Presence Of Institutional Shareholders Research Articles

Analysis of The Influence of Institutional Ownership, Managerial Ownership, and Ownership Structure on Company Financial Performance: Case Study of Manufacturing Companies In Indonesia

This research aims to analyze the impact of institutional ownership, managerial ownership, and ownership structure on the financial performance of manufacturing companies in Indonesia. Financial performance is measured using various indicators such as profitability, liquidity, and leverage. The study is based on data from a number of manufacturing companies in Indonesia during the period 2020-2022. The results of the analysis indicate that institutional ownership has a significant positive impact on the financial performance of companies, suggesting that the presence of institutional shareholders can enhance efficiency and profitability. On the other hand, managerial ownership also contributes positively to financial performance, indicating that active management participation in share ownership can drive growth and profitability. However, the research findings show that the impact of ownership structure varies depending on the financial performance indicators considered. There are significant differences in the influence of ownership structure on profitability, liquidity, and leverage of the companies. This research provides valuable insights for stakeholders, regulators, and company owners in understanding the role of institutional ownership, managerial ownership, and ownership structure in enhancing the financial performance of manufacturing companies in Indonesia. The practical implications of these findings can help companies in making better decisions regarding share ownership and financial strategies.

Promoting organizational diversity and preserving socioemotional wealth: can family businesses balance the two?

PurposeA key characteristic for a family firm, preservation of socioemotional wealth, may appear to be at conflict with the concept of organizational diversity. The authors investigate how organizational diversity, captured through heterogeneity in ownership structure, diversity in the senior management team, interfaces with the concept of the socioemotional wealth of family businesses in an emerging economy, when these firms pursue inorganic growth strategies.Design/methodology/approachDrawing on the concepts of socioemotional wealth, behavioral agency theory and bifurcation bias, the authors develop perspectives on how ownership structure, family influence in executive management and institutional shareholding influence a family firm's internationalization strategies captured through propensity to pursue cross-border M&A – an activity that may threaten the preservation of socioemotional wealth. The authors also explore the role of business group affiliation, another organizational diversity construct, and contingent parameters like past financial performance and export intensity in this study. The authors take pooled data over 15 years, involving 346 large firms from India, which are family-controlled, to carry out the study.FindingsThe authors’ empirical analysis shows that family stake in the company and family members' presence in the executive team negatively influence the propensity to pursue cross-border M&A activities. A firm's affiliation to a business group moderates these negative relationships. On the other hand, the presence of institutional shareholders, positive past financial performance and export intensity positively influence cross-border M&A propensity.Originality/valueThe results establish that family businesses' attempts to preserve socioemotional wealth may come at the cost of promoting organizational diversity.

The role of institutional shareholders in the relationship between unconditional conservatism and earnings management

This study investigates whether and how institutional shareholders affect the relation between unconditional conservatism and earnings management. We analyze the relation between unconditional conservatism and accrual-based earnings management and the relation between unconditional conservatism and real earnings management, focusing on the role of the institutional shareholders variable in these two relations. First, we find evidence of positive (negative) relations between unconditional conservatism and accrual-based (real) earnings management. Second, we demonstrate that the presence of institutional shareholders has a mitigating (amplifying) impact on the relation between unconditional conservatism and accrual-based (real) earnings management. This study contributes to enrich the previous literature in two ways. First, it extends the strand of research on the relation between accounting conservatism and earnings management (Garcìa Lara, García Osma, & Penalva, 2020; Chen, Hemmer, & Zhang, 2007; Gao, 2013), focusing on unconditional conservatism since it is less prevalent than conditional conservatism in previous literature (Ruch & Taylor, 2015). Second, it extends the strand of research on the impact of institutional ownership on accounting practices (Farooq & El Jai, 2012; Sakaki, Jackson, & Jory, 2017), highlighting the role of the institutional shareholders in the relation between unconditional conservatism and earnings management

Impact of corporate governance, financial and regulatory factors on firms’ acquisition ability

Purpose The capital markets witness phenomenal shifts of corporate control. With the shift of world economy into a global one, there has been a rapid increase in the volume of acquisitions. The previous studies shed light on the motives behind acquisition and impact of acquisition on both bidding and target firms. The purpose of this study is to bridge a gap in literature by exploring the factors affecting the acquisition ability (AA) of the firms. The study has analyzed the role of financial strength, corporate governance and regulatory influence on AA of acquiring firm. Design/methodology/approach Cross-sectional data has been analyzed with respect to Pakistan stock exchange for a period of 2004-2017 by using logit regression. Findings Analysis indicates that firm-specific variables are important determinants in firm’s decision to acquire. Chief Executive Officer duality and presence of institutional shareholders on the board contribute to this important phenomenon in the life of the acquiring firms. Bidding firm’s financial strength is also another important consideration while going for corporate control transfer transactions. The empirical results indicate the better AA for firms characterized by minimum capacity usage, lower level of intangible assets, lower debt levels and lower advertising expenses. However, the regulatory factor has no significant role in firms’ AA. The findings of the study are helpful for managers, regulators and policymakers. Originality/value Analyzing the role of financial strength, corporate governance and regulatory influence on AA of acquiring firm is a rare study, especially in an emerging country such as Pakistan.

