Protection Of Minority Shareholders Research Articles

Challenges Faced by Minority Shareholders in Commercial Companies in Cameroon: A Legal Analysis

The protection of minority shareholders in Cameroon is an ancient weakness recognized of plaguing the Cameroon commercial scene from the existence of the concept itself. The situation under English law was regulated by the received English law under the Common law regime. This application was by virtue of section 11 of the Southern Cameroon High Court Law (SCHCL) of 1955. What upheld in Nigeria was hitherto applied in the then West Cameroon since it was administered as an integral part of Nigeria. In French Cameroon, the received business laws from France were applicable. These laws were relevant within the territory until later appealed with the coming of the Organisation for the Harmonisation of Business Laws in Africa known by its French acronym OHADA. Those earlier laws accorded very little attention to protection of the minority shareholders in commercial companies. That was due to slow commercial development at that moment. The ensuing results of this research reveals that, the raison d’etre of low performance of some companies in Cameroon, is due to the fact that, there has been inadequate measures as well as ineffective Implementation of the laws regulating the protection of minority shareholders owing to the fact that there exist several challenges and difficulties in the Implementation of these laws. The challenges faced by the minority have worsened because even the protection provided by the laws is difficult to implement and at times very expensive to undertake, reducing the shareholders’ proprietary rights. In all these, this paper has proffered recommendations that ameliorate the conditions of minority shareholders in commercial companies if taken into consideration.

Institutional conditions, economic policy uncertainty and foreign institutional investment in China

This paper investigates the influence of host and home country institutional conditions on foreign institutional investment. Utilizing longitudinal and multilevel data on foreign institutional investment in Chinese listed firms between 2004 and 2017, we document that foreign institutional investment decreases with increasing economic policy uncertainty in the host nation. We also find that foreign institutional investors respond more strongly to local economic policy uncertainty when their home nations are closer to China, are culturally and administratively similar to China, operate a smaller domestic stock market, and have weaker minority shareholder protection. The impact of economic policy uncertainty on foreign institutional investment is also stronger when the host nation institution is more developed and open.. Moreover, we reveal the mediating role of stock market volatility on this relationship. Overall, we document that foreign institutional investment is not only shaped by institutional conditions in the host country but also influenced by home country characteristics that define geographical and institutional distance between home and host nations.

The Agency Problem of Majority v Minority Shareholders: The Way Forward in India

Companies are considered to be microcosms of the countries and the society in which they operate. They are the collective institution of people having diverse interests but pursuing a common objective of growth and development of every individual involved. The rules dealing with corporate governance are not simply a matter of checks and balances but rather a mechanism through which increased customer satisfaction and shareholder value are achieved. Where numerous factors are considered while estimating a dynamic financial market, there’s one, in particular, that stands out. Countries that offer a legal framework to protect minority shareholders tend to have more robust markets because investors are more willing to take risks. The objective of this paper is to entice a wider debate on the issue of concentrated shareholding of the listed companies. This has been achieved by proposing some amendments in the law and also by suggesting to adopt certain solutions of various jurisdictions having a similar problem so as to incorporate better global corporate governance practices.

Board performance and its relation to dividend payout: evidence from Malaysia

PurposeTo examine the board of directors’ performance and if higher performance helps protect minority shareholders in an emerging capital market. Additionally, we determine if the different types of company ownership moderate the level of protection to minority shareholders.Design/methodology/approachThe study develops a measure of board performance with their compensation. And it tests its association with the dividend payout decision of 300 of the largest Malaysian public listed companies (referred to as PLCs) over the period 2008 to 2014.FindingsThe results find that higher board productivity in terms of return on capital employed is associated with higher dividend payout. Additionally, the study finds that the board performance measure interacts with race, ethnicity and gender of the board of directors and CEO duality to affect the dividend payout decision of Malaysian PLCs.Research limitations/implicationsIt is a single-country study of large Malaysian PLCs. And it uses only the governance mechanisms that have been shown in emerging capital markets to have the most significant effect on affecting the relationship between board performance and dividend payout.Practical implicationsThe findings show the importance of inclusivity and diversity in governing State-controlled firms in an emerging capital market.Originality/valueThe findings suggest improving corporate boards’ performance, protecting minority shareholders and contributing to the corporate governance literature. Notably, the study highlights boardroom diversity’s importance to enhance the boards of State-controlled firms’ performance.

