Auditor Resignation and Firm Ownership Structure

2011 ◽  
Vol 25 (4) ◽  
pp. 703-727 ◽  
Author(s):  
Samer K. Khalil ◽  
Jeffrey R. Cohen ◽  
Gregory M. Trompeter
Keyword(s):  
Portfolio Management ◽  
Ownership Structure ◽  
Family Firms ◽  
Abnormal Returns ◽  
Data Availability ◽  
Family Ownership ◽  
Stock Market Reaction ◽  
Auditor Resignation ◽  
The U.S ◽  
Control Samples

SYNOPSIS This paper investigates whether the likelihood of auditor resignations and the associated stock market reaction in family firms is significantly different from that in non-family firms. It also examines whether the aforementioned associations vary with the identity of the CEO managing family firms (founder, descendant, or non-family CEO). Relying on a sample of auditor resignations in the U.S. over five calendar years, 2004–2008, and using two control samples (matched and random) as benchmarks, we document the following. First, the likelihood of auditor resignations in family firms is significantly lower than that in non-family firms. Second, auditor resignations in family firms managed by a founder or non-family CEO (descendant) are also less (more) frequent compared to non-family firms. Finally, abnormal returns following auditor resignations in family firms and in family firms managed by a non-family CEO are higher (less negative) than those in non-family firms. These results are robust to the selection bias resulting from family ownership and contribute to the literature investigating auditor portfolio management decisions. Data Availability: All data are from publicly available sources.

Is family ownership of a firm associated with the control of managerial discretion and corporate decisions?

2016 ◽  
Vol 6 (1) ◽  
Author(s):  
Jennifer Martinez Ferrero ◽  
Lázaro Rodríguez-Ariza ◽  
Manuel Bermejo-Sánchez
Keyword(s):  
Ownership Structure ◽  
Design Methodology ◽  
Family Firms ◽  
Managerial Discretion ◽  
Family Ownership ◽  
Managerial Decisions ◽  
Corporate Decisions ◽  
Type Design ◽  
The Family ◽  
The Impact

Purpose This paper considers the association between family firms and managerial discretion, hypothesising that a higher degree of family ownership may decrease the conflict of interest between owners and managers, thus avoiding the risk of discretionary actions by the latter. Design/methodology/approach Our empirical analysis is based on a large sample of international listed companies from 20 countries including the Special Administrative Region of Hong Kong and covers the period 2002–2010. Methodologically, we use a logit model with marginal effects on the panel data. Findings Our analysis shows that family ownership is associated with greater control and monitoring of managerial decisions, thus avoiding information asymmetries and, therefore, the risk of discretionary actions. In other words, family owners impose a stronger discipline and dissuade non-family managers from using managerial discretion to act in their own interest. Finally, we clarify the inconclusive results reported previously about the effects of family ownership on discretionary practices. Originality/value Our paper contributes to the family firm literature by providing evidence of the impact of ownership structure on the level of discretionay practices. Furthermore, we explore the differences between family and non-family firms as each group has its own varied characteristics. Moreover, in contrast to most previous studies, which have focused on only one country, we extend the analysis to include an international sample of 20 countries. This leads to potentially more powerful and generalizable results.

Do family CEOs benefit investment efficiency when they face uncertainty?

2017 ◽  
Vol 11 (2) ◽  
pp. 248-269 ◽  
Author(s):  
Weiwei Gao ◽  
Wanli Li ◽  
Zhen Huang
Keyword(s):  
Ownership Structure ◽  
Family Firms ◽  
Generation Effect ◽  
Chinese Family ◽  
Family Ownership ◽  
Investment Efficiency ◽  
Content Type ◽  
Family Control ◽  
Large Shareholder ◽  
Shareholder Structure

