Accounting - Research Publications

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    State Control, Legal Investor Protection, and Ownership Concentration: Evidence from China
    Wu, S ; Xu, N ; Yuan, Q (WILEY, 2009-03)
    ABSTRACT Manuscript Type: Empirical Research Question/Issue: To control for the omitted‐variables and aggregation biases problem existing in previous cross‐country studies, our paper investigates the relationship of ownership concentration and legal investor protection across regions and over time in one emerging economy, China, during the period 1992 to 2003. Moreover, this paper examines whether state control affects this relationship. Research Findings/Results: For state‐controlled firms, we cannot find the typical inverse relationship between ownership concentration and legal investor protection documented by La Porta, Lopez‐de‐Silanes, Shleifer, and Vishny (1998), since state per se works as a substitute for formal legal investor protection in protecting property rights by exploiting political power. However, for non‐state‐controlled firms, the inverse relationship does hold. Theoretical Implications: Our findings suggest that the nature of the controlling shareholder should be taken into account when examining the relationship between ownership concentration and legal investor protection. Moreover, our findings give new insights, especially to the study on other emerging economies that share similar characteristics with China in terms of legal development and government control. Finally, the cross‐region study within one country provides a new perspective on the research in this area. Practitioner Implications: First, to provide a level playing field for different types of investors, the state's dual role of controlling shareholder and political power holder should be separated. Second, it is important to build up a good legal system to protect investors in order for a country to develop its capital markets, especially for the development of the non‐state sector.
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    Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance
    Gallagher, DR ; Nadarajah, P ; Pinnuck, M (SAGE Publications, 2006-01-01)
    We examine the performance and portfolio characteristics of actively managed equity funds impacted by top management turnover. Utilizing a unique database of monthly portfolio holdings, our study finds that, post-replacement, previously poor performing funds experience improved returns. However, this improved performance is not attributable to superior stock selection skill. We also find these new managers decrease the fund's reliance on momentum strategies and decrease the portfolio's concentration, which then leads to a reduced tracking-error volatility. Prior to the replacement event, underperforming investment managers exhibit preferences for larger, growth-oriented stocks, as well as riding momentum strategies and increasing portfolio turnover.
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    Management control for market transactions: The relation between transaction characteristics, incomplete contract design, and subsequent performance
    Anderson, SW ; Dekker, HC (INFORMS, 2005-12)
    Using an unusually comprehensive database on 858 transactions for information technology products and accompanying services, we study how close partners who are exposed to opportunistic hazards structure and control a significant transaction. We analyze data on the terms of contracting to determine whether transaction and supplier characteristics that generate opportunistic hazards are related to the formal management control structure. We also examine whether misalignment between transaction and supplier characteristics and the control structure is associated with ex post performance problems. Characteristics associated with hazards are found to be positively related to contract extensiveness. Factor analysis of the use of 24 contract terms reveals four groups of contract terms that are commonly used in combination. We interpret these factors as “dimensions of management control” and label them: assignment of rights, product and price, after-sales service, and legal recourse. Characteristics associated with hazards are positively related to the use of all four dimensions of management control, with different hazards associated with different controls. We then examine the relation between transaction characteristics and ex post transaction problems, demonstrating that even in the presence of mutually agreeable contracts, hazards remain. We conclude that costs of contracting are associated with increased use of contract terms on assignment of rights, after-sales service, and legal recourse. Finally, we present evidence that management control structures that are better aligned with transaction hazards mitigate subsequent performance problems, though at a nontrivial cost of contracting.
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    Diagnosing decision quality
    Davern, MJ ; Mantena, R ; Stohr, EA (ELSEVIER SCIENCE BV, 2008-04)