Position Of Shareholders Research Articles

Shareholder reaction to corporate philanthropy after a natural disaster: an empirical exploration of the “signaling financial prospects” explanation

Corporate response to natural disaster in the forms of cash and/or in-kind donations (corporate philanthropic disaster response, or CPDR) is a growing form of corporate philanthropy. Through an event study methodology based on 1,775 firms listed on the Tokyo Stock Exchange, we analyze shareholder reaction to CPDR announcements after the 2016 Kumamoto earthquakes in Japan. Controlling for the possibility that the most common explanations (buying goodwill and corporate governance) are at play, our results provide an empirical test of a little-explored explanation for the positive shareholder reaction to CPDR: namely, that corporate philanthropy is a market signal to outside investors of the firm’s future financial prospects. We find this explanation to be significant. Of note are also the facts that shareholder reaction is only significantly positive in the case of cash donation (as opposed to in-kind), and is more positive when announced early. Overall, our results align with the “strategic philanthropy” view grounded in resource-dependence theory. But instead of the typical focus on non-financial stakeholders, we argue that philanthropic donations can be used to directly influence investors.

Konstytucyjna wolność przedsiębiorczości i prymat własności prywatnej a tak zwana złota akcja Skarbu Państwa

The subject of the study is the special privilege of the state in companies in which – having a minority of shares – they have golden share, and therefore the ability to exert an authoritative influence on significant decisions of the company, going beyond the capital position. This means limiting the freedom of enterprise and the primacy of private property. Golden share can be understood as an attempt to reconcile the interests of private owners with an important public interest in certain sectors of the economy where the interest of the state becomes particularly important. Since it is an exception to the equal position of shareholders, its use in economic policy should be extremely rare.

The Competing EU and UK Influence on Corporate Governance in Ireland Following Brexit

Company law and corporate governance in the Republic of Ireland have long been heavily influenced by developments in the UK. However, the UK’s withdrawal from the European Union raises the question whether this will continue to be the case. This article examines the historical development as well as the way forward for corporate governance and the position of shareholders in Ireland following Brexit. It is argued that the influence from global trends, such as climate change mitigation, will have a significant impact on corporate governance in both the EU and the UK. However, any changes in corporate governance may occur at a different pace in the UK and EU, where Ireland would be more under the sphere of influence of the EU. As these trends generally set out to decrease any emphasis on short-term shareholder value creation, it is likely to impact the position of shareholders in Ireland as well. corporate governance, comparative law, shareholder primacy

Kritička analiza pravila o identifikaciji akcionara u srpskom zakonu o privrednim društvima

This paper contains an in-depth analysis of provisions in the Serbian Companies Act that regulate the right of listed companies to identify their shareholders and final shareholders. These rules were adopted in 2021 with the aim to harmonize Serbian law with the law of the European Union, i.e., the Revised Shareholder Rights Directive 2007/36/EC (SRD II). The first part of the paper explains the problem of identifying shareholders of listed companies and analyzes the reasons for regulating this issue at the EU level and in Serbia. The central part of the paper deals with the right of a listed company to know its shareholders, the corresponding obligations of intermediaries and the position of shareholders in that respect. A detailed analysis of these issues leads to a conclusion that the Serbian lawmaker has in certain aspects departed from the SRD II, which resulted in distortion of the whole concept of shareholder identification and incoherence of the current system of rules on listed companies. For this reason, in the last part of the paper the author gives specific proposals for improvement of existing rules in this field.

The effect of the number of bank relationships on firm leverage: high-risk shift and the curse of mainstream banks

