Expropriation through loan guarantees to related parties: Evidence from China

Berkman, Henk; Cole, Rebel A.; Fu, Lawrence

doi:10.1016/j.jbankfin.2007.11.001

Cited by 323 publications

(227 citation statements)

References 23 publications

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“…Using loan guarantees to ensure credit to other firms under family ownership is one (important) way of expropriating minority shareholders (Berkman, Cole, & Fu, 2009). While loan guarantees to related parties can be viewed simply as a way of mitigating intra-group financial constraints, they obviously hurt the affiliated firms or subsidiaries (affiliates) as their ability to finance at low costs is hampered or clearing loans in the case of loan default lays a burden on them.…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Governance Structure and Related Party Loan Guarantees: The Case of Chinese Family Business Groups

Chen

Arnoldi

2015

Manag. Organ. Rev.

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Loan guarantees to related parties by affiliated subsidiaries within family controlled pyramids form a means by which the controlling family expropriates value from minority shareholders. The controlling family, however, will attempt to escape blame for the behavior. Using a sample of 1785 listed Chinese firms affiliated with family-controlled business groups, we explore how family governance structure affects the use of related party loan guarantees. As hypothesized, we find that affiliates with non-family chairmen, but with family directors or senior executives, issue larger volumes of loan guarantees to related parties, whereas affiliates with family chairmen and those with non-family interlocking chairmen do not. The behavior is moderated by regional institutional development.

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Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Governance Structure and Related Party Loan Guarantees: The Case of Chinese Family Business Groups

Chen

Arnoldi

2015

Manag. Organ. Rev.

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“…We try to measure the extent to which related party transactions are employed, and thus include related party sales, purchases, accounts receivable and payable to be consistent with prior literature (e.g., Aharony et al, 2010;Jian and Wong, 2008). In addition, we further include loan guarantees, which are a common channel for entrenchment by controlling shareholders, for comparison (Berkman et al, 2009). …”

Section: Methodsmentioning

confidence: 99%

The Change of Consolidation Rules and Its Impact on Earnings Management

Yang¹,

Li²,

Lin³

et al. 2017

Proceedings of the 6th Business &Amp; Management Conference, Geneva

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Boundaries of consolidated reporting entities vary between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Based on the rules-oriented conceptual framework, U.S. GAAP adopts ownership-based consolidation approach (ARB 51), while IFRS adopts control-based approach that is more principle-oriented (IAS 27). Exploiting a unique setting which took place in Taiwan that switched from U.S. GAAP to IFRS in

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“…At the same time, it constrains (diminishes) the opportunistic uses of discretionary accruals in a company's financial statements (Chung, Firth, & Kim, 2002;Park & Shin, 2004), inter-group borrowings (Berkman, Cole, & Fu, 2009), and corporate fraud (Chen et al 2009). …”

Section: Literature Review Of Rptsmentioning

confidence: 99%

Disclosure on Related Party Transactions: Evidence from Italian Listed Companies

Bava

Trana

2016

Accounting, Economics and Law: A Convivium

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Recent shortcomings in corporate affairs, related to the bursting of the New Economy Bubble and the global financial crisis, have forced regulators to strengthen current rules introducing new bans and requirements, aimed at guaranteeing the substantial and economic fairness of related party transactions (RPTs). In 2010 rules regarding RPTs were completely reshaped by the Italian Regulatory Body for the Italian Stock Exchange (CONSOB Regulation no. 17221). One of the most important amendments regarded the change in the criteria by which RPTs are mandatorily disclosed to investors. This change replaces a selection process based on a qualitative with a quantitative approach, in order to reduce the subjectivity of this particular evaluation. This study aims to analyze the effectiveness of the disclosure of RPTs after the introduction of the new rules. Our results show that although the new rules contribute to increasing the amount of information disclosed to investors through a higher number of documents reported by companies, their percentage in relation to the overall amount is worryingly low.

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Expropriation through loan guarantees to related parties: Evidence from China

Cited by 323 publications

References 23 publications

Governance Structure and Related Party Loan Guarantees: The Case of Chinese Family Business Groups

Governance Structure and Related Party Loan Guarantees: The Case of Chinese Family Business Groups

The Change of Consolidation Rules and Its Impact on Earnings Management

Disclosure on Related Party Transactions: Evidence from Italian Listed Companies

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