Share Centralization, Investor Sentiment and Firm Performance

Chia-Hsin Cheng

doi:doi:10.11648/j.ijber.20190803.11

| Peer-Reviewed

Share Centralization, Investor Sentiment and Firm Performance

Chia-Hsin Cheng

Published in International Journal of Business and Economics Research (Volume 8, Issue 3)

Received: 16 March 2019 Accepted: 6 May 2019 Published: 29 May 2019

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

The purpose of this paper is to identify how internal corporate governance and external investor sentiment impacts the operating performance of the firm. The corporate governance mechanism affects the firm’s operating activities, and transfers its results to outside investors by public financial reports. Since the universal uninformed investors could only identify the firm’s net income instead of accrual earnings, this paper reflects the “visible” accounting number to represent investors’ received information differently from literatures. Sampling the Taiwanese listed companies from 2007 to 2014, I demonstrate variable definition, build regression models and examine them by full sample analysis and by grouping analysis. The results show three points contributed to professional and business field. The first is that both the higher investor sentiment and the larger shareholding percentage of the board are relevant to reported performance. In addition, because the investor sentiment is encouraged by firm’s net income, the managers should devote to better earnings for borrowing equity capital when the firm’s debt ratio is high. Finally, only in the situation that the enterprise faces low investor sentiment and little shareholding of the board is the shareholding percentage negative relationship to the operating performance. It infers that instead of informing the firm’s prospect to the outside investors, the board might hold on its share right inside of the firm.

Published in	International Journal of Business and Economics Research (Volume 8, Issue 3)
DOI	10.11648/j.ijber.20190803.11
Page(s)	78-84
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Corporate Governance, Investor Sentiment, Operating Performance, Share Concentration

