Local investors and corporate governance

Chhaochharia, Vidhi; Kumar, Alok; Niessen‐Ruenzi, Alexandra

doi:10.1016/j.jacceco.2012.03.002

Cited by 204 publications

(116 citation statements)

References 81 publications

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“…Ayers et al (2011) document that managers' discretion over financial reporting increases with the geographic remoteness of institutional investors from a firm's headquarters; they conclude that monitoring costs incurred by these investors increase with distance. Similarly, Chhaochharia et al (2012) find that corporate monitoring is more effective when excreting by local institutional investors than by their non-local counterparts. These arguments motivate our first hypothesis:…”

Section: Review Of the Literature And Hypotheses Testedmentioning

confidence: 83%

Geographic location, excess control rights, and cash holdings

Boubaker

Derouiche²,

Lasfer

2015

International Review of Financial Analysis

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We assess the extent to which remotely-located firms are likely to discretionarily accumulate cash rather than distribute it to shareholders. We consider that these firms are less subject to shareholder scrutiny and, thus, will have high agency conflicts as the distance will facilitate the extraction of private benefits. Consistent with our predictions, we find a positive relation between the distance to the main metropolitan area and cash holdings, and this impact is more pronounced when the controlling shareholder has high levels of excess control rights (i.e., separation of cashflow rights and control rights). Our results hold even after accounting for all control variables, including financial constraints, and suggest that geographic remoteness can be conducive to severe agency problems, particularly when there is a large separation of cash-flow rights and control rights.JEL Classification: G30; G31; G32; G35.

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Section: Review Of the Literature And Hypotheses Testedmentioning

confidence: 83%

Geographic location, excess control rights, and cash holdings

Boubaker

Derouiche²,

Lasfer

2015

International Review of Financial Analysis

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“…The outcome of these proxy contests is important given that a large body of literature shows how board compositions can affect accounting outcomes (Klein, 2002;Bushman et al, 2004a). Chhaochharia et al (2012) find that local institutions are more likely to increase CEO turnover and to reduce excess CEO pay. Large shareholders can further be the leading plaintiffs in class action lawsuits.…”

Section: (Iii) Large Shareholders' Possible Effects On Earnings Managmentioning

confidence: 99%

“…It is entirely possible that certain large shareholders have a positive influence while others have a negative influence. 2 Prior research relies on these arguments to motivate the prediction between institutional ownership and EM (e.g., Chhaochharia et al, 2012), between blockholders and EM (e.g., Farber, 2005), between corporate governance and EM (e.g., Francis et al, 2005), between founding family control and EM (e.g., 2007), between public ownership and EM (e.g., Hope et al, 2013), and between the legal environment and EM (e.g., Leuz et al, 2003). Thus, they may influence corporate policies to various extents.…”

Section: Introductionmentioning

confidence: 99%

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

Dou¹,

Hope²,

Thomas³

et al. 2016

Business Fin & Account

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Using a large hand‐collected sample of all blockholders (ownership ≥ 5%) of S&P 1500 firms for the years 2002–2009, we first document significant individual blockholder effects on earnings management (accrual‐based earnings management, real earnings management, and restatements). This association is driven primarily by these large shareholders influencing rather than selecting firms’ financial reporting practices. Second, the market's reaction to earnings announcements suggests that investors recognize the heterogeneity in blockholders’ influence on earnings management. The results highlight the highly individualized effects of blockholders and a mechanism through which shareholders impact reported earnings.

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“…Existing studies show that investors who are located close to their investment, tend to buy and hold the shares of companies, instead of taking advantage of their superior information and selling them when it seems appropriate and point thereby, to the relevance of geographic proximity for establishing trust (Huberman, 2001). Although, larger distances can be bridged by modern communication technologies like the Internet, direct contact via face to face or word-of-mouth communication still positively affects the level of trust in the counterpart with whom we make any sort of cooperation (Chhaochharia et al, 2012;Ivkovic and Weisbenner, 2005). One might therefore suggest that trust is more easily developed between geographically proximate agents (Bachman and Lane, 1996;Zaheer et al, 1998;Bönte, 2008).…”

Section: On the Link Between Access And Trustmentioning

confidence: 99%

Trusting financial institutions: Out of reach, out of trust?

Filipiak

2016

The Quarterly Review of Economics and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper empirically investigates the relationship between individual trust in financial institutions and individual access to these institutions. Based on a large-scale survey of savings patterns of Indians, we find that individuals reporting that they do not have access to certain financial institutions within a commutable distance of one day are less likely to trust these institutions with their money. Terms of use: Documents in EconStor mayMoreover, we find that this relationship holds for different banks and financial institutions offering services in low-income areas and that differences in trust can be explained to some extent by differences in individual access.JEL-Codes: D1, G11, G21, R2

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Local investors and corporate governance

Cited by 204 publications

References 81 publications

Geographic location, excess control rights, and cash holdings

Geographic location, excess control rights, and cash holdings

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

Trusting financial institutions: Out of reach, out of trust?

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