Showing papers on "Corporate group published in 2017"

What is corporate law

Abstract: This article is the first chapter of the second edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda and Edward Rock (Oxford University Press, 2009). The book as a whole provides a functional analysis of corporate (or company) law in Europe, the U.S., and Japan. Its organization reflects the structure of corporate law across all jurisdictions, while individual chapters explore the diversity of jurisdictional approaches to the common problems of corporate law. In its second edition, the book has been significantly revised and expanded. As the book's introductory chapter, this article describes the functions and boundaries of corporate law. We first detail the economic importance of the corporate form's hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. We then identify the major agency problems that attend the corporate form, and that, therefore, corporate law must address: conflicts between managers and shareholders, between controlling and minority shareholders, and between shareholders as a class and non-shareholder constituencies of the firm such as creditors and employees. In our view, corporate law serves in part to accommodate contract and property law to the corporate form and, in substantial part, to address the agency problems that are associated with this form. We next consider the role of law in structuring corporate affairs so as to achieve these goals: whether, and to what extent standard forms - as opposed, on the one hand, to private contract, and on the other, to mandatory rules - are needed, and the role of regulatory competition. Whilst the ‘core’ features of corporate law are present in all - or almost all - legal systems, different systems have made different choices regarding the form and content of many other aspects of their corporate laws. To assist in explaining these, we review a range of forces that shape the development of corporate law, including domestic share ownership patterns. These forces operate differently across countries, implying that in some cases, complementary differences in corporate laws are functional. However, other such differences may be better explained as a response to purely distributional concerns. In addition to Chapter 1, Chapter 2 of the Anatomy of Corporate Law (2nd ed.), Agency problems, Legal Strategies, and Enforcement is also available (full text) on SSRN at http://ssrn.com/abstract=1436555.

Auditor Choice and Its Implications for Group‐Affiliated Firms

Abstract: We examine which of two opposing financial reporting incentives that group-affiliated firms experience shapes their accounting transparency evident in auditor choice. In one direction, complex group structure and intragroup transactions enable controlling shareholders to pursue diversionary activities that they later hide by distorting reported earnings. In the other direction, as outside investors price-protect against potential expropriation, controlling shareholders may be eager to improve financial reporting quality in order to alleviate agency costs. To empirically clarify whether group affiliation affects company insiders' incentives to address minority shareholders' concerns over agency costs, we examine auditor selection of group firms relative to stand-alone firms. In comparison to nongroup firms, our evidence implies that group firms are more likely to appoint Top 10 audit firms in China, especially when their controlling shareholders have stronger incentives to improve external monitoring of the financial reporting process. After isolating group firms, we find that the presence of a Top 10 auditor translates into higher earnings and disclosure quality, higher valuation implications for related-party transactions, and cheaper equity financing, implying that these firms benefit from engaging a high-quality auditor. In additional analysis consistent with our predictions, we find that group firms that are Top 10 clients pay higher audit fees and their controlling shareholders are more constrained against meeting earnings benchmarks through intragroup transactions and siphoning corporate resources at the expense of minority investors. Collectively, our evidence supports the narrative that insiders in firms belonging to business groups weigh the costs and benefits stemming from auditor choice.

Testing the Correlations between Corporate Giving, Performance and Company Value

Abstract: The paper seeks to identify the relationship between the charitable contributions, performance, and market value of Romanian listed companies. To achieve the objective, a panel data analysis was conducted on a group of companies listed at Bucharest Stock Exchange in the period 2011 to 2016, which registered profit for the entire period. The empirical analysis points out, using a logistic regression, which financial and non-financial indicators contribute to the decisions of the companies to make the charitable contributions. It also tests the impact of those indicators and corporate giving activities like Corporate Social Responsibility (CSR) activities on company value, represented by Tobin’s Q Ratio and on company performance, expressed by Return on Equity (ROE). The results show that there is a positive correlation between the charitable contributions, performance, and market value of the Romanian listed companies.

