Level Of Ownership Concentration Research Articles

Family firms’ survival in an economic downturn: The role of ownership concentration and collaborative intensity

ABSTRACT This study examines the key topic of small- and medium-sized enterprise (SME) survival during an economic downturn by focusing on the role of family governance. We argue that family SMEs typically show higher levels of organizational inertia that may particularly harm their performance during an environmental jolt, while other idiosyncrasies, including greater survivability capital and owners’ transgenerational sustainability intentions, enhance their odds of survival. However, we also contend that family firms are a heterogeneous group, and draw attention to the level of ownership concentration and collaborative intensity as factors likely to enhance these firms’ survival. Conversely, we posit that family businesses with lower ownership concentration will benefit more from high collaborative intensity, thus suggesting the need to examine the joint survival effects of these two factors. We performed Cox survival analyses on a sample of 259 SMEs tracked from 2005 to 2019. The results offer important implications for scholars, managers, and policymakers.

Tax Haven Use and Related‐Party Transactions: Evidence from Australia

AbstractRelated‐party transactions (RPTs) and transfer pricing techniques are typically used by multinational enterprises to reduce their tax obligations by shifting the income to zero or to low‐tax countries. These techniques have thrived and have emerged as a significant concern for tax authorities. This study investigates the effect of tax haven utilisation on related‐party sales pricing in a sample of Australian listed firms. We find that tax haven use is positively and significantly associated with related‐party sales pricing. Moreover, we identify a positive and significant interaction between tax havens and earnings management with related‐party sales pricing. Ownership concentration and its interaction effect with tax havens are significant predictors of the increased use of related‐party sales pricing. Overall, the empirical findings demonstrate that earnings management, a high level of ownership concentration and the use of tax havens are substantial factors that enable firms to obtain tax benefits via the use of RPTs.

Multiple Blockholders and Firm Value: A Simulation Analysis

In this paper, we analyse the relationship between the distribution of ownership and firm value in the presence of multiple blockholders. In recent years, the topic has attracted the attention of many scholars. Yet, the empirical evidence on the relationship between the distribution of ownership among large shareholders and firm value has been non-conclusive and contradictory. We focus on the interaction between a controlling block of shareholders and a non-controlling block that can monitor the largest controlling block. We develop and simulate a simple model combining the two effects related to the presence of additional blockholders that can monitor the largest controlling block of shareholders. The first concerns the incentives of the controlling blockholders to expropriate other shareholders (the alignment effect); the second concerns the incentives for non-controlling blockholders to exercise monitoring activities (the monitoring effect). We examine the influence of the distribution of ownership between controlling and non-controlling shareholders on the total amount of company resources diverted to provide private benefits to controlling shareholders. Since net firm value is decreasing in the amount of company resources diverted, our analysis sheds light on the relationship between the ownership structure and firm value. We show that, in the presence of multiple blockholders, the relationship between ownership concentration and firm value may change depending on the relative size of the shareholders and the relative size of private benefits of control. Our results help in understanding the variety of shapes that have been empirically detected, and shed some light on the conditions that make optimal diversions, as a function of the level of ownership concentration, monotone (increasing and decreasing) or non-monotone.

Corporate governance and cost of equity: the moderating role of ownership concentration levels

PurposeThe study analyzes the influence of corporate governance and ownership concentration levels on the cost of equity. Further, the authors extend the literature by investigating the moderating effect of ownership concentration levels (i.e. at 5%, 10% and 20%) on the relationship between corporate governance and the cost of equity.Design/methodology/approachThe study applies several robust panel regression techniques to a sample of 114 active non-financial companies listed on the Pakistan Stock Exchange from 2011 to 2016. Corporate governance was measured through a unique index comprising 30 governance attributes. The cost of equity was measured through the capital asset pricing model. Further, the authors construct three variables for ownership concentration levels, i.e. at 5%, 10% and 20%. To address the endogeneity problem, the one-lagged variable model and GMM approaches were also applied.FindingsThe results indicate that better corporate governance reduces the cost of equity, while ownership concentration at high thresholds would increase the cost of equity. Further, the authors find that ownership concentration at the 20% threshold moderates the relationship between corporate governance and the cost of equity. Thus, the authors argue that firms can minimize the risk faced by shareholders by implementing substantive corporate governance mechanisms. In addition, effective corporate governance mechanisms at high ownership concentration levels are imperative for managing the cost of equity.Originality/valueThe study reports novel evidence that ownership concentration at a high threshold moderates the effect of corporate governance on the cost of equity.

