This paper examines how executive pay is set when a firm is a business group member. Using Korea as a laboratory setting, we find that member firm?s cash compensation for its executives is positively linked to the stock performance of other member firms as well as its own. Further analyses reveal that this positive link to other members?
performance is consistent with the hypothesis of corporate resources being tunnelled from one member to another for the benefit of the controlling family. We find that this link is stronger to the performance of others that are more likely to benefit from tunneling (firms in which the controlling family has cash flow rights greater than those of the subject firm) and in firms that are more likely to suffer from tunneling (firms in which the controlling family has control-ownership disparity above the sample median).
Firms can issue stocks classified in many ways. They can be classified in respect to voting rights, dividend rights, redemption rights, conversion rights, and many others. In this study, we ask if it is desirable to give greater freedom to firms...Read more
This paper examines the impact of enhanced executive remuneration disclosure rules and the introduction of dual voting rights under UK regulations of 2013 on the voting patterns of shareholders. Based on a hand-collected dataset of the pay...Read more
Preemptive rights can prevent cheap-issuance tunneling by a controller when outside investors know that the offered securities are cheap. But when outsiders cannot tell whether the securities are cheap or overpriced, preemptive rights fail to...Read more
Although controlling shareholder agency problems have been well studied so far, many questions still remain unanswered. In particular, an important puzzle in “bad-law” jurisdictions is: why some controlling shareholders (“roving controllers”)...Read more