As the past few decades have seen China become the world’s second-largest economy and Chinese multinationals take leading roles in various sectors, China’s corporate governance (CG) has evolved and brought about new methods of Environmental, Social and Governance (ESG) evaluation. This paper examines China’s CG development status through case studies of notable China companies, looks at current Chinese ESG evaluation systems designed by MSCI and local Chinese institutes, and suggests four unique factors that should be integrated into future Chinese ESG evaluation system development. This is the first of a series of papers by Lyndsey Zhang that reviews current Chinese CG development and ESG implementation, identifies opportunities and challenges through case studies, and suggests areas for improvement for Chinese companies looking to accomplish the following: become more sustainable by increasing focus on corporate purpose and ESG considerations, and position themselves as industrial leaders in both the emerging market and global economy in the next few decades. This series also looks at other emerging market countries’ economic development and CG models, and explores how China’ success can be replicated by other emerging market countries to facilitate their economic growth and CG development.
{"title":"China's Corporate Governance Development and ESG Evaluation","authors":"L. Zhang","doi":"10.2139/ssrn.3736301","DOIUrl":"https://doi.org/10.2139/ssrn.3736301","url":null,"abstract":"As the past few decades have seen China become the world’s second-largest economy and Chinese multinationals take leading roles in various sectors, China’s corporate governance (CG) has evolved and brought about new methods of Environmental, Social and Governance (ESG) evaluation. This paper examines China’s CG development status through case studies of notable China companies, looks at current Chinese ESG evaluation systems designed by MSCI and local Chinese institutes, and suggests four unique factors that should be integrated into future Chinese ESG evaluation system development. \u0000 \u0000This is the first of a series of papers by Lyndsey Zhang that reviews current Chinese CG development and ESG implementation, identifies opportunities and challenges through case studies, and suggests areas for improvement for Chinese companies looking to accomplish the following: become more sustainable by increasing focus on corporate purpose and ESG considerations, and position themselves as industrial leaders in both the emerging market and global economy in the next few decades. This series also looks at other emerging market countries’ economic development and CG models, and explores how China’ success can be replicated by other emerging market countries to facilitate their economic growth and CG development.","PeriodicalId":432278,"journal":{"name":"CGN: Firms with a Controlling Shareholder (Topic)","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121433022","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose This study aims to investigate how ownership structure and bank regulations individually and interactively influence risk-taking behaviour of a bank. Design/methodology/approach This empirical framework is based on dynamic two-step system generalised method of moments estimation technique to analyse an unbalanced panel data set covering 144 conventional banks from 12 Middle East and North Africa (MENA) countries. Findings The estimation results suggest that foreign shareholding has an inverse relationship with bank risk-taking. In addition, official supervisory power is found to have a positive association with bank risk, and this relationship is reinforced for banks with higher ownership concentration. In addition, capital stringency increases bank risk, whereas market discipline has an opposite effect, only in countries with higher activity restrictions. Finally, the interaction between ownership concentration and activity restriction has an inverse association with bank risk-taking. Research limitations/implications Overall, the evidence suggests that the Basel II framework and the regulatory reform initiatives in the post-global financial crisis period do not seem to have reduced bank risk-taking in MENA countries. Originality/value This study contributes to the literature on the effectiveness of regulatory reform based on the three pillars of the Basel II guidance (capital regulations, market-oriented disclosures and official supervisory power), and offers evidence in support of “political/regulatory capture hypothesis” of bank regulation. The results also provide support for “global advantage hypothesis” of bank ownership.
{"title":"Ownership, Regulation and Bank Risk-Taking: Evidence from the Middle East and North Africa (MENA) Region","authors":"Faizul Haque","doi":"10.1108/CG-07-2017-0135","DOIUrl":"https://doi.org/10.1108/CG-07-2017-0135","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate how ownership structure and bank regulations individually and interactively influence risk-taking behaviour of a bank.\u0000\u0000\u0000Design/methodology/approach\u0000This empirical framework is based on dynamic two-step system generalised method of moments estimation technique to analyse an unbalanced panel data set covering 144 conventional banks from 12 Middle East and North Africa (MENA) countries.\u0000\u0000\u0000Findings\u0000The estimation results suggest that foreign shareholding has an inverse relationship with bank risk-taking. In addition, official supervisory power is found to have a positive association with bank risk, and this relationship is reinforced for banks with higher ownership concentration. In addition, capital stringency increases bank risk, whereas market discipline has an opposite effect, only in countries with higher activity restrictions. Finally, the interaction between ownership concentration and activity restriction has an inverse association with bank risk-taking.\u0000\u0000\u0000Research limitations/implications\u0000Overall, the evidence suggests that the Basel II framework and the regulatory reform initiatives in the post-global financial crisis period do not seem to have reduced bank risk-taking in MENA countries.\u0000\u0000\u0000Originality/value\u0000This study contributes to the literature on the effectiveness of regulatory reform based on the three pillars of the Basel II guidance (capital regulations, market-oriented disclosures and official supervisory power), and offers evidence in support of “political/regulatory capture hypothesis” of bank regulation. The results also provide support for “global advantage hypothesis” of bank ownership.\u0000","PeriodicalId":432278,"journal":{"name":"CGN: Firms with a Controlling Shareholder (Topic)","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127161683","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose - The purpose of this paper is to determine if the US Treasury's at-the-market sales of 5.27 billion Citigroup shares in 2010 drove down the banks' share price. It attempts to use the evidence of Citigroup's stock returns to accept or reject competing hypotheses of larger stock sales. Design/methodology/approach - The paper uses a geometric Brownian motion model to test if there were abnormal returns at various points in the US Treasury's highly publicized stock sale that lasted from 26 April to 6 December 2010. Findings - There was a weakly significant drop in the stock price at the announcement of the sale and a weakly significant rise in the stock price just after it ended. This is evidence that the demand curve for the stock had a negative slope. Practical implications - The evidence from this study will influence policy makers and investors in the upcoming privatizations of large bailed-out firms such as American International Group, Ally Financial, Chrysler, and General Motors. The evidence indicates that slow at-the-market sales may temporarily depress stock prices more than quicker, underwritten secondary offerings. Patient investors may experience modest abnormal returns from providing liquidity to the US Treasury as it privatizes its holdings. Originality/value - This is the only paper to study the stock price impacts of the US Treasury's liquidation of its 27 percent stake in Citigroup in 2010. Because the stock sales were delegated to a third party and highly publicized, unlike most other large stock sales, the Citigroup privatization is an unprecedented opportunity to test if the demand curve for common stocks is perfectly elastic.
