Dispersed Ownership Research Articles

What drives risk disclosure in Islamic and conventional banks? An international comparison

AbstractThis paper examines and compares the relationship between risk disclosure and corporate attributes in Islamic and conventional banks. Using a comprehensive risk disclosure index covering nine dimensions, we analyse the level of risk‐related disclosure (RRD) in a sample of 72 Islamic banks and 97 conventional banks across 11 countries. The RRD index shows that Islamic banks disclose less information about risk comparing to conventional banks. Listed banks, larger banks and aged bank disclose more information about risk than the others. Block holders, foreign ownership and board size affect negatively risk disclosure. However, board independence and the percentage of foreign directors in the board affect positively risk disclosure. Moreover, banks with higher Tier 1 ratio disclose less information about risk. Our results encourages regulators to improve corporate governance mechanisms in their banking systems through the optimization of ownership structure (dispersed ownership) and the board's composition in order to promote higher level of transparency and RRD.

Examining The Excess Cash Holdings As An Indicator of Agency Problems

This research aims to examine the implications of excess cash holdings on firm value based on agency theory. Data were obtained from a total sample of 1828 non-financial public companies in Indonesia, with 672 exceeding normal cash holdings using the panel regression techniques. The result showed that excess cash holdings have a negative effect on the firm value which is stronger for more concentrated ownership, for more dispersed ownership and for more financially difficult firms. Overall the empirical finding showed that excess cash holdings acts as a significant indicator of agency problems.

Ambidexterity in family firms: The interplay between family influences within and beyond the executive suite

Ambidexterity commonly refers to the simultaneous pursuit of exploration and exploitation and may be particularly beneficial for family firms. In this study, we investigate how family CEO and top management team (TMT) family affiliation influence ambidexterity. In addition, we consider the role of family ownership dispersion and how it impacts the ability of the top managers of family firms to foster ambidexterity. We test our hypotheses on a unique dataset combining archival and multiple respondent survey data of 167 German family firms. Our results shed light on conditions under which family-led leadership can pursue ambidexterity.

The effect of institutional ownership and ownership dispersion on eco-innovation

This paper aims to determine the role that the different institutional investors play in promoting eco-innovation, focusing on the analysis of the corrective or enhancing effect that can be derived from ownership dispersion related to the participation in a company's stock capital of institutional investors with different time horizons. The results obtained for a sample of 6,454 companies for the period 2002–2017 show the convergence of the short-term institutional investors’ interests with the long-term institutional investors’ demands, which has a positive effect on the implementation of proactive environmental strategies, such as eco-innovation. Additionally, this positive effect is enhanced by disperse ownership structures associated with the participation in a company's stock capital of both types of institutional investors, thereby increasing the firm's commitment to environmental sustainability. Although financial institutions and pension funds diverge from this long-term orientation, seeking an immediate economic return, ownership dispersion allows for correcting their individual negative effect on eco-innovation.

Dampak Dispersion Of Ownership, Financial Distress, Dewan Pengawas, Umur Listing terhadap Pengungkapan Sukarela Bank Syariah

This study aims to look at the effect of ownership dispersion, financial distress, sharia supervisory board and age of listings on the extent of voluntary disclosure in Islamic banks registered with OJK in the 2015-2018 period. The population of the study was 14 companies of Islamic Commercial Banks and the number of samples obtained were 13 companies with an observation period of 4 years. Data analysis techniques using multiple linear regression. Statistical results show that Simultaneous that dispersion of ownership, financial distress, sharia supervisory board and age of listings have a positive and significant effect on voluntary disclosure of Islamic Commercial Banks. While partially dispersion of ownership and sharia supervisory board negative significant influence on voluntary disclosure of Islamic Commercial Banks.
 Keywords: Voluntary Disclosure; Ownership Dispersion; Financial Distress; Supervisory Board; Age Of Listing.

