Do executives benefit from shareholder disputes? Evidence from multiple large shareholders in Chinese listed firms

Fang, Yuanli; Hu, Maggie; Yang, Qingsen

doi:10.1016/j.jcorpfin.2018.06.008

Cited by 54 publications

(49 citation statements)

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“…They have weak motivation to exert monitoring influence to ensure that management acts in accordance with their interests. The coordination friction and bargaining costs reduce their monitoring incentives (Fang et al, 2018).…”

Section: Mls and Bank Profitability In Mena Banksmentioning

confidence: 99%

How multiple large shareholders affect bank profitability under the dispersion and the coalition hypotheses? An insight from the MENA region

Boussaada

Hakimi

2020

IJMF

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PurposeThe aim of this paper is to examine whether multiple large shareholders and their interactions affect bank profitability in the MENA region.Design/methodology/approachTo achieve this goal, we used a sample of conventional banks in the MENA region observed during the period 2004–2015. We performed the System Generalized Method of Moment as the empirical approach.FindingsEmpirical results indicate that under the dispersion hypothesis, multiple large shareholders (MLS) tend to reduce bank profitability for both return on assets (ROA) and return on equity (ROE). However, under the alignment of interests’ hypothesis, coalition between the first and the second largest shareholder increases bank profitability only for ROA. We also find that an additional large shareholder, beyond the two largest, reduces bank return equity.Originality/valueTo the best of our knowledge, to date, there is no study that investigates the effect of MLS and the bank profitability in the MENA region. Indeed, this study shows the importance of considering ownership composition among large shareholders in banking studies.

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Section: Mls and Bank Profitability In Mena Banksmentioning

confidence: 99%

How multiple large shareholders affect bank profitability under the dispersion and the coalition hypotheses? An insight from the MENA region

Boussaada

Hakimi

2020

IJMF

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“…They proposed the classic “agent–agent theory,” which stated that the “two rights” separation leads to information asymmetry between the principal and the agent, resulting in agency problems between shareholders and managers and higher agency costs. However, their theory has only been tested using a utility function rather than empirical research (Chen et al, 2018 ; Fang et al, 2018 ; Carter et al, 2021 ).…”

Section: Research Hypothesismentioning

confidence: 99%

“…For example, Chen et al ( 2018 ) investigated the effect of corporate financial distress risk on the initial compensation contracts of new executives. Fang et al ( 2018 ) verified the effects of major shareholder ownership on executives' excess compensation. With respect to capital cost, recent studies have focused more on the relationship between these costs and information disclosure, CEOs' internal debt, and the social relations between executives and directors (Collins and Huang, 2011 ; Hasan et al, 2015 ; Shen and Zhang, 2020 ; Luong et al, 2021 ).…”

Section: Introductionmentioning

confidence: 99%

“…Since Jensen and Murphy ( 1990 ) first studied executive incentives, an increasing number of scholars have focused on this topic (Dyreng et al, 2010 ; Bebchuk et al, 2011 ; Adhikari et al, 2015 ; Chen et al, 2018 ; Fang et al, 2018 ). However, we should pay more attention to the goal of the incentive mechanism, that is, the coordination of interests between shareholders, management, employees, and creditors (La Porta et al, 1997 ; Shleifer and Vishny, 1997 ; Bertay and Uras, 2020 ; Castro et al, 2020 ).…”

Section: Introductionmentioning

confidence: 99%

“…Research on executive incentives and capital cost has mainly explored the effects of corporate performance on executive incentive systems (Chen et al, 2018 ; Fang et al, 2018 ; Abudy et al, 2020 ; Chowdhury et al, 2020 ; Carter et al, 2021 ; Gao et al, 2021 ; Ren et al, 2021 ). For example, Chen et al ( 2018 ) investigated the effect of corporate financial distress risk on the initial compensation contracts of new executives.…”

Section: Introductionmentioning

confidence: 99%

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Research on the Effect of Executive Incentive Institutional Innovation on the Cost of Equity—Evidence From Chinese Listed Companies

Wang

Deng

2021

Front. Psychol.

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Executive incentive has long been a hot topic among academics and practitioners. With the continuous development of China's manager market, the spirit of innovation and entrepreneurship among executives has exerted a greater influence on corporate performance. Enterprise innovation is an important part of the entrepreneurial spirit. Moreover, China's supply-side reforms and compensation system of the state-owned enterprises (SOEs) have been advanced and innovative. Therefore, based on the manager human capital theory and the organizational innovation theory, and using 15,492 firm-year observations from China's Shanghai and Shenzhen A-share listed companies for the period 2005–2018, we constructed various models, including the Gorden model, the Growth Rate of Price–Earnings Ratio model (PEG), the Ohlson and Juettner-Nauroth model (OJ), and the Capital Asset Pricing model (CAPM), to measure the cost of equity. We investigated the effect of the institutional innovation of executive incentives on the cost of equity, and the heterogeneous influence of China's special property rights system on the relationship between the two. We found that the innovations of the executive incentive system have a positive governance effect on the cost of equity. In particular, executive compensation incentives significantly reduce a company's equity costs. We also find that the state-owned property rights may weaken the positive effect of institutional innovation of executive incentives. Furthermore, China's executive incentives system and corporate governance mechanism are imperfect; and therefore, institutional innovation is a matter of great urgency and more innovative ideas for the manager market need to be introduced. China's listed companies should give full play to the spirit of innovation and entrepreneurship, constantly innovating incentive-based compensation systems of companies, and establishing a scientific and innovative concept of the cost of equity. The findings are robust after controlling for potential endogeneity concerns.

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The Evolution of Chinese Corporate Governance

Wong

2023

CSR, Sustainability, Ethics &Amp; Governance

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Do executives benefit from shareholder disputes? Evidence from multiple large shareholders in Chinese listed firms

Cited by 54 publications

References 50 publications

How multiple large shareholders affect bank profitability under the dispersion and the coalition hypotheses? An insight from the MENA region

How multiple large shareholders affect bank profitability under the dispersion and the coalition hypotheses? An insight from the MENA region

Research on the Effect of Executive Incentive Institutional Innovation on the Cost of Equity—Evidence From Chinese Listed Companies

The Evolution of Chinese Corporate Governance

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