Eva Liljeblom, Benjamin Maury and Alexander Hörhammer
State ownership has been common especially in industries with restricted competition. In Russia, state-controlled firms represent around 41 percent of the market value of all…
Abstract
Purpose
State ownership has been common especially in industries with restricted competition. In Russia, state-controlled firms represent around 41 percent of the market value of all listed firms (Deloitte, 2015). Yet, there is a significant gap in the literature regarding the effects of various forms of government control in listed firms. The purpose of this paper is to fill this gap by exploring the impact of the complexity of state ownership and competition on the performance of Russian listed firms.
Design/methodology/approach
The sample consists of data for 72 firms (360 firm-years) in the Russian MOEX broad market index during 2011–2015. The complexity of state ownership is captured by studying forms of state control including majority/minority, direct/indirect, federal/regional, mixed structures and golden shares.
Findings
The authors find significant differences in performance relating to different forms of state ownership. State control is negatively related to firm valuation and the sales/employees ratio. Performance is weakest when state ownership takes the form minority, regional or direct ownership. State control through golden shares typically outperforms other state-controlled firms. The authors find indications of employment prioritization beyond the economical optimum. In addition, the relation between state ownership and profitability becomes positive in sectors where state firms appear to enjoy lower competition.
Originality/value
While the effects of state ownership have been studied on many markets, there is a lack of studies on the effects of different forms, or the complexity, of state ownership beyond direct and indirect ownership. The authors contribute to the literature on the performance effects of state ownership by studying a multitude of forms of governmental ownership as well as the role of competition in Russia. Especially the profitability of state-controlled firms is significantly affected by industry characteristics. Implications of the results are discussed both from firm and policy maker perspectives.
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Timo Korkeamäki, Eva Liljeblom and Markus Pfister
The purpose of this paper is to study the value effects of hedging in the airline industry during a period of high volatility and high fuel costs. The authors also study the…
Abstract
Purpose
The purpose of this paper is to study the value effects of hedging in the airline industry during a period of high volatility and high fuel costs. The authors also study the determinants of hedging in the airline industry, most importantly whether managerial ownership affects airlines’ tendency to hedge their fuel price risk.
Design/methodology/approach
This study’s research design follows closely previous studies in the area. This allows comparison of the results of this study to those reported earlier, and thus the authors can draw conclusions about the effects of the different market conditions during the sample period.
Findings
The authors find a positive relationship between hedging and firm value, but the relationship is weaker than what is reported in prior studies. The result appears driven by the early part of the sample, whereas in the latter half of the sample, when uncertainty and fuel price are higher, the hedging premium is smaller. The authors also find that hedging premium is larger for firms that follow passive hedging strategies and that managerial ownership increases the firms’ degree of hedging.
Originality/value
This study provides new results on the old question of whether hedging generates value in the airline industry. The recent period of high volatility and high fuel prices makes this an interesting question to re-visit.
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Alex Lundqvist, Eva Liljeblom, Anders Löflund and Benjamin Maury
The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within…
Abstract
Purpose
The cultural and legal differences between foreign acquirers and African target firms can be substantial. There is also a large variation in cultures and legal systems within Africa. However, there is limited research on merger and acquisition (M&A) performance by foreign firms in Africa. The purpose of this paper is to fill this gap by exploring the “spillover by law” hypothesis (Martynova and Renneboog, 2008) that focuses on the influence of the external environment on the governance and performance of foreign M&As in Africa.
Design/methodology/approach
The data set covers 415 M&A transactions by foreign firms in Africa during the period of 1999–2016. Dynamic data covering the country’s legal, cultural and political environment are collected from the World Bank, the Heritage Foundation and Transparency International.
Findings
The authors find that the legal environment significantly affects the returns of bidders on African firms. For complete acquisitions, bidder returns are significantly higher when the bidder’s country has higher shareholder protection and higher creditor protection compared with the target firm’s country. The results show that the effects are significant when there is a full control change (including a change in the target firm’s nationality) but not in the case of partial control transfers. The results are consistent with the “spillover by law” hypothesis.
Originality/value
The authors contribute to the literature on cross-border M&As by separately studying the valuation effects of full, majority and minority changes in control; by being the first study of the legal spillover effects in Africa; and by being the most extensive study of the legal determinants of the valuations of non-African acquirers of African firms.
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Tor Brunzell and Eva Liljeblom
The purpose of this paper is to survey chairmen's perceptions of female board representation in five Nordic countries, focussing on whether the chairman's perception of board work…
Abstract
Purpose
The purpose of this paper is to survey chairmen's perceptions of female board representation in five Nordic countries, focussing on whether the chairman's perception of board work is related to gender diversity, and on differences between high- and low-risk firms.
