Equity Ownership Research Articles

Private equity and entrepreneurial investments: understanding the determinants of founder-CEO succession in the Caribbean

ABSTRACT Our study develops a contextually embedded institution-theoretic model of the major influences precipitating entrepreneurial founders’ leadership succession. Drawing on a unique sample of 184 listed firms from 10 national securities markets across the Caribbean region, we find that both business group (BG) and private equity (PE) ownership are associated with an increased likelihood of founder retention. The results also show that firms’ adoption of shareholder value corporate governance negatively moderates the BG main effect, while positively moderating its PE counterpart. We argue that this is reflective of a simpler lifecycle in emerging economies centred on one major transition, namely the transition from internal to external resource provision.

Financial influence on global risks of zoonotic emerging and re-emerging diseases: an integrative analysis

Emerging and re-emerging infectious diseases (EIDs), such as Ebola virus disease and highly pathogenic influenza, are serious threats to human health and wellbeing worldwide. The financial sector has an important, yet often ignored, influence as owners and investors in industries that are associated with anthropogenic land-use changes in ecosystems linked to increased EIDs risks. We aimed to analyse financial influence associated with EIDs risks that are affected by anthropogenic land-use changes. We also aimed to provide empirical assessments of such influence to help guide engagements by governments, private organisations, and non-governmental organisations with the financial sector to advance a planetary health agenda. For this integrative analysis, we identified regions in the world where there was evidence of a connection between EIDs and anthropogenic land-use changes between Nov 9, 1999, and Oct 25, 2021, through a targeted literature review of academic literature and grey literature to identify evidence of drivers of anthropogenic land-use change and their association with commodity production in these regions. We only included publications in English that showed a connection between deforestation and the production of one or more commodities. Publications merely describing spatial or temporal land-use change dynamics (eg, a reduction of forest or an increase of palm-oil plantations) were excluded. As we were assessing financial influence on corporate activities through ownership specifically, we focused our analysis on publicly listed companies. Equity data and data about ownership structure were extracted from Orbis, a company information database. We assessed financial influence by identifying financial entities with the largest equity ownership, descriptively mapping transboundary connections between investors and publicly listed companies. 227 public and private companies operating in five economic sectors (ie, production of palm oil, pulp and wood products, cocoa, soybeans, and beef) between Dec 15, 2020, and March 8, 2021, were identified. Of these 227, 99 (44%) were publicly listed companies, with 2310 unique shareholders. These publicly listed companies operated in six geographical regions, resulting in nine case-study regions. 54 (55%) companies with complete geographical information were included in the countries network. Four financial entities (ie, Dimensional, Vanguard, BlackRock, and Norway's sovereign wealth fund) each had ownership in 39 companies or more in three of the case-study regions (ie, north America, east Asia, and Europe). Four large US-based asset managers (ie, Vanguard, BlackRock, T Rowe Price, and State Street) were the largest owners of publicly listed companies in terms of total equity size, with ownership amounts for these four entities ranging from US$8 billion to $21 billion. The specific patterns of cross-national ownership depended on the region of interest; for example, financial influence on EIDs risks that was associated with commodity production in southeast and east Asia came from not only global asset managers but also Malaysian, Chinese, Japanese, and Korean financial entities. India, Brazil, the USA, Mexico, and Argentina were the countries towards which investments were most directed. Although commodity supply chains and financial markets are highly globalised, a small number of investors and countries could be viewed as disproportionally influential in sectors that increase EIDs risks. Such financial influence could be used to develop and implement effective policies to reduce ecological degradation and mitigate EIDs risks and their effects on population health. Formas and Networks of Financial Rupture-how cascading changes in the climate and ecosystems could impact on the financial sector.

