Private Benefits Research Articles

Earnings quality, institutional investors and corporate cash holdings: evidence from India

PurposeThis paper aims to examine the relationship between earnings quality and corporate cash holdings in an emerging economy. Existing literature posits that earnings quality is a result of information asymmetry and firms with lower earnings quality increases cash holdings, to shield the firm from future uncertainties. In this paper, the authors propose a ‘private benefits hypothesis’, which suggests that lower earnings quality is an indicator of opportunism and expropriation of resources in the firm, through tunneling or excessive executive compensations. As a result, firms with lower earnings quality increase cash holdings in their control, to increase their private benefits and to avoid the scrutiny of the external stakeholders. The authors further examine the monitoring role played by institutional investors on cash holdings, with varying degrees of earnings quality.Design/methodology/approachThis study uses an unbalanced panel data sourced from Prowessdx, from 2000 to 2019. The analysis employs 20,231 firm-year observations from 2,421 firms. Earnings quality is calculated following Dechow and Dichev (2002).FindingsEmpirical analysis confirms that the firms with higher earnings quality reduce cash. Further, institutional investors reduce the cash holdings in firms with higher earnings quality. Institutional investors effectively reduce the cash only in firms with at least 10% of equity shareholding. The results are robust to alternative measures of earnings quality and endogeneity concerns.Originality/valueThis study diverges from the information asymmetry hypothesis in the existing literature on earnings quality and cash holdings and highlights the underlying private benefits hypothesis, that will impact cash holdings. Next, the 10% institutional shareholding is important in the Indian context as it represents the minimum threshold at which block holders can request extraordinary general meetings (Section 100 of the Companies Act 2013) or the involvement of the National Company Law Tribunal (NCLT) (Section 213 of the Companies Act 2013). This study highlights that unlike in Anglo-Saxon economies, institutional investors or other minority shareholders are empowered by the Companies Act 2013 to play a vital role in corporate governance with a mere 10% equity.

Management‐Employee Alliance and Earnings Opacity*

ABSTRACTThe rise of stakeholder governance has triggered a wave of legal initiatives to strengthen the employee voice in firms. However, how managers trade off the competing objectives between shareholders and employees when making financial reporting decisions is not well understood. Exploiting staggered employment protection laws (EPLs) across 26 countries, we find that managers facing strong EPLs report more opaque earnings. Exploring the mechanism, we show that EPLs induce manager‐employee alliance: EPLs enhance employees' power to influence managers' private benefits and create an incentive for managers to treat employees more favorably, leading to an increase in manager‐employee reciprocal benefits. Further analysis shows that the alliance drives the increase in opacity following EPLs. Such alliance‐induced opacity impedes the ability of institutional shareholders to make timely adjustments to portfolio holdings in response to EPLs. Last, we identify several governance mechanisms that help break the manager‐employee nexus and restore reporting transparency. Overall, our study documents manager‐employee alliance as a potential cost of rigid labor laws and an important source of managerial reporting bias.

When Do Controlling Shareholders “Over-invest”? The Disciplinary Effect of Product Market Competition

This study examines the effect of the interaction between controlling shareholder ownership and product market competition on investment inefficiency in Korea. Consistent with classical agency theory, this study finds that the lower the controlling shareholder ownership, the greater the overinvestment. However, this relationship strengthens in noncompetitive markets but disappears in competitive markets. This suggests that product market competition has a disciplinary effect on the incentive of controlling shareholders to pursue private benefits. This study has implications for the disciplinary effect of competition and expands the literature on agency theory in emerging countries with concentrated ownership structures.

The economic impacts of house screening against malaria transmission: Experimental evidence from eastern Zambia

Malaria imposes an economic burden for human populations in many African countries, and this burden may be reduced through house screening initiatives. We use a randomized controlled trial to measure the economic impacts of house screening against malaria infection. We use a sample of 800 households from 89 villages in rural and peri-urban Zambia to collect baseline data in August 2019 and endline data in August 2020. The main outcome variables are (self-reported) malaria prevalence rates, labor supply, and income, and consider individual and household-level outcomes. House screening reduces malaria prevalence, the number of sick days due to malaria, and the number of malaria episodes. Impacts on adults are more pronounced than on children. In terms of economic impacts, house screening increases labor supply and (household) income. We find particularly large effects on labor supply for women household members. A cost-benefit analysis, based on estimated benefits and measured costs, suggests that the private benefits of house screening exceed the costs. While not all houses are suitable for house screening, we conclude that screening is a promising and cost-effective approach to reduce malaria infections.

