Do managers make takeover financing decisions that circumvent more effective outside blockholders?

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

“…These findings are consistent with the notion that real earnings management is harder to detect and to prevent than accrual management, especially for investors with a limited monitoring role (Davis and Kim, 2007;Klein and Zur, 2009). Following Harris et al (2010), in untabulated analyses we further partition the estimated blockholder fixed effects into 'aggressive monitors' of management (activists/pension funds, corporations, hedge funds, venture capitalists/LBOs, and individuals) and 'moderate monitors' (mutual funds, insurance companies/money managers, and banks/trusts). To evaluate the economic importance of the effects, we relate the interquartile range of an estimated blockholder fixed effects distribution to the average value of the EM measure among the firms in our sample.…”

“…The exception is the positive and significant coefficient on RESTATE for banks/trusts, who are considered as 'moderate monitors' (Harris et al, 2010). We then run the same test for each type of blockholder.…”

“…We also provide the distribution for each type of blockholder. Following Harris et al (2010), in untabulated analyses we further partition the estimated blockholder fixed effects into 'aggressive monitors' of management (activists/pension funds, corporations, hedge funds, venture capitalists/LBOs, and individuals) and 'moderate monitors' (mutual funds, insurance companies/money managers, and banks/trusts). Consistent with our predictions, we find significantly greater heterogeneity for aggressive monitors.…”

“…Most of the coefficients are either significantly negative or insignificant. The exception is the positive and significant coefficient on RESTATE for banks/trusts, who are considered as 'moderate monitors' (Harris et al, 2010). As a complement to the above analysis, we use a changes specification to examine the 'influence ' versus 'select' explanations.…”

Research on the relationship among large shareholders and its economic consequences of listed companies in China

“…Holderness (2009) examines U.S. listed company data and validates the existence of shareholder heterogeneity: different types of shareholders show different professional backgrounds and investment motives. Harris et al (2010) divide shareholders into active monitoring ones and moderate monitoring ones, basing the divisions on management's monitoring efforts, to find that effects of different types of shareholders on corporate financing decisions will show significant differences. Harris et al (2010) divide shareholders into active monitoring ones and moderate monitoring ones, basing the divisions on management's monitoring efforts, to find that effects of different types of shareholders on corporate financing decisions will show significant differences.…”