Managerial Ownership Influencing Tunnelling Behaviour

Juliarto, Agung; Tower, Greg; Zahn, Mitchell Van der; Rusmin, Rusmin

doi:10.14453/aabfj.v7i2.3

Cited by 40 publications

(34 citation statements)

References 88 publications

(137 reference statements)

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“…In the previous period, the main method for evaluating this element is by market reaction at the time, which related party transactions are announced such as Peng et al (2011); Bae et al (2002); Faccio and Stolin (2006); and . Interestingly, this factor is also estimated by the level of related party transactions in accordance with the studies of Juliarto et al (2013) and Gao and Kling (2008). Despite of the difficulties, some researchers find that the aforementioned relationship with both positive and negative effects in Qian and Yeung (2015) and Boubaker (2005) respectively.…”

Section: Introductionsupporting

confidence: 74%

Bank Financing and Corporate Governance: Empirical Evidence from Vietnam

Huynh

Cong

2017

Asian Economic and Financial Review

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Article History JEL Classification G32, G34, G39. This paper examines the role of debt resulting from bank financing for corporate governance towards the activities of withdrawing cash and assets to controlling shareholders' account to benefit their rights by capturing secondary data for 250 nonfinancial firms listed in the Vietnam Index, considered as one of the emerging stock markets, during the period from January 2006 to December 2016. The authors build three models to investigate in explaining whether the negative impact of intercorporate loan on predicted firms' performance or not, the level of constitution by the aforementioned loans to debt financing and the simultaneous influence of both debt and these loans to firms' performance. We employ two regression methods including system Generalized Method of Moments (system-GMM) as well as Two Stage Least Squares (2SLS) for estimating three proposed models to ensure consistent and unbiased results. The findings show that the Vietnamese companies could use debt to control the majority shareholders' expropriation. However, the overuse bank financing and weak corporate governance might adversely lead to future firms' performance. Contribution/ Originality:This study contributes to the existing literature by employing system-GMM and 2SLS to explain the relationship between bank financing and corporate governance from country research, Vietnam. This paper is one of very few studies which have investigated the negative impact of intercorporate loan on predict firms' performance in Vietnam.

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Section: Introductionsupporting

confidence: 74%

Bank Financing and Corporate Governance: Empirical Evidence from Vietnam

Huynh

Cong

2017

Asian Economic and Financial Review

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“…Companies conduct related party transactions for three motives; to minimize transaction costs (Cook 1977;Fisman and Khanna 1998), to manipulate earnings (Jian and Wong 2003;Aharony et al 2010), and to tunnel or prop-up (Cheung et al 2009a;Cheung et al 2009b;Cheung et al 2006;Juliarto et al 2013). Tunneling results in transactions that are a priori likely to result in expropriation of minority shareholders such as asset transactions, trading relationship, equity transactions, account receivables or loan guaranties (Cheung et al 2009a).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Controlling shareholders have the power to set corporate policy to obtain them. It is not surprising that most previous studies of tunneling focused on market reactions at the time of the announcements of related party transactions (Bae et al 2002;Cheung et al 2006;Cheung et al 2009a;Faccio and Stolin 2006;Peng et al 2011) or used the level of related party transactions as a proxy for tunneling (Gao and Kling 2008;Juliarto et al 2013). The usage of the level of related party transactions to measure tunneling is problematic because companies conduct related party transactions not only for opportunistic reasons but also for efficiency reasons.…”

Section: Introductionmentioning

confidence: 99%

“…Some empirical evidences have suggested that related party transactions can be used for expropriation through tunneling activities (Aharony et al 2010;Berkman et al 2009;Cheung et al 2006;Cheung et al 2009a;Gao and Kling 2008;Jian and Wong 2003;Juliarto et al 2013).…”

Section: Introductionmentioning

confidence: 99%

“…However, in developing counties, such tunneling receives little attention (Juliarto et al 2013). Tunneling can occur in country with high and low levels of corporate governance (Johnson et al 2000).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Current Asset Tunneling and Firm Performance in an Emerging Market

Sari¹,

Baridwan²

2014

JAKI

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This study examines the effect of current asset tunneling on firm performance from the emerging market perspective. Although tunneling activities is a common practices by businesses especially in Indonesia, there exist obstacles in the measurement of tunneling activity because it is difficult to proof the existence of such practices. In this study, we measure tunneling by using accounts receivables and develop tunneling detection criteria. In addition, this study examines the effect of tunneling on firm performance and market reaction during the announcement of the related party transaction. The study finds that from the perspective of the being-tunneled companies, receivables to related parties negatively affect the company's profit margin. Companies which announce related party transaction indicating tunneling obtain negative abnormal return during the announcement of the related party transaction. Keywords: current asset tunneling, related party transaction, firm performance, emerging market AbstrakPenelitian ini menguji pengaruh tunneling aset lancar pada kinerja perusahaan pada perspektif negara berkembang. Meskipun aktivitas tunneling terjadi dalam praktik bisnis di Indonesia, tetapi terdapat kesulitan untuk mengukurnya karena aktivitas tunneling sulit dibuktikan. Penelitian ini membangun kriteria deteksi tunneling. Penelitian ini juga menguji pengaruh tunneling pada kinerja perusahaan dan reaksi pasar modal pada saat pengumuman transaksi pihak berelasi. Penelitian ini menemukan bahwa dari perspektif perusahaan yang di-tunnel, piutang kepada pihak berelasi berpengaruh negatif terhadap kinerja perusahaan. Perusahaan yang mengumumkan transaksi pihak berelasi yang terindikasi tunneling mendapatkan return negatif.

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Corporate Governance and Corruption: A Comparative Study of Southeast Asia

Wijayati

Hermes

Holzhacker

2015

Decentralization and Governance in Indonesia

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The weak corporate governance framework in Indonesia, as in other countries in Southeast Asia, was deemed a crucial factor in deepening the financial and economic crisis in the late 1990s. Over a decade after the 1997 Asian financial crisis, Indonesia and other Southeast Asian countries have made substantial governance reforms. The reform measures of the institutional framework, both in the public and corporate sectors, were intended to transform Indonesia into a clean, transparent, and accountable country. While the reforms have resulted in increased political stability, improved government effectiveness, and a more conducive investment climate, corruption remains a major concern in Indonesia. This study aims to evaluate how corporate governance mechanisms can reduce the opportunities for corruption. By utilizing agency theory, we argue that a strong corporate governance institutional framework helps to reduce a country's level of corruption. We focus attention on three components of corporate governance mechanisms, i.e., shareholder rights, the quality of the board of directors (BoD), and appropriate accounting and auditing standards, including transparency standards. In an attempt to strengthen corporate governance standards and practices in Indonesia, we conducted a comparative study among Southeast Asian middle-income countries, i.e., Indonesia, Malaysia, and Thailand. We rely on accessible secondary data such as corporate governance codes, laws, and regulations. Our study concludes that the Indonesian corporate governance institutional framework is less stringent compared to Malaysia and Thailand. This condition provides a favorable environment for corruption to persist because the standards and practices are less demanding and the companies do not necessarily have to comply with the existing regulatory framework.

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Managerial Ownership Influencing Tunnelling Behaviour

Cited by 40 publications

References 88 publications

Bank Financing and Corporate Governance: Empirical Evidence from Vietnam

Bank Financing and Corporate Governance: Empirical Evidence from Vietnam

Current Asset Tunneling and Firm Performance in an Emerging Market

Corporate Governance and Corruption: A Comparative Study of Southeast Asia

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