Coopetition configuration and performance of international joint ventures for high-speed rail projects

PurposeMembers in the international joint ventures (IJVs) for high-speed rail (HSR) projects usually engage in coopetition interactions to create common benefits (CB) and simultaneously safeguard private benefits (PB). Previous studies of coopetition and performance using variance-based methods usually ignore the combinational influence of diverse coopetition constructs on performance, which can be effectively compensated by adopting a configuration perspective. Therefore, this research aims to ascertain various combinations of three coopetition constructs (coopetition relationship, coopetition capability and coopetition strategy) that lead to high IJVs’ performance through a configuration approach.Design/methodology/approachFirst, the research framework of coopetition configuration was established, and the key constructs were operationalized, which were validated by expert interviews. Then the information on 12 HSR IJVs was collected and quantified through nine rounds of interviews and a questionnaire survey. Later, the fuzzy-set qualitative comparative analysis (fsQCA) was applied to explore what coopetition configurations benefit the CB or PB achievement.FindingsConfiguration results indicate that six coopetition configurations lead to CB outcome and seven configurations lead to PB outcome. Based on the results, coopetition contexts are divided into four categories: firm-based coopetition, project-based coopetition, firm-project-based coopetition and none-based coopetition. Then, a selection scheme for coopetition strategies in various contexts has been developed. The results also show that the core conditions mostly appear in the coopetition relationships and coopetition strategies dimensions, and the optimal coopetition strategies vary in different contexts.Originality/valueThis study enhances the theoretical understanding of coopetition in HSR IJVs and assists relative HSR industrialists, as well as the mega infrastructure project managers, in IJVs’ implementation. The configuration perspective of this paper also contributes to a systemic and holistic view of coopetition in HSR IJVs.

Financing and provision of healthcare for two billion people in low-income nations: Is the cooperative healthcare model a solution?

The international consensus in support of universal health coverage (UHC), though commendable, thus far lacks a clear mechanism to finance and deliver accessible and effective basic healthcare to the two billion rural residents and informal workers of low- and lower-middle-income countries (LLMICs). Importantly, the two preferred financing modes for UHC, general tax revenue and social health insurance, are often infeasible for LLMICs. We identify from historical examples a community-based model that we argue shows promise as a solution to this problem. This model, which we call Cooperative Healthcare (CH), is characterized by community-based risk-pooling and governance and prioritizes primary care. CH leverages communities' existing social capital, such that even those for whom the private benefit of enrolling in a CH scheme is outweighed by the cost may choose to enroll (given sufficient social capital). For CH to be scalable, it needs to demonstrate that it can organize delivery of accessible and reasonable-quality primary healthcare that people value, with management accountable to the communities themselves through structures that people trust, combined with government legitimacy. Once LLMICs with CH programs have industrialized sufficiently to make universal social health insurance feasible, CH schemes can be rolled into such universal programs. We defend cooperative healthcare's suitability for this bridging role and urge LLMIC governments to launch experiments testing it out, with careful adaptation to local conditions.

The Relation Between Cash Reserves, Governance, and Donations in Nonprofit Organizations

Cash reserves enable nonprofit organizations to absorb financial shocks and meet unexpected demand for charitable services. Large cash holdings, however, provide managers with an opportunity to use funds to accrue private benefits, and excessive cash levels may negatively influence donors’ contribution decisions. Although an extensive literature examines cash holdings in for-profit firms, few accounting studies address the determinants and consequences of cash reserves in nonprofits (Core et al., 2006). This study investigates whether corporate governance mechanisms, which are designed to limit managers’ opportunistic behavior, are associated with nonprofit managers’ ability to build cash reserves. It also examines how excessive cash reserves influence donors’ decisions to contribute to a charity. Results indicate that cash reserves are positively associated with three proxies for corporate governance (board size, board independence, and board monitoring activities). We also find that excessive cash holdings are negatively associated with future donations, after controlling for governance. Our results suggest that donors withhold contributions from charities that are likely to hold their donations for future use rather than deploy them in the current period. This study contributes to research addressing the role of governance in controlling nonprofit managers’ actions and provides new evidence on factors affecting donors’ giving decisions.

