Complex Ownership Structures Research Articles

Earnings management in the family business groups of Pakistan: the role of corporate governance

Purpose This paper aims to examine the role of corporate governance (CG) in the earnings management (EM) of affiliated companies in family business groups (FBGs) listed on the Pakistan Stock Exchange (PSX), using principal–principal agency theory. Design/methodology/approach The sample of 327 nonfinancial firms of the PSX, consisting of 187 group-affiliated firms and 140 nonaffiliated firms has been used in this study for the period of 2010 to 2019. The study uses different regression models for analysis, with robustness tests of various alternative measures of EM and FBG affiliation. In addition, endogeneity is controlled with the propensity score matching method. Findings The findings show that EM is less prevalent in affiliated firms compared to nonaffiliated companies. The results show a negative and significant relationship between FBGs affiliated firms and EM. Moreover, the results also show a positive relationship between EM and the interaction term of the CG index and group affiliation. It refers to the fact that effective governance cannot reduce EM in affiliated companies of FBGs as well as in the nonfinancial companies of the PSX. In addition, the quality of CG is higher in affiliated companies compared to its counterpart in nonaffiliated firms. The findings support the principal–principal agency theory that CG cannot mitigate the expropriating behavior of controlling shareholders against minority shareholders by reducing EM in emerging markets due to the ownership concentration phenomenon. Research limitations/implications This research study has implications for small investors, government agencies and regulators. The findings of the study show that CG code should make it mandatory for companies to reveal information about their complex ownership structure and ownership information about affiliated companies and directors. Furthermore, it is suggested to revisit the code of CG in the Pakistani context of principal–principal conflict instead of the agent–principal explanation of agency theory based on Anglo–Saxon countries. Originality/value This research study has contributed to the CG and FBG literature in relation to EM in idiosyncratic settings of Pakistan. One of the prime contributions of the paper is the development of a comprehensive CG index. This research study used detailed, manually collected novel data on affiliated firms of FBGs in Pakistan.

Fortifying the grid in the Southeastern U.S. through microgrids: Navigating an uncertain regulatory environment

AbstractOne shortcoming of the current grid in North America is a lack of resiliency and reliability in inclement weather and the general need for investment to update its aging infrastructure. This is especially apparent in the Southeastern U.S., where tornadoes, hurricanes, flooding, and lightning strikes regularly disrupt power to customers. One way to increase grid resiliency in natural disasters is through the implementation of microgrids, which are a group of customers within defined electrical boundaries with the ability to connect to the grid or disconnect from the grid and operate independently in island mode. There are several factors impeding microgrid adoption, especially regulatory uncertainty. In many states, and particularly Southeastern states, there are not explicit tariffs regulating the interconnection and operation of microgrids, making investment in microgrids risky. Microgrids have been difficult for states to regulate because they often integrate multiple energy technologies and have complex ownership structures. There are three primary policy suggestions that could enhance microgrid adoption in the Southeastern U.S.: (1) States should adopt regulatory frameworks for microgrids that properly value the resiliency and grid benefits of microgrids, particularly through legislation that establishes legal definitions and rights of microgrids. (2) State legislatures should consider a shift to performance‐based ratemaking (PBR) rather than cost‐of‐service (COS) ratemaking to better prioritize certain performance goals, such as grid resiliency, and encourage more widespread adoption of microgrids. (3). To improve the economics of microgrids, state legislatures should consider authorizing community choice aggregation (CCA).

