Insider Ownership Research Articles

CORPORATE OWNERSHIP STRUCTURE AND INVESTORS’ CONFIDENCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

This paper investigates the effect of corporate ownership structure on investors’ confidence of listeddeposit money banks in Nigeria. The study adopted correlational research design using panel datacollected from annual reports and accounts of 14 deposit money banks in Nigeria that form thewhole population of the study for the period of 10 years (2010-2019). Descriptive statistics was usedto analyze data in order to provide summary statistics for the variables. Pearson’s correlationtechnique was employed in order to analyze and ascertain the extent of the relationship between thedependent and independent variables. The fixed effect regression results revealed that institutionalinvestors have a positive and significant relationship with investors’ confidence. The result furthershows that insider and block ownership has a negative and statistically significant relationship withinvestors’ confidence. And on the contrary foreign ownership has no significant relationship hencedid not play any role in influencing investors’ confidence of listed deposit money banks in Nigeria.Based on the findings, the study recommends managers of listed deposit money banks in Nigeriashould give more room to institutional investors to own more shares so that the higher their interest,the more they will be willing to monitor the activities of the firms. This will enable investors to havemore confidence in the firms. Insider ownership should be monitored and reduced by the Securitiesand Exchange Commission; this will prevent insiders from owning a substantial amount of equitywhich give them the freedom to act in their best interests at the detriment of other shareholders. Thestudy further recommends managers of listed deposit money banks should ensure that their firmsdesist from higher levels of block holder ownerships in order to reduce ownership concentration.

Cheap-stock tunneling in US rights offerings: empirical evidence and policy implications

This paper is the first paper to comprehensively analyze the impact of disclosure of commitments by insiders to participate in rights offerings in the US. Fried and Spamann (2020) have shown theoretically that such disclosures could help minority shareholders overcome information asymmetries by allowing them to mimic the participation decisions of insiders. This paper finds empirical evidence that these disclosures are not always sufficient to facilitate mimicking. The lack of transferable subscription rights and the presence of private benefits are associated with increases in insider ownership, which suggests that these features are barriers to mimicking. The paper also finds evidence of positive abnormal stock returns around the announcement of insider participation in rights offerings, which suggests that this signals asymmetric information to the market. Together, this is evidence that cheap-stock tunneling may occur in US rights offerings.

Board Reforms around the World: The Effect on Corporate Social Responsibility

This study examines the effects of major board reforms on firms’ corporate social responsibility (CSR) performance in countries around the world. Using a difference-in-differences design, we find robust evidence that worldwide board reforms can have significant effects on various stakeholders, resulting in increased firm CSR performance in both the environmental and social dimensions. Relative to countries that have implemented comply-or-explain reforms, countries with rule-based reforms tend to drive the increase in CSR performance post-reform. In addition, the effect of reforms on CSR performance is more pronounced for firms with higher levels of institutional ownership or lower levels of insider ownership and in countries with weaker CSR awareness and more stringent legal and regulatory environments. Further analyses show that reforms strengthen the relationship between CSR performance and future financial performance. Finally, we explore the possible mechanism through which board reforms could have a significant effect on firms’ CSR performance. We find that board reforms increase a firm’s likelihood of integrating CSR criteria in executive compensation.

Delaware’s Dominance, Wyoming’s Dare. New Challenges, Same Outcome?

