• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.8
• /
• pp.451-459
• /
• 2020

This study aims to examine the relationship of the four factors that increase the protection of minority shareholder investment. The factors are non-controlling shareholders, corporate governance, free cash flow, and shareholder wealth. The data for this study is obtained from the 2017 annual reports of 136 Thai public companies listed in the Market of Alternative Investment of Thailand (MAI). The analysis uses a multiple regression model to determine which factors encourage and which inhibit the protection of minority shareholder investment. The study tests four hypotheses. The results rejected H1 because non-controlling shareholders have negatively correlated with minority shareholder investment protection (beta -0.155 and p-value 0.050). The results accepted H2, H3 and H4 as follows. H2: corporate governance has positively correlated with minority shareholder investment protection (beta 0.17 and p-value 0.031). H3: free cash flow has positively correlated with minority shareholder investment protection (beta 0.214 and p-value 0.007). H4: shareholder wealth has positively correlated with minority shareholder investment protection (beta 0.318 and p-value 0.000). The major findings suggest strong minority shareholder investment protection was enhanced by increasing corporate governance, free cash flow and shareholder wealth. The protection of minority shareholder investment needs to reduce non-controlling shareholding pattern.

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

• The Korean Journal of Financial Management
• /
• v.22 no.1
• /
• pp.37-69
• /
• 2005

This study intends to verify whether stock repurchase, as well as stock dispositions, affects shareholder's wealth and also whether repurchase/dispositions has varying impact de-pending on its purpose. According to empirical analysis, announcement of stock repurchase results in positive abnormal returns when the objective of stock repurchase is stock price stabilization or cancellation of shares. However, when the purpose of stock repurchase is granting incentives to executives/employees, we get the negative abnormal returns. Also, the termination of stock trust for reason of expiration or stock dispositions of which goal is to give incentives to executive/employees has a negative impact on stock price, whereas direct dispositions of stock to raise cash or to improve financial structrue are shown to significantly increase the wealth of shareholders. Cross-section analysis also confirms that stock repurchase and dispositions has different impact on excess returns depending on its purpose. The results of this study imply that the dispositions of stock should be regarded as an important financial strategic tool to be used by companies and what's more, such studies dealing with stock repurchase or dispositions should take firm's purpose into consideration in their approach.

• The Korean Journal of Financial Studies
• /
• v.3 no.1
• /
• pp.267-299
• /
• 1996

The takeover boom of the 1980s was accompanied by a series of innovations in debt contracts, including the poison put that allows bonds to be redeemed in the event of a corporate control change. The poison put was included in a large majority of convertible debt offerings, shortly after the first issues with such provisions. We attempt to understand the factors that contributed to the widespread adoption of this innovation in convertible bonds and the consequences for shareholder wealth. Our, findings suggest that by reducing the potential for bondholder-shareholder conflicts and by conveying positive information about future takeover prospect'5, poison puts result in significant benefits to issuing firm shareholders, particularly if the firm is under takeover speculation. There are, however, no benefits when a firm has adopted anti-takeover measures prior to the offering. There is weaker evidence that existing bondholders do worse when poison puts are present.

• The Korean Journal of Financial Management
• /
• v.25 no.2
• /
• pp.191-213
• /
• 2008

This study tests and reconfirms the wealth transfer of mergers and acquisitions(M&As) by examining the changes in and the relationship between shareholder and bondholder wealth after the announcements of M&As for the publicly listed firms in Korea Stock Exchange and KOSDAQ market during $1999{\sim}2006$. The change in shareholder wealth is measured by the Cumulative Abnormal Return(CAR) at the M&A announcements, and the change in bondholder wealth is calculated using the Yield Spread Change(YSC) and the change in acquiring firms' credit ratings. The empirical tests show that the CAR of 344 sample acquiring firms at the announcement is 3.59%, which confirms results of the prior research on M&As in Korean market. The average YSC for 35 sample acquiring firms between $2001{\sim}2006$ proves to be negative when we use the yield spread of firms with comparable credit ratings as a benchmark, which means that the acquiring firms' bondholders gain with the announcements of M&As. We find the same result using another benchmark-the yield spread of government bonds. The improvement in the acquiring firms' credit ratings one year after the M&As also indicates that the M&As, on average, increase bondholder wealth. Our test results are consistent with those of the existing studies on the effect of bondholder wealth after the M&As in the United States, which shows that the bondholder wealth increases after the M&As. We do not find the evidence that there is a wealth transfer from the acquiring firms' bondholders to the shareholders after the M&A announcements. Rather, this study confirms that the wealth of the acquiring firms' bondholders increases in the M&As in Korea.

