Search Results (45)

Audit committees monitor the actions of managers as they pursue the goal of shareholder wealth maximization. The purpose of this study is to measure the impact of audit committee oversight on novel aspects of firm performance, including investor rationality, price expectations, human capital, and research and development expenses. It extends the literature to non-financial outcomes of audit committee oversight. The literature thus far has focused on the financial effects of audit committee oversight, such as return on assets, return on equity, risk, debt capacity, and firm value. Data was collected from 588 publicly traded firms in the U.S. pharmaceutical industry and energy industry from 2010 to 2022. Audit oversight was measured by the novel measurement of the frequency of the term ‘audit committee’ in annual reports and Form 10Ks from the SeekEdgar database. COMPUSTAT provided the remainder of the data. Panel Data fixed-effects models were used to analyze the data. Audit committee oversight significantly increased investor rationality, significantly reduced price expectations, and significantly increased human capital investment. An inverted U-shaped relationship occurred for audit committee oversight and research and development expenses, with audit oversight first increasing research and development expenses, then decreasing them. The study makes several contributions. First, the study uses a novel measure of audit oversight. Second, the study predicts the effect of audit committee oversight on unexplored non-financial measures, such as human capital and research and development expense. Third, the study offers a current test of the Miller model, as the last tests were performed over 20 years ago. Fourth, the study examines the impact of auditing on market measures that have not been explored in the literature, such as investor rationality and short selling. Full article

This study examines the impact of family directors, family shareholding, and family control on the environmental and social dimensions of ESG in family business governance. Scholars debate whether family businesses prioritize short-term gains over long-term ESG issues or, due to their long-term focus, integrate ESG into their strategies. One group of scholars argues that family businesses tend to focus excessively on short-term financial performance, neglecting long-term non-financial performance. In contrast, another group contends that due to socioemotional wealth considerations, family businesses place particular emphasis on long-term non-financial performance. This study utilizes data from publicly listed companies in Taiwan to conduct relevant research. Furthermore, we incorporate external governance variables to examine their impact on environmental and social performance. The research data come from the TEJ database. The sample is the annual data of listed companies in Taiwan. The sample period covers 2015 to 2022, with a total of 4377 company-year observations. The study finds that the corporate governance mechanisms of family enterprises have a negative and significant impact on environmental and social performance. However, external governance factors, such as higher institutional investor shareholding ratios, third-party-verified sustainability reports, and corporate governance evaluations, help mitigate these negative effects. Future research could extend the study period and explore additional external governance variables or alternative datasets to enhance the robustness and generalizability of the findings. Full article

This study empirically examines the wealth effects of mergers and acquisitions (M&As) in the Indian capital market, focusing on cross-border M&As. This study considers a sample of 58 cross-border and 34 domestic M&As, comprising more than 50 percent of the shares acquired by the acquiring companies from 2004 to 2019. We analyzed the wealth effects of cross-border M&As by applying the event study methodology. The abnormal returns of domestic and cross-border mergers and acquisitions for various window periods were compared using an independent t-test. The wealth effects of the acquiring firm have been further investigated with the inclusion of top advisor services and without the inclusion of advisor services in mergers and acquisitions transactions. This result suggests that cross-border M&As do not create a significant positive return for shareholders. There is no considerable wealth gain for shareholders of acquiring companies in domestic and cross-border mergers and acquisitions. We also find that including top advisor services in the M&A process does not influence the acquiring firm’s wealth. The price-to-book value ratio of the acquiring firm is a significant determinant of its returns. Full article

This study examines the impact of ESG rating disclosures on the stock performance of highly rated semiconductor companies in Taiwan from 2017 to 2023. The findings reveal significant abnormal returns surrounding ESG rating releases, with positive returns before the event reflecting investor optimism and negative returns afterward indicating market reassessment. The analysis highlights varied effects of ESG dimensions: environmental performance benefits lower-performing firms, social initiatives show negative impacts on high-performing firms, and governance practices demonstrate both short-term costs and long-term benefits. Policy continuity emerges as a critical factor in moderating the financial impacts of ESG performance. Stable and supportive policies enhance the positive effects of ESG initiatives, while inconsistent frameworks exacerbate inefficiencies. These results emphasize the importance of aligning ESG strategies with consistent policy environments to maximize shareholder wealth, offering valuable insights for investors, corporate managers, and policymakers. Full article

