Abstract
Taking the 141 related party cooperation announcements by Chinese listed companies from January 2001 to December 2013 as the sample, the article investigates the impact of the focal firms’ ownership structure and relative characteristics of related parties on the focal firms’ value creation. The empirical results indicate that ownership concentration negatively affect the value creation, while equity restriction has no influence on the focal firms’ value creation. The related party’s relative scale plays a significantly positive role on the focal firms’ value creation, while the related party’s relative associated relationship is negatively related to the focal firms’ value creation. The article contributes to the current literature by investigating whether the governance mechanism of listed companies could create value for the focal firms under the background of related party cooperation, and providing empirical evidence about the influence of ownership structure and relative characteristics of related party on the focal firms’ value creation.
Highlights
A related-party cooperation is a business deal or arrangement between two parties who are joined by a special relationship prior to the deal
In order to accurately investigate the effects of ownership structure and the relative characteristics of the related party on the value creation of the focal firms, we build up four multivariate regression models with Tobin's Q as the dependent variable
Different from Xu et al [6], our results suggest that equity restriction has no significant impact on the value creation of focal firms, and the reason may be that the first major shareholder and the second major shareholder share common interests and are even controlled by the same ultimate owner
Summary
A related-party cooperation is a business deal or arrangement between two parties who are joined by a special relationship prior to the deal. Cheung et al [1] examine a sample of 328 filings of “connected transactions” between Hong Kong listed companies and their controlling shareholders and their findings indicate that firms earn significant negative excess returns both around the initial announcement of the connected transactions and during the 12-month period following the announcement. It is the first time that this article investigates whether cooperation between the related parties would create value for focal firms, and provides empirical evidence about the influence of ownership structure and relative characteristics of related party on the focal firms’ value creation.
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