Performance sensitivity of executive pay: the role of ownership structure, board leadership structure and board characteristics

This article first analyses the impact of independent director interlocks on firms' earnings persistence in China, an emerging market from 2007 to 2017. Using the independent director network data and the unique internal control index, this article investigates the association between independent director interlocks and earnings persistence, and the roles of firms' outside director interlocks and firms' inside internal control playing in earnings persistence. Our results reveal a significant and positive association between independent director interlocks and earnings persistence, and in the context, there is a clear mediation effect of internal control in relationship of independent director interlocks and earnings persistence. Further analyses on the scope and stability of independent director interlocks effects show that independent director interlocks can both improve accrual earnings persistence and cash flow persistence. Meanwhile, the effect of independent director interlocks differentiates under the influence of firms' strategy, only playing a significant role in defensive ones. Moreover, we find that independent director interlocks can relieve the 'accrual anomalies' in the securities market. Our results are robust to the various measure of earnings persistence and alternative methodological techniques.

Section: Resultsmentioning

confidence: 99%

Independent director interlocks: effects and boundary on the earnings persistence of the firm

Liao

Chen

2020

“…state ownership is negatively associated with tax avoidance in China. The prior literature also suggests that ownership concentration increases the incentives of owners to effectively monitor the managerial behaviours and curtails the managerial opportunism (Ataay, 2018). In line with this argument, Richardson et al (2016) proposes that ownership concentration influences the tax avoidance behaviour of the firms.…”

Section: Additional Test: Controlling For the Effect Other Factorsmentioning

confidence: 87%

Financial statement comparability and corporate tax avoidance: evidence from China

Majeed

Yan

2019

This paper examines whether financial statement comparability (hereafter referred to as comparability) is associated with corporate tax avoidance. We document the negative relationship between comparability and tax avoidance. Our findings indicate that comparability reduces information asymmetry, which makes the monitoring of managerial activities more effective. In addition, comparable information may increase the risk of detection of aggressive tax strategies, which leads to reputational, regulatory and political risks. We further examine how analyst coverage and product market competition influence the relationship between comparability and corporate tax avoidance. The results show that analyst coverage substitutes for the effect of comparability on tax avoidance. However, we do not obtain any conclusive evidence that product market competition plays a complementary role to comparability in reducing tax avoidance. Our results are robust to the various measures of comparability and tax avoidance and alternative methodological techniques.

“…Regarding these two theoretical hypotheses, we believe that in the context of Latin American countries the monitoring hypothesis is more plausible. Differing from most of the previous literature focused on the U.S. and developed markets, Latin American countries are characterised by the civil-law legal system, in which most of the monitoring is performed through internal governance systems, low levels of investor protection of minority shareholders, and concentrated as well as pyramidal ownership structures (Ataay, 2018;Lefort, 2005;Saona & San Mart ın, 2016). For instance, according to Lefort (2005), corporate governance in Latin America is characterised by a high level of ownership concentration in which many companies are controlled by one of the industrial or financial conglomerates.…”

Section: Ownership Structure Features and Real Activities Manipulationmentioning

confidence: 99%

Real earnings management and corporate governance: a study of Latin America

Mellado

Saona

2019

This article analyses the impact of ownership structure features and institutional settings on real activities manipulation. The analysis is based on a sample of listed companies in the underexplored Latin American market for the period of 2004-2016. Paneldata-based G.M.M. System Estimation is used in the empirical analysis. The results confirm that the monitoring role of the majority owner is crucial in mitigating managerial opportunistic behaviour. Here, opportunistic behaviour refers to engaging in real activities manipulation that reduces the informative content of financial statements. However, analysis of insider ownership revealed that managers had a negative impact on transparency. We observed that as insider ownership increases, managers engage more actively in real earnings management. We also find that the institutional ownership and the quality of the regulatory system proved to be effective mechanisms in reducing real activities manipulation. ARTICLE HISTORY