Business Commons^™

State Ownership And Earnings Management In Highly-Valued Firms: Evidence From China, Leye Li, Gary S. Monroe, Jing Wang

Faculty of Business - Papers (Archive)

We examine how state ownership affects Chinese firms’ earning management during a period of high valuation. Based on a sample of 19,107 firm-year observations with sufficient data on the China Securities Markets and Accounting Research (CSMAR) database over the period from 2003 to 2017, we find the magnitude of accruals management first increases for up to three years of high valuation, and then reduces after the fourth year. This finding is consistent with the view that the difficulty of consistently using accruals to manage earnings upwards increases over time because of the reversing nature of accruals. We find that managers …

Foreign Institutional Investment, Ownership And Liquidity: Real And Information Frictions, Mingfa Ding, Birger Nilsson, Sandy Suardi

Faculty of Business - Papers (Archive)

The literature widely documents the negative liquidity impact of foreign participation in firms that permit high foreign institutional ownership. This paper employs a unique setting for the limited participation of qualified foreign institutional investors (QFII) in China’s A-share market and examines how this impacts on stock liquidity in emerging markets. Contrary to the findings in the literature, foreign investor participation helps enhance the liquidity of affected stocks by promoting trade activities and price discovery. The improvement in liquidity does not occur through the information friction channel, but rather the real friction channel. Our results are robust to endogeneity issue and …

Does Control-Ownership Divergence Impair Market Liquidity In An Emerging Market? Evidence From China, Xiaojun Chu, Qigui Liu, Gary Tian

Faculty of Business - Papers (Archive)

This paper examines how institutional characteristics of emerging economies influence the effect of control-ownership divergence on market liquidity. We find that the divergence is negatively associated with liquidity and that this negative relationship is more pronounced in firms with more severe agency problems and information asymmetry. We argue that in an emerging market, the negative effect of the divergence on liquidity is worsened by state ownership and poorer shareholder protection, both of which result in more severe agency conflicts; we also find, however, that this effect is alleviated by the NTS reform, which aligns the interest of different shareholders.

Disproportionate Ownership Structure And Ipo Long-Run Performance Of Non-Soes In China, Xiaoming Wang, Jerry Cao, Qigui Liu, Jinghua Tang, Gary Tian

Faculty of Business - Papers (Archive)

This paper examines the relationship between ownership structures and IPO long-run performance of non-SOEs in China. Although non-SOEs underperform the market in general after IPO but the poor performance is mainly caused by the IPOs with ownership control wedge. Non-SOEs with one share one vote structure outperform those with control-ownership wedge by 30% for three years post-IPO performance in adjusted buy-and-hold returns. Non-SOEs with control-ownership wedge have higher frequency of undertaking value-destroying related party transactions. These findings suggest that non-SOEs need to improve corporate governance such as disproportionate ownership structure to better safeguard the interest of long-run shareholders.

Bank Ownership And Efficiency In Post-Conflict Era Of Sri Lanka: Evidence From Aggregate Efficiency Technique, Bolanda Hewa Thilakaweera, Charles Harvie, Amir Arjomandi

Faculty of Business - Papers (Archive)

Deviating from conventional methods in comparing the group performance of banks this study extends the established literature to compare efficiency between foreign and domestic banks, by employing comprehensive weighted aggregate efficiency measures derived through bootstrap simulations for the banking sector for the post - confli ct era of Sri Lanka. The study also compares the banking sector performance between initial and later parts of the post - conflict period, using weighted aggregate efficiency measures. At the end of the armed conflict between LTTE 1 and Sri Lankan government forces the banking sector experienced considerable expansion in terms of banking density …

Does Ownership Affect Bank Performance? An Analysis Of Vietnamese Banks In The Post - Wto Entry Period, Le Thanh Phuong, Charles Harvie, Amir Arjomandi

Faculty of Business - Papers (Archive)

This study investigates the impact of financial reforms, bank characteristics, and time trends on the performance of the Vietnamese banking sector under the assumption that ownership can result in a divergence of technologies utilised by different bank groups (including state - owned, private, and foreign banks), and the fact that these groups may respond differently to the same environmental variables . By combining a meta - frontier analysis with double - bootstrap two - stage DEA the authors analyse the impact of en vironmental variables on bank efficiency across separate groups operating under different technologies. Accordingly, this paper, firstly, employs …

Ownership Characteristics And Earnings Management In China, Fei Guo, Shiguang Ma

Faculty of Business - Papers (Archive)

Chinese firms are characterized by multiple ownership and high ownership concentration. In this research, we conduct an intensive investigation into the determination of ownership characteristics in earnings management behaviors for Chinese domestic listed firms. Our results indicate that earnings management is determined by the motivations of different types of ownerships. In particular, when a state agency is the largest owner, firms are less likely to undertake earnings management, although the state ownership ratio is positively associated with earnings management. Tradable ownership and particularly concentrated tradable ownership reduce earnings management, while total ownership concentration fosters earnings management.

