A New Measure of Control-Cash Flow Deviation: Cases in Taiwan

Pei-Gi Shu (), Sue-Jane Chiang () and Man-Yin Chen ()
Additional contact information
Pei-Gi Shu: Fu Jen Catholic University
Sue-Jane Chiang: Fu Jen Catholic University
Man-Yin Chen: Fu Jen Catholic University

Asia-Pacific Financial Markets, 2018, vol. 25, issue 4, No 3, 325-340

Abstract: Abstract The traditionally defined measure of deviation fails to capture the possibility that controlling owners might pledge their shares for bank loans and with that money from bank loans to amplify their personal leverage in the stock market. In this study we construct a newly defined measure of deviation that includes pledge ratio into the definition. Using a sample of 2777 firm-year observations in the sampling period of 2011–2015, we find that the newly defined measure of deviation is negatively correlated with firm’s performance and are more capable of dictating firm’s performance than the traditionally defined measure. We further find that the newly defined deviation could better contrast the performance measures between normal firms and financially-distressed firms.

Keywords: Control right; Cash flow right; Deviation; Pledging ratio (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10690-018-9251-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:apfinm:v:25:y:2018:i:4:d:10.1007_s10690-018-9251-8

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10690/PS2

DOI: 10.1007/s10690-018-9251-8

Access Statistics for this article

Asia-Pacific Financial Markets is currently edited by Jiro Akahori

More articles in Asia-Pacific Financial Markets from Springer, Japanese Association of Financial Economics and Engineering
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().