High Ownership Concentration Research Articles

The Role of Internal Risk Governance in Improving Bank Performance: A Theoretical Perspective

Internal risk governance is a critical determinant of bank performance, influencing stability and profitability within a complex and dynamic financial environment. This study examines the mechanisms by which internal risk governance affects the performance of Chinese city commercial banks (CCBs) through the lenses of Principal-Agent Theory and Risk Management Theory. Specifically, the research explores the interplay among internal governance, capital regulation pressures, ownership concentration, income diversification, and risk-taking behavior. The findings reveal that enhanced internal risk governance mitigates risk-taking behaviors, thereby improving bank performance. Conversely, increased capital regulation pressures and higher ownership concentration are linked to elevated risk-taking and reduced performance. Additionally, income diversification is shown to decrease risk-taking while positively impacting bank performance. This study provides new insights into the theoretical and practical dimensions of risk management, offering implications for strategic decision-making, regulatory oversight, and policy formulation aimed at strengthening the resilience of city commercial banks.

Corporate ownership and firm performance. Evidence from an emerging market

PurposeThis paper aims to examine the relationship between corporate ownership and firm performance, and the mechanisms through which ownership creates the firm value. Vietnam has been chosen as the research site because it is characterized by high ownership concentration, a high level of state ownership, strong incentives for foreign ownership and a weak external governance system.Design/methodology/approachWe use data on the ownership structure of 527 listed firms in Vietnam during the 2010–2021 period. Corporate ownership includes concentrated, state and foreign ownership, while firm performance is measured by ROA and Tobin’s Q. In addition to Pooled OLS, system GMM and the propensity score matching are employed to mitigate the possibility of unreliable and biased results.FindingsWe find that firms with highly concentrated ownership tend to have better performance. Both state ownership and foreign ownership with their unique advantages contribute to enhancing firm performance. Further analyses delve into specific channels through how controlling shareholders, state and foreign owners facilitate firm value creation: the ease of access to capital, the lower cost of capital and the higher sales. Our results are robust to alternative proxies for ownership concentration and different methodological approaches.Originality/valueOur study contributes to the ongoing debate about the ownership–performance relationship by providing novel insights into how corporate ownership influences firm performance.

From boardroom to sustainability reporting: stakeholder-RBV insights into ESG disclosures among Malaysian banks

Purpose Strengthening ESG strategies in Malaysian banks is necessary as they continue to face difficulties integrating ESG into their strategies and disclosure despite existing government frameworks. This study aims to use stakeholder-resource-based view (RBV) concept to explore how board characteristics and ownership concentration influence ESG disclosure practices in Malaysian banks. Design/methodology/approach The study analysed annual, environmental, social and governance (ESG) and integrated reports of Malaysian banks from 2010 to 2022 to examine the effects of board characteristics on ESG disclosures. Using content analysis and 481 balanced data sets, ordinary least squares (OLS) and robust regressions were applied, with interaction terms testing the moderating effects of ownership concentration. Findings Board independence negatively impacts ESG disclosure in Malaysian banks, suggesting that independent directors may not prioritise sustainability. Board size, diversity and sustainability committees positively influence ESG practices. Ownership concentration interactions reinforce these findings, but board independence remains negatively significant. Research limitations/implications Future research should expand the sample to other emerging markets, explore a wider range of bank board attributes and use advanced econometric methods to increase the generalisability of the results. Practical implications The study impacts theory, financial institutions and policy, redefining ESG practices in Malaysian banking. It highlights the role of board characteristics and the importance of ownership concentration. Several practical recommendations are provided. Social implications The study impacts theory, financial institutions and policy by redefining ESG practices within Malaysian banking. It highlights the significance of board characteristics and ownership concentration, offering several practical recommendations. Originality/value The study fills gaps in the literature by examining the impact of board characteristics on ESG disclosures through content and statistical analyses. It integrates stakeholder theory with RBV to provide novel insights into ESG reporting in Malaysian banks, highlighting the role of high ownership concentration in emerging markets.