Legal Protection of Minority Shareholders under Corporate Governance Process

In recent days, most of the corporate are failing in managing business effectively and the major cause for this is conflicts between majority and minority shareholders of the company which lead to direct or indirect destruction of business at the end. Even though, there are certain laws and provisions made for the sake of minority shareholders, those are enforced well and needs to make them as utmost safeguards to minority shareholders. In this paper, we will discuss the issues for conflict including rights of minority shareholders as well as roles and responsibilities of shareholders by analyzing possible solution for conflicts between majority and minority shareholder.

Impact of the COVID-19 Outbreak on Minority Shareholder Protection

The COVID-19 outbreak, which was announced by the World Health Organization (WHO) as a global outbreak on 11 March 2020, comprises a risk not only for human health, but also for the whole world including society, business and the global economy. During lockdowns caused by the COVID-19 virus, the general atmosphere of companies changed. The significant restrictions and measures announced by the countries in order to deal with the COVID-19 crisis had serious economic outcomes for companies. The crisis environment has been used by some managers, who are also majority shareholders in the company or influenced by majority shareholders, for their own interests to oppress minority shareholders and to remove them from the company and management. Protection of shareholders matters for the facility of companies to raise the capital required to grow, innovate, diversify and compete. Thus, in these difficult COVID-19 times, it is more important to provide protection for minority shareholders. That will develop the level of confidence, trust and finally the levels of investment, which would result in a healthy and robust countries’ economy. Based on that, this article uniquely contributes to minority shareholder protection during the COVID-19 outbreak by focusing on corporate governance and also primary remedies that may be obtained by shareholders during the current pandemic. COVID-19 outbreak, Corporate governance, Minority shareholder protection, Derivative action, Unfair prejudice petition

LEGAL ASPECTS OF MERGER STUDY ON PT BANK TABUNGAN PENSIUNAN NASIONAL TBK

Mergers and acquisitions have been the driving force of the world economy and have played an important role in the strategies of many companies. To create a healthy, strong, and competitive banking structure, several steps are needed to consolidate banking sector. To realize this vision, Financial Services Authority (OJK) encourages investors and the banking industry to consolidate, including through a merger, one of those is the Merger of BTPN and SMBCI. The purpose of this article is to examine legal aspects in the merger process and procedure as well as the main issues relating to the application of principles in the protection of employees and minority shareholders. The method used to address the problems in this article is normative legal research, which shows that the merger is a horizontal merger by applying the principles of fair dealing and appraisal rights and not forgetting to apply the principle of employee protection.

Evidence on the Non-linear Effect of Large Ownership on the Enterprise Value of Indian Manufacturing Firms

The study advances the existing literature on corporate finance and governance by establishing a non-linear effect of large ownership on the enterprise value of Indian manufacturing firms. The study employs both static and dynamic panel models on a set of panel data consisting of 112 Indian manufacturing firms. The study establishes a U-shaped relationship between large ownership and enterprise value of the sampled firms. Large promoters until 34% of ownership are found to exert a negative effect on enterprise value which signifies expropriation effect along with poor alignment of interest with the firms. However, for ownership concentration by promoters after the said threshold, the effect is found to be positive signifying improved alignment of interests, efficient monitoring and disciplining of managerial opportunistic behaviour. Based on the findings, the study suggests the Indian manufacturing firms not to entirely rely on the role of large owners and to opt for improved external regulatory and institutional establishment for the protection of minority shareholders’ interest and ensuring stringent corporate governance.

Abuse of Rights by Majority Shareholders in Indonesian Family-Owned Company: Is It Likely?

The familial relations entwining the ownership and management of a family-owned company creates a significant opportunity for majority shareholders to exercise their rights to others' detriment. Various jurisdictions have addressed such issue by projecting the concept of abuse of rights by majority shareholders (abus de majorité). The concept aims to detect which behaviour could be considered an abuse and provide legal protection for minority shareholders and companies. In Indonesia, however, such a concept has not been explicitly adopted nor discussed at length. This work examines what behaviour which could be considered as a form of abuse of rights by majority shareholders under the Indonesian company law, and how the protection and practice of Indonesian private company law against such behaviour. This work is a normative legal research using conceptual, comparison, statutory, and case-law approaches. The comparison and case-law approaches will be utilized to examine the universal concept of majority shareholders abuse of rights by examining the adoption of the concept in various jurisdictions and examine several relevant cases brought to the Indonesian court. As a result, it concludes that there are still problems surrounding the legal measures available, as this behaviour is still prevalent, especially in Indonesia's family-owned companies. Hence, more stringent rules are needed to protect minority shareholders and the Indonesian Company's interests effectively.

The Law Governing Related Party Transactions in Canada: Rules, Standards and Regulatory Scrutiny

Canada is an interesting laboratory to study the law governing related party transactions because of the distinctive features of its capital markets and its regulatory landscape. The ownership structure of Canadian corporations resemble more closely those of continental Europe and South East Asia than those of the United States. Further, deviation from the one share/one vote rule is widespread. Thus, the primary corporate governance problem relates to the risk that dominant shareholders extract private benefits of control at the expense of the corporation and its public shareholders. As for regulation, publicly-traded corporations are subject to provincial corporation and securities laws, which are largely harmonized at the national level. The paper reviews the law governing RPT in Canada, which is the product of corporate law and securities regulation. Although they are not prohibited, conflict of interest transactions are regulated by an intricate set of ex ante rules and ex post standards of review that impose procedural and substantive requirements. Specifically, the paper shows that the following fundamental questions lead to many answers: 1) Who is charged with the screening of RTP?; 2) How does the screening work?; 3) When does it operate? Against this backdrop, the paper analyses the role of procedural safeguards and substantive review by looking at two conflicting cases regarding the impact of majority of the minority approval. It also presents data on the use of majority of the minority approval by reviewing 79 transactions between 2013 and 2018 where this procedural safeguard was mandated. The anecdotal and empirical discussion serves to put majority of the minority approval in perspective with respect to its protective function. The analysis closes with a discussion of a recent initiative on the part of Canadian securities regulators, which translates into a heightened involvement in the review and oversight of conflict of interest transactions. On the one hand, this initiative may buttress the effectiveness of majority of the minority approval by reinforcing the procedural safeguards. On the other hand, it may have unintended effects on the protection of minority shareholders.

Corporate Governance in the Middle East and North Africa: A Systematic Review of Current Trends and Opportunities for Future Research

Research Question/Issue: We 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/Insights: We 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 Implications: To 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 Implications: This 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.

Financial reporting quality and dividend policy: New evidence from an international level

This study examines the link between financial reporting quality and dividend payout across 123 countries. We find that financial reporting quality increases dividend payout after controlling for firm and country specifics. We also investigate different channels that mediate the relation between financial reporting quality and dividend payout. We find that the positive association between high-quality financial reporting and dividend payout is more pronounced when firms have free cash flow problems, face financial constraints, and are located in countries with greater minority shareholder protection rights. Conversely, firms benefit less from this positive relation when located in countries with higher accounting standards. The findings remain consistent after several robustness checks, thus highlighting the effectiveness of more transparent disclosure of financial information in reducing information asymmetry related to firms’ internal agency costs and their relationships with external parties.

Protection of minority shareholders’ rights in group of companies: Lithuania and EU company law perspectives

Just as in the entire European Union, in Lithuania company groups are an integral part of the modern business world. It is the companies that are part of company groups are leading both in Lithuania and in the European Union in terms of a number of economic indicators: revenues, number of employees, amounts of taxes paid and other contributions. Despite being an integral part of modern business, regulation of company groups has not yet attracted sufficient attention both at the European Union or the national level. Such absence of a consistent regulation may lead to or cause, inter alia, infringements of rights of minority shareholders. Accordingly, the purpose of the present article is to assess whether the effective Lithuanian or European Union regulation is sufficient to protect minority shareholders’ rights in group of companies.

Reforms Protecting Minority Shareholders and Firm Performance: International Evidence

This study investigates the effect of corporate governance reforms protecting minority shareholders on the firm value measured by Tobin’s Q. Using the difference-in-differences estimation and a large international sample from 65 countries for the period 2005–2018, the results show that the firm values increase more in the reform countries than non-reform countries relative to pre-reform levels. This positive effect changes for firms with high and low levels of debt. Moreover, the values after reforms increase more for firms located in civil countries and in countries with rule-based reform approaches and low debt enforcement because the reforms strengthening minority shareholder protection are more efficient in those countries. The evidence is robust to accounting-based performance as well.

