Date of Award
Doctor of Philosophy
Ronald E. Shrieves
James W. Wansley, Phillip Daves, Joseph V. Carcello
This study uses a simultaneous equations model to examine the impact of ownership structure on corporate policies and performance for listed firms in East Asia and Western Europe. The policy areas examined include dividend, diversification, leverage, and earnings management. Both accounting performance and market valuation are used as performance measures. The empirical analysis reveals that the policy choices are interrelated and have joint impact on firm performance. There exist some regional differences with respect to how ownership structure affects the largest shareholder’s policy decisions. These differences are related to the difference in capital market developments and possibly reflect the nonlinear effects of ownership structure as well.
For a sample of 927 listed firms from eight East Asian economies, I find that (1) the level of cash flow rights held by the largest owner is positively related to subsequent dividend payment, diversification, leverage, operating efficiency, and firm value, and negatively related to earnings management; (2) efficiency gains and expropriation costs coexist in firms with concentrated ownership; (3) the expropriation costs increase with the control stake held by the largest owner; (4) firms located in countries with better investor protection pay higher dividends, are less engaged in earnings management, and have superior performance.
For a sample of 1,757 listed firms from 13 Western European economies, I find that (1) the level of cash flow rights held by the largest owner has negative effects on leverage and firm value; (2) the excess control rights are negatively related to dividend payment, diversification, leverage, and firm value; (3) strong investor protection is beneficial to minority shareholders.
Taken together, this study provides some insights regarding how controlling shareholders choose corporate policies for expropriation purposes. The extant literature largely ignore the interrelationships among firm policies and their joint impact on firm performance. In addition, the empirical results for the listed Asian firms suggest that efficiency gains and expropriation costs coexist in firms with concentrated ownership structure. Some of the expropriation costs born by minority shareholders may be viewed as a price paid for the efficiency gains, supporting the view of Grossman and Hart (1980). This study contributes to the growing body of literature on the efficiency of corporate governance mechanisms around the globe.
Zhang, Rongrong, "The Benefits and Costs of Concentrated Ownership of Firms in East Asia and Western European Economies: A Simultaneous Equations Approach. " PhD diss., University of Tennessee, 2004.