Categories Of Shareholders Research Articles

The effect of ownership composition on corporate financial performance in the European frontier markets

PurposeThis study investigates the influence of ownership composition on market-based and accounting-based financial performance in the European frontier markets (EFMs), a target region for global investors.Design/methodology/approachOwnership composition is defined as shareholders' concentration and structure (i.e. foreign, domestic, state and free-float), whereas financial performance is measured as Tobin's Q and return on assets. The system generalised method of moments panel data estimation technique is employed on a sample of 241 companies.FindingsFindings reveal that companies from European Union (EU) frontier markets are controlled, on average, by one to five large shareholders. Being a signal of expropriation rationale of majority shareholders regardless of the capital structure, this highly concentrated ownership and decision-making model negatively affects the market-based and accounting-based financial performance of the companies and thereby supports the agency theory in the frontier markets.Research limitations/implicationsThe findings provide empirical evidence for authorities, investors, analysts and corporations regarding the effect of ownership percentage and structure in the Eastern European region, assisting also other frontier and emerging markets in corporate governance and other regulatory decisions.Originality/valueThe ownership–performance relationship varies from developed to emerging markets with conflicting results. This study provides evidence on monitoring and expropriation effects of majority shareholders in the context of different categories of shareholders. In doing so, it combines the analysis of both ownership concentration and structure in the EFMs.

Effect of Ownership Diversity on Financial Distress: Evidence from Colombo Stock Exchange

Ownership diversity is defined as the distribution of ownership and control among various categories of shareholders. Many organizations' ownership structures have become increasingly diversified in terms of race, nationality, gender, and socioeconomic level in recent years. Globally, there's little consensus on how ownership diversity affects financial distress. Using the agency theory and entrenchment hypothesis, this study investigates how the diversity of ownership affects the financial distress of business firms. This research makes a contribution to the empirical literature by applying panel data analysis on 181 non-financial companies from 2012 to 2019 on the Colombo Stock Exchange of Sri Lanka. The study uses Herfindahl-Hirschman Index to measure ownership diversity. In contrast, Altman Z Score Analysis, Emerging Market Score, and Interest Coverage Ratio measure financial distress. The results of the logistic regression models demonstrate that ownership diversity significantly and positively affects financial distress. This signifies that the diversified ownership structure raises the agency cost as it incurs high monitoring costs to monitor diverse shareholders, leading to financial distress within business firms.

Dividend Policy of Russian Companies with State Participation as a Mechanism of Relations with the Owners

The formation and implementation of the dividend policy of Russian companies with state participation differ from the policies pursued by the public and non-public joint-stock companies owned by private investors. The state, being a special shareholder, affects the dividend policy from the position of the owner and the regulator, who has the ability to set certain restrictions and rules for companies that are not in the power of other categories of shareholders. Systemic risks and the uncertainty of the development of the Russian economy objectively require an in-depth study of the regulation of dividend policy in public companies with state participation. It is generally accepted that with a decrease in the number of dividends paid to owners of ordinary shares, the weighted average cost of capital becomes lower, while at the same time the financial performance of a business and the amount of retained earnings become higher. Therefore, the company's dividend policy is an important element of financial management and relations with the owners. The question of the importance of dividend policy for public companies with state participation is the most controversial and little studied today. The price of shares, the structure of equity capital, and the need to attract borrowed capital are directly dependent on the size of dividends. However, the payment of dividends reduces the amount of profit that can be reinvested in the development of the company, so the impact of dividend policy on the financial condition of the company is ambiguous. In this regard, it seems relevant to improve the dividend policy of public companies with state participation through solving the problems existing in them.

"Nonfarm Employment Report Tradingwith Binary Options & Temporal Functionalities "

The main target of this paper is to discuss a short-term strategy for trading the monthly USA Nonfarm Employment Reports (NFP; Non-Farm Payrolls), by incorporating binary options and temporal warning dynamics & triggering trading functionalities (TTF). The proposed trading strategy is not a fully documented trading system, because it is derived, as well as it has been back-tested on USA Markets sample data (2000-2016) with an initial formal definition and documentation. The nonfarm employment reports are well known to create market volatility fostering short-term trading. Hence, a strategy based on binary options and these TTF functionalities offer great profit opportunities. The current paper contributes to corporate finance literature by examining, analyzing and defining these TTF functionalities. For this purpose, four categories of shareholders are regarded: The long-term investors, the short-term swing traders, the short-term momentary speculators, and the intraday speculators. Paper concludes that, in daily and intraday NFP trading, the short-term swing traders -if they incorporate binary options and apply the proposed TTF in their trading plans and strategies- are benefit at the expense of momentary and intraday speculators, while the long-term investors are not actually affected by the NFP release reports trading.

