Shareholders Benefit Research Articles

Shareholder perceptions of external tax advisors in corporate tax planning

AbstractWe examine shareholders' perceptions about how external tax advisors contribute to corporate tax planning. As residual claimants of corporate tax planning, shareholders benefit from lower corporate taxes, but also bear the financial and reputational costs of subsequent tax enforcement. Despite the influential advisory role of external tax advisors in corporate tax planning, existing research on how shareholders perceive this role is limited. Using event study methods and exploiting the heightened regulation of tax advice through the covered opinion rules as a setting, we observe average and cross‐sectional stock returns consistent with shareholders perceiving external tax advisors as contributing unfavorably to tax planning by promoting excessively risky strategies. We further find that risky and overall tax planning declined across firms after the enactment of the rules, consistent with shareholders' perceptions about tax advisors' contributions to firms' tax planning. Overall, our findings contribute to research on shareholder perceptions and valuation of tax planning, and have important implications for practice, where regulatory oversight of external tax advisors remains a significant concern.

Is the market biased in M&A, dividend payment, and share repurchase events?

Companies with excess capital can opt to: pay dividends to shareholders, buy back treasury shares for short-term shareholder benefits, or pursue M&A investments for long-term shareholder returns. Using difference in differences approach of event research methods combined with unique manually collected data sets, this paper investigates the market bias for three events: M&A, share repurchase, and dividend payment. The results show that information was leaked to the outside 1 day before it was officially announced at all events. When observing the company's performance 3 years after the event announcement, we also find that the market reaction is biased in M&A and stock dividend payment events, but accurate in the cash dividend payment and share repurchases. In addition, the market has the strongest and longest reaction to the news of the company buying back shares; has the weakest reaction to the stock dividend payment; has the shortest reaction to cash dividend payment; has a negative reaction to the acquisition company's stock, and has a positive reaction to the target company's stock. Our research has provided empirical evidence on the market response to published information, and supports CEOs make the most accurate choices when the company has an excess cash flow.

Does the issuance of green bonds nudge environmental responsibility engagements? Evidence from the Chinese green bond market

Policymakers and managers have increasingly adopted green bonds as a direct financing tool to address environmental degradation and climate change in emerging economies; however, the increasing green washing sentiments in the green bond market raise questions on whether green bonds can nudge polluting businesses to achieve green transformation. Therefore, this study joins the controversial debate by investigating the impact of green bond issuance on corporate environmental responsibilities and the potential impact mechanisms and economic consequences. Using the data of Chinese listed enterprises from 2011 to 2020 and the staggered issuance of green bonds as plausibly exogenous shocks, we determine that the enterprises in the experimental group that issued green bonds increased their environmental performance compared to their counterparts. Furthermore, this positive link is maintains after a series of robustness tests. Moreover, we identify that green bond issuance plausibly enhances environmental responsibility engagements through two governance channels, namely, internal management and external supervision. This beneficial effect appears more pronounced for subsamples of firms in low-polluting industries, without environmental subsidies and with higher managerial abilities. Furthermore, economic consequences indicate that the issuance of green bonds primarily motivates speculative shareholder benefits, as evidenced by short-term increases in stock yields but with limited impact on the short-run financial performance. Overall, these findings offer new evidence supporting that green financing tools could play a helpful hand toward environmental sustainability.

Sustainability reporting and bank performance in a developing country

The purpose of this study is to test whether sustainability reporting leads to better performance and creates value for investors in developing markets. This study examined the 32 Bangladeshi banks. The generalized method of moments (GMM) is used to analyze this study. Ordinary least square (OLS) is used for robustness check in this study. The finding of this study shows that there is a significant corporate social responsibility (CSR) and a negative association between environmental, social, and corporate governance (ESG) scores and bank performance of Bangladeshi banks. The result of ESG indicates that environmental, social and governance performances reduce both banks’ profitability and values. The results of the research show that ESG has a significant CSR, insignificant ED and CG and negative impact on the performance of banks and the economic benefits of shareholders. Unfortunately, this study also shows that there is no relationship between environmental disclosure, corporate governance (ECG) and bank performance (ROE). Finally, this study provides a policy implication and future guidelines to all stakeholders.

