Protection Of Minority Shareholders Research Articles

The Effect of Board Gender Diversity on Dividend Payments : Evidence from Indonesia

This research aims to analyze the impact of board gender diversity on dividend payments in Indonesia. Indonesia is one of the emerging economies. Some of the institutional specificities of emerging economies are the lack of protection of minority shareholders' rights, and market uncertainty may increase agency problems that raise doubts about future cash flows such as dividend payments. This research uses the data of listed firms from Indonesia Stock Exchange over the period 2013-2016. The data collection method uses purposive sampling. Indonesia implements a two-tier system that has directors and commissioners. We find evidence indicating that women directors are negatively related to the dividend payment, while women commissioners have positively related to the dividend payment. Moreover, we find that women independent directors, women executive directors, and women executive commissioners are positively associated with dividend payments, while women independent commissioners do not have an effect on dividend payments. The sample in this study is limited because the payment of dividends is not a necessity. This study provides the view that board gender diversity can create systems that make better decisions and encourage women to have a chance to participate in top management.

Comparative Corporate Governance

The question how the governance of enterprises, including the governance of capital markets, should be arranged is as old as the market economy and capitalism itself. Reforms have been stimulated by recently corporate scandals that imposed a critical discussion on the way public corporations are directed and controlled. The literature on corporate governance (CG) originated in the US and the UK, and was initially concerned with a fairly narrow set of issues such as how shareholders can monitor and motivate management to act in their interests. This literature distinguishes between two dichotomous CG models. First, the shareholder-oriented model, which is characterized by strong shareholder rights, single powerful CEO and protection of minority shareholders, prevails mainly in Anglo-Saxon countries. Second, the stakeholder-oriented model, which is characterized by weaker shareholder rights, consensus leadership, and concentrated ownership, prevails in most of the European continent and Japan. For a number of reasons, comparative CG and convergence debates often take place within the contours of the cultural–institutional or societal approach used in this book. Since institutionalists and the societal approach stresses the embeddedness of national institutions and ‘complementarities’ between institutions, alternative responses to internationalizing capital markets, other than convergence, appear possible. Companies may respond very differently to similar sorts of pressure, and distinct sets of ‘best practice’ contingent on the national context may emerge. The current chapter applies this approach by examining the interaction between CG aspects in large, small and medium-sized firms and national institutions in different countries, in the context of internationalizing capital markets. By adopting an institutional approach, the first section describes the major CG features influencing post-war company decision-making in advanced economies. The in-depth explanation of the two main models is followed by an analysis of the Japanese CG model, which is argued to be similar to the Rhineland model. The second section explores the continental European models, which are variants of the two main models. The analysis shows that variations among the advanced and transition economies in these CG features stem from differences in key societal institutions, such as governmental regulation, the character of the financial system, corporate law, and cultural values. In the third section, we offer a brief overview of the models of CG in BRIC countries and more specifically, we discuss in the form of case studies, CG in Russia and China. The fourth section deals with the worldwide diffusion of CG codes, which are instruments of self-regulation, defining best practices with respect to boards, management, supervision, disclosure and auditing. We discuss the main drivers of their diffusion and characteristics across countries, as well as the possible convergence of CG best practices. Finally, the closing case, dealing with the Ahold scandal, should be seen in the light of the link between CG and CSR. The chapter concludes with the major strengths and weaknesses, as well as future directions of change in both CG models.

Minority Shareholder Protection under the Corporate Governance Regime of Pakistan

Minority Shareholder Protection under the Corporate Governance Regime of Pakistan