PurposeFirms prefer to have more than one bank relationship to secure the flow of funds for their operations, particularly in bank-based economies. On the other hand, banks lean toward expanding their customer base with firms already in the credit market. The purpose of this study is to investigate the effect of the number of bank relationships as a firm-specific determinant of capital structure and to discuss its impact on the banking sector.Design/methodology/approachA two-step system generalized method of the moments estimation method is used in this study. The sample comprises 213 Turkish non-financial, publicly listed firms with a positive shareholder’s value for the 2012–2017 period.FindingsThe findings show that the number of bank relationships increases the leverage of sample firms while the concentration in the banking sector decreases it. These rather intriguing findings are attributed to an under-the-counter credit policy that causes a high-risk shift and a curse of mainstream banks. Once the mainstream banks allocated credit to the firm, its credibility is consumed by the following banks, which is implied by the significantly negative relationship between bank concentration and firm leverage. This problem is defined as the mainstream bank curse in the study.Originality/valueThe previous literature focuses on the effects of the number of bank relationships on firm profitability, cost of debt and shareholder wealth. However, its impact on the capital structure has not yet been systematically investigated. To the authors’ knowledge, this is the first study to critically analyze the effect of the number of bank relationships on the capital structure. The findings will be of immense benefit to the banking sector and the regulatory bodies.

Uninformative Performance Signals and Forced CEO Turnover

This paper provides evidence that corporate boards violate the informativeness principle in their forced CEO turnover decisions by failing to ignore uninformative performance outcome signals. I show that CEOs of firms with barely positive shareholder returns in the previous year are less likely to be dismissed than CEOs of firms with barely negative returns, even though this return outcome is conditionally uninformative. I observe a similar pattern for stock returns relative to the S&P 500 index return: a firm's board is less likely to dismiss its CEO if the firm barely outperformed the S&P 500 index than if the firm barely underperformed the S&P 500 index. Moreover, I demonstrate that the tendency of boards to consider uninformative absolute return outcomes has decreased over time, while their tendency to consider uninformative relative return outcomes has increased over time. This suggests that boards have shifted their focus toward relative returns while continuing to violate the informativeness principle.

Legal Analysis of Shareholders as an Organ of The Company Viewed From Commercial Code

This paper aims to explain the authority possessed by the members of Shareholders in the Articles of Association. In Articles of Association of Limited Liability Company, it contains regulations governing an operational activity that will become the purpose of Limited Liability Company. The Articles of Association have compelling and binding nature for all members of Shareholders, all members of the Board of Commissioners, and all members of the Board of Directors. Members of Shareholders are an organ owned by Limited Liability Company whose authority owned by all members of the Board of Commissioners and all members of the Board of Directors. One of the authorities possessed by the members of Shareholders is to appoint the members of the Board of Commissioners and members of the Board of Directors. In this paper, the author used research methods of normative and juridical, meaning that the writing method is carried out by analyzing secondary legal materials or library materials to find solutions to problems of legal problems arising and to use a problem approach based on laws or legal rules in general about the powers of the shareholders that apply to such event and approach the problem based on a conceptual basis. The results show that the position of the shareholders is not higher than and even equal to the position of the Board of Commissioners and Board of Directors. Whereas in the Indonesian Commercial Code, it stipulates that the position of shareholders is the highest in a Limited Liability Company.Keywords: Authority of Shareholders; Company Law Number 40 of 2007; Limited Liability Company

The position of shareholders in the restructuring proceedings of distressed companies: From a shareholders' veto power to their duty to enforce (Aufopferungs‐ or Duldungspflicht) a restructuring plan

AbstractThis article addresses the problem of the position of equity holders in restructuring proceedings, tackling a new issue in the overall European scenario of insolvency law, where innovative rules have been introduced on this topic in Germany (ESUG), France (loi Macron), Spain (ley concursal), besides the new provisions laid down by the EU Preventive Restructuring Directive. Overall, these rules target the same outcome, while relying on different tools, namely, to overcome the veto power of shareholders in the enforcement of an approved and confirmed restructuring plan. Shareholders can in fact resort to their veto power pursuant to company law when dealing with structural operations having an impact on the property structure of a distressed company, that is, a debt‐equity‐swap. This article focuses on the rules governing the position of shareholders as laid down in Article 163, paragraph 5 and Article 185, paragraph 6 of the Italian Insolvency Law (IIL), in force since 2015, which will be probably amended in September 2021 by Articles 90 and 118 of the new Italian Crisis and Insolvency Code (ICC). The article ultimately provides a comparison with the legal framework in other European countries as well as in the EU Preventive Restructuring Directive. Many issues arise from the new Italian regulation, in particular regarding its field of application, its relationship and its coordination with company law and the protection of shareholders' property in the shares.

