Too much of a good thing? The nonlinear influence of noncontrolling large shareholders on corporate innovation

PurposeNoncontrolling large shareholders can reduce the agency problem of executives and can reduce the expropriation or tunneling behavior of controlling shareholders, thereby promoting corporate innovation. However, too many noncontrolling large shareholders may also lead to excessive supervision, thereby inhibiting innovative activities that contribute to the long-term value of the firm. Research to date, however, has not examined the nonlinear impact of noncontrolling large shareholders on corporate innovation. Based on principal–agent theory and the too-much-of-a-good-thing (TMGT) effect, the authors discuss the inverted U-shaped influence of noncontrolling large shareholders on corporate innovation and the moderating effect of industry competition and corporate product diversification on the above relationship.Design/methodology/approachBased on the empirical data of Chinese listed companies from 2003 to 2017, the authors use the bidirectional fixed effects model to conduct empirical testing and robustness testing of the research hypotheses.FindingsThere is an inverted U-shaped relationship between noncontrolling large shareholders and corporate innovation; type I and type II agency costs play a mediating role between noncontrolling large shareholders and corporate innovation. In addition, firm product diversification weakens the inverted U-shaped relationship between noncontrolling large shareholders and corporate innovation, but industry competition has no significant moderating effect on the above relationship.Practical implicationsThis research has important implications for policy makers, to better activate corporate innovation vitality, and investors, to better choose investment targets. Specifically, investors and policy makers should be aware that an appropriate increase in larger noncontrolling shareholders can maximize the enthusiasm of firms for innovation and enhance corporate value, but they should also realize that having too many noncontrolling large shareholders may backfire.Originality/valueThis research helps the authors to understand the pros and cons of increasing the number of noncontrolling large shareholders more comprehensively and also helps to understand corporate innovation more comprehensively from a supervisory perspective. In addition, this research also enhances the explanatory and predictive power of the TMGT effect.

The Influence of Ownership Concentration on Firm Financial Decisions and Value: Evidence from Nairobi Securities Exchange

This study paper examines the influence of ownership concentration and firm financial decisions on firm value for firms listed on the Nairobi securities exchange. This study is supported by theoretical literature under the signaling hypothesis, institutional monitoring hypothesis, and agency theory. The study used longitudinal data for listed firms during the ten years (2008- 2017) and regression analysis was used to study the nature and extent of the relationship. The target population was sixty-eight firms that traded equity securities during the period. Empirical results reveal that ownership concentration has no significant positive effect on firm value, but dividend payment significantly influences firm value, and the capital structure only compliments other corporate governance processes in a firm. Firms listed on the Nairobi Securities Exchange have a high level of ownership concentration and this suggests, contrary to the shareholder monitoring hypothesis, large shareholders could be entrenched and, unless other complementary corporate mechanisms are present, large shareholders may not act in the best interest of minority shareholders.The youthful spirit of students to become entrepreneurs is apparent to the naked eye. However, the general objective of this research was to analyze the entrepreneurial attitude of male students from the Tecnológico Nacional de México campus, Tepeaca. One hundred and seventy-two male students were surveyed. The questionnaire was designed and validated by experts in the area. The validation was carried out by a new method; This consists of applying a Pearson factorial analysis for linear correlations and chi-square for nonlinear associations. Five postulates are applied to debug and validate each item. The items are taken as factors or independent variables to contrast the working hypotheses. The sampling was random. The results matrix obtained after applying Pearson's correlation yielded three correlations above 0.7. With these correlations, six linear hypotheses were validated. Only eight chi-squarevalidated nonlinear hypotheses were selected due to the limited space of a scientific article. In general, 400 working hypotheses were designed in the order of 20 items taken in two to two. It is concluded that the surveyed students have extensive knowledge of entrepreneurship. They are prepared for innovation, creation, and success in the companies they own and the companies where they provide their services.