Implications Of Ownership Identity And Insider's Supremacy On The Economic Performance Of The Listed Companies, Qaiser Rafique Yasser, Abdullah Al Mamun

Faculty of Business - Papers (Archive)

We adopt a multi-theoretic approach to investigate a previously unexplored phenomenon in extant literature, namely the differential impact of ownership identity and director dominate shareholding on the performance of emerging market firms. The main research question addressed is, whether the impact of this relationship is conditional on the identity of the block investor. First, the relationship between overall block ownership and firm performance is tested by employing multiple regressions on 500 firm-year observations for the period from 2007 to 2011. Then, the block ownership is classified as the state, individuals, insiders, financial institutions, corporate and foreign investors and the influence …

Ownership Control And Debt Maturity Structure: Evidence From China, Wenjuan Ruan, Grant Cullen, Shiguang Ma, Erwei Xiang

Faculty of Business - Papers (Archive)

Purpose - The authors examine the debt maturity structure of Chinese listed companies during the period when bond market was under-developed and the majority of commercial banks were owned by the state. The purpose of this paper is to answer why and how the different ownership control types impact the firms' preference and accessibility to either long- or short-term debts.

Design/methodology/approach - The univariate analysis was used to test the differences of debt maturity choices for firms grouped by ownership control types, profitability and institutional development. Then, logit regression and ordinary least squares regression were applied to examine the determinants …

Does Bank Ownership Imply Efficient Monitoring? Evidence From Bank Lending And Firm Investment Efficiencies In China, Gary G. Tian, Xiaofei Pan

Faculty of Business - Papers (Archive)

This study investigates the effect of bank ownership on lending and firm investment efficiencies to give reasons for the mixed evidence that exists on the impact of bank ownership on firm performance. Using China's listed firms as an example, we find that bank ownership reduces the efficiency of bank lending and harms investment efficiency for state-owned enterprises (SOEs), while simultaneously relating to optimal lending decisions and enhanced investment efficiency for non-SOEs. Our findings suggest that banks monitor non-SOEs effectively, but are less effective at monitoring SOEs. We document that banks' ex post monitoring on non-SOEs' investment policy results from their …

Mutual Fund Ownership, Firm Specific Information, And Firm Performance: Evidence From China, Wenhua Sharpe, Gary Tian, Hong Feng Zhang

Faculty of Business - Papers (Archive)

This paper shows empirically that the positive association between mutual fund ownership and firm value in China is mainly driven by the informed trading of mutual funds. Utilizing the unique short term feature of mutual fund holdings for the period from 2001 to 2010, we provide an informational link between a decomposed component of market-to-book ratio (firm specific valuation component) and mutual fund holdings. Specifically, we find that firms with a higher level of mutual fund ownership are associated with a higher specific value. Moreover, the positive association between the specific value of a firm and mutual fund ownership is …

Ownership Concentration And Expropriation In Chinese Ipos, Jerry Cao, Jeremy Goh, Vincent Tang, Gary Tian

Faculty of Business - Papers (Archive)

This paper explores the ubiquitous deviation between large shareholders' control rights and cash flow rights by examining ownership concentration and expropriation in the unique context of Chinese IPOs. We find that IPO firms whose largest shareholders have control rights in excess of their cash flow rights underperform other IPOs by 32% and 26% on three-year post-IPO buy-and-hold returns (BHR) and cumulative abnormal (CAR), respectively. These firms also experience greater declines in operating performance post IPO, driven partly by the high likelihood of their undertaking value-destroying related party transactions. Their first day returns are also significantly lower than those of other …

Migrant Remittances, Financial Sector Development And The Government Ownership Of Banks: Evidence From A Group Of Non-Oecd Economies, Arusha Cooray

Faculty of Commerce - Papers (Archive)

