Institutional Ownership Research Articles

Corporate moral hazard and ESG performance: Unveiling the influence of gross enforcement actions and ownership dynamics in US multinational corporations

AbstractExisting research often highlights the impact of several categories of corporate enforcement action on corporate performance, thus overlooking the impossibility of isolating the impacts of other concurrent enforcement actions. The current study employed the gross value and volume of corporate enforcement actions to examine the influence of corporate moral hazard (CMH) on environmental, social, and governance performance (ESGP) along with ownership dynamics. The S&P data from 2018 to 2022 were analyzed, covering 1925 observations of US multinational corporations (MNCs) based on various aspects of corporate governance (CG). Institutional, insider, and family ownership were applied as proxies for ownership structure. CSRHub ratings represented ESGP, while Sustainalytics ratings were used for robustness. The analysis involved various econometric models, including the feasible generalized least squares model (FGLSM). Resultantly, CMH negatively affected ESGP, whereas CG mechanisms revealed a positive influence. Contrary to existing literature, the size of corporate law cases is a stronger proxy for CMH than the amount of enforcement actions. Although institutional owners decrease the number of enforcement actions, they encounter substantial penalties. Above‐average insiders reduce lawsuits and exert significant control over penalties, while below‐average insiders result in heavier penalties and lawsuits to an extent. Families are the most positively influential owners; having more family owners increases penalties and ESGP but reduces lawsuit size, particularly when ownership exceeds the mean percentage.

The Effect of Ownership Structure on the Going Concern Companies Listed in the Iraqi Stock Exchange

The ability of the economic unit to continue is one of the basic assumptions for preparing financial statements. Therefore, users of these statements need to have a clear image of the unit’s performance and financial situation and to ensure that there is no indicator warning of financial distress. For example, there is a conflict of interest between the unit’s shareholders on the one hand and the management on the other hand. Therefore, this research seeks to study the effect of the difference in the nature of the ownership structure on the going concern of economic units. The research is based on the hypothesis that each type of ownership structure has a negative impact on the going concern unit. The research selected five economic units listed on the Iraqi Stock Exchange from the service sector as a sample for the research. Data is collected for the period extending from 2011-2021. The research used the survey method to measure the ownership structure and applied a Kida Model to measure going concern. The most significant results of the research are a negative effect of institutional ownership, concentrated ownership, and management ownership on the going concern of the unit, In contrast, the effect is positive for both government ownership and family ownership, and foreign ownership has no effect. Paper type: Research paper

Institutional Ownership, Media Sentiment and Stock Price Crash Risk in China

Institutional Ownership, Media Sentiment and Stock Price Crash Risk in China

Disclosures in integrated reporting in Indonesia: Do corporate governance and ownership structures matter?

This study aims to analyze the impact of corporate governance and ownership structure on implementing elements of integrated reporting (IR) in the annual reports and sustainability reports of firms in Indonesia. This study includes corporate governance elements such as the size of the board of directors, the independence of the board of commissioners and the presence of audit and risk management committees. Meanwhile, the ownership structures examined in this study are institutional ownership and managerial ownership. The data were obtained through the content analysis of firms’ annual and sustainability reports. This research uses secondary data from the firms' websites and the Indonesia Stock Exchange (IDX) website. The data were then analyzed further using multiple regression analysis. The results show that only the risk management committee positively affects IR disclosure. At the same time, other independent variables do not affect IR disclosure. All control variables positively affect IR disclosure. This study adds to the literature by demonstrating that the risk management committee, firm size, profitability and leverage influence the extent of integrated reporting disclosure. This research contributes to corporations by illustrating that a risk management committee can enhance the importance of IR disclosure in Indonesia.

Top management team stability and maturity mismatch between investment and financing: the moderating effects of state ownership and institutional ownership

PurposeAccording to the resource-based theory, a firm’s unique resources and capabilities are the key to its competitive advantage. This paper aims to investigate the effect of top management team (TMT) stability, an important intangible resource of the firm, on the maturity mismatch between investment and financing of companies. Additionally, we explore the moderating effects of state ownership and institutional ownership in this context.Design/methodology/approachThis study conducts an empirical analysis based on the ordinary least squares (OLS) model with a sample of Chinese companies listed on the Shanghai and Shenzhen stock exchanges from 2010 to 2022.FindingsThe results show that TMT stability significantly mitigates the degree of maturity mismatch. Both state ownership and institutional ownership weaken the negative effect of TMT stability on maturity mismatch. Besides, alleviating financing constraints is a crucial pathway through which TMT stability influences maturity mismatch.Practical implicationsThe findings help firms to effectively retain TMT talents and reduce the occurrence of maturity mismatch.Originality/valueThis paper not only helps to expand the research on the economic effects of TMT stability but also provides new ideas on how to alleviate the maturity mismatch of companies.