“Your house won’t be yours anymore!” Effects of Misinformation, News Use, and Media Trust on Chile’s Constitutional Referendum

News consumption and voting behavior are interlinked and particularly important in elections where traditional political cleavages are not easily applicable. This relationship becomes more complex and uncertain in contexts of low trust in the news media and high levels of misinformation circulating in different news ecosystems. In this study, we test an indirect path between differentiated news media consumption and voting choices, mediated by belief in misinformation, and moderated by news media trust. Our data come from a two-wave panel survey of 1,332 respondents, conducted in Chile before and after the 2022 Constitutional Referendum, a political event that captured international attention after a constitutional proposal was rejected in a process initiated with high public support. Our analyses found that news media consumption significantly affected voting preferences in the referendum, not only indirectly through the acceptance of misinformation, but also directly, suggesting that news organizations might act, intentionally or not, as soundboards of misinformation. These findings suggest that countries with enough press freedom to rely on the news media to be informed but also a high concentration of ownership, topics, and angles covered, might become fertile soil for misinformation to spread in the form of professional news coverage, instead of fabricated, easy-to-spot fake pieces circulating in dubious websites or on social media.

The Influence of Related Party Transactions on Earnings Management in Indonesian Food and Beverage Sub-Sector Companies: Ownership Concentration as a Moderating Variable

This research tests how transactions among related parties influence the management of earnings, considering ownership concentration as a moderating factor. The research specifically targets businesses inside of the food and beverage sub- division that are registered on the Indonesia Stock Exchange (IDX) during the phase by 2016 to 2022. Earnings management, a tactic frequently utilized by corporate executives to manipulate reported financial outcomes, is associated by both accrual-based and real earnings management techniques. This research emphasizes how transactions by related parties can enable accrual earnings management, especially in circumstances defined by significant ownership concentration, where major stockholders might leverage their influence to the disadvantage of smaller group stockholders. Through moderated regression analysis, this research investigates the extent to which ownership concentration can enhance or reduce the influence of related party transactions on earnings management. The outcomes reveal that a high concentration of ownership intensifies earnings manipulation, particularly in less regulated settings such as Indonesia, where conflicts of interest among majority and smaller group stockholders are prevalent. These outcomes add to the expanding literary works on corporate governance and offer valuable empirical insights for stakeholders concerning the monitoring of related party transactions.

Impact of ownership concentration on the auditor switching with modified audit opinion as mediation variable

Motivated by recent studies that show that ownership characteristics have an effect on auditor opinion and auditor change, this research examines the effect of ownership concentration on the auditor switching with modified audit opinion as a mediation variable. The explanatory variable is ownership concentration, and the explained variable is auditor change and modified audit opinion as mediating variables. The method used for analysis is called logistic regression. The data is related to manufacturing companies listed on the Tehran Stock Exchange from 2013 to 2022. Research findings show that ownership concentration has a positive and significant effect on auditor change. Ownership concentration has a significant negative effect on the modified audit opinion. Modified audit opinion mediates between ownership concentration and auditor change. Empirical findings show that high ownership concentration may increase the probability of auditor change and decrease the probability of modified audit opinions.

The Impact of Employee Stock Ownership Plans on Capital Structure Decisions: Evidence from China

