Interests Of Minority Shareholders Research Articles

Immovable Castles, Movable Companies and the Real Seat Criterion in Troubles (Edil Work, C-276/22)

With Edil Work C-276/22, a decision of 25 April 2024, the Court of Justice of the European Union has solved questions concerning the freedom of establishment of companies incorporated in a certain Member State but operating exclusively in another Member State. The Court holds that the Member State of operation may not require concurrent or exclusive application of its company law, other than in cases where overriding mandatory provisions are at stake, such as for example rules protecting interests of creditors, workers, and minority shareholders.

How Do Female Directors Moderate the Effect of Family Control on Firm Value and Leverage? Evidence from Indonesia

Corporate governance is enriched by the existence of female directors. Their presence adds value to corporate governance by incorporating different perspectives and experiences. Female directors play an important role in preventing corporate harm, daring to ask critical questions and controlling conflict among various stakeholders. This study aimed to explore the effect of family control (FC) in stimulating leverage and firm value and assess the moderating role of female directors between FC on leverage and firm value. The sample was collected from the Indonesian Stock Exchange of 1,171 data observations-years (2019–2021 period) of companies listed. This research also used a linear regression model to analyse the purpose of hypotheses. The findings of this study indicate that female directors do not moderate the relationship between FC on leverage and firm value. The results prove the opposite of the assumption that the presence of female directors can harmonise and balance the interests of majority and minority shareholders. Finally, this article also contributes to the literature by developing the moderating role of female directors.

The practice of applying the squeeze-out procedure and its impact on the introduction of escrow accounts as a new type of bank accounts in Ukraine

The article deals with the peculiarities of the squeeze-out procedure in Ukraine within the framework of European integration and implementation of European corporate governance standards. The author analyzes the positions of European courts on the legality and constitutionality of the squeeze-out procedure in the context of violation of minority shareholders’ property rights. The author ivestigates the grounds for declaring squeeze-out unconstitutional in Georgia, in particular, the procedure for determining the price of shares, that resulted in an imbalance of interests of the participants in the procedure. Taking into account the Court’s position, a new entity was involved in the process of share buyback – a court which, upon the application of the majority shareholder, appoints an independent expert or a brokerage company to price the shares and fixes the price of shares and the date of their compulsory buyback in its decision. It is found out that the main interests of a majority shareholder in the squeeze-out procedure are to reduce administrative costs of holding a general meeting, to get rid of passive shareholders and to minimise opposition from minority shareholders, and to avoid free-ridering. At the same time, the interests of minority shareholders in the implementation of this mechanism are to obtain favourable terms from the sale of the shareholding. It is found out that most of the lawsuits of minority shareholders in Ukraine were related to the underpricing of alienated shares. The method of determining the price of shares was to establish the market value of the company’s shares by a valuation entity. However, due to the lack of effective regulatory framework for this procedure, such a price often did not meet the fairness criterion. The author examines the position of the Commercial Court of Cassation as part of the Supreme Court of 2022 regarding the understanding of the fair price of shares, which means not a specific amount of money (value), but compliance by the issuer (supervisory board) with the procedure for determining the market value of shares provided for by law. The author analyzes the implementation of an escrow account contract into the legislation of Ukraine. The author clarifies the procedure for paying the price of shares to minority shareholders by transferring funds to the bank where the claimant has opened an escrow account in accordance with the Law of Ukraine “On Joint Stock Companies”.

A Study of Controlling Shareholds' Tunneling Behavior

Since the establishment of the Shanghai Stock Exchange and the Shenzhen Stock Exchange in the 1990s, China's capital market has emerged. Over the years, the domestic capital market has achieved certain results, but negative phenomena have gradually emerged, and the problem of tunneling is one of the representative issues. A concentrated ownership structure is prone to breed tunneling behavior, which results in a decrease in company value, damage to the interests of minority shareholders, and a reduction in market efficiency. This paper, through the study of relevant literature, summarized the behaviors of controlling shareholders' asset-stripping companies that harmed people's interests, listed different methods used by controlling shareholders for asset stripping, explored the causes of controlling shareholders' asset-stripping behavior, and examined the consequences of controlling shareholders' asset stripping methods.

