Majority Shareholders Research Articles

Couples’ Joint Holdings and Real Earnings Management

The involvement of affinity in corporate governance will affect the strategic decision-making of enterprises. Based on the shareholding data of Chinese A-share-listed family firms from 2008 to 2021, this paper explores the impact of couples’ joint holdings on real earnings management. The study founds that compared with the family firm with a single shareholding of husband or wife, couples’ joint holdings positively affect real earnings management. Further analysis shows that in the case of poor company growth and two-job mergers, couples' joint holdings will exacerbate real earnings management; higher capital appropriation by major shareholders and higher management expense ratio contribute to the positive correlation between couples' joint holdings and real earnings management. This study has particular reference significance for the family firm to optimize the governance structure and improve accounting information quality under the husband-wife shared governance mode.

Major Shareholders’ Reduction and the Risk of Stock Price Crash

This paper takes China Shanghai and Shenzhen A-share listed companies from 2007 to 2021 as samples to empirically test the impact of major shareholder reduction on the risk of stock price crash. This paper finds that the reduction of major shareholders promotes the risk of stock price crash of listed companies, that is, compared with listed companies without major shareholders’ reduction, the risk of stock price crash of listed companies with major shareholders’ reduction is higher, and this conclusion still holds after controlling the conservative factors. Further examination shows that the major shareholder’s manipulation of information has an impact on the risk of stock price crash, and the impact of major shareholder’s reduction on the risk of stock price crash is more obvious in China state-owned enterprises, non-high-tech enterprises, enterprises in the bull market period and enterprises in areas with low market investors.

Financial and Sports Results of Public Sector Enterprises Operating Professional Sports Clubs

This article analyses the extent of state ownership and examines whether there are differences in business and sports activity results between state-owned and private entities running football clubs in the Polish Ekstraklasa. The study examined a panel of 100 entities (N) comprising 26 enterprises running football clubs whose male teams participated in Ekstraklasa games during five seasons: 2016/2017, 2017/2018, 2018/2019, 2019/2020 and 2020/2021. The study covered five consecutive financial years ending in 2017, 2018, 2019, 2020 and 2021. The statistical and financial analysis method was applied. The financial and sports results of state owned and private enterprises in the period of 2017-2021 were compared based on selected ratios. The mean and median values of the variables taken for analyses (financial and sports ratios) were calculated. A non parametric Kruskal-Wallis test was applied to assess the differences between the ratios for the groups of enterprises under study. The analysis revealed that state-owned companies and local government units are major shareholders in Polish professional football clubs. Examination of the financial results of public and private enterprises that run such clubs revealed statistically significant differences between most of them. Among the three groups of enterprises, those run by local government enterprises achieved the worst financial results measured by profitability, financial liquidity, debt, team cost and equity. The best financial situation was observed in the state-owned enterprises. Although no statistically significant difference was found in the sports achievements between the groups of clubs, the privately owned enterprises had better results (the median and the mean values) than the other enterprises concerning the number of points and a higher place at the end of the season.

Military managers and earnings management

AbstractIn a developing market, where the ownership is highly concentrated and the central governance issue is the conflict between majority and minority shareholders, how do managers with previous military experience (military managers) affect the quality of financial reporting? We use a sample of Chinese listed firms over period 2006–2016, with a total of 16,010 firm‐year observations. Our results suggest that firms with military managers are associated with higher levels of earnings management, through both accrual‐based and real‐activities manipulations. Those firms are more susceptible to financial restatements, qualified audit opinions, and penalties for violation. To alleviate endogeneity problems, we use both the instrumental variable regression and propensity score matching, and our results are robust. In addition, the effect of military managers is more pronounced in state‐owned firms and firms with weak internal control systems. These findings improve our understanding of the link between managerial traits and financial reporting decisions, in an environment where the major governance issue is the conflict between majority and minority shareholders.