Purpose This paper aims to investigate whether family CEOs benefit investment efficiency under uncertainty with Chinese family firms and to test the moderating effect of ownership structure, including family ownership, the separation of family control from family ownership and the multiple large shareholder structure. Design/methodology/approach Fixed-effects models are designed for a sample of 5,734 firm-year observations for Chinese family firms from 2009 to 2014. Findings The results show that investment efficiency is low under uncertainty, and having family CEOs can reduce this negative relationship. Further analysis reveals that for firms with family CEOs, the negative effect of uncertainty on investment efficiency is weaker when the family has higher ownership, when family control is less separated from family ownership, or when family firms have multiple large shareholder structures. Research limitations/implications The authors do not distinguish founder-CEOs and descendant-CEOs. Most of Chinese family firms are still managed by founders, so the authors cannot explore the generation effect although different generations manage firms differently. Because family succession is becoming a more and more important problem in China, further research may be able to explore the generation effect. Practical/implications This paper suggests that in emerging economies with weak investor protection, outside minority shareholders can avoid expropriation from family owners by investing in firms with large family ownership, little separation of family control from ownership or multiple large shareholder structure. In addition, policymakers can encourage institutional investors to participate in family business to improve corporate governance. Originality/value Drawing on both Type I and Type II agency theory perspectives, the authors argue that although family CEOs can generally benefit firms’ investment efficiency, the benefits vary with firms’ ownership structure. In other words, family CEOs are not absolute agents or stewards but some extent of combination of both.

Investor Perceptions of Potential IFRS Adoption in the United States

2012 ◽  
Vol 88 (2) ◽  
pp. 577-609 ◽  
Author(s):  
Philip P. M. Joos ◽  
Edith Leung
Keyword(s):  
United States ◽  
Stock Market ◽  
Market Reaction ◽  
The United States ◽  
Data Availability ◽  
Current Debate ◽  
Litigation Risk ◽  
Ifrs Adoption ◽  
Stock Market Reaction ◽  
The U.S

ABSTRACT This paper examines the stock market reaction to 15 events relating to IFRS adoption in the United States. The goal is to assess whether investors perceive the switch to IFRS as beneficial or costly. Our findings suggest that investors' reaction to IFRS adoption is more positive in cases where IFRS is expected to lead to convergence benefits. Our results also indicate a less positive market reaction for firms with higher litigation risk, which is consistent with investors' concerns about greater discretion and less implementation guidance under IFRS for these firms. Overall, the findings are relevant to the current debate on IFRS adoption in the U.S. and highlight the importance of convergence to investors. Data Availability:  All data are publicly available from the sources indicated in the paper (see Appendices A and B).

scholarly journals Impact of Family Ownership on Market Value of a Firm: A Comparative Analysis of Family and Non-Family Companies Listed at Karachi Stock Exchange (Pakistan)

2015 ◽  
Vol 3 (12) ◽  
pp. 673-683
Author(s):  
Safdar Husain Tahir ◽  
Hazoor Muhammad Sabir
Keyword(s):  
Ownership Structure ◽  
Family Firms ◽  
Stock Exchange ◽  
Generalized Method Of Moments ◽  
Chief Executive ◽  
Family Ownership ◽  
Young Generation ◽  
Listed Firms ◽  
Inflection Points ◽  
The Impact

The current study attempts to investigate the impact of family ownership structure on value of firms listed at the Karachi Stock Exchange (KSE) of Pakistan. For the distinction of FOB from Non-FOB, two threshold points (25% & 50%) of ownership structure are used. A sample of 280 listed firms at KSE is collected ranging for the period 2002-13. Generalized Method of Moments (GMM) is applied on panel data to estimate the coefficients of variables. The empirical results indicate that the family firms outperform the non-family ones. The better performance of young generation of family firms over succeeding generation is also revealed but professional chief executive officer (CEO) over family member is preferred. Furthermore, this study discovers inflection points i.e. (62% & 57%) for family and non-family firms under quadratic specification respectively.

PENGARUH FAMILY OWNERSHIP, PERUBAHAN TARIF PAJAK DAN KEBIJAKAN HUTANG TERHADAP NILAI PERUSAHAAN

2017 ◽  
Vol 9 (2) ◽  
Author(s):  
Elfina Astrella Sambuaga
Keyword(s):  
Ownership Structure ◽  
Tax Reform ◽  
Stock Exchange ◽  
Family Ownership ◽  
Corporate Debt ◽  
Tax Rates ◽  
Manufacturing Companies ◽  
The Impact ◽  
The Relationship ◽  
Debt Policy

<p>This study aims to provide empirical evidence related to the influence of family ownership, tax reform on corporate debt policy, and further prove the impact on the firm value.This study examined the effect of changes in tax rates in 2009 and 2010 on the relationship between family ownership structure and corporate debt policy. The population of this research is manufacturing companies listed in Indonesia Stock Exchange for 8 consecutive years (2006-2013), with the period of observation for 7 years (2007-2013). A period of 8 years was taken to see a company that is consistently listed on the Stock Exchange prior to the end of the observation period. The result of this study shows that tax reform from progressive tax rates to a flat rate does not affect the relationship between family ownership structure and corporate debt policy. In contrast to the year 2009, changing rate from 28% to 25% in late 2010 was a significant effect on the debt policy with the company of family ownership. Based on the results, it was found that family ownership and debt policy significantly affect the company's enterprise value. It can be concluded, the higher the family ownership, the company's value would be diminished. Instead, the company's value will increase when the company adds to its debt policy.</p><p>Keywords : debt policy, family ownership, firm value, tax reform.</p>

