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Article
Publication date: 22 September 2022

Shao-Huai Liang, Hsuan-Chu Lin and Hui-Yu Hsiao

The purpose of this study is to investigate whether financial institutions, which are highly regulated entities, experience fewer sanctions and have lower penalties (mandatory and…

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Abstract

Purpose

The purpose of this study is to investigate whether financial institutions, which are highly regulated entities, experience fewer sanctions and have lower penalties (mandatory and regulatory) if they have better corporate governance performance (voluntary).

Design/methodology/approach

This study uses unique corporate governance data endorsed by the authorities and sanction information for financial institutions in Taiwan from 2014 to 2020 to examine whether regulatory compliance is associated with corporate governance for financial institutions. This study also examines the moderating effects of shareholding concentration, governmental shareholding and foreign institution shareholding on this relationship.

Findings

The positive association between compliance and governance is found. In addition, partial results show that the positive relationship is less profound when the shareholder concentration is higher and more profound when government shareholdings are higher.

Originality/value

The findings of this study support the premise that a well-structured, non-mandatory corporate governance evaluation mechanism, that is actively established and monitored by the appropriate authorities, may influence the compliance performance of financial institutions which is mandatory and minimum social requirements.

Details

Journal of Financial Regulation and Compliance, vol. 31 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 9 January 2019

Hsuan-Chu Lin, Shao-Huai Liang, She-Chih Chiu and Chieh-Yuan Chen

The purpose of this paper is to empirically test the predictions in Titman (1984) and Berk et al. (2010) which indicate that firms with higher leverage will pay chief executive…

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Abstract

Purpose

The purpose of this paper is to empirically test the predictions in Titman (1984) and Berk et al. (2010) which indicate that firms with higher leverage will pay chief executive officer (CEO) and employee more. In addition, this paper examines whether financial distressed firms utilize leverage as a bargaining tool to reduce labor costs.

Design/methodology/approach

This paper conducts ordinary least squares regression analysis to investigate: CEO compensation which represents critical employees and lower-level employee compensation which represents less critical employees. Empirical data consist of US publicly held companies during the period between 2006 and 2013.

Findings

This paper finds that firms with higher levels of leverage tend to compensate employees for their human capital risk and that financially distressed firms consider leverage a bargaining tool by which to depress labor costs, which leads to lower employee compensation as compared to that of financially healthy firms.

Research limitations/implications

This paper highlights the importance of keeping balance between human capital and labor costs. In the case that human capital risk might not be fully compensated by firms facing financial distress, vicious cycle could occur because a failure of considering human capital might invite unrecoverable consequence. This could be done in future research.

Originality/value

This paper has three contributions. First, this paper supports the Titman (1984) and Berk et al. (2010) by empirically documenting that high-leveraged firms compensate their employees for potential human capital risk. Second, this paper adds to the literature by empirically providing that human capital risk might not be fully compensated if the firms are facing financial distress. Finally, this paper contributes to the authorities by showing that employees’ interests may be sacrificed if the firm is under financial distress.

Details

International Journal of Managerial Finance, vol. 15 no. 1
Type: Research Article
ISSN: 1743-9132

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