Making Social Welfare Policy in America: Three Case Studies since 1950

Making Social Welfare Policy in America: Three Case Studies since 1950

Resource rents, savings behavior, and scenarios of economic development

The paper revisits the nexus between natural resources and economic growth from the lens of development economics. It augments the traditional dual-sector economy model by the assumption that in addition to capitalists, also workers contribute to the capital accumulation through private savings out of their wage income. The proposed differential game theory model of the interaction between the public and the elites identifies two realistic open loop Nash and three Stackelberg scenarios for the management of the commodity driven budget surplus. Based on the conventional transversality conditions, the model detects a progressing decay of social cohesion and institutional quality. It shows that at the early stages of the exploitation of the natural resource riches, both the public and elites enable a rather modernization-friendly scenaros. At the rather advanced stages of the exploitation of natural resources both groups try to maximize their short-term private benefits and by doing so protract or even inhibit the process of economic modernization. The study finds that the savings behavior of the workers has a positive modernization effect. Nevertheless, workers’ savings cannot fully offset the negative modernization effects of the inferior management of natural resource revenues.

Realizing direct and indirect impact of environmental regulations on pollution: A path analysis approach to explore the mediating role of green innovation in G7 economies.

The alarming impact of climate change and environmental pollutants has increased the focus of policymakers and think tanks' focus on formulating environmental regulations. Environmental regulations may reduce emissions directly and indirectly, as postulated by the famous Porter Hypothesis. It shows that environmental regulation may enhance pollution-reducing innovation by reducing agency costs while at the same time increasing firms' private benefit. The study is designed to investigate environmental regulations' direct and indirect impact on CO2 and GHG emissions using innovations as mediation factors. The study employs a structural equation method using data on G7 economies from 1990 to 2020 to test the relationship between regulations, innovations, and pollution. The study findings confirm that environmental regulations help reduce emissions directly. Our findings also confirm the Porter hypothesis whereby regulations encourage innovations and result in reduced emissions through this indirect channel. The study findings have significant implications for controlling pollution through placing environmental regulations and encouraging innovations.

Beyond energy efficiency: Do consumers care about life-cycle properties of household appliances?

Legislative proposals intend to require that manufacturers provide consumers with information on product life-cycle impacts. Yet, little is known about how consumers value such life-cycle information and who would be most sensitive to it. In this paper, we employ data from a demographically representative household survey among the adult population in Germany (N = 404), which elicits individuals’ preferences for energy-related attributes of refrigerators. Based on mixed logit analysis of a discrete choice experiment, we find that consumers, on average, dislike refrigerators with much higher embodied energy, value the highest energy class, and prefer refrigerators with longer warranty periods. Latent class models distinguish three consumer classes: 'price sensitives' (36%), 'quality seekers' (24%) and 'energy savers' (40%). 'Energy savers' are characterized by a higher environmental identity, energy literacy, and more patience than the other classes. Rating scales reveal that consumers consider life-cycle properties with direct, private benefits much more strongly than properties with mainly indirect, social benefits. Results from ordered logit models suggest that women with more patience and high environmental identity consider all life-cycle properties more strongly, while durability appears to also be valued more by low-income and more energy literate consumers. The results support ongoing policy initiatives that require the provision of life-cycle information and call for instruments to help consumers select appliances based on life-cycle costs.

Hedgerows have contrasting effects on pollinators and natural enemies and limited spillover effects on apple production

Agricultural intensification has resulted in a decline in insect biodiversity and threatens the provision of valuable ecosystem services. Agri-environment schemes (AESs) have been implemented in an effort to conserve biodiversity on farmland and increase agricultural sustainability, but their effectiveness can vary widely. To better determine which factors influence AES effectiveness, the relative roles of local habitat features, habitat quality, and landscape context need to be further explored. The aim of this study was to determine the most important factors influencing field margin AES effectiveness in commercial apple orchards, in terms of arthropod biodiversity conservation and ecosystem service provision. We surveyed wild bees and aphid natural enemies in field margins and apple trees in 20 orchards, ten bordered by hedgerow field margins (an AES) and ten with herbaceous field margins (no hedgerows present, not an AES). We considered field margin floral resources and the cover of semi-natural habitat in the surrounding landscape as indicators of local habitat quality and landscape context, respectively. We furthermore quantified pollination and pest control as measures of ecosystem service delivery and the relationship between arthropod communities and apple yield (initial and final fruit set) and quality. We found that hedgerow presence strongly predicted both pollinator and natural enemy communities and that these relationships were more pronounced than those with local habitat quality and landscape context. Hedgerows were negatively related to wild bee richness and abundance within the orchard, and positively related to natural enemy richness and abundance at the field margin but not within the orchard. We found no relationships between local and landscape factors and ecosystem service delivery, and no relationship between wild bee communities and apple yield, suggesting that apple is not pollen limited in our study system. There was, however, a negative relationship between natural enemy richness and initial fruit set. We conclude that annually cut hedgerows can benefit the conservation of natural enemies, but have limited arthropod-mediated private benefits for apple production, and likely need to be supplemented with additional local habitat resources for the conservation of wild bees. Our findings indicate that local habitat factors can strongly influence biodiversity regardless of landscape context, but that AESs likely need to be designed with separate biodiversity and ecosystem service targets, and specific taxonomic groups, in mind.