Despite an increased criticism, Delaware’s dominance has not been experiencing a significant decline: as of today, 67.8% of Fortune 500 companies are still incorporated in this jurisdiction. Nevada is known as Delaware’s most important competitor, with an aggressive strategy that overrode the effort of any other jurisdiction. Yet, its success has been limited to a specific market segment: small firms with low institutional shareholding and high insider ownership. Scholars suggest several explanations for both the rise and the staying power of Delaware. These explanations are essentially subsumed under the credible commitment theory and the network theory. According to the former, investors rely upon Delaware commitment towards the business community; whilst the latter emphasises how Delaware is profiting from the position achieved. The credible commitment theory and the network theory sometimes overlap and combine. Both predict that Delaware is hard to dethrone. In recent years, commentators have argued that this hegemony might be endangered by two different threats: the migration of cases induced by Delaware courts’ response to overlitigation; and the invasive growth of federal regulation—in particular, the possible introduction of a federal incorporation. Yet, criticism and predictions on Delaware’s decline are recurring and always follow the same pattern. Unsurprisingly, the migration turned out to be marginal; and the debate on a federal incorporation was revived in conjunction with a political campaign but fizzled out afterwards. I contend that a mounting challenge to Delaware’s dominance is mostly going off the radar. Wyoming is targeting a new segment of the market for corporate charters: i.e., cryptocurrency businesses. This jurisdiction is attempting to attract these incorporators by enacting liberal legislation and providing their companies with a safe harbour. Wyoming’s aggressive stance provides the motivation to canvass causes and consequences, criticism and challenges to Delaware’s dominance. The investigation might generate insights as to why Wyoming’s strategy will succeed or fail. In fact, this market segmentation approach is the same tactic that Nevada adopted, though Wyoming is applying the strategy to a sector that has meaningful growth potential and is pushing it to the point of introducing exemptions to state securities laws and banking regulation. The application of the credible commitment theory and of the network theory to Wyoming’s approach suggests that the strategy of building a reputation and proving a commitment to tech-incorporators is correct but is also conditioned upon a confluence of events which also needs time. Wyoming should develop an expertise that is too costly to be easily replicated by other jurisdictions and earn a share of the charters market before federal legislature and regulatory bodies pre-empts Wyoming’s law for cryptocurrencies. To the extent that Wyoming’s strategy proves to be effective, it will gain this jurisdiction the lead only in the blockchain segment of the market, whilst Delaware will continue to dominate the rest of it. In light of all this, Wyoming’s approach might be a dare. Yet, it is also the most promising—maybe the only possible—strategy to challenge Delaware’s dominance at the present time. (27(1) Fordham Journal of Corporate & Financial Law forthcoming 2021) See also https://www.law.ox.ac.uk/business-law-blog/blog/2021/03/delawares-dominance-wyomings-dare-blockchain-companies-and-market

Do managers seek control and entrenchment?

A unique dataset of post-IPO thrifts with heterogeneous initial insider ownership allows us to use revealed preferences to determine the level of ownership insiders believe to be optimal. We find strong evidence that insider ownership converges to the 20% to 30% range, whether insiders begin with diffuse or concentrated ownership. This range of ownership has been found consistent with entrenchment and control in the literature. Our results are robust to a battery of variables related to insider ownership such as moral hazard, adverse selection, market timing, insider characteristics, and firm characteristics. Furthermore, we find that managers with diffuse ownership accumulate shares most aggressively during the period of regulatory anti-takeover protection, consistent with an entrenchment motive. We find that managers with above-average pay are more likely to seek higher ownership, consistent with the existence of private benefits of control. Finally, we find that insider ownership determines equity issuance, leverage, and share liquidity in ways consistent with expected accumulation or reduction in insider ownership for control purposes.

Corporate Governance Determinants of Financial Restatements: A Meta-Analysis

This paper conducts a meta-analysis of 182 published archival accounting and auditing studies on the corporate governance determinants of financial restatements. We aim to provide a focused and systematic examination of various internal and external corporate governance factors that may predict financial restatements. We do so by aggregating results statistically across individual studies and correcting statistical artifacts, thereby we provide findings that are much more precise than those of narrative reviews. We categorize the chosen governance variables into (a) audit firm and audit engagement characteristics; (b) gender, board attributes, and audit committee attributes; (c) CEO related attributes; (d) ownership structure variables; and (e) external corporate governance variables, and thus we generate a total of 37 separate corporate governance variables. Our results reveal that the governance mechanisms of Big N auditor choice, types, and timeliness of audit opinions and board independence are significantly and negatively associated with the occurrence of financial restatements. However, economic bonding between auditors and their clients, insider ownership, and firm complexity all increase the likelihood of restatements significantly. We hope that our findings will make a meaningful contribution to the literature on financial restatements and corporate governance by providing insights for regulators on the governance mechanisms that may require further scrutiny in combating the occurrence of financial restatements.

Arrests and indictments of corporate insiders, ownership structure, and corporate governance: Evidence from Korea

AbstractWe find evidence that higher insider ownership is significantly associated with lower incidences of insider arrests and indictments in the Korean stock market for the period of 2000 through 2015. This evidence is robust to different measures of insider ownership: Cash flow rights, control rights, wedge, and managerial ownership. Our findings are consistent with the view that the larger ownership combined with longer tenure of corporate insiders, while potentially entrenching insiders, extend the time horizon of these insiders so that they have stronger incentives to minimize the incidences of severe and serious corporate crimes, as reflected in insider arrests and indictments, that can substantially harm long‐term firm value.

