The determinants of corporate performance

We study the relationship between institutional investor ownership and R&D expenditure at the firm level. Our study of the relationship between the changing ownership structure and firm’s R&D expen...

Institutional Ownership in Financial Services: Performance and Risk

PurposeThis study aims to advance the discussion on internal audit (IA) findings by empirically investigating the relationship between chief executive officer (CEO) characteristics and the IA function, particularly IA findings and implementing IA recommendations and examining whether CEO and management support for IA moderate the effect of the recommendations on corporate performance.Design/methodology/approachData were gathered from two sources. A survey was conducted, directed at 217 heads of internal audit (HIAs) in listed companies on the Bursa Malaysia, and the annual reports of these companies for the period of 2018–2019 were consulted. A second survey was directed at audit committee chairs to obtain a perspective from other parties.FindingsThe results indicate that although CEO characteristics are not significantly associated with the number of IA findings, only CEO experience has a significant relationship with the level of the implementation of IA recommendations. The study also demonstrates that management support for IA is positively associated with corporate performance. Further, CEO experience and management support for IA increase the effects of the level to which those recommendations are implemented on corporate performance. However, the effect of management support on corporate performance is eliminated when it interacts with the involvement of CEOs in the HIA appointment and when these HIAs report directly to CEOs.Practical implicationsThese outcomes provide implications for policymakers, regulators and researchers. Malaysia’s regulatory authorities, as well as those in other countries, particularly emerging markets where the institutional and cultural environments have similar characteristics, could consider the evidence of the relationship between the CEO’s financial background, management support for IA and IA recommendations when guiding companies about the mechanisms for appointing HIAs. Simultaneously, the results obtained could be useful when auditors are involved in risk assessment and rely on IA recommendations.Originality/valueThis study adds to the literature on the significant relationship between CEO characteristics (particularly CEO experience) and the level of implementing IA recommendations. It advances the research efforts on management support for IA by providing empirical evidence of how such support fosters a greater role for IA in improving corporate performance, as well as moderates the effect of IA in that endeavour. Further, the present study contributes to the developing literature on determinants of corporate performance by considering how these variables perform in the Malaysian setting.

This paper applies a more robust methodology in industry-adjustment on measuring firm performance as related to ownership structure. We consider insider ownership, institutional ownership, and blockholder ownership. Even after controlling for the endogeneity of insider ownership, we still find positive effect of insider ownership on firm performance, which is conflicting with results found by other recent studies. We find a non-linearity in the relationship between insider ownership and firm performance, but our results do not support a relationship as neat as the inverse U-shape effect found by earlier studies. Our results indicate that the effects of the insider and square of insider on performance are positive, yet the effect of the cubic of insider ownership on firm performance is negative. As no other study based on U.S. data used the cubic of insider ownership and document its effect, our finding is new. We find strong negative effect of blockholder ownership on firm performance, and our results indicate that institutional investors are efficient monitors whose existence helps improving firm value and protecting outside minority shareholders.

This research aims to test the effect of agency cost toward financial performance in family business measured by Tobin’s Q and Altman Z-Score with proxied by insider ownership, dispersion ownership, institutional ownership. This research was conducted at family business firms listed in Indonesian Stock Exchange from 2011-2015. In this research, multiple linear regression analysis were used. The result show the agency cost (insider ownership, dispersion ownership, institutional ownership) simultaneously have a significant effect toward Tobin’s Q, insider ownership and institutional ownership are not significant toward Tobin’s Q, dispersion ownership has a significant effect toward Tobin’s Q, agency cost (insider ownership, dispersion ownership, institutional ownership) simultaneously and partial are not significant toward Altman Z-Score.

PurposeAs the influence of institutional investors over managerial decision-making grows, so does the importance of understanding the effect of institutional investor ownership (IO) on firm outcomes. The authors take a comprehensive approach to studying the effect of IO on earnings management (EM).Design/methodology/approach The authors study the relation between IO and EM using a sample of 59,503 listed U.S. firm-year observations from 1981–2019. The authors proxy EM with earnings surprises and with accrual-based and real activity measures. The authors test for nonlinear relations and analyze changes resulting from the passage of the Sarbanes–Oxley Act.FindingsThe findings support a positive IO-EM relation overall, but show that the relation is dynamic and heavily context-dependent with evidence of nonlinearity. The authors also find evidence that IO positively affects accrual-based EM and real activities EM negatively.Originality/valueTo the authors’ knowledge, this is the first study of the IO-EM relation to consider evidence of nonlinearity in the U.S. context, measuring changes to the relation over time, and with the use of several measures of EM.

