Who benefits from political connections? Minority investors or controlling shareholders

Wang, Lihong; Lin, Philip T.

doi:10.1080/16081625.2016.1151364

Cited by 17 publications

(12 citation statements)

References 37 publications

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“…This condition depicts the negative entrenchment effects, which hamper the wealth of minority shareholders. If the controlling shareholders are politically motivated instead of considering firm value maximization, then they can expropriate the wealth of minority shareholders (Wang and Lin, 2017). The results of our study are consistent with those from the study of Morck et al (1988), who argued the negative relationship between concentrated ownership and market value.…”

Section: Regression Analysissupporting

confidence: 88%

The role of controlling shareholders in determining investments of intellectual capital among Taiwanese semiconductor companies

Hsieh

Ting

Asif

et al. 2019

JIC

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Purpose Although intellectual capital (IC) has been proven to be value-added for companies, the drivers of IC performance remain an under-researched area. From the perspective of corporate governance, the purpose of this paper is to examine how controlling the ownership of shareholders would influence IC performance. Design/methodology/approach This study utilized value-added intellectual capital (VAICTM) and its subcomponents, namely human capital, structural capital and capital employed efficiencies, to proxy for IC performance and regression analyses to assess the association between controlling the ownership of shareholders and the IC performance of Taiwanese listed semiconductor firms for the years 2009–2017. Findings Results show that controlling the ownership of shareholders is nonlinearly related to IC performance. Specifically, controlling their ownership positively affects the level of IC performance up to an optimal point before it turns to be a negative relationship thereafter. Practical implications The results of this study can help policy makers and other stakeholders understand the role of controlling shareholders in determining IC performance. The findings of this study suggest a nonlinear relationship between controlling the ownership of shareholders and IC. Originality/value This study provides an extended perspective in studies related to the determinants of IC by considering the resources provided by controlling shareholders. The definitions of controlling interests and IC applied in this study are compared and aligned with those found in the International Financial Reporting Standard 10 – Consolidated Financial Statements and the International Integrated Reporting Council, respectively.

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Section: Regression Analysissupporting

confidence: 88%

The role of controlling shareholders in determining investments of intellectual capital among Taiwanese semiconductor companies

Hsieh

Ting

Asif

et al. 2019

JIC

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“…Johnson et al (2000) argue that it is not uncommon for the controlling shareholders to transfer firms' resources, a practice which they term "tunnelling", for the purpose of expropriating minority shareholders. Subsequent research has examined the various mechanisms through which controlling shareholders can extract resources from minority shareholders, for example, through related-party transactions (Berkman et al, 2010), relatedparty loan guarantee (Huang, 2016), or appointing politically connected independent directors (Wang and Lin, 2017).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Share pledges and firm value

Liu

Scott

2019

Pacific-Basin Finance Journal

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Share pledging occurs when investors use their shareholding as collateral to obtain personal loans. In China, the practice of share pledging has grown exponentially in recent years, with potentially significant impacts on non-pledging shareholders, especially given high agency conflicts between controlling and minority shareholders. We empirically examine the relationship between share pledges and firm value. Using a sample of pledges by major shareholders of listed Chinese firms from 2003 through 2015, we find a positive association between share pledging and firm value. This relationship is moderated by the presence of state ownership and higher ownership concentration. Overall, we provide empirical evidence on the impacts of share pledging in the Chinese capital markets, with our findings having significant implications for investors, managers, and regulators.

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“…First, we assess the implications of RPTs in a different corporate governance context. Prior studies present evidence from contexts with widely dispersed shareholding and strong investor protection (Aguilera et al, 2006;El-Helaly, 2016;Ahmed and Mather, 2016) and higher government shareholding (Wang and Lin, 2017;Jian and Wong, 2010). Among East Asian countries, corporate governance practices, ownership structure and investor protection tend to exhibit similar characteristics (Lemmon and Lins, 2003;Aswadi Abdul Wahab et al, 2011).…”

mentioning

confidence: 99%

Do related party transactions affect earnings quality? Evidence from East Asia

Rahmat¹,

Muniandy

Ahmed

2020

IJAIM

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Purpose The purpose of this paper is to examine the effect of related party transactions (RPTs) and types of RPTs (complex, simple and loan) on earnings quality in four East Asian countries: Hong Kong, Malaysia, Singapore and Thailand. Design/methodology/approach RPTs and types of RPTs are measured using two approaches, magnitude and abnormal (magnitude change). Earnings quality is measured using proxies for accrual earnings management and identified as discretionary accruals (DAC) and performance matched discretional accruals (PMDAC). Findings The results suggest that firms in these countries experience poor earnings quality when they are engaged in RPT. The effect of RPT-simple on earnings quality is more severe than RPT-complex. However, the presence of higher investor protection and stricter enforcement of regulations in countries like Singapore and Hong Kong reduce the negative impact of RPTs on earnings quality. Research limitations/implications The results support the argument that the presence of controlling shareholders in East Asia is likely to lead to engagement with RPTs, which will increase the likelihood of firms’ earnings manipulation via DAC. This study has two limitations. It only focuses on Hong Kong, Malaysia, Singapore and Thailand, and the results may not be generalizable to other countries. Second, this study only measures the magnitude and abnormal RPTs based on the disclosures available in annual reports. Originality/value This paper contributes to the literature by examining the effect of RPTs and types of RPTs on earnings quality in four selected East Asian countries.

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Who benefits from political connections? Minority investors or controlling shareholders

Cited by 17 publications

References 37 publications

The role of controlling shareholders in determining investments of intellectual capital among Taiwanese semiconductor companies

The role of controlling shareholders in determining investments of intellectual capital among Taiwanese semiconductor companies

Share pledges and firm value

Do related party transactions affect earnings quality? Evidence from East Asia

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