Browsing by Subject "ownership structure"

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  • Keinonen, Henrik Markus Alfred (2021)
    This paper examines the relationship between ownership concentration and firm performance within the Nordic corporate governance model. Using data on Finnish publicly listed companies (PLCs) during a period of economic growth and stability, we find that the ownership share of the largest owner is negatively related to Tobin’s Q . We posit that certain blockholders may exchange their active monitoring and control function of the management for the private benefits of control, which is an inherent risk of the Nordic Corporate Governance (NCG) model. We find that state ownership is negatively associated with Tobin’s Q , suggesting that government owners might promote politically desirable goals rather than create long-term value for all shareholders. It is plausible that certain domestic blockholders render PLCs with a concentrated ownership structure less a!ractive to foreign investors.
  • Keinonen, Henrik (Hanken School of Economics, 2021-12-08)
    The aim of this research is to study agency problems in entrepreneurial ventures and publicly listed companies (PLCs). Agency problems originate from asymmetric information, and can be detrimental to a firm’s investment attractiveness, high-growth ventures’ financial markets, and listed companies’ valuation. The overarching research question is what are the agency problems among entrepreneurial ventures and publicly listed companies, are these problems similar in nature, and can they be prevented or cured? The question is addressed in three different settings. Paper I reflects on business angel networks’ (BANs) value to startup entrepreneurs and their societal context, and provides statistics on BANs in Europe and the US. Paper II empirically investigates the impact of Israeli scaleup entrepreneurs’ criteria when selecting a Venture Capital (VC) firm, inverting the typical research order. Paper III contributes by providing answers to why certain blockholders in Finnish PLCs do not take responsibility for the company’s long-run development, but instead maximise their private utility. The authors employ descriptive statistics and quantitative research: interview data, an ordered logit regression model, longitudinal panel data with cross-sectional and time-series observations, and ordinary least squares regression. Agency problems in startups stem from the transactional process between entrepreneur and angel investor. In this setting, the entrepreneur might provide untruthful information to the investor or abuse the funding. BAN service quality may, however, reduce information asymmetries in entrepreneurial venture quality, and build trust between entrepreneurs and investors. BANs in more mature business angel markets tend to offer better quality services than those in less mature markets. Agency problems in scaleups manifest between VC firms and entrepreneurs, where VC managers may push entrepreneurs to take excessive risks that endanger their personal wealth. Empirically, entrepreneurial experience has a negative relationship with the importance entrepreneurs attach to valuation, which is moderated by the importance they attach to VC networks and reputation. Honest signalling of the parties’ qualities may reduce agency problems in the startup and scaleup phases. Large state ownership and company value are negatively associated, suggesting that government owners may promote political goals rather than long-term value for all shareholders. Liquidating state ownership in non-strategic companies and re-investing the assets through ETF funds would constitute a Pareto improvement. Ultimately, this study shows that agency problems are contextual and differ on the firm’s stage of development, namely startup, scaleup or PLC. But agency problems can be alleviated, which is important to the aggregate economy.
  • Ahmed, Sheraz (Svenska handelshögskolan, 2009-09-02)
    A growing body of empirical research examines the structure and effectiveness of corporate governance systems around the world. An important insight from this literature is that corporate governance mechanisms address the excessive use of managerial discretionary powers to get private benefits by expropriating the value of shareholders. One possible way of expropriation is to reduce the quality of disclosed earnings by manipulating the financial statements. This lower quality of earnings should then be reflected by the stock price of firm according to value relevance theorem. Hence, instead of testing the direct effect of corporate governance on the firm’s market value, it is important to understand the causes of the lower quality of accounting earnings. This thesis contributes to the literature by increasing knowledge about the extent of the earnings management – measured as the extent of discretionary accruals in total disclosed earnings - and its determinants across the Transitional European countries. The thesis comprises of three essays of empirical analysis of which first two utilize the data of Russian listed firms whereas the third essay uses data from 10 European economies. More specifically, the first essay adds to existing research connecting earnings management to corporate governance. It testifies the impact of the Russian corporate governance reforms of 2002 on the quality of disclosed earnings in all publicly listed firms. This essay provides empirical evidence of the fact that the desired impact of reforms is not fully substantiated in Russia without proper enforcement. Instead, firm-level factors such as long-term capital investments and compliance with International financial reporting standards (IFRS) determine the quality of the earnings. The result presented in the essay support the notion proposed by Leuz et al. (2003) that the reforms aimed to bring transparency do not correspond to desired results in economies where investor protection is lower and legal enforcement is weak. The second essay focuses on the relationship between the internal-control mechanism such as the types and levels of ownership and the quality of disclosed earnings in Russia. The empirical analysis shows that the controlling shareholders in Russia use their powers to manipulate the reported performance in order to get private benefits of control. Comparatively, firms owned by the State have significantly better quality of disclosed earnings than other controllers such as oligarchs and foreign corporations. Interestingly, market performance of firms controlled by either State or oligarchs is better than widely held firms. The third essay provides useful evidence on the fact that both ownership structures and economic characteristics are important factors in determining the quality of disclosed earnings in three groups of countries in Europe. Evidence suggests that ownership structure is a more important determinant in developed and transparent countries, while economic determinants are important determinants in developing and transitional countries.
