Minority investor protection mechanisms and agency costs: An empirical study using a World Bank–developed approach

This study aims to examine the impact of minority investor protection mechanisms on agency costs. All relevant indicators of minority investor protection adapted from the World Bank’s annual ‘Doing Business’ reports, along with concentrated government ownership, are employed with a panel data sample of 135 Vietnamese listed firms during the period 2014–2018. It is found that the following mechanisms are effective in mitigating agency costs and hence agency problems at the firm level: 1) review and approval requirements for related-party transactions; 2) minority shareholders’ ability to sue and hold directors liable for their duties; 3) minority shareholders’ access to internal corporate documents; 4) investors’ rights to approve major corporate investment and sale of asset decisions; and 5) disclosure in annual reports of salaries, bonuses and other forms of remuneration to directors and management. Interestingly, board independence and controlling government shareholders are not confirmed to play significant roles in addressing agency problems. To the best of the authors’ knowledge, this is the first attempt at testing for the impact of minority investor protection mechanisms developed by the World Bank on agency costs at the firm level, hence providing empirical evidence for the adoption of the minority investor protection mechanisms promoted by the World Bank. This study also provides policy implications for selecting effective mechanisms to mitigate agency conflicts between controlling shareholders and minority investors in order to enhance the financial performance of firms in an Asian emerging market.

The Impact of Environmental Uncertainty on Corporate Innovation: Empirical Evidence from an Emerging Economy

The paper analyzes the effect of environmental uncertainty on corporate technological innovation from the perspective of an innovation value chain under the institutional background of China. This paper not only discusses the intermediary effect of agency problems on environmental uncertainty and corporate technological innovation but also deeply explores the influence of information transparency, government subsidies, and other mechanisms to alleviate agency problems on environmental uncertainty and corporate technological innovation. We use the data of listed companies in China from 2008 to 2019 as the research sample, and the results show that, in general, environmental uncertainty has a negative effect on both input and output of technological innovation, and the negative effect can last for two years. Further research shows that the agency problem has an intermediary effect on the environmental uncertainty and corporate technology innovation, and the environmental uncertainty aggravates the agency problem, which hinders the input and output of corporate technology innovation. As an important mechanism to alleviate the agency problems, information transparency and government subsidies can effectively alleviate the agency conflict, thus reducing the inhibition of environmental uncertainty on the input and output of technological innovation. Our findings contribute to the discussion of driving factors for technological innovation in the context of China’s system. Our results provide useful insights into the link between environmental uncertainty and corporate innovation for economic academics and practitioners alike.

An Austrian Take on ESG

This paper analyzes the contemporary debate about ESG – Environment, Social, Governance – using economic insights from Austrian Economics; particularly, on entrepreneurship, agency, and information asymmetry. These insights are contrasted to similar concepts in “mainstream” economics suggesting that the Austrian insight goes beyond them, first by stressing effectiveness in addition to efficiency and institutions in addition to law-likeliness. When applied to ESG, the Austrian insight portraits ESG as a special case of the socialist, or economic calculation debate causing misalignments between inter- and intrafirm goals, exacerbates agency problems and suffers from serious flaws in its conceptualization as well as methodology. Relying on entrepreneurship, however, could make ESG work. This paper, thus, applies Austrian economics to contemporary debates claiming that its insights provide a unique perspective but at the same time updating its research program.

Cash Dividends as A Signal to Broker-Dealer Firms

Using multivariate regression analysis complemented with simple linear regression, I find that not only do current fiscal year brokerage, clearing, and Exchange expenses affect commission and fees (CE) paid to the broker but also prior brokerage, clearing, and Exchange expenses (BCE). Also, I find that Cash dividends are positively correlated with BCE expenses as well as CE fees. This result is particularly interesting because it implies that brokers can influence commission and fees by affecting the BCE expenses. This might also provide further reasons for agency problems to take place. Overall, this paper contributes to the existing literature on the behavior of brokers and dealers and how they influence the stock market.

FUNDAMENTAL EFFECT OF MICRO ECONOMICS ON STOCK PRICES IN THE JAKARTA ISLAMIC INDEX

This study aims to examine the effect of microeconomic fundamentals as proxied by financial ratios to stock prices in the Jakarta Islamic Index (JII) group. The population in this study were companies that were consistently incorporated in JII for the period 2011-2015 and were analyzed using multiple linear regression. The results of this study indicate that there are three variables that have a significant influence on Islamic stock prices in the JII group, namely the market ratio proxied by EPS, the leverage ratio proxied by DAR and the activity ratio proxied by TATO, while the profitability ratio as proxied by ROA and liquidity ratio as proxied by CR. partially does not affect the price of sharia shares at JII. However, simultaneously effect. This indicates that the three proxies that have a positive effect have a relationship with agency problems, namely between the principal (shareholder) and the agent (management).

Family ownership, information problem and firm performance

This paper reviews recent corporate financial literature dealing with family business issues. It discusses research papers that explain the nature and type of agency problems in family firms. It provides empirical evidence of the association of family ownership with information asymmetry. It also portrays the influence of family firms over corporate disclosures. We have analyzed literature to explain the empirical association between family ownership, and so ownership control, and firm performances. This paper also attempts to find out the research gap based on reviewed papers and tries to give the future directions of research in this regard.

Dividend policy and the downside risk in stock prices: evidence from the MENA region

PurposeThe aim of this paper is to document the impact of dividend policies on the downside risk in stock prices.Design/methodology/approachThe authors use the data for non-financial firms from the MENA region to test our arguments by estimating the pooled OLS regressions. The data cover the period between 2010 and 2018.FindingsThis paper shows that firms with higher dividend payouts have significantly lower downside risk in their stock prices than the other firms. The findings of this paper are robust across various proxies of dividend policy and across various sub-samples. This paper contends that lower downside risk associated with the stock prices of firms paying high dividends is due to the fact that these firms have lower agency problems. Lower agency problems reduce the downside risk in stock prices.Originality/valueTo the best of the authors’ knowledge, most of the prior research (covering the MENA region) overlooks the impact of dividend policy on the downside risk in stock prices. This paper fills this gap by documenting the relationship between the two by using the data for firms from the MENA region.