Private equity investment in Sweden's primary care sector and regulatory responses to avoid risk selection

Abstract Background Until the 1990s primary care centres in Sweden were almost exclusively public and operated by the country's regions. A primary care reform in 2010 that increased competition between approved providers for public funding led to a rapid growth of private providers. Concerns were raised that profit-driven providers would select patients with lower risks. Methods We analysed contracts between county councils and private care providers and reviewed strategies employed by local governments to avoid risk selection and whether there were any differences between left- and right-wing governments. Results By 2020 over 270 new private primary care centres had been established, most of which were for-profit. Of the overall approximately 1200 primary care centres, about 60% are still owned by the regions and about 40% are privately owned. About a third of the private for-profit practices were owned by international private equity firms in 2018. Three main strategies were used by local governments to avoid risk selection: risk adjustment of the financial reimbursements on the basis of health and/or socio-economic status of listed patients; design of patient listing systems; and regulatory requirements regarding the scope and content of the services that had to be offered by all providers. Left-wing local governments were more prone than right-wing governments to adopt risk adjustment strategies at the onset of the reform but these differences diminished over time. Conclusions A variety of regulatory instruments can be used to avoid risk selection by private providers. However, due to a lack of systematic research, no firm conclusions can be drawn so far on the overall impact of private equity ownership on primary care provision in Sweden.

Corporate Social Responsibility, Ownership Structure, and Financial Performance: An Analysis of Taiwan's Food and Catering Industry

Abstract This study explores the interplay between corporate social responsibility (CSR), ownership structure, and financial performance within a diverse sample of firms, both listed and OTC, in Taiwan's food and catering industry. The empirical results clearly indicate no direct link between financial performance and the active implementation of CSR initiatives. Yet, the research supports the monitoring hypothesis, convincingly suggesting that block-holder ownership can effectively supervise managerial actions, thereby reducing agency conflicts and potentially improving financial outcomes. Furthermore, the study underscores the convergence-of-interest hypothesis, emphasizing that when managerial insiders’ interests closely align with those of shareholders through equity ownership, it can notably enhance a firm’s financial performance. JEL classification numbers: G32. Keywords: Corporate Social Responsibility (CSR), Ownership Structure, Financial Performance.

The Study of Corporate Social Responsibility and Ownership Structure on Bank’s Financial Performance in Taiwan

Abstract This study investigates the relationship between corporate social responsibility (CSR), ownership structure, and financial performance in a sample of 14 domestic financial holding companies in Taiwan. The empirical data gathered clearly indicate that banks recognized with CSR awards demonstrate superior financial performance across all models compared to those without awards. Notably, the bank’s practice of CSR, which signifies drawing from and contributing back to society, correlates with superior financial returns. In terms of large external shareholders, the institutional block-holders has a more pronounced impact as a monitoring mechanism compared to individual block-holders. Moreover, the study also supports the convergence-of-interest hypothesis, indicating that the alignment of interests between the managerial insiders and the shareholders through equity ownership can bolster a company’s financial performance. JEL classification numbers: G32. Keywords: Corporate Social Responsibility (CSR), Ownership Structure, Financial Performance.

COVID-19 risks in private equity nursing homes in Hesse, Germany – a retrospective cohort study

BackgroundPrivate-equity-owned nursing homes (PENH) represent the strongest form of profit orientation in the nursing care market. Private equity firms aim to increase the profitability of nursing care facilities, which often leads to cost-cutting measures and the use of less qualified staff. Our study aims to fill the existing knowledge gap by examining the association between private equity ownership and COVID-19 related infections and deaths among residents and staff during the COVID-19 pandemic.MethodsWe analyzed outbreak and mortality data for the period from 20/03/2020 to 05/01/2022 from 32 long-term care facilities in the Federal State of Hesse, Germany, which included 16 PENH that were propensity score matched on regional population density and number of beds with 16 non-PENH. We used logistic regression to determine the odds ratios (OR) for above-median values for the independent variables of PENH-status, number of beds, proportion of single rooms, registered nurses' ratio, and copayments.ResultsPENH had substantially fewer outbreaks in number, but longer and larger outbreaks among nursing home residents, as well as a markedly increased proportion of deceased residents. The odds of the outcome "infections & deaths" were 5.38 (p <. 05) times higher among PENH compared to non-PENH.ConclusionsThe study indicates a need for further research into the quality of care in PENH to inform evidence-based policy decisions, given the higher infection and death rates. Improved documentation and public visibility of PENH is also recommended, in line with existing practices for for-profit and non-profit nursing homes in Germany. Given our findings, regulatory bodies should closely observe PENH operational practices.

Do exchange traded funds affect corporate cash holdings?