We investigate the relative importance of managerial entrenchment and incentive alignment as indicated by REIT risk-taking. The two theories make contradictory predictions about the sign of the relation between insider ownership and risk. We test for the possibility of diminishing entrenchment returns to insider ownership. Empirical results for equity and asset betas soundly reject linear models in favor of nonmonotonic relations with reversals at insider ownership of 36%. Up to that point, increasingly entrenched insiders mitigate their own risk aversion. Above 36%, incentive alignment emerges as managers become more substantial owners. Leverage declines at an accelerating rate above 20% insider ownership. Together these results suggest a shift in the composition of risk, from leverage risk to asset risk, reflecting comparative advantage and a crossover in the relative monitoring costs of debt and equity. Problematically for linear models, the coefficient of insider ownership is not significant for most risk measures, producing the misleading appearance of no relation between insider ownership and risk. Institutional ownership is significantly negatively related to leverage. Thus incentives are aligned between insiders and institutional owners at insider ownership above 20%.

Guided by the evidence that insiders and institutional investors are better informed, I comprehensively investigate the trading behavior and ownership of insiders and institutional investors in Taiwan in an attempt to differentiate between the two types of investors. Insiders gain profits from their filing of selling shareholdings and institutional investors acquire abnormal returns from block trades. Insider and institutional ownership both show positive effects on performance. Firms with high institutional ownership have higher performance, but not lower volatility. The results remain by considering the endogeneity issue and alternative measures of performance. These findings provide evidence that the efficient monitoring effect is more significant than the convergence of interest effect.

Timeliness of financial report submission is one of the important qualitative characteristics that financial reports must fulfill, as timely information has higher predictive and feedback value for stakeholders. Delays in submitting financial reports can reduce information relevance and increase information asymmetry. In this research, three factors that can influence the timeliness of financial statement submission, including financial distress, institutional ownership, and board size.The objects of this research are property and real estate sector companies listed on the Indonesia Stock Exchange (IDX) in 2019-2023. Samples were obtained based on the purposive sampling method, resulting in 260 samples from 52 companies during the 2019-2023 period. The data analysis used in this research is logistic regression using SPSS 26 software.The findings of this research indicate that financial distress and institutional ownership do not have a significant influence on the timeliness of financial statement submission. However, board size has a significant positive influence on the timeliness of financial statement submission. This research contributes to strengthening previous research and identifying whether these factors have significant interactions in influencing the timeliness of financial statement submission.

Taxes are a primary source of government revenue and play a crucial role in economic development. However, tax avoidance practices are still widely practiced by companies, including in the mining sector, which has significant potential to generate state revenue. This study aims to examine the influence of financial distress, corporate governance (independent commissioners and audit committees), and institutional ownership on tax avoidance in mining companies listed on the Indonesia Stock Exchange for the 2020–2023 period. The study population consisted of 83 companies, and through purposive sampling, 61 companies were selected, with a total of 244 observations. The analysis used panel data regression with the help of Eviews 25. The results indicate that financial distress and institutional ownership have a positive effect on tax avoidance, while independent commissioners and audit committees have a negative effect on tax avoidance. These findings suggest that a company's financial condition and ownership structure play a significant role in determining tax avoidance policies.

