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Author: Sam Han
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
We examine the relation between managerial stock ownership and the firm's information environment. We focus on three dimensions of the information environment: total, public, and private information precisions (Barron, Kim, Lim and Stevens 1998). Our results suggest that firms' total and public information precisions are positively related to managerial ownership. In contrast, there is no clear pattern in private information precision across different levels of managerial ownership. We also observe that managerial ownership has a greater impact on the firm's public information environment after the implementation of Regulation Fair Disclosure, suggesting that the regulation was more effective in terms of improving the firms' public information flow for firms whose managers' interests are better aligned. Collectively, our findings suggest that one of the possible channels through which managerial ownership associates with earnings informativeness and firm value is the firms' public information precision and that managerial incentive alignment plays an important role in how managers respond to a new disclosure regulation.
Author: Sam Han
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
We examine the relation between managerial stock ownership and the firm's information environment. We focus on three dimensions of the information environment: total, public, and private information precisions (Barron, Kim, Lim and Stevens 1998). Our results suggest that firms' total and public information precisions are positively related to managerial ownership. In contrast, there is no clear pattern in private information precision across different levels of managerial ownership. We also observe that managerial ownership has a greater impact on the firm's public information environment after the implementation of Regulation Fair Disclosure, suggesting that the regulation was more effective in terms of improving the firms' public information flow for firms whose managers' interests are better aligned. Collectively, our findings suggest that one of the possible channels through which managerial ownership associates with earnings informativeness and firm value is the firms' public information precision and that managerial incentive alignment plays an important role in how managers respond to a new disclosure regulation.
Author: Bok Baik
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
This study examines the effect of equity ownership by managers on a firm's information environment vis-agrave;-vis its effect on analyst forecast accuracy and analyst following. We collect a sample of over 26,000 observations on managerial ownership during 1988-2002 and find that managerial ownership is negatively related to both the accuracy of analysts' consensus earnings forecasts and analyst coverage. Interestingly, this negative relation is most pronounced for firms with impending quot;bad news.quot; We also find that firms with greater managerial ownership are less likely to issue a management earnings forecast, particularly in anticipation of bad news. Our results are consistent with the view that managerial entrenchment leads to information opacity, reducing forecast accuracy and discouraging analyst coverage. We further document a positive relation between analyst coverage and firm value, particularly for firms with greater managerial ownership and a relatively poor governance structure, suggesting that investors view analyst coverage as an alternative governance mechanism to mitigate managerial entrenchment. However, our evidence of reduced analyst following indicates that this monitoring activity appears to be lacking when it would be most beneficial.
Author: Sam Han
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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Book Description
Despite the importance of sell-side financial analysts as information intermediaries in the capital market, little is known about how managerial equity ownership associates with their information environment. Using Barron, Kim, Lim and Stevens' (1998) framework of measuring information precision, we observe that managerial ownership is positively associated with financial analysts' public and private information precisions, largely consistent with the alignment view of managerial equity ownership. These results are robust to controlling for various economic and statistical factors that might affect the inference.
Author: Sarah Elizabeth Shonka
Publisher:
ISBN:
Category :
Languages : en
Pages : 64
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Book Description
Passive investment strategies (i.e., indexing) have grown substantially over the past twenty years to over $3 trillion in assets, but there is little empirical evidence on the effect of indexers on a firm's information environment. Owing to the passivity of their investment strategy, indexers likely differ from active institutional investors in their demand for financial information, which could have implications for the supply of financial information in the market. I find that increases in indexed ownership are associated with a reduction in the quantity and quality of financial information provided by two key suppliers of financial information - analysts and managers. Specifically, I find that increases in indexed ownership are associated with increases in analyst following, but analysts are less accurate in their forecasts. In addition, I find that increases in indexed ownership are associated with management issuing fewer forecasts. These findings stand in contrast to the documented positive association between institutional ownership and the information environment. Overall, my results indicate that, all else equal, increases in indexed ownership are associated with deteriorations in a firm's information environment, which is a particularly relevant finding given the significant growth in indexing in recent years.
Author: Christian Alexander Wegener
Publisher: GRIN Verlag
ISBN: 3640814479
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
Seminar paper from the year 2006 in the subject Business economics - Investment and Finance, grade: sehr gut, University of Münster (Finance Center Münster), language: English, abstract: Many scholars have analyzed whether and how management share ownership should be used in terms of a corporate governance instrument to enhance corporate performance. The empirical results, however, have been inconclusive till this day. This seminar paper attempts to explain the problems and difficulties that underlie the obscurity and how researches might eventually unravel this challenge.