Shareholder Reaction to Corporate Philanthropy: Beyond the 'Buying Goodwill' Explanation

Corporate response to natural disaster in the forms of cash and/or in-kind donations (corporate philanthropic disaster response --CPDR) has been a growing form of corporate philanthropy. Thus far, it has been empirically studied primarily in the U.S. and Chinese settings (Patten, 2008; Zhang et al., 2010), but never regarding Japan. Through an event study methodology, we analyze shareholder reaction to CPDR announcements after the Kumamoto earthquakes, a series of major earthquakes which occurred in Japan from April 14th 2016. Our main contribution resides in unpacking three possible explanations for the positive shareholder reaction to corporate philanthropy we found. Our results provide some support for the most common explanation (

The Shareholder Response to Corporate Tax Planning Advice Regulation

We examine the shareholder response to heightened regulation of corporate tax planning advice through the covered opinions rules under U.S. Treasury Department Circular No. 230. These rules imposed extensive due diligence obligations and drafting requirements on tax professionals for a broad range of written tax advice. Despite overwhelming criticism from tax professionals, stock returns reveal a positive shareholder response to the promulgation of the rules, equating to a $12.33 billion aggregate increase in shareholder value. Consistent with shareholders believing that the benefits of the rules—deterrence of excessively risky tax planning and increased monitoring—would offset the burdens, we find that the shareholder response was more positive for firms with higher tax risk, weaker monitoring, and higher tax risk coupled with weaker monitoring. Overall, these findings provide new evidence that shareholders perceive regulations aiming to curtail risky tax planning as value enhancing when they target tax professionals rather than taxpayers.

Insider Stock Pledges and Shareholder Wealth

While pledging shares as collateral for personal loans is commonly practiced in many countries that protect minority shareholders, the empirical evidence has shown only its value destruction to shareholders. This paper offers an (partial) explanation of this puzzle by documenting a positive shareholder wealth effect of this practice. We find sizeable, significant, and positive stock market reactions to the regulation that facilitates share pledges (2.17%, 87 billion USD) and the effect is larger for (32~43 bps) for financially constrained firms and firms whose controlling shareholders have more shares to pledge. Similar effects are found for pledge transactions and the reverse for the regulation that reduces share pledges. Financial constraint and controlling ownership jointly determine the share pledge purpose to finance listed firms. Following pledge transactions with the purpose of financing listed firms (to purchase shares or for consumption), inter-corporate borrowing increases (insider ownership increases or decreases), and the CARs upon disclosures are significantly positive (negative). While the ratio of shares pledged is positively associated with crash risk, we find that pledging shares for the purpose of financing is negatively associated with crash risk.

Report on Improving Corporate Governance in Hong Kong - A Comparative Based Study