Premiums and Stock Price Responses in Equity-Stake Purchase Deals in Korea’s Stock Market

In this study, we examine a sample of 160 equity-stake purchase deals between companies listed on Korea’s stock market during 2009~2017. The sample comprises deals in which acquiring firms buy at least 5% of the target’s common stock but excludes mergers or acquisitions of the target’s entire equity. The deal premium is measured by the difference between the deal price and the target’s share price a day or a week before the deal’s announcement. We find that although the deal premium tends to increase with the size of the equity stake in the target, it is negative in about half of the sample and its median value is close to zero. Moreover, the deal premium is positively associated with the won value of the deal size relative to acquiring firms’ assets but negatively associated with their quality (measured by operating profitability) and size of insider ownership. We also analyze stock price responses to deal announcements. For acquiring firms, the mean cumulative abnormal return over (-2, 2) (i.e., CAR (-2, 2)) is not statistically significant but CAR (-2, 2) increases with deal premium and the target’s operating performance. For target firms, the mean CAR (-2, 2) is significantly positive (approximately 1.6%) but we cannot identify factors that are systematically associated with their CAR (-2, 2).

Real effects of share repurchases legalization on corporate behaviors

We use staggered share repurchases legalization from 1985 to 2010 across the world to examine its impact on corporate behaviors. We find that share-repurchasing firms do not cut dividends as a substitution. The cash for repurchasing shares comes more from internal cash than external debt issuance, leading to reductions in capital expenditures and R&D expenses. While this strategy boosts stock prices, it results in lower long-run Tobin's Q, profitability, growth, and innovation, accompanied by lower insider ownership. Tax benefits and paying out temporary earnings are two primary reasons that firms repurchase.

Approaches to Control Mechanisms and Their Implications for Companies ’ Profitability: a Study in UAE

This study tries to evaluate and test the role of control mechanisms represented by foreign ownership and insider ownership on companies’ profitability in the listed companies in the UAE and whether independent variables are matter in determining the profitability of such companies. This study utilized companies belong to non-financial sector for the year of 2019 with a sample of 50 companies to be analyzed in the current study. To test the independent and dependent variables, regression analysis was used via using SPSS. The findings show that insider ownership has insignificant impact on companies’ profitability On the other hand, the findings revealed evidence to support the effect of foreign ownership on companies’ profitability. Moreover, there is insignificant evidence reflected the fact that companies’ size has insignificant impact on companies’ profitability. This study added further evidence in Dubai context where there is a rare and unique studies that have been done in this important context. It takes in tits account to investigate both insider and foreign ownership and their impact companies’ profitability

Do country-level legal, corporate governance, and cultural characteristics influence the relationship between insider ownership and dividend policy?

We explore how the effects of the change in insider ownership concentration on the dividend policy in different legal, corporate governance, and cultural environments in Asian countries. The severity of agency problems of controlling insiders and outside investors in Asian countries provides a unique circumstance for exploring this issue. Unlike previous findings, we find an inverse U-shaped relation between insider ownership and dividend payouts in Asian countries. Second, we note that Asian firms in common law countries pay higher dividends compared with Asian firms in civil law countries. We further find that countries with more robust corporate governance structure have higher dividend payouts, and there is an inverse U-shaped relation between insider ownership and dividend payouts in Asian countries with more robust corporate governance. Finally, we also find cultural dimension measures play an essential role in payout policy.

PENGARUH CORPORATE GOVERNANCE TERHADAP KINERJA PERUSAHAAN MANUFAKTUR

Introduction: This study aims to determine the effect of insider ownership, audit committees, leverage, firm size, the number of independent commissioner on the performance of manufacturing firms in the Indonesian stock exchange. Methods: The type of data used in this research is quantitative data. This study uses a tool to answer the hypothesis in the form of multiple linear regression. The number of samples taken by the sampling technique as many as 50 companies listed in Indonesia Stock Exchange. Results: From the test results indicate that there is insider ownership, audit committees, leverage significant positive effect on the performance of manufacturing companies in Indonesia Stock Exchange. firm size and the number of independent commissioners no significant positive effect on the performance of manufacturing companies in Indonesia Stock Exchange. Conclusion and suggestion: The implication of these findings is that insider ownership, audit committees, and leverage it will be able to produce a good performance. Although firm size and the number of independent commissioners has no effect, but still must be considered, because if the firm size and the number of independent commissioners are not in accordance with the provisions of SFAS may result in the presence of certain interests that are not in accordance with the company's goals.