Heterogeneity in shadow prices of water pollutants: A study of the seafood processing industry in Vietnam

Water pollution poses a critical challenge, especially in fast-growing regions, with profound implications for human well-being. Marginal abatement cost (MAC) estimation is crucial for designing efficient water pollution control policies. This study applied the directional distance function to estimate MACs for three water pollutants (Biochemical Oxygen Demand, Chemical Oxygen Demand, and Total Suspended Solids) within Vietnam's seafood processing industry. Additionally, the paper conducted a regression analysis to investigate the determinants of these MACs, utilizing primary data from 116 seafood processing plants in the Mekong River Delta. The median MACs for Biochemical Oxygen Demand, Chemical Oxygen Demand, and Total Suspended Solids were 2451 US$/ton, 3983 US$/ton, and 5519 US$/ton, respectively. The results revealed substantial MAC heterogeneity. Capital-intensive firms, less labor-intensive entities, those with a more complex ownership structure, entities not situated along the seashore or riverside, export-oriented firms, and those demonstrating higher compliance exhibited consistently lower MACs for the three water pollutants. These findings challenge the efficiency of uniform standards or environmental fees in controlling pollution, suggesting that a tradable permit system could offer a more cost-saving alternative.

The architecture of procurement in sustainable and zero-emission neighborhood projects—strategic challenges and new realities

AbstractAs an intermediate layer located between buildings and cities, neighborhoods are considered critical with regard to the transition to low-carbon cities and zero-emission societies. Sustainable and zero-emission neighborhood (ZEN) projects can be characterized as both complex and multi-organizational. However, there is currently only limited research available concerning collaboration among organizations in relation to ZEN projects. In particular, there is a lack of evidence as to how lead organizations arrange procurement for ZEN projects. Using a case study approach, this paper explores the potential of procurement to serve as a system integrator in ZEN projects. Our findings indicate that system integration by means of procurement in ZEN projects is difficult due to several challenges. Among the identified challenges, the most important are the complex ownership structure, the lack of supporting regulations, and the unclear mandate of the procurement department. In light of these findings, we propose a conceptual model that lead organizations could apply to support the realization of ZEN projects.

Internal pyramid structure, judicial efficiency, firm-level governance and dividend policy

This study examines the moderating effect of judicial efficiency and firm-level governance on the relationship between internal pyramid structure and dividend. The results suggest that the effect of the vertical and horizontal pyramid structure on the dividend is negative and significant. We find that the impact of the pyramid's vertical structure on the dividend is more substantial than the horizontal structure. The results also reveal that judicial efficiency and firm-level governance moderate the association between complex ownership structures and dividends.

Using Unmanned Aerial Vehicles (UAVs) to Analyze the Urban Environment

Abstract Over the last decades, the evolution of technology has helped us to facilitate various types of works in areas related to land and property management as well as spatial planning. The exploitation of new tools and methods has prompted the international interest in the recording and modeling of geospatial information in more than two dimensions depicted in traditional projects, until then. This has contributed to address a series of issues related to intense urbanization, as well as challenges in identifying complex ownership and building structures. A relatively recent such method is the mapping of buildings and wider spatial units by using Unmanned Aerial Vehicles (UAVs) that has contributed to the production of 3D models by using the appropriate software. This technology finds resonant in recent years in Greece. However, it has not been applied to the mapping of large spatial units such as urban areas. This research paper performs a wide area mapping using UAV. Its purpose is to investigate to what extent the UAVs can do it successfully. For this reason, a brief evaluation is attempted, taking into account the accuracy of the data as well as the cost and time required in relation to traditional techniques. The result justifies the specific technique that appears to produce good quality metering and quality data while helping to save resources.

Complex Ownership Structures: Addressing the Risks for Beneficial Ownership Transparency

Complex Ownership Structures: Addressing the Risks for Beneficial Ownership Transparency

Complex ownership, contract enforcement, creditor rights, and leverage

ABSTRACT This study examines the moderating effect of judicial efficiency and creditor rights on the relationship between internal pyramid structure and leverage. The results suggest that the effect of the vertical and horizontal pyramid structures on leverage is positive and significant. We find that the impact of the pyramid’s vertical structure on leverage is more substantial than that of the horizontal structure. The results also reveal that judicial efficiency and creditor rights weaken the association between a complex ownership structure and leverage.

