• Journal of Digital Convergence
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• v.18 no.6
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• pp.237-244
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• 2020

The purpose of this study is to empirically analyze the effect of information related to the largest shareholder's change on the likelihood of reporting a loss for firms listed on the Korea Exchange. Specifically, this study conducts a logit regression analysis to examine the firm's loss reporting with frequent changes in the largest shareholder among the largest shareholder change types. So, it controls the impact of a firm's loss reporting, such as the previous year's loss reporting and discretionary accruals. As a result of the analysis, firms whose largest shareholder have changed more than 2 times in the accounting period are found to have higher firm risk in loss reporting than other firms. The results of this analysis confirm that frequent changes in the largest shareholder, which are disclosures of investment risks on the Korea Exchange, may result in investment risk situations such as loss reporting.

• Journal of Distribution Science
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• v.20 no.3
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• pp.53-58
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• 2022

Purpose: Controlling and minority shareholders sometimes have conflicting interests. Controlling shareholders who do not have adequate monitoring can exhibit a strong tendency to maximize their personal wealth. In this case, cash holdings can be the easiest means for them to pursue their personal interests. This study examined whether the largest shareholder's ownership proportion affected the speed at which firms adjust their cash holdings to target levels in Korean distribution and service companies. Research design, data, and methodology: The study uses regression analysis to examine 834 firm-year samples listed on the KOSPI between 2013 and 2018 in the distribution and service sectors. Results: The largest shareholder's ownership is positively related to a firm's cash holdings adjustment speed. That is, the larger the largest shareholder's ownership, the faster the firm adjusts its cash holdings to achieve the target level. Conclusions: This study contributes to the literature by providing evidence that the cash holdings adjustment speed in Korean service and distribution companies is affected by the largest shareholder's ownership. As the agency problem between controlling and minority shareholders in Korea is a major issue, minority owners' sensitivity to agency costs may help restrict controlling owners' ability to maximize their personal wealth.

• Management & Information Systems Review
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• v.34 no.5
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• pp.277-293
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• 2015

Mutual Savings Banks generally have weaker governance structure than other financial institutions, so the possibility of earnings management by owner-largest or managements of mutual savings banks is higher than other financial institutions. This study examines the relationship between corporate governance and quality of internal control of financial reporting. If the expropriation of minority shareholder hypothesis holds, we predict that the larger block shareholder in mutual savings banks, the weaker the internal control system by more likely the opportunistic earnings management by bank managers. On the other hand, under the convergence of interest hypothesis, we predict that the larger block shareholder in mutual savings banks, the stronger the internal control system by reduction in agency costs as owner-manager's holdings increases, and there a negative relationship is expected between internal control weakness and the holdings of the owner-largest shareholder. We find that mutual savings banks with higher owner-largest shareholder equity has significant positive relations with their internal control of financial reporting material weakness. This result suggests that the greater owner-largest shareholder equity, the more likely the opportunistic earnings management, so that decrease quality of internal control. This paper extends the literature on financial institutions corporate governance to verify whether governance system, especially, owner-largest and quality of internal control has significant positive relations.

• Journal of Digital Convergence
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• v.20 no.1
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• pp.41-46
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• 2022

Chinese stock market often rises and falls sharply. The impact of the stock price crash risk has become a hot research field to maintain financial stability. This study starts from the perspective of the proportion of largest shareholders holding shares, and studies whether largest shareholders have more incentive to supervise management and reduce self-interest behavior of management. We use the data of Chinese listed companies from 2009 to 2019 as a sample, and study the relationship between largest shareholders and share price crash risk. Empirical research shows that the higher the proportion of largest shareholders of state-owned enterprise, the company's stock price crash risk can be significantly reduced. This study suggests that the higher the share of the largest shareholder, the lower the opportunistic behavior of managers and that information asymmetry between the company and the shareholders can be alleviated.

