The Effect of Ownership Structure and Investor Protection on Firm Value: Analyst Following as Moderating Variable

Desi Susilawati, Fuad Rakhman

Abstract


The research related to the association between structure ownership and the firm value is a discussion about corporate governance which is still has contradictory conclusion and mixed result. It indicates open question that needs empirical evidence. The influence of concentrated ownership on firm value still brought conflict of interest so the role of analyst following can be stated as an alternative of corporate governance mechanism (Lang et al., 2004). The objectives of this research are to examine the interaction effect between concentrated ownership and analyst following, and the effect of investor protection toward firm value in five Asian companies. Asia is chosen because it has unique characteristic, in term of corporates ownership structure which is more concentrated on families and board of governance is weak (Choi, 2003). The data is consisting of 7.100 firm year observations obtained from Bloomberg and OSIRIS database for the period 2011-2013 in five Asian Countries, i.e. China, South Korea,  Malaysia, Taiwan, and Thailand. Multiple Regression analysis is used to test hypotheses. The results show that concentrated ownership is positively affects the firm value. However, there is no empirical evidence that the interaction of concentrated ownership and analyst following positively affect the firm value. As hypothesized, this research also shows that investor protection has negative impact on firm’s value.


Keywords


Concentrated Ownership; Analyst Following; Investor Protection; Firm Value

Full Text:

Download Article

References


Barniv, R., M. Myring and W. Thomas. 2005. The association between the legal and financial reporting environments and forecast performance of individual analysts. Contemporary Accounting Research, 22, 727-758.

Berger P. and E. Ofek. 1995. Diversification‟s effect on firm value. Journal of Financial Economics, 37(1), 39-65.

Boubaker, S. and F. Labe´gorre. 2007. Ownership structure, corporate governance and analyst Following:A study of French listed firms. Journal of Banking & Finance, 32, 961–976

Chang, J., T. Khanna and K. Palepu. 2000. Analyst activity around the world Working Paper, Harvard Business School.

Cheng, M. and K. R. Subramanyam. 2008. Analyst following and credit ratings. Contemporary Accounting Research, 25 (4), 1007-1044.

Claessens, S., S. Djankov, J.P.H. Fan, and H. P. Lang. 2000. The Separation of Ownership and Control in East Asian Coorporation, Journal of Financial Economics, 58, 81-112.

Claessens, S., S Djankov, J.P.H. Fan and H. P. Lang. 2002. Disentangling the incentive and Entrenchment Effects Of large Share-holdings. Journal of Finance, 57, 2741-2771

Coffee, J. C. 1991. Liquidity Versus Control: The Institutional Investor as Corporate Monitor. Columbia Law Review, 91 (6), 1277-1368.

Coles, J. L., N.D. Daniel and L. Neveen. 2004. Managerial Incentives and Risk-Taking. Journal of financial Economics, 79 (2), 431-468.

Demsetz, H. and K. Lehn. 1985. The structure of corporate ownership: Causes and conse-quences. Journal of Political Economy, 93, 1155-1177.

Fama, E. F. and M. C. Jensen. 1983. Separation of Ownership and Control. The Journal of Law & Economics, 26 (2), 301-325.

Fan, J., and T. Wong. 2002. Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics, 33, 401-425.

Gul, F. and H. Qiu. 2002. Legal protection, corporate governance and information asymmetry in emerging financial markets. Working paper, City University of Hong Kong.

Healy, P. and K. Palepu. 2001. Information asymmetry, corporate disclosure, and thecapital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31 (1), 405-440.

Houqe, M. N., T. V. Zijl, K. Dunstan, and A. K. M. W. Karim. 2012. The Effect of IFRS Adoption and Investor Protection on Earnings Quality Around the World. The International Journal of Accounting, 47, 333–355.

Jensen, M.C, and W. H. Meckling. 1976. Theory of the Firm; Managerial Behavior, Agency Cost and Ownweship Structure. Journal of Financial Economics, 3, 305-360

Klapper, L., and I. Love. 2004. Corporate governance, investor protection, and performance in emerging markets. Journal of Corporate Finance, 703-728.

Lang, M. H., K. V. Lins, and D. P. Miller. 2004. Concentrated control, analyst following and valuation: do analysts matter most when investors are protected least?’. Journal of Accounting Research, 42, 589-622.

Lang, M. H. and R. J. Lundholm. 1996. Corporate disclosure policy and analyst behavior. Accounting review, 467-492.

La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. W. Vishny. 1998. Law and Finance. Journal of Political Economy, 106 (6), 1113–1155.

La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny. 2000. Investor protection and corporate governance. Journal of Financial Economics, 58, 3-27.

Lemmon, M. L. and K. V. Lins. 2003. Ownership structure, corporate governance, and firm value: Evidence from the East Asian financial crisis. The journal of finance, 58 (4), 1445-1468.

Lang, M., K. Lins, and D. Miller. 2003. ADRs, analysts, and accuracy: Does cross listing in the United States improve a firm's information environment and increase market value?. Journal of Accounting Research, 41 (2), 317-345.

Lang, M., K. Lins, and D. Miller. 2004. Concentrated control, analyst following and valuation: Do analysts matter most when investors are protected least?. Journal of Accounting Research, 42 (3), 589-622.

Mouselli, S. and K. Hussainey. 2014. Corporate governance, analyst following and firm value. Corporate Governance, 14 (4), 453-466.

Morck, R., A. Shleifer, and R. W. Vishny. 1988. Management Ownership andMarket Valuation: An Empirical Analysis. Journal of Financial Economics, 20, 293-315.

Pedersen, T. and S. Thomsen. 1997. European patterns of Corporate Ownership: A Twelve-Country Study. Journal of Interna-tional Business Studies, 28 (4), 759-778.

Pedersen, T. and S. Thomsen. 1999. Economic and systemic explanations of ownership concentration among Europe's largest companies. International Journal of the Economics of Business, 6 (3), 367-381.

Shleifer, A. dan R. W. Vishny. 1986. Large Shareholders and Corporate Control. Journal of Political Economy, 94, 461–488.

Smith, P. M. 1996. Shareholder Activism by Institutional Investors: Evidence from CalPERS. The Journal of Finance, 51 (1), 227-252

Villalonga, B. and R. Amit. 2006. How do family ownership, control and management affect firm value?. Journal of financial Economics, 80 (2), 385-417.

Shah, S. Z. A. and Z. Hussain. 2012. Impact of ownership structure on firm performance evidence from non-financial listed companies at Karachi Stock Exchange. International Research Journal of Finance and Economics, 84.

Yu, M. 2009. Analyst following and corporate governance: emerging-market evidence. Accounting Research Journal, 23 (1), 69-93.




DOI: http://dx.doi.org/10.18196/jai.190192

Refbacks

  • There are currently no refbacks.




Office:
Ruang Journal of Accounting and Investment,
Gedung Ki Bagus Hadikusuma (E4) Lantai 2 Pojok Barat, Universitas Muhammadiyah Yogyakarta,
Jalan Lingkar Selatan, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta, Indonesia
Website: journal.umy.ac.id/index.php/ai - E-mail: jai@umy.ac.id
Phone: +62 274 387 656 (ext: 334)

Journal of Accounting and Investment is licensed under Creative Commons Attribution 4.0 International License.