||What determine share pledging behavior of the directors and supervisors?
||Department of Accountancy
share pledging behavior of the directors and supervisors
In this paper, we investigate what determine share pledging behavior of the directors and supervisors. What give them incentives to do different behavior, some directors and supervisors never do share collateral, others continue doing and still others pledge high shares? Nowadays, the high share pledge ratio which has been considered as a warning that tells us that someone is hollowing out company's assets, is still done by the directors and supervisors. Why is that? Most of previous studies focus on the consequences of shares pledging behavior rather than the causes of shares pledging behavior. This paper attempts to provide the factors of directors and supervisors’ share collateralization.
This paper uses the data of Taiwanese publicly listed companies from the Taiwan Economic Journal (TEJ) database from 2000 to 2012. Firstly, we use logit model to assess whether independent variables are suitable with subsample which are pledging shares for 13 year-end and non-pledging shares for 13 year-end. Then, we use tobit model to assess with full sample. Both are used to measure and explain variables from three perspective: firm characteristics, stock price and corporate governance. And it can stronger the results and remove the error of the results which are caused by incorrect statistical method by using two different models.
Our empirical results indicate that shares pledging behavior of the directors and supervisors has connections with firm characteristics, stock price and corporate governance. The research findings also indicate that the existence of supervision of creditors of the firms helps with reducing agency problem. In addition, we use the types of control of business groups data constructed by TEJ and find that the family control type which compared with the professional manager control is more likely to do shares pledging behavior.
Finally, our empirical results support corporate governance in the firms which have shares pledging behavior of the directors and supervisors is easier causing agency problem between controlling shareholders and minority shareholders than in the firms which have no shares pledging behavior of the directors and supervisors. Controlling shareholders could have more power to gain the interests from exploiting minority shareholders by pledging shares.
List of Tables VI
List of Figures VII
Chapter1. Introduction 1
Chapter2. Literature Review 5
2.1 The agency problem 5
2.2 Expropriation of minority shareholders 6
2.3 Shareholders and creditors 9
2.4 The effect of shares pledging behavior on company 10
2.5 The causes of shares pledging behavior 11
Chapter 3 Data and Methodology 13
3.1 Data measurement 13
3.2 Models and estimation 20
3.2.1 Logit model 21
3.2.2 Tobit model 21
3.3 Develop of hypotheses 21
3.3.1 Connection to firm characteristics 23
3.3.2 Connection to stock price 25
3.3.3 Connection to corporate governance 26
3.4 Empirical methodology 27
Chapter 4 Empirical Results 32
4.1 Descriptive Statistics 32
4.2 Pearson correlation coefficient 34
4.3 Results of logit models 35
4.4 Additional Tests : Tobit models 37
Chapter 5 Conclusions 39
5.1 Findings and contributions 39
5.2 Limitations and directions for future research 39
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