Does the identity of multiple large shareholders affect the value of excess cash? Evidence from China

Lin, Tsui Jung; Tsai, Han Fang; Imamah, Nur; Hung, Jung Hua

doi:10.1016/j.pacfin.2016.10.007

Cited by 23 publications

(15 citation statements)

References 41 publications

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“…Bates [2] finds that the average cash-to-assets ratio for U.S. full operating cycle firms more than doubles from 1980 to 2006 and that findings are in agreement with CLFOC model presented in that paper. Bates [2] claims that economic importance of cash levels increase is that at the end of the sample period, the average firm can retire all debt obligations with its cash holdings [12]- [23].…”

Section: Discussionmentioning

confidence: 99%

Levels of Liquid Assets in Full Operating Cycle Firms: Polish Firms Case

Michalski¹,

Buleca²,

Kamińska³

et al. 2017

JOEBM

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The aim of the study is to determine the rules governing the modern cash management in small and medium enterprises with a full operating cycle with particular emphasis on environmental conditions influencing enterprises. External factors resulting from the economic situation surrounding the company, interact with the operating cycle of the overall enterprise operational risk which is reflected in the level of cash held. At the core of the research hypothesis is the belief that the level of cash and cash management policies in the enterprise in an integrated manner with other elements resulting from the operating cycle contribute to moderating the risk of the enterprise and that it can be shown using empirical data from companies operating effectively in practice business. JEL: D01, D22, G17.

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Section: Discussionmentioning

confidence: 99%

Levels of Liquid Assets in Full Operating Cycle Firms: Polish Firms Case

Michalski¹,

Buleca²,

Kamińska³

et al. 2017

JOEBM

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“…Being too weak to enforce their own rights, small shareholders have to rely on blockholders to monitor the controlling shareholder [1]. Benefits of blockholder monitoring have been widely documented in different areas, especially emerging markets (Lins, 2003;Pombo and Taborda, 2017) and specific countries such as China (Bai et al, 2004;Chen et al, 2019;Jiang et al, 2018;Lin et al, 2016), Finland (Maury and Pajuste, 2005), Italy (Volpin, 2002) and the USA (Basu et al, 2016;Bethel et al, 1998;Kim, 2010). Blockholders can contest and challenge the right of control, and therefore, discipline managers who are mostly connected with the controlling shareholder.…”

Section: Corporate Governance 53mentioning

confidence: 99%

“…Second, we contribute to growing literature on the role of blockholders in corporate governance. Previous studies in this area mostly focus on the impact of external blockholders on firm value (Bai et al, 2004;Basu et al, 2016;Bethel et al, 1998;Jara-Bertin et al, 2008;Lin et al, 2016;Maury and Pajuste, 2005;Pombo and Taborda, 2017). A few other studies examine governance-related issues such as dividend policy (Faccio et al, 2001), executive compensation (Kim, 2010), investment policy (Jiang et al, 2018) and managerial perk consumption (Chen et al, 2019).…”

Section: Raf 201mentioning

confidence: 99%

“…Previous studies mostly highlight the positive impacts of the reform on various performance and governance metrics. Those positive impacts include alleviation of financial constraints (Chen et al, 2012), reduced tunneling of corporate resources (Liu and Tian, 2012), improved firm performance (Campello et al, 2014), increased output and employment at SOEs (Liao et al, 2014), reduced foreign share discounts (Hou and Lee, 2014), more aligned interests between management and shareholders (Chen et al, 2015), the increased value of excess cash (Lin et al, 2016) and more innovation (Tan et al, 2020). Among a few exceptions, Jiang et al (2018) find that blockholders enhance corporate investment efficiency, but the SSS reform causes some blockholders to leave, and therefore, reduces the investment efficiency.…”

Section: Raf 201mentioning

confidence: 99%

“…They argue that potential competition for corporate control enhances corporate governance by mitigating the controlling shareholder's tunneling incentives. Lin et al (2016) show that multiple large shareholders enhance the value of excess cash, especially when the competition for control between the controlling shareholder and other blockholders is intense. Jiang et al (2018) also show that multiple large shareholders enhance investment efficiency by reducing overinvestment and improving future investment performance.…”

Section: Background Review and Development Of Hypothesesmentioning

confidence: 99%

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Blockholders and corporate governance: evidence from China’s split-share-structure reform

Qian

Tam

2021

RAF

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Purpose Proper empirical tests of the effect of blockholders’ monitoring incentives on corporate governance are scant in the literature because the relationship between ownership structure and enforcement of corporate governance mechanisms is bidirectional. This study aims to address the endogeneity issue by examining the effect of blockholding on executive turnover–performance sensitivity, using the split-share-structure (SSS) reform in China as an exogenous shock to blockholders’ monitoring incentives. Design/methodology/approach This study uses a logit model for estimating the change in executive turnover–performance sensitivity around the SSS reform. Sub-sample analysis is conducted to examine whether the impact of SSS reform on the turnover-performance sensitivity is stronger for firms with more contestable blockholders who might consider stock liquidity, risk sharing and diversification in their monitoring/trading decisions. Findings Top executive turnover, defined as CEO or board chair turnover, becomes less sensitive to firm operating performance after the reform, mainly for firms with contestable blockholders prior to the reform. Stock liquidity and blockholders’ demand for diversification can explain the impact of contestable blockholding. Moreover, blockholding is sensitive to firm operating performance after the reform but not before it. Originality/value With few exceptions, most studies in the blockholding literature focus on the effect of blockholder monitoring on firm value. Examining an exogenous shock to blockholding, this paper provides a set of new evidence for the impact of blockholding on executive turnover–performance sensitivity. The results call for more evidence of the impact of blockholding on executive turnover from other markets.

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