Common Shareholders Research Articles

Impact of corporate governance on tax avoidance

In light of the pivotal role that taxes play as a primary source of income, particularly within developing economies, this study aims to examine the influence of various corporate governance (CG) mechanisms on tax avoidance. We employ three proxies to measure tax avoidance or tax management within companies listed on the Tehran Stock Exchange (TSE). The CG mechanisms under scrutiny encompass board size and independence, CEO duality, auditor type, common stock ratio of at least 5% to total stock, managers' common stock holdings about total stock, gender diversity, manager ownership value, board meeting frequency, CEO stock ownership percentage, institutional shareholders' stock holdings, audit committee membership, and financial specialization. This research investigates 192 companies listed on the TSE, utilizing data available on the TSE website from 2011 to 2021. Our findings indicate that while several CG mechanisms, such as board size and independence, audit firm size, gender diversity, institutional ownership, and the specialization of audit committee members, serve to reduce tax avoidance, CEO duality exacerbates it. Moreover, profitability, financial leverage, and capital significantly inhibit tax avoidance. In contrast, the return on assets (ROA), economic growth, and inflation have a pronounced positive association with tax avoidance. A notable constraint of this study lies in its exclusive focus on publicly listed firms, driven by the availability of relevant information. This study offers valuable insights into the three dimensions of tax avoidance and their interaction with CG mechanisms, with implications for performance monitoring.

The effects of fund commonality in mutual fund families on fund operating expenses and return correlations:

This article examines the effects of the commonality of mutual funds within a fund family, which is measured by common stock holdings and multi-fund management, on fund operating expenses and return correlations. For U.S. equity funds during the period of 2001–2006, we find that common stock holdings and multi-fund management are negatively related to fund operating expenses but positively related to the correlation of fund return residuals, which increases the correlation of fund returns. Additionally, we find that the fund commonalities can have negative net effects on risk-adjusted returns of a portfolio with equity funds that have different investment objectives.

Funding Contagion through Common Owners

Abstract Funding contagion is the impaired ability of a firm to raise external funds when negative shocks hit other firms under the same owner. We study this possibility with pairs of private firms in unrelated industries that share a large common shareholder. We find that a firm’s debt growth and financial leverage go down when the partner firm experiences negative shocks. Our results are consistent with creditors contracting the credit supply because of cash flow cross-pledging between related firms. Funding contagion increases when control rights are strong, and the credit market is less developed. (JEL G30, G32) Received: February 17, 2021; Editorial decision: July 18, 2023 by Editor: Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Role of board indexes on corporate social responsibility (CSR) and shareholders’ wealth

Corporate governance plays a vital role in supporting the moral obligation of social responsibility and wealth maximization to facilitate stakeholders. The core purpose of the study is to investigate the impact of corporate governance indexes on social responsibility and Shareholders' wealth maximization in the US firms. The current study employs a sample of 286 non-financial S&P 1500 listed firms from the year 2010–2020. The panel data for S&P 1500 index firms were collected from the Eikone data stream professional service terminal. Panel regression models with fixed and random effects were employed to investigate the proposed hypotheses. In addition, the problem of endogeneity was addressed by the dynamic GMM model. This study constructed an index score for the very first time to address CSR and shareholders' wealth. The results of the study revealed that board composition and board diversity support community development (CSR), but negatively impact global sustainability development (CSR index). However, the audit committee was found to have no impact on both CSR funds and Index. Moreover, the audit committee index (AC) and board diversity index (BC) were also found to significantly contribute to shareholders' wealth maximization, but the audit committee index does not support community development. Shareholder wealth was found to have a very weak relationship with the audit committee index. Our findings have significant implications especially for developed countries. The policymakers and legislators are suggested to employ diverse boards of directors with a balanced composition to enhance human welfare and community development. In addition, regulatory bodies should appoint skilled audit committee members and directors with diverse cultural backgrounds, qualifications and experience to protect common shareholders' interest.