FAKTOR-FAKTOR PENENTU KEBIJAKAN DEVIDEN PADA PERUSAHAAN YANG TERINDEKS SAHAM SYARIAH INDONESIA

This research aims to investigate the influence of managerial ownership, profitability and investment opportunity set on dividend payout ratio for the companies that listed in the Indonesia Islamic Stock Index. The proxies consist are the level of insider ownership, return on equity, the market value equity to book value equity, and dividend payout ratio. The data are gained from the 260 financial statement of 52 companies that listed in the Indonesia Islamic Stock Index from period 2012 to 2016. The results showed that simultaneously the insider ownership, return on equity, and investment opportunities set have significant influence on the dividend payout ratio. In partially, the result showed that only investment opportunity set has a significant negative influence on the dividend payout ratio.Peneliti

Examining Managerial Misbehavior in Asian Banks through Loan Loss Provisions*☆

AbstractThis paper reviews the impact of corporate ownership concentration, insider ownership, and the development of regulatory and financial systems on the opportunistic behavior of managers to alter financial reporting. By using the panel data technique with a sample of banks from 25 Asian countries, the major findings indicate that ownership concentration as well as insider ownership positively impact the banks’ accrual‐based earnings management. Results also reveal that an improvement in regulatory and financial systems restricts executives’ capacity to manage earnings. Islamic banking and IFRS adoption reduce the manipulation of earnings. Policy implications from the results are also discussed.

CORPORATE GOVERNANCE , DEBT POLICY AND PROFITABILITY RELATIONSHIP

This study examines the relationship of Corporate Governance with Debt Policy, and Profitability, especially in corporate that conduct IPOs on the Indonesia Stock Exchange for the 2018-2019 period. Corporate Governance uses proxies of the Board of Commissioners, Independent Commissioners, Institutional Investors, and Insider Ownership which is predicted to affect Debt Policy and Profitability Using a purposive sampling technique, obtained 108 samples, the analyst uses multiple regression with the IBM SPSS 23 program. The findings show that Insider Ownership and the Board of Commissioners have a positive effect on profitability, Institutional Investors and Independent Commissioners are not proven to affect profitability. Corporate governance variables that are proven to influence Debt Policy are Insider Ownership, Institutional Investors, and Independent Commissioners.

VALUE OF THE FIRM: INFLATION AND ROLE OF DIVIDEND DECISION MEDIATION

The objective of this study was to determine the effect of leverage, insider ownership, investment opportunity set (IOS) and inflation on dividend decision. Besides, to prove the effect of leverage, insider ownership, investment opportunity set (IOS) and inflation on firm value through the role of dividend decision mediation and to determine the direct effect of dividend policy on a value of the firm in the consumer goods industry sector. The population is companies in the consumer goods industry sector listed on the IDX during the period 2010-2018. The sampling method uses purposive sampling technique — the total sample of 38 companies using 342-panel data. The analytical method used is path analysis. The results showed that insider ownership and investment opportunity set (IOS) significantly influence dividend decision. However, leverage and inflation do not affect the dividend decision. Also, insider ownership and inflation have a significant effect on the value of the firm, but leverage and investment opportunity sets (IOS) do not affect. Dividend decision affects the value of the firm; besides, dividend decision is proven to significantly play a role in mediating the influence of insider ownership and investment opportunity sets (IOS) on the value of the firm.

PENGARUH PROFITABILITAS, STRUKTUR KEPEMILIKAN DAN REPUTASI KAP TERHADAP NILAI PERUSAHAAN (Studi Kasus Perusahaan Kimia di Bursa Efek Indonesia Tahun 2013 – 2017)

This study aims to analyze the effect of profitability on firm value, analyze the influence of inside ownership on firm value, analyze the influence of institutional holdings on firm value, and analyze the influence of KAP reputation on firm value in chemical companies listed on the Indonesia Stock Exchange in 2013-2017. This research is quantitative research. Where the data obtained is in the form of numbers which are then processed and analyzed to get an overview and relationship between the variables used. Data analysis used in this study is multiple linear regression analysis using SPSS as a tool. The results of this study indicate that there is a positive and significant effect on profitability on firm value, there is a positive and significant influence on the ownership of firm value, there is a positive and significant influence of institutional holdings on firm value, and there is a positive and significant influence on the firm's KAP reputation.

