Corporate Shareholder Research Articles

Presidential Address: Corporate Finance and Reality

ABSTRACTThis paper uses surveys to document CFO perspectives on corporate planning, investment, capital structure, payout, and shareholder versus stakeholder focus. Comparing policy decisions today to those 20 years ago, I find that companies employ decision rules that are conservative, sticky, and geared to time the market; rely on internal forecasts that are miscalibrated and considered reliable only two years ahead; and emphasize corporate objectives that focus increasingly on stakeholders and revenues. These practice of corporate finance themes can discipline academic models toward better explaining outcomes. Models of satisficing decision‐making or costly managerial biases align with many of the themes.

THE INFLUENCE OF COMPANY CHARCTERISTICS, GOOD CORPORATE GOVERNANCE, REPUTATION AND SHAREHOLDER PRESSURE ON ENVIRONMENTAL DISCLOSURE

Environmental disclosure is a tool for the company to show its responsibilities to the environment. This study aims to investigate the influence of company characteristics, good corporate governance, reputation, and stakeholder pressure on environmental disclosure. This study uses purposive sampling technique and resulted a final sample of 53 (fifty three) manufacturing companies listed on IDX during 2017-2019. The analytic technique used in this study is multiple linear regression analysis. The result of this study shows that independent commissioners as part of good corporate governance mechanism, reputation and shareholders pressure have significant effect on environmental disclosure. Meanwhile, sales growth, profitability and environmental pressure have not significant effect on environmental disclosure. The conclusion of this study shows companies should consider any information needed by stakeholders, including environmental disclosure. For regulators, the results of this study can be a consideration to collaborate with parties that can increase awareness of the importance of environmental, such as independent commissioners and majority shareholders

RETRACTED ARTICLE: The effect of firm size, industry type and ownership structure on the relationship between firms' sustainable innovation capability and stock liquidity

Does the company attach importance to research and development (R&D) investment in its operations? Is stock liquidity detrimental to corporate innovation and thus damages the company’s sustainable development capabilities? We estimate the relationship between between stock liquidity and firms’ sustainable innovation capability on China’s stock market by OLS method and difference in difference (DID) method. The traditional conclusion is: the higher the stock liquidity, the weaker the enterprise's sustainable innovation level, especially in state-owned enterprises. The DID estimation using the share-trading reform and the policy of large and small-sized non-tradable share shows that: stock liquidity will affect the sustainable innovation level of the enterprise positively. The reasons for this mechanism are the supervision mechanism in the operation of the enterprise, the effect of the balance of the ownership structure and the improvement of corporate governance. The conclusions are that the improvement of ownership concentration promotes this positive relationship, and the behavior of institutional investors does not have a significant impact. These findings also provide new insights into the relationship between corporate management and shareholder investment behavior on the level of innovation.

The Devolution and Inevitable Extinction of the Continuity of Interest Doctrine

The continuity of interest doctrine, in its present form, is the extrastatutory requirement that the historic shareholders of a target company must retain a quantum of equity interest in the acquiror in order for an acquisition to qualify as a reorganization entitled to tax-free treatment. If sufficient stock of the acquiror is not retained by the target's shareholders for a long enough period, the transaction is not a tax-free reorganization, and the target corporation and target shareholders (including those that did retain the acquiror's stock) are subject to tax on their gains. On the other hand, because the doctrine is not an anti-abuse rule, if the continuity of interest requirement is not met, the target and its shareholders are entitled to recognize any loss on the transaction.This summary of the doctrine and its consequences is, of course, greatly simplified. Every aspect of the continuity of interest doctrine carries with it a formidable array of complex issues. For example, for how long must the target's shareholders have held their stock to be considered "historic" shareholders? What types of interests in the target qualify as equity for purposes of the test? What type and quantum of continuing interest in the acquiror is required, and for how long and in what form must it be retained? Some of these questions have recently attracted significant attention as a result of a Tax Court case, J.E. Seagram Corp. v. Commissioner, newly issued regulations under section 338, and an announcement that the Internal Revenue Service is considering a comprehensive reassessment of the doctrine.