Design/methodology/approach
The authors combine data from a questionnaire directed to the chairmen of the boards in Nordic listed companies with data on firm characteristics and board composition.
Findings
The authors find that the chairmen (97.5 percent male) are significantly less satisfied with female board members as compared to male ones. The authors also find that firms with nomination committees have more gender diverse boards, as well as indications of a more positively perceived contribution of female representation in high-risk firms.
Research limitations/implications
The study is restricted to perceptions of chairmen for listed Nordic firms. The low response rate of 20.1 percent is a severe limitation.
Practical implications
The increasing practice of using nomination committees in the Nordic countries seems advantageous from gender balance perspective.
Originality/value
The authors contribute to the literature on gender diversity in boards by providing results from a board intern perspective.
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Steven Graham and Wendy L. Pirie
The fact that stocks going ex‐dividend decline in price by less than the dividend amount is theoretically attributed to the differential taxation of dividend and capital gains or…
Abstract
The fact that stocks going ex‐dividend decline in price by less than the dividend amount is theoretically attributed to the differential taxation of dividend and capital gains or the differential taxation of investor groups. NYSE, Amex and Toronto Stock Exchange listed stocks, and stocks interlisted on these three exchanges, are examined to infer the tax jurisdiction of the marginal investor. The stock price changes relative to the dividends are consistent with a tax clientele effect. Further, the stock price changes are plausible given the tax rates. Ex‐dividend day behavior is different for non‐interlisted stocks on all three exchanges, suggesting each exchange has a different tax clientele. Canadian firms interlisted on US exchanges exhibit ex‐dividend day behavior consistent with the appropriate US exchange’s non‐interlisted stocks, suggesting that the marginal investors in these stocks are American.
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Terhi Chakhovich, Seppo Ikäheimo and Tomi Seppälä
Purpose – This research presents empirical evidence on which performance measures are perceived as short-term oriented and long-term oriented by company executives, and on whether…
Abstract
Purpose – This research presents empirical evidence on which performance measures are perceived as short-term oriented and long-term oriented by company executives, and on whether any perceived performance measure-related time orientation affects the time orientation of these executives. In addition, the study explores which measures impact executive time orientation, regardless of how these measures are perceived.
Methodology/approach – A survey was used to collect the perceptions of chief financial officers (CFOs) in 109 companies listed in the Nasdaq OMX, the Nordic Stock Exchange. Performance measures include: stock price, earnings, returns, cash flow, success of development programs, EVA™, sales, and balanced scorecard, and the method employed was multiple regression.
Findings – First, the CFOs perceived returns, sales, EPS, and stock price to have long time orientation. Second, the use of returns, stock price, and success of development programs as major performance measures encourage the CFOs toward long-term behavior, whereas the use of cash flow encourages short-term behavior. Third, stock price, earnings, and EPS are measures whose perceived time orientation affects the time orientation of executives. It is most likely due to this influence, that they have received major attention in public debates on the short time orientation of executives at the expense of other, more “silent” measures that also impact executive time orientation. Contextual factors strongly affect the results.
Practical implications – The study assists in designing executive performance measurement systems that encourage desired time orientation.
Originality/value – This study contributes to the fields of performance measurement and time orientation by recognizing the multidimensionality of the construct of time orientation and by showing how performance measures and their perceived time orientation influence executive time orientation.
Earlier studies have found that the country characteristics play important role in measuring the corporate transparency. The purpose of this paper is to examine whether the…
Abstract
Purpose
Earlier studies have found that the country characteristics play important role in measuring the corporate transparency. The purpose of this paper is to examine whether the firm-level determinants play an important role in corporate transparency measured as the quality of disclosed earnings across transitional Europe and what role an overall transparency measured by the Corruption Perception Index plays in it. This paper further tests if the market reacts similarly to discretionary and non-discretionary components of earnings across different groups of countries with respect to transparency.
Design/methodology/approach
The financial and ownership data of listed companies in ten European countries is obtained from Amadeus. The transparency ratings are obtained from Transparency International. The sample consists of a panel of 2001 listed companies and modified Jones model of Dechow et al. (1995) is used to measure the quality of earnings.
Findings
This paper shows that the firm-level determinants (except firm size) of the quality of earnings are different among different groups made on the basis of transparency ratings. However, the determinants of the quality of earnings are not different within each group. The ownership structure of companies plays important role in determining the quality of earnings in most transparent countries whereas financial factors play significant role in least transparent countries. The markets respond positively to earnings quality in most transparent group of countries.