Author: R. Glenn Hubbard
Publisher: University of Chicago Press
ISBN: 0226355942
Category : Business & Economics
Languages : en
Pages : 354
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Book Description
In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
Author: Ting Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 59
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Book Description
This study examines the information environment and earnings management of dual class firms. Motivated by the pronounced entrenchment phenomenon at dual class firms due to divergence between voting and cash flow rights, we are interested in whether dual class firms adopt corporate disclosure choices that imply greater opacity as well as employ judgment in financing reporting to misguide the outside shareholders about the firm's true performance. Based on a sample of 12,672 firms from 19 countries during 1994-2010, we find that dual class status is associated with poorer information environment and increased accrual-based earnings management, consistent with the notion that managers of dual class firms exhibit incentives to conceal private control benefits from the outside shareholders. Results further suggest that dual class ownership structure weakens the mitigating impact of investor protection on earnings management. Following unification, firms experience an improvement in information environment and a decrease in earnings manipulation.
Author: Charles P. Himmelberg
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
Both managerial ownership and performance are endogenously determined by exogenous (and only partly observed) changes in the firm's contracting environment. We extend the cross-sectional results of Demsetz and Lehn (1985) and use panel data to show that managerial ownership is explained by key variables in the contracting environment in ways consistent with the predictions of principal-agent models. A large fraction of the cross-sectional variation in managerial ownership is explained by unobserved firm heterogeneity. Moreover, after controlling both for observed firm characteristics and firm fixed effects, we cannot conclude (econometrically) that changes in managerial ownership affect firm performance.
Author: Mu-sŏng Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 151
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Book Description
After Shleifer and Vishny (1997) introduce agency conflicts between controlling insiders and outside investors, a new research trend has emerged, which focuses on controlling insiders' incentives for opportunistic behavior and assumes that controlling insiders may want more opaque corporate information environment to mask their pursuance of private control benefits. However, there are still open issues on the topic of how different controlling shareholder types, such as business group owners, institutional owners and family owners, each affect corporate information environment. Therefore, this study aims to investigate the different roles of controlling ownership types on corporate informational environment. Chapter 1 examines earnings management behaviors of firms affiliated with business groups, using a unique dataset for South Korean business groups (chaebols) between 1993 and 2007. Contrary to predictions of agency theory, we find that group firms are actually less engaged in earnings management than non-group firms, and we offer controlling family's concern for group reputation as an explanation. Group firms are also shown to use more real cash flow-based earnings management than discretionary accruals management. The results are robust with respect to the method of control sample construction, alternative models and group definitions, and endogeneity. There is also evidence that corporate reforms undertaken in the aftermath of the Asian financial crisis, including regulations on auditing and combined group-wide financial reports, appear to have mitigated the use of earnings management by group firms. These results are consistent with the notion that concerns for group reputation may mitigate agency-based opportunistic earnings management behaviors. Chapter 2 examines whether domestic and foreign institutional investors improve corporate transparency in the presence of controlling benefits. We construct the transparency index, as well as its sub-indices based on firm- and market-level information, using group and non-group firm-level data for South Korea between 2001 and 2007. The results show that foreign institutional ownership improves overall corporate transparency, while the effects of domestic institutional ownership are insignificant. This is traceable to sub-index findings that foreign investors are associated with improvement in both firm-level and market-level transparency, while domestic institutional investors are associated with a decrease in firm-level transparency, but with an increase in market-level transparency, which may offset each other. The effects are non-linear for domestic institutional ownership, while those of foreign institutional ownership remain monotonic. These findings are consistent with the notion that domestic institutional investors are conflicted by their role as monitors to boost transparency and by their desire to pursue control benefits by exploiting insider information and promoting selective transparency. Foreign investors, lacking such controlling benefit opportunities, tend to promote general transparency. Chapter 3 examines how the dynamics between family owners and market participants, such as analysts, market makers and investors determine a firm's overall transparency, using South Korean data between 2001 and 2007. Our results show that family ownership has a positive relation with earning-based transparency, while it has a negative relation with market-based transparency. As a result, family ownership seems to have no impact on overall transparency. However, an analysis based on sorting of family ownership shows that firms with less than 30% family ownership show a positive significant relation to overall transparency, but firms with family ownership of 30% or higher have an insignificant relation with overall transparency. This discrepancy may exist because family owners may want to promote corporate transparency through better earning-based information dissemination, but market participants discount such efforts and this discount increases as family ownership increases.
Author: Sabri Boubaker
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
This study investigates the effects of some characteristics of the French corporate governance model - deemed to foster entrenchment and facilitate private benefits extraction - on the extent of analyst following. The results show that analysts are more likely to follow firms both with high discrepancy level between ownership and control and those controlled through pyramiding. These findings provide empirical support to the argument that minority shareholders value private information on firms with high expropriation likelihood, asking thence for more analyst services. Additional findings show that analysts are reticent to follow firms managed by controlling family members. This is, in part, explained by these firms' reliance on private communication channels rather than public disclosure, producing a poor informational environment.
