Agyenim Boateng

The empirical determinants of target capital structure and adjustment to long-run target: evidence from Canadian firms

The main objective of this article is to provide more insight into the empirical determinants of target capital structure of Canadian firms. Panel data covering the period 1996 to 2004 was analysed using a much stronger estimation technique, that is, a dynamic regression model. The results show that profitability and tangibility have a positive and significant impact on the firm leverage, whereas growth opportunities and size have a negative influence on the leverage of Canadian firms. The study also suggests that firms have long-term target leverage ratios, but the speed of adjustment to the target leverage ratios is relatively slow in the context of Canadian firms.

Understanding the motives for SMEs entry choice of international entry mode

Purpose – What drives small to medium‐sized enterprises’ (SMEs’) internationalisation strategy remains a significant issue in international business research, despite the huge research efforts on this subject over the past three decades. The purpose of this paper is to investigate and compare the motives behind the equity modes of foreign market entry in Norway.Design/methodology/approach – Employing a cross sectional survey, a sample of 146 firms consisting of 42 international equity joint ventures (IJVs), 53 cross‐border mergers & acquisitions (CBM&As) and 51 wholly owned subsidiaries (FWOS) from Norway was collected and analysed.Findings – It was found that whereas market development and power influence the choice of IJVs and CBM&As, the need to access resources and control resources appear to be the most important motives behind FWOS as an entry mode choice. Moreover, the regression results indicate that market development and power, technology development, location advantage and synergistic gains app...

An Analysis of the Inward Cross-Border Mergers and Acquisitions in the U.K.: A Macroeconomic Perspective

The incidence of cross-border mergers and acquisitions (CBM&As) has accelerated over the past two decades. Yet previous empirical work relating to CBM&As has been confined to firm-specific factors. This is against the backdrop that researchers have not been able to develop a coherent theory explaining the increasing trends of CBM&As activity. Building on prior studies, this study attempts to extend the few existing studies by using a simple empirical nonlinear framework to analyse the number of CBM&As inflows between 1987 and 2008 into the U.K. from a macroeconomic perspective. The main findings are that the response of the inflow is asymmetric as there is more persistence during stock market booms versus recessions. There are asymmetries with respect to relative prices suggesting that merger inflow activity appears to be higher once the stock prices rise above a threshold level of 8 per cent. Other factors which have significant bearing on CBM&As inflows are the rate of inflation and growth in real GDP.

Multiple Large Shareholders, Excess Leverage and Tunneling: Evidence from an Emerging Market

Manuscript Type. Empirical. Research Question/Issue. Past empirical efforts in corporate governance have examined the effects of large shareholders with excess control rights on tunneling activities. However, no study has systematically investigated the effects of multiple large shareholders on excess leverage policies and tunneling in an emerging country environment where minority rights protection is weak. In this study, we examine the role of multiple large shareholders and the effects of control contestability of multiple large shareholders on firm excess leverage decision and tunneling by controlling shareholders. Research Findings/Insights. Using a sample of 2,341 Chinese firms for the years 2001 to 2013, we document that the contestability of multiple non‐controlling large shareholders relative to controlling shareholders reduces the adoption of excess leverage policies, tunneling and enhances capital investment. Another intriguing finding is that the government, as a controlling shareholder, exerts significant influence and reduces the monitoring effectiveness of multiple larger shareholders. Theoretical/Academic Implications. By addressing the role of multiple large shareholders on excess leverage decisions, this study makes an important contribution to the corporate governance literature. We extend the recent developments in agency theory regarding the role of multiple large shareholders in constraining expropriation of controlling shareholders with excess control rights and their effect on firm leverage decisions. Our results support the theoretical models which indicate that the presence of multiple large shareholders is an important and efficient internal governance mechanism that mitigates a firms agency costs, particularly, in an emerging market environment where corporate governance is weak and inadequate to curb the tunneling problem.

Commercial bank ownership and performance in China

This study examines the determinants of bank performance based on proxy variables that assess the quality of assets, profitability, liquidity and overall performance. Using a sample of 111 Chinese commercial banks over the period of 2000–2012, we find that foreign banks appear to have better asset quality and overall performance although lower profitability compared to domestic banks. In contrast, the state-owned banks tend to be more profitable and have better liquidity position compared with other domestic banks and foreign banks. At bank level, equity/liability ratio exerts significant influence on overall bank performance, while at the macroeconomic level, per capital GDP, GDP growth, inflation and unemployment rates appear to have a bearing on bank performance.

