Jonchi Shyu

Family ownership and firm performance: evidence from Taiwanese firms

Purpose - Using the panel data of 465 Taiwanese listed companies and taking into consideration endogeneity issues this paper aims to examine the influence of family ownership on firm performances. Design/methodology/approach - The use of a panel data set encompassing a five-year period enables one to examine both cross-sectional and within-firm variations in the relationships between family ownership and firm performances. The paper also uses a simultaneous equation system to account for the endogeneity between family ownership and firm performances, and apply the quadratic equations to identify the percentage of family ownership that maximizes firm performance. Findings - When either a profitability indicator (ROA) or a valuation indicator (Tobins Q) is applied, the empirical results show that family ownership positively affects firm performance. The results also show that the profitability of a firm (ROA) first increases and then decreases with family ownership. In other words, when families have more than 30 per cent control of the firm, the potential for entrenchment and poor performance becomes greater. Originality/value - This paper is the first to examine the relationships between family ownership and firm performances, while simultaneously addressing the issue of endogeneity and identifying the optimal level of family ownership in Taiwanese firms. The finding that family ownership positively affects firm performance elucidates why a family firm is one of the most important business development models in Taiwan. Meanwhile, the finding that the percentage of family ownership should not exceed 30 per cent to avoid the occurrence of poor performance also suggests that excessive family shareholdings may not be necessarily healthy for a family firm in Taiwan.

Ownership structure, capital structure, and performance of group affiliation: Evidence from Taiwanese group-affiliated firms

Purpose - This study seeks to examine how agency problems and internal capital markets in group-affiliated firms are mutually influenced by the ownership structure, capital structure, and performance. It also aims to examine the endogeneity in group affiliation. Design/methodology/approach - Using panel data, this study employs two-stage least squares regression with the instrumental variable technique to examine the relationship among capital structure, ownership structure, and performance of group-affiliated firms. Simultaneous equation models are constructed to identify the effects of interdependent decisions. Findings - The empirical results indicate a U-shaped relationship between insider ownership and performance. Moreover, the alignment of ownership and control rights determines the relationship between ownership structure and performance for group-affiliated firms. The capital structure decisions of group-affiliated firms are independent of firm performance and insider ownership, supporting the view that capital structure decisions of group-affiliated firms are determined by the overall characteristics of the business group, rather than those of the individual firms. Practical implications - Business groups can reduce the agency problems that occur in group affiliation by increasing the insider ownership (after a certain tunneling point), debt financing, and dividend payout. Originality/value - Previous studies have paid little attention to the effects of the agency problem and the internal capital market on group affiliation. Whether endogeneity is a consequence of the common characteristics of group affiliation or a result of the simultaneity existing among ownership structure, capital structure, and performance is also unknown. This paper fills some of these gaps.

Diversification, Performance, and the Corporate Life Cycle

This paper investigates the relation between the extent of diversification in firms and their performance at different life cycle stages. To illustrate the joint endogeneity of diversification and performance, we treat both the extent of diversification and firm performance as endogenous variables in a simultaneous equation system. Empirical results reveal that corporate diversification erodes firm value. Overall, firms in their growing stages experience a significant diversification discount; however, mature firms do not show such findings. Although unrelated diversification leads to trading at a discount in all growing and mature firms, conversely, related diversification exhibits an evident premium in mature firms.

How the environment determines banking efficiency: a comparison of banking firms in Taiwan, Hong Kong, and Mainland China

This study uses the three-stage data envelopment analysis (DEA) model to explore the true managerial efficiency of the banking firms in Taiwan, Hong Kong, and Mainland China. The empirical results indicate that the environmental conditions have a significant impact on banking efficiency. When the country-specific situations are important factors in explaining efficiency difference, the common frontier estimates obtained by neglecting those factors can generate biased and overestimated inefficiency levels. With findings obtained from the slack variable analyses, the current study can provide inefficient banks with ways to reduce their input waste through the adjustment of input allocations. The findings also confirm the importance of the three-stage DEA and its applications in determining the true managerial efficiencies of banks. Without the three-stage DEA, the management could be misguided when making strategic decisions and conducting inappropriate resource allocation.

The true managerial efficiency of international tourist hotels in Taiwan: three-stage data envelopment analysis

This study uses international tourist hotels in Taiwan as samples to measure the true managerial efficiency of international tourist hotels based on the three-stage data envelopment analysis (DEA). Three operation models are tested, namely, group and non-group entities, chains and independents, and large- and small-scale entities, to explore the operation factors determining the management performance. Empirical results show that group operation is not the main determinant of operation efficiency of international tourist hotels, whereas small-scale hotels (those with rooms fewer than 300) and chain hotels have significantly superior operational efficiency. By using a three-stage DEA, the management can avoid erroneous resource distribution decisions and enhance managerial efficiency.

Do Focused Funds Offer Superior Performance in an Emerging Market? Evidence from Taiwan's Stock Market

We examine the effects of the number of stock holdings and industry concentration on Taiwans equity fund performance. The quadratic regression model is applied to explore the optimal number of stock holdings for mutual funds. The empirical results suggest that funds with a smaller number of stock holdings and with a higher level of industry concentration achieve better performance. We also find that mutual fund performance and the number of stock holdings have an inverted U-shaped relationship, and funds that hold twenty-four to twenty-eight stocks can generate superior performance.