Does CFO Board Membership Benefit Shareholders? The Case of Corporate Acquisitions

Does CFO Board Membership Benefit Shareholders? The Case of Corporate Acquisitions

Directors and officers liability insurance and the wealth effect of M&A announcements

ABSTRACT We explore the association between Directors and Officers Liability Insurance (D&O insurance) and the valuation of mergers and acquisitions (M&As) from the perspective of the monitoring hypothesis versus the moral hazard hypothesis. Examining a sample of 278 M&A announcements made by listed firms in Taiwan from 2009 to 2020, our study finds that high D&O-insured acquiring firms are associated with producing better benefits for shareholders through M&A channels than low-insured firms. Such a positive relationship is more evident for acquirers with higher agency problems, indicating that D&O insurance assists in weakening the conflict between managers and shareholders and serves as a viable substitute for traditional corporate governance, effectively taking on the role of an external monitoring channel. Further analyses reveal that D&O insurance is associated with improvement in the post-M&A operating performance. Overall, the evidence supports the monitoring hypothesis, implying that acquirers holding high-level D&O insurance are more likely to deter opportunistic managerial behaviours and enhance the corporate monitoring quality, thereby exerting a positive influence on valuation from M&A transactions.

Structural positioning of nomination committees: Evidence from Iceland

Nomination committees (NCs) are the subject of ongoing scholarly and professional debates regarding their purpose, practices, and organizational structure. Existing research suggests that NCs can enhance corporate governance by improving the process through which directors are appointed (Al Absy & AlMahari, 2023; Grove et al., 2020). In Nordic corporate governance, these committees are integrated in various ways, either as shareholders committees or subcommittees of the board. Iceland, a Nordic country, serves as a critical case study for investigating perspectives among stakeholders on the structural positioning of NCs — whether they should operate as subcommittees of corporate boards or shareholders committees. This unique context of Iceland adds a layer of intrigue and curiosity to our research. Interviews were conducted with thirteen individuals comprising shareholders, board members of publicly listed companies, and nomination committee members. Additionally, surveys were distributed among shareholders, board members, and nomination committee members of Iceland’s 300 largest corporations in 2020 and then again in 2023. The findings suggest that NCs should be shareholders’ committees voted by the shareholders instead of board committees. Such an arrangement is proposed to optimize the benefits for shareholders and boards in forming and operating NCs.

Effect of Dividend Policy and Capital Structure on Firm Value with Growth Opportunity as a Moderating Variables

Objective: Main objective this research is to examine and analyze the effect of dividend policy and capital structure on firm value with growth opportunity as a moderating variable.
 Methodology: Quantitative techniques are used in this study. A purposive sampling of 54 samples based on preset criteria was conducted on the trading and service organizations that will be listed on the Indonesian Stock Exchange in 2019–2021 as the population for this study. Dividend Policy and Capital Structure, which are independent factors, Firm Value, a dependent variable, and Growth Opportunity, a moderating variable, are the variables that were looked at in this study. The research data was subjected to analysis using the SmartPLS 3 software application, which served as the analytical tool.
 Results: The results of the research show that dividend policy which is proxied dividend payout ratio (DPR) has a significance impact on firm value, capital structure which is proxied debt to equity ratio (DER) has a significant impact on firm value, growth opportunity which is proxied earning per share (EPS) has a significance impact on firm value, dividend policy has a significance impact on firm value with growth opportunity as a moderating variable and dividend policy has not impact on firm value with growth opportunity as a moderating variable. The results of the research overall study have consequences for businesses in the trade and service sectors that are listed on the IDX, requiring them to conduct evaluations or plan in order to optimize corporate value for the benefit of shareholders.
 Implication: Implications will be impact all parties based on the results of this research among companies listed on the IDX will make planning and evaluation, especially the trade and service sector to take precautions so that the company's value remains stable and normal. For potential investors, it will be an opportunity and opportunity to choose to invest in the right company to achieve maximum profit, high company value is indeed an attraction for investors but good growth is also a support in seeing how far a company can increase its firm value supported by a high capital structure also has good implications for the company's development.