This study investigates the influence of migrant remittances on two dimensions of the financial sector, namely, size and efficiency in a sample of 94 non-OECD economies. Evidence suggests that migrant remittances contribute to increasing the size and efficiency of the financial sector. The study, in addition, examines the impact of remittances on financial sector size and efficiency through their interaction with the government ownership of banks. The results suggest that remittances lead to larger increases in financial sector size in countries in which the government ownership of banks is lower, and increases in efficiency in countries in which the government …

The Effect Of Ownership Structure On Leverage Decision: New Evidence From Chinese Listed Firms, Qigui Liu, Gary Tian, Xiaoming Wang

Faculty of Commerce - Papers (Archive)

This paper examines the effect of state control and ownership structure on the leverage decision of firms listed in the Chinese stock market. Our results show that state-owned enterprises (SOEs) have higher leverage ratios than non-SOEs, and SOEs in regions with a poorer institutional environment have higher leverage ratios than SOEs in better regions. We also show that the largest shareholding (the percentage of shares held by the largest shareholder) in the SOEs has a negative relationship with the leverage ratio, while the largest shareholding in non-SOEs has a non-linear relationship with the short-term and long-term debt ratios. Finally, this …

Disproportional Ownership Structure And Pay–Performance Relationship: Evidence From China's Listed Firms, Jerry Cao, Xiaofei Pan, Gary Tian

Faculty of Commerce - Papers (Archive)

This paper examines the impact of ownership structure on executive compensation in China's listed firms. We find that the cash flow rights of ultimate controlling shareholders have a positive effect on the pay–performance relationship, while a divergence between control rights and cash flow rights has a significantly negative effect on the pay–performance relationship. We divide our sample based on ultimate controlling shareholders' type into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms. We find that in SOE controlled firms cash flow rights have a significant impact on accounting based pay–performance relationship. In privately controlled firms, …

Political Connections, Founding Family Ownership And Leverage Decision Of Privately Owned Firms, Qigui Liu, Gary G. Tian

Faculty of Commerce - Papers (Archive)

In this paper, we examine the effect of political connections versus founding family ownership on the relationship between disproportional ownership structure and leverage decisions of privately owned firms listed in Chinese market. We find that disproportional ownership has positive effect on leverage, indicating that controlling shareholder tends to use both disproportional ownership structure and debt to expropriate. We also find that the interacted term between disproportional ownership and political connections has a positive impact on leverage ratio, and disproportional ownership structure is negatively related with leverage ratio of founding-family controlled firms, which indicate a substitute effect between political connections and …

The Ownership And Ownership Concentration? The Impact On The Performance Of China's Firms, Shiguang Ma, Tony Naughton, Gary G. Tian

Faculty of Business - Papers (Archive)

This paper investigates the impact of ownership and ownership concentration on the performance of China's listed firms. By recognizing the differences between ownership and ownership concentration, and between total ownership concentration and tradable ownership concentration, we find that ownership concentration is more powerful than any category of ownership in determining firm performance and that it has approximately positive linear relations with firm value. The tradable ownership concentration has a more significant and positive influence on firm performance than total ownership concentration. The highest level of firm performance is approached when a firm is characterized with both total ownership concentration and …

Migrant Remittances, Financial Sector Development And The Government Ownership Of Banks, Arusha V. Cooray

Faculty of Commerce - Papers (Archive)

This study investigates the influence of migrant remittances on twodimensions of the financial sector, namely, size and efficiency. Evidence suggests thatmigrant remittances contribute to increasing the size and efficiency of the financialsector. The study, in addition, examines the impact of remittances on financial sectorsize and efficiency through the government ownership of banks channel. While theresults suggest that remittances lead to larger increases in financial sector size incountries in which the government ownership of banks is lower and increases inefficiency in countries in which the government ownership of banks is higher, thegovernment is found to play an important role in promoting …

Disproportional Ownership Structure And Pay-Performance Relationship: Evidence From China's Listed Firms, Jerry Cao, Xiaofei Pan, Gary G. Tian

Faculty of Commerce - Papers (Archive)

This paper examines the impact of disproportional ownership structure on the pay-performance relationship in China’s listed firms. We find that the cash flow rights of the ultimate controlling shareholder have a positive effect on this relationship while a divergence between the control rights and cash flow rights has a significantly negative effect. By dividing our sample into state owned enterprises (SOE), state assets management bureaus (SAMB), and privately controlled firms, we find that cash flow rights in SOE controlled firms have a significant impact on accounting based pay performance and cash flow rights in privately controlled firms also affect the …

