IDEAS home Printed from https://ideas.repec.org/a/bla/corgov/v12y2004i3p389-402.html
   My bibliography  Save this article

The Agency Problems, Firm Performance and Monitoring Mechanisms: the evidence from collateralised shares in Taiwan

Author

Listed:
  • Lanfeng Kao
  • Jeng‐Ren Chiou
  • Anlin Chen

Abstract

This paper indicates that there is an inverse relationship between collateralised shares and firm performance. We further show that this inverse relationship exists only in conglomerate firms. These findings imply that agency problems resulting from shares used as collateral by boards of directors are more serious in conglomerate firms than in non‐conglomerate firms. Moreover, we provide evidence that monitoring by institutional investors, creditors and dividend policy can effectively reduce the agency problems of shares used as collateral and thus can improve firm performance.

Suggested Citation

  • Lanfeng Kao & Jeng‐Ren Chiou & Anlin Chen, 2004. "The Agency Problems, Firm Performance and Monitoring Mechanisms: the evidence from collateralised shares in Taiwan," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(3), pages 389-402, July.
    • Handle: RePEc:bla:corgov:v:12:y:2004:i:3:p:389-402
    DOI: 10.1111/j.1467-8683.2004.00380.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-8683.2004.00380.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-8683.2004.00380.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Claessens, Stijn & Djankov, Simeon & Joseph P. H. Fan & Lang, Larry H. P., 1999. "Expropriation of minority shareholders : evidence from East Asia," Policy Research Working Paper Series 2088, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiang, Fuxiu & Xia, Xiaoxue & Zheng, Xiaojia, 2021. "Does controlling shareholders' share pledging raise suppliers' eyebrows?," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    2. Chan, Konan & Chen, Hung-Kun & Hu, Shing-yang & Liu, Yu-Jane, 2018. "Share pledges and margin call pressure," Journal of Corporate Finance, Elsevier, vol. 52(C), pages 96-117.
    3. Aboudou Maman Tachiwou, 2016. "Corporate Governance and Firms’Financial Performance of Listed Company in the West African Monetary Union (Wamu) Regional Financial Exchange," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(8), pages 212-212, August.
    4. Chien Mu Yeh, 2020. "The influence of foreign institutional investors, institutional directors, and the share pledge ratio of directors on financial performance of tourism firms," Tourism Economics, , vol. 26(1), pages 179-201, February.
    5. Wu, Wei-Hwa, 2021. "Extendible stock loan," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    6. Xiao, MingFang & Cao, June & Chiang, Yao-Min, 2022. "Kiss the baby for the nurse's sake? - Guaranteeing employees' stock purchase against loss program," International Review of Financial Analysis, Elsevier, vol. 81(C).
    7. Wang, Xiaoqiong & Zhen, Hongxian & Zhu, Feifei, 2023. "Voting with their feet: Controlling shareholders' share pledging and other major shareholders' strategic response," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    8. Liu, Wei & Tian, Gary Gang, 2022. "Controlling shareholder share pledging and the cost of equity capital: Evidence from China," The British Accounting Review, Elsevier, vol. 54(6).
    9. Guo, Kai & Ke, Bin & Tang, Song, 2023. "Private firms' financial constraints and share pledging by controlling shareholders of publicly listed firms: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 80(C).
    10. Nigel Driffield & Jun Du & Jan Godsell & Mark Hart & Katiuscia Lavoratori & Steven Roper & Irina Surdu & Wanrong Zhang, 2021. "Understanding productivity:Organisational Capital perspectives," Working Papers 013, The Productivity Institute.
    11. Wu, Chen-Hui & Lin, Chan-Jane, 2017. "The impact of media coverage on investor trading behavior and stock returns," Pacific-Basin Finance Journal, Elsevier, vol. 43(C), pages 151-172.
    12. Kuang-Hua Hu & Sin-Jin Lin & Ming-Fu Hsu, 2018. "A Fusion Approach for Exploring the Key Factors of Corporate Governance on Corporate Social Responsibility Performance," Sustainability, MDPI, vol. 10(5), pages 1-18, May.
    13. Zhu, Bing & Xia, Xiaoxue & Zheng, Xiaojia, 2021. "One way out of the share pledging quagmire: Evidence from mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 71(C).
    14. Xiao, Zhongyi & Chen, Haitao & Chen, Kang, 2023. "How does institutional investors' information acquisition inhibit share pledging? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 89(C).
    15. Pei-Gi Shu & Sue-Jane Chiang & Man-Yin Chen, 2018. "A New Measure of Control-Cash Flow Deviation: Cases in Taiwan," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 25(4), pages 325-340, December.
    16. Zhou, Jingting & Li, Wanli & Yan, Ziqiao & Lyu, Huaili, 2021. "Controlling shareholder share pledging and stock price crash risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    17. Su-Lien Lu & Ying-Hui Li, 2019. "Effect of Corporate Governance on Institutional Investors’ Preferences: An Empirical Investigation in Taiwan," JRFM, MDPI, vol. 12(1), pages 1-21, February.
    18. Richard A. Johnson & Karen Schnatterly & Scott G. Johnson & Shih-Chi Chiu, 2010. "Institutional Investors and Institutional Environment: A Comparative Analysis and Review," Journal of Management Studies, Wiley Blackwell, vol. 47(s2), pages 1590-1613, December.
