Dominant Owners Research Articles

Legal System for Endorsing Press Independency in Indonesia

Political transition of post Soeharto's authoritarian regime has been deeply influenced by a decentralised model of governance, which affected to more serious attacks to the journalism works. The extra-judicial killing, physical violence, criminalising against journalism, and other attacks through formal judicial process or other forms, included impunity system, have shown uneasy situation for journalist at field or members of the press to perform journalistic works. Violence against journalists at field in decentralised Indonesia has been more influenced by the role of political-economy contestation at the local level, rather than the influence of situation and policies at national level. The law enforcement to protect journalist at works seems easily deniable and disregarded due to law system itself that does not give significance effect. The court has been used to collapsing media, silencing opposition, retaliating, and terrorising journalism works.
 My research shows that the most targeted medias for ULAP (unjustifiable lawsuits against press) or criminalisation have been connected to its reliability, professionalism journalistic or high quality of news. On the other side, impunity has prevailed and become a dominant situation that is not merely caused by ‘external media’ factors, but also showed an ‘internal media’ factors. Avoiding the judiciary becomes phenomena that does not always relate to distrust over the judicial system, but more on a ‘forced situation’. In my presentation, I will show how this situation articulates a new configuration of political imperium which combines of free press and dominant ownership over media, plus illiberal democracy which legally allows and lets predatory system to be supreme class in the governance and other state institutions.

Ownership structure and company performance: a panel study from Poland

PurposeThe purpose of this paper is to investigate the links between company ownership structure and financial performance in the context of the largest Central European stock market. Using the framework of agency theory, the authors address the question of the expropriation effect by dominant owners and the effect of collusion between shareholders of different types on company performance.Design/methodology/approachThe authors test hypotheses on the relations between ownership concentration and the involvement of different shareholders (state, CEO, industry and financial investors) vs return on assets (ROA). The authors adopt the panel model controlling for endogeneity and sector of operation and analyze the data from the unique sample of 495 Polish non-financial firms listed on the Warsaw Stock Exchange in years 2005-2014 with a total of 3,203 observations.FindingsThe authors identify a negative correlation between ownership concentration by the majority shareholder and ROA, which corresponds with the expropriation rationale of blockholders. The authors also observe negative effects due to ownership concentration by the second largest shareholder, supporting the notion of collusion. The results show that ownership by industry investors is associated with a higher ROA. Ownership by the CEO, state and financial investors proves to have no statistically significant effect on performance.Originality/valueThe paper further develops the nature of ownership-performance relations in the specific economic context of a post-transition, emerging European stock market, weak external corporate governance mechanisms, insufficient investor protection and significant concentration of share ownership. The results add to the understanding of monitoring vs expropriation effects by large owners and the collusion between different types of shareholders.

How Institutional Investors on Boards Impact on Stakeholder Engagement and Corporate Social Responsibility Reporting

AbstractInstitutional investors are relevant dominant owners with a very high representation on the boards of European firms. Despite their prevalence, research on the role of institutional directors and their impact on firm disclosure policy is scarce. We examine the association between institutional directors and corporate social responsibility (CSR) reporting, distinguishing between pressure‐sensitive (e.g. banks) and pressure‐resistant directors (e.g. funds). We find that institutional directors show different incentives and conflicts of interests towards increasing CSR reporting. Specifically, we note that directors representing banks are likely to promote additional information about the firm's environmental and social commitments in order to lower the risk faced by lenders, minimise the probability of default, and maintain their prestige and professional reputation. On the other hand, directors representing fund institutions overweight short‐term earnings potential, which decreases their incentives to improve a firm's CSR reporting. Our findings confirm the importance of institutional investors on CSR reporting policy of firms. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