Employee treatment and stock price crash risk: evidence from China

PurposeThis study aims to examine the impact of employee treatment on stock price crash risk in emerging markets. The study further sheds light on the economic channels and boundary conditions between employee treatment and crash risk.Design/methodology/approachThis study employs a large-scale archival dataset of Chinese A-share listed firms covering 2010 to 2021. To establish causality, the study leverages multi-way fixed effects, Oster’s test, change regression and instrumental variable methods to alleviate endogeneity concerns.FindingsThe results reveal that employee-friendly treatment leads to a lower crash risk. Moreover, improving internal control quality and enhancing firm reputation appear to be the two plausible economic channels through which employee treatment mitigates crash risk. Cross-sectionally, the documented impact is more evident for human-capital-intensive firms, firms with weaker external monitoring and those operating in fiercely competitive industries.Originality/valueThis study is among the first to show that employee treatment has a favorable consequence for shareholder benefit through reducing crash risk. The study thus adds to the ongoing debate regarding the relationship between employee treatment and shareholder wealth. The study also extends the nascent literature on the role of rank-and-file employees in shaping corporate information landscapes.

The role of inside debt in banks’ M&A choices: wealth expropriation or conflict resolution?

PurposeThis study investigates the impact of bank CEOs’ inside debt on shareholder benefits in the context of bank mergers and acquisitions (M&A) before the 2008–2009 financial crisis.Design/methodology/approachEmploying an event-study methodology, this analysis delves into market reactions to bank M&A announcements during 2006–2007, encompassing 105 M&As by 79 public commercial banks. This era witnessed heightened risk-taking behavior on the verge of the financial crisis. We explore the relation between relative inside debt and market abnormal returns at M&A announcements and the association between relative inside debt and cash payment preferences in M&As.FindingsEvidence suggests that M&A announcements from banks where acquiring CEOs hold a substantial inside debt experience favorable stock market reaction, particularly for smaller banks. Additionally, banks with elevated CEO inside debt tend to favor cash as a payment mode for M&As.Research limitations/implicationsOne limitation of this study is the short period of data availability. The data used in this study covers only 2006 and 2007, the periods marked by notable risk-taking activities on the verge of the financial crisis. Although this period is perfectly suitable for our investigation, given the prevalence of conflicts between equity and debt holders, it is essential to acknowledge that our findings may not capture changes or trends over time. Nevertheless, the results offer valuable insights into the factors that influence the behavior of the studied population. Future research could employ a longitudinal design to address this limitation and gain a more comprehensive understanding of the dynamics over extended periods.Practical implicationsOur study has significant implications for businesses and policymakers as it provides insights into the factors contributing to financial crises and how compensation mechanisms can be used to moderate bank risk-taking. We propose that CEO inside debt compensation presents a plausible mechanism that boards of directors can incorporate into bank executive compensation contracts. By doing so, they can promote value-enhancing investments and moderate excessive risk-taking, thereby safeguarding the financial stability of individual banks and overall financial system.Originality/valueOur study sheds light on the beneficial role of bank CEO inside debt for shareholders, contributing empirical backing to the conflict resolution viewpoint in the discourse on wealth appropriation. From a regulatory stance, our findings advocate for the inclusion of bank CEO inside debt in executive remuneration agreements. Such a strategy can empower boards of directors to mitigate undue risk and enhance shareholder value in M&As, safeguarding both individual bank and broader financial system stability.

Compulsory sale of shares by shareholders at the request of a person (or persons acting jointly) who owns a controlling package of shares (squeeze-out): amendments in legal regulation

This article is dedicated to the analysis of legislative amendments in the procedure for the compulsory sale of shares by shareholders at the request of a person (or persons acting jointly) who owns a controlling package of shares (the «squeeze-out» procedure). It is argued that due to the adoption of the new Law of Ukraine «On Joint Stock Companies,» the legal regulation of the studied procedure has not undergone significant changes. However, it is emphasized that the newly adopted act has detailed certain procedural aspects and introduced the concept of a competing demand.
 It has been established that in accordance with the new requirements of the Law of Ukraine «On Joint Stock Companies» of 2022, a public irrevocable demand for the purchase of shares from all shareholders must include information about the bank where the applicant for such a demand obtained a banking guarantee for the performance of its financial obligations under Article 95 of this Law, as well as information about the material terms of such guarantee. It is argued that the absence of more detailed provisions specifying the requirements for such a banking guarantee could lead to various violations of this provision.
 The article analyzes the innovations of the Law of Ukraine «On Joint Stock Companies» of 2022 regarding the right to submit a competing demand. Shareholders who have received a public irrevocable demand in accordance with Part 10 of Article 95 of this Law are endowed with this right. At the same time, when exercising the right to submit a competing demand, shareholders (or shareholders acting jointly) are obliged to adhere to the provisions regarding the price of the compulsory sale of shares provided in the competing demand. This price must be at least 5 percent higher than the price stated in the public irrevocable demand or in a previously submitted competing demand.
 The article examines the provisions concerning the use of the escrow agreement mechanism within the «squeeze-out» procedure. It is demonstrated that in the legislation of Ukraine, the period for the release of funds from such an account to the benefit of shareholders, their successors, or other persons entitled to receive funds, has been extended.