Перспективні напрями розвитку фондового ринку України з урахуванням сучасних тенденцій

Introduction. The recovery of Ukraine's economy in the war and post-war periods is impossible without rebuilding the modern institutional structure of the financial sector, in which the leading place will be occupied by the domestic stock market. Problem Statement. Taking into account the fact that the stock market of Ukraine is not formed and does not correspond in most parameters to other countries of the Eastern European region, it is advisable to consider its features in more detail and propose more effective reforms in this area. Purpose. To identify the key problems that led to the decline of the domestic stock market, analyze the best practices and successful approaches to the development of securities markets in the world, as well as formulate proposals for the reconstruction of a more modern and efficient market in Ukraine. Methods. Theoretical and methodological basis of the research is scientific works of foreign and Ukrainian scientists, modern statistical information base of the stock exchanges. The study of problems and approaches related to the peculiarities of the development of the Ukrainian stock market was carried out using the methods of critical and scientific analysis, comparative analysis, scientific generalization and systematization, induction and deduction. Results. The development of the stock market in the context of digitalization opens up significant opportunities for a more innovative and rapid renewal of Ukraine. But the essential problems of the domestic stock market remain: 1) non-performance of the basic functions that are typical for other countries; especially the asset pricing function; 2) insecurity of the rights of citizens of Ukraine on the stock market; 3) lack of corporate efficiency and clear specialized vertical integration of large Ukrainian enterprises; 4) payment of dividends only to the majority shareholders, the state and manipulation with them. Conclusions. Modern developed stock markets of the world have a significant potential in the context of the development of both traditional and digital economies, so there is an urgent need to modernize the domestic stock market. At the same time, the development of the stock market will have great prospects if the infrastructure is significantly improved, the ownership of assets in Ukraine is respected, and the corporate sector respects the public interest.

Has shareholder background been priced?–Evidence from the issuance of financial bonds by financial leasing companies

This paper analyzes the influence of sponsors and major shareholders on the financing costs of financial leasing companies. Based on the natural experiment of financial leasing companies issuing financial bonds, we find that the financing cost of financial leasing companies controlled by non-banks is significantly higher than that controlled by banks, and the cost of financing for financial leasing companies is generally cheap when the largest shareholder is larger and more profitable. Further, the financing cost of the financial leasing companies controlled by banks is mainly affected by its factors, while the other is significantly affected by the basic characteristics of major shareholders.

Analysis of Dairy M&A: Evidence from Acquisition of Ausnutria by Yili Diary

Nowadays, dairy industry has shown a diversified development trend, all kinds of dairy enterprises not only produce room temperature milk, yogurt, infant formula, goat milk powder track also gradually become the goal of dairy enterprises development. A number of dairy companies have previously implemented acquisitions aimed at developing the goat milk powder, such as Mead Johnson's acquisition of Mercurial. Yili Corporation ("Yili"), as a leading company in China's dairy industry, aims to complete its industrial structure and expand the development of goat milk powder. From 2020 to 2022, Yili, through its wholly-owned subsidiary, Hong Kong Jingang Trade Holding Co ("Jingang"). After the acquisition, Yili became the sole major shareholder. With this acquisition, both parties aim to reap synergies and seek the operational benefits of 1+1>2. The purpose of this paper is to examine the financial impact of this merger on both companies and to make recommendations for future mergers and acquisitions of related dairy companies. According to the analysis, this paper figure out that M&A plays a strategic role for both companies, facilitating the integration and utilization of resources of both companies, bringing a win-win situation for both parties. However, the long-term impact of the M&A will require ongoing attention. These results shed light on guiding further exploration of the M&A of dairy products enterprise.

Ownership Concentration, Capital Structure and Stock Returns of Firms Listed at the Nairobi Securities Exchange

Ownership concentration enables majority shareholders to influence the capital structure; a key financing decision that is independently linked to firm performance. Ideally, firm managers should strive to maximize stock returns by selecting an appropriate optimal capital composition that maximizes the trade-off between the cost of leverage and gains. However, the performance benefits are not always realized because the controlling shareholders may adversely affect stock returns by extracting private benefits at the expense of the minority shareholders, leading potential investors to consider the firm as a risky and unattractive investment, hence lowering stock demand and price. This research sought to determine the intervening effect of capital structure on the ownership concentration and stock returns relationship. A census survey was done on sixty-seven firms listed at NSE from 2006 to 2019 and data was obtained from sixty firms that had been listed for at least two years. A fixed effects model was then utilized to conduct data analysis. The four-step mediation process showed that capital structure mediated the connection between ownership concentration and stock returns. The results contribute to the empirical literature by reducing the conflicting positions on the link between ownership concentration and stock returns by introducing capital structure into the relationship and confirming the role of capital structure in performance management. The study recommends that agents be given incentives through monitoring and regulation to ensure that management interests and those of their principals are aligned when important financing decisions are being made to serve the interests of both majority and minority shareholder. This will promote and enhance corporate performance and increase stock returns.