References

[1]	Heflin, F. and C. Hsu (2008). The impact of the SEC’s regulation of non-GAAP disclosures. Journal of Accounting and Economics 46, 349–365.
[2]	Zheng, K. J, D. J. Lin and F. D. Zhang (2013). The effectiveness of corporate governance on the firm’s fraud and big shareholder’s bankruptcy. World of Management 2013 (5), 157-168.
[3]	Larcker, David F, Scott A. Richardson and I˙rem Tuna (2007). Corporate governance, accounting outcomes, and organizational performance. The Accounting Review 82 (4), 963-1008.
[4]	Tetlock, P. C. (2007). Giving content to investor sentiment: the role of media in the stock market. Journal of Finance 62 (3), 1139–1168.
[5]	Davis A. K. and J. M. Piger (2012). Beyond the numbers: measuring the information content of earnings press release language. Contemporary Accounting Research 29 (3), 845-868.
[6]	Dechowa, Patricia, Weili Geb and Catherine Schrand (2010). Understanding earnings quality: a review of the proxies, their determinants and their consequences. Journal of Accounting and Economics 50, 344–401.
[7]	Gompers, Paul and Andrew Metrick (2003). Corporate governance ad equity prices. The Quarterly Journal of Economics 118 (1), 107-155.
[8]	Cheng, S. (2008). Board size and the variability of corporate performance. Journal of Financial Economics 87, 157-176.
[9]	Iliev, Peter, Karl V. Lins, Darius P. Miller and Lukas Roth (2011). Shareholder voting and corporate governance around the world. Review of Financial Studies 28 (8), 2167-2202.
[10]	Giroud, Xavier and Holger M. Mueller (2010). Does corporate governance matter in competitive industries?. Journal of Financial Economics 95, 312-331.
[11]	Akshita Arora, “Literature review assessing the relationship between corporate governance and firm performance”. Compendium of Research Papers of National Conference on Managing tomorrow: Issues and Challenges by D. Y Patil Institute of Management Studies, vol 2, pp. 394-424, 2015.
[12]	Bai, C. E, Q Liu, Z. Lu, M. Song and J. X. Zhang (2005). An empirical study on Chinese listed firms' corporate governance. Economic Research 2, 81-91.
[13]	Yin, Z. J, J. H. Huang and M. Xiao (2015). Is the single big holder bad for corporate governance: an evidence-based on shareholding model and two types of governance cost. Academic Journal of GuangDong University of Finance and Economics 6 (143), 60-72.
[14]	Huyghebaert, Nancy and L. H. Wang (2019). Value creation and value distribution in Chinese listed firms: the role of ownership structure, board characteristics, and control. European Journal of Finance 25 (6), 465-488.
[15]	Cai, W, C. Zeng, E. Lee and N. Ozkan (2016). Do business groups affect corporate cash holdings? Evidence from a transition economy. China Journal of Accounting Research 9 (1), 1-24.
[16]	Srivastav, A. and J. Hagendorff (2016). Corporate Governance and Bank Risk-taking. Corporate Governance-An International Review 24 (3), 334-345.
[17]	Lin, Z, M. Liu and C. Noronha (2016). The Impact of Corporate Governance on Informative Earnings Management in the Chinese Market. Abacus-A Journal of Accounting Finance and Business Studies 52 (3), 568-609.
[18]	Cheng, Q, J. Lee and T. Shevlin (2016). Internal Governance and Real Earnings Management. Accounting Review 91(4), 1051-1085.
[19]	Agrawal, A. and T. Cooper (2017), Corporate Governance Consequences of Accounting Scandals: Evidence from Top Management, CFO and Auditor Turnover. Quarterly Journal of Finance 7 (1). DOI: 10.1142/S2010139216500142.
[20]	Garcia-Sanchez, IM. and E. Garcia-Meca (2018). Do talented managers invest more efficiently? The moderating role of corporate governance mechanisms. Corporate Governance-An International Review 26 (4), 238-254.
[21]	Horstmeyer, D. (2019). Beyond Independence: CEO Influence and the Internal Operations of the Board. Quarterly Journal of Finance 9 (2). DOI: 10.1142/S201013921950006X.
[22]	Colli, A. and A. M. Colpan (2016). Business Groups and Corporate Governance: Review, Synthesis, and Extension. Corporate Governance-An International Review 24 (3), 274-302.
[23]	Baker, Malcolm and Jeffrey Wurgler (2006). Investor sentiment and the cross section of stock returns. Journal of Finance 61 (4), 1645-1680.
[24]	Ali, Ashiq and Umit G. Gurun (2009). Investor sentiment, accruals anomaly, and accruals management. Journal of Accounting, Auditing and Finance 24 (3), 415-431.
[25]	Hwang, Byoung-Hyoun (2011). Country-specific sentiment and security prices. Journal of Financial Economics 100 (2), 382–401.
[26]	Baker, Malcolm, Jeffrey Wurgler and Yu Yuan (2012). Global, local, and contagious investor sentiment. Journal of Financial Economics 104 (2), 272-287.
[27]	Chou, P. H, T. Y. Huang and H. J. Yang (2013). Arbitrage risk and the turnover anomaly. Journal of Banking and Finance 37, 4172-4182.
[28]	Mclean, R. and David, M. Zhao (2014). The business cycle, investor sentiment, and costly external finance. Journal of Finance 69 (3), 1377-1409.