The Governance Role of Minority State Ownership in Non‐state‐owned Enterprises: Evidence from Corporate Fraud in China

AbstractThis study attempts to shed new light on how the state as a minority shareholder benefits stakeholders, by investigating its role in deterring corporate fraud in non‐state‐owned enterprises (non‐SOEs). Through an analysis of publicly traded non‐SOEs in China, this study reveals that minority state ownership negatively impacts firm fraud, and the results hold after alternative tests. The identified channels of this association are that minority state ownership mitigates tunnelling, enhances internal control, and alleviates the financial constraints of non‐SOEs. Further analysis shows that this relationship is more pronounced in firms with weaker corporate governance, stronger fraud incentives, and lower levels of political connections. Overall, this study contributes to our understanding of the role of minority state ownership in emerging markets within the context of corporate fraud, highlighting the importance of critically evaluating the effects of government intervention in different contexts.

Advantages and Disadvantages Analysis and Legal Risks of LBO

The leveraged buyout (LBO) is an important and genius operation in the field of mergers and acquisitions. Companies expand and optimize their performance with the help of LBOs. The market as well as the society can also benefit from LBOs. But however, all coins have two sides. There are a lot of negative cases that illustrate that the LBO is not an impeccable operation. Shareholders benefit can be harmed and there are insider buyouts when managers impose on their shareholders as they are privileged with their insider power. This paper is going to discuss the advantages and disadvantages of LBOs.

Legal Reformulation of Derivative Action Regulations for Protection of Minority Shareholders in Indonesia: Comparative Study of Indonesia and Australia

Arrangements related to legal protection for minority shareholders regulated in Law no. 40 of 2007 concerning Limited Liability Companies (hereinafter referred to as UUPT) still found limitations both in filing rights to sue, objections, and implementation of derivative actions in terms of arrangements regarding the protection of minority shareholders due to a corporate action or certain decisions that take refuge behind the legality of the validity of the General Meeting Shareholders (GMS) whose enactment is heavily influenced by the interests of the majority shareholders. The existing arrangements are felt to be far from justice for minority shareholders. This study will examine whether the Derivative Action arrangements contained in the Company Law as a legal umbrella in providing protection for minority shareholders are adequate and how the legal systems are compared with regard to Derivative Action arrangements in Indonesia and Australia. The purpose of this study is to find out to what extent the Derivative Action regulations contained in the Company Law can protect minority shareholders and to compare the legal systems between the two countries as input and consideration for corrections and improvements to the national legal system. This research uses a type of normative research with a statutory approach and a comparative approach. The results of this legal research found certain aspects of the Australian Corporation Law which can provide a sense of justice and legal certainty as legal benefits for minority shareholders which can be used as legal reformulations in Indonesia.

Analisis Penerapan Corporate Social Responsibility pada PT. BPRS Puduarta Insani Berdasarkan Perspektif Maqashid Syariah

Corporate Social Responsibility is one form of the company's efforts to foster good relations with the community. Even though basically the company's activities are only for profit and operate for the benefit of shareholders, the company must pay attention to the community in its business activities. In the view of Islam, CSR is a company's obligation that is excluded from income that falls on the obligation of zakat, infaq and alms. So the problem being studied is how to implement Maqashid sharia in the CSR program at PT. BPRS Puduarta Insani and lies in the extent to which the CSR program is realized in operational activities. The methodology used in this study is a descriptive qualitative approach. The type of data used in this research is primary and secondary data. Based on the results of research conducted at PT. BPRS Puduarta Insani can be concluded that the implementation of corporate social responsibility has been going well. If viewed from maqashid sharia regarding the implementation of corporate social responsibility, it can be seen from programs such as orphan compensation, mosque construction assistance, achievement scholarships, and other social activities. So it can be concluded that the implementation of corporate social responsibility by PT. BPRS Puduarta Insani in accordance with the five concepts of maqashid sharia.
 Keywords: Corporate Social Responsibility, Maqashid Syariah, and PT. BPRS Puduarta Insani