The ‘Report on Improving Corporate Governance in Hong Kong’, commissioned by the Hong Kong Institute of Certified Public Accountants, assesses the strengths and weaknesses of Hong Kong’s corporate governance (CG) system, based on a study of the CG systems in the United Kingdom, the United States, Mainland China and Singapore. The objective of the study was to produce implementable recommendations to improve Hong Kong’s CG system in a manner consistent with overarching objectives of fostering regulatory efficiency and long-term market competitiveness. For this purpose, it was important to recognize that the CG system in each jurisdiction has emerged in consequence of developments and experiences, successes and failures shaped by historical, political, legal, market, and social and cultural contexts — what works, or fails, in one jurisdiction might fail, or work, in another. Divergences in the concept of CG and how to measure it were also discussed. Hong Kong’s dual responsibilities model in which the statutory regulator (SFC) and the stock exchange both have regulatory oversight of the listed market is somewhat unique. Overall, the model has worked well in response to significant developments including Hong Kong’s global position in the IPO market and the highly significant shift to the listing of Mainland enterprises that now account for the majority of market capitalization and trading. Yet, Hong Kong must do significantly better in a number of areas to protect its market and the shareholders who invest in it. The recommendations seek to address these concerns. Board processes and standards: While each jurisdiction studied is dealing with similar types of issues the experience in each jurisdiction is markedly different, with some reforms having a positive effect, others not. In some instances, the market response to reform can be to game it to bring about an alternative outcome from the one intended by regulators, thus producing unexpected consequences. Hong Kong should adopt better mechanisms to protect shareholders from potential abuses of the board by strengthening the functions of the audit committee and independent directors, and requiring greater CG-related transparency. Enforcement by shareholders: Shareholders’ rights are well established in Hong Kong law but are subject to important caveats as regards the ability of a shareholder to acquire information relevant to the identification of the infringement of a right, and to pursue that right in practice. Hong Kong has not followed the adoption by the UK and Mainland China of group/joint litigation. Shareholders also have no rights in relation to breaches of listing rule disclosure requirements, despite having (together with regulators) an expectation that directors and issuers will comply with them. This is important since breaches of CG standards in listing rules currently do not amount to legal causes of action, yet shareholders qua investors do consider the CG practices of an issuer in the total mix of information available to them. Enforcement by regulators: The weak position of shareholders is exacerbated by the existence of an enforcement lacuna between the stock exchange and the SFC, whose powers are either too weak and ineffective, or too strong and insufficiently graduated in relation to a wrongdoing that does not warrant (or may not give rise to) court action. This represents a serious shortcoming in regulatory efficiency as compared to all the other markets studied and leaves many important CG standards set by the listing rules subject to ineffective enforcement. A number of the recommendations would enable earlier behaviour correction via more effective and graduated means of consequence management without requiring changes to the dual responsibilities model of regulatory oversight. Non-Hong Kong incorporated companies: Cross-border enforcement issues and potential conflicts of law are not unique to Hong Kong. However, the preponderance of Mainland enterprises listed in Hong Kong lends a different emphasis to the problem and establishing more effective means of enforcement against these companies has become essential. Improving ex ante mechanisms of enforcement that provide for more effective early warning identification and correction mechanisms can work well in this regard. New cross-border enforcement arrangements with the Mainland specifically tailored to the public capital market may also need to be considered. CG system architecture and policy: The Report observed significant differences in the way policy is developed and enforced in the different jurisdictions, and notes that the development of the Hong Kong market has in various ways outpaced policies on market development. Many of the 28 recommendations made in the Report are relatively straightforward to implement, others require further work to be undertaken as to their more specific details and potential ramifications. A few specifically contemplate a further consultation or enquiry process. An important interim purpose is to generate discussion that may lead to an enhanced recognition and understanding of areas in need of reform when Hong Kong is examined against best practices internationally.

Legal Regulation of Equity Construction: Shortcomings Determining Some Types of Economic Crimes

There are various types of unlawful, including criminal, behavior in the sphere of construction, but the lawmakers have reduced them all to «defrauding shareholders». The growth in the number of such offences is directly connected with the shortcomings in the system of subcontractor bidding, the legislation on self-regulating organizations and the general economic climate for developers. The authors conclude that «defrauded shareholders» are the result of failed financial pyramid schemes devised by developers to compensate for insufficient funds and expensive bank loans. The lawmakers should take into account not only the position of shareholders, but also the position of developers who need a cheap loan, while amendments to legislation set various limits to means available to them. Calculations show that a bank loan with a 5 % interest automatically eliminates most problems, but this solution is outside the industrys control. At present, a developer can only obtain a loan for project funding if the full project documentation is ready, the construction permit has been obtained and at least 30 % of the total amount has already been invested in the site. Most developers cannot meet these requirements. To summarize, there should be adequate punishment for offenders in the sphere of real estate (imposition of fines proportionate to the public danger of the action). At the same time, administrative liability is incurred if the actions of a person do not constitute a criminal offense. Administrative liability is less repressive than the criminal one, which is evident from the comparative analysis of administrative and criminal punishments and the type of deprivations and encumbrances that they entail. The future of equity construction depends not only on criminal or administrative legislation, but on the economic climate in Russia and the complex financial and legal measures aimed at protecting defrauded shareholders.