Does CEO duality give more influence over executive pay to the majority or minority shareholder? (A survey of Brazil)

PurposeThe purpose of this paper is to focus on comparing the influence of majority and minority shareholders on executive compensation under conditions of CEO duality, examining majority and minority shareholder influences by measuring their investment and return activity. The paper seeks to uncover how CEO duality changes the impact the two categories of shareholders have on executive compensation, especially in an emerging nation.Design/methodology/approachIn total, 30 corporations out of the 70 corporations listed on the BM&F Bovespa (a Brazilian stock market) were used for the paper. Quarterly data were collected on the companies from the Datastream database. The paper conducted a moderated regression analysis on the data to determine the conditional effects of majority and minority holders’ investment and returns on executive compensation.FindingsThere are incentives for executives meeting majority shareholder objectives, but minority shareholders’ influences act as a disincentive for executives. Only the influence of blockholders by their returns is affected by the separation of the roles of CEO and Chairman. The effect is such that firms with a separation of the roles have their executives rewarded in line with increments to the returns made to blockholders, but firms that have the roles merged pay a high wage that is inconsistent with managerial performance. Finally, the majority of variation in executive pay levels can be attributed to individual company traits.Research limitations/implicationsThe paper’s sample is biased to firm which had publicly available data on the total compensation payable to their top executives.Practical implicationsAdvocates of minority shareholder rights may need to exercise patience with the implementation of more formalised governance structure, as they are not providing protection for minority shareholders within the period studied.Originality/valueThe paper provides empirical evidence within the Brazilian context of minority shareholder effects on executive compensation and the effect of CEO duality on the relationship.

The impact of state and foreign ownership on banking risk: Evidence from the MENA countries

This paper investigates the impact of foreign and state ownership on banking risk. Panel data regression analysis is applied to a sample of 171 commercial banks from the MENA region during the 2006–2012 period. Two-stage least-squares analysis is conducted. Our results show that State ownership encourages banks to take more risks while foreign ownership reduces risk-taking. In addition, state-owned banks tend to increase capital adequacy ratio to hedge against high level of risk. Our finding also indicates that all categories of shareholders take a prudent attitude that influences risk reduction after the 2008 crisis.

Ownership structure and risk-taking behaviour in conventional and Islamic banks: Evidence for MENA countries

This paper investigates the impact of ownership structure, measured by two dimensions: nature of owners and ownership concentration, on bank risk, controlling for country and bank specific traits and other bank regulations. Particularly, it compares risk-taking behaviour of conventional and Islamic banks in 10 MENA countries under three types of bank ownership (family-owned, company-owned and state-owned banks) over the period 2005–2009. The result shows a negative association between ownership concentration and risk. We also find that different categories of shareholders have different risk attitudes. Family-owned banks have incentives to take less risk. State-owned banks display higher risk and have significantly greater proportions of non-performing loans than other banks. By comparing conventional and Islamic banks, the empirical findings show that private Islamic banks are as stable as private conventional banks. However, Islamic banks have a lower exposure to credit risk than conventional banks.

The New Legal Regime on Minority Shareholder Protection in Albania

This article aims at introducing the main changes brought by the new Albanian Company Law on minority shareholders’ protection. Due to the harmonization of our legislation with the acqui, new pieces of laws were introduced in commercial law. In 2008 the new law “On entrepreneurs and commercial companies” was enacted. The latter introduced new practices and concepts, some of them not familiar to the Albanian legal system. I was motivated to write a paper on minority shareholders protection in order to emphasize the new regime and instruments of protection granted by the new laws. A matter which concerns investors and especially foreign ones is the protection of minority shareholders. This paper discusses the instruments of protection of minority shareholders bringing the novelties of the newly introduced laws because of the unclear regime under the repealed law using the analytical and comparative method. Few rights which were known by the former Albanian company law were usually compromised, but under the law in force, minorities are much more protected.Does the new law strengthen the position of such category of shareholders? What are the rights of minority shareholders conferred by the law? These and other questions will be addressed herein.

