Block Shareholders Research Articles

Does the Firm with Well-Educational Level of Board Members Have Good Corporate Governance?

This study examined the degree to which the educational level of directors affects corporate governance and firm value in firms. From the results, it has been found that the educational levels of directors are negatively related to corporate governance performance. On the other hand, firms with higher-educated directors have lower block shareholders’ holdings, which implies that the ownership right is not concentrated and block shareholders cannot effectively monitor the operation of the firm to avoid agency problems. Furthermore, a firm with higher educational levels of directors and stronger governance mechanisms is more significant to raise the firm value.

The Impact of Internal Corporate Governance Mechanisms on Profitability in Companies Listed in the Stock Market

This paper attempts to investigate the effects of the internal corporate governance mechanisms represented in (the size of the board of directors, CEO duality, the administrative ownership, and the ownership of Block Shareholders Ownership) on the profitability of the companies listed on the Egyptian Stock Exchange. The sample of the study reached (85) companies listed on the Egyptian Stock Exchange for the period 2012 to 2016. The researcher relied on the method of "Moment Structures Analysis (AMOS) Of Analysis to study the relationships between the study variables. A program specially prepared by Dr. Andrew F. Hayes is to test the direct effects of the sub-elements of one variable on the sub-elements of another variable. The methodology of this method depends on the Sobel test and the Bootstrap method. The research has reached several results, the most important of which are: There is a positive, statistically significant impact relationship between the internal corporate governance mechanisms with its various dimensions and profitability, and the researcher has recommended that companies should strive to comply with corporate governance rules and support internal corporate governance mechanisms because of their positive impact on profitability.

The Impact of Goodwill Recognition and Goodwill Impairment on the Increasing Holdings of Block Shareholders

There is a large amount of goodwill recognition and goodwill impairment. These characteristics would trigger stock price fluctuation. Hence, stakeholders will increase holdings to mitigate the volatility of stock prices. According to the data in regard to the Chinese A-share nonfinancial listed companies from 2007 to 2020, we study the reaction of block shareholders after goodwill recognition and goodwill impairment, respectively. Our findings are as follows: (1) goodwill recognition leads to increasing holdings of block shareholders; (2) goodwill impairment also leads to increasing holdings of block shareholders when there is a large amount of goodwill impairment. We also take state ownership into consideration: compared to state-owned firms, private firms show a much stronger positive relation between goodwill recognition and level of increasing holdings of block shareholders, but there is no significant relation between goodwill impairment and increasing holdings of block shareholders in state-owned firms. These empirical results provide us with abundant evidence that block shareholders would increase shareholdings when there is goodwill recognition due to private information of positive future expectation in M&A. Meanwhile, block shareholders would stabilize stock price via increasing shareholdings when goodwill is impaired.

Ownership Concentration, Corporate Liquidity, and Dividend Payment Policy: Evidence from Indonesian Financial Industries

The main objective of this research is to analyze the effect of ownership concentration and corporate liquidity on dividend payment policy in the Indonesian financial industry. Dividend payment is measured using dividend pay-out ratio on measuring dividend payment. Corporate ownership concentration is measured using the number of shares held by legal individual investors and large block shareholders. Ownership concentration is divided into three categories, which are inside shareholders, stable shareholders, and market shareholders. Corporate liquidity is measured by corporate profit, defined by retained earnings/total assets and retained earnings/total equity, corporate leverage (total liabilities/total assets), and corporate size (log normal total assets). We apply data panel regression and the robust least square method. Based on the robust least square method of testing data panel regression, we find there is a relationship between insider shareholder, market shareholder, and dividend payment policy. In contrast, there is no relationship between stable shareholder and dividend payment policy. We also found a relationship between corporate profit, which variable is retained earnings/total assets, corporate leverage, and corporate size, and dividend payment policy. These results lead to the conclusion that dividend payments increase when ownership by inside shareholders decreases, and that when ownership by market shareholders increase corporate profit will also increase, and corporate leverageand corporate size decreases.