A Decision-making Perspective of the International Entry Mode Choice

Previous research considers the entry mode decision as a rational and as a single decision. In this study, we draw upon decision making theory to argue that entry mode choice is the product of a boundedly rational, sequential decision making process. In the first stage of the entry mode decision-making process, firms eliminate alternative entry modes which do not possess certain critical attributes while in the second stage, the firms select an acceptable entry mode which is a tradeoff of multiple attributes. We contend that the elimination criteria depend on the type of dominant owners. Therefore, we examine the entry mode decision making process for firms with high levels of family ownership (i.e., family dominant firms) and those with high levels of institutional ownership (i.e., institutionally dominant firms). Specifically, we propose that family dominant firms and institutional dominant firms have different risk profiles that lead to unique entry mode preferences at each stage. That is, higher family ownership leads to the preference for low control, low financial risk entry modes in the first stage. As such, family dominant firms are more likely to eliminate the wholly owned subsidiary in the first stage of the entry mode decision process. Alternatively, institutional investor dominant firms are risk- neutral, so they are more likely to choose high control, high financial risk entry modes. In addition, the tradeoff between control and financial risks is more likely to be considered in the second stage of entry mode decision making process when the counterpart type of owners are involved.

The development of employee ownership in China

PurposeLittle systematic work has been completed on the incidence of employee ownership in a Chinese context. Similar to the situation in Eastern Europe, this type of ownership was quite widespread in China, particularly during the 1990s. Based on the existing literature and available statistical data, the purpose of this paper is to identify drivers of, and barriers to, the development of employee ownership in China.Design/methodology/approachThe scattered evidence from the literature and official statistical sources are collected and structured in a systematic analysis where the drivers and barriers for employee ownership in the transition process from plan to market are identified at three levels: society, the company and the individual.FindingsEmployee ownership developed as a transitory stage between state and private ownership; employees acquired ownership stakes as part of the privatisation of small- and medium-sized state-owned enterprises as well as collectively owned enterprises. However, in most cases the dynamics of ownership resulted in dominant ownership by managers. This trend became more noticeable at later stages of the privatisation process.Research limitations/implicationsThe paper shows how policies and institutional settings at the society level are determining for the development of employee ownership.Originality/valueThe contribution of the paper is to give a general and systematic analysis of the development of employee ownership in China both based on a comprehensive literature review and by utilising existing statistical sources.

Reputation as a governance mechanism? Evidence from payout policy of insider‐controlled firms in Taiwan

AbstractThis paper examines the effect of entrenched insiders’ reputational concerns on corporate payout policy in Taiwan, a market in which typical public firms are controlled by a single dominant shareholder who is subject to weak takeover threats and has incentives and abilities to extract private benefits by oppressing minority equity holders. The reputation‐building hypothesis predicts that firms with higher expropriation risk by a controlling shareholder make more payouts to credibly commit not to expropriate minority shareholders, thereby establishing reputation in the capital market for risk diversification and low‐cost external financing. I show that corporate payout intensity is significantly and positively correlated with measures related to the moral hazard of dominant owners. The reputation effect manifests in firms that most value it; the interaction analyses indicate that younger, smaller, or growth firms with higher controlling shareholder expropriation risk pay more cash dividends. Moreover, firms are less likely to omit dividends and more likely to resume dividends when their controlling shareholders are more entrenched. Finally, I show that the value of cash dividends is higher for firms with higher controlling shareholder expropriation risk and that expected dividend increases in these firms are value enhancing.

Ownership Contingent Influence of Governance Structure on CEO Compensation: Need for Change in Governance Paradigm

The study examines the need for changes in the standard governance structure through investigation of the moderating effect of ownership identity and ownership concentration on the influence of standard governance structure on CEO compensation in companies with dominant owners in control. Using data from companies listed on the National Stock Exchange (NSE) of India that were a part of the diversified 100 stock index for the period 2007-2012, we find that the influence of standard governance structure on CEO compensation is indeed contingent on identity of the owner and concentration of ownership. Duality is the only governance measure that directly influences CEO compensation in family owned domestic private companies. Gender diversity and proportion of non-executive independent directors directly influence CEO compensation in corporate owned foreign private companies. The direction of influence of non-executive independent directors however supports the possibility of board capture by CEOs. In case of government companies, none of the governance measures directly influences CEO compensation. The key finding of the study are the meagre and in one instance an inappropriate (from governance point of view) influence of standard governance measures. As the decision on CEO compensation in case of companies with dominant owners in de facto control of board and executive management implies ‘principal-principal’ rather than ‘principal-agent’ conflict of interest, the results from the study suggest a re-think on the standard governance framework that is designed to deal with the latter conflict. A 2013 legislative initiative disenfranchising interested shareholders from voting on related party transactions including CEO compensation is a step in the right direction but much else remains to be done. Corporate governance frameworks across the world are derived from the frameworks proposed in the US and UK context of dispersed ownership. The framework is designed to deal essentially with ‘principal-agent’ conflict of interest. This ‘one size fits all’ approach may not ensure governance effectiveness in several situations that arise in functioning of organizations that require dealing with ‘principal-principal’ conflict. Our study on CEO compensation in the Indian context underlines the need for governance based on minority-shareholder-centered governance framework.