Do family-controlled and financially healthy firms manage their reported earnings? Evidence from Indonesia

This paper examines whether family-controlled and financially healthy firms practice earnings management. The data collection focuses on non-financial firms listed on the Indonesia Stock Exchange for the fiscal year 2017–2019. Family and financially healthy firms are key predictor variables for predicting earnings management behavior. Jones’s (1991) modified cross-sectional model measures discretionary accruals (the earnings management indicator). This study reveals a negative relationship between family entities and earnings management practices, suggesting that family-controlled firms are more likely to report a higher quality of earnings. This study also documents that family entities with financial difficulties have more incentive to practice earnings management. Additionally, the study indicates that the involvement of a family member in executive positions leads to lower financial reporting quality. Finally, this study reports a nonlinearity association between family share ownership and the magnitude of earnings management. The study’s findings may assist policymakers in considering the costs and benefits associated with various levels of ownership concentration, especially in the hands of family members.

The real earnings management gap between private and public firms: Evidence from Europe

Employing a comprehensive dataset spanning 11 European Union countries, we provide novel insights on how country-level institutional factors affect differences in the extent of real earnings management (REM) activity by publicly listed and privately held firms (the ‘REM gap’). Thus, we explain why the public–private firm REM gap varies systematically across countries. Exploring the impact of country-level governance and legal environment, we observe the REM gap to be greater in weaker market settings and in jurisdictions with higher book-tax conformity, despite REM levels overall typically being lower in such jurisdictions. While overall REM levels are positively related with the strength of investor protection and the extent of disclosure requirements and negatively related with ownership concentration levels, these factors play only a modest role in explaining variations in the REM gap. Our broad-based evidence also provides consistent support for the existence internationally of a ‘partial substitution effect’ where increased (decreased) REM activity is offset to some extent, but not wholly, by reduced (increased) accruals-based earnings management activity. Our findings have important implications regarding the comparability of financial statement information provided by public and private firms.

Does media exposure moderate the relationship between ownership structure and environmental disclosure quality: evidence from Jordan

PurposeGiven the increasing emphasis on environmental issues, this study attempts to offer concrete evidence on the relationship between ownership structure and environmental disclosure quality and whether media exposure moderates this relationship.Design/methodology/approachThe sample adopted in this study includes a group of 94 Jordanian companies listed on the Amman Stock Exchange from 2010 to 2016. Data about companies' environmental disclosure were manually collected using the content analysis method.FindingsOur findings reveal that increasing the levels of ownership concentration and management ownership can negatively impact the quality of environmental reporting among companies in Jordan. This type of reporting, however, is likely to be benefited from the presence of a high level of foreign ownership. In terms of the role played by media, media coverage may act as a buffer against the negative relationship between environmental reporting and ownership concentration and management ownership. On the other hand, the relationship between foreign ownership and environmental reporting remains positive and significant no matter the amount of media attention the company is receiving.Originality/valueThis study is crucial because it contributes to the existing environmental debate studies in two crucial ways. It first offers the first evidence on how media exposure can moderate the relationship between ownership structure and environmental disclosure. Second, this study's findings provide important implications for regulators and policymakers in Jordan.