Multiple large shareholders and corporate fraud: evidence from China

This study tests the effect of multiple large shareholders on the level of corporate fraud using the data of Chinese listed companies from 2010 to 2018. We find lower probabilities and lower corporate fraud frequencies when there are multiple large shareholders in Chinese listed companies, indicating that their presence plays a supervisory role in internal governance. These results persist after we control for endogeneity. Moreover, the effect of multiple large shareholders on corporate fraud is strengthened with the separation of control right and cash flow right. Further analyses reveal that companies with multiple large shareholders experience considerably reduced information disclosure fraud but no reduction in operating or leader frauds. Additionally, information asymmetry and the capital occupation of controlling shareholders both play a mediating role in the relationship between multiple large shareholders and the level of corporate fraud. This study enriches the literature on the determinants of corporate fraud and the effects of multiple large shareholders. Our findings also provide implications for companies and regulators regarding ways to reduce fraud.

Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms

This study contributes to the literature by exploring the relationship between board financial expertise and cash holding policy and further showing how this relation is moderated by multiple large shareholders (MLS). This research is based on agency theory, resource dependence, trade-off, and pecking order theory to confirm how resourceful directors screen cash holding practices. This study selects the 100 listed family firms from the emerging economy of Pakistan for the period of 2006–2017. With the use of static (random and fixed effect estimator) and dynamic (GMM) estimation techniques, this study reveals that the financial expertise of the board members has a significant negative impact on the firms’ cash holding level. Further, moderating effect of MLS between board financial expertise and cash holding is significantly positive due to weak corporate governance mechanisms in family firms. Moreover, the research has implications for developing corporate governance mechanism and the management of liquid assets that corporate management might use for their benefits.

Does Ownership Concentration Affect Profitability and Dividend Policy? Evidence from Listed Banks in Jordan

This paper examines how the ownership concentration affects banks’ profitability and dividend policy in Jordan. All banks listed on the Amman Exchange were selected (16 banks) over the period 2010 to 2019. Ownership concentration was defined as the percentage of ownership that equals or exceeds 5%, while profitability was defined by return on equity; dividend policy was defined by the pay-out ratio. Simple regression was utilized to examine the effect; the result revealed that ownership concentration has a positive significant impact on profitability, which means that banks with higher ownership concentration have better profitability, this result justified by the view of the power that controlling shareholders can greatly use to require management to make decisions that improve the performance. The finding showed a negative significant impact on dividend policy, which indicates that the existence of large shareholders can reduce agency conflicts; and maximize the wealth of the company. It is recommended that related parties especially investors should take the concentration of ownership as an important factor to take their investment decisions, whether related to purchasing banks’ shares for various purposes, or expectations of potential dividends.

The dark side of blockholder control: evidence from financial statement fraud cases

Purpose The purpose of this study is to investigate whether large blockholders are associated with financial statement fraud at their companies. Although a substantial body of prior studies has focused on chief executive officers’ motivations to manipulate financial statements, the correlation between majority shareholders and financial statement fraud has received little attention. This paper aims to fill this gap by investigating whether the sample firms have controlling shareholders or executives (i.e. blockholders vs management) and whether financial statement fraud schemes, motivations and consequences differ between blockholder- and management-controlled firms. Design/methodology/approach Using a clinical approach, the authors Study 12 Canadian financial statement fraud cases uncovered by the Ontario Securities Commission between 1997 and 2020. Findings First, the authors find blockholder control in six cases. These findings infer that these large shareholders received private benefits at the expense of minority shareholders. The comparative analyzes suggest that fraudulent firms controlled by blockholders go bankrupt more often than those controlled by managers. The authors also find that improper disclosure is the most common fraud scheme in blockholder-controlled firms. Originality/value The authors conduct a deep analysis of financial statement fraud cases to examine the of blockholder control on the likelihood of financial statement fraud. This paper adds new insights to the research on financial crime by investigating whether large shareholders affect the probability of fraud and the extent to which they might do so.