The effect of board of directors attributes, environmental committee and institutional ownership on carbon disclosure quality

AbstractThis study assesses the effect of the board of directors' attributes, environmental committee (EC), and institutional ownership (IO) on carbon disclosure quality (CDQ) from the perspectives of legitimacy and agency theories in Malaysia. This study collects and analyzes data based on 1000 observations of firms from carbon‐intensive industries from 2015 to 2019. The effect of the board of directors' attributes, EC, and IO on the CDQ was observed using a panel data regression model. The study revealed a significant positive relationship between board independence, board size, female representation, EC, IO, and CDQ. These findings suggest that carbon disclosure awareness is rising in Malaysia as firms have gradually integrated corporate governance (CG) best practices into their business strategies. To the best of our knowledge, this is the first study to examine the factors that influence CDQ in Malaysian businesses. This study identified firms with a higher CDQ using a new global reporting initiative‐based carbon reporting index. This expands the literature on carbon disclosures. This study focuses on carbon‐intensive industries, which might not reflect Malaysia's current CDQ situation. Thus, future research should focus on other sectors to fully grasp the current state of the CDQ in Malaysia and offer new perspectives on emerging markets. The findings may benefit a vast group of regulatory bodies in assessing Malaysian firms' responses to local and international carbon guidelines.

Common institutional ownership and cost of equity: evidence from publicly listed companies in China

Common institutional ownership and cost of equity: evidence from publicly listed companies in China

The Effect of Managerial Ownership and Institutional Ownership on Company Value in Mining Companies Listed on the Indonesia Stock Exchange

This study aims to examine the influence of managerial ownership and institutional ownership on company value as an intervening variable in mining companies listed on the Indonesia Stock Exchange. The data used is secondary data obtained from the annual reports of mining companies listed on the Indonesia Stock Exchange for the 2019-2022 period. The analysis method used is multiple linear regression with the help of SPSS software. The results of the study show that managerial ownership has a significant positive effect on the company's value. Likewise, institutional ownership has a significant positive effect on the value of the company. As an intervening variable, it has also been proven to affect the relationship between managerial ownership, institutional ownership, and company value. The Adjusted R Square in this study is 0.309, which means that 30.9% of the variation in the value of the company can be explained by the variables of managerial ownership and institutional ownership, while the remaining 69.1% is explained by other factors that were not studied in this study.

Common institutional ownership and corporate cost stickiness —Evidence from China

This study examines the impact of common institutional ownership (CIO) of firms on their degree of cost stickiness. Taking the data of China's A-share listed companies during the period 2007–2022 as sample, we find that firms with common institutional ownership (CIO) have a lower degree of cost stickiness. Mechanism test find that CIO mitigate the degree of cost stickiness by improving the governancing and monitoring efficiency and by promoting the transfer of information among portfolio firms. Heterogeneity tests provide evidence that the positive relation is stronger among non-state-owned firms and firms in monopolistic industries.

The Effect of Ownership Structure on the Going Concern Companies Listed in the Iraqi Stock Exchange

The ability of the economic unit to continue is one of the basic assumptions for preparing financial statements. Therefore, users of these statements need to have a clear image of the unit’s performance and financial situation and to ensure that there is no indicator warning of financial distress. For example, there is a conflict of interest between the unit’s shareholders on the one hand and the management on the other hand. Therefore, this research seeks to study the effect of the difference in the nature of the ownership structure on the going concern of economic units. The research is based on the hypothesis that each type of ownership structure has a negative impact on the going concern unit. The research selected five economic units listed on the Iraqi Stock Exchange from the service sector as a sample for the research. Data is collected for the period extending from 2011-2021. The research used the survey method to measure the ownership structure and applied a Kida Model to measure going concern. The most significant results of the research are a negative effect of institutional ownership, concentrated ownership, and management ownership on the going concern of the unit, In contrast, the effect is positive for both government ownership and family ownership, and foreign ownership has no effect. Paper type: Research paper

The Influence Of Institutional Ownership And Profitability On Company Value With Dividend Policy As A Moderating Variable

This research aims to examine the influence of institutional ownership and profitability on company value by considering dividend policy as a moderating variable in banking companies on the Indonesia Stock Exchange for the 2017-2022 period. The research method used is path coefficient analysis to test the relationship between variables. Data was obtained from annual reports of banking companies registered on the IDX. The research results show that there is a positive and significant influence between the profitability variable on company value with a significance value of 0.006 (<0.05) while the institutional ownership variable does not have a positive and insignificant influence with a significance value of 0.309 (>0.05). Apart from that, dividend policy as a moderating variable is able to influence the relationship between profitability and company value with a significance value of 0.000 (<0.05), while dividend policy is not able to influence the relationship between institutional ownership and company value. Thus, the conclusion of this research is that institutional ownership has no effect on company value with or without considering dividend policy, while profitability has a direct and significant influence on company value with or without considering dividend policy. Therefore, company management needs to pay attention to these factors in managing company policies and investments to increase long-term company value.