The Impact of Internal Corporate Governance Mechanisms on Profitability in Companies Listed in The Stock Market

This paper attempts to investigate the effects of the internal corporate governance mechanisms represented in (the size of the board of directors, CEO duality, the administrative ownership, and the ownership of Block Shareholders Ownership) on the profitability of the companies listed on the Egyptian Stock Exchange. The sample of the study reached (85) companies listed on the Egyptian Stock Exchange for the period 2012 to 2016. The researcher relied on the method of Moment Structures Analysis (AMOS) Of Analysis to study the relationships between the study variables. A program specially prepared by Dr. Andrew F. Hayes is to test the direct effects of the sub-elements of one variable on the sub-elements of another variable. The methodology of this method depends on the Sobel test and the Bootstrap method. The research has reached several results, the most important of which are: There is a positive, statistically significant impact relationship between the internal corporate governance mechanisms with its various dimensions and profitability, and the researcher has recommended that companies should strive to comply with corporate governance rules and support internal corporate governance mechanisms because of their positive impact on profitability.

Informational Advantage of Institutional Blockholders

This study investigates whether institutional investors with large ownership (institutional blockholders) have informational advantages over other investors. The sample of this study is constructed from institutional investors’ mandatory filings on block shareholding of greater than 5% of a firm’s shares. Institutional blockholders are classified into active institutions if they express an intention to engage in a firm’s management as their purpose of investment and into passive institutions otherwise. To verify the information content of block ownership, this study investigates the short- and long-term market reaction to announcements of institutional investors’ block ownership. Main findings are summarized as follows. First, significant cumulative abnormal returns (CARs) are observed around the announcements. The CARs are much higher for active institutions than passive institutions. Second, the stocks owned by passive asset management companies significantly outperform both the market and the benchmark portfolio in the long-term. In contrast, the stocks owned by active private investment companies significantly underperform the benchmark portfolio. Overall, the results of this study suggest that passive asset management companies have superior skills in selecting undervalued stocks and they use long-lived information when they make large investment. In contrast, the inconsistent results on short- and long-term performance of stocks owned by active private investment companies imply that private investment companies’ activism are not effective enough to meet the initial expectations of the market.

Effectiveness of Corporate Governance Attributes on Disclosure of Non-Financial Information in Developing Economies

The study examines how corporate governance attributes enhance disclosure of non-financial information in developing economies using a case study of companies listed on selected Stock Markets in Sub-Saharan Africa. Corporate governance attributes such as Chief Executive Officer (CEO) non-duality, board size, board composition, audit committee independence, block and director shareholdings are examined while controlling for firm size, profitability and leverage. The study adopts a quantitative research approach where panel data is obtained to carry out a comparative analysis of companies listed on stock markets of South Africa, East Africa and Nigeria. The data is collected from annual reports of each company for a period of four years and is analysed to obtain Random- Effects Multiple regression models. Findings indicate that the effect of CEO Non-duality, board size and having a higher proportion of non-executive directors on boards is significant and positive. Block ownership of shares and directors’ shareholdings have a negative effect on disclosure of non-financial information. However, the study does not provide evidence to suggest that Audit committee independence affects non- financial information disclosure. The major contribution of the study is to establish corporate governance attributes that play a vital role in disclosure of non-financial information using a comparative analysis of listed companies in Sub-Saharan Africa. The paper is the first of its kind in developing economies. Keywords : Corporate governance attributes, corporate disclosure, non-financial information. DOI: 10.7176/RJFA/12-4-02 Publication date: February 28 th 2021

The Role of Block Shareholders in the Relationship between Diversification and Bank Performance in Vietnam

The Role of Block Shareholders in the Relationship between Diversification and Bank Performance in Vietnam

The impact of corporate governance on corporate social performance: Cases from listed firms in Taiwan

From the perspective of the agency problem, we explore how corporate governance affects corporate social performance (CSR performance) with a special focus on the role of inside and outside block shareholders. The empirical results from listed firms in Taiwan show that controlling owners having entrenched control, as manifested in CEO/chairman duality and family control, are less inclined to engage in CSR. Moreover, inside block shareholders (including large shareholders and directors) with higher shareholding are also less motivated to engage in CSR. By contrast, outside block holders, including foreign institutional shareholders and domestic institutional shareholders, enhance monitoring effectiveness and therefore encourage firms to engage in CSR. Furthermore, board independence is also positively correlated with CSR performance. Finally, CSR performance is positively correlated with firm's ROA.

