Does a leopard change its spots? Auditors and lawyers as valuation experts for minority shareholders in the judicial appraisal of private firms

2020 ◽  
Author(s):  
Jani Saastamoinen ◽  
Hanna Savolainen
Keyword(s):  
Private Firms ◽  
Minority Shareholders ◽  
Judicial Appraisal

scholarly journals Enterprise Risk Management In Private Firms: Does Ownership Structure Matter?

2016 ◽  
Vol 32 (2) ◽  
pp. 671 ◽  
Author(s):  
Elisabetta Mafrolla ◽  
Felice Matozza ◽  
Eugenio D'Amico
Keyword(s):  
Risk Management ◽  
Agency Theory ◽  
Ownership Structure ◽  
Enterprise Risk Management ◽  
Private Firms ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Enterprise Risk ◽  
The Government ◽  
Private Corporations

Private firms adopt Enterprise Risk Management (ERM) practices voluntarily. Using results of a survey that involved 78 respondents, we investigate the adoption of ERM practices in Italian private corporations and question whether ERM adoption is affected by the ownership structure of the firm. We find that agency conflicts between controlling and minority shareholders, which arise when ownership dispersion decreases, affect ERM adoption, and that when proprietorship is more dispersed, the firm places more focus on ERM projects. Additionally, we document the different roles of different types of owners. More specifically, in line with the patronage agency theory, the government-controlled enterprises undergo more intense ERM, whereas, in line with behavioral agency theory, individual and family-controlled firms pay less attention to ERM adoption.

scholarly journals Legal Origins and the Financial Conservatism of Private Firms

2019 ◽  
Vol 11 (5) ◽  
pp. 103
Author(s):  
Hongzhong Fan ◽  
Mirza Nouman Ali Talib ◽  
Pan Chen
Keyword(s):  
Financial Crises ◽  
Common Law ◽  
Civil Law ◽  
Private Firms ◽  
Law And Finance ◽  
Minority Shareholders ◽  
Legal Origins ◽  
Tax Shields ◽  
The Difference ◽  
Financial Conservatism

Following the literature of corporate law and finance, our study emphasizes on differences of legal origins and their laws influencing the capital structures of the private firms following suboptimal conservative policies. The countries considered in each legal origin represents common law countries (UK, Australia, India, Pakistan and Thailand) and Roman backed civil law countries (Japan, South Korea, Germany) respectively. The time series considered for the study is 2000-2017. The findings provide that the conservative private firms are smaller in size with less investments but are positively related with profitability in both legal origins. However, the dividend payouts and non-debt tax shields have significant positive relation with conservative policies in civil law countries. It shows that the presence of minority shareholders’ protection law in civil law countries directs the firms to pay more dividends which may also help them in reducing agency costs. We further exhibit that, before financial crises of 2008, the conservative firms in both legal origins are less directed towards dividends, especially in common law countries. Nevertheless, private conservative firms of civil law countries are more inclined towards dividend payouts after financial crises. The study implicates that the difference of laws in legal origins affect the capital structures of the conservative private firms. It further provides that because of the less effective credit markets, private firms may also be forced to adopt conservative policies in civil law countries but may also have less agency problems due to high probability of having dividend payouts.

Earnings Management and Audit in Private Firms

2019 ◽  
pp. 154-178
Author(s):  
Inna Sousa Paiva ◽  
Paulo Varela Dias
Keyword(s):  
Statistical Analysis ◽  
Earnings Management ◽  
Financial Statements ◽  
Private Firms ◽  
Minority Shareholders ◽  
Multivariate Statistical ◽  
Controlling Shareholders ◽  
Management Measures ◽  
Multiple Regression Technique ◽  
The Relationship

This chapter examines the relationship between the level of earnings management and the audit in private firms under the influence of financial crisis recuperation, using a sample of Ireland and Portuguese firms from 2008 to 2016. The authors use accruals methodology, namely four earnings management measures to capture earnings management in private firms. Multivariate statistical analysis was applied using the traditional multiple regression technique. Empirical results show that private firms with audited financial statements have powerful incentives to expropriate wealth from minority shareholders, pursuing their own interests at the expense of non-controlling shareholders. They also find that the private firms with audited financial statements in years under adjustment programs demonstrated lower level of earnings management. This study contributes to the accounting literature by providing empirical evidence for the effects of audit and earnings management in private firms in a financial recuperation context.

scholarly journals A Governança Corporativa das Empresas Brasileiras com Controle Privado Nacional

2009 ◽  
Vol 7 (4) ◽  
pp. 385 ◽  
Author(s):  
Bernard S. Black ◽  
Antonio Gledson De Carvalho ◽  
Érica C. R. Gorga
Keyword(s):  
Corporate Governance ◽  
English Language ◽  
Financial Statements ◽  
Cash Flows ◽  
Audit Committees ◽  
Legal Rights ◽  
Private Firms ◽  
Minority Shareholders ◽  
Consolidated Financial Statements ◽  
Language Version

We provide an overview of the corporate governance practices of Brazilian public companies, based primarily on an extensive 2005 survey of 116 companies. We focus on the 88 responding Brazilian private firms which are not majority owned by the state or a foreign company. We identify areas where Brazilian corporate governance is relatively strong and weak. Board independence is an area of weakness: The boards of most Brazilian private firms are comprised entirely or almost entirely of insiders or representatives of the controlling family or group. Many firms have zero independent directors. At the same time, minority shareholders have legal rights to representation on the boards of many firms, and this representation is reasonably common. Financial disclosure lags behind world standards. Only a minority of firms provide a statement of cash flows or consolidated financial statements. However, many provide English language financial statements, and an English language version of their website. Audit committees are uncommon, but many Brazilian firms use an alternate approach to ensuring financial statement accuracy – establishing a fiscal board. A minority of firms provide takeout rights to minority shareholders on a sale of control. Controlling shareholders often use shareholders agreements to ensure control.

Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

2017 ◽  
pp. 83-99
Author(s):  
Elisabetta Mafrolla ◽  
Viola Nobili
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Regulatory System ◽  
Discretionary Accruals ◽  
Bank Loans ◽  
Bank Loan ◽  
Banking Union ◽  
Private Firms ◽  
European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

Board Effectiveness: An Evaluation based on Corporate Governance Score

Think India ◽  
2015 ◽  
Vol 18 (1) ◽  
pp. 16-23
Author(s):  
Hitesh Shukla ◽  
Nailesh Limbasiya
Keyword(s):  
Corporate Governance ◽  
Good Governance ◽  
Sustainable Growth ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Effective Governance ◽  
Performance Orientation ◽  
Corporate Governance Mechanism ◽  
And Performance ◽  
Ethical Governance

Growth, progress, and prosperity of any country depend highly on the corporate governance mechanism of that country. Good governance of a country helps it to sustainable growth and consistency in progress. The good governance should contribute towards the improvement in transparency, ethics, morality, and disclosure. The principles of good governance stand on honesty, trust, integrity, openness, and performance orientation. Our honorable Prime Minister Narendra bhai Modi had given the three E for good governance during his speech on Independence Day i.e. Effective Governance, Electronic Governance, and Ethical Governance. The fundamental concern of corporate governance mechanism is to ensure the protection of minority shareholders/owners of specific firms. Mechanism of a corporate governance specifies the relations among the shareholders, board of directors, and managers. The present paper is an attempt to evaluate the effectiveness of the board by calculating the corporate governance score. The mandatory and non-mandatory guidelines have been considered while assigning points to specific parameters of the corporate governance.

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