Corporate Social Responsibility and Earnings Management: The Moderating Role of Family Ownership

2019 ◽  
Vol 12 (1) ◽  
Author(s):  
Asif Saeed ◽  
Aijaz Mustafa Hashmi ◽  
Attiya Yasmin Javid
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Family Firms ◽  
Negative Impact ◽  
Stock Exchange ◽  
Least Square ◽  
Family Ownership ◽  
Corporate Social ◽  
The Impact

This study aims to explore the impact of family ownership on the relationship among corporate social responsibility (CSR) and earning management (EM) in Pakistan. Data is collected from nonfinancial listed firms on Pakistan Stock Exchange (PSE) for the period 2009-2017. Our results of pooled ordinary least square regression indicate that CSR has significant negative impact on EM. Furthermore, results also indicate that association between CSR and EM is moderated by family ownership. Family firms which perform CSR activities are less involved in EM as compare to nonfamily firms perform CSR activities. This variation in behavior of EM in family and non-family firms can possibly be explained by socioemotional wealth theory. Keywords: Corporate Social Responsibility, Earnings Management, Family Ownership

Investor Reaction to Auditors' Going Concern Emphasis of Matter: Evidence from a Natural Experiment

2018 ◽  
Vol 38 (2) ◽  
pp. 27-55 ◽  
Author(s):  
Jean Bédard ◽  
Carl Brousseau ◽  
Ann Vanstraelen
Keyword(s):  
Trading Volume ◽  
Natural Experiment ◽  
Abnormal Returns ◽  
Data Availability ◽  
Financial Statement ◽  
Regulatory Change ◽  
Price Response ◽  
Going Concern ◽  
Incremental Value ◽  
Investor Reaction

SUMMARY Using a “natural experiment” provided by a change in Canadian auditing standards requiring an emphasis of matter paragraph in the auditor's report (GC-EOM) when the financial statements include a going concern uncertainty disclosure (GC-FS), this paper examines the incremental investor reaction to the auditor's report over the related GC-FS. Conditioning on the linguistic severity of the GC-FS (weak and severe), we first document a negative price response to severe but not to weak GC-FS before the regulatory change. This implies that investors react to financial statement disclosures and account for their degree of interpretability in the absence of a GC-EOM. When the uncertainty disclosure is accompanied by a GC-EOM, we find incremental negative abnormal returns and lower abnormal trading volume only for weak GC-FS. Collectively, these findings imply that an emphasis of matter paragraph in the auditor's report can have incremental value to investors. JEL Classifications: M42; G12; G14. Data Availability: Data used are available from public sources identified in the study.

scholarly journals Limiting role of resource dependence: an examination of director interlocks, board meetings and family ownership

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vidya Sukumara Panicker ◽  
Rajesh Srinivas Upadhyayula
Keyword(s):  
Board Of Directors ◽  
Resource Dependence ◽  
Family Firms ◽  
Emerging Market ◽  
Resource Provisioning ◽  
Independent Directors ◽  
Family Ownership ◽  
Independent Director ◽  
Content Type

PurposeThis paper attempts to examine the activity and involvement of board of directors in internationalization activities of firms in emerging markets, by evaluating the resource provisioning roles of interlocks provided by board of directors, and the frequency of board meetings. We demonstrate that the effectiveness of board involvement is contingent upon the levels of family ownership in firms since family ownership could impact the firm’s ability to utilize the presence of different types of board members.Design/methodology/approachThe authors test our hypotheses on a sample of listed Indian companies, extracted from the Prowess database published by the Centre for Monitoring Indian Economy (CMIE), a database of the financial performance of Indian companies. On a panel of 3,133 firm years of 605 unique Indian firms with foreign investments, over a time period of 2006–2017, the authors apply different estimation techniques.FindingsThe results demonstrate that both board meeting frequency and director interlocks are instrumental in supporting internationalization activities in emerging market firms. However, family ownership moderates the role of insider and independent interlocks on internationalization investments in different ways; the authors find that interlocks provided by independent directors support internationalization activities in family firms, whereas those provided by insider directors do not. Further, the study also finds that board meetings are less effective in internationalization of family firms.Practical implicationsThe authors conclude that family firms aiming at international diversification require to develop more connected and networked independent directors to enable internationalization in firms. While independent director interlocks enhance the international investments, it is also useful to know that board meetings are ineffective in utilizing the resources in family firms. This points to the possibility that family firms should device mechanisms to integrate family meetings with board meetings so that they can utilize the within-family processes to aid in their internationalization decisions.Originality/valueThe study contributes to resource dependence theory by understanding its limiting role in family firms. Theoretically, it helps delineate the limiting resource provision role of the insider directors vis-à-vis independent directors. The authors argue that the resource provision role of insider director interlocks does not effectively help in internationalization in comparison to independent director interlocks in family-dominated firms. Consequently, the study shows the limiting role of resource provision and utilization by family-owned firms in comparison to non-family-owned firms.