Affiliated block shareholders and analyst optimism

We investigate several previously under-documented conflicts of interest that may result in analyst optimism by utilizing two unique features of brokerage firms in China, namely, the dominant ownership of large shareholders within the brokerage firms and the mandatory disclosure of brokerage firms’ commission income derived from each mutual fund client. We show that controlling shareholders of an analyst’s brokerage-firm put pressure on the analyst to report more optimistically biased earnings forecasts and recommendations to the stocks they hold larger positions in. We also find that the magnitude of analyst optimism increases with the shareholdings of the mutual funds that contribute commission fees to the analyst’s brokerage firm. These findings remain robust after incorporating a regulation change that reduces conflicts of interest in the brokerage industry and higher dimensional fixed effects, and thus are unlikely to be driven by reverse causality or omitted variable bias.

기관투자자의 특성과 감사보수와의 관계 : 외부대규모기관투자자 및 투자기간을 중심으로

기관투자자의 특성과 감사보수와의 관계 : 외부대규모기관투자자 및 투자기간을 중심으로

Foreign Monitoring and Audit Quality: Evidence from Korea

This study investigates the effects of both foreign majority shareholders and foreign investors’ participation in the board of directors on audit quality, as reflected by auditor size and audit fees. In addition, the study examines the moderating effect of an agency problem on the relationship between foreign investors and the monitoring of audit quality. Using 1574 non-financial firm-year observations listed on the Korea Stock Exchange from 2000 to 2003, we find that the presence of foreign investors such as foreign block shareholders and foreign outside directors increases audit quality. At the same time, the monitoring role of foreign block shareholders is more powerful than that of foreign external directors. Moreover, the foreign block shareholders in professional management-controlled firms exert a more profound influence on audit quality than do those in owner-controlled ones. These test results imply that foreign investors with independence, expertise, and monitoring incentives could play an important role in improving the corporate governance system in Korea, which in turn would not only enhance firm value, but also strengthen the sustainability of Korean companies.

Audit committees and financial reporting quality

PurposeThe purpose of this paper is to examine the determinants of the volume of environmental disclosures and their quality, with particular focus on the role of audit committees (ACs) and the effects of the Smith report recommendations for the UK Corporate Governance Code.Design/methodology/approachQuantitative large sample analysis of UK FTSE350 companies for the period 2007-2011.FindingsFirms with higher quality ACs make higher quality disclosures. Larger firms with block shareholders have greater volume of disclosures, whilst AC quality does not increase disclosure volume.Research limitations/implicationsFindings are based on evidence from single country and imply further international comparative research.Practical implicationsACs mitigate the requirement for prescriptive legislation on narrative accounting disclosures relating to environmental issues.Originality/valueThe paper contributes to research that has examined the relationship between corporate governance mechanisms, specifically ACs, and the quality of financial reporting by considering voluntary narrative disclosures on environmental matters.

Ownership structure, insider behavior, and IPO performance of SMEs in China

This paper examines the drivers of IPO performance of 783 SMEs in China between 2009 and 2012 that were listed on the SME and Growth Enterprise Boards. The study finds that firms that had prior venture capital (VC) investment did not perform better than those that did not. Among VC-invested firms, ventures (1) with strong VC control rights relative to those of the largest block shareholder, (2) with former ownership affiliation between the VC and the underwriter, and (3) that paid higher IPO fees had a negative long-term performance. The negative relationship between VC-underwriter ownership affiliation and long-term performance decreases as the reputation of the underwriter increases.

Effect of the board of directors and the audit committee on firm performance: a panel data analysis

This research examines the relationship between independent directors, the audit committee (AC), and firm performance, taking into account the impact of the chief executive officer’s powers and block shareholders. We use the maximum likelihood estimator, based on agency theory assumptions and cylindered panel data, to examine three models of firm performance. The results show that the independence of the board is reflected clearly by increased economic and equity performance of the firm. However, an AC that is fully independent or meets frequently is associated with lower firm performance. Unlike pension funds, institutional shareholders can be considered an effective control mechanism in the context of France. Our results development includes advanced explanations for market liquidity and shareholders’ portfolios. The study period ends before the European regulation on ACs came into effect in 2008. This allows for an appreciation of soft law in French corporate governance. It also lets us compare the data with the way firms operate their boards one decade later. The evidence provides useful guidelines on the supremacy of soft law in corporate governance and suggests that the composition and functioning of the board of directors should be moderated based on the firms’ context. The specificity of the cylindered panel data helps to better examine the impact of the board and AC’s independence and functioning in French corporate governance structure.