The determination of the capital structure is a critical component of a company’s financial decision-making process. The question of how to optimize a firm’s capital structure to increase its value has been a significant topic of interest within the financial community. The employee stock ownership plan (ESOP) has developed rapidly in China’s capital market over the past decade, providing a suitable context for studying the impact of employee equity incentives on capital structure decisions. This paper employs cross-sectional ordinary least squares regression models and unbalanced panel fixed effect models to investigate the impact of employee stock ownership plans (ESOPs) on firms’ capital structure decisions. The analysis is conducted on a sample of Chinese A-share listed companies on the Shanghai and Shenzhen Stock Exchanges. The research considers both static capital structure choice and dynamic capital structure adjustment. We find that the implementation of an ESOP reduces the level of corporate debt and accelerates the dynamic adjustment of capital structure, suggesting that employee equity incentives play a role in optimizing firms’ capital structure decisions. We also find that the impact of ESOPs on the dynamic adjustment of capital structure is asymmetric. Specifically, the implementation of ESOPs markedly accelerates the downward adjustment of capital structure, yet has no impact on the upward adjustment of capital structure. Further analysis demonstrates that the impact of ESOPs on capital structure decisions is contingent upon the macroeconomic environment, industry characteristics, corporate governance, and ESOP contract designs. First, the optimization of ESOPs on capital structure decisions is more pronounced in an economic boom environment, in a poor market climate, or in competitive industries. Second, the reduction effect of ESOPs on corporate debt is more pronounced in non-state-owned companies, high-tech companies and those with lower ownership concentration. In contrast, the acceleration effect of ESOPs on capital structure adjustment is more pronounced in state-owned companies, non-high-tech companies and those with higher ownership concentration. Ultimately, ESOPs financed by loans from a firm’s major shareholders—or with a longer lock-up period, smaller shareholding size or executive subscription ratio—demonstrate a more pronounced optimization effect on capital structure decisions. This paper not only contributes to the existing literature on the relationship between equity incentives and capital structure decisions, but also provides guidance for listed companies on the reasonable design of their ESOPs and the optimization of their capital structure decisions.

Pension Insurance Contribution and Corporate Maturity Mismatch of Investment and Financing: Evidence from Contribution Rate Reduction in China

ABSTRACT Pension insurance contribution is an important factor affecting corporate financial decision-making. This study investigates the influence of the pension insurance contribution rate reduction policy on the corporate maturity mismatch between investment and financing. We found that the pension contribution reduction policy reduces actual contribution burden of firms, and the average actual contribution rate decreases by 0.26% after the nominal rate is reduced by 1%. However, the policy also significantly aggravates the corporate maturity mismatch of investment and financing, which survives a battery of robustness tests. The positive effect of pension insurance contribution rate reduction on the maturity mismatch of investment and financing is more apparent in private, smaller-scale firms and in firms with higher ownership concentration and lower management incentive levels. The pension contribution reduction policy strengthens long-term investment tendency by reducing the actual contribution burden of companies and shortens debt maturity by increasing principal-agent costs. The results of this study provide a new perspective for understanding the mismatch between corporate investment and financing.

Energy-Related Uncertainty and Idiosyncratic Return Volatility: Implications for Sustainable Investment Strategies in Chinese Firms

This study examines the impact of energy-related uncertainty on idiosyncratic volatility (IVOL) in Chinese firms, leveraging data from the Shanghai and Shenzhen stock exchanges between 2007 and 2022. Utilizing the Energy-Related Uncertainty Index (EUI) and the Fama–French five-factor model, we analyze a comprehensive dataset of 20,998 firm-year observations to understand how macroeconomic uncertainties specific to the energy sector influence firm-specific risk. Our findings reveal that a one-unit increase in the EUI is associated with a 5.1% rise in idiosyncratic volatility across all firms, underscoring the significant impact of energy-related uncertainty on firm-specific risks. The effect is more pronounced in energy-related firms, where a one-unit increase in the EUI leads to a 6.4% increase in IVOL, compared to a 3.7% increase in non-energy-related firms. By incorporating industry-wise, heterogeneity, and phase-based analyses, our findings reveal significant variations in the EUI’s impact across energy and non-energy sectors. State-owned enterprises, firms with high ownership concentration, and smaller firms are more vulnerable to energy uncertainties. Additionally, the effect of the EUI on IVOL is more pronounced during periods of high uncertainty. These insights have important implications for sustainable investment strategies, risk management, and policymaking, providing a deeper understanding of the intricate dynamics of energy markets in fostering sustainable economic growth and development.

Do promoters cause financial distress in a bank?