DIŞSALLIK VE COVİD 19 AŞISININ OPTİMUM ÜRETİM SORUNU

The COVID 19 pandemic, a new type of coronavirus, started about a year and a half ago. The rapidly developing COVID-19 pandemic has not only put many countries in the world into a health crisis; but also increasingly brought along economic and social crises. According to economic theory, the optimum production level of goods that emit positive externalities under free market conditions remains below the socially desirable amount. Since externality requires consideration of societal benefits and costs rather than private benefits and private costs, the state should be a regulator in the market. The COVID 19 vaccine is heavily subsidized and consumption expenditures are insufficient and covered by the public. Despite this, a proposal to waive the intellectual property right was put forward to ensure social immunity as soon as possible by increasing the rate of vaccination at the global level; however, no consensus has been reached. In this study, the lack of COVID 19 vaccine supply and how to remove the restrictions on this issue are discussed. In the first chapter, the concept of public goods is explained in detail. The subject of the second part is the intervention of the state in the production of externalities and goods that create externalities. In the third and last part, the inadequacy of the COVID 19 vaccine supply and the measures to be taken to increase the supply is discussed.

Fraud within the Nigerian health system, a double threat for resilience of a health system and the response to the COVID-19 pandemic: a review.

As Nigeria battles the COVID-19 pandemic, systemic fraud within the health system may undermine the efforts to halt the devastating effect of the disease and the fight against COVID-19. Fraud is a major concern worldwide, especially in developing countries such as Nigeria, where it is widespread within the health system. The vulnerability of the Nigerian health system despite several efforts from relevant stakeholders, has consistently been underscored before the pandemic arose, raising serious concerns. These concerns include fraud, embezzlement, and mismanagement of funds, exploitation, lack of transparency in policymaking, cutting corners in procurement processes, and taking advantage of the healthcare workforce for personal benefits. Also, other involvements in the vulnerability of the Nigerian health system that are worrisome include stakeholders using the pandemic to their advantage to increase their private benefits, a short supply of vital health resources, fraudulent recruitment of the health workforce, and ineffective crisis management. This study explores fraud within the Nigerian health system, its impact and implications for health-system resilience as well as its response to the COVID-19 pandemic. Guided by agency theory, causes and impacts of fraud in the health system and its implications on the response to COVID-19 were explained. Systematic review method was employed; out of 1462 articles identified and screened dated from 1991 to 2021, sixty articles were included in the analysis and interpretation. Specific fraud interventions should focus on a weak and vulnerable health system, service delivery, high-risk institutionalized health workforce, and addressing issues of fraud within and outside the health system in order to curb the dreaded COVID-19 and its variants in Nigeria.

Operationalizing digital self-determination

Abstract A proliferation of data-generating devices, sensors, and applications has led to unprecedented amounts of digital data. We live in an era of datafication, one in which life is increasingly quantified and transformed into intelligence for private or public benefit. When used responsibly, this offers new opportunities for public good. The potential of data is evident in the possibilities offered by open data and data collaboratives—both instances of how wider access to data can lead to positive and often dramatic social transformation. However, three key forms of asymmetry currently limit this potential, especially for already vulnerable and marginalized groups: data asymmetries, information asymmetries, and agency asymmetries. These asymmetries limit human potential, both in a practical and psychological sense, leading to feelings of disempowerment and eroding public trust in technology. Existing methods to limit asymmetries (such as open data or consent) as well as some alternatives under consideration (data ownership, collective ownership, personal information management systems) have limitations to adequately address the challenges at hand. A new principle and practice of digital self-determination (DSD) is therefore required. The study and practice of DSD remain in its infancy. The characteristics we have outlined here are only exploratory, and much work remains to be done so as to better understand what works and what does not. We suggest the need for a new research framework or agenda to explore DSD and how it can address the asymmetries, imbalances, and inequalities—both in data and society more generally—that are emerging as key public policy challenges of our era.