Corporate governance and shareholders’ confidence in cooperative corporations: a systematic literature review

Background: The confidence of Bottom 40 (B40) shareholders is crucial for cooperative corporation’s sustenance within wider corporate governance. An in-depth study on cooperatives is needed, as they play a crucial role in the Malaysian economic system and contribute greatly to the country’s social development. However, in the current landscape, confidence among shareholders is at stake. This study aims to identify the research gap into corporate governance for cooperative corporations in relation to B40 shareholder confidence, as well as identify current study challenges and develop a conceptual framework for future research. Methods: We conducted a systematic literature review, with the use of agency theory to assess shareholders’ confidence. Emerald, ProQuest, InderScience, Scopus and Science Direct were the online databases used in this study to search five keyword phrases: corporate governance, confidence, cooperative, agency theory and Bottom 40% (B40) household. Tranfield’s five stages were used to conduct the systematic review. Results: Only 5 of the 324 studies assess shareholders’ confidence in cooperatives, as well as one paper on B40 and two papers on agency theory. Our review presents three major findings. First, research in the context of B40 shareholder’s confidence in cooperative corporations is limited. Second, the challenges related to shareholders’ confidence in B40 are major issues in the context. Third, research on agency theory in the context of shareholders’ confidence within cooperative corporations and corporate governance is still scant. Conclusions: This review urges the research community to conduct more studies based on the highlighted research gaps.

Do the Minority Shareholders of Russian Corporations Need More Protection?

Russian corporate governance has traditionally been viewed as lacking in contrast to that of Western states. The major concern has been controlling shareholders’ expropriation of minority shareholders, especially in the setting of state-owned enterprises (SOEs). However, in recent years, the law and court treatment of minorities’ rights have taken a positive turn, drawing more investors to joint-stock companies (JSC), the Russian equivalent of US corporations. This article examines whether such developments sufficiently protect minority shareholders’ interests in the areas of (1) access to information, (2) controlling shareholder transactions, (3) takeovers by a controlling shareholder, and (4) dividend distributions. This article examines the formation and current state of the law and court practice in these areas, and proposes legislative reform, where appropriate. The article concludes that, although there is room for improvement, the law and the courts generally afford sufficient protections to minority investors, but the key factor that may boost the quality of corporate governance is minority shareholders’ active participation in corporate affairs, especially in the general meetings of shareholders. corporate governance, minority shareholder protection, Russian corporate law

Corporate Profitability and Shareholder Meeting Participation in Italian Listed Companies

This paper intends to investigate the relationship between the attendance of annual general meetings (AGMs) and company performance in terms of profitability. In particular, it is intended to highlight some elements that can be interpreted as constituting attendance at the shareholder meetings, for example, the number of shareholders present at the shareholder meeting, the share of authorized capital attending the shareholder meeting, and the duration of the shareholder meeting. Following this analysis, attention is devoted to the relationship between corporate performance and shareholder meeting participation (one of the possible governance mechanisms available to monitor the activity carried out by company management). We analyse the AGMs convened for the adoption of financial statements. Empirically, the study uses the minutes of the meetings of a sample of Italian listed companies held in 2017 and 2018 on the occasion of the adoption of financial statements for the 2016 and 2017 fiscal periods, respectively. The main results show a positive relationship between the share of authorized capital attending annual shareholder meetings and the level of corporate profitability of Italian listed companies.

Corporate Governance and Shareholder's Activism as a Tool for Protection of Shareholders’ Interest

Corporate Governance and Shareholder's Activism as a Tool for Protection of Shareholders’ Interest

The Corporate Contract and Shareholder Arbitration

The Corporate Contract and Shareholder Arbitration

Corporate Social Responsibility Programs and Shareholder Value

Corporate Social Responsibility Programs and Shareholder Value

Derivative Action- An Impartial Right given to Minority Shareholders under Pakistan’s Legislation

Derivative Action- An Impartial Right given to Minority Shareholders under Pakistan’s Legislation

The Nail that Sticks Out: Corporate Social Responsibility and Shareholder Proposals

