Ownership Structure and Divestiture Decisions: Evidence from Australian Firms

Ownership Structure and Divestiture Decisions: Evidence from Australian Firms

Pascal Nguyen University of Technology, Sydney (UTS); Financial Research Network (FIRN)

Nahid I. Rahman University of Technology, Sydney (UTS); Financial Research Network (FIRN)

Lucy Zhao University of Technology, Sydney (UTS); Financial Research Network (FIRN)

January 9, 2013
2013 Financial Markets & Corporate Governance Conference

Abstract: 
Divestitures have the potential to create shareholder value by helping firms optimize their portfolio of assets. Even so, firms do not necessarily take up divestitures because of agency problems. In fact, large controlling shareholders may prefer to extract private benefits of control at the expense of minority shareholders. In addition, divestitures may expose the misappropriation of corporate resources. In this paper, we explore the role that other blockholders play in constraining the largest shareholder’s influence. The results indicate that divestiture activity decreases with the ownership of the largest shareholder, which imposes a cost to minority shareholders since the firm’s value is not maximized. The presence of another significant blockholder appears to curb this negative bias towards divestitures. This finding provides an economic rationale for the higher performance of firms characterized by more balanced ownership structures. Involvement of family owners also appears to provide similar benefits.

Do Strong Shareholder Rights Mitigate Earnings Management?

Do Strong Shareholder Rights Mitigate Earnings Management?

Marshall A. Geiger University of Richmond – E. Claiborne Robins School of Business – Economics

David S. North University of Richmond – E. Claiborne Robins School of Business

April 5, 2013
Journal of Accounting, Ethics and Public Policy, Vol. 14 No. 2, 2013

Abstract: 
In this paper we examine the relationship between the strength of a firm’s shareholders rights, as part of their overall corporate governance structure, and the discretionary financial reporting choices made by the firm’s financial executives. Specifically, we examine the strength of shareholders rights and the reported levels of discretionary accounting accruals and the use of special reporting items on the income statement. We posit and find that in settings where shareholder rights are strong, after controlling for other reporting related factors, managers report lower levels of discretionary accruals and special reporting items, and use special reporting items significantly less frequently compared to firms with weak shareholder rights. Our findings suggest that having strong shareholder rights imposes additional monitoring on the firm’s financial reporting executives, leading to reduced earnings management attempts by financial executives and higher quality financial reporting.

The Separation of Investments and Management

The Separation of Investments and Management

John Morley University of Virginia School of Law

March 27, 2013
Yale Law Journal, Forthcoming

Abstract: 
This paper suggests a basic shift in the way we think about investment funds. The essence of these funds and their regulation lies not just in the nature of their investments, as is widely supposed, but also and more importantly in the nature of their organization. All types of investment funds — including hedge funds, private equity funds, venture capital funds, mutual funds, exchange-traded funds and closed-end funds — adopt a structure that I term “the separation of investments and management.” Investment enterprises place all of their investment assets into a “fund” with one set of owners, and all of their managers, workers and operational assets into a “management company” or “adviser” with a different set of owners. Investment funds also radically limit investors’ control, sometimes eliminating voting rights and boards of directors entirely. This pattern of organization has never been clearly explained or identified as a common feature of investment funds, but it has often worried and confused commentators and was recently the subject of a case in the U.S. Supreme Court. This paper explains this pattern by showing how it limits fund investors’ control over their managers and exposure to their managers’ profits and liabilities. Investors benefit from these limits for a combination of reasons having to do with exit rights, risk management and the economies of scale that managers can achieve by operating multiple funds. This pattern of organization is a large part of what defines investment funds and animates their regulation.

Gene swapping makes new China bird flu a moving target; Influenza experts say the H7N9 strain is still swapping genes with other strains, seeking to select ones that might make it fitter. If it succeeds, the world could be facing the threat of a deadly flu pandemic; bird flu death toll rises to 14

Analysis: Gene swapping makes new China bird flu a moving target

5:47am EDT

By Kate KellandHealth and Science Correspondent

LONDON (Reuters) – A new bird flu virus that has killed 13 people in China is still evolving, making it hard for scientists to predict how dangerous it might become.