Development Trend of Smart Home Industry A case study of Haier Smart Home

In recent years Smart Home appliance is a research hotspot in the home appliance industry. It is the product of a series of high-end technologies such as the Internet of Things, 5G, and AI, and is in the growth stage of the product life cycle. In this paper, the PESTAL analysis method and Porter's Five Forces model are used to analyze the environment and competition in the Chinese smart home industry. It is found that the generation of Smart Home conforms to the upgrading of social demand and economic development, so it is supported by the government. However the industry now lacks a unified technology connector, resulting in the fragmentation and isolation of current products from different producers. This paper also takes Haier Smart Home as an example, focusing on its analysis of product logic chain and of financial status. Through the establishment of seven brands, Haier Smart Home has created a perfect product system, which can meet the multi-level demand of middle and high-end, and ranks high in sales. Contrast to its competitors, Haier Smart Home's complex ownership structure and overlapping sales channels do harm to the efficiency of its operation, which eventually result in a low-profit margin, but its sales are high, and asset turnover also maintains at a good level, so the company overall operation is in good condition, and its future growth space is large.

Vertical and Horizontal Agency Problems in Private Firms: Ownership Structure and Operating Performance

AbstractWe investigate how ownership structure influences operating performance and implied agency costs. Our sample includes over 42,000 U.K. private and public firms. We document several new results of considerable economic significance relating to i) horizontal agency costs arising from unequal ownership within private firms, ii) amplification of agency costs from joint presence within the same firm of horizontal agency problems and vertical agency problems arising from separation of ownership and control, iii) mitigation in agency costs wrought by a second large shareholder, iv) impact of complex ownership structures, and v) agency cost differences between public firms and comparable private firms.

Austria

Growth in Austria has been strong, but the outlook has moderated, and financial vulnerabilities are building up. Structural vulnerabilities include a large and tiered banking system, complex ownership structures and financial interlinkages, and a focus on Central, Eastern, and South Eastern Europe (CESEE) markets. Banks are exposed to cyclical risks from volatility in the CESEE, and rising vulnerabilities in the housing market. The solvency coverage ratio of insurance firms is high, but the sector suffers from low growth, low interest rates, and future profitability risk.

The Blurring of Corporate Investor Nationality and Complex Ownership Structures

Recent years have seen a significant increase in complexity of multinational enterprises (MNEs) ownership structures. Complex corporate structures raise concerns on the effectiveness of national and international investment policies, based on the notion of investors’ nationality. This motivates this research effort aimed at analysing the ownership structures of some 700 thousand foreign affiliates (FAs). A new methodology, the bottom-up approach, is introduced. The main objective is to empirically map the shareholder space of FAs, along the vertical dimension, from the direct shareholders to the ultimate owners. We find that FAs are often part of transnational investment chains; more than 40% of foreign affiliates have direct and ultimate shareholders in different jurisdictions (double or multiple passports). Based on shareholders’ nationality, we then propose and empirically analyse the salient features of four main archetypes of FAs ownership structure: plain foreign, conduit structures, round-tripping and domestic hubs. Each poses specific challenges to the policy-maker.

Do ownership structures effect forest management? An analysis of African American family forest landowners

Complex ownership structures like absentee ownership and heirs' property could affect management of forestlands owned by African American family landowners in the southern United States. The Theory of Planned Behavior offers a framework for understanding the role of ownership structures, along with other landowner characteristics on forest management intentions and behaviors. We used data from surveys of African American forest landowners in Georgia to inform logit models of legacy goals, management goals, management activity and management planning. Older landowners, male landowners, and landowners who had received professional advice were significantly more likely to have legacy goals, while landowners who did not report obstacles to management were more likely to have management goals. Ownership structures did not have a significant effect on landowners' goals, nor did they have a significant effect on management activities. However, absentee ownership, along with technical advice, significantly affected management planning. Results suggest that rather than the ownership structure, the most important factor in determining forest management is professional advice. The trust and personal relationship between landowners and forest professionals ultimately determine the engagement level of African American forest landowners in sustainable forest management.

Recreational and Tourist Qualities of Submontane Resorts Within the Cracow Metropolitan Area

The metropolitan area is a zone where the process of focusing on and concentrating around the central city is discernible in all aspects of residents’ lives and functioning of smaller towns. The population and businesses within the zone closest to the metropolitan centre are directly dependent on the main urban core, but as the distance grows, new internal links are created between satellite towns, yet they always remain with the impact zone of the agglomeration. Tourism and recreation are at the top of the list of available services, so the discussion on the future of small towns in the Cracow Metropolitan Area must focus on this branch of business activity. The concept of the metropolitan area has been present in our legislation for more than fifteen years now, and the area is determined and modified following the principle that it must be continuous and dense, the maximum distance from the centre of the metropolis to its outskirts must not exceed 50 km, i.e. on the average – the isochron of an hour’s drive by car from the centre to the outer boundaries, and the principle of single affiliation, which says that one commune may be a part of only one metropolitan area. All the above principles apply to the Cracow Metropolitan Area, which is reflected inter alia in the change in land use forms and the increase of the land development density. Urban spaces which grow in the shadow of a metropolis copy and transfer patterns of functioning and living from a big city to small towns, which may – in consequence – lose their identity. Małopolskie Voivodeship, including the Cracow Metropolitan Area, 26% of which is made up by the Cracow agglomeration, is a region characterised by a complex ownership structure and varied land configuration, the latter adding to its tourist and recreational qualities. Towns of submontane character are situated in the southern part of the Cracow Metropolitan Area, in the poviats (counties) of Myślenice, Wadowice, Bochnia and Wieliczka. The most interesting submontane towns within the influence zone of the Cracow Metropolitan Area and – at the same time – the ones which best characterise the problem of spatial structure transformations resulting from tourist services are, among others, Lanckorona, Lipnica Murowana, Nowy Wiśnicz and Łapanów. Analysis of the existing conditions and spatial transformations, as well as the adopted vision of development of the above-mentioned towns, are the grounds on which we may determine the trends in the development of their spatial structure, changing to keep up with the tourist services sector. Development of tourism will contribute to preservation of the environmental assets, cultural heritage and identity, as well as to creation of new jobs. It will also give residents an opportunity to acquire an additional source of income.

Do Firm- and Board-specific Characteristics Corroborate Underpricing? A Study on the Indian IPOs

The present research article is an attempt to add something new and revalidate the influence of already existing corporate governance dimensions related to the board of directors on listing-day performance of the Indian initial public offering (IPO) firms measured through underpricing. Like other emerging market economies, firms in the Indian economy are also characterized by concentrated ownership held by an owner or a promoter in the context of the Indian corporate environment. In the backdrop of this concentrated complex ownership structure, the present study analyses the influence of the board of directors on underpricing when the appointment of such directors is largely an affair handled by such owners, whom they are given the task to monitor. The sample consists of 471 IPO firms which went public during the time period from January 2003 to December 2017. Results obtained from the regression analysis show that the board size and board committees act as information signals for Indian IPO firms having a significant and negative relation with listing-day initial excess returns. Other board-related dimensions of governance do not have significant influence on underpricing. Overall board variables have a very miniscule contribution in explaining the underpricing in Indian IPO firms.

Complex Pyramid Structure, Judicial Efficiency and Firm Performance A Comparative Analysis of Chinese and Pakistani Listed Companies

This study explores the association between the complex pyramid ownership structure and firm’s market performance at Chinese and Pakistani firms, and the effect of efficient judiciary on this relationship. Previous studies report that Pakistani pyramidal firms have complex ownership structure, which motivate us to study the effect of complex pyramid structure on the performance of Chinese and Pakistani firms.We use a sample of non-financial Chinese and Pakistani firms for the period 2010-2017. Results show that pyramid structure at Pakistani firms is more complex than at Chines firms, and that control layers and control chains have negative association with performance. However, in chines pyramidal firms the control layers have negative association with firm’s performance while control chains have no association with firm’s performance, we find that efficient district courts moderate the negative effect of control layers and control chains on the dividend payout. Our results show that in the presence of inefficient courts the minority investor rights have insignificant effect on the relationship of complex pyramid structure and firm’s performance.