This paper demonstrates whether the impact of agency costs on firm value depends on the level of managerial power using the fraction of capital held by the manager, as well as their level of voting rights. Focusing on a sample of 120 non-financial French firms incorporated in the CAC All-Tradable Index for the period 2008–2022, the first empirical analysis provides strong evidence that agency costs of equity, as measured in terms of operating expenses, administrative expenses and the agency cost of free cash flow, exert a negative impact on the firm’s market value. In a second empirical analysis, we split our sample into three sub-samples with the aim of capturing the effect of managerial power. The findings lead us to believe that the association between the agency cost measurement and the firm’s market value depend on the level of managerial power. This paper challenges prior studies by strengthening our understanding of managerial behavior (incentive, neutral, and entrenchment) in relation to shareholder wealth. Furthermore, it contributes to the recent literature by enabling a better knowledge of the disparity related to studies conducted in other countries with different governance models. Full article

Because the PCAOB was unable to inspect audits of Chinese accounting firms until recently, regulators introduced legislation (HFCAA) potentially forcing Chinese companies to delist for non-compliance with PCAOB audit requirements. To understand the equity markets’ response to this legislation, we analyze the short-term (event study) and long-term stock performance of U.S.-listed Chinese firms relative to the stock performance of other foreign companies. We find that Chinese companies outperform other Asian firms for the Pre-HFCAA Period, but they underperform other Asian firms from the time the HFCAA was introduced (28 March 2019) until an agreement was reached (26 August 2022). For the post-agreement period (26 August 2022 to 31 December 2022), the performance of Chinese and other Asian stocks is similar. Between 28 March 2019 and 31 December 2022, a typical shareholder lost 76% of wealth, and, compared to other Asian companies, the losses were around 87%. The findings highlight the importance of regulatory compliance and transparency in maintaining investor confidence and protecting shareholders’ interests. Full article

Working capital management is critical because it affects a company’s profitability, liquidity, and investment decisions, all of which have an impact on financial performance. As a result, effective and efficient working capital management is an essential component for commercial and service businesses. Given the importance of the commercial and services industries to the Kenyan economy, the goal of this research was to investigate the impact of working capital management on the financial performance of these firms, particularly those listed on the Nairobi Securities Exchange (NSE), from 2003 to 2022. Working capital management was measured using the average age of inventory, average collection period, average payment period, and cash conversion cycle, whereas financial performance was measured using return on asset, return on equity, and net operating profit margin. Using panel regression analysis, the results showed that the average inventory age, average collection period, average payment period, and cash conversion cycle were all negatively related to financial performance for NSE-listed commercial and service firms. Based on the findings, it is recommended that Kenyan commercial and service firms adopt prudent optimal working capital management practices to improve firm financial performance and maximize shareholder wealth. Full article

This paper investigates the impact of debt financing on dividend payments when they face the agency costs of free cash flow. It focuses on a sample of 120 firms listed on the Saudi Stock Exchange during the period of 2011–2021. The findings from the Generalized Least Squares regression model revealed that the presence of agency costs of free cash flows may limit the funds available for dividend payments. Regarding the moderating effect of debt structure, the research highlights the significant role of long-term debt in making more prudent use of free cash flow. The use of long-term debt becomes more effective and can enhance shareholder wealth when a firm is facing agency costs of free cash flow. More specifically, bondholders primarily focus on affirmative covenants which require the firm to undertake specified actions such as maintaining assets and financial ratios, or paying taxes, but they do not restrict financing activities such as dividend payments. Since interest and debt repayments are fixed obligations, using free cash flow for dividend disbursement is considered a more profitable and beneficial approach for shareholders in the context of Saudi Arabia. This study contributes to our understanding of financial management under different debt structures and improves our scientific knowledge of the culture of Saudi firms regarding the dividend distribution policy. Full article

This study analyzes the impact of Chinese shipment volumes measured in TEUs on US stock performance in the initial stages of the COVID-19 outbreak. The analysis indicates that, initially, US stocks were negatively affected irrespective of firms’ trade engagements with China; however, as the global pandemic unfolded, companies with elevated imports from China exhibited more pronounced abnormal returns. The findings further reveal an increased influence of debt level and cash holdings on stock performance as the crisis intensified in Europe and the USA. These results highlight the evolving nature of global trade dynamics and their implications for financial markets amid global crises. Furthermore, this study provides valuable insights into the resilience of global supply chains during crises like the COVID-19 pandemic. The observed pattern, where companies with greater import volumes from China experienced better stock returns, underscores the importance of adaptable supply chains during disruptions. Full article

This study investigates governance mechanisms and their relation to firm value, i.e., executive compensation restrictions during the regulatory period and their effects on the performance of firms that received Troubled Asset Relief Program (TARP) funds. We employ an event study to investigate the market reactions for TARP recipients, followed by OLS regression to examine the stock return effects of 10 announcements. For comparison, we also employ a multivariate regression model (MVRM) based on a system of equations with seemingly unrelated regressions (SURs). Our evidence shows that changes in firm value have a negative and significant relationship with changes in total compensation for TARP companies that have paid back their debts to the government. However, the relationship is weaker than that for TARP companies that have not paid back the bailout money. Full article