Research limitations/implications
The results of this study provide interesting basis for future research on economic and social integration of Europe. Although the policy makers are trying to integrate the countries through common Laws and decrees but examining the firm-level factors such as size, growth and ownership are still important. The regulators should address the issue of corporate transparency in Europe by looking at the importance of these factors with respect to overall transparency.
Originality/value
This study extends the knowledge, not only for academicians and investors but for policy makers as well. This study re-emphasizes the role of country-level transparency and firm-level determinants of the corporate transparency within Europe.
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This study examines how the strong emphasis placed on the purposes of budgeting, referring to a comprehensive focus on budgeting, is related to top managers' education and tenure…
Abstract
Purpose
This study examines how the strong emphasis placed on the purposes of budgeting, referring to a comprehensive focus on budgeting, is related to top managers' education and tenure while controlling for their functional positions in their respective firms and ages, as well as several company-specific predictors (information quality, firm size, information technology, importance of profit and strategy).
Design/methodology/approach
Survey data were collected from senior managers of large manufacturing firms in Finland and Sweden.
Findings
The results suggest that academic business education is positively associated with a comprehensive focus on budgeting, but tenure as well as functional position in the company (Chief Financial Officer (CFO) or not) and age are not. Overall, the company-specific control variables in general and information quality in particular are shown to have greater explanatory power than the top management characteristics analyzed.
Research limitations/implications
This study identifies several empirically supported factors that seem to contribute to a comprehensive focus on budgeting. The effects of information quality, business education, the importance of profit and firm size could be considered in future research.
Practical implications
Academic business education matters more than the other top management characteristics analyzed. If organizations want to make comprehensive use of budgets, they should employ business graduates and be mindful of company-specific variables.
Originality/value
This study is the first to address a comprehensive focus on budgeting and some of its determinants. Future research could investigate a broader set of such determinants in different contexts.
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Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management…
Abstract
Purpose
Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management practices on the organizational performance of small- and medium-scale enterprises.
Design/methodology/approach
Data were collected from 45 small-sized and 72 medium-sized firms. Data supported the hypothesized relationships. Construct reliability and validity were established through confirmatory factor analysis. The conceptual model and hypotheses were evaluated by using structural equation modeling.
Findings
The results indicate that working capital significantly influenced organizational performance. Capital budget management significantly influenced organizational performance. A non-significant influence of asset management on organizational performance was observed.
Research limitations/implications
The generalizability of the findings will be constrained due to the research’s SMEs focus and cross-sectional data.
Practical implications
The study’s findings will serve as valuable pointers for stakeholders and decision-makers of SMEs in developing well-articulated and proactive financial management systems to ensure competitiveness, sustainability, viability, and financial competencies.
Originality/value
The study adds to the corpus of literature by evidencing empirically that financial management practices significantly influenced SMEs’ performance.
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Hariem Abdullah, Aliya Zhakanova Isiksal and Razha Rasul
This paper aims to examine the effect of dividend policy on firm value for financial sector in an emerging country. Furthermore, it examines the moderating effect of IFRS adoption…
Abstract
Purpose
This paper aims to examine the effect of dividend policy on firm value for financial sector in an emerging country. Furthermore, it examines the moderating effect of IFRS adoption and the abolishment of mandatory dividend payment policy with considering the Lintner model of dividend smoothing.
Design/methodology/approach
Data were collected from 111 firms listed on Borsa Istanbul in the financial sector in Turkey over 1995–2017. Using an explanatory research design, this study performs various multivariate regression techniques to investigate the proposed relationships.
Findings
The outcomes demonstrate a positive and significant association between dividend policy and firm value. In addition, the relationship has strengthened after IFRS adoption, indicating that accounting information such as dividend-based ratios prepared under IFRS is more value relevant. The empirical outcomes supported the Lintner model, which is persistent with the signalling hypothesis. Moreover, the findings state that the abolishment of mandatory dividend payment in 2009 strengthened the association between dividend policy and firm value for financial institutions in Turkey.
Practical implications
These results provide an insight to the investors and managers that the effect of IFRS adoption and other policy changes could be greater on the association between dividend policy and firm value. The study empirically tests Lintner model of dividend smoothing for financial firms in an emerging economy.
Originality/value
This study contributes to the literature through providing vital insights on the relationship between dividend policy and firm value and empirically revisiting the Lintner model for financial sector in a developing economy, specifically Turkey. Furthermore, it addresses the influence of IFRS implementation on the association between dividend policy and firm value. These findings are robust to alternative sampling methods and to controlling for other factors which influence firm value.