Stock Market Reaction to Corporate Crime: Evidence from South Korea

Abstract: This paper examines the impact of corporate crime on the stock market in South Korea. Specifically, we examine the effect of crime type (white-collar vs. street crime, operational vs. financial), industry type (financial vs. industrial), business group affiliation (chaebol-affiliated vs. non-chaebol-affiliated), and corporate governance (strong vs. weak board structure index) on the relationship between corporate crime announcement and stock market reaction. We find negative reactions to stock prices around the announcements of corporate crimes but no significant difference in reactions between announcements of individual and organizational crimes. Individual white-collar crimes have a stronger negative impact on stock prices than do individual street crimes on average, while financial crimes have a significantly greater negative impact than do operational crimes in organizations. Moreover, financial sector firms are impacted more significantly by the announcement of corporate crimes than are non-financial firms. In addition, the stock prices of chaebol-affiliated firms decrease less than do those of non-chaebol-affiliated firms, and those with a higher board committee subindex seem to be influenced less by news of corporate crimes if the size control variable is excluded. Multivariate cross-sectional analyses show consistent findings after controlling for firm-specific factors, crime-type effect, and industry and year effects. The results of this study provide valuable insights because it covers several types of corporate crime, including those committed by individuals and those perpetrated by firms.

Business group heterogeneity and the internationalization-performance relationship: Evidence from Indian business groups

Abstract: Business groups, the dominant organizational form in many Asian markets, have expanded their operations into international markets. We combine the resources-based view with the institutional perspective to highlight the costs and benefits of business groups’ internationalization, rather than business groups’ affiliated firms’ internationalization, and consider how ownership heterogeneity among business groups influences the internationalization-performance relationship. Three ownership types—family, domestic financial institution, and foreign corporate—serve as distinguishing characteristics of business groups and potential moderators of this relationship. In a sample of 185 Indian business groups examined over more than a decade (2000–2010), we find that these three ownership types have a differential impact on the internationalization-performance relationship¸ depending on the level of internationalization of the business group. Specifically¸ we find that at lower levels of internationalization, family and foreign corporate ownership has a positive moderating effect whereas domestic financial institutional ownership has a negative moderating effect. Conversely¸ at higher levels of internationalization, family and foreign corporate ownership has a negative moderating effect, while domestic financial institutional ownership positively moderates the internationalization-performance relationship.

Centralization of intragroup equity ties and performance of business group affiliates

Abstract: Research summary: Although prior research has suggested that equity ties are important for business groups, less attention has been paid to the specific mechanisms through which equity ties create value. We develop a framework that specifies how centralization of intragroup equity ties affects the performance of group affiliates. We use the exogenous shock of the 2008 financial crisis and a difference-in-differences analysis of 51,730 observations of business group affiliates in Taiwan to show that centralization of equity ties enhances affiliate performance, but such effects weaken when the environment becomes turbulent. Moreover, we find that listed affiliates obtain fewer benefits from centralization than unlisted affiliates. Overall, our study deepens scholarly understanding of not only how groups create value, but also how value is differentially appropriated among affiliates. Managerial summary: Our research speaks directly to owner-managers of business groups with respect to creating an optimal equity network structure that binds the affiliated firms of the group. Our findings suggest to managers that the overall structure of equity ties in a business group has major implications for the performance of the affiliate firms of the group, and the network structure within the group should be designed deliberately and thoughtfully on an on-going basis. In particular, control through centralized equity ties is performance-enhancing in normal periods, but such control may be counterproductive as turbulence increases in business environments, or as the number of listed group firms increases. Hence, owner-managers may consider optimizing the network structure by lowering the degree of centralized equity ties under such circumstances, or at a minimum, lowering centralized control. Copyright © 2016 John Wiley & Sons, Ltd.

Ownership identity, strategy and performance: business group affiliates versus independent firms in India

Abstract: We consider whether the impact of entrepreneurial orientation on business performance is moderated by the company affiliation with business groups. Within business groups, we explore the trade-off between inter-firm insurance that enables risk-taking, and inefficient resource allocation. Risk-taking in group affiliated firms leads to higher performance, compared to independent firms, but the impact of proactivity is attenuated. Utilizing Indian data, we show that risk-taking may undermine rather than improve business performance, but this effect is not present in business groups. Proactivity enhances performance, but less so in business groups. Firms can also enhance performance by technological knowledge acquisition, but these effects are not significantly different for various ownership categories.