Principles of Good Corporate Governance in Conflict of Interest Transactions between Public PT and Minority Shareholders

The research entitled Good Corporate Governance Principles in Conflict of Interest Transactions Between Public Limited Companies and Minority Shareholders aims first to know and understand and analyze the arrangements related to the implementation of good corporate governance principles towards minority shareholders. Second, to know, understand and analyze conflict of interest transactions that occur between publicly listed public limited companies and minority shareholders. The research method used in this thesis uses Normative research methods which are library research, namely research on laws and regulations and literature related to the material discussed. Based on the research results, it can be concluded First: the principles of good corporate governance in conflict of interest transactions between publicly listed public limited companies and minority shareholders. Decisions in the GMS made by the majority are not entirely fair to minority shareholders. Conflicts of interest that occur in the Company are often detrimental to the interests of minority shareholders. Second: shareholder protection is still not properly implemented by the board of directors because it violates the principles of fiduciary duty and statutory duty. This can be seen from the violation of the rights of minority shareholders, namely the failure to conduct an assessment, the failure to disclose information and the failure to hold an Independent GMS. On the other hand, OJK through its authority has protected the interests of minority shareholders by imposing administrative fines.

Does parenting daughters increase corporate cash dividends? Evidence from Chinese family firms

Research in the social sciences has shown that interactions with biological daughters are potent catalysts for instilling and nourishing parents' social values, preferences, and behaviors. Drawn on the female socialization hypothesis, we investigate the impact of ultimate controlling owners’ offspring gender on corporate dividend policy. Based on data from Chinese family-owned listed companies, our empirical results document a “daughter effect” in cash dividends. That is, ultimate controlling owners shaped by daughters are more altruistic and less likely to exploit the interests of minority shareholders, which leads to more dividend activities. The results remain robust when considering endogeneity. Moreover, the “daughter effect” is more pronounced when the ultimate controlling owner is male, has a higher education background, and has been influenced by the daughter for a longer time. This paper contributes to the growing literature on female socialization and the determinants of dividend payments.

Protection of the Minority Shareholders in Company Law Regime

This comprehensive article explores the critical role of minority shareholders and the legal frameworks and mechanisms established to protect the interests and rights of minority shareholders within the realm of company law and corporate governance. Minority shareholders, despite their smaller ownership stakes, hold a substantial influence in maintaining the equilibrium of power, ethical conduct, and financial integrity within the corporations. The safeguarding and empowerment of minority shareholders within the expansive domain of company law are not just legal obligations but also the basic ethical principle of corporate governance. This article engages in an exploration of the complex mechanisms and prosperous legal provisions designed to ensure the protection, participation, and prosperity of minority shareholders within the vast realm of company law and it also into understanding the role of minority shareholders as guardians of corporate democracy provides a foundation for appreciating their influence in the corporate world. The Minority Shareholders are not just shareholders but they are also the advocates for ethical conduct, transparency, and accountability of the Company. The neglect of the protection of the minority shareholders within a company can result in a range of adverse consequences, and the article explores the negative effects of not safeguarding the rights and interests of minority shareholders, including the erosion of trust and confidence, reduced investment, and diminished market value. The article highlights the paramount significance of these safeguards, examines the complexities of regulatory architecture, navigates potential challenges, and provides an exhaustive understanding of the comprehensive and evolving protection, rights, and opportunities extended to the minority shareholders in modern corporate governance.

Pengaruh Komponen Good Corporate Governance Pada Nilai Perusahaan

Good corporate governance appears to control behavior and resolve conflicts between parties within the company. This study aims to determine the effect of good corporate governance components on firm value. This study examines 88 companies listed twice a year in the SRI-KEHATI Index in 2019-2022. The components of good corporate governance in this study are proxied by managerial ownership, institutional ownership, independent commissioner composition, and board size. This study uses firm size as a control variable. 
 The analysis technique used is multiple linear regression analysis. The results of the analysis show that managerial ownership, institutional ownership, and board size have a positive and insignificant effect (95 percent confidence level) on firm value while the composition of independent commissioners has a significant positive effect on firm value. The implication of this research is that companies with a high composition of independent commissioners indicate that independent commissioners supervise and coordinate well in maintaining a balance between the interests of majority and minority shareholders so that it has an impact on increasing firm value.