Influenza experts say the H7N9 strain is probably still swapping genes with other strains, seeking to select ones that might make it fitter.

If it succeeds, the world could be facing the threat of a deadly flu pandemic. But it may also fail and just fizzle out. Read more of this post

Investor Jim Rogers Says Gold Needs Correction, Isn’t Buying Yet as it hasn’t dropped enough; Indians Defer Gold Purchases, Betting Bear Market Set to Deepen

Investor Jim Rogers Says Gold Needs Correction, Isn’t Buying Yet

Gold, which tumbled into a bear market last week, is in need of a correction, according to investor Jim Rogers, who said that he’s not buying the commodity yet as it hasn’t dropped enough. “This may be the correction that gold needs,” said Rogers, chairman of Rogers Holdings. “If it goes down enough, I will start buying it,” Rogers told reporters in Singapore today, without identifying a level. Gold extended losses to the lowest level in two years today after investors cut holdings in exchange-traded products as the U.S. recovers. Rogers, who foresaw the start of a commodity rally in 1999, has previously backed bullion to rally as central banks boosted their balance sheets to stimulate growth. Bullion for immediate delivery fell as much as 3.9 percent to $1,425.75 an ounce and was at $1,436.10 at 3:55 p.m. in Singapore. Prices tumbled 5 percent on April 12, taking losses to more than 20 percent since the record close in September 2011 and meeting the common definition of a bear market. Rogers said in April 2006 that a boom in energy and raw- material prices would help drive gold to a then-record $1,000, without giving a timeframe for that forecast. In July 2007, Rogers said that he wasn’t selling his gold position even though there were too many speculators backing further gains. In October 2009, Rogers said that gold may top $2,000 in the next decade, citing the printing of money. In August 2011, Rogers said while he wouldn’t buy more gold “right now,” the metal was still poised to rally to $2,000 “over the years.”

To contact the reporters on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

Indians Defer Gold Purchases, Betting Bear Market Set to Deepen

Gold buyers in India, the world’s biggest consumer, are delaying purchases in a bet that the bear market in bullion will deepen, according to the All India Gems & Jewellery Trade Federation.

“People are expecting prices to drop more as the sentiment in the market is weak and selling pressure remains,” Chairman Haresh Soni said in a phone interview from New Delhi. The price volatility is discouraging buyers, he said. The federation represents about 300,000 jewelers nationwide. Read more of this post

Slovenia’s plan to sell shares in state-owned companies failed to ease investor concern that the country will become the next euro-area nation to need a bailout

Slovenia Asset-Sale Plan Fails to Ease Debt Squeeze Concern

Slovenia’s plan to sell shares in state-owned companies failed to ease investor concern that the country will become the next euro-area nation to need a bailout. Slovenia’s default risk rose to a six-month high and bond yields hovered near records as the country prepares to tap markets this week. Prime Minister Alenka Bratusek’s April 12 announcement of plans to sell stakes in companies, including a bank, looks like an effort to stall rather than to obtain financing, according to Milan Smiljanic, head of trading at Perspektiva d.d.

“There is skepticism that they are only buying time and will try to fix debt problems, avoiding privatization,” Smiljanic said by e-mail from Ljubljana. “There are no bank bidders at the moment.” Slovenia, the European Union’s fourth-smallest economy, is trying to avoid becoming the sixth euro-area state to seek a bailout after international lenders agreed to help Cyprus. The government will sell 500 million euros ($654 million) in 18- month Treasury bills at an auction in two days as it tries to shore up confidence that it can recapitalize its ailing banks without seeking outside assistance. The cost of protecting Slovenian debt against non-payment using credit-default swaps rose to a six-month high today, advancing six basis points to 375, according to data compiled by Bloomberg. A basis point is 0.01 percentage point. Read more of this post

%d bloggers like this: