Do Voluntary Investor Protection Mechanisms Spread to High or Low Quality Legal Regimes?

Based on a quadratic form of audit tenure in explaining audit quality, we estimate a reference point that is potentially optimal for audit firm rotation for 22 countries across legal regimes with high versus low levels of investor protection. We find that our estimate for the high investor protection regime is longer than that for the low investor protection regime (24 years vs. 14 years for our main measure). However, very few firms from our sample would have been affected if there were a requirement of a mandatory rotation term, suggesting that mandatory audit firm rotation may not be necessary. In additional analyses, we not only evaluate the empirical validity of the quadratic form but also use various measures of our key variables, to conduct several other robustness tests. We continue to find a longer optimal point for countries with stronger investor protection in these robustness tests. Our findings imply that stronger country-level investor protection is a substitute for a shorter term of mandatory audit firm rotation.

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Minority investor protection mechanisms and agency costs: An empirical study using a World Bank–developed approach

Accounting ◽

10.5267/j.ac.2021.6.014 ◽

2022 ◽

Vol 8 (2) ◽

pp. 235-248 ◽

Cited By ~ 1

Author(s):

Hoang N. Pham ◽

Minh C. Nguyen

Keyword(s):

World Bank ◽

Agency Costs ◽

Investor Protection ◽

Agency Problems ◽

Minority Shareholders ◽

Firm Level ◽

The World Bank ◽

The World ◽

Protection Mechanisms ◽

The Impact

This study aims to examine the impact of minority investor protection mechanisms on agency costs. All relevant indicators of minority investor protection adapted from the World Bank’s annual ‘Doing Business’ reports, along with concentrated government ownership, are employed with a panel data sample of 135 Vietnamese listed firms during the period 2014–2018. It is found that the following mechanisms are effective in mitigating agency costs and hence agency problems at the firm level: 1) review and approval requirements for related-party transactions; 2) minority shareholders’ ability to sue and hold directors liable for their duties; 3) minority shareholders’ access to internal corporate documents; 4) investors’ rights to approve major corporate investment and sale of asset decisions; and 5) disclosure in annual reports of salaries, bonuses and other forms of remuneration to directors and management. Interestingly, board independence and controlling government shareholders are not confirmed to play significant roles in addressing agency problems. To the best of the authors’ knowledge, this is the first attempt at testing for the impact of minority investor protection mechanisms developed by the World Bank on agency costs at the firm level, hence providing empirical evidence for the adoption of the minority investor protection mechanisms promoted by the World Bank. This study also provides policy implications for selecting effective mechanisms to mitigate agency conflicts between controlling shareholders and minority investors in order to enhance the financial performance of firms in an Asian emerging market.

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Ieguldītāju aizsardzības mehānisma attīstības tendences: normatīvo aktu grozījumi 2017. un 2018. gadā

SOCRATES. Rīgas Stradiņa universitātes Juridiskās fakultātes elektroniskais juridisko zinātnisko rakstu žurnāls / SOCRATES. Rīga Stradiņš University Faculty of Law Electronic Scientific Journal of Law ◽

10.25143/socr.14.2019.2.009-022 ◽

2019 ◽

Vol 2 (14) ◽

pp. 9-22

Author(s):

Tatjana Jukna

Keyword(s):

Investor Protection ◽

State Level ◽

The State ◽

Financial Instruments ◽

Protection Mechanism ◽

Technical Developments ◽

Protection Mechanisms ◽

The Republic ◽

The Eu

Ieguldītāju aizsardzības mehānisms ir diezgan jauns tiesību institūts, kura elementi ietverti vairākos Latvijas Republikas un Eiropas Savienības normatīvajos aktos. Ieguldītāju aizsardzības problemātikas aktualitāti veicina gan globalizācija, gan tehnoloģiju attīstība, kā arī jaunu finanšu instrumentu veidu rašanās. Ieguldītāju aizsardzības pasākumu attīstību Latvijas tiesiskajā regulējumā būtiski ietekmē Eiropas Savienības normatīvā regulējuma pārņemšana nacionālajā tiesību sistēmā.  Šajā rakstā skartas personu kā ieguldītāju tiesības, kas cieši saistītas ar vērtspapīru kā patstāvīgu privāttiesiskas apgrozības priekšmetu, t. i., ieguldītāju aizsardzības pamatelementi aplūkoti ieguldījumu pakalpojumu kontekstā. Taču šeit netiek aplūkotas akcionāru, obligacionāru, ieguldījumu apliecību īpašnieku tiesības, kas izveidojas no īpašumtiesībām uz vērtspapīriem ar tieši vērtspapīrā nostiprinātajām tiesībām (piemēram, ar izpirkuma tiesībām, balsstiesībām, tiesībām uz informāciju u. c.). Mechanism of the investor protection is a quite new law institute. The elements of the investor protection mechanism could be found in various legal acts both at the state level of the Republic of Latvia and at the level of the EU. Globalisation, technical developments and arising of new types of financial instruments encourage actualisation of investor protection problematics.  The development of the measures related to the investor protection are influenced by the transportation of the EU legal acts into national law systems. The article is devoted to the rights of investors as elements of investor protection mechanisms in the aspect of providing of investment services to the investors.

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