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Two essays on corporate finance : the impact of independent non-executive directors and the longevity of family control

Impact of independent non-executive directors and the longevity of family control

Authors King, Roger
Issue Date 2006
Summary Essay 1: Does the Reputation of Independent Non-executive Director Matter? Evidence from Hong Kong In response to recent corporate scandals, shareholders and regulators around the world are demanding greater corporate transparency. If indeed, as is often stated, Independent Non-executive Directors (INED) can play an important role in monitoring management and enforcement of transparency, then do INEDs' personal reputations matter? This paper examines shareholders' response to appointments of INEDs in Hong Kong - a society where corporate ownerships are concentrated and personal reputations are highly valued. My study finds prestigious individuals are positively related to less risky and better performing firms. I also find appointments of prestigious INEDs are associated with smaller IPO underpricing, and that the market reacts positively to the new non-replacement appointments of less-busy prestigious INEDs. However, the market seems to be indifferent to reputation in replacements of INEDs. These results extend the reputation capital literature by providing evidence on the role INEDs in certifying and signaling the quality of firms. JEL classification: D81; G11; G14; G15; G24; G32; G34 Keywords: Reputation; Independent Non-executive Directors; Underpricing; Underwriters, Auditors; Corporate Governance; Board Composition Essay 2: Family Control Longevity: Evidence from the S&P 500 The desire to retain control for founders of family firms is one of the key differences between family-owned firms and firms with other forms of ownership. It affects investment decisions as well as the capital structure of the firms. This study investigates how industry characteristics affect family control longevity and age at IPO for family controlled firms using a sample of large US firms that are family founded. Specifically I document that family firms in cyclical industries that require capital to stay competitive seek public equity funding earlier in their corporate lives thus shortening family control spans. The results, I believe, contribute to a better understanding of determinants of IPO timing and longevity of control for family founded firms. JEL classification: D21, E32, G32, G33, G34 Keywords: Ownership structure; Family business; Capital structure; Capital-intensive industries; Cyclical industries; Company growth; Family control; Corporate control; Endogeneity of ownership structure.
Note Thesis (Ph.D.)--Hong Kong University of Science and Technology, 2006
Language English
Format Thesis
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