An empirical study of equity agency costs and internationalization: Evidence from Taiwanese firms

Chiang, Yi-Chein; Ko, Chun-Lein

doi:10.1016/j.ribaf.2009.01.001

Cited by 9 publications

(7 citation statements)

References 26 publications

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“…Chiang and Ko (2009) suggest that Taiwanese firms have incentives to provide more information voluntarily and help to reduce information asymmetry, thereby enabling them to raise capital on the best available terms. Liu and Chen (1998) explore the timing of managers' voluntary earnings forecasts and indicate that Taiwanese investors depend more heavily on the voluntary information issued by listed companies than do investors in Western countries.…”

Section: Discussionmentioning

confidence: 99%

Heaping in Reported Earnings: Evidence from Monthly Financial Reports of Taiwanese Firms

Lin

Guan

Fang

2011

Emerging Markets Finance and Trade

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Heaping is a phenomenon in which reported numbers tend to appear in increments that are important for cultural or other reasons. This study reports that heaping is present in monthly earnings reports for publicly listed companies in Taiwan. We find that Taiwanese firms tend to report monthly earnings in increments of 5 in the first two places (digits) of the earnings numbers. Furthermore, we observe predominantly more zeros in the third through fifth places of monthly earnings numbers, suggesting that monthly earnings tend to be reported in increments of 10 in the first three, first four, and first five places. Reporting of monthly earnings in Taiwan is discretionary, and our findings suggest that managers of Taiwanese firms are susceptible to heuristic bias when reporting monthly earnings. These findings complement studies on heaping in U.S. financial markets documenting that managers and financial analysts tend to make earnings per share estimates that heap in increments of nickels.

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Section: Discussionmentioning

confidence: 99%

Heaping in Reported Earnings: Evidence from Monthly Financial Reports of Taiwanese Firms

Lin

Guan

Fang

2011

Emerging Markets Finance and Trade

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“…Following Fu et al (2012), beta, size, book-to-market (BM) value have been controlled. We control for size because size affects agency cost (Chiang and Ko, 2009; Jensen and Meckling, 1976). We also control for leverage, as debt financing may reduce the agency cost because of monitoring role played by lenders (Agrawal and Knoeber, 1996).…”

Section: Methodsmentioning

confidence: 99%

Impact of investment efficiency on cost of equity: evidence from China

Majeed

Zhang

Umar

2018

JABS

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Purpose The purpose of this study is to investigate the effect of investment efficiency on cost of equity capital. Design/methodology/approach Prior research indicated that any governance mechanism which reduces the agency conflict reduces the cost of equity capital. This study provides empirical evidence that investment efficiency represents such governance mechanism which reduces agency conflict and hence cost of equity. The authors use price earning growth ratio (Easton, 2004) and Ohlson and Juettner-Nauroth (2005) model for the measurement of cost of equity while investment efficiency measure of Biddle et al. (2009) have been employed to examine the association. We also use Chen et al. (2013) measure of investment efficiency for robustness. Findings The results show that investment efficiency is negatively associated with cost of equity. It was also found that there is a strong relationship of investment efficiency with cost of equity for non-state-owned enterprises (NSOEs), while no significant relationship is found for state-owned enterprises. Furthermore, overinvestment is significantly associated with cost of equity capital. However, no significant relationship was found between underinvestment and cost of equity. Originality/value The results provide empirical support to the argument that investment efficiency acts as a mechanism which represents lower agency conflict. Moreover, the findings provide evidence that government act as “deep pocket” while NSOEs are punished by investors for inefficient resource allocation. This study also proposes that there is a positive relationship between overinvestment and cost of equity.

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“…Common institutional investors may take advantage of the information and scale advantages developed among firms in the same industry to collude with management and hollow out firms (Cheng et al, 2022), thus exacerbating the zombification of firms. It has been shown that investors with higher shareholding ratios have more opportunities to contact the management of investee companies, and the possibility of collusion with management is greater (Wang, Liu, et al, 2023; Wang, Qi, et al, 2023). In a sense, as a pivotal node in the flow of information and resources, common institutional investors can unite the strength of other enterprises in the same industry (Gao et al, 2019; Liu and Hou, 2023), prompting the formation of ‘interest alliances’ in the same industry, and thus have stronger strength to conspire with the management of the company.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Can common institutional ownership inhibit the formation of zombie firms? Evidence from China

Ding

2024

Asian-Pac Economic Lit

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The survival of zombie firms severely crowds out healthy corporate investment and employment growth, eventually undermining economic growth potential. Hence, how to properly address the problem of corporate zombification is an essential part of achieving high‐quality economic development in China. In recent years, the phenomenon of common institutional ownership has become increasingly widespread in the capital markets and has a significant impact on the strategic decisions of companies. There are currently two views on the corporate governance role of common institutional ownership: the synergistic governance effect and the collusive fraud effect. Using data from Chinese‐listed firms from 2009 to 2021, this paper finds that common institutional ownership can significantly inhibit the formation of zombie firms. The higher the degree of their linkage and the greater the shareholding, the more pronounced the synergistic effect. The findings remained valid after considering the endogeneity issue and conducting robustness tests. Furthermore, the mechanism test suggests that common institutional ownership inhibits the formation of zombie firms by improving internal control quality and reducing agency costs. This paper contributes to the study of how to inhibit the formation of zombie firms by identifying common institutional ownership from the perspective of external governance mechanisms. In addition, this paper enriches the research on the economic consequences of common institutional ownership. Finally, various practical implications for policymakers may be realised, which may help curb the trend of corporate zombification through equity‐based instruments.

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An empirical study of equity agency costs and internationalization: Evidence from Taiwanese firms

Cited by 9 publications

References 26 publications

Heaping in Reported Earnings: Evidence from Monthly Financial Reports of Taiwanese Firms

Heaping in Reported Earnings: Evidence from Monthly Financial Reports of Taiwanese Firms

Impact of investment efficiency on cost of equity: evidence from China

Can common institutional ownership inhibit the formation of zombie firms? Evidence from China

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