Business Groups and Tunneling: Evidence from Corporate Charitable Contributions by Korean Companies

Abstract: This paper investigates whether corporate philanthropic decisions are associated with a firm’s listing status and business group affiliation. Analyzing a large sample of public and private firms in Korea, we find that (1) public firms make more charitable contributions than private firms and (2) business group-affiliated firms make more charitable contributions than non-affiliated firms. The results suggest that public firms, owing to greater public scrutiny, and business groups, owing to higher political costs, are encouraged to make more corporate charitable contributions. Further, we find that (3) the greater corporate giving by public firms than private firms is more pronounced for business group-affiliated firms, compared with non-affiliated firms. The result is consistent with business groups’ strategic coordination of their affiliates’ philanthropic decisions to maximize the value of the business group as a whole or to tunnel business group resources out to controlling shareholders who hold a larger portion of private affiliates than public affiliates.

Overcoming the corporate veil challenge: could investment law inspire the proposed business and human rights treaty?

Abstract: This article proposes a model of treaty-based veil piercing for civil liability claims by victims of human rights harm inflicted by businesses. The primary inspiration for this model comes from investment treaty provisions dealing with corporate investors. Our examination of investment law for this purpose exposes the double standard in the treatment of the corporate veil between these two remedy regimes, and offers a way to address this. The test we propose for lifting the veil in order to allow victims to claim against the parent company in a corporate group is one of ‘legal control’. It aims to capture cases where the parent did not necessarily take an active role in the subsidiary's business, but it is still treated as being in control of the subsidiary by virtue of its direct or indirect ownership or ability to appoint management.

Determinants of Internal Versus of External R&D Offshoring: Evidence from Spanish Firms

Abstract: This paper analyzes the determinants of R&D offshoring of Spanish firms using infor-mation from the Panel of Technological Innovation. We find that being an exporter, continuous R&D engagement, applying for patents, being a subsidiary, and firm size are factors that positively affect the decision to offshore R&D. In addition, we obtain that the factors that influence this decision for firms that belong to a business group differ depending on whether the firm purchases R&D services within the group or through the market.

Impact of Business Group Affiliation on Capital Structure Adjustment Speed: Evidence from Indian Manufacturing Sector:

Abstract: Firms’ capital structure dynamics and ownership structure are two extensively studied subjects of research in corporate finance in recent years. This study combines these two branches of re...

Corporate Governance and Firms’ Performance of Mauritian Listed Companies

Abstract: As the world is becoming a global village, companies need to constantly assess their corporate governance structures to remain competitive. This calls for better management and, eventually, better governance in the stewardship of shareholders’ funds. Companies must understand that good governance is about balancing conformance with performance so as to create value. This study aims at examining the relationship between the level of corporate governance and corporate competitiveness of listed companies on the Stock Exchange of Mauritius. Relationship between corporate governance practices and financial performance focusing on the maximization of shareholders wealth and share prices movements of listed companies is another focus of the study. The corporate governance degree is expressed in terms of value through the corporate governance index. The present study examines how listed companies are conforming to good governance practices, using survey data and whether strong level of conformance to good corporate governance practices influences corporate competitiveness. The results of this study indicate that most listed companies view corporate governance as essential for the good management of the enterprise. It is also found that there is a positive correlation between the corporate governance index value and financial performance of firm. It is also deduced that there exists a strong correlation between corporate governance and corporate competiveness. One important implication of the study is that corporate governance is not just an emancipation of company law. In turn, shareholder primacy is a misleading conception in the institution of corporate governance even if it is a valid argument in the specific coverage of company law.

Effect of Business Group Affiliation on Firm Internationalization: The Case of India Under Reforms

Abstract: The authors investigate how diversified business groups influence the structural reform–firm strategy relations given its effect on strategic choice and its implementation in a large emerging economy: India. By integrating business group, industrial organization, and international business literature, the authors predict considerable differences in the exporting behavior of business group–affiliated firms on the basis of their market competitiveness and governance dynamics. The authors test their predictions empirically with longitudinal data of 6,119 Indian firms over a 21-year period starting from 1991–1992 to 2011–2012 and find support for most of the hypotheses. These findings suggest that knowledge of the heterogeneity within business groups are essential for understanding the response of business group affiliates in light of the progression of reform process in India. This study thus contributes to a more complete conceptual understanding of the strategic responses of promarket reforms of bu...