• Journal of the Korean Operations Research and Management Science Society
• /
• v.15 no.2
• /
• pp.45-61
• /
• 1990

This study examines shareholder wealth effects in tender offers and attempts to explain abnormal return variations of bidding and target firms at announcement of takeovers using the free cash flow hypothesis of Jensen. On average, bidders with large free cash flows pay higher premia (apparently more than fair market value) to targets than do other bidders with no free cash flows. Thereby, these bidders experience negative wealth effects on announcement of tender offers. Cross-sectional regression analysis suggests that for the subsample of takeover bids where bidders have large free cash flows, the increase in the debt ratio resulting from takeover has a significant positive wealth effect for bidding firm shareholders, while it has no effect in other subsamples. The evidence is consistent with the free cash flow hypothesis.

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

• International Area Studies Review
• /
• v.15 no.1
• /
• pp.87-106
• /
• 2011

Using an event study, this paper investigates stock price reactions on Korean listed firms' convertible bond (CB) issue announcements over the sample period of January 2000 to November 2007. This study finds that on the Korean Security market, the CB issue announcements are associated with an increase in shareholder wealth on the announcement date. An information leakage by insider traders is also observable at preannouncement dates. Unlike the prior studies that indicate a prevailing negative effect on the announcements, this paper shows that domestic CB issue announcements as well as offshore ones yield a positive impact on the stock prices. This presents that in terms of stock price reactions to the CB issue announcements, the two CB issue markets show the positively same effects on shareholder wealth for the post-2000 period. For its drivers, this paper suggests that on the Korean market, firm size have negative relationship with the increase in the wealth incurred by the announcements. By contrast, an issue to maturity, a growth opportunity, and a relative issue size make a positive impact on it.

• East Asian Journal of Business Economics (EAJBE)
• /
• v.5 no.1
• /
• pp.10-26
• /
• 2017

This paper explains the concept of Economic Value Added (EVA) that is gaining popularity in India. We also examine whether EVA is a superior performance measure, both for corporate disclosure and for internal governance. Of late, companies in India have started focusing on shareholders wealth creation by adopting value-based models for measuring shareholder value that helps to align managerial decision-making with the firm preferences. In recent years, the EVA framework is gradually replacing the 'traditional' measures of financial performance on account of its robustness and its immunity from 'creative' accounting. Even though some leading Indian companies have already joined the band wagon of their American counterparts in adapting the EVA-based corporate performance systems, many other are hesitating as there is no strong evidence that the EVA system works in India. Till now, EVA disclosures are "not mandatory for the Indian companies." Also, we examine the value-creation strategies of selected Indian companies by analyzing whether EVA better represents the market-value of these companies in comparison to conventional performance measures. The study indicates that "there is no strong evidence to support Stern Stewart's claim that EVA is superior to the traditional performance measures in its association with MVA." As part of this study, we have also extensively surveyed the EVA disclosures in the Annual Reports made by the same sample group of 500 corporations from India.

• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.9
• /
• pp.283-291
• /
• 2020

Although the corporate governance plays a crucial role in protecting shareholder wealth, the effect of corporate governance on cost of debt is unclear. On one hand, the corporate governance reduces asymmetric information between corporate and external investor including debtholder leading to a decreasing in cost of debt financing. On the other hand, bondholders require higher rate of return for an improvement corporate governance. Hence, this study aims to investigate the relationship between the mechanism to improve corporate governance namely board effectiveness and the cost of debt in an emerging market. As we aim to explore the relationship between cost of debt and board effectiveness, we select corporation in Thailand as our sample because the businesses in Thailand are major debt-financing. Hence, our sample include listed firm in Stock Exchange of Thailand between 2007 and 2016. Our main findings support the sub-optimal investment hypothesis in that improved board effectiveness is associated with higher cost of borrowing. In addition, we find that the number of board member-board size, the number of board meeting, and the percentage of non-executive on audit committee play are positively associated with the cost of debt financing. Furthermore, we perform two-stage-least square (2SLS) to ensure that our results are far from endogeneity issue.