The strength of the board on sustainability assurance decisions

2017 ◽  
Vol 24 (4) ◽  
pp. 863-886 ◽  
Author(s):  
Jennifer Martinez-Ferrero ◽  
Lázaro Rodríguez-Ariza ◽  
Isabel María García-Sánchez
Keyword(s):  
Random Effects ◽  
Design Methodology ◽  
Family Firms ◽  
Positive Impact ◽  
Family Businesses ◽  
Family Ownership ◽  
Logit Models ◽  
Board Size ◽  
Content Type ◽  
Sustainability Reports

Purpose The purpose of this paper is to analyze how family ownership influences the strength of the board’s monitoring function in companies’ decisions regarding the assurance of sustainability reports. Design/methodology/approach The international sample consists of 536 companies operating in more stakeholder-oriented countries during the period 2007-2014. The paper proposes alternative logit models of analysis using the random-effects estimator. Findings The results provide evidence that a firm’s sustainability assurance and its choice of accounting professionals as higher quality assurers are positively associated with board size and independence. The main result is the positive impact of family businesses on these assurance issues. The paper evidences the greater orientation toward sustainability issues of family businesses. Furthermore, it verifies the greater impact of board size on family firms’ assurance demand. Originality/value This study sheds some light on the unexplored topic of sustainability assurance in family firms. One of the differentiating aspects with respect to previous studies is the consideration of the moderating factor of family property. This study also contributes to the understanding of family firms’ demand for assurance and its practitioners, and the literature’s focus on its determinants.

Global financial crisis, ownership structure and firm financial performance

2017 ◽  
Vol 34 (4) ◽  
pp. 447-465 ◽  
Author(s):  
Ali Salman Saleh ◽  
Enver Halili ◽  
Rami Zeitun ◽  
Ruhul Salim
Keyword(s):  
Financial Crisis ◽  
Financial Performance ◽  
Ownership Structure ◽  
Family Firms ◽  
Global Financial Crisis ◽  
Ownership Concentration ◽  
Financial Leverage ◽  
Content Type ◽  
Crisis Period ◽  
The Global Financial Crisis

Purpose This paper aims to investigate the financial performance of listed firms on the Australian Securities Exchange (ASX) over two sample periods (1998-2007 and 2008-2010) before and during the global financial crisis periods. Design/methodology/approach The generalized method of moments (GMM) has been used to examine the relationship between family ownership and a firm’s performance during the financial crisis period, reflecting on the higher risk exposure associated with capital markets. Findings Applying firm-based measures of financial performance (ROA and ROE), the empirical results show that family firms with ownership concentration performed better than nonfamily firms with dispersed ownership structures. The results also show that ownership concentration has a positive and significant impact on family- and nonfamily-owned firms during the crisis period. In addition, financial leverage had a positive and significant effect on the performance of Australian family-owned firms during both periods. However, if the impact of the crisis by sector is taking into account, the financial leverage only becomes significant for the nonmining family firms during the pre-crisis period. The results also reveal that family businesses are risk-averse business organizations. These findings are consistent with the underlying economic theories. Originality/value This paper contributes to the debate whether the ownership structure affects firms’ financial performance such as ROE and ROA during the global financial crisis by investigating family and nonfamily firms listed on the Australian capital market. It also identifies several influential drivers of financial performance in both normal and crisis periods. Given the paucity of studies in the area of family business, the empirical results of this research provide useful information for researchers, practitioners and investors, who are operating in capital markets for family and nonfamily businesses.

Sign in / Sign up

Export Citation Format

Share Document