This study examines and presents a model of The role of Tax Avoidance in the Impact of Ownership Structure on Corporate Performance (empirical study on manufacturing companies listed on the IDX for the 2016-2021 period). This study used multiple linear regression analysis using panel data that combines time-series data and cross-series data. The data obtained were 16 manufacturing companies listed on the IDX in 2016 – 2021 using the purposive sampling method, so that the total data in this study was 96. The results of this study show that Public Ownership has a positive effect on Tax Avoidance, Institutional ownership has a negative effect on Tax Avoidance, Foreign Ownership has a positive effect on Tax Avoidance, Tax Avoidance has a negative influence on Corporate Performance, Public Ownership negatively affects Coporate Performance, Institutional Ownership negatively affects Corporate Performance, Foreign Ownership negatively affects Corporate Performance and Tax Avoidance have no effect in mediating Ownership Strucutre (Public, Institutional, and Foreign Ownership) to Corporate Perfomance

This paper examines the association between concentrated ownership and the profitability of banks in Indonesia during the period from 2012 to 2018 with a total sample of 93 banks or 651 observations. This study applies the Random Effect regression method, and reveals a non-significant association between concentrated ownership and bank profitability as measured by ROA and ROE. It indicates that a majority of shareholders tend to use their power to exploit minority shareholders, which can also strengthen the monitoring effect. However, the regression also indicates that there is a significant non-linear relationship between concentrated ownership and profitability when measured by ROE. There is a mixed-effect between concentrated ownership and profitability in the case of Indonesian banks. Moreover, a regression is also utilized with dummy variables of concentrated ownership (FIN and IND) to assess the difference between non-financial institution ownership and financial institution ownership. The results show no significant difference in cases. This can be caused by institutional ownership (financial institutions), which only acts as a short-term trader that emphasizes short-term profits. Therefore, its existence as a shareholder is not any different to the presence of non-financial institution ownership. The findings of this study show that the application of POJK No. 56/POJK.03/2016 regarding Share Ownership of Commercial Banks which regulates the maximum limit of concentrated ownership in banks may not work effectively in strengthening bank performance.

We examine the relationship between institutional investor ownership and dividend payouts using a large sample of NSE-listed non-financial firms during the period 2001 to 2016. Consistent with the evidence from the US market, institutional investors, on average, have larger holdings in dividend-paying firms and are seen to prefer dividend payers over non-payers among larger firms. However, among smaller firms, institutional investors seem to prefer non-paying firms. Consistent with it, logistic regression results reveal that institutional investors do improve a firms’ propensity to pay dividends, primarily across large firms. Further, among dividend-paying firms, institutional investors, on average, are observed to have relatively lesser holdings in firms with higher payouts than those with lower payouts. In line with these observations, regression analysis also provides no evidence to support a positive relationship between total institutional ownership and payout level. However, across investor categories, we do find evidence for domestic institutional investors (DII) in improving payouts. Further, we use a dynamic panel GMM estimator to correct for endogeneity and find that the relationship is robust among large firms. Our results highlight the role of DII in improving dividend payout and provide support to models that predict a positive relationship. JEL Classification: G23, G32, G34, G35

The study titled liquidity, profitability, insider ownership, institutional ownership and growth of the company on dividend policy company property sector, real estate and building construction to determine the influence of the five variables on dividend policy on the company's property sector, real estate and construction of buildings. This research was conducted during the period 2010-2014. The populations in this study are all companies listed in Indonesia Stock Exchange during the study period of data collection method using purposive sampling, in order to obtain 6 companies. This study used panel data regression analysis with a model Fixed Effect and the tool to analyze the data used Eviews 8. Testing the hypothesis using by the coefficient of determination, t-test statistics and F-test statistics.The results showed that liquidity does not affect the dividend policy, profitability does effect on dividend policy, insider ownership does not affect the dividend policy, institutional ownership does affect the dividend policy, the company's growth does not effect on dividend policy. The implication of this research for the company to consider profits as a main consideration to dividend policy as well as the company continues to invest despite profit increase or decrease.

The ownership structure of a publicly held Corporation is one of the internal mechanisms of corporate governance. Insider ownership is one of the internal controlling mechanisms that could theoretically reduce agency costs. Earlier researcher has investigated the effects of insider ownership on firm performance. But we have attempted to add few more dimensions to it. Firstly, earlier studies did not attempt to study this relationship after the implementation of revised corporate governance code in 2006 in India and after the changes in the disclosures of insider ownership as per the clause 49 of the listing agreement. Secondly, earlier studies did not take into account the time lag for the studies on Indian markets. We have attempted time lag studies using panel data on the Indian Markets using MBVR ratio as a performance measure. The result shows that corporate performance is significantly influenced by insider ownership. Hence corporate governance issues needs to be dealt with great care.Â