The Nail that Sticks Out: Corporate Social Responsibility and Shareholder Proposals

Developments in Singapore Company Law in 2021

Singapore’s common law-origin corporate law regime ranks highly on corporate law and governance indices and is administered in part by superior courts served by judges with significant commercial expertise. As part of the Singapore Academy of Law’s Annual Review of Cases, this Paper reviews decisions of the Singapore superior courts (comprising the High Court and the Court of Appeal) decided in 2020. The cases reviewed feature a wide range of issues with domestic and international significance, including private enforcement of directors’ duties, corporate attribution, corporate veil piercing and shareholder disputes. This Annual Review will be useful for academics and lawyers who wish to stay up to date on legal developments in a leading Asian, common law jurisdiction, and on the reception of landmark common law cases in a leading Anglo-Commonwealth jurisdiction.

The double burden of maldistribution: a descriptive analysis of corporate wealth and income distribution in four unhealthy commodity industries

ABSTRACT The health and ecological harms created and spread by firms active in many unhealthy commodity industries (UCIs) have received considerable attention from the public health community. However, less focus has been paid to analysing the distribution of wealth and income – important social and economic determinants of health – by these industries. This study aimed to examine long-term trends in wealth and income distribution by publicly listed corporations active in four UCIs: fossil fuels; tobacco; ultra-processed foods; and alcohol. Quantitative analysis of a range of data was conducted for firms listed on stock exchanges in the United States (US). Wealth and income distribution metrics were analysed at the industry level, including effective corporate tax rates and shareholder value ratios. The equity ownership structures and investor location of 20 of the largest firms were also explored. Since the 1980s, US-listed firms in the examined UCIs have distributed much less of their wealth and income to governments and much more to shareholders and investors mostly based in high-income countries. The study provides evidence that firms active in UCIs create a ‘double burden of maldistribution’: their externalised social and ecological harms disproportionately affect disadvantaged population groups and governments in low- and middle-income countries; whilst, simultaneously, they are increasingly transferring wealth and income to a group over-represented by a small and privileged elite. The identified distributive injustice warrants increased policy attention.

Corporate governance and shareholders’ confidence: A pre-post analysis of corporate governance code 2017 in Pakistan

This study aims to examine the impact of the recently introduced Corporate Governance Code (CGC) of the Security Exchange Commission of Pakistan (SECP) on shareholders' confidence. The four recommendations of the CGC 2017 included in the study are female directors, independent directors, independent chairman of the audit committee, and board size. The study uses a purposive sample of the top 100 companies listed Security Exchange Commission of Pakistan with a plea for better compliance. By employing Ordinary Least Squares with Panel Corrected Standard Errors (OLS-PCSE) to a data collected from annual reports of the sample firms from 2015 to 2019. The SECP code 2017 anticipated that CG dimensions will improve firm performance and shareholders’ confidence. The findings are fairly consistent and robust across two time periods (pre and post), whereas the results show that board diversity increases firm performance in both eras. Besides, the multiple regression results indicate that firm performance is negatively and significantly linked with independent directors. Nevertheless, the results show that board size and independent chairperson of the audit committee do not have a significant impact on firm performance. As these anticipations yet lack empirical support. The findings of this study provide important insights for the regulatory bodies, policymakers, and all other key stakeholders of the public listed companies of Pakistan. The study empirically investigates the recommendations of the CGC 2017 and has originality or value, particularly for the developing countries.

Corporate Governance from a Cross-Country Perspective and a Comparison with Romania

This paper investigates corporate governance from a cross-country perspective and makes a comparison with Romania. There are studies that examine the corporate governance issues related to Romanian companies, but these studies provide only qualitative and descriptive accounts of the research topic, with limited cross-country analysis. The present paper complements the literature by producing a quantitative analysis of cross-country corporate governance and makes a comparison with Romania. For this purpose, a set of corporate governance indicators from a large sample of 39 advanced and developing countries was collected for the 2006–2020 period. In terms of corporate governance dimensions, it was found that Romania underperforms other developing countries in the dimensions of director liability and ownership and control, while it outperforms them in the dimensions of corporate transparency, disclosure, and shareholder rights. The results indicate that the stagnant corporate governance scores and the low development level of stock markets stand out as important business challenges for the country. The correlation and regression analyses show that stock market development is closely associated with corporate governance dimensions and, overall, corporate governance scores matter greatly for the economic growth of countries, such as Romania, which can benefit greatly from the improvement of corporate governance codes and practices in the private sector.