FAIRNESS THROUGH EFFICIENCY: THE CASE FOR A NONMANDATORY MANDATORY BID RULE Y BID RULE

It is commonly believed that the Mandatory Bid Rule is necessary to ensure the protection of minority shareholders, and that the inefficiency it causes is the price we must pay for fairness. In this paper, we challenge that belief. We suggest that efficiency and fairness are not competing notions – instead, in the Indian market for corporate control, an efficient regulatory regime is most likely to lead to fair outcomes. To make this point, we demonstrate that the protection the MBR grants is inherently less valuable in India than in the UK, where it originates, since takeovers in India are seller-driven and are therefore, prima facie likely to be good for the company. In this background, we empirically evaluate the takeovers that occurred between October 2015 and February 2022 to demonstrate that minority shareholders neither really need, nor particularly want the protection of the MBR. In fact, both they and every other stakeholder would likely be better off without it. However, recognising the inertia built into the regulatory framework, and the players it governs, we propose a temporary system where the MBR would not apply by default, but companies can nonetheless choose to have it be applicable to them. It is our hope that such a transitory regime will generate further evidence on the comparative fairness and efficiency outcomes of each system, allowing both companies and policymakers to make better decisions thereafter.

Asset Prices with Investor Protection and Survival Analysis of Shareholders in the Cross-Sectional Economy

In this paper, we consider a dynamic asset pricing model in a cross-sectional economy with two firms where a controlling shareholder cannot divert output in one firm with perfect investor protection for minority shareholders and where he can divert a fraction of output in the other firm with imperfect protection. After obtaining the parameters of asset prices by solving the shareholders' consumption-portfolio problems in equilibrium, our model features the effect of investor protection and cross-section in the economy. Furthermore, some survival analysis of the shareholders is presented and sufficient conditions on extinction of the shareholders are given in either firm. Our numerical results are in line with some empirical evidence: (i) poorer investor protection in the cross-sectional economy enables the controlling shareholder to hold less shares of the firm with perfect protection and more shares of the firm with imperfect protection, decreases stock gross returns of both firms, increases stock volatilities of both firms, and decreases interest rates of the economy; (ii) compared with the economy with the single relative firm, for the firm with perfect protection, cross-section enables the controlling shareholder to hold less shares, decreases stock returns, increases stock volatilities slightly and decreases interest rates, while for the firm with imperfect protection, cross-section enables the controlling shareholder to hold more shares, increases stock returns and volatilities and increases interest rates.

Legal Analysis of Minority Shareholder Protection in Pakistan

Legal Analysis of Minority Shareholder Protection in Pakistan

Permitting dual class shares in the UK premium listing regime – a path to enhance rather than compromise investor protection

AbstractUnequal voting rights arrangements under dual class share structures are increasingly favoured by entrepreneurs and founders of technology companies, in order to retain a degree of control over the company that is disproportionate to their equity shareholdings. The rise of such share structures around the world has put competitive pressure on the UK Government and the country's financial regulator to relax the one share, one vote principle in the premium listing regime of the London Stock Exchange, to ensure the UK equities market remains world-leading and fit for the future development of the economy. There is, however, a long tradition of institutional investors’ distaste for dual class share structures. In fact, the near extinction of dual class listings in the UK capital markets can be largely attributed to the opposition of large British institutions. Therefore, this paper will critically discuss the conflict between the demands to attract listings from high-tech and innovative companies and concerns of a race to the bottom in the UK context. It rebuts criticisms based on investor protection and argues that if dual class companies were permitted to list in the Premium Segment, the higher level of regulatory protection provided in the premium listing regime would help enhance minority shareholder protection and shareholder engagement. The additional safeguarding measures, as we have seen from other global financial centres, would also help to restrain the potential abuse of controllers’ weighted voting power. Together with the market mechanism, permitting dual class listings in the Premium Segment should be welcomed.

Perlindungan Hukum Pemegang Saham Minoritas PT (Persero) dalam Pembentukan Anak Perusahaan BUMN

