New issue of the Corporate Ownership and Control journal
The recent issue of the journal Corporate Ownership and Control is devoted to the questions of earnings management, dividend payout probability, shareholder identity, risk management, Fama-French factors, market efficiency, behavioural finance, corporate governance indexes, political influences, accruals quality, asymmetric information, sustainability reporting, turn-of-the-month effect, family business, corporate tax burden etc. More details concerning the issue are given below.
Bruce Dehning, Charu Sinha and Praveen Sinha examine the question of changes in earnings management brought about by Enterprise Resource Planning (ERP) system implementation using an alternate measure of earnings management and earnings quality – a firm’s likelihood of a GAAP violation. The findings are that the probability of a GAAP violation decreases significantly after the implementation of ERP systems, but less for larger firms, and more for high growth firms.
Sebastian Kuhlmann and Joachim Rojahn analyse the dividend payout behaviour of German issuers, which is considered rather flexible in terms of its distribution frequencies and dividend yields compared to international practice. The sample period covers the years 2007 to 2014. Despite considerable differences in the classification techniques applied, the authors find that previous years’ dividend payments, corporate profitability and firm size are consistently the most important firm-specific determinants of dividend payout probabilities. Only the largest shareholders with equity stakes that are either between 25% and 50% or above 50% rank among the most important variables. The impact is nonlinear. When controlling for shareholders’ identities, the authors find that both financial institutional and managerial ownership are especially important.
Daniela Coluccia, Stefano Fontana, Elvira Anna Graziano, Matteo Rossi and Silvia Solimene aim to answer the following question: What is an alternative measure of risk that estimates the banking risk-taking behaviour, also considering their risk culture? By analysing a panel of the thirty Global Systematically Important Banks (G-SIBs) from 2006 and 2013, the study provides empirical evidence that the presence of a Risk Committee, the size of the Risk Committee and the number of the Risk Committee’s meetings have a positive impact on a bank’s volatility. Using multiple regression analysis on panel data, the authors verify the relationship between the bank asset risk and explicative variables that measure risk governance, banks’ size and traditional banks’ risk indicators.
Marcelo Gonçalves and Andre Carvalhal investigate whether Fama-French’s size and value factors (SMB and HML) can be predicted by past returns of 16 portfolios formed by companies from the same industry in Brazil. The analysis reveals that 14 of 16 industries predict SMB one month ahead. Furthermore, the returns of a few industries predict the volatility of SMB and HML up to three months ahead of time. Considering the explanatory capability of the Fama-French model, the results of this research show that Brazilian industry returns contain valuable information for the SMB and HML factors, demonstrating that investors cannot absorb all the information in a timely manner, resulting in their gradual diffusion throughout the market.
Dina Hassouna and Hassan Ouda aim at constructing an objective measurement tool for the quality of corporate governance practices implemented by listed companies in Egypt. Consequently, several main criteria for the inclusion and the exclusion of a corporate governance guideline were followed. The resulting “objective index and questionnaire” includes a total of 66 indicators grouped under four main internal corporate governance mechanisms: Ownership structure; Board of directors; Transparency and disclosure and Board committees. Additionally, the scoring process that can be used in the rankings of Egyptian listed companies is suggested.
Muhammad Sadiq and Zaleha Othman investigate the relationship between political influences and earnings manipulations. The authors measure earnings manipulation using models developed by Bhattacharya et al. (2003) and McNichols (2002), for a large sample of 129 listed firms in Pakistan Stock Exchange over the period 2009–2013. This study finds that politically influenced firms are involved in accruals earnings management and lack transparency, implying lower earnings quality. The findings are consistent with prior studies, which show the positive relationship between political influences and earnings manipulations.
Andreas Oehler, Tim A. Herberger, Matthias Horn and Henrik Schalkowski focuse on companies’ post IPO ownership structure, in particular, private equity capital engagement, in order to analyse IPOs stock performance matters. For this purpose, the authors employ a unique dataset on German IPOs from 2004 to 2014 that allows identifying companies’ ownership structures before and after the IPO. The authors compute stocks’ market-adjusted returns and information ratios for the first 200 trading days to answer two research questions. First, do stocks of companies that were (partially) owned by private equity investors prior the IPO show a different performance after the IPO than stocks of companies without prior investments of private equity investors? Second, does the extent of private equity investors’ involvement at the IPO (i.e. their pre and post IPO shareholdings) influence the stock performance following the IPO?
