Examining nonlinear relationship between institutional investor, foreign investor ownership ratio and firm value of hospitality company

2019 ◽  
Vol 28 (8) ◽  
pp. 1-16
Author(s):  
Yoo-Li Jung ◽  
Yoon-Young Ahn
Keyword(s):  
Firm Value ◽  
Institutional Investor ◽  
Foreign Investor ◽  
Nonlinear Relationship

scholarly journals Controlling shareholders’ ownership structure, foreign investors’ monitoring, and investment efficiency

2016 ◽  
Vol 13 (3) ◽  
pp. 159-170 ◽  
Author(s):  
Hyun-Young Park ◽  
Soo-Joon Chae ◽  
Moon-Kyung Cho
Keyword(s):  
Firm Value ◽  
Investment Decisions ◽  
Jel Classification ◽  
Foreign Investor ◽  
Investment Efficiency ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Foreign Investors ◽  
Controlling Shareholders ◽  
Cash Flow Rights

This study examines the effect of control-ownership wedge (the difference between control rights and cash flow rights) on investment efficiency. Subsequently, the authors analyze how the level of foreign investor monitoring influences the association between control-ownership wedge and investment efficiency. The results of the analyses show that investment efficiency deteriorates as control-ownership wedge increases. This, in turn, suggests that when this wedge increases, agency problems and information asymmetry between controlling and minority shareholders become more severe. The authors also perform an analysis by dividing the samples into four groups based on foreign investor ratio from the least to the greatest. The result shows that control-ownership wedge deteriorates investment efficiency in the group with the least foreign investor ratio. The result reveals that foreign investor monitoring is effective corporate governance mechanism to monitor the controlling shareholders’ investment decisions. We also find that higher control-ownership wedge with over-investment tendency negatively affects firm performance, which implies an inefficient investment behavior. This result suggests that as controlling shareholders’ ownership increases, controlling shareholders becomes more and more reluctant to assume a loss of firm value as a result of reduced investment efficiency. This study provides additional evidence that the greater control-ownership wedge decreases investment efficiency, while recent studies on the relation between control-ownership wedge and investment efficiency suggest mixed evidence. In addition, the results show that foreign investors play an effective monitoring role when controlling shareholders are in position of exercising exclusive power. The results indicate the importance of external investors’ monitoring over investment decisions. Keywords: control-ownership wedge, foreign ownership, investment efficiency, over-investment, under-investment. JEL Classification: G32, M41

scholarly journals Managerial ownership, capital structure and firm value

2009 ◽  
Vol 7 (2) ◽  
pp. 71-82 ◽  
Author(s):  
Wenjuan Ruan ◽  
Gary Gang Tian ◽  
Shiguang Ma
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Firm Value ◽  
The Other ◽  
Managerial Ownership ◽  
Nonlinear Relationship ◽  
Managerial Control ◽  
Empirical Results ◽  
Self Interest ◽  
Direction Opposite

This paper extends prior research to examine the managerial ownership influences on firm performance through the choices of capital structures by using a new sample of S&P 500 firm in 2005. The empirical results of OLS regressions replicate the nonlinear relationship between managerial ownership and firm value. However, we found that the turning points had moved up in our sample compared with previous papers, which implies that the managerial control for pursuing self-interest, and the alignment of interests between managers and other shareholders can only be achieved now by management holding more ownership in a firm than that found in the previous studies. Managerial ownership also drives the capital structure as a nonlinear shape, but with a direction opposite to the shape of firm value. The results of simultaneous regressions suggest that managerial ownership affects capital structure, which in turn affects firm value. Capital structure is endogenously determined by both firm value and managerial ownership; while managerial ownership is not endogenously determined by the other two variables.

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