Report from the Netherlands: Recent Developments with Respect to Company Law in the Netherlands

chain principle, mandatory bid, cascade offer, takeover regulation, minority shareholders protection, equal treatment of shareholders, market for corporate control, control, significance test, premium value

The Benefits of Voting Trust System in the Current Corporate Governance of China

The inclusion of a shareholder voting trust system in China is an important, yet absent, feature of modern corporate sector. Despite its necessity, it seems that no proper notice of its nonexistence has been taken in the past nor has any attention been paid to this particular area in previous decades. Since China lies among the top corporate players of the world, there is a need for increased trust from the general public to invest in the current corporate sector. It is the position of this paper that the most practicable way of achieving this goal is to introduce a shareholder voting trust system. Therefore, this paper shall focus on all the advantages that voting trust systems have provided in the corporate world and how similar systems could potentially be introduced into the Chinese corporate system. Keywords: Voting Trust, Minority Shareholders Protection, Corporate Governance, DOI: 10.7176/JLPG/104-07 Publication date: December 31 st 2020

The Chain Principle: Equilibrium Between a Regulatory Need and Its Effects

This article addresses the tension between the need to regulate takeovers activity through the chain principle, as to ensure minority shareholders protection and equal treatment of shareholders, and the adverse effects that may arise from that regulation. An explanation of how the chain principle is regulated in the United Kingdom and difficulties in applying the chain principle rules, particularly, to ascertain the chain price. Different possibilities Germany is offered and the Sky bid is presented as an example of the practical of how the chain principle could be designed are considered, namely regarding the most suitable method to ascertain the chain price and the most adequate entity to do it. The article ultimately concludes that the chain principle is a regulatory need because the mandatory bid rule could not be successfully achieved without the chain principle and that there is no perfect solution to find an equilibrium between the need to regulate the chain principle and its adverse effects, as rules enhancing the probability of an offer being made may have a negative impact on the premium value; while rules enhancing the premium value may have a negative impact on the probability of an offer being made. chain principle, mandatory bid, cascade offer, takeover regulation, minority shareholders protection, equal treatment of shareholders, market for corporate control, control, significance test, premium value

Inheritance tax, shareholder protection, and the market value of family firms: A cross‐country analysis

AbstractResearch SummaryWe examine the relationship among inheritance taxes, shareholder protection, and the family firms' market value. Drawing on the family firm, corporate governance, and institutional complementarities literature, we argue that inheritance taxes act as external corporate governance mechanisms for decoupling business families' socioemotional goals. However, this depends upon minority investor protections. In strong protection countries, the incentives for family self‐governance created by high inheritance taxes are offset by the loss of business family autonomy inherent in strong shareholder protection. Using a sample of 284 firms across 31 countries, we provide support for these arguments. Results suggest that inheritance and shareholder protection laws are substitutive external corporate governance mechanisms to align business family and nonfamily shareholders' interests.Managerial SummaryWe investigate how inheritance taxes and shareholder protection laws interact to generate several outcomes that can benefit or harm family firms' market value. We argue that high rates of inheritance taxes in a country push business families to focus more on firm value maximization and less on pursuing family‐centric goals, thus increasing firm value. However, we further argue that the positive role of inheritance taxes on family firms' market value weakens when the country also exhibits strong shareholder protection laws. Therefore, inheritance and shareholder protection laws substitute for one another when they intersect in business families. We find evidence consistent with these ideas when examining a sample of publicly traded firms across 31 countries. Our results corroborate that policymakers' concerns regarding the protection of minority shareholders must not consider only investor protection laws, but also how investor protection interact with other institutions such as inheritance law.

Family Management and Corporate Bond Spreads: Do Foreign and Government Ownerships Matter?

ABSTRACT This research hand-collects data on family CEOs of family-controlled firms (named family management) to investigate the relation between family management and corporate bond spreads in Taiwan with a sample of 1,660 firms for the period 1996–2015. We show new evidence on the impact of financial constraints and CEOs’ characteristics on corporate bond spreads. Results find an impact of family management on increasing corporate bond spreads after considering firms’ and bonds’ characteristics. Moreover, the effect of family management on higher bond spreads is offset by firms under foreign or government ownership, as interacting family management with such ownership effect would give outside investors more assurance and protect minority shareholders from exploitation. Finally, firms’ financial constraints and CEOs’ weak characteristics lead to a detrimental impact of family management on bond spreads.

Promoting Nigerian capital market development through the protection of minority shareholders: a re-assessment of enforcement pathways

The protection of minority shareholders is an essential requirement for a viable and strong capital market. Enhanced protection of minority shareholders provides assurance to investors that their investments will not be expropriated by corporate insiders or lost through regulatory inefficiency. Despite diverse provisions that accord protection to minority shareholders, there are still legal, economic and institutional impediments that stultify effective enforcement. Consequently, it is contended that the public enforcement of minority shareholders’ rights should transcend the existing approach and literally ‘encroach’ on the traditional sphere of private enforcement to promote greater confidence and participation in the capital market.