[29]	Shin, Jae Eun (2019). Asymmetric Investor Reaction around Earnings Benchmark under Economic Uncertainty. Asia-Pacific Journal of Financial Studies 48 (1), 98-122.
[30]	Chu, Xiaojun, J. Y. Qiu (2019). Forecasting Volatility with Price Limit Hits-Evidence from Chinese Stock Market. Emerging Markets Finance and Trade 55 (5), 1034-1050.
[31]	Huang, H, G. Jin and J. Chen (2016). Investor sentiment, property nature and corporate investment efficiency: based on the mediation mechanism in credit financing. China Finance Review International 6 (1), 56-76.
[32]	Sun, W, C. Zhao, Y. Wang and C. H. Cho (2018). Corporate social responsibility disclosure and catering to investor sentiment in China. Management Decision 56 (9), 1917-1935.
[33]	Wu, Y, T. Liu, L. Han and L. Yin (2018). Optimistic bias of analysts' earnings forecasts: Does investor sentiment matter in China?. Pacific-Basin Finance Journal 49, 147-163.
[34]	Chen, Y. W, R. K. Chou, C. B. Lin (2019). Investor sentiment, SEO market timing, and stock price performance. Journal of Empirical Finance 51, 28-43.
[35]	Healy, P. and K. Palepu (2001). Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics 31, 405–440.
[36]	Ali, A, Ty Chen and S. Radhakrishnan (2007). Corporate disclosures by family firms. Journal of Accounting and Economics 44, 238-286.
[37]	Richardson, Scott A, I˙rem Tuna and Peter Wysocki (2010). Accounting anomalies and fundamental analysis: a review of recent research advances. Journal of Accounting and Economics 50, 410-454.
[38]	Mujtabamian, G. and S. Sankaraguruswamy (2012). Investor sentiment and stock market response to earnings news. The Accounting Review 87 (4), 1357-1384.
[39]	Han, Jianlei, Jing He, Zheyao Pan and Jing Shi (2018). Twenty Years of Accounting and Finance Research on the Chinese Capital Market. Abacus-A Journal of Accounting Finance and Business Studies 54 (4), 576-599.
[40]	Noda, Akihiro (2018). Auditor choice as a commitment device. Journal of Financial Reporting And Accounting 16 (3), 374-394.
[41]	Chang, T. Y, S. M. Hartzmark, D. H. Solomon and E. F. Soltes (2017). Being Surprised by the Unsurprising: Earnings Seasonality and Stock Returns. Review of Financial Studies 30 (1), 281-323.
[42]	Cheng, Q, Y. J. Cho and H. Yang (2018). Finanmant reporting changes and the internal information environment: Evidence from SFAS 142. Review of Accounting Studies 23 (1), 347-383.
[43]	Joslin, Scott and Yaniv Konchitchki (2018). Interest rate volatility, the yield curve, and the macro-economy. Journal of Financial Economics 128 (2), 344-362.
[44]	Jackson, Andrew B, M. A. Plumlee and B. R. Rountree (2018). Decomposing the market, industry, and firm components of profitability: implications for forecasts of profitability. Review of Accounting Studies 23 (3), 1071-1095.
[45]	Alsharairi, M, R. Dixon and R. Al-Hamadeen (2017). Event-specific earnings management: additional evidence from US M&A pre-and post-SOX. Journal of Financial Reporting And Accounting 15 (1), 78-98.
[46]	Henry, Elaine and Marietta Peytcheva (2018). Earnings-Announcement Narrative and Investor Judgment. Accounting Horizons 32 (3), 123-143.
[47]	DeBoskey, D. G, Y. Luo and L. Zhou (2019). CEO power, board oversight, and earnings announcement tone. Review of Quantitative Finance And Accounting 52 (2), 657-680.
[48]	Tshipa, J, L. Brummer, H. Wolmarans and E. Du Toit (2018). The impact of flexible corporate governance disclosures on value relevance: Empirical evidence from South Africa. Corporate Governance-The International Journal of Business in Society 18 (3), 369-385.
[49]	Cheung, A, M. Hu and J. Schwiebert (2018). Corporate social responsibility and dividend policy. Accounting and Finance 58 (3), 787-816.
[50]	Brown, A. B, J. Dai and E. Zur (2019). Too Busy or Well-Connected? Evidence from a Shock to Multiple Directorships. Accounting Review 94 (2), 83-104.
[51]	Caskey, J. and V. Laux (2017). Corporate Governance, Accounting Conservatism, and Manipulation. Management Science 63 (2), 424-437.
[52]	Lobo, G. J, M. Neel, A. Rhodes (2018). Accounting comparability and relative performance evaluation in CEO compensation. Review of Accounting Studies 23 (3), 1137-1176.
[53]	Choi, JH, S. Choi, L. A. Myers and D. Ziebart (2019). Financial Statement Comparability and the Informativeness of Stock Prices about Future Earnings. Contemporary Accounting Research 36 (1), 389-417.
[54]	Cornett, M. M, A. J. Marcus and H. Tehranian (2008). Corporate governance and pay-for-performance: the impact of earnings management. Journal of Financial Economics 87, 357-373.
[55]	Wang, C. R. and Ni J. (2012). Share structure, board characteristics and earnings management. Academic Journal of Anhui University 2012 (1), 141-149.
[56]	Lin, Y. E, H. H. Chih, C. H. Cheng and L. R. Wei (2015). The impact of industrial structure on capital expenditure: evidence from Taiwan. Cross-Strait Financial Journal 3 (1), 47-66.