Block Shareholders and Stock Liquidity in the Indian Stock Market: Lack of Trading or Information Asymmetry?

We study the effect of block shareholding on stock liquidity using panel models for 128 stocks from the period 2011 to 2014. After controlling for the size of the firm, ownership concentration is found to have a small statistically significant negative effect on liquidity. Ownership structure models indicate that block shareholding by Government has a negative effect on liquidity. However, we do not find any statistically significant effects due to block shareholding by individuals and families or foreign or domestic institutions. Lower turnovers of state owned companies may be due to lack of trading rather than information asymmetry or signalling effects.

Corporate governance and auditor quality – Malaysian evidence

Purpose The purpose of this paper is to conduct an investigation into the relationship between a firm’s corporate governance mechanisms (audit committee composition and operation, block shareholder, CEO duality, financial state, ownership dominance, political connection, share price, and family control) and auditor quality selection in Malaysia, for periods before and after the introduction of Malaysian Code of Corporate Governance in 2007 (MCCG 2007). Design/methodology/approach 300 companies listed on the Malaysian Stock Exchange from 2006 to 2008 were selected. A Binary regression method was used to analyse the data collected from both annual reports and financial databases. Findings The study has found that in general, MCCG 2007 influenced auditor selection through restructuring of corporate governance tools, such as audit committees and internal audit functions. Research limitations/implications Results have provided evidence that the restructuring of corporate governance may contribute and drive company to enhance the quality of the audit performed by selecting better quality auditor and/or improvising the audit related functions within the company such as formalising internal audit function. This study, however, employed an archival method of study and only used three years (2006, 2007 and 2008) of data analysis. Future research should analyse data from a longer period and utilize a field survey to understand reasons for auditor selection from the company perspective. Originality/value Building on previous studies, this study contributes to the current body of knowledge as it also considers the objective from the perspective of the revised MCCG 2007. It examines whether the introduction of new or revised corporate governance guidelines may immediately impact company auditor selection. Therefore, it compares the auditor quality of the company from pre-MCCG 2007 (2006) and post-MCCG 2007 (2008).

The Impact of Ownership Structure on Internal Business Transactions and the Moderating Effect of Foreign Investors

This study aims to explore the relationship of large business conglomerates in Korea betweencorporate governance and internal business transactions as well as the moderating effect offoreign block ownership. Using sample firms with internal business transactions with affiliatesin large business conglomerates, this study examined the impact of corporate governancefactors including controlling shareholders' ownership and control-ownership disparity oninternal transactions. This study focused on the role of foreign block shareholders in particularas outside monitor in order to investigate their moderating impact on internal businesstransactions. The empirical result shows that controlling shareholders' ownership has a positiveeffect on internal transactions while control-ownership disparity has a negative effect. Foreignblock ownership is likely to negatively moderate the positive relationship between controllingshareholders' ownership and internal transactions and to positively moderate the negativerelationship between control-ownership disparity and internal transactions, suggesting thatexpropriation of wealth by controlling shareholders is mitigated by the impact of foreign blockshareholders. The empirical findings of this study imply that sound corporate governancedecreases the likelihood of tunnelling which could be induced by controlling shareholders'opportunities for wealth transfer.

Corporate ownership patterns in developing countries

This paper examines the effect of firm-, industry-, and country-level factors on corporate ownership pattern within the context of six African countries. Based on theory, we develop multi-dimensional models and examine data pertaining to 377 non-financial firms across a time period of 15 years using a battery of econometric procedures. In the sample countries, ownership concentration and/or block shareholding increases with firm level debt maturity structure, industry regulation, and perceived level of corruption in a country and its real GDP per capita. We also find ownership concentration and/or block shareholding decreases with firm level basic capital structure, firm size, and orientation of the financial system of a country. Our findings signify the role that information asymmetries, agency conflicts, and institutional pressures play in the determination of corporate ownership patterns in developing countries. The findings have practical implications for the investment community in assessing ownership patterns of companies listed in developing countries. Furthermore, the results spark insights that are potentially useful to enhance corporate governance institutions in developing countries.

The Impact of Block shareholder on Quality of Internal Control in Korea’s Mutual Savings Banks

The Impact of Block shareholder on Quality of Internal Control in Korea’s Mutual Savings Banks