Activist‐impelled divestitures and shareholder value

Research Summary: This study analyzes how the divestitures that are impelled by activist investors in their campaigns against public corporations affect shareholder value. Using hand‐collected data on the activist campaigns that were launched against and the divestitures that were undertaken by Fortune 500 companies between 2007 and 2015, we find that activist‐impelled divestitures are more positively associated with immediate and longer‐term measures of shareholder value than comparable manager‐led divestitures. These performance differences persist for nearly two years after the completion of these deals. Our results empirically test the idea that firms with agency problems unlock shareholder value when they divest, and support the notion that activist investors fulfill an important external governance function. Our work also opens new research opportunities and offers practical implications as well.Managerial Summary: This study investigates how divestitures that are undertaken at the behest of activist investors affect shareholder value. We find that divestitures that were undertaken under pressure from activist investors are associated with more positive shareholder returns than comparable divestitures that were undertaken voluntarily by managers. These performance differences persist for nearly two years after the completion of these deals, alleviating concerns about the purported short‐termism of activist investors. Our findings suggest that activist investors may fulfill an important governance function by inducing managers to undertake strategies that they might not otherwise pursue, thereby unlocking shareholder value.

Shareholder value effects of corporate carbon trading: Empirical evidence from market reaction towards Clean Development Mechanism in China

Are shareholders sensitive to corporate initiative of implementing Clean Development Mechanism (CDM) projects? And if so, what are the key factors that influence the corresponding abnormal return to enterprises? To answer these questions, we employed an event study methodology to evaluate the stock market reaction to the CDM projects certification in China since 2005. We illuminated three sources of ambiguity in the relationship between corporate CDM initiatives and shareholder value, namely the impacts from time, CDM types, and credits of carbon emission reduction (CER). Our empirical results showed that the CDM initiatives could benefit corporate shareholder values. The expected CER credit is the main driver for the increase in shareholder value. However, we also found that the positive shareholder value effect of CDM decreases over time. In particular, industrial gas CDM projects rather than renewable energy and energy efficiency projects are preferred by shareholders; but there are no significant differences in the shareholder value effect between bilateral contracting and unilateral implementation. This paper advanced knowledge on the shareholder value effect of corporate CDM initiatives, and more generally, the impact of corporate carbon trading on financial performance of enterprises in an emerging country context.

Settlement agreement types of federal corporate prosecution in the U.S. and their impact on shareholder wealth

This paper analyzes the shareholder wealth effects of corporate prosecution settlements in the U.S. from 2001 to 2014. We focus on the relative monetary size of the settlement and on deferred prosecution and non-prosecution agreements in contrast to traditional plea agreements. The results show that the settlement of criminal prosecution leads to positive shareholder wealth effects, which may be due to the resolution of any remaining uncertainty with respect to the total settlement amount and lower than expected settlement costs. Stockholders generally view the announcement of plea agreements more positively than the announcement of deferred prosecution and non-prosecution agreements. The likelihood of a certain agreement type is strongly dependent on the crime committed. Moreover, larger firms with better board-related governance structures that have not been criminally prosecuted prior to the settlement are more likely to avoid a criminal conviction.

Global Mergers and Acquisitions-An event study analysis on Tata Chemicals and British Salt.

This study presents the effect of Global Merger on stock prices of Tata Chemicals. We examine shareholder wealth gains of Tata Chemicals that acquired British Salt in Dec 2010. This study analyses global merger by Tata Chemicals in UK and the returns to shareholders as a result of the merger, using the event study methodology (Brown and Warner, 1980, 1985; and MacKinlay, 1997).We find that foreign acquirers experience positive and significant abnormal returns of nearly two percent over days (- 10,+ 10) when they acquire target in the UK. To capture the impact on stock prices as a result of global M&A using the event study methodology. Using the single-factor model the study finds that the average cumulative abnormal return (CAR) of the Tata Chemicals is positive and substantial. These results are statistically significant also. Thus, the bidder firm got significant positive abnormal returns. The single-factor model finds that the combined CAR is positive, significant and substantial. The bidder firm created a wealth of Rs 33.73 million in a one day window (single-factor model) as a result of the merger. The merger announcements of Tata Chemicals have positive and significant shareholder wealth effect both for bidder and target firm. The aim is to understand the shareholder wealth effects of merger. *Using the single-factor model, the study finds that the average cumulative abnormal return (CAR) of the Tata Chemicals is positive and substantial. These results are also statistically significant. Thus, the bidder firm got significant positive abnormal returns. *The single-factor model finds that the combined CAR for the target firm is positive, significant, and substantial. The bidder firm created a wealth of Rs 33.73 million in a one-day window (single factor model) as a result of the merger.

