New issue of the Corporate Ownership and Control journal
We are pleased to present the summer issue of the journal in 2018. The recent issue of the journal Corporate Ownership and Control is devoted to the questions of dividend policy, cost management, public sector, leadership, earnings announcements, share prices, earnings relevance, concentrated ownership, financial reporting, risk disclosures, public listing, profitability, initial public offerings, market timing, company performance, board diversity, CEO characteristics, board independence, ownership network, national intelligence, earnings management, securities class actions, auditor litigation, audit quality, reverse mergers etc. More detailed issues are given below.
Nádia Genebra Ahmad, Victor Barros, Joaquim Miranda Sarmento examine the determinants of firms’ dividend policy, measured by dividend yield, using a sample of firms that belong to the Euronext 100 index. Results show that the dividend yield in this paper is not associated with firms’ profitability, although both higher growth expectations by investors and larger size of firms negatively influence firms’ dividend yield. In this study was founded some evidence that leverage is indirectly related to more dividends. An important additional finding is that the level of leverage shapes dividend yields differently in the presence of stable payouts and stable dividends per share. As dividend policy is a key part of Finance research, the study contributes to the theory twofold. First, by focusing on a specific niche not developed by literature, and second by examining the indirect effects of the traditional determinants of dividend policy.
Loai Ali Alsaid, Jean Claude Mutiganda analyse the relationship between the state’s political ideologies and the implementation of cost management strategies during the re-privatisation of a public sector organisation. The authors conducted a case study in a public sector organisation operating in the electricity market of Egypt. The findings show that the implementation of cost management strategies had a political basis, grounded in the state’s reformative ideologies concerning re-privatisation of the public sector organisation. A theoretical contribution is to show the relevance of cost management strategies when used as a political tool to achieve a business goal. The key difference between this global trend elsewhere and in the Egyptian State, as in some other Islamic countries, is that Egypt was both nationalistic and militarised.
Ahmed M. Al-Baidhani aims the evaluate the usefulness and relevance of accounting earnings disclosures, as the key determinant of stock price changes. The main objective is to examine whether earnings response coefficient (ERC) behaviour could explain more fully the stock price changes, as to the reason why the stock price change is not equal to the number of announced earnings. The study is done with data sets from five countries of the Organization for Economic Co-operation and Development (OECD) group and Malaysia. Importantly, portfolio-based ERC is very close to the magnitude of the earnings in some tests, which supports the famous value relevance theory in accounting. This finding is new to this literature.
Michael Dobler, Melissa Luckner investigate risk disclosures by German non-listed firms in relation to key attributes of governance and ownership. Based on manual content analysis of risk disclosures by 100 firms in the manufacturing sector we employ univariate tests and multivariate regressions to examine the characteristics and determinants of risk disclosures, respectively. Results suggest that non-listed firms provide fewer risk disclosures but follow similar patterns in respect to the composition of risk disclosures as compared to prior evidence on German listed firms. The findings contribute to limited evidence on risk and discretionary disclosures by non-listed firms.
Miri Park, Hyeonji Song, Jijun Niu examine the impact of public listing on bank profitability. Using a large sample of US banks, we find that the impact depends on bank size. Specifically, for small and medium-sized banks, the public listing has a negative impact on profitability. In contrast, for large banks, the impact is positive. Our results are consistent with theories predicting that the net benefit of public listing increases with firm size.
Manas Mayur aims at understanding the variability in IPO volume and initial return in Indian capital market. In order to see whether the IPOs were timed with the favourable market or not the market was divided into the hot and cold market, defined on the basis of the monthly IPO volume. Then the relationship between market type and total proceeds was established with the help of a multivariate regression model with the idea that any timing attempt should be reflected in the activity of issuance of equity. The result based on multivariate regression suggest that Market timers, identified as firms that go public when the market is hot, tried to maximize the total proceeds at the time of IPO. The hot-market effect is remarkably robust; it is significant for both firm and industry-level characteristics.
Bushra Khan, André Nijhof, Rosalien A. Diepeveen, Daniëlle A. M. Melis explore the disclose proven relationships between good corporate governance variables and the financial and/or non-financial performance of companies based on a meta-analysis of relevant studies. The study provides evidence for the correlation between five corporate governance variables and company performance. Furthermore, several mediating and moderating factors influencing the relationship between corporate governance variables and company performance were identified in this meta-study. The overview of corporate governance variables and their relation to company performance serves as input for a better understanding of this relationship and subsequently the ongoing dialogue on enhancing corporate governance in practice.
Mirko Di Giacomo, Marisa Cenci review the ownership networks to quantify the ease with which a company can be controlled due to the shareholding relationships in which it is involved. In this paper, authors combine the descriptive and the optimization approach, introducing a linear programming model, namely Cheapest Control Problem (CCP). In particular, this study proposes CCP overcome some of the IC main limitations, i.e. the overestimation of control in presence of mutual cross-shareholdings. Furthermore, CCP solutions allow computing three indexes that measure the ease with which a company can be controlled depending on its ownership relationships. Finally, a case study is incorporated to compare IC and CCP solutions, discussing the informative power of the indices introduced.
Thomas Loy proposes novel insights at the intersection of psychology and corporate governance at the country-level. Research in psychology shows that intelligence and economic development are associated with good institutions. Although research in corporate governance regularly exhibits a negative association of good institutions and earnings management, increased cognitive ability likely is crucial to fulfill the complicated task of managing earnings. Cultural factors regularly relate to managers’ value systems and hence might influence their stance on earnings management. Therefore, this paper controls for the mitigating effect of a secretive cultural disposition on the relation between intelligence and earnings management in a multivariate analysis.
Nancy Chun Feng, Ross D. Fuerman contribute to the existing literature, analysing the first empirical evidence documenting the determinants and outcomes of private securities class action lawsuits filed in the US and Canada against Chinese companies and their auditors. Our findings show that, in the global context, Chinese companies are positively associated with their auditors being defendants and experiencing an adverse outcome. Two unique Chinese characteristics are that reverse mergers are positively associated with auditor litigation and bankruptcy has no association with auditor litigation. No mainland China CPA firm has ever paid to settle a private securities class action filed in the US or Canada; this also is a new finding. Several factors explain this last result.
To browse the issue, please, visit the following link.
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!