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

AbstractScholars have investigated the industry peer effect of corporate social responsibility (CSR). Borrowing from the awareness–motivation–capability (AMC) framework from competitive dynamics literature, we shift attention to focus on an important but neglected peer—investee peers—and argue that the corporate environmental responsibility (CER) of investee peers positively affects a focal firm's CER. Using data from Chinese listed firms from 2008 to 2018, we find that firms invest more on CER in response to increasing CER investment by investee peer firms (more awareness). This relationship is further affected by the firm's motivation (when the common shareholder is a foreign investor) and ability (when the focal firm's financial performance is high) to respond to competitive threats and tensions from investee peers. Our study contributes to the literature on CSR (specifically CER) by introducing the role of investee peers and extending the AMC framework to the CER literature.

The income bond puzzle

The income bond puzzle

Prepacks as a mechanism for resolving financial distress: The evidence

Prepacks as a mechanism for resolving financial distress: The evidence

The Sustainability Narrative: A Multi Study Using Event Studies to Analyse the American Energy Companies Shareholder’s Reaction to Sustainability News

This study investigates how shareholders of leading US energy companies value sustainability narratives. Leveraging the Global Database of Events (GDELT) from 2017 to 2019, 207,386 news items were extracted, 4101 event studies were performed, 3393 cumulative average abnormal returns (CAAR) were analysed, and 708 Abnormal volatilities (AV) were analysed. The magnitude of the analysis and further segmentation of the viral news by tone, type of energy, and environmental consequence help us to understand shareholders' investment decisions and narrative. We proved that the sustainability narrative has a significant impact on shareholder value. There is a clear negative bias on sustainability news, impacting negatively on the market. More importantly, we've identified positive news about fossil fuels impacting the market more than positive renewable energy news. These results provide empirical evidence for the case of greenwashing in businesses. There must be a common shareholder's narrative to penalise and reduce incentives for highly polluting investments to push forward an effective ecological transition. These results provide an objective for regulators to develop further regulations and incentives to fight against false sustainability news.

Analysis of the application of artificial intelligence technology in the protection of corporate governance rights and interests.

Corporate governance delivers feasible and controlled company operations using a group of common shareholders and appropriate policies. The roles and responsibilities of the shareholders suggest and improve corporate development through monotonous and independent rights. The implication of artificial intelligence provides knowledgeable insights for decision-making and control management. This article introduces a Mutual Consent-based Governance Regulation Model (MCGRM) for dissimilarity mitigation in corporate rule implications. The proposed model exploits transfer learning for balanced rule implication and decision-making. The learning states are defined based on mutual agreement, individual interest, and operational features. Based on the governance policies, the above rules are employed without hindering the pioneer regulations implemented in different periods. Therefore, artificial intelligence technology is utilized for prompt and swift governance decisions in delivering special rights for consumers and shareholders. The performance of this model is validated and verified using data sources related to governance policies from a real-time industry. The impact of varying policy features with dissimilarity is analyzed for varying occurrences. The analysis is given based on the considered data sources for which the classification and its impact over reports, sharing, voting, complaint, and market are analyzed. The availability before and after the proposed improves the above metrics by 10.48, 10.65, 9.78, 13.39, and 9.26%.

The Impact of Information Flow by Co-Shareholder Relationships on the Stock Returns: A Network Feature Perspective

One shareholder may invest in different listed energy companies, so the information held by common shareholders can be transmitted among companies. Based on the two-mode complex network method, we construct an information flow shareholder-based network and employ different network indicators representing features of information flow as variables to construct panel regression models to analyze the impact of information flow among listed energy companies on the stock returns. The results indicate that the information flow of listed energy companies are increasingly important and play a significant role over a period. The efficiency of information flow among listed energy companies is increasingly high and the network information is concentrated among a few of these companies. The efficiency of information flow and the independence of listed energy companies are significantly positively related to stock returns, while the listed energy companies’ ability to control information is not significantly related to stock returns. We employ a new perspective to analyze the information flow on how to influence stock returns, and offer some related suggestions for investors and policy makers in the future.

Manager Delegation, Owner Coordination and Firms’ Investment in Automation

Abstract This paper studies the combined effects of mixed ownership structures and manager delegation on firms’ investment in automation processes in a multi-stage triopoly game. We show that, in accordance with empirical evidence, firms owned by common shareholders invest less in automation and realize lower profits compared to a firm owned by independent shareholders. Direct collusion of owners in terms of coordinated investment increases the profits, the one of the independent firm even more than the profits of the commonly owned firms. Delegation of operational decisions to managers results in higher investment and lower profits. In markets with favorable technological opportunities for automation, common ownership combined with manager delegation leads to the highest social welfare.