High ownership concentration and income shifting in multinational groups

PurposePrior literature shows that income shifting is widely performed by multinational groups, but no research as yet has studied alignment between controlling and minority interests on tax avoidance in multinational groups with high ownership concentration. This study aims to analyze the effect of high ownership concentration on cross-jurisdictional tax-motivated income shifting.Design/methodology/approachTo test the hypotheses, this study focuses on European multinational groups. Data are collected on European parent firms and each subsidiary. The model considers the natural logarithm of profit before tax and tax incentive.FindingsFindings show that subsidiaries shift income for tax avoidance purposes. The alignment of shareholders’ interests and ownership concentration leads to higher levels of tax avoidance through subsidiaries’ infra-group transactions. High ownership concentration decreases the influence of minority interests and allows parent company shareholders to choose a tax avoidance strategy more freely.Practical implicationsThe results suggest that taxation levels need to be harmonized to reduce the incentive for tax avoidance and the incentive of governments to reduce their statutory tax rate, to shift profits inwards and reduce outward flow. Without international coordination, this approach may lead to the unevenness of legislative frameworks around the world, and bring significant disadvantages for some countries, influencing economic growth and business development.Originality/valueThis study extends prior findings showing that tax-motivated income shifting as a method of tax avoidance in European multinational groups is stronger in groups with high levels of ownership concentration. This means that managers have the incentive to shift income between subsidiaries for tax and ownership benefits in favor of the parent company’s shareholders and against minority interests.

Family-owned banks in Jordan: do they perform better?

PurposeFamily ownership is very common for Jordanian businesses, leading to a high level of involvement of family members in company management. There continues to be intense discussion on the pros and cons of family ownership, particularly as it focuses corporate control within a small family group. The purpose of this paper is to examine the performance of family- and non-family-owned banks that appear on the Amman Stock Exchange over the 2016 to 2020 period.Design/methodology/approachThe research on Jordanian domestic banks is based on data from the annual reports of banks listed on their websites which offers comprehensive data on finances, ownership and the board. Family-owned and non-family banks were analysed using multiple regression technique to identify any variations in their performance.FindingsUsing a sample of 16 domestic banks with 75 bank-year observations over the 2016 to 2020 period, the study supports other research in finding that family ownership is negatively related to bank performance. This is true for accounting-based and market-based performance measures, including return on assets (ROA), return on equity (ROE) and Tobin's Q test results. Additionally, analysis identifies greater negative consequences for performance within family-owned banks by board of directors.Originality/valueThis paper extends previous research on family businesses by investigating the impact of family ownership on the financial performance in the Jordanian bank sector. This research determined that devaluation is a consequence of higher levels of ownership concentration for domestic banks in Jordan.

The Influence of Ownership Concentration on Firm Financial Decisions and Value: Evidence from Nairobi Securities Exchange

This study paper examines the influence of ownership concentration and firm financial decisions on firm value for firms listed on the Nairobi securities exchange. This study is supported by theoretical literature under the signaling hypothesis, institutional monitoring hypothesis, and agency theory. The study used longitudinal data for listed firms during the ten years (2008- 2017) and regression analysis was used to study the nature and extent of the relationship. The target population was sixty-eight firms that traded equity securities during the period. Empirical results reveal that ownership concentration has no significant positive effect on firm value, but dividend payment significantly influences firm value, and the capital structure only compliments other corporate governance processes in a firm. Firms listed on the Nairobi Securities Exchange have a high level of ownership concentration and this suggests, contrary to the shareholder monitoring hypothesis, large shareholders could be entrenched and, unless other complementary corporate mechanisms are present, large shareholders may not act in the best interest of minority shareholders.The youthful spirit of students to become entrepreneurs is apparent to the naked eye. However, the general objective of this research was to analyze the entrepreneurial attitude of male students from the Tecnológico Nacional de México campus, Tepeaca. One hundred and seventy-two male students were surveyed. The questionnaire was designed and validated by experts in the area. The validation was carried out by a new method; This consists of applying a Pearson factorial analysis for linear correlations and chi-square for nonlinear associations. Five postulates are applied to debug and validate each item. The items are taken as factors or independent variables to contrast the working hypotheses. The sampling was random. The results matrix obtained after applying Pearson's correlation yielded three correlations above 0.7. With these correlations, six linear hypotheses were validated. Only eight chi-squarevalidated nonlinear hypotheses were selected due to the limited space of a scientific article. In general, 400 working hypotheses were designed in the order of 20 items taken in two to two. It is concluded that the surveyed students have extensive knowledge of entrepreneurship. They are prepared for innovation, creation, and success in the companies they own and the companies where they provide their services.

