Piotr Korczak

Corporate ownership and the information content of earnings in Poland

In this article we test the influence of ownership structure on the information content of earnings in Polish-listed companies. Our investigation is based on the notion that in a weak corporate governance environment expropriation of private benefits of control is pervasive and manipulation of financial disclosure is a way to conceal those benefits to avoid disciplinary action. Concentrated ownership can act as a substitute for missing country-level corporate governance mechanisms to limit acquisition of private benefits of control, reducing incentives to mispresent financial situation and thus improving the quality of public accounting information. We find that weak country-level corporate governance mechanisms in the transition environment are best substituted by concentrated holdings of several investors rather than a single large shareholder. The information content of earnings increases when a few blockowners jointly hold between 25 and 50% of voting rights. We argue that the overall beneficial effects on corporate governance practices come from each blockholders incentives to protect themselves from being expropriated by managers and other blockholders. We also find a positive impact of managerial holdings on the information content of earnings, and we argue that the holdings effectively align managers’ and investors’ interests.

Political Uncertainty Exposure of Individual Companies: The Case of the Brexit Referendum

This paper studies cross-sectional determinants of the exposure of U.K. firms to Brexit, an event which resulted in an unprecedented rise in political uncertainty. We find that internationalization has a moderating effect on Brexit exposure which goes beyond the pure currency translation effect and is consistent with international activities acting as a diversification mechanism for domestic risks. We also provide some indicative evidence that high-growth firms are more affected by Brexit. At the industry level, we show that Financials and firms in the consumer-facing sectors have the highest exposure to Brexit-related uncertainty. Knowledge of the variation in exposure of individual firms and sectors to political uncertainty associated with major political events can assist managers, investors and policymakers in taking remedial actions to limit its impact.

Do Executives Hold on to Equity-Linked Incentives? The Role of Minimum Shareholding Policies

Previous literature documents that executives tend to cash out equity incentives when equity-linked compensation vests. Such a behavior destroys long-term incentives and hence is costly to outside shareholders. It is recommended that the unloading of incentives can be limited when the firm adopts a minimum executive shareholding policy. In this paper we provide the first evidence on the effectiveness of such policies. We find that the policies have a very limited effect on managerial behavior. They do not encourage larger retention of shares acquired from exercised options and from vested performance shares but somewhat increase share accumulation through other channels, for example open market purchases. We identify factors in the design and enforcement of the policies that improve their effectiveness. We also show that the lack of compliance with the policy has potentially important economic implications in the form of weaker firm performance and lower valuations. Our results have implications for the debate on executive remuneration regulations and practices.