Ownership structure and demand for independent directors: evidence from an emerging market

PurposeIn this study, we examine how ownership structure affects the use of independent directors in Vietnam – an emerging stock market.Design/methodology/approachWe develop logit and tobit regression models to investigate the effects of ownership structure on the propensity to use independent directors and the number of independent directors on the board, respectively. Insider ownership and the use of independent directors are proposed to have a non-linear relationship.FindingsWith a sample of 1,318 observations collected from 192 listed firms over the period from 2008 to 2017, we find that insider ownership and independent director appointment have a U-shaped relationship. It is positive when insiders hold a small proportion of shares, and turns out to be negative when insiders hold a large percentage of shares. In addition, both state ownership and foreign ownership are negatively related to firm decisions of appointing independent directors.Practical implicationsOur findings imply that minority shareholders should have appropriate actions to reduce agency costs and protect their own interests. In addition, policymakers should improve the effectiveness of corporate governance legislation to increase the presence of independent directors in order to protect minority shareholders. Moreover, government agencies also need to increase the number of independent directors in state-controlled firms as a means to improve their corporate governance. Foreign investors may be a substitute for independent directors; therefore, firms without independent directors are able to improve their corporate governance by attracting foreign investors.Originality/valueWhile the extant literature shows that independent directors can help firms decrease agency costs of equity in financial decisions and performance, there are relatively few studies investigating corporate decisions to use independent directors. This paper contributes to the literature of corporate governance mechanisms through independent directors in emerging markets.

INSIDER OWNERSHIP, FREE CASH FLOW, DAN PERTUMBUHAN TERHADAP DIVIDEND PAYOUT RATIO

Dividend alongside capital gain is a return for stock holder. The aim of this study is to determine the condition of insider ownership, free cash flow, growth and dividend payout ratio, and to determine their effect of insider ownership, free cash flow and growth simultaneously and partially on dividend payout ratio. The population were mining companies sector listed in Indonesia Stock Exchange in the period of 2010-2017. The sample of this study is amounted to 4 companies with the amount of observations were 32. The method used were descriptive and verificative using panel data regression. The results showed that simultaneously insider ownership, free cash flow and growth has significant effect on dividend payout ratio with contribution of effect 68.19%. Partially, insider ownership has a significant positive effect, free cash flow and growth have significant negative effect on dividend payout ratio.

The impact of ownership structure on the cost of equity in emerging markets

PurposeThe purpose of this study is to cover the ownership structure as (institutional ownership and managerial ownership) influencing the cost of equity in emerging markets.Design/methodology/approachThe authors applied the regression model with the fixed-effect model in the data. Data collected from listed companies in the Iraq-Iran Stock Exchange during 2012-2017.FindingsThe authors found a significant positive associated between institutional ownership and the cost of equity in the Iranian and Iraqi contexts. The results also reveal a significant negative associated between managerial ownership with the cost of equity in the Iranian and Iraqi contexts. This means that when managerial ownership is increased, the cost of equity will be reduced. These results support the role of inside ownership to enhance fixed performance by reducing the cost of equity. So, managerial ownership can be a substitute for all shareholders. Moreover, the results indicate a similarity in the impact of the ownership structure on the cost of equity in the Iraqi and Iranian context, this means the similar elements among west Asian countries.Research limitations/implicationsFinancial companies such as banks and investment companies were not listed due to the difference in the nature of their work with the other sectors in the Iranian and Iraqi stock exchanges. Moreover, the authors are heavily constrained as listed companies must continue during the study period to calculate the cost of equity. Therefore, the results are difficult to generalize widely.Practical implicationsThis international study will enable investors in, as well as local and international investors to take the appropriate investment decision-making in the capital markets in these countries (Iraq and Iran). Moreover, it contributes significantly to helping corporate governance bloggers in Iraq and Iran understand the role of the ownership structure in corporate governance.Originality/valueThis is the first study of the interaction between institutional ownership, managerial ownership with the cost of equity in Iraq, the study will help complete the knowledge gap with developed markets. The results are important in future research because the authors believe that it is very important for the future to look at better for percentage levels of institutional and managerial ownership in the company ownership. Although the contribution is limited, it will provide a useful guide for more papers in other west Asian countries.