How Does The Separation Of Ownership And Control Affect Corporate Performance: The Impact Of Earnings Management In China, Yuqing Zhu, Gary G. Tian, Shan Zhao

Faculty of Commerce - Papers (Archive)

This paper examines the impact of disproportional ownership on true firm performance when firm performance is adjusted for the effect of earnings management. Results from regression analysis indicate that the separation between control and cash flow rights of family/or individual-controlled listed firms in China decreases firm performance when firm performance is adjusted for the effect of earnings management than when firm performance is measured as reported performance. The results also show that separation is significantly positively related with true firm performance in firms with low cash flow rights concentration. The main disproportional ownership mechanism, pyramidal structures is also investigated in …

Performance Implication Of Ownership Structure And Ownership Concentration: Evidence From Sri Lankan Firms, Athula S. Manawaduge, Anura De Zoysa, Kathleen M. Rudkin

Faculty of Commerce - Papers (Archive)

Purpose - This paper seeks to examine the impact of ownership concentration and ownership structure on firms’ performance of a sample of public listed companies in Sri Lanka in the premise of an agency theory framework.

Design/methodology/approach - The paper first investigates the nature of ownership structure and concentration and then examines whether there is strong evidence to support the observation that the variations of ownership structure across firms result in systematic variations in firm performance. This hypothesis is tested by assessing the impact of ownership structure and concentration on firm performance measured in terms of accounting profitability and market …

Board Composition, Board Activity And Ownership Concentration, The Impact On Firm Performance, Shiguang Ma, Gary Tian

Faculty of Commerce - Papers (Archive)

This paper provides a parallel investigation on the impact of board composition, board activity and ownership concentration on the performance of listed Chinese firms. We find that independent directors enhance firm performance effectively than other board factors. The frequency of shareholder meetings, rather than board meetings, is positively associated with firm value. Tradable share ownership concentration has a positive and linear relationship with firm value, while state and total share ownership concentration represent U(V) shapes. Importantly, companies with the highest levels of both total share and tradable share ownership concentration have a greater firm values than companies with the highest …

Managerial Ownership, Capital Structure And Firm Value, Wenjuan Ruan, Gary G. Tian, Shiguang Ma

Faculty of Commerce - Papers (Archive)

This paper extends prior research to examine the managerial ownership influences on firm performance through the choices of capital structures by using a new sample of S&P 500 firm in 2005. The empirical results of OLS regressions replicate the nonlinear relationship between managerial ownership and firm value. However, we found that the turning points had moved up in our sample compared with previous papers, which implies that the managerial control for pursuing self-interest, and the alignment of interests between managers and other shareholders can only be achieved now by management holding more ownership in a firm than that found in …

Managerial Compensation, Ownership Structure And Firm Performance In China's Listed Firms, Xiaofei Pan, Gary G. Tian, Shiguang Ma, Aelee Jun, Qingliang Tang

Faculty of Commerce - Papers (Archive)

This paper investigates managerial compensation and its relationship with firm performance in China's listed firms. In China, the largest shareholder dominates other shareholders, controls the firm and therefore exercises substantial impacts on manager compensation. After controlling for other firm and industry characteristics, we find that manager remuneration is greater and pay-performance relation is stronger for privately-controlled firms than for state-controlled firms. We also document that state-controlled firms exercise performance-based manager incentive schemes, which is contrary to evidence found in some earlier studies. Our results also indicate that top executives in firms with a foreign ownership are more highly compensated, relative …

Does Ownership Affect A Firm's Performance And Default Risk In Jordan?, Rami Zeitun, Gary Gang Tian

Faculty of Commerce - Papers (Archive)

Purpose – This paper seeks to examine the impact of ownership structure on firm performance and the default risk of a sample of publicly listed firms.

Design/methodology/approach – This paper examines the impact of ownership structure on firm performance and the default risk of a sample of 59 publicly listed firms in Jordan from 1989 to 2002.

Findings – The main findings were: ownership structure has significant effects on the accounting measure of performance return on assets (ROE); government shares are significantly negatively related to the firm's performance ROE; defaulted firms have a high concentration ownership compared with non-defaulted firms …