When Fundamental Investors Relieve Market Pressures on Management: Evidence from France

In this paper, using an original database of investors operating on the French stock market, we investigate the real effect of ownership structure. We call fundamental investor an investor who, on average, holds on average his shares for at least two years, is in the top quartile of a firm ownership, and has an active allocation strategy. We show that firms with greater fundamental investor ownership experience lower market reactions to earnings surprises and lower mispricing. Moreover, we show that a long/short portfolio on fundamental ownership generates significant positive shareholder value over time. Our findings are consistent with greater fundamental ownership generating shareholder value by allowing management to focus on the long-term drivers of firm intrinsic value rather than on market sentiment. We finally look at the determinants of the presence of fundamental investors.

“Are the new proposals for reform of directors’ disqualification requirements in the UK sufficient or cosmetic?”

Purpose The paper aims to examine the circumstances in which directors who fail to perform their duties and responsibilities with due diligence can be sanctioned and to evaluate whether the recent changes for reform both in the UK and European Union (EU) are adequate to deter directors from misfeasance or to cure defects in the law. The purpose of this paper is to articulate regulatory regimes for disqualification of corporate directors and the proposed changes to tighten loose ends in this area of commercial law. This paper articulates the duties and responsibilities of Corporate Officer and the varied context in which they are manifested in the UK. Owing to the onerous nature of corporate directorship, directors cannot passively sit in boardrooms or on their committees, but they need to demonstrate that they are hands on to get things done as expected. The first part of the paper articulates the current regimes on director’s disqualification so that it is used as a basis to examine the efficacy of the proposed changes for reform both on this area in the UK and Europe. The second part of the paper examines the proposed reform for change both in UK and in Europe and their efficacy to plug in law and practice. This area of corporate law is increasingly regulated by a number of agencies to ensure that directors perform their duties and responsibilities with due diligence. Design/methodology/approach The paper is structured in two parts whereby the first part examines the framework for disqualification of corporate directors and related issues in the UK. The second part articulates recent changes in the law on director’s disqualification with a view to evaluate whether these changes are robust enough to enhance the position of shareholders to ensure the company is well-managed for their interests or whether overregulation is inimical to the company by hindering directors from executing their corporate responsibilities with a measure of discretion. Findings The findings reflect that regulatory reforms should be evolved and implemented to strike a balance in ensuring that regulatory regimes are implemented not to penalise corporate directors unnecessarily but also to ensure that rules are respected. The paper urges caution because overregulation can inhibit corporate director from taking necessary risks (to be more guarded) to secure their positions. Research limitations/implications The paper was written on the basis of secondary and primary data sources often also alluding to empirical cases studies. It would have been better to carry out structured interviews to corroborate some of the findings of the paper. Practical implications Corporate governance is an onerous task, and thus, it requires corporate officers to exercise due diligence in execution of their duties and responsibilities. Getting the issue of corporate governance wrong often has ramifications for the company and respective corporate officers. These ramifications include not least penalising individual directors by disqualification from holding corporate directorship or the company being wound up altogether. Social implications Corporation plays an important role in the society such as creating employment opportunities, markets for goods and services, generating revenues to governments and the list goes on. Therefore, the way they are managed has important implications for societies and governments. Originality/value Even though the paper was written on the basis of primary and secondary data sources, it was done in a distinctive manner to foster the objective for writing it.

Bidders, Rivals, and Wealth Creation of the Banking Market Consolidation in the Asia-Pacific Region

We analyze the shareholder wealth implications of the financial sector consolidation in the Asia-Pacific region between 1995 and 2013. The results suggest that market power consideration play a prominent role when capital market participants value M&As between Asian financial institutions. Asian bidders achieve highly significant positive shareholder wealth effects, while their non-Asian peers obtain insignificant returns. Targets of non-Asian bidders earn significantly higher returns than targets of Asian bidders. At the same time, target rivals also stand to gain from further consolidation in the market. Overall, Asian bidders and their rivals profit from consolidation, particularly on the national level, suggesting that market power considerations may be a dominant motivation behind these mergers.