Social capital, knowledge sharing and innovation : the role of business group affiliation in Turkey

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Business group affiliation as institutional linkages in China’s emerging economy: A focus on organizational traits and institutional conditions

Abstract: We conceptualize business group affiliation as institutional linkages by integrating the resource-based view and institutional perspective to examine its direct and moderating effects on firm value in emerging economies. In a sample of 1233 Chinese listed companies, we find that while business group affiliation has mixed direct effects, it moderates the effects of organizational traits and institutional conditions on firm value. Specifically, group affiliation aggravates old firms’ “liability of oldness,” but helps mitigate large firms’ “liability of bigness.” Besides, business group affiliation can reduce the liabilities that institutional voids bring about, as evidenced in its moderating effects on the relationship between regional under-development/industrial restriction and firm value. Our findings point to the moderating effects of business group affiliation in emerging economies.

Why New Corporate Law Arises: Implications for the 21st Century

Abstract: The corporate governance landscape is much different than a generation ago Independent directors now hold a great majority of all board seats, institutional shareholders hold a supermajority of all shares in public corporations, and activist shareholders have become a recurring player in entity governance In turn, other corporate stakeholders express increasing concern about shareholders’ use of their power for selfish reasons and the perceived pernicious impact of shareholder wealth maximization as a guide for corporate law This chapter, part of a book on “The Corporate Contract in Changing Times” asks: Why does corporate law change and how it might change now? Corporate law changed regularly in the first half of our country’s history A series of innovations followed one after another during the nineteenth century — limited liability; general incorporation statutes; a strong shift to director-centric corporate governance; authorization of corporations holding stock in other corporations; and the disappearance of ultra vires and other limits on corporate behavior By the arrival of the twentieth century all the key economic elements of the modern corporation were in view and corporate law settled into a stable pattern we still see today State law abandoned its prior regulatory approach and its continual change in favor of a director-centric structure with expansive room for private ordering that has remained remarkably stable Federal law stepped in to restrain economic concentration (antitrust law), to protect employees and consumers against corporate power (done by industry regulation, employment and consumer laws not corporate governance), to limit corporate political contributions, and to make recurring, if sporadic and non-comprehensive, efforts to enhance the role of shareholders against managers This chapter examines this history of change in corporate law in America, the dramatic and abrupt shift in the focus of state corporate law visible in last decade or so of the nineteenth century, the interactive pattern of state and federal law that has grown up over the second half of the country’s history and prominent theories explaining what leads to corporate law change Together these various strands suggest there will be no fundamental change in state corporate law even in this time of visible stress to the now classic structure Changes that we see is more likely to come from federal law or, as has been most visible in recent times, because of market and technological-driven changes outside of law

Self-regulation in international corporate governance codes

Abstract: Soft law refers to a deviation from hard law that begins with the weakening of legal arrangements ‘along one or more of the dimensions of obligation, precision, and delegation’. Such a weakening of legal arrangements is considered potentially beneficial.

Investigating climate change intervention strategies in opencast mining contracting and plant hire companies: a case of mutual construction company group of companies, South Africa

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Behind the Numbers: State Capitalism and Executive Compensation in China

Abstract: The rapid rise of Chinese companies in the global economy has attracted great scholarly attention to Chinese corporate governance. Among the various areas of Chinese corporate governance, executive compensation is an important yet difficult part to research. The common research method of Chinese executive pay literature relies on pay figures disclosed in listed companies’ annual reports and tends to take the disclosed numbers at face value. This Article discusses three informal pay practices that constrain the usefulness and reliability of executive pay data formally disclosed in annual reports of Chinese listed companies, especially those owned by the state. A valid reading of formal pay figures entails an understanding of the network structure and the political environment in which Chinese companies operate. An investigation of the practices behind formal compensation numbers sheds light on many issues for scholars and policymakers, the salience of which escalates as the international interaction with Chinese companies expands. For example, it stresses the important role of political institutions in shaping executive compensation; it raises questions about the extent to which international cross-listing improves transparency of Chinese companies; it critically evaluates whether China’s latest reform policy deals with the real problems of its state-owned enterprises; it spotlights the lacuna of extant scholarship on Chinese executive compensation.

