Pyramidal Ownership Structure and the Sensitivity of Investment to Cash Flows

This study aims to identify whether there is a relationship between dual class shares issuance, pyramidal ownership structure and firms’ financial performance in the Brazilian market. To this end, univariate tests and panel data analysis were applied in a sample for the 2000 to 2012 period. The results indicate that there is a significant and negative relationship between dual class shares issuance and firm’s financial performance, regardless of whether there is a pyramidal ownership structure in firm. In other hand, we find positive effects from pyramidal structure on the firm’s financial performance, conditioned that there is no dual class shares issuance, and also on the absence of an excessive number of levels until the ultimate controlling shareholder in the pyramidal structure. These evidences suggest that the voting power matters to improve firms’ financial performance; and that there are benefits and costs from pyramidal ownership structure in Brazilian firms.

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The Effect of Pyramidal Ownership Structure to the Financing Policies and Firm Value in Indonesia: Cronyman as Moderating Variable

Jurnal Dinamika Akuntansi ◽

10.15294/jda.v10i1.12878 ◽

2018 ◽

Vol 10 (1) ◽

pp. 1-12

Author(s):

Hety Budiyanti ◽

Suad Husnan ◽

Mamduh Hanafi

Keyword(s):

Ownership Structure ◽

Firm Value ◽

Stock Exchange ◽

Sample Selection ◽

Least Squares Regression ◽

Listed Firms ◽

Financing Policies ◽

Final Sample ◽

Pyramidal Ownership ◽

Cash Flow Rights

The research to examine the effects of ownership structures on financing policies and firm valuation. The populations are all listed companies in Indonesia Stock Exchange for period of 2013 and 2015. The sample selection technique used purposive sampling and resulting in a final sample of 72 listed firms. Empirical tests are conducted using multiple regressions and two stages least squares regression to test the simultaneous relationship between ownership structure, financing policies and firm value. The estimated results provide support for the hypotheses proposed that the separation of cash flow rights and control rights have led the use of excess leverage among pyramidal companies to preserve ultimate owner’s control. However, we failed to find a significant relationship between firm’s leverage and firm’s value. The conclusion is the simultaneounity relation between ownership structure, leverage and firm value appear that only the ownership structure significantly related with leverage and firm value. Also firm value and leverage ownership impact the ownership structure. Meanwhile, leverage does not appear to have a significant relation with the firm value, or the other way around.

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Institutional Reforms and the Effects of Family Control on Corporate Governance

Family Business Review ◽

10.1177/0894486515609202 ◽

2015 ◽

Vol 29 (2) ◽

pp. 174-188 ◽

Cited By ~ 11

Author(s):

Yung-Chih Lien ◽

Chia-Chen Teng ◽

Shaomin Li

Keyword(s):

Corporate Governance ◽

Ownership Structure ◽

Institutional Environment ◽

Governance System ◽

Negative Effects ◽

Institutional Reforms ◽

Family Control ◽

Family Governance ◽

Pyramidal Ownership ◽

Firm Governance

According to the institution-based view of corporate governance, firm-governance efficiency is influenced by the institutional environment in which the firm operates. In this study, we examine how firms under a family-governance system adapted to institutional reforms over time. The results of the analysis indicate that institutional reforms reduce firm dependence on family governance and eliminate the negative effects on performance exerted by a controlling family’s pyramidal ownership structure. We also find that institutional reforms foster external corporate governance by domestic institutional investors. In conclusion, our study shows that institutional reforms alter the essence of family firm governance.

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Ownership structure and analysts’ forecast properties: a study of Chinese listed firms

Corporate Governance ◽

10.1108/cg-02-2015-0018 ◽

2016 ◽

Vol 16 (1) ◽

pp. 54-78 ◽

Cited By ~ 7

Author(s):

Sun Liu

Keyword(s):

Ownership Structure ◽

Emerging Market ◽

Forecast Accuracy ◽

State Ownership ◽

Managerial Ownership ◽

Content Type ◽

Listed Firms ◽

Pyramidal Ownership ◽

And Control ◽

The Relationship

Purpose The purpose of this paper is to investigate the association between ownership structure and the properties of analysts’ forecasts in China’s unique corporate setting. Design/methodology/approach Multiple regression models were used to examine the influence of ownership structure mechanisms on analysts’ forecast properties for listed Chinese firms during the period 2008-2012. Findings The paper finds that analysts’ forecast accuracy is higher for listed firms with high levels of foreign ownership and managerial ownership. However, the complex pyramidal ownership structure could make corporate information less transparent and then increase the complexity of forecasting; hence, it results in less precise analysts’ forecasts. Interestingly, the relationship between state ownership and analysts’ forecast properties appears to be non-linear (an inverted U-shape), and the inflection point at which the relationship becomes negative occurs at state ownership over 45 per cent. Originality/value To the best of the author’s knowledge, this paper is the first to investigate the influence of ownership structure mechanisms on the properties of analysts’ forecasts in an emerging market, and the findings provide some insight on how the properties of analysts’ forecast might be shaped by certain ownership and control features in the context of concentrated state ownership and complex pyramidal ownership structure.