A Comparative Study of the Retirement Benefits of Private and Government Employees Towards An Information Awareness Campaign

A Comparative Study of the Retirement Benefits of Private and Government Employees Towards An Information Awareness Campaign

Research on the Mechanism of the Impact of M&A Motivation on M&A Performance

Under China’s financial supervision system, the financial industry gradually tries to merge and acquire in order to achieve the strategic goal of industrial integration and economic transformation, and maintain a state of continuous rising profitability. M&A, as an important means to reallocate resources in the capital market, has a far-reaching impact on enterprises and is also a hot issue in the field of corporate finance research in recent years. Because of the complexity of M&A activities, the identification of M&A motives is particularly important for the study of M&A performance and related issues. However, the previous research lacks a systematic study of M&A motivation and its influence on M&A performance from the perspective of “agent”. Therefore, based on the existing M&A theories and the actual situation in China, this article studies the relationship between managers’ agent M&A motivation and M&A performance from the perspective of “agents”. This article innovatively introduces a compensation mechanism to study the impact of agent M&A motivation on M&A performance, which can obtain whether agent M&A motivation damages corporate value, and can also understand whether executives seek private benefits through M&A, providing evidence for the agent motivation hypothesis from multiple perspectives.

Optimal ownership and capital structure with expansion investment, debt renegotiation and private benefits of control

Optimal ownership and capital structure with expansion investment, debt renegotiation and private benefits of control

THE MONEY LAUNDERING SCAM INITIATED BY DEWAN HOUSING FINANCE CORPORATION LIMITED (DHFL) AND YES BANK: AN EXPLORATORY ANALYSIS OF OVER-LEVERAGED BORROWINGS

Dewan Housing Finance Corporation Ltd. (DHFL) was founded in 1984 in the state of Maharashtra, India by the Wadhawan family to facilitate access to cost-effective housing finance opportunities for the lower and middle-income strata residing in semi-urban and rural India. Till 2018, the firm was ranked amongst the distinguished performers in the housing finance industry in the nation. Yes Bank was founded in India in 2004 by Rana Kapoor and Ashok Kapur. In its initial years of expansion, Yes Bank experienced immense development. However, the bold and aggressive lending practices by the bank involved high risks and the bank’s loan book included diverse defaults including DHFL. This impetuous lending ultimately led to the Non-Performing Assets (NPA) tragedy and the RBI’s authorized moratorium for Yes Bank. This research paper provides a detailed analysis of an Indian investigative journalist company named Cobrapost which published an exposé in January 2019 indicting DHFL of exploiting more than INR 31,000 crore of public finances through diverse shell firms and siphoning private benefits primarily for the firm’s immediate stakeholders. The study further underscores the details of the famous fraudulent case between Yes Bank and DHFL, the Central Bureau of Investigation booking Rana Kapoor and the Wadhawan brothers on accusations of criminal conspiracy and defrauding under the Prevention of Money Laundering Act, 2002 and the associated negative consequences for the two business organizations. This banking forgery has been labeled as one of the biggest scams in the banking industry in the nation. So let's hop on to read the detailed case analysis

Coalizão de acionistas e dividendos: evidências do mercado de capitais brasileiro

ABSTRACT This article examines the effect of the heterogeneity of shareholder coalitions on the distribution of dividends in companies listed in Brazil. To analyze the relationship between large shareholders and dividends, it is essential to consider the way the control is ensured. Large shareholders can share control by forming coalitions, and differences in the composition of coalitions can alter the incentives the cooperating parties have for the activity of monitoring. Based on shareholder agreements, we explore the heterogeneity among shareholder coalitions by presenting elements that can characterize the role of shared control in the corporate governance of companies in a market environment described by the concentration of control in a single large shareholder. This study presents potential economic and social impacts, as it is of particular interest to outsider shareholders, and even potential investors, to know how insiders can use dividend policy, since the distribution of profits tends to mitigate agency problems. To identify the shareholder coalitions we resorted to shareholder agreements. The analysis model was estimated using the two-stage system generalized method of moments (GMM-Sys) with unbalanced panel data for the period from 2008 to 2019. We discovered that the number of shareholders in the coalition and the leveraging of the voting rights of the biggest shareholder in the coalition are negatively related to the dividends distributed, and that the voting rights of the coalition are positively related to the dividends distributed. These results contribute to the principal-principal approach of agency theory and highlight that the incentives and capacity of shareholder coalitions to pursue private benefits of control depend on their own characteristics.