Does Granting Minority Shareholders Direct Control Over Corporate Decisions Increase Shareholder Value? A Natural Experiment from China

2010 ◽  
Author(s):  
Zhifeng Yang
Keyword(s):  
Natural Experiment ◽  
Shareholder Value ◽  
Direct Control ◽  
Minority Shareholders ◽  
Corporate Decisions

scholarly journals Minority Shareholders' Control Rights and the Quality of Corporate Decisions in Weak Investor Protection Countries: A Natural Experiment from China

2013 ◽  
Vol 88 (4) ◽  
pp. 1211-1238 ◽  
Author(s):  
Zhihong Chen ◽  
Bin Ke ◽  
Zhifeng Yang
Keyword(s):  
Mutual Fund ◽  
Natural Experiment ◽  
Investor Protection ◽  
Securities Regulation ◽  
Minority Shareholders ◽  
Control Rights ◽  
Corporate Decisions ◽  
Weak Evidence ◽  
Equity Offering

ABSTRACT Using a 2004 Chinese securities regulation that requires equity offering proposals to obtain the separate approval of voting minority shareholders, we examine whether giving minority shareholders increased control over corporate decisions helps to reduce value-decreasing corporate decisions for firms domiciled in weak investor protection countries. We find that the regulation deters management from submitting value-decreasing equity offering proposals in firms with higher mutual fund ownership. There is also weak evidence that minority shareholders are more likely to veto value-decreasing equity offering proposals in firms with higher mutual fund ownership in the post-regulation period. Overall, our evidence suggests that in weak investor protection countries, the effect of granting minority shareholders increased control over corporate decisions on the quality of corporate decisions depends on the composition of minority shareholders. JEL Classifications: G32; G34; G38

Risk Shifting and Corporate Pension Plans: Evidence from a Natural Experiment

2018 ◽  
Vol 54 (2) ◽  
pp. 907-923
Author(s):  
David J. Pedersen
Keyword(s):  
Default Risk ◽  
Natural Experiment ◽  
Causal Effect ◽  
Shareholder Value ◽  
Pension Plans ◽  
Risk Shifting ◽  
Agency Conflicts ◽  
Exogenous Shock ◽  
Corporate Pension

Using a natural experiment to identify the causal effect of an increase in default risk on firm actions, I find little evidence managers shift risk to corporate pension plans following an exogenous shock to the firm’s long-term liabilities. The finding is robust to focusing on firms where the incentive to engage in risk shifting is arguably the greatest, such as financially vulnerable firms and firms with fewer agency conflicts. This study casts doubt on the risk-shifting hypothesis and shows managers do not take risk-shifting actions that would increase shareholder value even when those actions pose little threat to managerial utility.

Minority shareholder participation and earnings management

2019 ◽  
Vol 9 (1) ◽  
pp. 73-109 ◽  
Author(s):  
Dongming Kong
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Minority Shareholders ◽  
Excessive Pressure ◽  
Data Set ◽  
Content Type ◽  
External Monitoring ◽  
Corporate Decisions ◽  
Alternative Measures ◽  
New Perspective

PurposeThe purpose of this paper is to test a catering theory by examining impacts of minority shareholders’ pressures on earnings management (EM), and attempt to answer: what is the role of minority shareholders participation (MSP) in corporate governance? and does MSP serve as an external monitor to managers, or does it put excessive pressure on them?Design/methodology/approachUsing a novel online voting data set in China’s stock market, the author constructs the measure of MSP, and regress the EM on MSP. To address the endogeneity, the author introduces propensity score matching and difference-in-difference methods, instrumental variables, and Heckman estimation to show that the results are robust to different specifications and alternative measures.FindingsThe author documents that: MSP plays limited role in external monitoring; and firms facing high MSP levels tend to manage earnings more actively. In addition, information asymmetry, proposals’ importance, managerial incentives, and CEO financial expertise significantly affect firms’ catering behaviors.Originality/valueThis paper contributes to different strands of the literature. First, the finding significantly supports the catering hypothesis from a new perspective of EM. Second, the author contributes to a hotly debated issue in corporate governance: whether minority shareholders should be granted increased participation in corporate decisions? The results also provide timely empirical evidence for government regulators who are concerned about the costs and benefits of granting minority shareholders direct control over corporate decisions.

scholarly journals The Impact of Corporate Governance and Ownership Structure on Earnings Management Practices: Evidence from Listed Companies in Pakistan

2014 ◽  
Vol 19 (2) ◽  
pp. 27-70 ◽  
Author(s):  
Kamran Shah ◽  
Attaullah Shah
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Ownership Structure ◽  
Management Practices ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Minority Shareholders ◽  
Corporate Decisions ◽  
The Board Of Directors ◽  
The Impact

This study analyzes the impact of corporate governance and ownership structure on earnings management for a sample of 372 firms listed on the Karachi Stock Exchange over the period 2003–10. We estimate discretionary accruals using four well-known models: Jones (1991); Dechow, Sloan, and Sweeney (1995); Kasznik (1999); and Kothari, Leone, and Wasley (2005). The results indicate that discretionary accruals increase monotonically with the ownership percentage of a firm’s directors, their spouses, children, and other family members. This supports the view that managers who are more entrenched in a firm can more easily influence corporate decisions and accounting figures in a way that may serve their interests. This finding is consistent with prior research evidence on the role of dominant directors in expropriating external minority shareholders in Pakistan. Further, our results indicate that institutional investors play a significant role in constraining earnings management practices. We do not find any evidence that CEO duality, the size of the auditing firm, the number of members on the board of directors, and ownership concentration influence discretionary accruals. Among the control variables, we find that firms that are more profitable, are growing, or have higher leverage actively manage their earnings, while earnings management decreases with the age of the firm. The results are robust to several alternative specifications.

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