BUMN (Persero) is regulated in UU 19 of 2003 on BUMN. BUMN hold 50% or more of share as a major controlled, the minority share can be owned by other parties with IPO mechanism. BUMN is including the subject of Law Number 40 of 2007 on Limited Liability Company, which specifically regulates the rights of shareholders. However, the problem is related to when the BUMN carrying out its business activities establishes a subsidiary based on the decision of the GMS, where the majority shareholder who is the largest shareholder is on the side of him, which makes the rights of the minority shareholder neglected. The purpose of this study is to analyze the pattern of protection for minority shareholders of Limited Liability Company according to Corporat Law system and the legal remedies of minority shareholders in protecting their rights to action. This research is a normative legal research with descriptive analytical research. The result of this study is that legal protection for minority shareholders of BUMN is regulated in BUMN Law and Limited Liability Company Law but there are the rights of these shareholders which are only fulfilled if they receive support from the majority shareholder, so that the sense of justice of minority shareholders is not protected. , however, there are efforts to settle disputes that can be taken both litigation and non-litigation, especially Acts against the Law (1365 BW) with the mechanism regulated in the Law on Company LawDOI: https://doi.org/10.26905/mlj.v2i2.7166

Can a not-for-profit minority institutional shareholder make a big difference in corporate governance? A quasi-natural experiment

In this study, we examine the effectiveness of the China Securities Investor Services Center (CSISC), a new minority shareholder protection mechanism promoted by the China Securities Regulatory Commission, in constraining earnings management. Employing a difference-in-differences analysis for a sample of Chinese listed companies during 2015–2017, we find that CSISC shareholding reduces earnings management. We also find that this effect exists in firms with weaker internal or external corporate governance mechanisms and in firms without political connections. The additional analyses show that the difference in earnings management between the treatment firms (i.e., CSISC-holding firms) and control firms is diminishing after the CSISC shareholding pilot program was promoted nationwide, and that CSISC shareholding also constrains controlling shareholders' tunneling. Our findings have important policy implications for emerging markets that attempt to improve minority shareholder protection.

Minority Shareholders’ Legal Protection in a Limited Liability Company System

The purpose of this study is to determine the legal protection model for the majority and minority shareholders in public limited companies. This research method is normative research. To investigate the ineffectiveness of laws and regulations, in particular, Law No. 40 of 2007 on limited liability companies in providing shareholder protection, researchers have studied the laws and regulations and considered the views of experts on legal concepts related to legal protection for shareholders, particularly, minority shareholders. The results showed that the law did not provide maximum legal protection for minority shareholders, creating an imbalance between the rights of the minority and majority shareholders. For this reason, 1) reform or progressive changes in laws and regulations are needed, for instance, in PT Law No. 40 of 2007. These changes should be fundamental to philosophical aspects (values and perspectives) in providing shareholder protection; 2) the review of shareholders’ protection methods should be based on the aspects of fairness

Doctrine of Just and Equitable Winding Up as Minority Shareholders’ Remedy in Pakistan

This article examines the doctrine of just and equitable winding as a minority shareholders' remedy in Pakistan. This is a residual remedy and developed with the passage of time for the protection of minority shareholders in the UK. The courts in the UK have established different views regarding circumstances in which remedy may be sought. In some cases, the court held that the jurisdiction of winding up is not different from unfair prejudice. Therefore, this article will further discuss the possibility of seeking remedy viz a viz other minority shareholders’ protection mechanism such as remedy against unfair prejudice.This article is based on qualitative research. The doctrinal and comparative research methods have been applied in the research. This article concludes that the remedy of winding up on just and equitable grounds may be effective only when the grounds for seeking remedy are wider than the unfair prejudice remedy

The Impact of Family Ownership on Quality and Disclosure of Internal Control in Pakistan

The role of family owners in the internal control environment is characterized by contradictory theoretical arguments i.e., entrenchment and alignment behavior. Therefore, the objective of this study is to investigate the behavior exhibited by family owners concerning the internal control environment in an underdeveloped regulatory setting. The study collected both primary and secondary data to use a multivariate regression research design to investigate the impact of family owners and CEOs on the internal control quality and disclosure of enterprises. The results of the current study demonstrated that family owners and family CEO have a negative impact on the internal control quality and disclosure, which validates the entrenchment behavior exhibited by family owners in the Pakistani setting. The results of the current study imply that policymakers should promote strict policy initiatives regarding the effectiveness of internal controls and their reporting so that companies are compelled to have better engagement in internal control practices for the protection of minority shareholders.