Does the order of claims to assets on the balance sheet reflect equity risk?

PurposeThis paper empirically examines whether the order of liability and preferred stock accounts presented on the balance sheet is consistent with how the stock market values their riskiness.Design/methodology/approachThis paper measures a firm’s riskiness with idiosyncratic risk and employs the first-difference design to test the relation between idiosyncratic risk and the order of current liabilities, noncurrent liabilities and preferred stock, respectively. Further, the paper tests whether operating liabilities are viewed as riskier than financial liabilities. Finally, the authors partition their sample based on the degree of financial distress and investigate whether the results differ between the two subsamples.FindingsThe paper finds that current liabilities are viewed as riskier than noncurrent liabilities and preferred stock is viewed as less risky than current and noncurrent liabilities, consistent with the ordering on the balance sheet. Further, the paper finds that operating liabilities are viewed as riskier than financial liabilities. Finally, the authors find that total liabilities and preferred stock (redeemable and convertible classes) are viewed as riskier for distressed firms than for nondistressed firms.Originality/valueThe authors thoroughly investigate the riskiness of several classes of claims and document that the classification of liabilities and preferred stock classes is relevant to common stockholders for assessing their associated risk.

An Impact of Covid‐19 in Profitability of the Cooperative Organization in Khotang District

The purpose of the study was to analyze the profitability ratios of co-operatives organizations in Khotang District before and after Corona virus Diseases Of 2019(COVID 19) from 2018 to 2021 A.D. To analyze the effect of profit due to Pandemic, secondary data are collected based on final audit report. In this study the quantitative research approach is used. The net profit of the two organizations is compared, the five types of the profitability ratios are calculated using formulas. The net profit ratios, Return on Shareholders’ Equity (ROSE), Return on Common Shareholders Equity (ROCSE), Return on Assets (ROA) and Return on Common Equi (ROCE) are found increased of (Subha Labha Bachat Tatha Rin Sahakari Sanstha) SLBRS whereas then other cooperative Sidda Laxmi Bachat Tatha Rin Sahakari Sanstha (SBRS) are found decreased. The ROCE of SBRS are found decreasing and decreasing then it became negative. The analysis shows that there are not any effect of Pandemic in profitability for SLBRS but another organization SBRS has adverse effect.

How shareholders react to sustainable narratives about leading European energy companies? An event study using sentiment data from the global database for events, language and tone (GDELT)

ABSTRACT This study aims to investigate how the shareholders of leading European energy companies value sustainability narratives. It uses news from the Global Database of Events, Location, Language, and Tone (GDELT) and analyses the cumulative average abnormal returns (CAAR) and abnormal volatilities (AV), incorporating the event study methodology. A total of 279,546 big news items were used, and 4,026 event studies were conducted. The extensive analysis of data and the segmentation of the news by tone, type of energy generation and environmental consequences helps to understand shareholders’ investment decisions. This study found that the sustainability narrative significantly impacts shareholder value; however, this narrative’s interpretation has no consensus. The sustainability news about these companies moves the stock market upwards for some shareholders, while others do the contrary. These results are observed by comparing CAAR and AV. The results found by this article are crucial for regulators to push forward an effective ecological transition. It should be legislated so that there is a common shareholders’ narrative, discouraging highly polluting investments.

Credit Risk Assessment of Small and Medium‐Sized Enterprises under the Financial Model of Online Supply Chain

The rapid development of Internet technology meant that online supply chain finance has become an important source of small‐ and medium‐sized enterprise (SME) finance. From a review of associated studies, this study constructed an online supply chain financial credit risk evaluation index system that had eleven level 2 indicators and 28 level 3 indicators for the four dimensions of financing enterprise qualification, core enterprise qualification, supply chain operations, and the macroenvironment. To assess the viability of this indicator system, data on 368 SMEs in four industries, clothing, home appliances, pharmaceutical, and construction, were selected as research samples. An online supply chain financial credit risk evaluation model for the different industries was then constructed using principal component analysis (PCA) and logistic regression methods. It was concluded that when evaluating online supply chain financial credit risk, it is necessary to focus on the solvency, profitability, and asset structure efficiencies of the financing enterprises. Due to the different production and operating characteristics of industries, significant variations in the degree and direction of the credit risk factors between industries were found; therefore, evaluating credit risks by industry significantly improved the accuracy of the model’s credit risk predictions. For example, home appliance SMEs need to pay greater attention to their inventory turnover and construction industry SMEs should pay greater attention to their sales growth rate, return on common stockholders’ equity, and GDP growth rate. Based on these results, some suggestions for commercial banks, supply chain core enterprises, and SMEs are given to improve supply chain financing. The conclusion of this study enriches the related research on credit risk assessment of SMEs and also provides decision support for improving SMEs to prevent credit risk.