AbstractWe examine the effects of equity ownership by exchange traded funds (ETFs) on corporate cash holdings. We find that firms increase their cash holdings in response to higher anticipated risks generated by ETFs. To establish a causal interpretation, we use the Russell 1000/2000 index reconstitution as an instrument for ETF ownership. We further show that shareholders place a higher value on the additional cash held by firms with higher ETF ownership. These findings are more pronounced among financially constrained firms. Overall, our results suggest that firms hold more precautionary cash to mitigate future funding needs due to higher ETF‐induced risks.

Ownership, institutions, and the agency of M&amp;A completion

AbstractResearch SummaryIn this paper, we study how variations in debt and equity ownership and the institutions that govern interactions between different types of principals and agents affect the completion likelihood of acquisitions. Using a sample of 55,722 acquisitions, our study finds that risk‐averse debtholders reduce the completion likelihood of acquisitions. When acquisitions cross borders, the acquiring capital providers become exposed to institutional environments that have evolved to prioritize different ideologies or principals because of the structure and customers of local capital markets. As a result, institutional duality in home and target countries reduces the completion likelihood of acquisitions. Our study integrates varieties of capitalism arguments and firm‐level agency conflicts and highlights the theoretical importance of capital markets and their concentration.Managerial SummaryAn acquisition is a highly consequential negotiation process between managers and capital providers of a firm. Based on their evaluation of a potential deal, managers propose acquisitions to capital providers who either accept it or pressure managers into withdrawing from the announced deal. This study considers firms' capital structure and cross‐national differences in the governing institutions to explain the resistance of capital providers against announced acquisitions. In particular, it points to the fear of capital providers losing control of their firms as a driver of their resistance against cross‐border acquisitions. However, when a favorable capital‐market structure in the target's home country alleviates the fears of capital providers, their resistance weakens.

Equity ownership concentration’s impact on corporate internal control: the moderating effects of female directors and board compensation

By promoting diversity in equity ownership concentration, strengthening female representation on boards, aligning pay with sustainability goals, and implementing strong internal control processes, companies can integrate sustainable practices into their operations, improve their sustainability performance, and attain long-term environmental and societal health. Therefore, this study examined the relationship between ownership concentration and internal control through the sustainability lens, specifically focusing on the moderating effects of female directors and board compensation. Data from a sample of 1609 A-share listed businesses in Shanghai and Shenzhen between 2012 and 2021 were analyzed. The findings from the fixed effects model revealed the following: ownership concentration negatively affects internal control; the number of female directors positively influences internal control; female directors actively moderate the relationship between ownership concentration and internal control; and board compensation enhances the effectiveness of internal control. These insights provide valuable data for businesses to enhance their internal control systems, appoint key personnel, and advance their sustainability goals. This study suggests that linking board characteristics to corporate internal control can lead to strengthened sustainable objectives. It also incentivizes directors to prioritize and integrate sustainability concerns in their decision-making. Furthermore, by ensuring that compensation reflects sustainability performance, firms can cultivate a sustainability-based culture and drive effective internal controls that support sustainable practices, ultimately contributing to long-term environmental and social well-being.

Mood, attention, and household trading: Evidence from terrorist attacks

In response to terrorism, households reduce their trading activity and equity ownership. While the decline in the net value of trades is consistent with increasing risk aversion, reduced Google search volumes, lower aggregate attention indices, and fewer purchases of newsworthy stocks suggest that investors pay less attention to the financial markets after attacks. Additional tests indicate that investor inattention is driven by distress-induced avoidance rather than distraction, and the effect is limited to retail investors. Finally, reduced retail trading after attacks leads to a decline in stock liquidity.

기업경영자의 이혼과 재산분할

The equitable division of property in the events of divorces of business owners has attracted much attention from the public as it has potential to affect corporate governance. In particular, if a succession of business ownership is involved and the business owner's share in the corporation was acquired by gift or inheritance, the issue whether the share remains non-marital asset and therefore not subject to equitable division procedure arises. In principle, no reason exists for the issue of the divisibility of non-marital asset to be resolved differently in the case of business owner's divorce. The division of non-marital asset should remain an exception. There are, however, good reasons for the Supreme Court case and family court practice as well to identify non-marital asset as the object of equitable division where the marriage has been maintained for a long period. In particular, it should be considered that the substance of the business behind the business owner's share or equity has constantly changed during the marriage, and that the business owner makes a personal contribution to these changes or rather value increase. Just as business income in a sole proprietorship, even if it is based on non-marital property, is undoubtedly subject to equitable division, the increase in the value of the share or equity to a corporation should also be subject to equitable division, even though the share has been acquired by gift or inheritance. In this case, of course, the outstanding contribution of the business owner can also be considered in determining the division ratio. Undoubtedly, investors and other stake-holders can be interested in avoiding or reducing the possible affect of business owner’s divorce upon the corporate governance. It is the role of the prenuptial agreement in Korean as well as many other legal systems, however, to meet these needs. Even in the absence of a prenuptial agreement, the family court should try to minimize the affect of equitable division on corporate governance especially when determining the way to allocate divisible assets.