The Power of Crowds: Can Minority Shareholder Activism Promote Management Forecast Accuracy

In a setting where minority shareholder becomes into a higher stakeholder class with much salience, we study whether their voices promote management forecast accuracy. We test our framework by observing the publicly listed firms in Chinese Shenzhen Stock Exchange between 2010 and 2018, and find that small investors, when empowered with the availability to interact with firm management directly on the online social media platform, could improve management forecast accuracy by requesting information from firms. Furthermore, the positive impact of minority shareholder activism on forecast accuracy is stronger when focal firm is involved with more negative media coverage and when managers attach more importance to minority shareholder activism. This study not only contributes to the literature on shareholder activism, stakeholder salience and management earnings forecast, but also have valuable implications for protecting minority shareholders via the powerful voice of ordinary individuals in the information era.

Corporate governance in the Middle East and North Africa: A systematic review of current trends and opportunities for future research

AbstractResearch Question/IssueWe systematically review the corporate governance (CG) literature on the Middle East and North Africa (MENA), organize it into six main themes and their subthemes, and propose several opportunities for future research.Research Findings/InsightsWe highlight CG's unique characteristics in the MENA region as well as differences and similarities across MENA countries. We shed light on how organizations are governed in this region especially that their ownership structures are centered on families and the state, and that Islam plays a major role in their governance. Our review establishes a solid foundation for future research directed at CG practices in the MENA region and encourages policymakers and practitioners to improve CG in the region.Theoretical/Academic ImplicationsTo the best of our knowledge, this is the first systematic literature review covering CG in the MENA region. In an effort to encourage the continuing evolution of this research stream and augment its contributions to the broader CG literature, we develop an extensive research agenda focusing on several key topics that deserve further attention such as ownership and countries' political regimes, family business and royal families, Sharia law, and executive compensation, among others.Practitioner/Policy ImplicationsThis review invites policymakers and investors to consider implementing better policies aimed at improving CG practices, specifically by fomenting transparency, developing financial markets, providing stronger protections for minority shareholders, and enhancing compliance with existing and new regulations.

Shareholders’ Lawsuit in Georgian Legislation and Case Law

Obtaining shares in a joint stock company grants the owner important rights and imposes several obligations on them. In the list of shareholders’ rights, one of the most important subjects is the right to sue the shareholder’s lawsuit. The right to bring in front of courts certain aspects of company-related activities is the legal mechanism of protecting the shareholders other rights. Shareholders’ lawsuit plays an important role in the protection of minority shareholders. Shareholders’ lawsuit also includes two types of legal actions: direct lawsuit and derivative lawsuit. Georgian case law is not very advanced in this area. When shareholders bring matters in front of courts, the number of precedents adhered to is rare. As for the derivative lawsuit, the relative novelty of this legal institution in Georgian legislation causes the lack of deeper understanding. Georgian doctrine does not provide thorough analysis of legal nature and divergence of shareholders’ lawsuits when it comes to case law. As mentioned above, it is quite scarce.

Perlindungan Hukum Terhadap Pemegang Saham Minoritas Dalam Undang-Undang Perseroan Terbatas

The interests of minority shareholders in the company often conflict with a sense of justice and legal protection. This normative research discusses the issue of legal protection for minority public shareholders and the principle of justice in legal protection for minority shareholders. The legal protection of minority shareholders includes the right to propose a GMS (Article 79 paragraph 2 letter a), sue the board of directors (Article 97 paragraph 6) and the board of commissioners (Article 114 paragraph 6), request a company examination (Article 138 paragraph 3 letter a), and propose the dissolution of the company (Article 144 paragraph 1). The Company Law protects the rights of minority public shareholders based on the silent majority principle. The principle of justice to protect minority public shareholders is derived from the principle of distributive justice, the voting rights of minority shareholders are proportional to the portion of shares paid up, even though the equality is not equal. Judges' considerations regarding the legal protection of minority public shareholders are based on Article 138 paragraph (3) letter a of the Company Law, at least 1/10 of the total shares. Minority public shareholders are eligible to apply for an SLJ examination to the court. So that the minimum requirement of 1/10 of the total shares becomes a guideline to protect the rights of minority shareholders and as a derivation of the principle of distributive justice

