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Complex Interests of Managerial Stockholdings and Ownership Change Analysis
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許溪南, 陳振遠, 梁慧玫
Hisnan Hsu; Roger Chen; Hueimei Liang
Date of Exam
Date of Submission
corporate governance, managerial stockholdings, managerial ownership change, firm performance
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This dissertation consists of three essays in corporate governance. The first essay, titled “Control or Invest: Complex Interests of Managerial Stockholdings” examines the structural relation between managerial ownership and firm performance. By using simultaneous equation models and considering the complex interests of management, our results show that complicated mutual effects exist between managerial ownership and firm performance. In diffused ownership structure (0-13%), better firm performance may induce management to hold more stockholding, indicating possible investment purpose that is not addressed in previous studies. Management with mid-range of stockholdings (13%-50%), have positive effect on firm performance but not vice versa, which agrees with the “convergence-of-interest hypothesis”. For highly concentrated ownership structure (>50%), negative mutual effect exists, which agrees with the “entrenchment hypothesis”, giving notice to protect minority shareholders.
The second essay, titled “The Discrepancy of R&D Expenditure, Ownership Structure and Performance between Electronic and Non-electronic Industries” addresses on the mutual effects among R&D expenditure, ownership structure and firm performance in electronic industry. The characteristics of high research expenditure, high performance, and stock-based compensation plan of electronic industry may exaggerate the mutual effects between these three factors than companies in non-electronic industry. The empirical evidence first shows that better firm performance will result in higher managerial equity in both electronic and non-electronic industries. Another finding is that electronic industry has higher and more stable research expenditure, no matter firm’s performance; while non-electronic industry spends more in research only when the firm is doing well.
The third essay, “The Adjustment and Determination of Ownership Change”, is used to examine the equilibrium hypothesis regarding managerial ownership variation. The equilibrium hypothesis assumes that managers will continuously re-optimize their ownership to maximize firm’s value. In this essay, instead of studying the cross-sectional relationship between managerial ownership and firm performance, we use a dynamic setting to examine how managers adjust their ownership over time and what factors will determine the within firm variation. It is shown that there is small within firm variation in managerial ownership with strong mean-reversion adjustment the entire sample. The results also show that firm characteristics like debt ratio, R&D expenditure and operating income do not relate significantly to within firm variation, but firm performance and institutional parameters like the reselection of board members, stock turnover and ownership level do.
This thesis contributes to provide investment purpose as an alternative explanation for insiders’ stockholding, in addition to the expropriation activities that is major concern in prior studies. The change analysis further provides more understanding of within firm variation vertically that is still vague in the literature (HHP, 1999). These new findings add knowledge to managerial ownership in emerging market like Taiwan. The managerial implication is that investors may not fully depend on manager’s self-discipline to solve agency problem. Outside supervision, including independent board member and supervisor, institutional investors and corporate governance evaluation, could be emphasized to reinforce corporate governance.
目次 Table of Contents
TABLE OF CONTENTS
1.1 The Context of This Thesis 1
1.2 Structure of This Thesis 3
2 CONTROL OR INVEST: COMPLEX INTERESTS
OF MANAGERIAL STOCKHOLDINGS
2.1 Introduction 4
2.2 Conceptual Issues and Predictions 7
2.2.1 Structural relationship 7 2.2.2 Complex interests of managerial ownership 9
2.2.3 Hypothesis 10
2.3 Data and Variable Definition 12
2.3.1 Data 12
2.3.2 Control variables 14
2.4 Empirical Specification and Analysis 16
2.4.1 Simultaneous equations 16
2.4.2 Empirical results 18
2.4.3 Nonlinear relation 18
2.5 Mutual Effects in Subgroups 20
2.5.1 Low, middle and high groups 20
2.5.2 ROA as alternative firm performance 22
2.5.3 ROE as alternative firm performance 23
2.5.4 The effects of issuing ECB 24
2.6 Summary 25
3 The DISCREPANCY OF R&D EXPENDITURE,
OWNERSHIP STRUCTURE AND PERFORMANCE
BETWEEN ELECTRONIC AND NON-ELECTRONIC
3.1 Introduction 39
3.2 Literature Review 42
3.2.1 Ownership structure and performance 42
3.2.2 R&D expenditure and performance 42
3.3 Data Description and Variable Definition 45
3.3.1 Data 45
3.3.2 Model and variable definition 46
3.4 Electronic and Non-Electronic Industries 50
3.4.1 Descriptive summary 50
3.4.2 Discrepancy between electric and non-electric industries 51
3.5 Empirical Evidence 52
3.5.1 The results of pooled data 52
3.5.2 Results of electric and non-electric industries 52
3.5.3 Non-linear relation in electric industry 53
3.5.4 Other control variables 55
3.6 Summary 56
4 THE ADJUSTMENT AND DETERMINATION OF
4.1 Introduction 65
4.2 Conceptual Issues and Empirical Models 68
4.2.1 Partial adjustment model to observe ownership change 68
4.2.2 Empirical specification 69
4.2.3 Non-linear partial adjustment 73
4.3 Data and Results on Change Analysis 73
4.3.1 Data and descriptive statistics 73
4.3.2 Expected managerial equity 75 4.3.3 Regression on changes in director ownership 76
4.4 Difference between High and Low Performance Companies 77
4.4.1 Differential adjustment in director ownership 77
4.4.2 Comparing low and high performance companies 78
4.5 Determinants of Changes in Managerial Equity 85
4.5.1 Impact of changes in firm characteristics 79
4.5.2 Institutional factors to cause within firm variation 81
4.5.3 Regression results on institutional parameters 84
4.5.4 Year change analysis 86
4.5.5 ROA and ROE as alternative firm performance 87
4.6 Summary 87
5.1 Conclusion of Three Essays 102
5.2 Future Research Work 104
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