Complex Ownership and Capital Structure: Evidence from Korean Firms

Complex Ownership and Capital Structure: Evidence from Korean Firms

The Effect of a Complex Ownership Structure and Judicial Efficiency on Leverage: Evidence from Pakistani Listed Companies

ABSTRACTWe explore the impact of complex ownership structure and judicial efficiency on firm leverage at Pakistani pyramid firms. Ratio of controlling to ownership rights is much higher at Pakistani firms than in other economies, which motivates us to study its impact on leverage. Our results reveal that complex internal structure at Pakistani pyramid firms is positively related to leverage. We find that the presence of efficient courts weaken the impact of complex ownership structure on leverage at pyramid firms. Contrary to the literature, we find that the political connections of pyramid firms in Pakistan are not related to corporate leverage.

Focus: Tax avoidance hurts development – workers must fight back

10 | International Union Rights | 25/1 FOCUS | TAX AND TRADE UNION RIGHTS For decades, the development debate has been dominated by the story of foreign aid, and how it helps developing countries, especially in Africa, to eradicate poverty and improve their populations’ welfare. We have also been told that only by lowering taxes for foreign firms can we create development. But there is another story: that of illicit financial flows, and how they ensure developing countries lose more to rich countries then rich countries send in aid. The UN High Level Panel on Illicit Financial Flows, chaired by former South African President Thabo Mbeki estimated that between USD $30 billion and $60 billion is siphoned off annually from the Continent, according to a report released in 2015. These estimates are still fairly conservative: latest data suggests that could be as high as USD $80 billion. This is much more than Africa received in financial aid and foreign direct investment combined between 2003 and 20121. Trade unions and our civil society allies are working hard to tell the real story and make sure that developing countries, in Africa and across the world, can use all their resources to develop independently for the benefit of all. What is causing these outflows? What does this haemorrhage that specialists call ‘illicit financial flows (IFF)’ consist of? While there are proceeds from crime, money laundering and corruption, Thabo Mbeki concluded in 2015, ‘large commercial corporations are by far the biggest culprits of illicit outflows’, through dodgy tax policies that shift wealth offshore. Astonishingly, multinationals were responsible for over 65 percent of IFFs, well ahead of organised crime (30 percent) and corrupt practices (5 percent) Most of these flows occur when companies that are owned or controlled within the same group buy and sell to each other. Through the manipulation of the prices they ensure that profits are not made in the African country but instead in a tax haven where low taxes are paid. The problem is particularly pronounced in extractive industries, important for developing countries, which are dominated by large multinationals that control global value chains. They take advantage of their complex ownership structures and universal presence to manipulate quantities, prices - or both - but also to disguise the destinations and sources of their trade. Africa is full of examples. Zambia’s national data show that Switzerland is the top buyer of its copper, whereas Swiss trade statistics register no copper imports from the country at all. According to Nigerian authorities, the Netherlands is an important destination of its oil exports, but a substantial part of these sales does not appear in Dutch data. Timber production in Liberia and mineral production in the Democratic Republic of the Congo (DRC) and South Africa tell similar stories. Illicit financial flows are not a recent phenomenon in Africa. It is estimated that the continent has lost over $1Trillion USD through capital flight since the 1970s2. But it is getting worse. In Africa, capital flight has tripled since 2001, making Africa a net creditor to the rest of the world. In total, the continent lost about USD $850 billion between 1970 and 2008, with Nigeria, Egypt and South Africa accounting for 55 percent of illicit financial flows over this period. Lowering taxes does not increase investment There are enormous pressures from foreign investors and foreign governments to extend further tax concessions such as tax holidays, tax-free zones, investment and tax treaties, and acceptance of corporate ownership structures that facilitate tax avoidance. Such concessions are often designed to favour foreign corporations over domestic firms, with little demonstrable benefit from increased investment. In 2010, the United Nations Industrial Development Organisation (UNIDO) conducted a business survey of 7000 companies in 19 subSaharan African countries. The results suggest that tax incentive packages ranked 11th out of 12 in importance for investment decisions; and this importance has fallen over time. But the damage to the economy of the outflow is real. Africa is the most vulnerable region in the world when illicit outflows are compared to GDP. The average annual GDP loss of 5.7 percent has an outsized impact on the continent, according to Washington based Think-tank Global Finance Integrity (GFI...