Common auditor, knowledge transfer and audit quality: international evidence

Purpose Using an international sample of firms affiliated with a business group, this paper aims to investigate the audit quality of common auditors, i.e. auditors shared by multiple firms affiliated with the same business group. Design/methodology/approach This paper utilizes a large sample of group-affiliated firms from 35 regions. Following the frameworks of DeFond and Zhang (2014) and Fung et al. (2017), this paper measures audit quality using the absolute value of abnormal accruals and modified audit opinions. Ordinary least squares (OLS) regression is used to address the research question. Findings The findings demonstrate that audit quality improves for firms that share the same auditor with other group members. Importantly, cross-country analyses reveal that this relationship is stronger when auditors operate in countries with stricter local auditor inspection programs and an overall opaque information environment. Additionally, the impact of common auditors on audit quality is more pronounced for group affiliates that have a more opaque firm-level information environment and are monitored by heightened institutional ownership. Practical implications While affiliates are more likely to select the same audit firms as common auditors, the evidence regarding the effects of common auditors is mixed. The results of this study provide further insights into auditor choices for group-affiliated firms and offer a potential avenue for better protecting shareholders' interests. Originality/value The results of this study add to the ongoing debates regarding the costs and benefits of common auditor choice for group affiliates. To the best of the authors’ knowledge, this study is the first to demonstrate that the effects of common auditors may vary in different external environments.

The Influence Of Intellectual Capital And Leverage On Financial Performance In Banking Companies Listed On The Indonesian Stock Exchange

This study aims to analyze the influence of intellectual capital, institutional ownership and leverage on financial performance in banking companies listed on the Indonesia Stock Exchange. The Financial Performance of Banking Companies is measured using Return on Equity (ROE) as the main indicator. The data used in this study are secondary data obtained from the annual reports of banking companies listed on the IDX during the 2019-2022 period through the website www.idx.co.id. The analysis method used in this study is multiple linear regression. The results of the study simultaneously show a significant, which means that intellectual capital, institutional ownership and leverage simultaneously affect the financial performance of banking companies listed on the Indonesian Stock Exchange. The results of the study partially show a significant, which means that intellectual capital and institutional ownership have a positive and significant effect on the financial performance of banking companies, while leverage has a negative and significant effect on the financial performance of banking companies listed on the Indonesian Stock Exchange. It is expected that further research can use other independent variables, such as liquidity and company size with different observation periods.

The Nexus Between Corporate Governance, CSR, and Firm Value: Tax Avoidance as an Intervening Variable

This research investigates the role of tax avoidance in the relationship between corporate governance, firm value, and corporate social responsibility. The research design is explanatory research, through hypothesis testing. 175 manufacturing companies were observed from 2017 to 2021, with a sample size of 875. A panel regression and leverage acted as a control variable using SPSS software, after conducting models and robustness tests. The findings show the influence of tax avoidance on institutional ownership and economic corporate social responsibility (CSR). Tax avoidance partially mediates the relationship between institutional ownership and firm value, and fully mediates between economic CSR and firm value. The implication for academics and practitioners is that enabling corporate governance requires institutional owners to supervise the determination of company managerial policies. Additionally, the economic CSR program can reduce tax avoidance and is responded to positively by investors. The limitations of the research are that for the constant value to be significant, additional variables should be added to the model. Further research could include adding company performance, gender, and intellectual capital variables. Keywords: corporate governance, corporate responsibility, tax avoidance, leverage, firm value

The Influence of Business Ethics and Diversity on ESG Disclosure: Empirical Evidence from Indonesian Firms

This study examines the impact of corporate governance mechanisms, board characteristics, and ethical leadership on Environmental, Social, and Governance (ESG) performance in Indonesian companies. The analysis investigates how board ethics, independence, tenure, ownership structure, and other governance factors influence ESG scores. The findings reveal that board ethics and independence significantly improve ESG performance, supporting the role of ethical leadership and resource dependence theory in shaping corporate sustainability. Additionally, the study highlights the role of institutional ownership in driving ESG outcomes, particularly in emerging markets. Cultural factors, such as board culture, also contribute to the variability in ESG performance, suggesting the importance of aligning corporate governance practices with local values and global sustainability standards. The results have important theoretical implications, extending corporate governance theories to the context of developing economies. Practically, the findings provide insights for policymakers, corporate leaders, and investors to enhance ESG performance through effective governance reforms and ethical leadership. This study offers a significant contribution to the growing literature on ESG in emerging markets and provides a foundation for future research on corporate sustainability in different institutional settings.