Ownership concentration, ownership identity and seasoned equity offerings probabilities: Evidence from Germany

AbstractThis study analyzes the effect of ownership concentration and ownership identity on the probability of seasoned equity offerings (SEOs) in the German stock market. In Germany, equity issues require shareholder approval by a supermajority vote of 75% at shareholder meetings. This study contributes to the literature by testing the non‐monotonic effect of ownership concentration on the SEO probability. While low levels of ownership concentration can be expected to increase SEO probabilities, for example, through signaling effects, high levels of ownership concentration beyond the 25% blocking minority imply a negative effect, likely driven by the largest shareholder's willingness to maintain control. After constructing a control group using propensity score matching, we find that SEO likelihood is positively affected by the ownership concentration of the largest shareholder, as long as the 25% blocking threshold is not reached, regardless of the largest shareholder's identity. However, once this threshold is exceeded, the SEO likelihood decreases significantly as the equity stake of the largest shareholder increases. Nonetheless, when we control for the identity of the owners with equity stakes above the 25% threshold, the negative effects are predominantly not statistically significant at common levels.

IMPLEMENTATION OF GOVERNANCE IN SMEs: COMPARISON OF IMPLEMENTATION IN FAMILY AND NON-FAMILY BUSINESS (CASE STUDY IN SMEs IN YOGYAKARTA)

The purpose of this study is to identify the application of aspects of corporate governance in family businesses and SMEs scale non-family businesses in the Special Region of Yogyakarta and to identify differences in the application of aspects of corporate governance in family businesses and non-family businesses on the scale of SMEs in the Special Region. Yogyakarta. Respondents in this study involved SMEs in the Special Region of Yogyakarta. Five family businesses and five SME scale non-family businesses in the Yogyakarta Special Region were selected in each sampling location. The sample was determined by the convenience sampling method. This study will first examine the application of governance in family businesses and non-family businesses separately, then compare the application of governance between the two types of business.This study indicates that each type of business has carried out corporate governance in its business, but not maximally. There are advantages and disadvantages in its application. Most of the reasons for these differences in implementation arise from the basic characteristics that differentiate family businesses and non-family businesses, namely the ownership structure and the business structure. The more concentrated ownership and business structure, the less transparency, accountability, responsibility, independence, and fairness the company tends to be. On the other hand, in companies with more dispersed levels of ownership concentration and business structure, the application of the five aspects of corporate governance will increase.Keywords: Good Corporate Governance, Small and Medium Enterprises, Family and Non-Family Business

It’s all about culture! Institutional context and ownership concentration across Europe

It is widely recognised that the formal institutional context affects firm ownership concentration. However, the impact of the informal institutional context has received less research attention. Drawing from institutional theory, we tested our hypothesis that both the formal and informal (cultural) institutional contexts simultaneously influence firm ownership concentration. Based on a firm-level database of the largest 600 listed companies in 19 European countries for the period 2009–2015, we found that both formal and informal institutional contexts, considered independently from each other, affect the level of firm ownership concentration. However, when these institutional contexts are considered together, the significance of the formal institutional context's effect on ownership concentration disappears while the informal (cultural) institutional context remains significant. Specifically, our findings indicate that high power distance, collectivism, uncertainty avoidance, restraint, and short-term orientation favour firm ownership concentration. Overall, our findings demonstrate that the diversity in European cultures explains firms' different levels of ownership concentration across European firms, signalling that the European Union's efforts towards a common regulatory frame may not necessarily lead to a convergence of European firms' ownership structures and, consequently, of corporate governance practices.