Can Shareholders Benefit from Consumer Protection Disclosure Mandates? Evidence from Data Breach Disclosure Laws

ABSTRACT Data breach disclosure laws are state-level disclosure mandates intended to protect individuals from the consequences of identity theft. However, we argue that the laws help reduce shareholder risk by encouraging managers to take real actions to reduce firms’ exposure to cyber risk. Consistent with this argument, we find an on-average decrease in shareholder risk, proxied by cost of equity, after the staggered passage of these laws. We also find the effect is attenuated for firms that already took real actions to manage cyber risk before the laws. Further, after these laws, firms are more likely to increase cybersecurity investments and have a cybersecurity officer. Finally, we observe positive abnormal returns on key dates related to the passage of these laws. Our collective evidence suggests that consumer protection disclosure mandates can benefit shareholders and, specifically, that regulators can use disclosure mandates to incentivize managers to reduce firms’ exposure to cyber risk. Data Availability: All data used in this study are publicly available. JEL Classifications: G120; G340.

The Dark Side of Investor Conferences: Evidence of Managerial Opportunism

ABSTRACT Although the shareholder benefits of investor conferences are well-documented, evidence on whether these conferences facilitate managerial opportunism is scarce. We examine whether managers opportunistically exploit heightened attention around the conference to “hype” the stock. We find that (1) managers increase the quantity of voluntary disclosure leading up to the conference, (2) these disclosures are more positive in tone and increase prices to a greater extent than post-conference disclosures, and (3) these disclosures are more pronounced when insiders sell their shares immediately prior to the conference. In circumstances where pre-conference disclosures coincide with pre-conference insider net selling, we find evidence of a significant return reversal––large positive returns before the conference and large negative returns after the conference––and that the firm is more likely to be named in a securities class action lawsuit. Collectively, our findings are consistent with some managers hyping the stock prior to the conference.

Why Stakeholder Theory is “Non-exploitative”

This essay explores the growing interest in stakeholder theory, especially its non-exploitative nature, arising out of the need to contribute to the long-term and sustainable development of corporations. As corporations continue to grow, the traditional shareholder primacy theory is increasingly challenged, many scholars believe that this theory only pays one-sided attention to the benefits of shareholders, leading to the problem of short-term and financialization of corporations. The stakeholder theory, however, takes into account the benefits of customs, manufacturers, and other stakeholders, and better avoids exploitation. However, there are also some criticisms of stakeholder theory. For example, some people argue that the implementation mechanism of stakeholder theory is not feasible, and there are still groups that are not considered under stakeholder theory, so its non-exploitative nature is questioned. Many of the existing papers focus on the content of stakeholder theory and lack to analyze whether it avoids corporate exploitation through a specific interpretation of its content. The emphasis of this essay lies in analyzing the background and content of stakeholder theory and interpreting why it is not exploitative from the two levels, theoretical basis, and practical application, and contributes to the long-term success and win-win relationship of the company. This essay concludes that stakeholder theory can reduce corporate exploitation both in theory and practice, and contribute to the long-term success and sustainable development of corporations.

Do boutique investment banks have the Midas touch? Evidence from M&As

AbstractWe study whether the meteoric rise of boutique advisors in mergers and acquisitions (M&As) is justified by their buy‐side performance. We find that acquiring firms represented by boutique advisors generate superior short‐ and long‐run abnormal returns over those employing full‐service advisors. This effect is mainly prominent in private deals, interindustry mergers, and deals involving inexperienced acquirers, where valuation uncertainty tends to be higher. Overall, our results reflect that acquirer shareholders benefit from boutique investment banks' high level of industry expertise and independent advice, supporting the rising demand for their financial advisory services.

Do derivatives benefit shareholders? Evidence from India

We show that for a sample of 1,882 publicly listed Indian firms and sample period from 2016 to 2021, derivative-usage significantly reduces the idiosyncratic stock return volatility. The negative effect of derivative-usage on idiosyncratic volatility is more pronounced for firms with poor information environment, and financially-constrained and distressed firms. The quality of corporate governance does not influence the relationship between derivative-usage and firm risk. The valuation of derivative-user firms is significantly higher than that of non-derivative-user firms. Overall, using derivatives benefits the firms using them, both in terms of reducing risk and creating value for the shareholders.