Focus: Tax avoidance hurts development – workers must fight back

10 | International Union Rights | 25/1 FOCUS | TAX AND TRADE UNION RIGHTS For decades, the development debate has been dominated by the story of foreign aid, and how it helps developing countries, especially in Africa, to eradicate poverty and improve their populations’ welfare. We have also been told that only by lowering taxes for foreign firms can we create development. But there is another story: that of illicit financial flows, and how they ensure developing countries lose more to rich countries then rich countries send in aid. The UN High Level Panel on Illicit Financial Flows, chaired by former South African President Thabo Mbeki estimated that between USD $30 billion and $60 billion is siphoned off annually from the Continent, according to a report released in 2015. These estimates are still fairly conservative: latest data suggests that could be as high as USD $80 billion. This is much more than Africa received in financial aid and foreign direct investment combined between 2003 and 20121. Trade unions and our civil society allies are working hard to tell the real story and make sure that developing countries, in Africa and across the world, can use all their resources to develop independently for the benefit of all. What is causing these outflows? What does this haemorrhage that specialists call ‘illicit financial flows (IFF)’ consist of? While there are proceeds from crime, money laundering and corruption, Thabo Mbeki concluded in 2015, ‘large commercial corporations are by far the biggest culprits of illicit outflows’, through dodgy tax policies that shift wealth offshore. Astonishingly, multinationals were responsible for over 65 percent of IFFs, well ahead of organised crime (30 percent) and corrupt practices (5 percent) Most of these flows occur when companies that are owned or controlled within the same group buy and sell to each other. Through the manipulation of the prices they ensure that profits are not made in the African country but instead in a tax haven where low taxes are paid. The problem is particularly pronounced in extractive industries, important for developing countries, which are dominated by large multinationals that control global value chains. They take advantage of their complex ownership structures and universal presence to manipulate quantities, prices - or both - but also to disguise the destinations and sources of their trade. Africa is full of examples. Zambia’s national data show that Switzerland is the top buyer of its copper, whereas Swiss trade statistics register no copper imports from the country at all. According to Nigerian authorities, the Netherlands is an important destination of its oil exports, but a substantial part of these sales does not appear in Dutch data. Timber production in Liberia and mineral production in the Democratic Republic of the Congo (DRC) and South Africa tell similar stories. Illicit financial flows are not a recent phenomenon in Africa. It is estimated that the continent has lost over $1Trillion USD through capital flight since the 1970s2. But it is getting worse. In Africa, capital flight has tripled since 2001, making Africa a net creditor to the rest of the world. In total, the continent lost about USD $850 billion between 1970 and 2008, with Nigeria, Egypt and South Africa accounting for 55 percent of illicit financial flows over this period. Lowering taxes does not increase investment There are enormous pressures from foreign investors and foreign governments to extend further tax concessions such as tax holidays, tax-free zones, investment and tax treaties, and acceptance of corporate ownership structures that facilitate tax avoidance. Such concessions are often designed to favour foreign corporations over domestic firms, with little demonstrable benefit from increased investment. In 2010, the United Nations Industrial Development Organisation (UNIDO) conducted a business survey of 7000 companies in 19 subSaharan African countries. The results suggest that tax incentive packages ranked 11th out of 12 in importance for investment decisions; and this importance has fallen over time. But the damage to the economy of the outflow is real. Africa is the most vulnerable region in the world when illicit outflows are compared to GDP. The average annual GDP loss of 5.7 percent has an outsized impact on the continent, according to Washington based Think-tank Global Finance Integrity (GFI...