The Impact of Minority Shareholder Protection and Atomization of Shareholder Base on the Nonoperating Activities of Firms

In the presence of strong minority shareholder protection mechanisms, shareholders may become placid and even inattentive with regards to their firms’ nonoperating activities in the hope that those mechanisms serve to assure agents’ incentive compatibility. Relying on a cross-country panel database, the paper evidences that a stronger minority shareholder protection at the country level is associated with larger firm-level long-term nonoperating investments, higher share of nonoperating investment incomes in the firms’ bottom line, and relatively larger acquisitions. At the company level, the implementation of stronger minority shareholder protection mechanisms, like internal policies favoring shareholder engagement and equality of voting rights, is documented to result in higher reliance on nonoperating incomes, larger acquisitions, higher cash reserves and lower dividend payouts. At the same time, the atomization of shareholder base appears to reduce the effectiveness of nonoperating activities as the firms with a larger shareholder base tend to hold more long-term investments while concomitantly recording lower investment incomes. In contrast, higher shareholder diversification is shown to be associated with lower cash holdings and higher dividend payouts. Overall, while being attentive to cash management and dividend policies, minority shareholders seem to be excessively forbearing with regards to the use of the bulk of nonoperating assets.

Perlindungan Hukum Pemegang Saham Minoritas Terhadap Implikasi Praktik Insider Trading dalam Perdagangan Saham di Pasar Modal

The capital market is a means provided in order to find sources of financing and as a means of investment that involves all potential public funds, both those available domestically and those available abroad. This study uses a normative science study using a librarian study in the form of law and is assisted by primary data sources and secondary data sources. The results show that minority shareholders own less than 5% of the total shares traded in the capital market. Meanwhile, insider trading is a practice in which a corporate insider transacts securities using exclusive information that they have that is not yet available to the public. The position of Minority Shareholders regarding the practice of insider trading in trading shares in the capital market is the cause of the practice of insider trading. Therefore, legal protection for minority shareholders in the practice of insider trading in stock trading in the capital market is carried out by applying applicable laws and using the theory of legal protection by Philipus M. Hadjon.

A Panacea or a Wisdom Tooth? Assessing the Misconstrued Mandatory Bid Rule

The Mandatory Bid Rule (MBR) requires a bidder who acquires control over a firm to make a general offer to all remaining shareholders to purchase their residual shares. It is the most powerful institution that requires controlling shareholders to share the control premium with other shareholders in a control transaction. The MBR is considered to be a key method of protection for minority shareholders, but nevertheless faces strong criticism over high implementation costs and an ongoing debate over its effectiveness in practice. From a utilitarianism perspective, the paper shows the relevance between the MBR and the effectiveness of minority shareholder protection mechanisms in a jurisdiction of legal transplantation. Using Mainland China as the test sample where the MBR was adopted, removed and then reintroduced, the paper employs the empirical research methodology to highlight market reactions when the rule is removed. The paper analyzes the efficiency of the MBR and outlines the types of environments and jurisdictional specifications where the MBR can operate at an optimal level, and alternatively, where the MBR will not be value-maximizing. It offers ideal legislation suggestions for similar jurisdictions considering transplanting MBR.

The Impact of Institutions on Collaborative Innovations and the Role of Equity‐Based Entry Modes

AbstractThis paper examines the impact of institutional variables on multinational enterprises’ choice between majority and minority acquisitions in their foreign affiliates and how this choice influences their propensity to collaborate with local firms. Using the institutional theory and the transaction costs theory, we develop a number of hypotheses. In particular, we suggest that majority acquisitions will be more likely than minority acquisitions and greenfields to enter collaborative R&D projects in countries that belong to the Civil Law/Eastern European legal tradition, or countries where the protection of minority shareholders is poor. These hypotheses are tested using an unbalanced panel of subsidiaries controlled by British multinationals, located in 39 countries. The results confirm our theoretical predictions.