Transgenerational innovation capability in family firms

PurposeBased on the theory of dynamic capabilities, the purpose of this study is to examine how generation influences the effect of innovation capability on family business performance. To achieve this purpose, a moderation model is tested using the generational level as the moderating variable.Design/methodology/approachThis study used a sample of 106 family businesses CEOs who were surveyed by mail using the Limesurvey 2.5 platform. The results obtained were analyzed using the second-generation partial least squares (PLS) structural equation model. The MICOM (Measurement Invariance of Composite Models) approach was used to analyze the moderating effect.FindingsThis research sheds lights on the innovation capacity to influence the family businesses performance, and on the generational level moderating this effect. As a result, the influence of the innovation capacity in second generation family businesses performance is higher than in the first generation.Research limitations/implicationsThis study reveals the influence that the generational level has on the effect of innovation capacity on the family business performance. A greater dispersion of ownership, more participatory decision-making, and greater CEOs commitment to leadership in second- and later-generation family businesses, are the main key drivers of this result.Originality/valueIn comparison to previous studies, this research provides insights into the moderating effect of the generational level on the influence of innovation capacity on the family businesses performance through the MICOM approach (Measurement Invariance of Composite Models).

The Silent Majority: Private U.S. Firms and Financial Reporting Choices

ABSTRACTThis study uses a comprehensive panel of tax returns to examine the financial reporting choices of medium‐to‐large private U.S. firms, a setting that controls over $9 trillion in capital, vastly outnumbers public U.S. firms across all industries, yet has no financial reporting mandates. We find that nearly two‐thirds of these firms do not produce audited GAAP financial statements. Guided by an agency theory framework, we find that size, ownership dispersion, external debt, and trade credit are positively associated with the choice to produce audited GAAP financial statements, while asset tangibility, age, and internal debt are generally negatively related to this choice. Our findings reveal that (1) equity capital and trade credit exhibit significant explanatory power, suggesting that the primary focus in the literature on debt is too narrow; (2) firm youth, growth, and R&D are positively associated with audited GAAP reporting, reflecting important monitoring roles of financial reporting; and (3) many firms violate standard explanations for financial reporting choices and substantial unexplained heterogeneity in financial reporting remains. We conclude by identifying opportunities for future research.

Green Building, Cost of Equity Capital and Corporate Governance: Evidence from US Real Estate Investment Trusts

Distinct from the existing literature, which mainly focuses on the impacts of green building practices on the owners’ benefits, this paper examines capital market participants’ perceptions of green building, specifically, the cost of equity capital. The study uses data regarding the United States Real Estate Investment Trusts (US REITs) from 2000 to 2016, employing a panel regression analysis and adopting a Price Earnings Growth (PEG) ratio model for the cost of equity capital estimation. We find a negative relationship between green building certification and the cost of equity capital. Our results encourage REITs to participate in green building certification and aim for higher green building rankings. In addition, we examine whether corporate governance could affect the intensity of green building practices in REITs. It is found that corporate governance practices implemented to align shareholders’ and managers’ interests, such as higher institutional holdings and a less dispersed ownership structure, positively impact firms’ resource allocation for green initiatives. The results suggest there could be mutual benefits for both economic profits and sustainable buildings.

Efek Moderasi Size dalam Pengungkapan Sukarela: Bukti Empiris di Bursa Efek Indonesia

The purpose of this study is to analyze the determinants of voluntary disclosure (VD) by using three non-interaction models and one interaction model. This paper observes four VD’s determinants (ownership dispersion, managerial ownership, audit committee, and independent commissioners), one control variable (capital structure), and one moderating variable (total asset). By using panel data analysis (225 observations) on the Indonesia Stock Exchange (IDX), it is found that the total asset can be used as the moderating variable in explaining the determinants of VD in IDX. Furthermore, the interaction model shows better results than non-interaction models. Managerial ownership, independent commissioners, and ownership dispersion show high consistency with the tested hypotheses. This is different from the audit committee which does not support the hypothesis. These findings implicate managerial policies that need to consider good corporate governance in supporting the voluntary disclosure of public companies in Indonesia. Strengthening external validity in the form of replication, developing research models, and refining research methods is needed to strengthen the managerial implications. Testing the robustness by simulating various substitute proxies to optimize the generalization of research findings needs to be considered in future studies.