• Journal of Distribution Science
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• v.12 no.4
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• pp.85-92
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• 2014

Purpose - This study conducted empirical research on non-financial corporations listed on the stock exchange from 2001 to 2010, focusing on the effects of corporate governance on real earnings management of corporations. In particular, this study examined primarily the impact of the largest shareholder who could use earnings management to pursue his own self-interest, and foreign investors who played a checking role against the largest shareholders. The study also reviewed the relationship between corporate governance and earnings management while also considering corporate growth. Research design, data, and methodology - As for the measurements of real earnings management, abnormal operating cash flow and abnormal production cost were utilized. As for the independent variables, share ratio of the largest shareholder and affiliate person (M) and share ratio of foreign investors (FT) were leveraged. This study excluded those organizations that had changed their fiscal years, those that had not submitted an audit report, corporations under supervision, delisted corporations, corporations that had changed their business type, and so on, from the non-financial corporations out of the publicly traded corporations whose fiscal year ended in December from 2001 to 2010 in addition, KIS values were utilized for the corporate financial data in the study. To verify whether management structure and growth had an impact on real earnings management of a corporation through empirical analysis, a multiple regression analysis model was applied. Result - First, as a result of the analysis, the share ratio (M) of the largest shareholder and affiliate person was found to have a significant positive correlation with abnormal cash flow from operations(ACF) and abnormal production cost (APD). When controlling the growth, the share ratio (M) of the largest shareholder and affiliate person was found to have an insignificant correlation with abnormal cash flow from operations(ACF) but a significant correlation with abnormal production cost (APD). Second, foreign ownership (FT) was found to have a significant positive correlation with abnormal cash flow from operations(ACF) and abnormal production cost (APD) at the confidence level of 1 percent when not including the growth dummy. When controlling the growth, foreign ownership (FT) was found to have a significant negative correlation with abnormal cash flow from operations (ACF) and with abnormal production cost (APD). Conclusion - The results imply that the largest shareholder is closely related to earnings management through real activities regardless of corporate growth. It is also possible to determine from these results that foreign investors are related to earnings management through real activities when not considering corporate growth, but that they would reduce earnings management in the case of considering the growth. Thus, this study verified along with the existing studies that foreign investors were conducting the control function on controlling shareholders.

• The Korean Journal of Financial Management
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• v.27 no.1
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• pp.89-120
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• 2010

In this paper, we analyse empirically the relations between ownership structure and cash holdings of firms listed on Korea Securities Market and Kosdaq Market of Korea Exchange. The main results of this study can be summarized as follows. Cash holdings increase as large shareholder's equity holdings increase. Cash holdings increase as the difference between first largest shareholder's and second largest shareholder's equity holdings increase, and cash holdings increase as the ownership concentration increase. Managerial ownership exert a non-linear effects on cash holdings. So to speak, at lower level of managerial ownership, managers hold more cash to pursue their own interests at the expense of minority shareholders, but at higher level of managerial ownership, the interests of managers and shareholders are aligned, and also at highest level of managerial ownership, managers hold more cash to pursue their own interests at the expense of minority shareholders. Cash holdings increase larger in owner-controlled firm than in management-controlled firm. These results support the expropriation of minority shareholders hypothesis that large shareholders can extract private benefits from corporate resources under their control at the expense of minority shareholders. This paper contributes to defining information value of large shareholder's equity holdings on cash holdings for a firms' other stakeholders such as investors and creditors, and to strengthening a legal and institutional safeguard for external minority shareholders. Ownership concentration might have negatively affected the evolution of the legal and institutional frameworks for corporate governance and the manner in which economic activity is conducted. It could be a formidable barrier to future policy reform.