PurposeThe study aims to explore the impact of ownership concentration (OC) on bank financial distress (FD). Furthermore, the bank’s financial stability levels determine the association between the two.Design/methodology/approachBank data of 33 Indian commercial banks are procured for ten years (2013–2022). The panel data econometrics is applied for empirical estimations. The quantile regression approach is used to determine the association between OC and FD at different quantiles of the FD. Non-normalcy of the data is checked and ensured before applying the quantile regression.FindingsSurprisingly, it is found that promoters have a nonlinear impact on the firm’s stability. The inverted U-shape result implies that as promoters cross a threshold level, the benefit of increasing promoters’ stake takes a beating and a further increase in promoters’ stakes adversely impacts the stability of the banks. Moreover, this threshold value increases while moving from low to high levels of stability in a quantile regression application.Research limitations/implicationsThis study uses promoters as the proxy for OC. Other existing definitions of OC are not used in the study, which can further improve the robustness of the results. Additionally, the use of the type of ownership (private, public or foreign) is also not adopted in the present study. Both the limitations can be the study’s future scope on the topic.Practical implicationsThe high OC is supposed to influence corporate governance adversely. Therefore, policymakers recommend low OC for better governance. However, the present study finds evidence that a higher OC (high threshold of OC as the stability increases) would be better for financial stability. This situation demands a trade-off between governance and financial stability regarding OC.Originality/valueThe authors do not observe any study having the nonlinear impact of OC on financial stability (opposite of FD). Moreover, the threshold of OC for the optimum level of financial stability increases as stability goes high. This evidence using quantile regression and finding the turning point using a quadratic equation is also not seen in the literature.

Determinants of Investment Property Choice: an Empirical Analysis of Nigeria Listed Firms

In order to investigate the factors influencing the choices of investment properties of the firms listed on Nigeria Exchange Group (NGX), this study carried out an empirical investigation. 155 businesses that were listed on the Nigerian Exchange Group (NGX) as of December 31, 2022, made up the study's population. A purposive sampling strategy was used to select a sample size of fifty-five firms. Data were obtained from the companies' audited annual financial reports for the years 2012-2022. Panel data regression (PDR) was utilized for the analysis of data. The findings showed that the accounting choices made by businesses regarding the management of investment property are significantly influenced by both debt and business size. Furthermore, the choice of how to treat investment property in accounting is not much influenced by the degree of board independence. Moreover, non-financial firms listed on the stock exchange choose different accounting methods for their investment assets due to the negative and significant effects of ownership concentration. This is due to the fact that a company that has a high ownership concentration is less likely to base its accounting choices on the International Financial Reporting Standards (IFRS). This implies that businesses are less likely to adhere to the fair value technique for valuing investment property if their ownership is more concentrated. The study discovered that a firm's accounting decision on the handling of investment property is significantly influenced by the drivers of investment property choosing. It is, thus, recommended the need for firms to set up a system that would track and assess investment property choices on an ongoing basis. This is expected to develop robust, and proactive plans that consider both short-term financial gain and long-term viability.

Green investment policy and maturity mismatch of investment and financing in China's heavily polluting enterprises

In the context of China's heavily polluting enterprises facing a challenge of maturity mismatch due to long payback cycles and environmental risks, this study investigates the potential impact of China's ‘Green Investment Guidelines (Trial)’ released in 2018. The guidelines serve as a policy focal point, aiming to address the challenges posed by long payback cycles and environmental risks in the investment projects of these enterprises. Analyzing data from 2015 to 2021, our findings reveal a negative correlation between the guidelines and the maturity mismatch problem. Long-term investment emerges as a crucial intermediary variable in this relationship. Notably, the inhibitory effect is more pronounced in non-state-owned enterprises, firms with weak governance capabilities, and those with high ownership concentration.

Stock repurchases, ownership structure and board composition: evidence from Thailand