    19. Andreas Högberg, 2011. "Family Ownership and Regional Economic Development in Asia and Europe," ERSA conference papers ersa10p940, European Regional Science Association.
    20. Huang, Paoyu & Ni, Yensen, 2017. "Board structure and stock price informativeness in terms of moving average rules," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 161-169.
    21. Hou, Xipei & Shen, Yinjie(Victor) & Xing, Jing & Zhou, Fuzhao, 2023. "Hastily announced: Mergers and acquisitions with pledging shareholders," Journal of Financial Stability, Elsevier, vol. 67(C).
    22. Shi, Yang & Li, Jiachen & Liu, Ruiming, 2023. "Financing constraints and share pledges: Evidence from the share pledge reform in China," Journal of Corporate Finance, Elsevier, vol. 78(C).
    23. Su-Lien Lu & Kuo-Jung Lee, 2021. "Investigating the Determinants of Credit Spread Using a Markov Regime-Switching Model: Evidence from Banks in Taiwan," Sustainability, MDPI, vol. 13(17), pages 1-25, August.
    24. Li, Wanli & Zhou, Jingting & Yan, Ziqiao & Zhang, He, 2020. "Controlling shareholder share pledging and firm cash dividends," Emerging Markets Review, Elsevier, vol. 42(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chong-En Bai & Zhigang Tao & Changqi Wu, 2004. "Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 277-305, Summer.
    2. Henry, Peter B. & Lorentzen, Peter Lombard, 2003. "Domestic Capital Market Reform and Access to Global Finance: Making Markets Work," Research Papers 1820, Stanford University, Graduate School of Business.
    3. Haider A. Khan, 2004. "General Conclusions: From Crisis to a Global Political Economy of Freedom," Palgrave Macmillan Books, in: Global Markets and Financial Crises in Asia, chapter 9, pages 193-211, Palgrave Macmillan.
    4. Amira, Khaled & Muzere, Mark L., 2011. "Competition among stock exchanges for equity," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2355-2373, September.
    5. Carney, M. & Gedajlovic, E.R., 2001. "Organisational Path-Dependence and Institutional Environment," ERIM Report Series Research in Management ERS-2001-07-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    6. Siregar, Sylvia Veronica & Utama, Sidharta, 2008. "Type of earnings management and the effect of ownership structure, firm size, and corporate-governance practices: Evidence from Indonesia," The International Journal of Accounting, Elsevier, vol. 43(1), pages 1-27, March.
    7. Al-Faryan, Mamdouh Abdulaziz Saleh, 2017. "The relationship between corporate governance mechanisms and the performance of Saudi listed firms," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 14(2-2), pages 338-349.
    8. Randall Morck, 2003. "Why Some Double Taxation Might Make Sense: The Special Case of Inter-corporate Dividends," NBER Working Papers 9651, National Bureau of Economic Research, Inc.
    9. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    10. Wahyu Widarjo & Rahmawati & Bandi & Ari Kuncara Widagdo, 2020. "Underpricing and Intellectual Capital Disclosure: Evidence from Indonesia," Global Business Review, International Management Institute, vol. 21(6), pages 1325-1337, December.
    11. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    12. Shamsul Abdullah, 2014. "The causes of gender diversity in Malaysian large firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1137-1159, November.
    13. Yenpao Chen & Chien-Hsun Chen & Weiju Chen, 2009. "The impact of related party transactions on the operational performance of listed companies in China," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 12(4), pages 285-297.
    14. Kun Wang & Greg Shailer, 2015. "Ownership Concentration And Firm Performance In Emerging Markets: A Meta-Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 199-229, April.
    15. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection: Origins, Consequences, Reform," Harvard Institute of Economic Research Working Papers 1883, Harvard - Institute of Economic Research.
    16. Konstantin Kosenko, 2007. "Evolution of Business Groups in Israel: Their Impact at the Level of the Firm and the Economy," Israel Economic Review, Bank of Israel, vol. 5(2), pages 55-93.
    17. Andrea Colli, 2013. "Coping with the Leviathan: Minority shareholders in state-owned enterprises -- evidence from Italy," Business History, Taylor & Francis Journals, vol. 55(2), pages 190-214, March.
    18. Amzaleg Yaron & Ben- Zion Uri & Rosenfeld Ahron, 2016. "Tunneling or Propping? Evidence for Related Party Transactions in Israel," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 7(6), pages 332-349.
    19. Ricardo N. Bebczuk, 2005. "Corporate Governance and Ownership: Measurement and Impact on Corporate Performance and Dividend Policies in Argentina," Research Department Publications 3212, Inter-American Development Bank, Research Department.
    20. Mouna Aloui & Bassem Salhi & Anis Jarboui, 2019. "Market risk, corporate governance, and the regulation during the recent financial crisis," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 15(5), pages 700-718, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:corgov:v:12:y:2004:i:3:p:389-402. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.