The role of the state, ownership structure, and the performance of real estate firms in China

Prior studies suggest that high levels of state ownership are related to poor performance of listed companies in China. As a result, privatization has become an important tool to revitalize the under-performing state-owned companies. We have therefore witnessed a continuous decline in the state shareholding over the past decade as a result of the ongoing economic reforms. In this article, we examine the role of state ownership in real estate sector to find out whether shrinking state ownership in a strategically important sector like real estate impact on performance. Using 1999–2010 data on all listed real estate firms, this article shows that relatively higher state shareholding is associated with poor performance in the pre-boom years and better performance in the booming years. The analysis also suggests that the positive effect in the booming years is non-linear and high level of state ownership can still lead to inefficiency and relatively poor performance. In addition, other types of shareholding and concentration of shareholding are also examined. Better firm performance is related to either very low or very high levels of legal person shareholdings. The effect of tradable A-shares fraction on company performance is negative and significant. Management share ownership has a positive influence on performance. Finally, the effect of ownership concentration on performance is also positive in general.

Mobile Phone Innovation and Inclusive Human Development: Evidence from Sub-Saharan Africa

A recent World Bank report reveals that poverty has been decreasing in all regions of the world with the exception of sub-Saharan Africa (SSA) as more than 45% of countries in the sub-region are off-track from achieving the Millennium Development Goal (MDG) extreme poverty target. This paper investigates the effects of mobile phone technology, knowledge creation and diffusion on inclusive human development in 49 SSA countries for the period 2000-2012 using Tobit model. The study finds that mobile phone penetration in SSA is pivotal to sustainable and inclusive human development irrespective of the country’s level of income, legal origins, religious orientation and the state of the nation. However, the pupil-teacher ratio exerts a negative influence on inclusive human development. The net effects of interactions between the mobile phone and knowledge diffusion variables are positive.

Explaining the surge in M&A as an entry mode: home country and cultural influences

Prior studies examining the effects external factors on international market expansion have focused on host country factors with scant attention being given to home country factors. This study examines the trends, patterns and the impact of cultural and home country macroeconomic influences on Chinese cross-border mergers and acquisitions (CBM&A) as an entry strategy for the period of 1998-2011. Our findings indicate that CBM&A is the preferred mode of market entry by the Chinese emerging market firms. The regression results indicate that home country macroeconomic and cultural variables, including GDP, money supply, interest rates, inflation, acquisitions in resource seeking sectors and cultural distance play an important role in explaining the foreign market expansion of Chinese firms.

Executive shareholding, compensation, and analyst forecast of Chinese firms

ABSTRACT We examine the impact of executive and leadership shareholding and cash compensation on analyst forecast error and dispersion as proxies for information asymmetry. We find that firms pay higher compensation (or excess compensation) to executives and directors are associated with higher information asymmetry. The positive association is stronger where executives’ and directors’ shareholdings are higher. Shareholding appears to facilitate managerial entrenchment and gives highly paid executives/leadership stronger structural power which adversely affects information disclosure leading to larger forecast error and dispersion. These results are robust to different measures of compensation and alternative models controlling for the predictability of firm-level earnings. Our findings indicate that executive/director shareholding and compensation do not provide sufficient incentives for information disclosure by Chinese firms.

On the value relevance of analyst opinions and institutional shareholdings in China

Purpose This paper aims to examine the relevance of stock analysts’ opinions and institutional investors’ shareholding to the value of Chinese firms. Design/methodology/approach The authors use both internal and external corporate governance mechanism to investigate value relevance of analyst opinion and institutional shareholding to Chinese firms. Findings The authors find that Tobin’s Q is positively related to analysts’ consensus forecast optimism and institutional investors’ shareholding but negatively related to analyst forecast dispersions. Further analysis using subsamples of partially state-owned enterprises and non-state-owned firms indicate that institutional investors have significant impact on firm value for all firms irrespective of the ownership type, whereas analyst forecasts opinions appear to have significant effects on partially state-owned firms but insignificant effects on non-state-owned firms. The results also show that internal governance appears to be an important pre-requisite that affects analysts’ forecast opinions and that good internal governance reinforces external governance mechanism to create firm value. Originality/value Studies analysing the effects of both internal and external mechanisms on firm value in emerging economies are scant. This study attempts to extend and contribute to this line of research by investigating the relevance of institutional investors and stock analysts’ opinion to firm valuation.