Shareholder Stewardship in India: The Desiderata

The goal of this paper is to examine whether the stewardship code, which emanated in circumstances that are specific to the United Kingdom (UK), is capable of transposition to other jurisdictions that experience different corporate structures as well as legal and institutional mechanisms. It does so in the context of India, which has introduced a series of stewardship codes for different types of institutional investors. This paper cautions against the wholesale adoption of a UK-style stewardship code in India due to the specific factors that are at play in that jurisdiction, and instead calls for a sui generis approach to stewardship. At least three reasons necessitate such a departure from the UK stewardship approach. First, while the prominence of institutional investors in the UK in the context of companies with dispersed ownership inspired the UK-style stewardship code, the roles and challenges that institutional investors experience in India in the context of concentrated shareholding are considerably different. Second, the goals of stewardship vary from the UK, where the focus is on the long-term financial sustainability of beneficiaries of institutional investors, to India, which follows a pluralistic stakeholder approach to corporate law. Third, the traditional mode in the UK of using a code-based soft law approach to implementation of stewardship is unsuitable to the Indian circumstances that steadfastly rely on mandatory rules in the form of hard law in the corporate arena.

CSR reporting and ownership structure: Evidence from Italian listed companies

The paper empirically explores how firms’ Corporate Social Responsibility (CSR) disclosure varies according to their ownership structure. Three different kinds of ownership structures are considered: family firms (FFs), state-owned firms (SOFs) and firms with dispersed ownership (DOFs). It is the first study examining the relationship between CSR disclosure and ownership structure, which includes in the analysis also FFs and SOFs. The analysis is provided on a sample of 192 listed firms with reference to Italy, a suitable setting for the purpose of the study due to the considerable presence of both FFs and SOFs. Firstly, a content analysis on the CSR documents disclosed by the 192 firms is provided and then data are empirically analysed to test whether the ownership structure influences a firm’s CSR disclosure. Results show that FFs and SOFs disclose less CSR information and the explanation can be found in the lower level of agency problems they have to face. The paper contributes to the stream of literature about CSR disclosure, because it argues that the contents of CSR disclosure vary according to firm’s ownership structure and also to those about FFs and SOFs because it shows that the presence of a concentrated ownership lowers the level of CSR information disclosed.

Влияние отношений собственности на элементы корпоративного управления в российских компаниях

The article deals with the influence of ownership relations on the elements of corporate governance in modern Russian companies. The assessed parameters that help to reveal the rela-tion have been offered: shareholder influence, notice of a general meeting of shareholders, infor-mation in notifications, availability of general meetings of shareholders, proxy voting, financial re-porting standards, access to documentation, etc. The analysis of the specific features of corporate governance in the Russian public joint-stock companies on the basis of open sources of information has been carried out. The study was conducted using the GAMMA method developed by the rating agency Standard & Poor’s. The main results of the study showed that the greater the representation of minority shareholders and/or higher their activity, the more independent directors in the company, the higher the level of disclosure. If there is one large private shareholder in the company, he can also act as chairman of the board of directors. It is difficult to assess the impact of ownership relations on corporate governance in state-owned companies. If the company has a small number 
 of minority shareholders and their activity is low, transparency is limited only by disclosure 
 of mandatory information. It has been inferred that the peculiarities of relations between shareholders, as well as relations between shareholders and hired managers indirectly affect corporate governance’s elements. Models of the corporate control in the Russian Federation have been given (private enterprise model, managers' collective ownership model, concentrated ownership corporate control model, dispersed ownership corporate control model). More research is needed to identify 
 a more evident relation. The article has been written in the framework of the research work “De-velopment of property relations in a modern society”.