Ownership structure and firm performance of listed tourism firms

AbstractOwnership structure has been identified as a critical governance component due to its effect on firm performance. Within ownership structure, issues of institutional shareholders, cash flow rights of controlling owners, and ownership discrepancy have not been examined in the tourism sector. The current study uses listed tourism firms in Taiwan to empirically examine how these three variables influence firm performance. Results show a positive effect on return on assets and Tobin's Q from the presence of institutional shareholders and cash flow rights of controlling owners. Ownership discrepancy has a negative effect on Tobin's Q. The present results can make contributions to agency theory and principles for good governance.

Top-executives Compensation: The Role of Corporate Ownership Structure in Japan

This paper explores the impact of corporate control, measured by ownership structure, on top-executives' compensation in Japan. According to agency theory, the pay-performance link is expected to be affected by the firm's ownership structure. Using a sample of 4,411 firm-year observations (401 firms for the 11-years period from 2001 to 2011) for Japanese non-financial firms publicly traded on the first section and second section of the Tokyo Stock Exchange (TSE), this study demonstrates that institutional ownership (both financial and corporate) is negatively related to the level of executives' compensation. Such finding is in line with efficient monitoring hypothesis which claims that the presence of institutional shareholders provides direct monitoring over managers, limits managerial self-dealing and curves the increase in top-executives pay. On the other hand, the results also show that managerial ownership is positively related to their compensation which supports managerial power theory hypothesis, i.e. management-controlled firms are more likely to extract more compensation from the business than other firms. Overall, this study confirms that corporate control has significant impact on cash compensation paid to Japanese top-executives after controlling the conventional pay-performance relationship.

Ownership structure and its effect on dividend policy in the Mexican context

This work focused on analyzing whether the ownership structure has any effect on the dividend policy of companies in the Mexican market. The decision of dividend payment is one of the major elements in corporate policy, as this dividend policy influences the value of the company. Therefore, decisions such as adopting a company growth policy through the reinvestment of profits, or better yet allocating them to the payment of dividends, are going to be influenced by the type of ownership structure that dominates the company. The analysis was based on three types of ownership structures such as: families, institutions (mainly banks) and small blocks of shareholders. Our results show that the concentration of property in families negatively influences the payment of dividends, whereas the presence of institutional shareholders has an inverse effect on the payment of the same. This indicates that the presence of big shareholders foreign to the families has a different effect on the payment policy of dividends in the Mexican context. This work provides literature information about the context of emerging countries as is the case of Mexico, given that much of the existing investigations focus on European or North American contexts, where the markets are well regulated and property is broadly distributed.

Estructura de propiedad y su efecto en la política de dividendos en el contexto mexicano

In this paper we focus on analyzing if the ownership structure has any effect on the dividend policy in the Mexican market. The decision to pay dividends is one of the key elements within corporate policy, since that dividend policy has an influence on the company value. Therefore, decisions such as adopting a growth policy of the company through the profits reinvestment or destine these profits to dividends pay, could be influenced by the ownership structure. We base our analysis on three types of ownership structure: families, institutions (mainly banks) and small blocks of shareholders. Our results show that the concentration of ownership in families has a negative influence on the dividends payment, while the presence of institutional shareholders has an inverse effect. This indicates that the presence of large shareholders different to families have a dissimilar effect on dividend policy. Our work contributes to the literature in the context of emerging countries such as Mexico, since much of the existing research has focused primarily in environments such as Europe or the United States, where markets are well regulated with widely distributed property.