{"title":"'Stocks Demand Curves and TARP Returns'","authors":"Linus Wilson","doi":"10.2139/SSRN.1639525","DOIUrl":"https://doi.org/10.2139/SSRN.1639525","url":null,"abstract":"Purpose - The purpose of this paper is to determine if the US Treasury's at-the-market sales of 5.27 billion Citigroup shares in 2010 drove down the banks' share price. It attempts to use the evidence of Citigroup's stock returns to accept or reject competing hypotheses of larger stock sales. Design/methodology/approach - The paper uses a geometric Brownian motion model to test if there were abnormal returns at various points in the US Treasury's highly publicized stock sale that lasted from 26 April to 6 December 2010. Findings - There was a weakly significant drop in the stock price at the announcement of the sale and a weakly significant rise in the stock price just after it ended. This is evidence that the demand curve for the stock had a negative slope. Practical implications - The evidence from this study will influence policy makers and investors in the upcoming privatizations of large bailed-out firms such as American International Group, Ally Financial, Chrysler, and General Motors. The evidence indicates that slow at-the-market sales may temporarily depress stock prices more than quicker, underwritten secondary offerings. Patient investors may experience modest abnormal returns from providing liquidity to the US Treasury as it privatizes its holdings. Originality/value - This is the only paper to study the stock price impacts of the US Treasury's liquidation of its 27 percent stake in Citigroup in 2010. Because the stock sales were delegated to a third party and highly publicized, unlike most other large stock sales, the Citigroup privatization is an unprecedented opportunity to test if the demand curve for common stocks is perfectly elastic.","PeriodicalId":432278,"journal":{"name":"CGN: Firms with a Controlling Shareholder (Topic)","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116948350","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the impact of family control and institutional investors on CEO pay packages in Continental Europe, using a dataset of 754 listed firms with 3731 firm-year observations from 14 countries during 2001–2008. We find that family control curbs the level of CEO total and cash compensation, and the fraction of equity-based compensation. Moreover, we do not observe a significant effect of family control on the excess level of total and cash compensation. This evidence indicates that controlling families do not use CEO compensation to expropriate wealth from minority shareholders. We show that institutional ownership is associated with higher levels of CEO cash and total compensation in Continental Europe, especially in family firms. Also, foreign institutional investors have a positive and significant impact on CEO compensation level. Finally, results indicate that institutional investors affect CEO pay structure: they increase the use of equity-based compensation in both family and non-family firms.
{"title":"CEO Compensation, Family Control, and Institutional Investors in Continental Europe","authors":"E. Croci, H. Gonenc, Neslihan Ozkan","doi":"10.2139/ssrn.1578391","DOIUrl":"https://doi.org/10.2139/ssrn.1578391","url":null,"abstract":"This paper investigates the impact of family control and institutional investors on CEO pay packages in Continental Europe, using a dataset of 754 listed firms with 3731 firm-year observations from 14 countries during 2001–2008. We find that family control curbs the level of CEO total and cash compensation, and the fraction of equity-based compensation. Moreover, we do not observe a significant effect of family control on the excess level of total and cash compensation. This evidence indicates that controlling families do not use CEO compensation to expropriate wealth from minority shareholders. We show that institutional ownership is associated with higher levels of CEO cash and total compensation in Continental Europe, especially in family firms. Also, foreign institutional investors have a positive and significant impact on CEO compensation level. Finally, results indicate that institutional investors affect CEO pay structure: they increase the use of equity-based compensation in both family and non-family firms.","PeriodicalId":432278,"journal":{"name":"CGN: Firms with a Controlling Shareholder (Topic)","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133832398","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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