The peril and promise of resource nationalism: A case analysis of Mongolia's mining development

Resource nationalism is often cited as the most serious risk to foreign mining investment in developing countries. Mongolia provides an important case study of studying this phenomenon and its impacts, especially during the global mining boom years from the late 1990s to 2010. This phenomenon has been exposed mainly through the ever increasing role of state ownership in major mineral deposits, mostly by direct equity participation. The rationale behind these nationalist policies is to maximize the economic and political benefits from extractive industries. However, in reality, the Mongolian government lacks financial and human resources as well as practical knowledge to engage directly in mega projects which pose substantial risks, if carried out improperly. The aim of this paper is to examine the underlying nature of the state-centric resource development model in Mongolia. Using an institutionalist approach, the study provides a systematic understanding of the root causes for the growing state involvements in mineral resource development, and its implications for and implementation upon the Mongolian mining sector, including major challenges encountered as a result of the dominant ownership structures shaping the industry.

When is blockholding growth enhanced?

<p class="BodyA">In this paper we test productivity differences among groups of firms with multiple controls. By using an exceptionally reach database, consisting of more than 4,000 Slovenian firms, each employing at least 50 employees or having their assets larger than two million euros (two criteria defining a small firm), and containing the information of firms’ ten largest owners and their financial statements for the period 2006-2014, we design all possible minimal controlling coalition types up to three dominant owners and examine which minimal controlling coalition type generates the highest expected total factor productivity (TFP). We show that the optimal blockholding coalition type, consistingof two members coalitions without dominant owners,was able to attain short-term efficiency of dispersed owners.Other blockholdingcoalition types stayed behind. A simple behavioristic principle is observed: short term efficiency of controlling coalition type decreases with the number of dominant owners and increases with the number of potential controlling (minimal) coalitions with different dominant owners.<strong></strong></p><p class="BodyA"> </p>

Will future land based food and fibre production be in family or corporate hands? An analysis of farm land ownership and governance considering farmer characteristics as choice drivers. The New Zealand case

Family farming in various guises has been the dominant ownership and governance system in primary production over recorded history. This outcome has been controlled by farmers and their families, possibly due to tradition, opportunities, personal characteristics, skill sets and the nature of primary production. Of these, it is hypothesised that the farmers’ personal characteristics play a major part in the choice, and continuance, of current ownership and governance systems. Equally as important, they, and therefore the land ownership system, play a part in the efficiency of production systems and improvement of the biological and production environment.The benefits and difficulties of commonly used ownership systems in Western society are reviewed. Using a sample of New Zealand (NZ) farms, a comparison of the managers’ features for owner/operator, partnership and corporate based systems is presented. There were significant differences in many variables including the farmers’ age, education, number of children, asset levels, years on the current farm, and similar, but more importantly, the farmers in the ownership system groups had differing personal characteristics. Significantly, despite the corporate based farms employing more professional assistance, the profit levels were similar across ownership systems leaving the farmers’ characteristics the main factors correlating with system choice. However, governance systems per se are only marginally correlated with production systems and efficiency.As successive generations of farmers are unlikely to have different characteristics, and corporate based systems continue to exhibit similar profit levels, relatively simple family based systems will continue to dominate farm land ownership and control. The trends suggest family farms will increase in size and involve family conglomerates facilitating the management of larger, and in many cases multiple, farms. While currently there are few differences in biological efficiency between ownership systems, given the efficiency benefits of size and scale, this could well change with the increase of family conglomerates. Relative to increasing corporatisation, the continuance of family based ownership and governance will also be of benefit to the environment. When developing land policies, these highlighted relationships should be taken into account. This study is a first to consider personal characteristics relative to ownership.