Common ownership and investor‐focused disclosure: Evidence from ESG financial materiality

AbstractIn this study, we investigate whether information demands made by common agents, specifically common institutional owners, drive firms to adopt a reporting framework that enhances the comparability and financial materiality of environmental, social, and governance information. Using a sample of 3659 unique US firms from 2015 to 2021, we collected data on the adoption of the Sustainability Accounting Standards Board's reporting framework—identifying first movers, followers, and non‐adopting firms—and their levels of common institutional ownership. Our results are robust across changes in the levels of common institutional ownership, various combinations of fixed effects, and the application of an instrumental variable approach. Our findings support the idea that investors' demand drives comparability and financial materiality in sustainability reporting and that common ownership enhances such disclosure by alleviating the concern over the proprietary costs of revealing sensitive information. Our study offers new insights into patterns of intra‐industry disclosure behavior and a better understanding of how a group of increasingly significant market participants (i.e., common institutional owners) influences firms' commitment to investor‐focused disclosure.

Investigating the Antecedents of Corporate Governance Influencing the Investment Efficiency of Firms: A Synthesis of Literature and Future Research Agenda

This review study investigates the critical antecedents of corporate governance affecting firms’ investment efficiency. It proposes a comprehensive framework encompassing corporate governance’s multifaceted aspects for all stakeholders’ benefit. A thorough literature evaluation has been conducted using the SCOPUS database, encompassing all publications published between 2010 and June 2023. The existing body of literature has also been examined through the theoretical frameworks, journals, authors, articles and research construct questions. After synthesising 154 articles through bibliometric analysis, four key antecedents (financial reporting quality, auditing and accounting quality, environmental, social and governance (ESG), institutional ownership and board structure) of corporate governance were identified as primary influencers of investment efficiency. New corporate governance perspectives, such as ESG and carbon taxation in the context of investment efficiency, have been identified and can be explored in depth by future researchers. The review provides a holistic framework for corporate governance, which defines the association with investment efficiency. The study presents potential future research areas where scholars can extend the scope of corporate governance from the perspective of investment efficiency.

Common Institutional Ownership and Auditor Risk Response

Based on the data of China's Shanghai and Shenzhen A-share listed companies from 2010 to 2021, this paper investigates the relationship between a company's common institutional ownership and auditors' risk response behavior. The study shows that common institutional ownership drives auditors to increase audit investment and audit fees, which supports the collusive fraud effect. Further analysis reveals that the effect of common institutional ownership on auditor risk response behavior is more pronounced in firms with a higher degree of industry competition as well as in state-owned enterprises, and that Big Four auditors will be more sensitive to the collusive fraud effect of common institutional ownership and respond to this risk mainly by increasing audit investment. This paper not only enriches the research literature on the factors influencing auditors' risk response behavior and the economic consequences of common institutional ownership but also sheds light on how to improve corporate governance and regulate the market order in practice.

The Effect of Leverage, Corporate Governance, and Profitability on Firm Value

This research analyzes the influence of debt on firm value with corporate governance as a variable presumed to moderate the relationship between debt and firm value. The research sample was selected using a purposive sampling method, resulting in 44 non-cyclical consumer sector companies listed on the Indonesia Stock Exchange (IDX) from 2018 to 2022. The study results indicate that corporate governance and profitability positively affect firm value, and firm size affects firm value. Corporate governance as a moderating variable can negatively moderate the relationship between debt and firm value. The findings of this study provide insights into institutional ownership, profitability, and firm size that affect firm value. Investors can use this information to conduct risk analysis and inform their investment decisions. Investors should choose companies with strong corporate governance and high profitability, considering institutional ownership in the corporate governance variable. Investors should preferably select companies with high institutional ownership and high profitability to ensure high firm value but choose companies with smaller sizes where the company uses total assets productively.

Supply chain vertical common ownership and cost of loans

This study explores how vertical common ownership reduces supply chain risk and influences creditors' decisions, focusing on the cost of loans. Findings reveal that creditors view such firms as less likely to default, evidenced by lower loan spreads. This effect is stronger for suppliers with more relationship-specific investments, weaker bargaining power, higher information asymmetry, and long-term common institutional ownership. Results remain robust through quasi-natural experiments from financial institutions' M&As, supplier-customer pair analyses, etc. We also compare vertical common ownership with the horizontal one and demonstrate its incremental contributions. Moreover, the fraction of customer sales and the institutional investors' share ownership likely influence the likelihood of vertical common ownership, with our results consistently holding under Heckman analysis. Overall, the results suggest that vertical common ownership enhances coordination and monitoring, reducing risks and creditor risk premiums. The findings may offer valuable insights into managing supply chain risks and understanding their financial implications.