Do shareholders tolerate faults in scientific and technological innovation? Evidence from Chinese listed companies

ABSTRACT Based on the data of Chinese A-share listed companies from 2009 to 2017, this paper examines whether or not shareholders tolerate the faults of scientific and technological (S&T) innovation and the effect of firm heterogeneity on this relationship. The empirical results show that, in general, shareholders do not tolerate faults in S&T innovation, and this intolerance intensifies with a longer failure time; there are differences in shareholders’ fault tolerance in different types of companies; shareholders of companies with high profitability and financial risk tend to tolerate faults in S&T innovation. This paper might provide some new insights for corporate shareholders to devise reasonable S&T strategies.

Corporate diversification, refocusing and shareholder voting

We examine if shareholders' attitude towards firm diversification strategy is revealed in their votes on management-initiated acquisition and divestment proposals using data on voting by shareholders of UK public firms between 1997 and 2019. We find that voting dissent is higher for diversifying acquisitions and lower for refocusing divestments, especially when these involve diversified firms. We also find a negative relationship between diversification premium and voting dissent. Our results provide evidence that diversification characteristics of firms and deals have a significant impact on shareholders' dissent in acquisitions and divestments.

Investment returns from reputation investing: do good firms provide good returns?

PurposeThis study aims to examine whether a good corporate reputation leads to superior investment returns. Theory and empirics provide support for the idea that a good corporate reputation improves firm value, but much of the previous research fails to consider the risk of the companies they study and relies only on accounting measures of performance such as return on assets. A complete picture of the relationship between corporate reputation and shareholder value should include risk-adjusted returns and correlation with benchmark returns.Design/methodology/approachThe Harris Poll Reputation Quotient (RQ), based on the reputations of the 100 most visible companies, suggests that companies with a “solid reputation” are more likely to be attractive investments. The authors construct portfolios using deciles and the RQ categories, rebalancing annually as RQ rankings are updated. Returns are adjusted for risk using Jensen's alpha, the information ratio, the Sharpe ratio, Modigliani and Modigliani's M2 measure, and Muralidhar's M3 measure.FindingsThe results indicate that choosing a portfolio based on the highest RQ-ranked firms does outperform the market on a risk-adjusted basis, and that the relationship between rankings and time-weighted returns is roughly monotonic. The authors also observe that corporate reputation is persistent, and that the best and worst most-visible firms are more likely to be privately held.Originality/valueThis research adds to the literature by including both market-based return measures and risk in the examination of the relationship between corporate reputation and financial performance.

Corporate Profile, Shareholding Position and Firm Profitability: Empirical Results from Pharmaceutical and Chemical Companies of Bangladesh

The study inspects the effect of corporate profile and shareholding position on firm profitability studying 31 listed pharmaceutical and chemical companies of Bangladesh. The analysis uses five measurements—earning per share (EPS), net profit margin (NPM), return on assets (ROA), return on equity (ROE) and basic earning power (BEP)—along with four moderating variables to define firm profitability. The findings demonstrate a positive association of independent directors and firm profitability, while female board-members generate negative results. Board size and the participation of sponsors-promoters produce no meaningful effect. The existing shareholding patterns reveal negative impacts on firm profitability. While public investors and institutes negatively affect the most, the foreign investors and sponsors-directors affect the least. The study suggests to increase the proportion of foreign shareholding and independent directors, decrease the portion of public shareholding and female directors, and opt for the new investment sources to align with positive profitability. Keywords: Profitability, Performance, Corporate profile, Shareholding structure, Corporate governance, Board structure. DOI: 10.7176/EJBM/13-20-05 Publication date: October 31 st 2021