Ownership patterns and control of top 100 Malaysian listed companies

The incentive of this study stems from the significance of protecting minority shareholders’ rights. It analyses the most dominant ownership structure practices within listed firms in Bursa Malaysia (BM), in which controlling shareholders (CSs) hold control on many firms despite relatively small portion of investment. Malaysian firms are characterised by high levels of concentrated ownership with families owning more than 70% of the listed firms in BM [9]. This study finds that the separation between cash flow rights (real investment) and control rights (voting rights) for Top 100 Malaysian listed firms is accomplished through pyramidal ownership and golden share arrangements. Hence, the divergence between cash flow rights (CFRs) and voting rights (VRs) exacerbates Type II Agency problem. This study calls for future studies in the area of accounting and finance to introduce and operationalise new measurement of Type II Agency Cost in order to better understand the agency conflicts within this unique market. It also better explains the state of the minority shareholders in the BM.

Related-party transactions, dominant owners and firm value

We examine RPTs in one Continental European country, Spain, where ownership concentration is prevalent and state ownership is practically non-existent. Our results show that more than half of listed Spanish firms commit to RPTs over the analyzed period. Furthermore, from the perspective of the related party to the transaction, connected transactions between listed Spanish firms and their blockholders account for 99.84% of the total RPTs carried out by listed Spanish firms. Finally, our findings reveal that financial, operating and investment dimensions of RPTs negatively affect firm value due to the presence of an expropriation effect whereby RPTs are driven by insiders’ opportunism, regardless of the dimension (financial, operating and investment) affected by the existence of RPTs. Thus, in a context where the main concern of corporate governance is the potential expropriation of minority shareholders by controlling owners, RPTs require special regulator's attention in order to improve investor protection and market confidence to promote a more efficient allocation of resources.

Evaluating non-industrial private forest landowner willingness to manage for forest carbon sequestration in the southern United States

Forest carbon sequestration is considered one of the most efficient strategies for climate change mitigation, and forests provide significant carbon storage in the United States. Non-industrial private forest (NIPF) ownership is the dominant ownership group in the southern US, but little is understood about landowners' willingness to manage forests for carbon sequestration. This study examines NIPF landowner willingness to delay final timber harvest for additional carbon sequestration despite unknowns about positive or negative impacts to profitability that result from carbon price fluctuations. Survey data from 735 landowners in the southern United States were used to estimate a probit model analyzing their participation behavior. Landowner willingness to participate in carbon sequestration practices was 55%, 25%, and 16% when such practices were more profitable, revenue neutral or less profitable than timber management only, respectively. Although many landowners would require a significant monetary incentive to participate in carbon sequestration, others would participate with little or no incentive. Those having recreational goals for their property were the most likely group to participate in carbon sequestration. Management changes (i.e., management plan and verification requirements) and carbon revenue were the two most important determinants of their probability of participation. In summary, this study provides a better understanding of the relationship between landowner participation and socioeconomic details, sequestration program attributes, attitudes, and behaviors. Designing education, incentive, and assistance programs that align with landowners' recreational goals would result in a low-cost carbon sequestration policy.

Sustainability disclosure, dominant owners and earnings informativeness

Focusing on an environment where ownership concentration is prevalent and where sustainability disclosure is not a new phenomenon, we investigate the effect that communication via social responsibility reporting has on earnings informativeness. We further address the moderating role of the dominant owner’s voting-cash flow wedge in the relation between sustainability disclosure and earnings informativeness.We show that communication via social responsibility reporting provides additional information to market participants to assess earnings informativeness. Furthermore, we show that the positive relationship between sustainability reporting and earnings informativeness intensifies as the dominant owner’s voting-cash flow wedge increases. Our results are consistent with sustainability disclosure reducing investors’ and other stakeholders’ uncertainty, thereby helping them better interpret financial information.