• The Korean Journal of Financial Management
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• v.25 no.1
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• pp.141-176
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• 2008

This study provides an analysis of ex post efficient outcome, which can be said an objective of distressed restructurings, using the stock return of listed companies. The findings of this study are as follows: First, upon completing the distressed restructurings, reorganization and workout cases showed positive announcement effects, which was statistically significant. Also, composition cases displayed a positive value, but it was not statistically significant. Second, with respect to post-restructuring long-run stock performance, reorganization and composition showed underperformance after completion. However, workout cases showed overperformance after the completion. Third, multiple regression analysis to find factors affecting post-restructuring long-run stock performance suggests that higher asset decrease(ASSETCH), shareholder concentration (OWNCEN), largest shareholders' stake(OWN) have more positive impacts on long-run performance. However, change of the largest shareholder(OWNERCH) has negative impacts on long-run performance. Finally, change of the largest shareholder is a negative factor in the performance of the distressed restructurings. Therefore, this study implies that if M&A is used as a way of early completing the distressed restructurings, prudent judgment is required on whether a firm can recover its competitiveness and is likely to be economically viable again.

• The Journal of the Korea Contents Association
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• v.13 no.2
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• pp.420-430
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• 2013

In this study, we investigate the current status of family friendly management and determinants of its level. We choose measures about family friendly management and use their results from ESG evaluation model by Korea Corporate Governance Service. We find that firms with larger size, lower leverage and higher firm value are more family friendly. And in contrast to previous studies, firms are more family friendly when they have less women to total employees. But firms with higher largest shareholder holdings are less family friendly. These results show that listed firms in Korea should be more family friendly considering their level of woman employment. Also the interest and support from top management are needed for activating family friendly management, but largest shareholder of korean firms are not active yet.

• Asia-Pacific Journal of Business Venturing and Entrepreneurship
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• v.9 no.1
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• pp.119-132
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• 2014

This study analyzed the failure prediction model of the firms listed on the KOSDAQ by considering whether there are embezzlement, malpractice and the largest shareholder changes or not. This study composed a total of 166 firms by using two-paired sampling method. For sample of failed firm, 83 manufacturing firms which delisted on KOSDAQ market for 4 years from 2009 to 2012 are selected. For sample of normal firm, 83 firms (with same item or same business as failed firm) that are listed on KOSDAQ market and perform normal business activities during the same period (from 2009 to 2012) are selected. This study selected 80 financial ratios for 5 years immediately preceding from delisting of sample firm above and conducted T-test to derive 19 of them which emerged for five consecutive years among significant variables and used forward selection to estimate logistic regression model. While the precedent studies only analyzed the data of three years immediately preceding the delisting, this study analyzes data of five years immediately preceding the delisting. This study is distinct from existing previous studies that it researches which significant financial characteristic influences the insolvency from the initial phase of insolvent firm with time lag and it also empirically analyzes the usefulness of data by building a firm's fail prediction model which considered embezzlement/malpractice and the largest shareholder changes as dummy variable(non-financial characteristics). The accuracy of classification of the prediction model with dummy variable appeared 95.2% in year T-1, 88.0% in year T-2, 81.3% in year T-3, 79.5% in year T-4, and 74.7% in year T-5. It increased as year of delisting approaches and showed generally higher the accuracy of classification than the results of existing previous studies. This study expects to reduce the damage of not only the firm but also investors, financial institutions and other stakeholders by finding the firm with high potential to fail in advance.

• Journal of Digital Convergence
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• v.20 no.4
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• pp.119-126
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• 2022

With the rise and rapid development of the "Internet+" economic model, the internet is deeply integrated with the social economy and penetrates every corner of life. Compared with expanding the scale of business operations through internal investment and capital accumulation, e-commerce companies are more inclined to directly gain control of other companies through efficient merger and acquisition (M&A). The purpose of this study is to analyze changes in financial performance before and after M&A of Alibaba, China's largest e-commerce company in the Internet era. To present the impact of M&A events on Alibaba's stock price and shareholder wealth more intuitively, this study selected the market model in the event study method to measure abnormal returns. The results show that an M&A event led to a reduction in Alibaba's shareholder wealth in the short term. This study presents the theoretical basis for the M&A performance of e-commerce companies.