Cite This Article

Plain Text BibTeX RIS

APA Style

Chia-Hsin Cheng. (2019). Share Centralization, Investor Sentiment and Firm Performance. International Journal of Business and Economics Research, 8(3), 78-84. https://doi.org/10.11648/j.ijber.20190803.11

Copy | Download

ACS Style

Chia-Hsin Cheng. Share Centralization, Investor Sentiment and Firm Performance. Int. J. Bus. Econ. Res. 2019, 8(3), 78-84. doi: 10.11648/j.ijber.20190803.11

Copy | Download

AMA Style

Chia-Hsin Cheng. Share Centralization, Investor Sentiment and Firm Performance. Int J Bus Econ Res. 2019;8(3):78-84. doi: 10.11648/j.ijber.20190803.11

Copy | Download

@article{10.11648/j.ijber.20190803.11,
  author = {Chia-Hsin Cheng},
  title = {Share Centralization, Investor Sentiment and Firm Performance},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {3},
  pages = {78-84},
  doi = {10.11648/j.ijber.20190803.11},
  url = {https://doi.org/10.11648/j.ijber.20190803.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190803.11},
  abstract = {The purpose of this paper is to identify how internal corporate governance and external investor sentiment impacts the operating performance of the firm. The corporate governance mechanism affects the firm’s operating activities, and transfers its results to outside investors by public financial reports. Since the universal uninformed investors could only identify the firm’s net income instead of accrual earnings, this paper reflects the “visible” accounting number to represent investors’ received information differently from literatures. Sampling the Taiwanese listed companies from 2007 to 2014, I demonstrate variable definition, build regression models and examine them by full sample analysis and by grouping analysis. The results show three points contributed to professional and business field. The first is that both the higher investor sentiment and the larger shareholding percentage of the board are relevant to reported performance. In addition, because the investor sentiment is encouraged by firm’s net income, the managers should devote to better earnings for borrowing equity capital when the firm’s debt ratio is high. Finally, only in the situation that the enterprise faces low investor sentiment and little shareholding of the board is the shareholding percentage negative relationship to the operating performance. It infers that instead of informing the firm’s prospect to the outside investors, the board might hold on its share right inside of the firm.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - Share Centralization, Investor Sentiment and Firm Performance
AU  - Chia-Hsin Cheng
Y1  - 2019/05/29
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190803.11
DO  - 10.11648/j.ijber.20190803.11
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 78
EP  - 84
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190803.11
AB  - The purpose of this paper is to identify how internal corporate governance and external investor sentiment impacts the operating performance of the firm. The corporate governance mechanism affects the firm’s operating activities, and transfers its results to outside investors by public financial reports. Since the universal uninformed investors could only identify the firm’s net income instead of accrual earnings, this paper reflects the “visible” accounting number to represent investors’ received information differently from literatures. Sampling the Taiwanese listed companies from 2007 to 2014, I demonstrate variable definition, build regression models and examine them by full sample analysis and by grouping analysis. The results show three points contributed to professional and business field. The first is that both the higher investor sentiment and the larger shareholding percentage of the board are relevant to reported performance. In addition, because the investor sentiment is encouraged by firm’s net income, the managers should devote to better earnings for borrowing equity capital when the firm’s debt ratio is high. Finally, only in the situation that the enterprise faces low investor sentiment and little shareholding of the board is the shareholding percentage negative relationship to the operating performance. It infers that instead of informing the firm’s prospect to the outside investors, the board might hold on its share right inside of the firm.
VL  - 8
IS  - 3
ER  -