A Comparative Study of Fiduciary Duty Examination Systems in Corporate Decision-Making

In recent years, China has witnessed a surge in corporate governance irregularities both internally and externally. Terms like "financial scandals" have frequently trended, drawing high attention from the general public and causing significant damage to China's financing environment. Even though there are complex regulations in place, there are still speculators who, under the guise of legal decision-making processes, act dishonestly, making it difficult to prevent. Perhaps we should consider introducing a fiduciary duty system and learning from the legal systems of the United States and the United Kingdom to protect the interests of small and minority shareholders. In the state of Delaware, often referred to as the world's corporate capital, a shareholder lawsuit involving "the world's richest person," Elon Musk, and his prideful Tesla company unfolded in the Delaware Chancery Court. It immediately attracted the attention of business owners, investors, and corporate legal scholars from across the United States and the world. Since Tesla officially announced the acquisition of Musk's affiliated enterprise in 2016, SolarCity, founded by his cousins, a protracted legal battle initiated by a substantial group of plaintiffs lasted for over five years, finally coming to an end in early 2022 with Musk's victory. This enduring lawsuit, centered around whether Musk violated his fiduciary duties to minority shareholders under Delaware corporate law, with its lengthy process, complex evidence, and the judge's astute rulings, has provided us with insights into the examination logic and techniques applied by top-tier corporate law regarding fiduciary duties. This holds significant guiding significance for the subsequent amendments and practices of China's Company Law.

Research on the Legal Review Standard of Anti-hostile Takeover by Listed Companies

With the acquisition and merger of various companies in the international economic market becoming more and more common, the phenomenon of hostile takeover in order to obtain the interests and competitiveness of the company is also more and more, the target company to prevent hostile takeover also created a lot of anti-hostile takeover measures. The legal regulations of anti-hostile takeover are different in different countries, but the types of anti-hostile takeover events are rich, so that the current legal regulations are not perfect, the legality premise of anti-hostile takeover cannot be effectively guaranteed, and the legality of anti-hostile takeover cannot be effectively reviewed. Therefore, this paper will use research method, case analysis method and summary method to solve the problem that the current legal review standard is relatively vague and insufficient. It holds that a more reasonable legal review standard of anti-hostile takeover should be established by establishing relevant legal principles, reasonably distributing the decision-making rights of shareholders and the board of directors, confirming the rights and obligations of the decision makers of anti-hostile takeover, and protecting the interests of minority shareholders and employees.

Protection of interests of minority shareholders in the case of the delisting of a company in the light of regulations binding in Europe

Protection of interests of minority shareholders in the case of the delisting of a company in the light of regulations binding in Europe

Can minority shareholders’ “hand-voting” promote green innovation of Enterprises—Empirical evidence from Chinese listed companies

China’s listed companies have serious Principal-agent problem of the second kind. Large shareholders have violated the rights and interests of minority shareholders in an endless stream of cases. However, the voice of encouraging minority shareholders to actively participate in enterprise decision-making is growing day-by-day. However, there is no consensus on whether the enthusiasm of minority shareholders in decision-making can have a positive impact on enterprises. Therefore, this article takes China’s A-share listed companies from 2016 to 2020 as the research sample, and from the perspective of green innovation, discusses whether the minority shareholders’ active participation in enterprise decision-making can improve the level of green innovation of enterprises. The study found that the minority shareholders’ active participation in enterprise decision-making can improve the level of green innovation. Moreover, the minority shareholders’ “hand voting” improves the green innovation level of enterprises by influencing the media attention; A higher level of legal environment is conducive to strengthening the role of minority shareholders’ participation in the shareholders’ meeting in green innovation. Based on the property right nature, regional and industrial level, further research found that the minority share-holders’ role in improving green innovation capacity is more significant in non-state-owned enterprises, eastern regions and heavy pollution industries. The research results show that minority shareholders, as an important force to monitor the senior executives’ behavior and enhance corporate value, actively participate in corporate decision-making, can not only improve corporate governance, but also benefit the sustainable development of enterprises.

Oppression and Mismanagement the Notion of Rule of Majority

The Prevention of Oppression and Mismanagement1 is a fundamental clause in the Companies Act that seeks to protect the interests of minority shareholders and prohibits firm management from abusing authority. However, although being a major clause of the Companies Act2, oppression and mismanagement3 are not defined. Because the meaning of mismanagement or oppression prevention might be broad, these phrases must be construed based on the facts of each instance. However, if we try to define Mismanagement, it relates to practises that violate the Memorandum of Association, Articles of Association, or other legislative rules, resulting in mismanagement inside the organisation. This provision empowers shareholders to sue the company’s management or majority owners in court if they think their rights are being violated or the business is being mishandled. The purpose of this article is to examine the portions of the Companies Act’s Prevention of Oppression and Mismanagement Act4, which is found in Chapter XVI of the Companies Act5, and contains its purposes, scope, and implementation as found in sections 241 to 246. It discusses the many behaviours that may constitute oppression and mismanagement, as well as how minority shareholders can seek redress through the legal system. The study also highlights the role of the Company Law Board and the National Company Law Tribunal6 in resolving oppression and mismanagement issues, as well as other particular directives such as A member’s shares or interest are purchased by another member, resulting in a capital decrease. Transfer/allotment of shares is restricted. Contracts between the company and the MD, or any other director or administration, may be cancelled or set aside as the tribunal thinks necessary. Any further agreements between the firm and anyone other than those stated above shall be dissolved. Only with proper notification and the approval of the affected party may the agreement be cancelled. Putting aside any transfer/delivery/payment/execution or other act pertaining to property made by or against the corporation during a period of three months of the date of the request under this section, which would be constituted fraudulent preference if done by or against the individual.7 Overall, this paper provides a thorough examination of the Companies Act’s Prevention of Oppression and Mismanagement provision and its significance in protecting minority shareholders’ interests and encouraging effective corporate governance.