A Study on the Relationship between the Presence of Institutional Shareholders, Bank Shareholders and the Cost of Financing Firms

A B S T R A C T The present study seeks to obtain evidence regarding the relationship between the presence of institutional investors, bank shareholders and financial costs of listed firms in Tehran Stock Exchange. To achieve this goal, the information of 188 firms is collected through the financial statements of firms listed in the stock market, and analyzed through R and spss statistical software and combined data. In this study, the presence of institutional investors and shareholders of the bank is evaluated as the independent variable and financial costs as the dependent variable. Based on Albring Model (2014), two indices are studied as the variables of financing. According to the results of research hypotheses, the existence of a significant relationship between the variables of institutional investors’ presence and firm growth, due to the reduction of financial costs, debt-to-asset ratio and dividends on assets ratio, taking into account internal growth rate, has been approved. In addition, the presence of this relationship is confirmed about debt-to-asset ratio with regard to the variable of short-term growth rate.

The Value of Governance

Corporate directors sometimes question the usefulness of “good governance”, asking whether implementing measures to improve corporate governance makes a difference. As this article shows, the preponderance of academic research suggests that the quality of governance does indeed matter. A common theme is a statistically significant and positive relationship between corporate governance measures and firm value. For example, Board composition, ownership structure, and the presence of institutional shareholders have all been found to relate to valuation outcomes. The strong implication is that the increasing emphasis by institutional investors such as pension funds on the quality of corporate governance in their investment practices is not misplaced.

Do Non-Executive Directors and Institutional Shareholders Influence Firm Performance? Evidence from UK

Corporate governance is a concept about the way in which board oversees the running of the company by its managers and how board members are in turn accountable to shareholders and the company. Good corporate governance has implications for company behavior towards employees, shareholders, customers and banks. After the financial crisis of 2007 the corporate world has become more active in preventing shareholders' interests. Several recommendations and suggestions have been made by different codes and bodies to influence the activities of both Non-Executive Directors (NEDs) and institutional shareholders to increase firm performance. The empirical evidence regarding this issue indicates a mixed result and there is still intense debate over the contribution of NEDs and institutional shareholders. For this, I analyzed the relationship between firm performance and NEDs & institutional shareholders in UK. I chose FTSE 100 companies and all the required data have been collected from Financial Times and Yahoo Finance. Several control variables (e.g. Firm Size, Leverage, Cash Flows and Capital Expenditure) have also been included in the analysis due to their close relationship with the firm performance. I developed a multiple regression model following the approach of Bhagat and Black (2002) and used SPSS program to run the multiple regression models. Both the results indicate that NED’s presence is related with firm performance and the presence of institutional shareholders is not related with firm performance. The result also suggests that NEDs are effective monitors on behalf of the shareholders and that the institutional shareholders are not. However, the results cannot be taken to conclude the relationship at this moment due to the limitations it faced and further robustness checks and research are needed to form a concrete opinion on NEDs and institutional shareholders in terms of firm performance.

Managerial Compensation, Voluntary Disclosure, and Large Shareholder Monitoring

We analyze a manager's investment decision when choosing between projects with differential resolution of information in an asymmetric information setting. The manager maximizes an objective function that has weights on the market value of the firm and the true long-term value of the firm reflecting the concerns of shareholders with short-term and long-term investment horizons. We show that the manager's concern for the current market value of the firm can lead to investment distortions - both overinvestment in short-term projects consistent with the literature and an over-investment in long-term projects. We also show that a manager's concern for current market value can induce the manager to voluntarily disclose his private information. Voluntary disclosure serves to reduce the cost of large shareholder monitoring, transfers a part of the monitoring costs to other shareholders, and alleviates investment distortion. In the context of compensation contracting, our results imply that equity based incentives can play a disclosure role in inducing managers to voluntarily disclose private information in addition to their traditional role in aligning managerial and shareholder interests. Our model generates several testable empirical implications. In firms with high levels of information asymmetry incentive compensation along with monitoring-with-disclosure constitutes and optimal governance structure. In these firms, the incentive compensation and large shareholder monitoring are complementary. In firms with low levels of asymmetric information and in firms where voluntary disclosure does not significantly reduce the large shareholder's monitoring costs, incentive compensation and monitoring are substitutes. Our model thus predicts that the use of stock options in executive compensation will be associated with the presence of institutional shareholders and will induce voluntary disclosure consistent with the findings in the empirical literature.

Do Institutional Investors Exacerbate Managerial Myopia?

This study analyzes corporate expenditures for property, plant and equipment (PP&E) and research and development (R&D) for over 2,500 firms from 1987 to 1994. We document a positive relation between expenditures for PP&E and R&D and institutional share ownership. This relation is robust to a variety of specifications. We examine the link between firm-level expenditures and institutional ownership by using lead-lag structures and changes in institutional ownership. The data do not support the contention that institutional investors cause corporate managers to behave myopically. Indeed, the data indicate that the presence of institutional shareholders allows managers to invest more in PP&E and R&D than would individual shareholders.