Yining Zhou contributes to accountancy literature with a systematic review of how materiality is defined as a sustainability accounting concept. The paper patterns prior definitional works into three streams (the simple synonym, the shareholder-based, and the stakeholder-based), and then critiques each of them. Compared to the other two streams, the stakeholder-based stream, which has been adopted as the mainstream in sustainability accounting community, is justified as to offer a more holistic and long-term scope on judging materiality of sustainability issues. But the current state of this stakeholder-based stream is problematic in failing to resolve the complexity of the stakeholder environment where business organizations operate. Accordingly, this paper proposes three critical questions: (1) all stakeholders or only primary stakeholders should be taken into account of materiality assessment; (2) how to address the diversity of stakeholder interests in the framework of materiality; and (3) how to apply the materiality concept in informal reporting practices.
Thomas Holtfort, Andreas Horsch and Steffen Hundt explore the turn-of-the-month (TOM) effects in European stock markets before and after the financial crisis. Previous literature reveals only mixed results with regard to (changes of) the TOM pattern. Therefore, this paper aims to provide further insights by a comparison of crisis and non-crisis periods, applying an evolutionary finance approach, which is based on computational agent-based modelling. The authors analyse stock price developments in six European stock markets for the period 2000-2014 with a special focus on the financial crisis. For this purpose, the authors apply parametric and nonparametric event study techniques and find explanations of this effect, like volatility, trade volume and the business cycle.
Pierluigi Santosuosso examines how the operating cash flow net of cash from investing activities (CFINV) is correlated with the net income for a sample of 189 Italian listed firms from 2011 to 2015.Research findings revealed three main results. First, firms that have a positive amount of CFINV greater than the amount of net income are unprofitable and levered. Second, CFINV is positively affected by firm profitability, efficiency and leverage. Third, the corporate tax burden is positively affected by firm profitability and efficiency but negatively influenced by leverage. A similar association between corporate tax burden and CFINV was also found.
Fabio Quarato explores debt maturity structure and innovation investments when family firms embrace an acquisition path. The author analyses acquisitions carried out in the period 2000-2013 by all Italian companies with turnover exceeding 50 million Euros, and the results support the long term perspective of family firms. In particular, family firms will use less bank debt to finance acquisitions, avoiding cutting research investments and relying on a more balanced debt maturity structure.
Alessandro Capodaglio, Giuseppina Iacoviello and Gianpaolo Neri analyse a fundamental task of the family business: the role played by a top management team that includes family members belonging to different generations in the strategy renewal process. In particular, the authors are interested in understanding how plurigenerational family business can apply incremental or radical strategic initiatives. A qualitative methodology is used to conduct a longitudinal case-study, using a deductive-inductive-deductive approach that is typical of the business administration studies. This paper leads to the conclusion that traditional Italian entrepreneurial model can be considered still relevant and successful if supported by a prudent and conscious corporate management.
Muttanachai Suttipun investigates investigate the extent and level of integrated reporting in the annual reports of companies listed on the Stock Exchange of Thailand (SET), to test the different level of integrated reporting between SET100 companies and Non-SET100 companies, and between Corporate Social Responsibility (CSR) award companies and Non-CSR award companies, and to test the effect of integrated reporting on the corporate financial performance. The findings show that there were significant differences in the level of integrated reporting between SET100 and non-SET100 companies, as well as between CSR award and non-CSR award companies. Manufactured capital reporting and holding a CSR award positively affected corporate financial performance, while the corporate financial performance was negatively related to environmental capital reporting.
Byungcherl Charlie Sohn and Ling Zhou study the effect of political connections on accounting conservatism for Chinese firms. Using the Chinese non-state-owned listed companies for the period 2008-2013, the authors find that the relation between political connections and accounting conservatism is insignificant because political connections may impair accounting conservatism on one aspect but also may strengthen accounting conservatism on the other aspect. This research contributes to the literature on the effect of political connections on firms’ various business activities by focusing on firms’ conservatism level of financial reporting using a unique institutional setting in China.
We hope that you will enjoy reading the journal and in future we will receive new papers, outlining the most important issues and best practices of corporate governance!