Conflict of interests among shareholders – does it refer to dividend decisions?

Abstract Research background Agency theory refers to the conflict of interests between different groups involved in the business. One aspect of the agency theory is conflict among shareholders. One of the areas of potential conflict is dividend payment. Purpose The goal of our paper was to identify the impact of voting behaviour of shareholders during Annual General Meetings on dividend decisions. We make a comparison between big and small companies. Research methodology We included the 20 biggest and the 20 smallest companies from the Warsaw Stock Exchange (WSE) in our sample over the 2010–2022 period. We collected 413 observations (shareholders’ presence, voting results from annual general meetings, and financial data). We use statistical tests, a correlation analysis, and a regression analysis. Results: We found that in small companies there is conflict among large shareholders on dividend payout decisions, while in big companies small shareholders show their disappointment by voting against or abstaining from voting for financial statement acceptance (but not dividend payout decisions). Additionally, we found that the higher presence of large shareholders at the AGM the lower the dividend payout is. Novelty: The originality of the paper is that instead of ownership structure we took into account shareholders’ presence at AGM’s. We deal with a unique set of hand-collected data on voting results. We present new evidence on interests of conflict among shareholders (not only on dividend decisions). Although the problem of the conflict between minority and majority shareholders was identified, there is a scarcity of research on its background and implication.

Family Ownership and Value of Takeover: Evidence from India

We examine how family-ownership influences takeover probability and takeover public announcement abnormal return of Indian publicly traded firms between 2003 and 2019. We find that family ownership has a significantly negative effect on target takeover probability at various levels of family ownership, viz. 20%, 40%, and 51%. Announcement period abnormal returns for target firms are positive at a lower level of family ownership of 20% and negative at a higher level of family ownership of 51%. These results are consistent with the agency cost explanation where family ownership reduces owner-manager agency conflict but exacerbates conflict between majority and minority shareholders. Our results hold for Heckman two-stage model.

Research on the Inhibition Path of Blockchain Technology to Related Party Transactions

With the rapid development of China's economy, related party transactions of listed companies have attracted much attention. Related party transactions are not only a legal means of earnings management of listed companies, but also a way for listed companies to cover up illegal behaviors such as tax evasion, profit transfer and profit delivery to major shareholders. How to identify and suppress related party transactions of listed companies and guarantee investors' profits? It is particularly important to promote the healthy development of financial markets. Blockchain technology has the characteristics of immutability, encryption, permanent tracking and decentralization, so that enterprises can achieve accounting tracking through the application of the technology, eliminating stakeholders' doubts about the authenticity of related party transactions. This paper introduces blockchain technology from three aspects, such as information sharing system, supervisory organization and mechanism, and demonstrates the feasibility of this technology to enhance the management level of enterprises, which is conducive to inhibiting the related party transactions of enterprises and improving the management level of enterprises.

How employee share ownership plans impact firms' market value: A conflict of interest theory approach

AbstractWe investigated whether the market places a higher value on banks with employee share ownership plans (ESOPs) than on those without them. Using a variety of empirical models, we found that ESOPs increased the market value of banks. However, this positive effect occurred only when banks were transparent or located in countries with strong shareholder protection. Our findings demonstrated that if banks were opaque or shareholder protection was weak, outside investors' concerns about managerial entrenchment in widely held banks and behind‐the‐scenes relationships between majority shareholders and managers in closely held banks outweighed the perceived benefits of ESOPs. Our study contributes to the literature by proposing a novel approach to study the effects of ESOPs through the prism of conflict of interest theory. Our findings also shed light on stakeholders' rationales for opposing or adopting ESOPs.

A Study on the Guarantee of Chinese One-man Company for Its Shareholders

Purpose - Research the legality of one member company’s shareholder guarantee. First of all, as far as the legislative purpose of the decision-making power of the shareholders’ meeting and the procedure for shareholders to avoid voting under the special guarantee stipulated in the Company Law of China is concerned, its legislative purpose is to prevent major shareholders from abusing their rights, protection of the Company and minority shareholders.
 Design/Methodology/Approach - There is no difference between large and small shareholders in a one-person company. The only shareholder of a one-person company is the only participant in the company’s operation and decision-making, who has the most direct understanding of the company’s operation, and has the most clear judgment on the company’s major issues. The oneness of the shareholders of a human company makes their behavior not only represent the will of shareholders, but also reflect the will of the company.
 Findings - Therefore, the Company Law does not deny the legality of one person’s company’s guarantee for shareholders. Secondly, the current Company Law has legally confirmed the full guarantee capacity of the company, and it is legitimate for the company to provide guarantees for others, shareholders or actual controllers of the company.
 Research Implications - Based on not violating the relevant principles of the Company Law, one person company’s provision of security for its shareholders belongs to the territory of “company autonomy”. As long as its procedures are legitimate, its behavior naturally has legitimacy.