Institutional investor network, analyst public information and extreme risks

This paper builds the institutional investor network on the basis of the common stock holdings of mutual funds with large positions. Institutional investors share and interact private information through social networks. Seen from separating private and public information, the effects of private information sharing in institutional investor networks and the effects of public information diffusion on extreme risks are examined, respectively. Then, the integrated impact of institutional investor information sharing with analyst on extreme risks is analysed. Empirical research has found that analyst public information spread will decrease the probability of extreme risks. The information sharing in social network of institutional investors will restrain stock market extreme risks. The closer network of institutional investors lower the influence of analyst public information on extreme risks. In addition, we also found that stock liquidity has weakened the inhibition of fund network information sharing on extreme risks. The research results provide reference for the authorities to regulate market participant behaviours so as to avoid risks.

Common Shareholders and Interlocking Directors: The Relation Between Two Corporate Networks

Abstract This paper studies the empirical relationship between common ownership and interlocking directorships. I estimate a gravity equation model for the probability that a pair of firms will have a common director, as a function of the geographic distance between the firms, their sizes, and a set of covariates, including measures of common ownership between the firms. The main finding is that, robustly across several measures of common ownership, firm pairs with higher levels of common ownership are associated with a higher likelihood of sharing directors. Also, their distance in the network of directors is smaller on average. Consistent with the “gravity” interpretation, larger firms are more likely to share directors, and firms that are geographically more distant are less likely to share directors.

Modeling the aggregate risk of common stockholder through the determined financial model

Subject. The article focuses on methods for modeling and quantifying the risk associated with common stockholders. Objectives. We perform a critical analysis and study how the existing risk assessment methods can be modified. The article demonstrates strengths and advantages of the determined financial model. Methods. The study is based on methods of the discourse analysis, mathematical statistics, financial modeling. Results. If the entity receives payments out of net profit, we show the modified formula for assessing the aggregate leverage and suggest using the term financial leverage in Russian. The chi-squared comparison method reveals the need to respect aggregate leverage restrictions. We also present formulae for assessing its minimum and maximum. In this study, we provide a broader view of the financial mentality as a concept, quantify to what extent the decision-maker is prone to risk. Conclusions and Relevance. The advisable aggregate leverage fits in the interval, which should be specifically assessed for each entity, and can be determined by official reporting data through the proposed formulae. Managing common stockholders’ risk pursues to maintain the aggregate leverage ratio within its maximum and minimum. This task can be solved by modifying the structure and ratio of fixed and variable costs.

Friend or foe: On a common shareholder relationship between mutual funds and public companies

We examine a novel business tie between mutual funds and public firms in China via a common shareholder (CS) relationship, in which a fund management company (FMC)'s shareholder also has a substantial stake in a public company invested by this FMC. The CS relationship may give connected funds an information advantage about the company over non-related funds. Meanwhile, mutual funds may engage in investment activities that help support stock prices of its CS-connected companies. Empirical evidence supports the superior information hypothesis but not the price support hypothesis. The holdings of CS-connected FMCs significantly predict subsequent stock returns. Moreover, such superior information is related to company fundamentals rather than short-term corporate events.

The impact of political uncertainty on institutional ownership

This paper provides original evidence from institutional investors that political uncertainty greatly affects investment behavior. Using institutional holdings of common stock, we find that institutions significantly reduce their holdings by 0.8–2.3% points during presidential election years. Such effect holds for gubernatorial elections with cross-state-border difference-in-difference analysis and for tests using a political uncertainty index. The effect is the opposite for American Depository Receipts (ADRs). In addition, we find that institutions benefit financially from the observed strategy, and such strategy is in line with predicted outcomes of presidential election polls.