The New Legal Regime On Minority Shareholder Protection In Albania

This article aims at introducing the main changes brought by the new Albanian Company Law on minority shareholders’ protection. Due to the harmonization of our legislation with the acqui, new pieces of laws were introduced in commercial law. In 2008 the new law “On entrepreneurs and commercial companies” was enacted. The latter introduced new practices and concepts, some of them not familiar to the Albanian legal system. I was motivated to write a paper on minority shareholders protection in order to emphasize the new regime and instruments of protection granted by the new laws. A matter which concerns investors and especially foreign ones is the protection of minority shareholders. This paper discusses the instruments of protection of minority shareholders bringing the novelties of the newly introduced laws because of the unclear regime under the repealed law using the analytical and comparative method. Few rights which were known by the former Albanian company law were usually compromised, but under the law in force, minorities are much more protected. Does the new law strengthen the position of such category of shareholders? What are the rights of minority shareholders conferred by the law? These and other questions will be addressed herein.

Ownership structure and tax-friendly dividends

The paper examines the existence of tax-based dividend clienteles using the novel environment of Australia, which has operated a full dividend imputation system since 1987. The analysis jointly focuses on the tax-based preferences of five categories of shareholders, including both domestic and foreign-domiciled shareholder classes. Incorporating the dividend franking percentage as a direct measure of the degree of tax benefit associated with dividends, strong evidence supporting the existence of tax-based dividend clienteles is present for both domestic and foreign shareholder categories. This includes domestic corporate blockholders and company directors, and local institutional investors following tax reforms in 2000, and foreign institutional shareholders which, alternatively, demand lower dividends and dividend franking. These findings persist after considering the effect of share repurchases, and under various model specifications controlling for unobserved firm heterogeneity and potential endogeneity between ownership structure and dividend payout policy.

Ownership structure and risk in publicly held and privately owned banks

Using detailed ownership data for a sample of European commercial banks, we analyze the link between ownership structure and risk in both privately owned and publicly held banks. We consider five categories of shareholders that are specific to our dataset. We find that ownership structure is significant in explaining risk differences but mainly for privately owned banks. A higher equity stake of either individuals/families or banking institutions is associated with a decrease in asset risk and default risk. In addition, institutional investors and non-financial companies impose the riskiest strategies when they hold higher stakes. For publicly held banks, changes in ownership structure do not affect risk taking. Market forces seem to align the risk-taking behavior of publicly held banks, such that ownership structure is no longer a determinant in explaining risk differences. However, higher stakes of banking institutions in publicly held banks are associated with lower credit and default risk.

Bank Ownership Structure, Market Discipline and Risk: Evidence from a Sample of Privately Owned and Publicly Held European Banks

The objective of this paper is to analyze the influence of ownership structure on the risk taking behavior of European commercial banks. We consider five categories of shareholders (managers/directors, institutional investors, non financial companies, individuals and families, and banks). Controlling for various factors, we find that asset risk is lower for banks where a higher proportion of total stocks is held by families and individuals who have less diversified portfolios. We also find that the probability of default of banks is higher when non financial companies or institutional investors hold a higher proportion of total equity. However, these results do not hold for listed banks in which non financial companies hold higher stakes suggesting that the market might be limiting the risk-taking incentives of such shareholders. We further show that market forces might be more effective in influencing risk in banks with a higher involvement of non financial companies than in banks with a higher portion of stock held by institutional investors.

Ownership Structure and Risk in Publicly Held and Privately Owned Banks

Using detailed ownership data for a sample of European commercial banks, we analyze the link between ownership structure and risk in both privately owned and publicly held banks. We consider five categories of shareholders (managers/directors, institutional investors, non-financial companies, individuals/families, and banks), a breakdown specific to our dataset. Controlling for various factors, we find that ownership structure is significant in explaining risk differences but that such findings mainly hold for privately owned banks. On the whole, a higher equity stake of either individuals/families or banking institutions is associated with a decrease in asset risk and default risk. Also, institutional investors and non-financial companies seem to impose the riskiest strategies when they hold higher stakes. We further find no significant differences in asset risk and default risk between publicly-held and privately-owned banks. Moreover, for public banks, changes in ownership structure do not affect risk taking. Market forces seem to align the risk-taking behavior of public banks and the ownership structure is no more a determinant to explain risk differences. An exception is that higher stakes of banking institutions in public banks are associated with lower credit and default risk.

Shareholders in Action

Recently a new category of shareholders is manifesting itself: as activist shareholders they intervene in the actual running of the company, dictating its governance, determining its strategies, and often taking a very aggressive attitude against the incumbent management. Their action is severely criticized by the politicians or in the media, as being destructive of the firms, of enterprise values or of employment. The paper aims at describing the features of the activist shareholders, comparing them to their elderly brothers, the institutional investors, concluding that more disclosure should be available about them, while suggesting that in case they effectively take control of the company, a remedy similar to the mandatory bid may be considered.