Financial and Internal Control Compliance Supervision of Listed Companies from the Perspective of Independent Directors

With the increasing regulatory requirements for listed companies in the securities market and investors' increasing attention to the compliance of listed companies, independent directors of listed companies are also facing higher performance requirements to better play the role of supervising the board of directors of listed companies as an independent third party, making suggestions on the management of listed companies and protecting the interests of minority shareholders. Independent directors have a systematic theory of financial and internal control and a wealth of practical experience, which undoubtedly provides a great gain for them to perform their duties effectively. From the perspective of independent directors, this paper analyzes the sources of financial and internal control compliance risks of listed companies, points out the focus of independent directors' attention on financial statements and internal control compliance and puts forward that the independent investigation mechanism is an effective scheme for independent directors to supervise the compliance of listed companies and prevent risks, which provides a practical reference for independent directors to perform their duties with high quality.

Improvement of corporate governance as a result of capital market development and improvement of the legal and regulatory environment in the Republic of Serbia

The framework of corporate governance in the Republic of Serbia is determined by relevant laws and by-laws. Today's regulations are on the trail of targeted European standards, and a bigger problem is manifested in their application than in the quality of individual legal solutions. With the primary goals of enhancing transparency and defending the interests of minority shareholders, pertinent legal measures have recently implemented additional requirements for public corporations as well as majority owners. The issue at hand is how much public company managers believe the legal and regulatory environment has improved corporate governance. On the other hand, the domestic capital market continued to flourish without receiving the crucial attention of the political and economic authorities. The Belgrade Stock Exchange, the sole operator of the regulated market and multilateral trading platform, is required to list all publicly traded firms in the Republic of Serbia's shares for trading on the exchange. The stock market in the Republic of Serbia still doesn't serve as a location for getting additional (equity or debt) capital, or only seldom does so, despite the undeniable advancements in the organisation and trading system. However, the arrival of new (institutional) investors on the Belgrade Stock Exchange brought changes and set new standards not only among direct market participants but also among managers and majority owners of public companies. For years, the reporting rules of public companies have been one of the regular obligations of their managers. It is important to know how much public company managers believe the growth of the stock market has contributed to better corporate governance.

Research on the Impact of Vertical Interlocks of Executives on Enterprise Innovation

The question of whether vertical interlocks of executives help to strengthen the supervision of listed companies by major shareholders or facilitates the capture of interests of minority shareholders by major shareholders has aroused concern in both theoretical and practical circles. Based on the date of Shanghai and Shenzhen A-share listed firms in China from 2009 to 2021, this paper examines the impact of vertical interlocks of executives on the enterprise innovation from the perspectives of "tunneling effect". The study finds that vertical executives reduce the enterprise innovation. The paper also finds that the vertical interlocks of executives play a "tunneling effect" through hollowing out by major shareholders.

Do audits serve as an external risk oversight tool to boost firm performance?

This study explores the relationship between audits, concentrated managerial power, and firm performance in the Chinese manufacturing industry. Analyzing 1,264 publicly listed manufacturing firms over the five-year period (2017–2021), this study provides evidence that heavily concentrated management control hurts firm performance. The finding that heavily concentrated management control hurts firm performance is consistent with existing research on emerging markets (Debnath et al., 2021). Furthermore, consistent with existing research on audits protecting shareholder interest (Beneish, 1999) and improving firm earnings (Baxter & Cotter, 2009), the results of this study demonstrate that audits have the potential to operate as a risk oversight mechanism, reducing the likelihood of concentrated management control and therefore improving firm performance overall. This role of audits in corporate governance may be especially important in China, where the protection of minority shareholder interests may be more crucial (Chen et al., 2013), and in fact, the current study shows that audits mitigate the negative effects of concentrated management control on firm performance. However, the current research also demonstrates that the effects of audits on firm performance depend critically on how audits are identified. While longer-term, more stable auditing relationships decrease the likelihood of concentrated management power and mitigate the negative impact of concentrated power on firm performance, higher auditing fees, on the contrary, are associated with more concentrated management power, exacerbating the damage concentrated power does to firm performance. The empirical results are robust when replicated using propensity score matching (PSM) and entropy balancing techniques. Overall, the results demonstrate the effectiveness of audits as a tool in corporate governance but suggest the existence of conflicts of interest in fee-based auditing, which exacerbate agency costs.