English

This paper examines the relationships between corporate governance variables and the extent of risk disclosures among listed companies in Kenya. The study aims to empirically examine the relationship between corporate governance variables and risk disclosures in 48 listed non-financial companies in Kenya. Content analysis of annual reports for the period 2010-2016 was used to measure the level of risk disclosures and compute the risk disclosure index for each company studied. The relationships between variables were analysed using panel data analysis. The findings show that the percentage of non-executive directors, ownership dispersion, percentage of foreign ownership, women in boards affected significantly the level of risk disclosures in the studied companies. Additionally, the control variables, firm’s size and firm’s profitability also significantly affected the level of risk disclosures. It can be concluded that the agency theory and the signalling theory can be used to explain the risk disclosure behaviours of listed firms in Kenya. It is recommended that companies should strengthen their corporate governance mechanisms in order to deal with risks facing them. Key words: Risk disclosures, corporate governance, agency theory, signalling theory, non-financial sectors.

Controlling Shareholders in the Twenty-First Century: Complicating Corporate Governance Beyond Agency Costs

By the end of the twentieth century, the then-dominant literature on “law and finance” assumed that concentrated ownership was a product of deficient legal systems that did not sufficiently protect outside investors. At the same time, commentators posited that the competitive pressures of economic globalization would push countries around the world to adopt an efficient regime of strong investor protection, which was thought to facilitate ownership dispersion. Nevertheless, at the dawn of the 2020s, ownership concentration not only persists, but appears to be on the rise among the world’s largest companies. This symposium essay in honor of Ronald Gilson explores what went wrong with the original predictions from two decades ago and the resulting lessons for corporate governance analysis. It shows that the focus on agency costs that dominated the earlier literature overlooked the fact that corporate governance structures are both (i) influenced by factors beyond tradeoffs in agency costs (such as non-pecuniary private benefits of control and nationalism), and (ii) affect social welfare in ways other than through their effects on investor protection. The essay then reflects on the emerging challenges to what I call the “modularity approach” to corporate law scholarship, and contemporary law-and-economic analysis more generally, which stipulates that each area of law should serve one key efficiency objective.

Pengungkapan Informasi Keuangan Secara Sukarela di Internet oleh Perusahaan Besar di Indonesia

The purpose of this study is to examine the impact of characteristics as a potential factor that might influence each financial disclosure on the internet voluntarily by large companies in Indonesia. The characteristic in this study are the company size, leverage, profitability, company age, dispersion ownership, industrial sector, and auditor type. The sample chosen uses a purposive sampling method to collect as many as 414 large companies listed on the Indonesia Stock Exchange in 2013 to 2017. Using binary logistic regression to determine the effect of independent variables on the dependent variables and processed using the program of SPSS version 21. 
 The results of data analysis and conclusions indicate that the size of the company has a significantly positive effect on Internet Financial Reporting. Variables of company age, industry sector, and auditor type indicate a significantly negative influence. Wheares, for the variables of leverage, profitability, and dispersion of ownership there are no significant findings on Internet Financial Reporting.

The Stock Market and Discrimination in Mortgage Lending

Comparing private banks that went public through mergers and acquisitions with similar private banks, we find that going public reduces the mortgage denial rates for African American borrowers by 6.1-6.3 percentage points, which reduces the racial disparity in mortgage approval rates by a third. Our results are not driven by changes in borrower risk characteristics, lender risk preferences, securitization, or increased disclosure requirements. The effect is more pronounced in areas suffering stronger racial biases. Our results suggest that the dispersed ownership can mitigate non-economically motived prejudice of concentrated private ownership and thereby alleviates taste-based discrimination in mortgage lending.