Corporate governance and shareholder-employee risk-shifting: Evidence from corporate pension plan sponsors

This study examines how corporate governance affects pension plan sponsors’ conflicting motives—risk-shifting vs. risk management—and their future pension funding status, R&D investments, and shareholder values. We focus on managers’ discretionary choices of expected rates of return on plan assets and discount rates for pension liabilities to capture risk-shifting motives and measure corporate governance quality through foreign equity ownership (strong monitoring) and stable equity ownership (weak monitoring). The evidence shows that well-governed firms use managerial risk-shifting to finance R&D and increase shareholder values. Risk-shifting by poorly-governed firms results in larger pension underfunding without increasing shareholder values.

CEO greed and corporate tax avoidance

PurposeResearch on the organizational ramifications of chief executive officer (CEO) greed remains scarce. This study intends to fill this gap by examining the impact of CEO greed on an important yet risky corporate strategy, corporate tax avoidance (CTA). Drawing on upper echelons theory, the authors argue that greedier CEOs tend to engage in more CTA. The relationship is weaker when CEOs experienced economic recessions in their early career and stronger when CEOs are endowed with equity ownership of their respective firms.Design/methodology/approachThe authors test the hypotheses with data from US public firms from 1997 to 2008 and employ the ordinary least square regression analysis to analyze the hypothesized relationships. The authors also test the robustness of the results by performing the two-stage least square regression and propensity score matching analyses.FindingsThe findings lend broad support to all the hypotheses. The authors find that greedier CEOs tend to engage in more CTA by paying lower corporate taxes. The impact of greed on CTA is attenuated when CEOs are recession CEOs and is exacerbated when CEOs own large numbers of firm shares.Originality/valueThis paper contributes to the upper echelons research by investigating a novel executive personal characteristic, greed, and its negative impact on an important organizational outcome. This paper also contributes to the growing tax research that recognizes the important role executives play in shaping corporate tax strategies.

Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review

ObjectiveTo review the evidence on trends and impacts of private equity (PE) ownership of healthcare operators.DesignSystematic review.Data sourcesPubMed, Web of Science, Embase, Scopus, and SSRN.Eligibility criteria for study selectionEmpirical research...

A voice for change? Capital markets as a key leverage point in Canada's fossil fuel industry

Canada as an oil and gas producing nation will play a definitive role in the transition to a carbon-constrained world. Yet, Canadian climate policy continues to prop the ailing oil and gas industry with supply-side policies that enables the continued expansion of fossil fuel production. This study examines the role of financial actors as high-leverage intervention points that may be used to limit the production and expansion of Canada's fossil fuel industry. Using a combination of network modelling, sensitivity analysis, and a novel scoring tool, we find that equity ownership in Canada's largest fossil fuel firms is increasingly concentrated among a small subset of predominantly foreign and corporate equity owners. Moreover, the high debt load of fixed assets make Canadian fossil fuel firms particularly sensitive to shareholder intervention. The findings suggest that prominent shareholders are unlikely to use their voice to curtail carbon emissions in Canada's fossil fuel industry, unless mandated to do so. Thus, the study concludes with important policy insights, to drive effective decision making and change.