POLITICAL CONNECTION, FOREIGN INSTITUTIONAL INVESTORS AND TUNNELING: EVIDENCE FROM INDONESIA

The purpose of this study is to examine the moderating effect of foreign institutional investors on the relationship between political connection and tunneling. To achieve this goal, our study has examined all companies listed on the Indonesia Stock Exchange between 2015 and 2019, and obtained 1,571 firm-year observations. By using a quantitative approach and data analysis using moderated regression analysis, the results of this study indicate that foreign institutional investors play a role in weakening political connections to tunneling. This shows that foreign institutional investors have a role in reducing tunneling. These investors influence the behavior and performance of the company, so, even though the company has political ties, foreign institutional investors are less susceptible to political pressure and are more likely to negotiate to enhance the interests of minority shareholders, and protect their reputations. This finding has important implications for regulators to consider when evaluating the Investor Protection Act, in particular the protection of minority shareholder rights in companies with political ties.

I Feel Your Pain: The Effect of Regulator as a Minority Shareholder on Merger and Acquisition Performance

We examine the effect of a regulator‐led advocate for minority shareholders on merger and acquisition (M&A) performance in China. In recent years, the China Securities Regulatory Commission established the China Securities Investor Services Center (CSISC), which began its ownership of 100 shares of public firms in 2016. The CSISC advocates for the interests of minority shareholders proactively. Focusing on abnormal stock returns in M&A announcements, we find that acquirers that have the CSISC as a shareholder (CSISC acquirers) exhibit higher positive abnormal stock returns than non‐CSISC acquirers. Cross‐sectional analysis suggests that the core results are mainly driven by firms with severe agency problems and weak external/internal monitoring, and those not controlled by the state. In addition, we find that CSISC acquirers have better long‐term performance and encounter more M&A failures than non‐CSISC acquirers. Our findings indicate that although the CSISC only holds 100 shares of listed companies, it plays an effective role in monitoring and driving firms to make appropriate M&A decisions.

Determinants of Islamic social reporting disclosure and its effect on firm’s value

PurposeThis paper aims to examine the effect of the independent board of commissioners and profitability on Islamic social reporting (ISR) disclosure implemented in companies that belong to the group category of Indeks Saham Syariah Indonesia (ISSI). This study also examined the advanced effect of ISR disclosure as a company strategy to obtain a firm’s value.Design/methodology/approachThe data of the independent board of commissioners, profitability, ISR disclosure and firm’s value were obtained from the annual reports of companies whose shares belong to the calculation of ISSI, totaling 24 companies. The ISR disclosure was measured using the content analysis method. While the research model used path analysis.FindingsThis study found that the independent board of commissioners directly affects the ISR disclosure while indirectly affects the firm’s value as mediated by the ISR disclosure. This finding indicates that the independent board of commissioners is regarded as capable of protecting investors’ interests from problems that may be incurred from asymmetry information. However, this study failed to prove that profitability directly affects the ISR disclosure.Research limitations/implicationsA list of ISR disclosure items in this research adopted the list developed by Haniffa and Othman, without any additional items. While the measurement of ISR disclosure used the content analysis, therefore there may be subjectivity issues accidentally done while scoring.Practical implicationsThis study recommends management of companies which belong to ISSI to optimize their independent board of commissioners because it has been proven in this study that their presence can significantly encourage a more independent, objective and fair climate while one of its main principles is to pay attention to the interests of minority shareholders and other stakeholders. Besides, the findings can be used to increase awareness of the company management about the importance of transparency in managing a company because the ISR disclosure has received positive responses from investors.Social implicationsThe findings of this study encourage companies to be more transparent in presenting information. An appropriate disclosure will provide a sense of security so that the investors can account for such earthly issues before Allah SWT, thus their spiritual satisfaction can be achieved.Originality/valueThis paper investigated further the effect of ISR disclosure on firm’s value which has never been performed by previous scholars. The ISR disclosure is a strategy to obtain legitimacy from investors, which was analyzed using the legitimacy theory.