PurposeThis study aims to examine the influence of ownership structure and board composition on the probability and intensity of stock repurchases. The study’s sample comprises 3,744 firm-year observations, consisting of 53 repurchasing firms with 96 firm-year observations from 2008 to 2019.Design/methodology/approachProbit and fixed-effects regression models are used to obtain empirical results. Moreover, a probit model with a continuous endogenous regressor (IV-probit) and an instrumental variable method with two-stage least squares (IV-2SLS) estimation are used to address endogeneity.FindingsCorporations with high family or state ownership tend to inhibit stock repurchases to hoard excess free cash flow, supporting agency theory. Conversely, firms with high board independence tend to repurchase their stocks at least once to distribute free cash flows to shareholders, confirming agency theory. Nonetheless, corporations with more female directors on the board or CEO duality tend to conduct stock repurchases at least once but do not repurchase stocks with high values. Interestingly, more female directors on the board may send false signals about undervalued stocks.Originality/valueThis is the first study to reveal that firms with CEO duality repurchase their stocks at least once but avoid repurchasing shares with high values. It is also the first study to explore whether women on a board may cause false signaling about undervalued stocks. Furthermore, this study reveals that family and state ownership are potential determinants of stock repurchases in countries with high ownership concentration. This is the first study to address this issue in Thailand.

DuPont analysis among European dentistry companies to measure the impact of the COVID-19 pandemic

Although health economics belongs to the highly respected economic disciplines within the research literature, there is a considerable gap related to the investigation of dentistry in particular, even after the global pandemic of COVID-19 disease. Fundamentally, the DuPont framework is a well-known complex analysis to evaluate companies from the point of view of financial performance. The investigation of the return on equity as a relation between the return on assets and the equity multiplier, simply called the leverage effect, is presented in this paper. Therefore, this study aims to estimate the effect of leverage and its changes due to the COVID-19 pandemic among dentistry companies in selected European countries with different healthcare insurance systems. This comparative investigation focused on the generalised method of moments with dynamic panel data from Orbis, the Bureau van Dijk financial database for 1,128 dentistry companies in nine European countries. Methodologically, concerning those post-estimation techniques to evaluate over- and underestimation of the models. It has been differentiating between companies with a high or low ownership concentration structure. The results have shown differences in the leverage effect during the pandemic, assuming that companies with a major owner increased their equity, while the debt leverage increased among those companies with dispersed ownership and vice versa. If economic theory states that debt financing is more effective for a company than using internal sources, it is apparently different in the case of dentistry during the pandemic. However, dispersed ownership is more often related to dentistry, according to mergers in this particular business industry.

Motivations And Effects of NEEQ's Transfer To SSE STAR Market In The Context Of Registration Reform: A Case Study Of TZTEK

NEEQ, officially known as the National Equities Exchange and Quotations, is the third national equity trading venue after Shanghai Stock Exchange and Shenzhen Stock Exchange. The National Equities Exchange and Quotations Corporation Limited (NEEQ Co. Ltd.) was registered with the State Administration for Industry & Commerce (SAIC) on September 20, 2012 with registered capital of RMB 3 billion, and was inaugurated on January 16, 2013 and gradually opening up to all regions nationwide. For small and medium-sized enterprises (SMEs), NEEQ offers a vital financing channel and enhances their liquidity. As a result, the number of enterprises listing on the NEEQ market has surged. However, this growth has brought about certain issues that cannot be ignored and have become increasingly serious. These issues include a high concentration of equity ownership and a decline in market liquidity. Consequently, the trading volume and turnover rate of NEEQ-listed companies have been decreasing year by year. This decline has significantly constrained the growth potential of some promising enterprises, such as TZTEK. These companies, which typically have good growth prospects, are often compelled to consider transferring to a different board in pursuit of sustainable development. This paper will first introduce the research significance and background of this chosen topic. Secondly, it will provide an overview of TZTEK's background of board transfer and transfer process. Then, it will analyze the motivation behind TZTEK's board transfer from the perspectives of financing, shareholder structure, and company valuation. The study will also involve an analysis of market effects, growth capability, and debt repayment capacity for TZTEK, both before and after the board transfer, using a series of relevant data. Finally, the paper will conclude with a summary of the research findings.