Counterbalance effect of multiple major shareholders in Chinese listed companies: A strategic decision-making perspective

The ownership structure of multiple major shareholders is very prevalent among China’s listed companies and has a vital impact on corporate strategy. This study examines the influence of multiple major shareholders on corporate differentiation strategy in Chinese listed companies. The results show that multiple major shareholders promote the decision and implementation of enterprise differentiation strategy. Board capital width and depth play a mediating role. Financial redundancy and corporate competitive culture positively moderate the relationship between multiple major shareholders and differentiation strategy, while human resource redundancy has a negative effect. Further research shows that in enterprises with multiple major shareholders, differentiation strategy can improve performance. From the perspective of equity balance, this study examines the role of multiple major shareholders in emerging markets to provide insights for improving the modern corporate governance system and guidance for enterprises to implement competitive strategies.

Uncovering the Impact of Local and Global Interests in Artists on Stock Prices of K-Pop Entertainment Companies: A SHAP-XGBoost Analysis

Stock price prediction is a significant area of research in finance that has been ongoing for a long time. Several mathematical models have been utilized in this field to predict stock prices. However, recently, machine learning techniques have demonstrated remarkable performance in stock price prediction. Moreover, XAI (explainable artificial intelligence) methodologies have been developed, which are models capable of interpreting the results of machine learning algorithms. This study utilizes machine learning to predict stock prices and uses XAI methodologies to investigate the factors that influence this prediction. Specifically, we investigated the relationship between the public’s interest in artists affiliated with four K-Pop entertainment companies (HYBE, SM, JYP, and YG). We used the Naver Keyword Trend and Google Trend index data for the companies and their representative artists to measure local and global interest. Furthermore, we employed the SHAP-XGBoost model to show how the local and global interest in each artist affects the companies’ stock prices. SHAP (SHapley Additive exPlanations) and XGBoost are models that show excellent results as XAI and machine learning methodologies, respectively. We found that SM, JYP, and YG are highly correlated, whereas HYBE is a major player in the industry. YG is influenced by variables from other companies, likely owing to HYBE being a major shareholder in YG’s subsidiary music distribution company. The influence of popular artists from each company was significant in predicting the companies’ stock prices. Additionally, the foreign ownership ratio of a company’s stocks affected the importance of Google Trend and Naver Trend indexes. For example, JYP and SM had relatively high foreign ownership ratios and were influenced more by Google Trend indexes, whereas HYBE and YG were influenced more by Naver Trend indexes. Finally, the trend indexes of artists in SM and HYBE had a positive correlation with stock prices, whereas those of YG and JYP had a negative correlation. This may be due to steady promotions and album releases from SM and HYBE artists, while YG and JYP suffered from negative publicity related to their artists and executives. Overall, this study suggests that public interest in K-Pop artists can have a significant impact on the financial performance of entertainment companies. Moreover, our approach offers valuable insights into the dynamics of the stock market, which makes it a promising technique for understanding and predicting the behavior of entertainment stocks.

Profitability of insider trading in Turkey

This study presents the first comprehensive evidence of insider trading patterns and abnormal profits in the Turkish stock market using almost 65,000 insider transactions for the period of 2008–2019. Our findings show that insiders earn a significant 6.58% abnormal profit during the one year following insider trading. Officers, directors, and institutional investors earn even more. Both purchases and sales are profitable. Top executives, major shareholders, and institutional investors earn significant dollar profits. Additionally, uninformed investors can beat the market by mimicking the portfolios of insiders, while evidence shows that regulatory changes do not reduce insiders’ profits. Finally, this study provides important trading implications for investors and regulatory implications for policymakers everywhere.