Family firm performance in times of crisis—new evidence from Germany

AbstractLiterature shows that founding-family control tends to positively impact firm performance and valuation. However, it is questioned whether this positive impact also persists in times of crisis or might even be reverted, as in such periods families could be focused on the survival of the firm even at the expense of long-term cash flows. By studying a large sample of listed German firms over the period 1998–2018, we document a significant outperformance of family firms in terms of ROA and (to a lesser extent) Tobin’s Q during the crisis years 2008–2010 relative to their non-family counterparts. Moreover, this crisis resilience is more pronounced the stronger the family influence in terms of equity ownership. Outside the crisis period, there is only weak evidence for any outperformance. Digging deeper into this crisis effect, we find family firms to significantly reduce their leverage during the crisis. This, however, is not done at the expense of future cash flows, as we find weak evidence that family firms increase their capital expenditures as well as their employment relative to their non-family counterparts. Given that these results also hold in a dynamic panel system GMM approach and withstand a battery of robustness tests, we hope to add new evidence on the drivers of family firm performance.

Audit Quality, Ownership Structure, and Agency Cost in Nigerian Quoted Industrial Goods Firms

This study examines the relationship between Ownership Structure, Audit Quality, and agency cost of Nigerian quoted industrial goods companies. Data from the annual reports of nine (9) selected companies whose data were readily available at the time of the study were included in the sample over a period of eleven years (2011-2021) on audit quality, managerial ownership share, institutional ownership share, administrative expenses ratio, and payout ratio were analyzed. The primary purpose of this study was to investigate the relationship between Audit Quality, Ownership Structure and agency cost of quoted Nigerian industrial goods companies. The data were analyzed using descriptive and inferential statistical techniques, including correlation matrix and fixed panel model regression. The correlation analysis revealed that all variables AER, AUQ, IOS, MOS, and PAR had correlation coefficients that were positive or negative and less than 0.9. Moreover, the results of the Fixed Effect panel model regression indicated that the probability values of the predictors were less than the study's adopted 5% level of significance (p-values 0.05), except for managerial ownership share and institutional ownership share, whose probability values were greater than 5% level of significance (p-values &gt; 0.05). The study concluded that there is a significant relationship between the Audit Quality, Ownership Structure of industrial goods companies and agency costs. As a result, it was suggested that there should be a balance between equity ownership managers and institutional investors to reduce agency costs and that audit quality should be improved by utilizing the Big-4 to reduce asymmetric information by managers and minimize agency conflicts.

New Drugs for Obesity, Is the Excitement Affordable?

New Drugs for Obesity, Is the Excitement Affordable?

Private Equity and Your Doctor: Profits Before Patients

Older Americans have unique health needs that require specialized care and support. As people age, they are more likely to develop multiple chronic conditions such as cancer, diabetes, heart disease, and arthritis, which can greatly affect their quality of life (Boyd et al., 2019). Additionally, older adults may also experience physical and cognitive declines, which can make it difficult for them to manage their own healthcare. Access to healthcare and supportive services is crucial for older Americans to maintain their health and independence. Services such as home healthcare, nursing homes, and hospice care play a vital role in helping older adults lead fulfilling lives and maintain their quality of life for as long as possible. The majority of hospice patients are diagnosed with one or more chronic conditions, with cancer being the most common (29.6%), followed by circulatory or heart disease (17.4%) and dementia (15.6%) (Hospice Facts & Figures, 2020). Meanwhile, as the American population of persons aged 65 years and over will soon outnumber those under 18 year of age, there are concerns about the quality of care for older Americans as the healthcare industry shifts towards private equity (PE) ownership (Braun, Stevenson, et al., 2021).

Publication trends in the Journal of International Financial Management and Accounting: A retrospective review

AbstractThis study uses bibliometric analysis to assess Journal of International Financial Management &amp; Accounting (JIFMA's) evolution between 1989 and 2021. In this retrospective review, we investigate the journal's performance, authorship trends, and intellectual structure. The journal's international focus is primarily on cross‐country studies and the effects of country‐level factors on various accounting and finance outcomes. The collaborative network of JIFMA's authors has also grown substantially consistent with rise in research collaboration in general across the world. We identify nine major themes making up JIFMA's knowledge structure: (1) value relevance of accounting information relating to the adoption of International Financial Reporting Standards, (2) voluntary corporate disclosure, (3) corporate use of financial derivatives, (4) corporate governance, (5) equity valuation, (6) stock return seasonalities, foreign equity ownership, and cost of capital, (7) earnings announcements and pecking order behavior, (8) triple‐bottom‐line disclosures, and (9) managerial ownership and earnings management. Our findings will likely benefit JIFMA's editorial board and other journal stakeholders including future researchers.