  • Maury, Benjamin (Svenska handelshögskolan, 2004-05-14)
    “Corporate governance deals with the ways in which suppliers of finance to firms assure themselves of getting a return on their investment” (Shleifer and Vishny (1997, p. 737). According to La Porta et al. (1999), research in corporate finance relevant for most countries should focus on the incentives and capabilities of controlling shareholders to treat themselves preferentially at the expense of minority shareholders. Accordingly, this thesis sets out to answer a number of research questions regarding the role of large shareholders in public firms that have received little attention in the literature so far. A common theme in the essays stems from the costs and benefits of individual large-block owners and the role of control contestability from the perspective of outside minority shareholders. The first essay empirically examines whether there are systematic performance differences between family controlled and nonfamily controlled firms in Western Europe. In contrast to the widely held view that family control penalizes firm value, the essay shows that publicly traded family firms have higher performance than comparable firms. In the second essay, we present both theoretical and empirical analysis on the effects of control contestability on firm valuation. Consistent with the theoretical model, the empirical results show that minority shareholders benefit from a more contestable control structure. The third essay explores the effects of individual large-block owners on top management turnover and board appointments in Finnish listed firms. The results indicate that firm performance is an important determinant for management and board restructurings. For certain types of turnover decisions the corporate governance structure influences the performance / turnover sensitivity. In the fourth essay, we investigate the relation between the governance structure and dividend policy in Finnish listed firms. We find evidence in support of the outcome agency model of dividends stating that lower agency conflicts should be associated with higher dividend payouts.
  • Wang, Peng (Svenska handelshögskolan, 2014-06-16)
    This dissertation consists of four self-contained papers. The first two of them concern pyramidal ownership structure, the third one deals with dual-board system, and the last one explores the contemporaneous relation between foreign investment flows and local equity returns. I choose the Chinese stock market as my laboratory. China will soon become the largest economy in the world, and China’s domestic stock markets are growing up rapidly since their establishment in the early 1990s. According to the World Federation of Exchanges (WFE), the number of listed companies in the two domestic stock markets, i.e., the Shanghai Stock Exchange and the Shenzhen Stock Exchange reaches 2,491 with a total market capitalization of 3.7 trillion of U.S. dollars at the end of 2012. Despite this fast growth, extant studies on the Chinese stock market are still limited in scope. Perhaps because researchers’ perceptions on Chinese listed firms still remain with older patterns, such as the dominance of state-owned enterprises (SOEs), the corrupted bureaucracy, the politically-appointed executives, and a market that is inaccessible to foreign investors. In this regard, one of my objectives in this dissertation is to provide some new insights into the modern corporate finance issues among Chinese listed firms. The first essay examines the ownership structure of the Chinese Growth Enterprise Market (GEM). I show that 46% of sample firms are set up in the pyramidal structure. Further, I demonstrate that the owners of most firms in the GEM are families, which stands in stark contrast with the firms listed on the main board in China, which are state-owned. The second essay is naturally an extension of the first one, we investigate Initial Public Offerings (IPOs) of firms on the GEM. The likelihood of a pyramid structure increases with the size of the IPO firm and state control. Our results do not suggest that pyramids are set up to overcome financial constraints. However, we document that pyramid IPOs are discounted before the IPO. The price to book ratio estimated at the subscription price is significantly lower for pyramid IPOs compared to stand-alone IPOs. The third one examines board effectiveness and independence by studying all firms listed in China from 2000 to 2009. I find a significant inverse relationship between supervisory board size and firm performance. This result indicates that large supervisory board size per se causes free-rider and communication or coordination problems, as occurs with boards of directors. The last essay examines the trading behavior and price effects of foreign institutions under the celebrated Qualified Foreign Institutional Investor (QFII) scheme on all non-financial firms in the Chinese A-share markets. I find that foreign institutions in the Chinese A-share markets do not show positive or negative feedback trading; however, their flows have a strong impact on future equity returns because of informational advantage.
  • Maury, Benjamin; Liljeblom, Eva (Wiley-Blackwell, 2010-12-31)
    This paper examines the impact of a regime shift on the valuation of politically powerful oligarch firms. Focusing on the Yeltsin-Putin regime shift in Russia, we find that the valuations of outside shareholders claims are significantly higher under the Putin regime than under the Yeltsin regime after controlling for industry and time effects. The findings suggest that the increasing cost of extracting private benefits outweigh the reduction in the value of political connections following the political regime change. The results are also consistent with changes in the risk of state expropriation. Our results show that effects driven by the political regime change complement the traditional view stating that increased ownership concentration improved the performance of Russian oligarch firms.