Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction

This is an event study that examines the effects of related party transaction (RPT) and corporate governance factors in a firm's daily cumulative abnormal return of the stock price (CAR), using a sample of 422 RPTs engaged by 286 listed firms in the Main Market of Bursa Malaysia from 2008 to...

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Main Author:	Koay, Chew Chai
Format:	Thesis
Language:	eng eng
Published:	2015
Subjects:	HD2709-2930.7 Corporations
Online Access:	https://etd.uum.edu.my/5755/1/s92496_01.pdf https://etd.uum.edu.my/5755/2/s92496_02.pdf
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id	my-uum-etd.5755
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Taufil Mohd, Kamarun Nisham
topic	HD2709-2930.7 Corporations
spellingShingle	HD2709-2930.7 Corporations Koay, Chew Chai Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction
description	This is an event study that examines the effects of related party transaction (RPT) and corporate governance factors in a firm's daily cumulative abnormal return of the stock price (CAR), using a sample of 422 RPTs engaged by 286 listed firms in the Main Market of Bursa Malaysia from 2008 to 2013. Univariate analysis (t-test) is used to determine the RPT's announcement effect on CAR in the short horizon window, and ordinary least squares (OLS) and logistic regression are employed to investigate the relationships between the W sCA R and exogenous variables of RPT types and size, Minority Shareholder Watchdog Group (MSWG) activism, and corporate governance factors. The univariate result shows significant negative effects on CAR in the postannouncement of RPT, indicating governance discount of stock prices by the market in realizing the occurrence of expropriation, in particular asset acquisition and cash-payment types of RPT. The regression results show that cash ownership of the dominant owner and the divergence of control to cash right for the dominant owner and the directors have a significant negative relationship with CAR. This contributes to extant researches in emerging markets with findings that the problems of expropriation are mainly attributed to circumstances of high dominant family ownerships, which is further exacerbated by the entrenchment of the controlling shareholders and directors. This study also adds to the literature by showing evidence that MSWG activism, which results in higher fm's disclosure quality, has a significant positive effect on CAR in mitigating the expropriating behaviour of the controlling shareholders. Furthermore, the significant positive relationship between board independence and CAR also reinforces previous research findings that increasing the independence of the board enhances its effectiveness as an advocate for minority shareholders' interest. Finally, clear evidence was found that participation of the state's block holders or public investment fund contributes positively to the deterrence of expropriation by the dominant owner.
format	Thesis
qualification_name	Doctor of Business Administration (DBA)
qualification_level	Doctorate
author	Koay, Chew Chai
author_facet	Koay, Chew Chai
author_sort	Koay, Chew Chai
title	Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction
title_short	Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction
title_full	Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction
title_fullStr	Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction
title_full_unstemmed	Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction
title_sort	effect of corporate governance factors and mswg activism on cumulative abnormal returns induced by related party transaction
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2015
url	https://etd.uum.edu.my/5755/1/s92496_01.pdf https://etd.uum.edu.my/5755/2/s92496_02.pdf
_version_	1747827976015183872
spelling	my-uum-etd.57552021-03-18T08:25:07Z Effect of corporate governance factors and MSWG activism on cumulative abnormal returns induced by related party transaction 2015 Koay, Chew Chai Taufil Mohd, Kamarun Nisham Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HD2709-2930.7 Corporations This is an event study that examines the effects of related party transaction (RPT) and corporate governance factors in a firm's daily cumulative abnormal return of the stock price (CAR), using a sample of 422 RPTs engaged by 286 listed firms in the Main Market of Bursa Malaysia from 2008 to 2013. Univariate analysis (t-test) is used to determine the RPT's announcement effect on CAR in the short horizon window, and ordinary least squares (OLS) and logistic regression are employed to investigate the relationships between the W sCA R and exogenous variables of RPT types and size, Minority Shareholder Watchdog Group (MSWG) activism, and corporate governance factors. The univariate result shows significant negative effects on CAR in the postannouncement of RPT, indicating governance discount of stock prices by the market in realizing the occurrence of expropriation, in particular asset acquisition and cash-payment types of RPT. The regression results show that cash ownership of the dominant owner and the divergence of control to cash right for the dominant owner and the directors have a significant negative relationship with CAR. This contributes to extant researches in emerging markets with findings that the problems of expropriation are mainly attributed to circumstances of high dominant family ownerships, which is further exacerbated by the entrenchment of the controlling shareholders and directors. This study also adds to the literature by showing evidence that MSWG activism, which results in higher fm's disclosure quality, has a significant positive effect on CAR in mitigating the expropriating behaviour of the controlling shareholders. Furthermore, the significant positive relationship between board independence and CAR also reinforces previous research findings that increasing the independence of the board enhances its effectiveness as an advocate for minority shareholders' interest. Finally, clear evidence was found that participation of the state's block holders or public investment fund contributes positively to the deterrence of expropriation by the dominant owner. 2015 Thesis https://etd.uum.edu.my/5755/ https://etd.uum.edu.my/5755/1/s92496_01.pdf text eng public https://etd.uum.edu.my/5755/2/s92496_02.pdf text eng public dba dba Universiti Utara Malaysia Abdul Rahman, Rashidah., & Haneem Moharned Ali, Fairuzana (2006). Board, audit committee, culture and earnings management: Malaysian evidence, Managerial Auditing Journal, 21 (7), 783-804. Abdul Wahab, Effiezal Aswadi., How, J., & Verhoeven, P (2008). Corporate governance and institutional investors: evidence from Malaysia, Asian Academy of Management Journal of Accounting and Finance, 4(2), 67-90. Abdul Wahab, Effiezal Aswadi., Haron, Hasnah., Lok, C. L., & Yahya, Sofri (2011). Does Corporate Governance Matter? 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