Copy | Download

Author Information

Chia-Hsin Cheng

Business School, Yulin Normal University, Yulin, China

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Chia-Hsin Cheng. (2019). Share Centralization, Investor Sentiment and Firm Performance. International Journal of Business and Economics Research, 8(3), 78-84. https://doi.org/10.11648/j.ijber.20190803.11

Copy | Download

ACS Style

Chia-Hsin Cheng. Share Centralization, Investor Sentiment and Firm Performance. Int. J. Bus. Econ. Res. 2019, 8(3), 78-84. doi: 10.11648/j.ijber.20190803.11

Copy | Download

AMA Style

Chia-Hsin Cheng. Share Centralization, Investor Sentiment and Firm Performance. Int J Bus Econ Res. 2019;8(3):78-84. doi: 10.11648/j.ijber.20190803.11

Copy | Download

@article{10.11648/j.ijber.20190803.11,
  author = {Chia-Hsin Cheng},
  title = {Share Centralization, Investor Sentiment and Firm Performance},
  journal = {International Journal of Business and Economics Research},
  volume = {8},
  number = {3},
  pages = {78-84},
  doi = {10.11648/j.ijber.20190803.11},
  url = {https://doi.org/10.11648/j.ijber.20190803.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190803.11},
  abstract = {The purpose of this paper is to identify how internal corporate governance and external investor sentiment impacts the operating performance of the firm. The corporate governance mechanism affects the firm’s operating activities, and transfers its results to outside investors by public financial reports. Since the universal uninformed investors could only identify the firm’s net income instead of accrual earnings, this paper reflects the “visible” accounting number to represent investors’ received information differently from literatures. Sampling the Taiwanese listed companies from 2007 to 2014, I demonstrate variable definition, build regression models and examine them by full sample analysis and by grouping analysis. The results show three points contributed to professional and business field. The first is that both the higher investor sentiment and the larger shareholding percentage of the board are relevant to reported performance. In addition, because the investor sentiment is encouraged by firm’s net income, the managers should devote to better earnings for borrowing equity capital when the firm’s debt ratio is high. Finally, only in the situation that the enterprise faces low investor sentiment and little shareholding of the board is the shareholding percentage negative relationship to the operating performance. It infers that instead of informing the firm’s prospect to the outside investors, the board might hold on its share right inside of the firm.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - Share Centralization, Investor Sentiment and Firm Performance
AU  - Chia-Hsin Cheng
Y1  - 2019/05/29
PY  - 2019
N1  - https://doi.org/10.11648/j.ijber.20190803.11
DO  - 10.11648/j.ijber.20190803.11
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 78
EP  - 84
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20190803.11
AB  - The purpose of this paper is to identify how internal corporate governance and external investor sentiment impacts the operating performance of the firm. The corporate governance mechanism affects the firm’s operating activities, and transfers its results to outside investors by public financial reports. Since the universal uninformed investors could only identify the firm’s net income instead of accrual earnings, this paper reflects the “visible” accounting number to represent investors’ received information differently from literatures. Sampling the Taiwanese listed companies from 2007 to 2014, I demonstrate variable definition, build regression models and examine them by full sample analysis and by grouping analysis. The results show three points contributed to professional and business field. The first is that both the higher investor sentiment and the larger shareholding percentage of the board are relevant to reported performance. In addition, because the investor sentiment is encouraged by firm’s net income, the managers should devote to better earnings for borrowing equity capital when the firm’s debt ratio is high. Finally, only in the situation that the enterprise faces low investor sentiment and little shareholding of the board is the shareholding percentage negative relationship to the operating performance. It infers that instead of informing the firm’s prospect to the outside investors, the board might hold on its share right inside of the firm.
VL  - 8
IS  - 3
ER  -

Copy | Download