Impactful Female Directors and Earnings Management: The Moderating Effect of Ownership Concentration

The aim of this study was to examine the moderating effect of ownership concentration (OC) on the relationship between impactful female directors and earnings management (EM). The study concentrated on firms with the lowest positive earnings, measured by return on assets. The results showed that OC positively moderated the association between impactful female directors and accrual earnings management (AEM). With the moderating effect of OC, impactful female directors became positively associated with AEM. In terms of real earnings management (REM), the results showed that OC weakened the significant negative relationship between impactful female directors and REM that was found in the direct regression. With the moderating effect of OC, impactful female directors became insignificantly associated with REM. The study is extremely beneficial to policymakers, stakeholders, researchers, and society. It provides empirical findings that could help all parties to re-evaluate the role of the board of directors, specifically impactful female directors, in mitigating EM. The results highlight the impact of the majority shareholders, introduced by agency theory II, an issue that requires more solutions from regulators.

Could the simultaneous persistence of greater cash holdings and interest‐bearing debts affect stock price crash risk?

AbstractWe study the impact of a unique financial anomaly—the simultaneous persistence of greater cash holdings and interest‐bearing debts (SP‐GCHID) on stock price. Due to institutional diversity and the nature of transition economies, high cash holdings do not always stem from precautionary motive as usually claimed but can be the result of cash misappropriation and debt manipulation by major shareholders. Analysing data from Chinese listed firms from 2010 to 2018, we find that SP‐GCHID is associated with a higher stock price crash risk (SPCR). It is more evident among firms with major shareholders pledging their shares and firms exposed to more external information monitoring. SP‐GCHID also affects SPCR through increasing real earnings management, further suggesting that major shareholders' misappropriation is the main reason for SP‐GCHID's adverse effect. These findings are also robust in a range of endogenous tests. To our knowledge, this study is the first to explore the economic consequences of SP‐GCHID.

Tunneling Behavior and The Impact Caused by The Major Shareholder - A Case Study of Yunnan Bio valley Pharmaceutical Co., Ltd.

With the development of China's economy and capital markets, some companies have faced the problem of high capital needs. In this context, the phenomenon of shareholders of companies occupying the company's capital to hollow out the company for other purposes has emerged for a while. This paper presents a case study of Yunnan Biovalley Pharmaceutical Co., Ltd., in which the controlling shareholder appropriated the company’s funds. The study found that the following conditions made the situation of hollowing out easy to occur. First, there is a high equity concentration of major shareholders. Secondly, the company's internal governance is negligent. Finally, external supervision has insufficient strength. The auditors or sponsors do not rigorously implement the review and supervision process. Based on this situation, this paper uses the event study method to analyze the movements of share prices of the company before and after the event to find out the impact of the event of hollowing out on the minority shareholders. Through analyzing the hollowing out on the company's short-term solvency and profitability according to the company's financial indicators, so as to find out the impact of the tunneling behavior on the company's business development. Finally, the paper makes some relevant recommendations to reduce the frequency of tunneling. First, for the corporation, they should adjust the company's internal shareholding rate, improve the company's internal self-examination, and set up a relevant highly efficient accountability system. Secondly, external auditors and sponsor institutions should strengthen the supervision and punishment of the company's information disclosure to effectively prevent the occurrence of hollowing out.

Corporate governance from colonial Ceylon to post-civil war Sri Lanka

This paper examines the corporate governance mechanisms in Sri Lanka, a country that only a little more than a decade ago emerged from a 30-year long civil war. We focus on the evolution of Sri Lanka’s corporate governance from historical, sociocultural, and institutional perspectives. Taking Sri Lanka as a case where inclusiveness and reconciliation at the board level is important, we aim to diagnose the key corporate governance issues which we then broaden towards other South Asia developing countries and provide a research agenda. Many Sri Lankan firms suffer from typical Asian-style agency problems; conflicts of interest between (i) minority and majority shareholders, (ii) shareholders and debtholders, and (iii) shareholders and stakeholders. The most prevalent agency problem is the expropriation of minority shareholders’ rights through ownership pyramids, cross-holdings, or intermediate private firms. Although creditor protection laws limit the expropriation of debtholders’ rights, firms’ widespread use of political connections forces banks to grant cheap credit at favorable terms. Poor stakeholder management creates agency problems following window dressing of ESG disclosures, corporate opacity, and ethnicity-and gender-based discrimination in the workplace. This study shows that social norms and ethical values play a non-negligible role in the functioning of the corporate governance regulation and in corporate culture in Sri Lanka.