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Citigroup's Shareholder Tango in Brazil (A)

Kellogg School of Management Cases ◽

10.1108/case.kellogg.2016.000066 ◽

2017 ◽

pp. 1-16

Author(s):

Susan Perkins

Keyword(s):

Ownership Structure ◽

Private Equity ◽

Market Failure ◽

Joint Venture ◽

Telecommunications Industry ◽

List Type ◽

Strategic Choices ◽

Ownership Structures ◽

Pyramidal Ownership ◽

Group Ownership

Citigroup has discovered that Daniel Dantas, hired five years earlier to manage Citigroup's $750 million private equity investment in a Brazilian telecommunications industry joint venture, has allegedly mismanaged more than $300 million in assets and contracts. Dantas's misconduct relates to his management of Citigroup's CVC Fund and II-FIA, a legal entity representing a group of large Brazilian pension funds. Together with Dantas's Grupo Opportunity, CVC and II-FIA own Brasil Telecom, the third largest telecommunications company in the country. The partnership's pyramidal ownership structure makes his actions difficult to track. Citigroup must quickly determine how to disrupt Dantas's intricately woven web of control without allowing him to extract further value from the partnership. This case provides concrete examples of the expropriation risks joint venture partners face when unfamiliar with pyramidal group ownership structures. Understand and recognize governance-based differences between a pyramidal business group (e.g., the joint venture related to Brasil Telecom) and that of a widely held firm (i.e., a typical U.S. firm's ownership structure); understand that to avoid market failure firms must anticipate and adjust to the non-market institutional “rules of the game,” which vary greatly across nations; and understand the range of strategic choices and their optimal application to protect minority shareholder rights.

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The Impact of Free Cash Flows to the Financial Flexibility of the Banks listed in the Colombo Stock Exchange

10.54216/ajbor.040102 ◽

2021 ◽

pp. 23-27

Author(s):

Nadhira .. ◽

◽

Maha Saad Metawea

Keyword(s):

Ownership Structure ◽

Positive Relationship ◽

Stock Exchange ◽

Investment Decisions ◽

Cash Flows ◽

Free Cash Flow ◽

Panel Regression ◽

Financial Flexibility ◽

Free Cash Flows ◽

The Impact

There are considerable arguments in favour of and against the positive relationship between free cash flows (FCF) and financial flexibility. The aim of the study is to determine the impact of free cash flows on the financial flexibility of the banks listed in the Colombo Stock Exchange (CSE). The free cash flow will measure according to the model in Journal of Finance: Agency costs and ownership structure in 2000 and financial flexibility will determine using the financial leverage based on the model captured according to the Accounting Horizons Journal: Financial flexibility and investment decisions in 2007 . The population of the study is the banks listed in the CSE. The sample consists of 60 observations covering 12 banks for a period of over 05 years from 2015 to 2019. The panel regression model has been used to test hypotheses. The results indicate that there is a positive significant relationship between free cash flows and the financial flexibility of the banks listed in CSE.

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Citigroup's Shareholder Tango in Brazil (B)

Kellogg School of Management Cases ◽

10.1108/case.kellogg.2016.000068 ◽

2017 ◽

pp. 1-3

Author(s):

Susan Perkins

Keyword(s):

Ownership Structure ◽

Private Equity ◽

Market Failure ◽

Joint Venture ◽

Telecommunications Industry ◽

Strategic Choices ◽

Ownership Structures ◽

Institutional Rules ◽

Pyramidal Ownership ◽

Group Ownership

Citigroup has discovered that Daniel Dantas, hired five years earlier to manage Citigroup's $750 million private equity investment in a Brazilian telecommunications industry joint venture, has allegedly mismanaged more than $300 million in assets and contracts. Dantas's misconduct relates to his management of Citigroup's CVC Fund and II-FIA, a legal entity representing a group of large Brazilian pension funds. Together with Dantas's Grupo Opportunity, CVC and II-FIA own Brasil Telecom, the third largest telecommunications company in the country. The partnership's pyramidal ownership structure makes his actions difficult to track. Citigroup must quickly determine how to disrupt Dantas's intricately woven web of control without allowing him to extract further value from the partnership. This case provides concrete examples of the expropriation risks joint venture partners face when unfamiliar with pyramidal group ownership structures.(1) Understand and recognize governance-based differences between a pyramidal business group (e.g., the joint venture related to Brasil Telecom) and that of a widely held firm (i.e., a typical U.S. firm's ownership structure); (2) understand that to avoid market failure firms must anticipate and adjust to the non-market institutional “rules of the game,” which vary greatly across nations; and (3) understand the range of strategic choices and their optimal application to protect minority shareholder rights.

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Ownership concentration, free cash flow agency problem and future firm performance: New Zealand evidence

Corporate Ownership and Control ◽

10.22495/cocv9i3art8 ◽

2012 ◽

Vol 9 (3) ◽

pp. 96-110

Author(s):

Haiyan Jiang ◽

Ahsan Habib

Keyword(s):

New Zealand ◽

Firm Performance ◽

Cash Flow ◽

Ownership Structure ◽

Financial Institution ◽

Agency Problem ◽

Cash Flows ◽

Free Cash Flow ◽

Ownership Concentration ◽

Free Cash Flows

This study seeks to empirically examine the effect of ownership concentration on mitigating free cash flow agency problem in New Zealand. Following Jensen’s (1986) argument that managers have incentives to misuse free cash flows, this study tests whether concentrated ownership structure helps alleviate such a problem or exacerbates it. A natural consequence of this agency problem will be overinvestment and other operational inefficiencies which are likely to have a detrimental impact on firms’ future performance. The second objective of this paper is to examine the association between FCFAP conditional on ownership concentration on future firm performance. We measure free cash flow agency problem as the product of positive free cash flows and growth opportunities proxied by Tobin’s Q and find that financial institution-controlled ownership structure in New Zealand is positively associated with free cash flow agency problem. We also document that free cash flow agency problem conditional on ownership concentration negatively affects future firm performance.

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