 ◽  
Vol 18 (2) ◽  
pp. 206-219 ◽  
Author(s):  
Mamduh M. Hanafi ◽  
Bowo Setiyono ◽  
I Putu Sugiartha Sanjaya
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Cash Flow ◽  
Ownership Structure ◽  
Learning Process ◽  
Ownership Concentration ◽  
Subprime Crisis ◽  
Control Rights ◽  
Content Type ◽  
Cash Flow Rights

Purpose This paper aims to compare the effect of ownership on firm performances in the 1997 and 2008 financial crises. More specifically, it investigates the effect of cash flow rights, control rights and cash flow rights leverage on firm performance. Two conditions motivated the study. First, the 2008 financial crisis happened quickly, so it was endogenous for firms. This setting is ideal to deal with endogeneity problems in a study that involves ownership and performance. Second, during the 2000s, awareness and implementation of corporate governance increased significantly. The authors believe that the markets learn these changes and incorporate them into prices, as suggested by an efficient market hypothesis. Design/methodology/approach The paper investigates and compares the effect of ownership structure on firm performance in the 2008 subprime crisis period to that in the 1997 financial crisis. Both crises happen unexpectedly, so the authors can expect that the crises are exogenous to firms. The authors use cash flow rights, control rights and cash flow right leverage for the ownership structure dimension. They also study time-series data to investigate the effect of ownership on a firm’s value. Findings The study finds that cash flow right and cash flow right leverage did not affect stock performance during the subprime crisis of 2008. It also finds that cash flow right leverage and cash flow right affected stock performance during the financial crisis of 1997. The study attributes this finding to the learning process and improvement of corporate governance during the period of the 2000s. Using time-series data, it finds that cash flow rights positively affect firm performance, suggesting an alignment effect. Ownership concentration improves firm performance. When the study split its sample, it found that the effect ownership on firms’ value is stronger for large firms. Research limitations/implications The study’s main limitation is that it does not test directly the learning process hypothesis. The study contributes to the current literature by presenting more recent evidence on the effect of ownership structure on firm performance in a developing country. The authors argue that markets learn the improvement of corporate governance and incorporate this development into prices. Extending this research to other markets will provide confirmation whether the learning process is an international phenomenon. Practical implications The awareness and implementation of corporate governance should be maintained at least at this level. The positive relationship between ownership concentration and firm performance suggests that concentrated ownership performs monitoring more effectively. Investors should pay attention to ownership concentration. Social implications The finding that prices already reflect corporate governance may suggest that market is monitoring this issue. This seems to be a good finding. Markets can be expected to discipline companies in the implementation of corporate governance. The awareness and implementation of corporate governance should be maintained at least at the current level. Originality/value The study contributes to the current literature by presenting additional evidence on the effect of ownership (using cash flow rights, control rights and cash flow right leverage) on firms’ performance in a more recent period and in a developing country. This period is characterized by a significant increase in awareness and the implementation of good corporate governance.

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 Ownership structure and corporate governance code: The case of family business enterprises in Germany

2009 ◽  
Vol 6 (4) ◽  
pp. 382-390 ◽  
Author(s):  
Marion Weissenberger-Eibl ◽  
Patrick Spieth
Keyword(s):  
Corporate Governance ◽  
Family Business ◽  
Ownership Structure ◽  
Family Businesses ◽  
Minority Shareholders ◽  
Controlling Shareholders ◽  
Corporate Governance Code ◽  
Business Enterprises ◽  
And Control

Ownership of corporations in Germany is today highly concentrated in the hands of families and other companies. Theses ‘insider’ systems often result in core conflict tends to be between controlling shareholders and sometimes between strong stakeholders and weak minority shareholders. The aim of this paper is to research the characteristics of ownership and control in family business and point out the role of Family Business Governance in securing an appropriate control of the owning families. The authors give suggestions how to implement the German Governance Code recommendations in family businesses.

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.

Corporate governance and ownership structure: Indonesia evidence

2017 ◽  
Vol 17 (2) ◽  
pp. 165-191 ◽  
Author(s):  
Cynthia Afriani Utama ◽  
Sidharta Utama ◽  
Fitriany Amarullah
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Cash Flow ◽  
Rule Of Law ◽  
Ownership Structure ◽  
Capital Market ◽  
Negative Impact ◽  
Content Type ◽  
Controlling Shareholders ◽  
Control Right