Previous studies have overlooked hidden ownership in their analysis, which could result in biased findings. This research utilizes unique data sources to uncover hidden ownership patterns and employs ordinary least square regression to investigate the relationship between hidden ownership and firm performance. The findings indicate that hidden ownership affects a firm’s performance, but not in the same manner as previously thought. Firms with hidden ownership actually perform better than those without. These results contradict the belief that hidden ownership leads to wealth expropriation from minority shareholders and negatively impacts a firm’s performance. The study also remains robust after accounting for potential endogeneity using an instrumental variable approach. The findings provide policy implications and contribute to the ownership and firm performance literatures. Full article

Family firms make up the majority of private firms in China and play an important role in China’s national economy. With the deepening development of globalization and the implementation of the “going global” strategy, the overseas investment of family firms in China is increasing day by day. In the process of overseas investment, family firms often face the choice of equity entry mode. And, family strategic decisions may be influenced by family characteristics, in which family ownership is the key. Therefore, this paper discusses how family ownership affects the choice of equity entry mode in the overseas market of family firms. Based on social emotional wealth theory, this paper tries to discuss the relationship between family ownership and equity entry mode of Family firms, bring in external environment and internal governance factors of family firms, and put forward a research hypothesis. In order to verify the hypothesis, this paper takes 623 A-share listed family firms in the Shanghai and Shenzhen stock markets of China from 2010 to 2018 as research samples and tests the data through binomial logistic regression. The findings are as follows: (1) There is a positive correlation between family ownership and the entry mode of family firms in overseas markets. (2) Both the investment uncertainty of a host country and the shareholding ratio of institutional investors negatively moderate the positive correlation between family ownership and the shareholding entry mode of family firms in overseas markets. (3) The quality of home and regional institutions positively moderates the relationship between family ownership and family firms’ equity entry mode in overseas markets. The conclusions expand the empirical research on the relationship between the heterogeneity of Chinese family firms, the strategy of equity entry mode, and their sustainability. Full article

The present study aims to investigate the association between corporate governance mechanisms and financial performance among companies listed on the Tehran Stock Exchange (TSE). We also want to know if the COVID-19 global crisis moderates the relationship between them. The study sample consists of 1098 observations and 183 companies listed on the TSE from 2016 to 2021; furthermore, the statistical method used to test the hypotheses is panel data with random effects. In line with our expectations, the results show that the coronavirus pandemic worsened Iranian corporate performance. In support of agency theory, we figure out that board independence, board meeting frequency, and board financial expertise are correlated positively with firm value. In favor of resource dependency theory, this study finds robust evidence that audit committee size and independence have a positive effect on corporate performance. Most importantly, the positive linkage between board independence, board financial expertise, size, and independence of audit committee with firm performance was reversed during the COVID-19 pandemic, although the positive role of board meeting frequency in corporate profitability remained stable even during the COVID-19 outbreak. Furthermore, the outcomes indicate that CEO duality affects firms negatively, and this devastating effect became even stronger with the COVID-19 pandemic. Finally, we find that firms involved in mergers and acquisitions (M&A) managed to increase shareholders’ wealth using competitive advantage even during the pandemic. Full article

This paper investigates the impact of corporate social responsibility (CSR) on shareholders’ wealth during market downturn, focusing on the market crash caused by the COVID-19 pandemic and its aftermaths. We evaluate the relationship between firms’ CSR and stock returns using a sample of 803 firms listed on the Korean stock market. The results of our study reveal that firms’ pre-crisis CSR activities do not protect shareholders’ wealth during the crisis; in fact, they negatively affected stock returns during the COVID-19 crisis. This finding is consistent across several robustness tests and challenges the prevailing notion that CSR is solely a philanthropic endeavor. This study suggests that firms need to reconsider their CSR approach in order to better align it with shareholders’ interest. Full article

This study aims to investigate the effect of mergers and acquisitions (M&A) on shareholders’ wealth. Additionally, this study investigates the impact of the economic crisis during 2007–2008 on the shareholders’ perceptions of gaining additional value from mergers and acquisitions. In this paper, a sample of 84 M&As from 2006 to 2015 in Greece are studied to investigate the effect on shareholders of bidder companies. We find significantly negative abnormal returns just before the announcement of M&A, which negatively affects the bidder firms’ value. It is also observed that after 2009 M&A cases decreased, maybe because of the crisis in Greece that changed the investors’ perception of a value-destroying event. Companies that engage in M&A activities during economic downturns tend to experience a decline in shareholder value. This could be due to various factors, such as increased uncertainty and risk associated with such activities during economic uncertainty. By understanding the potential impact of such activities on shareholder value, companies can make more informed decisions about whether and when to pursue M&A opportunities. Full article