Stock repurchases in Japan: A solution to excessive corporate saving?

Since the 1990s profitable Japanese companies have faced lower domestic growth opportunities; they have invested less, yet most have not increased their payout. This has resulted in a substantial deleveraging of their balance sheets. The popular term for this phenomenon is “corporate saving.” Corporate saving by Japanese companies is now at the highest level in history. Dividends and stock repurchases are two potential ways to resolve excessive corporate saving. Stock repurchases in particular offer a fast, flexible and very public method to solve the problem of excessive corporate savings. This research is an investigation of stock repurchases by Japanese companies from 2000 to 2009. Companies repurchase their stock to return excess cash to investors, resolve governance issues, adjust capital structure and send signals. This paper uses accounting and stock market information to explain this behavior. Contrary to recent research on American firms, we find that replacement of dividends does not appear to explain stock repurchase behavior in Japan. We find evidence that repurchase behavior in Japan is linked to excessive corporate savings. However, repurchases are also closely linked to the ownership structure of the firm. Firms whose dominant owners are other members of the firm's industrial group are less likely to repurchase. Bank ownership has mixed implications for repurchases. Firms having foreign and individual ownership are more likely to repurchase stock. Foreign and individual ownership appears to improve governance and thus may be a partial solution to excessive corporate savings.

Emerging economies and institutional quality: Assessing the differential effects of institutional distances on ownership strategy

The current study contributes to the institution-based view of internationalization that is contingent upon the home country development. We examine the differential effects of formal and informal institutions on emerging market multinational corporations’ (EMNCs) ownership strategies. Facing a large informal institutional distance that represents diverse cultural beliefs, EMNCs opt for a low ownership position that alleviates legitimacy threat, whereas a large formal institutional distance leads EMNCs to establish dominant ownership control. EMNC home market conditions, including market size and regulatory institutional quality, further explain the differential effects of institutional distances.

Book Review: The 1% and the Rest of Us: A Political Economy of Dominant Ownership

Book Review: The 1% and the Rest of Us: A Political Economy of Dominant Ownership

"Insider ownership, corporate governance and firm performance: Analysis of Indian firms"

In emerging economies weak external governance mechanisms persist and dominant insider ownership is largely considered as a means of protecting investor interests. However, in such economies not al...

Damien Cahill, The End of Laissez-Faire? On the Durability of Embedded Neoliberalism. Edward Elgar: Cheltenham, 2014; 9781781000274, RRP USD110.

On the heels of the global financial crisis, many on the left of the political spectrum anticipated the end of neoliberalism. The financial and economic crisis—global in scope—had supposedly discredited over two decades of neoliberal rule. The massive state interventions required to curtail the worst vagaries of the crisis demonstrated to everyone paying even the remotest attention that deregulated markets are unstable, that bankers cannot be trusted with increasing the money supply and that government intervention could help steer the economy in a more positive direction should politicians be willing. Moreover, the aftermath of the crisis spawned the worldwide Occupy movement, with The Guardian recording at least 750 Occupy events across the world. These protests drew ever greater attention to the fact that neoliberal policies have been an abject failure for the non-owning classes of the world. However, at the same time, the policies in question have been highly profitable for dominant owners around the world—what Occupy called the 1%. This may be one of the major reasons why neoliberal policies continue to be pursued despite their consequences for popular social forces.

Timber Harvesting Behaviour in Massachusetts, USA: Does Price Matter to Private Landowners?

Non-industrial private forest is the dominant ownership type in the eastern USA. Most of the private owners have non-consumptive, appreciative values and through surveys report little interest in the generation of timber revenue. Timber harvesting in Massachusetts was investigated for a 25-year period to compare the frequency and volume of harvests for five commercial species on private land, to species-specific stumpage prices reported on a quarterly basis. For four of the five species, there was no relationship; however, for one species a consistent effect was identified, whereby the volume harvested and number of harvest events were found to be significantly related to stumpage price, west of the Connecticut River. This effect is absent for eastern Massachusetts, and also not apparent consistently for other species. It is concluded that under some circumstances, private landowner harvest decisions are influenced by stumpage price.