The Relationship between Board Characteristics and Bank Risk-Taking: The Moderating Effects of Market Discipline and Ownership Concentration

The purpose of this paper is to examine the direct impact of board-related characteristics on risk-taking behavior in the banking sector and the moderating effects of market discipline and ownership concentration on the relationship between these characteristics and bank risk-taking. Using data from a sample of Vietnamese commercial banks for the period 2010-2018, we find that, first, there is (partial) evidence of a negative relationship between the presence of female and independent directors and bank risk-taking. Second, the moderating effects of market discipline and ownership concentration are partially supported, providing some evidence of an incremental effect of specific board characteristics on bank risk-taking. In particular, the negative impact of directors’ educational level on risk becomes significant for banks that are listed, while the impact of independent directors is enhanced in banks with high ownership concentration. The large board size also has a negative influence on risk-taking when banks' ownership concentration is high. Our study has implications for corporate governance regulations and policymaking.

Financial distress, auditors’ going concern modification (GCM) and investors’ reaction in a concentrated ownership environment: new evidence from the Italian stock market

This paper feeds the literature about investors’ reaction to the release of going concern modified audit reports, which is abundant and controversial among scholars. Moving a step beyond the solely detection of abnormal stock returns at and around the event date, as done in the only two previous studies on the Italian setting, we perform an OLS multiple regression to test the informativeness of CARs and the influence of variables as selected firms’ accounts, auditor characteristics, the market capitalization and specific measures of financial distress to gather evidence whether investors react adversely to elements different from going concern modifications (GCMs). Based on our findings, investors react negatively to GCMs attached to qualified opinions and, surprisingly, positively to GCMs attached to clean opinions, reversing the prevailing evidence found out in the literature, especially in the USA. We attribute these results to the rough knowledge of Italian naïve investors of the going concern (GC) issue. The study detects how disclosure features conceived for large equity markets can lead to different investors’ behaviours in small ones on the one hand; on the other hand, it cannot lead to unequivocable generalization, even within similar countries, in light of sub-specific country features. The piece of evidence achieved suggests, for further research, to make an investors categorization to analyse market reactions, which takes more into account three main features stressed by the prevailing literature of small equity markets: high ownership concentration, the higher presence of institutional investors and the poorer reputation of BIG4 auditors.

Ownership Concentration, CEO’s Technical Background and Enterprise Innovation

From the perspective of enterprise innovation, this paper studies whether companies with higher ownership concentration are willing to hire a technology CEO. This paper studies the relationship between ownership concentration, CEO’s technical background, and enterprise innovation by taking private listed companies on small and medium-sized boards in Shenzhen Stock Market from 2011 to 2019 as research samples. The results show that CEO’s technical background promotes enterprise innovation. However, enterprises with higher ownership concentration are more willing to hire a non-technology CEO. Ownership concentration not only directly hinders enterprise innovation, but also indirectly hinders enterprise innovation by hindering the selection and recruitment of technical CEOs. Further research shows that under the condition of shareholding, technology CEOs significantly promote enterprise innovation, while under the condition of non-shareholding, technology CEOs have no significant impact on enterprise innovation. Without serving as chairmen, technical CEOs significantly promotes enterprise innovation, while serving as chairmen, technical CEOs have no significant impact on enterprise innovation. However, in the samples with high ownership concentration, there are significantly more companies where CEO serves as chairman and significantly fewer companies where CEO holds shares, which indicates that companies with high ownership concentration do not actively implement innovation incentive measures for CEOs. This study provides an important basis for Chinese private small and medium-sized enterprises to make innovative decisions in major shareholder governance and general manager selection.

Ownership concentration and cost of equity in Pakistan: the moderating role of disclosure and governance quality

PurposeThe purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.Design/methodology/approachData are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.FindingsThe study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.Practical implicationsThe findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.Originality/valueThe novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.

Systemic risk in European banks: Does ownership structure matter?

We empirically test whether ownership concentration explains the cross-variation in systemic risk contribution for a sample of European banks over the 2004–2021 period and how this effect may vary depending on the category of the largest controlling shareholder. We explore two potential contagion channels: the risk-taking incentives and banks’ assets commonality. The results show that higher ownership concentration is associated with greater banks’ systemic risk contribution. Moreover, we find that banks’ systemic risk contribution is even stronger for banks where institutional investors or States are the largest controlling owners. Overall, our findings contribute to the literature examining the determinants of banks’ systemic risk in particular and financial stability as a whole and have several policy implications.