Corporate governance: Does it matter for corporate social responsibility disclosure via website and social media by top listed UK companies?

This paper reports on the nature, extent, and determinants of online corporate social responsibility (CSR) disclosure practices among the top 350 companies listed in the London Stock Exchange (FTSE 350). This has been done through two-fold. First, the paper investigates the relationship between firm characteristics, board structure, and ownership structure with CSR information dissemination via social media. The results indicate that the company that has a high number of females on board has a significant effect on CSR and the product and service as a component of CSR. Moreover, the results reveal that the company with a high level of ownership concentration has an effect on community involvement, product and service, and environment. In addition, a company that has a high level of institutional ownership has an effect on the product and service. Finally, the company that has a high percentage of director ownership has an effect on the product and service. Second, the paper studies the effect of board structure and other control variables on the online CSR for the top listed UK firms. The dependent variables consist of a comprehensive index of disclosure and another four sub-indices which namely employees, community involvement, products & services, and environment. The results show that online CSR disclosure through the firms’ websites has been affected by board size, board diversity, audit type, profitability, leverage, firm age, and the sector in which the firm operates

Corporate Ownership Structure as a Determinant of “Risk Taking”: Insights from Italian Listed Companies

Ever since major accounting scandals and corporate collapses of the early 2000’s, the improved risk taking and the lax approach to risk management procedures, which are viewed as contributing factors to the market breakdown that occurred in the international market and, in particular, in the U.S. in 2007, have led to an increased awareness of the importance of managing risk on the part of listed companies. Risk management has gained importance in the definition of what it means to be the best and most efficient corporate governance structure and mechanism, as it can play a fundamental role in helping to achieve the company’s target. Also disclosure related to risk management is fundamental for the efficient functioning of capital markets since it helps to improve corporate transparency and to reduce the information asymmetry between insiders and outsiders.
 
 This paper aims to investigate the relationship between ownership structure and corporate risk-taking behavior and disclosure, as a tool for protecting shareholders, among Italian listed companies. The analysis is devoted to the Italian stock market because it is strongly characterized by a high ownership concentration and by the presence of a family ownership model; and this scenario makes the Italian one an interesting case to study. Based on a sample of 233 Italian listed companies, through a multivariate regression, we find that a high level of ownership concentration is positively related to a firms' low level of risk taking by the board of directors, so giving interesting insights to regulators and practitioners, as well as for further research.

The effect of institutional ownership on listed companies’ tax avoidance strategies

ABSTRACT The percentage of institutional ownership in China has increased gradually. Does this characteristic of Chinese institutional investors affect their participation in corporate governance, which in turn, affects corporate tax avoidance activities? We take 1108 listed Chinese companies from 2009 to 2017 to study this issue. The paper uses average daily total market capitalization as an instrumental variable to test the endogeneity problems. We run a quantile regression (QR) at the median level as robustness testing to overcome the fat tail of financial data. Then, the shareholding ratio of majority shareholders is introduced to verify that ownership concentration is one of the mechanisms through which institutional shareholders influence corporate tax avoidance decisions. The findings are as follows: The proportion of institutional investors’ shareholdings is positively related to the degree of enterprise tax avoidance. The increase in institutional investors’ shareholdings is likely to promote corporate tax avoidance. When the level of ownership concentration is low, the increase in institutional ownership can play a greater role in promoting tax avoidance.