The Hindu Undivided Family in Independent India’s Corporate Governance and Tax Regime

Abstract: Social science has had a very limited engagement with the socio-legal entity of the Hindu Undivided Family (HUF). In corporate and personal law—the two spaces it inhabits—it has been largely regarded as separate and distinct entity from “modern” tax and corporate governance entities like individuals and body incorporates. It is often referred to as an archaic remnant associated with feudal structures of land and property holdings. Its implications on capital accumulation in the “modern” structures of corporate governance and tax structures have not been studied at all. This paper is an attempt to arrive at a comprehensive delineation of the role of the HUF in the corporate governance and taxation regime in independent India.

Does business group affiliation matter for external debt finance? Evidence from India

Abstract: We investigate in the Indian context how developing-economy business groups make capital structure choices during economic reforms. Using eighteen years of panel data, we find a general trend towards deleveraging, reduced access to deficit financing, and higher costs of debt financing for group-affiliated firms. We further find that the first two of these trends are more pronounced for firms affiliated with large business groups. Our findings contribute to resource-dependence theory by demonstrating that the size of business groups is positively related to their ability to better manage environmental interdependence and uncertainty during economic reforms.

The influence of some selected variables from accounting system on profit or loss of agricultural companies in the Slovak republic

Abstract: 1024x768 The article presents the influence assessment of significance of some selected variables from the entrepreneurs' accounting system on the achieved profit or loss of the agricultural companies in the Slovak Republic Accounting information serves as an active tool for internal users for operational as well as strategic company management, and for external users the information is determined as legally binding output information which is a subject to disclosure Individual financial statements of assessed agricultural companies are considered to be the relevant source of information Agricultural companies are represented by commercial companies and agricultural cooperatives Profit or loss after income tax presents the final complex effect of economic company's performance The existence and development of companies is conditioned by assets which amount and structure depend on focus and the range of subject activity but as well as on specific factors set by the production process in the agricultural primary production The increase in liabilities is notable by the influence of unsufficient amount of own company funding sources, mainly the increase in trade payables The continuance of company reproduction process is secured by a bank loan drawdown The income situation of companies of agricultural primary production is favourably influenced by the subsidies of non-investment character During the observed period of years 2004 - 2014 the examined variables were assessed by means of statistical methods The obtained results of rate determination of statistical correlation between selected variables by means of classical canonical analysis and non-parametric correlation analysis secured that in the assessed group of companies all analysed variables influenced statistically significantly profit or loss after income tax, mainly the total value of assets and non-investment subsidies, except for years 2010, 2012 a 2013, when the statistically insignificant correlations was determined between profit or loss and especially short-term trade payables and current bank loans As regards the existence point of view it is recommended to companies to maintain the optimal assets and capital structure as well as the achievement of suitable profitability of company's activity Only the complex attitude towards the subject issue can be the assumption of sustainability for companies of agricultural primary production in the Slovak Republic and the increase in their performance Normal 0 21 false false false

Future Organization of Oral Health Services Delivery: From 2012 to 2042.

Abstract: The United States is currently experiencing a vortex of change in both general health and oral health care delivery, the ultimate outcome of which is still not well understood. The specific focus of this article is to examine the future organization of the oral health services delivery system (OHSDS) in the U.S., with special attention given to the role of large group dental practices (LGDPs) in that future. The article describes the various types of LGDPs and their ability to change the economic characteristics of the OHSDS. Large geographically distributed corporate group dental practices (LGDCGDPs) are the type that may expand their market share to the extent that they could change the economic characteristics of the OHSDS. A wide range of scenarios is used to project the expansion of LGDCGDPs into the future. The scenarios modeled are not intended as predictions but rather to present a range of possible OHSDS market structures that may emerge over the next 30 years. The implications of each scenario for the economic competition within the OHSDS are described. Possible implications of these trends for dental education are also discussed. This article was written as part of the project "Advancing Dental Education in the 21st Century."