Informational role of ownership concentration: evidence from the Casablanca stock exchange

PurposeThe purpose of this paper is to provide empirical evidence on the informational role played by ownership concentration.Design/methodology/approachThe authors use bivariate vector autoregressive models to document the informational role of ownership concentration.FindingsThe findings suggest that the returns of firms with concentrated ownership structure lead the returns of firms with dispersed ownership structure in Morocco during the period between 2004 and 2014. The authors argue that this lead-lag relationship arises because a better information environment in firms with concentrated ownership structure enables quick incorporation of relevant information. The results are robust under different information regimes.Originality/valueThe authors believe that this paper is one of the first evidence on the informational role of ownership concentration in Morocco.

Determinants of good governance practices: the role of board independence

ABSTRACT This study contributes to broadening our knowledge of the corporate governance of firms. In particular, we consider board independence as a fundamental variable in the explanation of good governance practices. For this purpose, we analyse the Annual Corporate Governance Reports of the Spanish listed companies on the Continuous Market of the Madrid Stock Exchange during the period 2010–2016. The results for all companies reveal that firm size, ownership dispersion and board independence have a positive relationship with good practices, and the relationship between board independence and good governance practices is moderated by ownership dispersion. When we distinguish between firms that comply with board independence recommendation and those that do not, however, the results differ substantially, in terms of sign, magnitude and significance level. This highlights the importance of board independence in explaining good governance practices.

Women on boards and CEO pay-performance link

PurposeThe purpose of this paper is to investigate the crucial question of whether gender diversity in boardroom is associated with CEO pay and CEO pay-performance link.Design/methodology/approachThe authors used the data of companies listed on the Pakistan Stock Exchange for a sample consisting of KSE-100 index companies for the period of five years. The authors used the ordinary least square regression technique to test the developed hypotheses. The authors also used the two-step Heckman selection model, two-stage least square regression and propensity score matching method to control the problem of endogeneity.FindingsThe authors find reliable evidence of a negative association between gender diversity and CEO pay and of board gender diversity’s strengthening the relationship between CEO pay and firm performance. The authors also find that women director are more effective in setting the optimal contract in non-family-owned firms and firms with dispersed ownership structure as compared to family-owned firms and firms with concentrated ownership structure. Moreover, results also reflect that the influence of board diversity on both CEO pay and CEO pay-performance link is stronger when gender diversity goes beyond tokenism.Practical implicationsThe findings have implications in terms of providing the basis for policy makers to accord the same level of importance to gender diversity in the boardroom as well as contributing to the current debate on the desirability of mandating or recommending gender diversity on boardrooms.Originality/valueThis study is among the few studies which investigate the moderating role of boardroom gender diversity on the CEO pay-performance link. In addition, this study contributes to the institutional theory by providing the empirical evidence that the effect boardroom gender diversity on CEO pay and CEO pay-performance link varies by type of ownership.

When Activists Meet Controlling Shareholders in the Shadow of the Law: A Case Study of Hong Kong

AbstractShareholder activism has changed corporate governance around the world in the past decade. Conventional wisdom holds that shareholder activism is only effective in firms with dispersed ownership; there has been much less discussion on whether and how activism would work in firms with controlling shareholders. This article fills this gap by investigating whether and how legal mechanisms influence strategy planning and activism outcomes based on hand-collected data regarding activists’ initiatives against firms with concentrated ownership in Hong Kong from 2003 to 2017. This article finds that cases using formal legal mechanisms appear to have had a higher success rate. Among the legal tools available, minority veto rights are the most popular mechanism used by activists in Hong Kong, and are quite effective in leveraging their position in controlled firms. Furthermore, the availability of legal remedies and the ownership level of controlling shareholders are factors that influence activists’ strategies. Most activist initiatives against controlled firms involve corporate governance disputes where activists can rely on legal protection to enhance their bargaining position. On the other hand, activists tend not to make their demands public, and they also avoid exercising legal rights when controlling shareholders control the majority of the shares.