Pricing and Competition with 100% Variable Renewable Energy and Storage

Electricity production is a key sector in global decarbonization efforts, and variable renewable energy (VRE) technologies are a primary way to produce carbon-free electricity. We study an electricity market where generation is 100% VRE, while storage and elastic demand resolve temporal supply-demand imbalances. We model hourly market equilibrium to analyze price formation and imperfect, Cournot-type competition with varying levels of ownership concentration. Market power is exerted either with storage-only or with both VRE and storage. In such a system, prices are determined dynamically by demand and intertemporal storage decisions, breaking the static logic of “merit order” with dispatch-able generation. The numerical results indicate that market power with storage has a relatively moderate effect on prices and market efficiency. However, market power exerted with VRE has far larger welfare impacts, resulting from curtailed generation. However, such actions could be more readily observed by a regulator via monitoring.

Ownership Structure and Tax Avoidance: Evidence from Indian SMEs

The paper examines the relationship between ownership concentrations and tax avoidance for small–medium enterprises (SMEs) in India. With a panel dataset built from small- and medium-sized enterprise surveys over the period between 2013 and 2014, we find that SMEs with concentrated ownership have a negative association with tax avoidance. The result is more pronounced for SMEs headquartered in states/provinces with stronger economic and institutional environment. The results also indicate that for any two SMEs with similar levels of ownership concentration, the SME with higher capital needs is more likely to avoid taxes.

Corporate governance and firm performance within the Russian agri-food sector: does ownership structure matter?

This article provides pioneering empirical evidence on the ownership structure and firm performance relationship for the case of corporate agri-food companies in Russia. While Russia plays a vital role in the global agri-food system, its domestic agri-food production is evidently dominated by a small number of corporate enterprises, which are in turn characterized by high ownership concentration. We employ unique panel data obtained from 203 companies for the years between 2012 and 2017. A random effects model was used to analyze the impacts of ownership concentration and ownership identity on the firms’ financial performance, measured by return on assets and return on sales. Our results indicate an inverse U-shaped association between ownership concentration and firm performance, with average level of ownership concentration found to be on the descending range of the inverse U-shaped curve. Moreover, we observe a similar quadratic relationship between ownership concentration by government and directors and firm performance. On average, ownership by directors was found to be on the ascending range and below the peak point, suggesting a potential for further performance improvement, while the impact of agroholding ownership was found to be linear and positive.

Family firms, banks and firm value: Evidence from Malaysia

PurposeThis paper examines the relationship between the number of domestic banks that the firm engages with and firm value and how this relationship is moderated by ownership concentration at low and very high level on a sample of Malaysian family and non-family firms.Design/methodology/approachFor hypotheses testing, panel data analysis using the fixed effects model (FEM) is used because the FEM can address any endogeneity problems effectively (Chi, 2005). The panel data regression is conducted on both family firms and non-family firms.FindingsWe find that there is a significant negative relationship between the number of domestic banks engaged by family firms, operating in industries where these firms do not have absolute monopoly, and firm value. However, there is no evidence that this significant negative firm value effect is stronger in family firms compared to non-family firms. Furthermore, the significant positive moderating effect of ownership concentration on this relationship within family firms in such industries is evident only at low level of ownership concentration. Interestingly, at very high level of ownership concentration, this significant positive moderating effect becomes negative. There is no evidence that these significant moderating effects are stronger in family firms compared to non-family firms.Research limitations/implicationsThis research has focused only on family and non-family firms.Practical implicationsAn implication of this research is that there is a need for the capital market regulators to introduce appropriate policies to deter family firms from having a close relationship with domestic banks as well as monitor the number of domestic banks engaged by such firms. There may be policy implications for consideration by the Central Bank of Malaysia as well.Originality/valueThis research provides some insights to both academia and industry regarding the consequences of domestic banking relationship and different levels of concentrated ownership in family firms in an emerging market. These insights can help improve the corporate governance as well as ownership structure of Malaysian public-listed family firms which dominate the capital market. Our findings refute the argument by Peng and Jiang (2010) by demonstrating that corporate reputational effects may be a substitute for institutional deficiencies.