Purpose The purpose of this study is to investigate simultaneous relations between corporate governance (CG) practice and cash flow right, cash flow leverage (the divergence between control right and cash flow right of controlling shareholders). The two ownership measures reflect alignment and expropriation incentives of controlling shareholders. This study also examines the effect of multiple large shareholders (MLSs) on CG practice. Design/methodology/approach The study uses publicly listed companies (PLCs) excluding those from the Indonesian finance sector during 2011-2013 as the samples of the study. Two-stages least squares regression models were used to test the simultaneous relations between CG practice and ownership structure variables. The study develops a CG instrument to measure CG practice based on ASEAN CG Scorecard, that comprehensively covers OECD CG principles and that can be used for panel data. Findings CG practice has a positive influence on cash flow right and has a marginally negative impact on cash flow leverage, while cash flow right and cash flow leverage have a marginally negative impact on CG practice. Further, the existence of large MLS complements CG practice, but as the control right of the second largest shareholders becomes closer to the largest shareholder, the complement relation becomes less important. State- or foreign-controlled PLCs practice better CG than other PLCs. Research limitations/implications Studies on CG/ownership structure need to treat CG and ownership structure as endogenous variables in their research design. In addition, the level of rule of law in a country should be taken into account when examining the relation between CG and ownership structure. The interrelation among CG, ownership structure, capital structure and firm performance has been studied in the context of dispersed ownership structure and strong rule of law. Thus, future study needs to examine the interrelation among these four concepts in countries with high concentrated ownership and weak rule of law. Practical implications To minimize the risk of expropriation, investors in the capital market need to select shares of PLCs that practice CG suitable for the ownership structure of PLCs, have high ownership by the largest shareholder and have no divergence between control and ownership right, and or have MLSs. PLCs may need to choose the level of CG mechanism in the context of their ownership structure and consider the benefits and costs implementing them. Social implications The study supports the “one size does not fit all” perspective on CG and, thus, it supports the recently enacted financial service authority (FSA) rule requiring PLCs to follow the “comply or explain” rule on the CG code for PLCs. The FSA needs to enforce the compliance of PLCs with CG rules and encourage PLCs to implement CG in substance, not just in form. To strengthen the positive impact of good CG practice in attracting investments in capital market, the regulator needs to improve investor protection rules and ensure strong rule of law. Originality/value The study is the first to examine the simultaneous relation between CG practice and both cash flow right and cash flow leverage of the largest shareholder. It is also the first that investigates the impact of MLS on CG practice. It explores the complement and substitution relation between the two concepts in reducing agency costs. In term of research design, the study develops a CG instrument that is based on OECD CG principles, that can be used for panel data and that uses public information.

Ownership Dynamics with Large Shareholders: An Empirical Analysis

2013 ◽  
Vol 48 (2) ◽  
pp. 579-609 ◽  
Author(s):  
Marcelo Donelli ◽  
Borja Larrain ◽  
I. Francisco Urzúa
Keyword(s):  
Stock Returns ◽  
Empirical Analysis ◽  
Cash Flow ◽  
Ownership Structure ◽  
Corporate Ownership ◽  
Data Set ◽  
Percentage Points ◽  
Block Trades ◽  
Cash Flow Rights ◽  
Over Time

AbstractWe study the empirical determinants of corporate ownership dynamics using a unique, hand-collected 20-year data set on the ownership structure of Chilean companies. Controllers’ blockholdings are on average high and stable over time. Controllers still make changes to their holdings through issuance and block trades. In a typical year controllers’ blockholdings decrease (increase) by 5 percentage points or more in approximately 6% (7%) of firms. We find that the separation between controllers’ voting and cash-flow rights reduces the likelihood of ownership dilution. Dilution is preceded by high stock returns and predicts low stock returns in the future when done through issuance.

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 Investor Protection and Agency Theory in Corporate Governance in Pakistan

2021 ◽  
Vol 3 (1) ◽  
pp. 12-21
Author(s):  
Imtiaz Ahmed Khan ◽  
Altaf Hussain Abro ◽  
Farooque Ahmed Leghari
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Agency Cost ◽  
Corporate Structure ◽  
Minority Shareholders ◽  
Private Benefits ◽  
Controlling Shareholders ◽  
Global Trend ◽  
The Cost ◽  
Very High

The paper discusses the minority shareholders’ protection under the quantumof agency cost in corporate governance in Pakistan. The agency theory statesthat in most of the cases, the controlling shareholders and the topmanagement are normally involved in expropriating the funds of the company.This phenomenon increases the agency cost. The agency cost is directlyproportional to the cost of functioning of the company. In other words, theagency cost is inversely proportional to the profit of the company. Accordingto the agency theory, if the agency cost is decreased, the profit for investorincreases. The Pakistani corporate sector is dominated by the businessfamilies, the state and an opportunity to get the private benefits at the cost ofother stakeholders. There are the different mechanisms as discussed andapplied around the world to minimize the agency cost so as to make companyfinancially strong and better profit for the investors. In Pakistan, the agencycost is very high. Hence, there is a need to revamp the corporate governancemechanism to reduce the agency cost in order to provide a better protection tominority shareholders in a particular in the context of the global trend keepingin the view of the nature of corporate structure in Pakistan.

scholarly journals The effect of debt policy, company value, company size, investment cash flow on stock returns on mining companies listed on Indonesia Stock Exchange

2019 ◽  
Vol 9 (1) ◽  
pp. 99
Author(s):  
Ardhia Prameswari Regita Cahyani ◽  
Carolyn Lukita Sembiring
Keyword(s):  
Financial Performance ◽  
Stock Returns ◽  
Cash Flow ◽  
Firm Value ◽  
Stock Exchange ◽  
Company Size ◽  
Mining Company ◽  
Mining Companies ◽  
Company Value ◽  
Debt Policy

Investment is a delay in consumption now to be allocated to productive assets which are expected to generate profits in the future, which is called stocks return.  Mining company in Indonesia is an attractive sector to invest in stocks because from a geographical perspective, Indonesia is an archipelago structure that contains mining products. There are risks that will be experienced by investors when investing, namely systematic risk and unsystematic risk. Unsystematic risk can be avoided because related to management decisions. Knowing and analyzing the effect of debt policy, firm value, company size, investment cash flow on stock returns on mining companies listed on the Indonesian Stock Exchange. The statistical method used in this study is multiple regression analysis. The sample in this study is a mining company that has go public and published audited financial statements 2013-2017 with 84 data processed consisting of 28 companies each year. The results of hypothesis testing can be concluded that debt policy and firm value have significant effect on stock returns while firm size and investment cash flow does not have significant effect on stock returns. Investor will be interested in investing in companies with good financial performance rather than bad financial performance.

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