Agency conflicts and the demand for audits : Evidence from Adoption of COW laws

Hyunjin Jo 고려대학교 대학원 2024 국내석사

이 연구는 기업의 고품질 감사에 대한 수요와 증가된 대리인 문제 간의 관계를 조사했다. Corporate opportunity waivers(COWs) 법 도입에 따른 소규모 감사인과 비교하여 대규모 감사인, 그리고 산업 전문가 감사인과 비산업 전문가 감사인에 미치는 차별적 영향을 보여준다. 본 연구는 COW 법 도입에 따른 대리인 갈등의 변화가 기업의 감사품질 수요에 미치는 실질적인 영향을 보여준다. 이는 갈등이 기업 및 경영진 행동의 다양한 측면에 어떻게 영향을 미치는지를 확인하여 기존의 선행연구에 기여한다. 더불어 이러한 결과들은 중요한 법적 결정이 예상치 못한 결과로 이어질 수 있음을 보여준다. 이러한 법정 결정의 예상치 못한 감사품질 수요에 대한 영향은 자본시장 및 정책결정에 중요한 함의를 지닌다. In this study, I examine the relationship between firms’ demand for high-quality audits and heightened agency conflicts. The results show that distinct impacts of COWs adoption on big N auditors compared to small auditors, as well as on industry specialist auditors compared to non-industry specialist auditors. My study reveals that a notable rise in the likelihood of switching from non-Big auditors to big N auditors with COWs adoption. This study makes contributions to the existing body of knowledge in several significant ways. Initially, it delves into the analysis of a notable external legal factor that heightens agency conflicts and demonstrates how alterations in these conflicts, resulting from the adoption of corporate opportunity waivers (COWs). This expands the literature exploring how conflicts affect different aspects of firms and managers' behavior. Moreover, these findings indicate that important legal decisions can lead to unintended outcomes. These unanticipated effects of high court decisions on the demand for audit quality have important implications for both the capital market and policymakers.

Essays on Institutional Investors and Securities Class Actions

하원석 서울대학교 대학원 2021 국내박사

This dissertation is comprised of two essays on institutional investors and securities class actions. The first essay, entitled “Institutional Investors’ Portfolio Adjustment after Shareholder Litigation,” examines how institutional investors change their investment behavior toward non-litigated investees after experiencing litigation. Prior studies report that institutional investors play a key role in securities class actions by monitoring the court process, inducing favorable litigation outcomes for plaintiffs and improving governance in the litigated firms. I extend the prior studies by focusing on changes in the investment strategy of institutional investors after litigation. Using a sample of 102,234 institution-quarter observations in the U.S. over the 2006–2017 period, I document the following. First, institutional investors tilt their portfolios toward investees with higher financial reporting quality after experiencing litigation. Their portfolio adjustments following litigation are interpreted as an attempt to reduce ex ante litigation risk at the portfolio level. Second, the portfolio adjustments are less pronounced when institutional investors have a shorter investment horizon or when they stronger incentive to directly monitor investees’ agency conflicts. These results suggest that the portfolio adjustments based on financial reporting quality are less important when institutional investors heavily rely on private information in their short-term trading or when they benefit more from direct monitoring. Overall, this study provides evidence of the externalities of securities class actions in an investor’s portfolio and deepens the understanding of the economic consequences of securities class actions. The second essay, entitled “One Leaves, Another Arrives: The Behavior of Hedge Funds around Shareholder Litigation,” investigates the behavior of hedge funds around shareholder litigation, focusing on their activist and trading strategies. Despite their key role in promoting effective governance, hedge funds have been discredited in the litigation setting. I attempt to reconcile this discrepancy by examining the economic decisions of hedge funds in the face of shareholder litigation. Using extensive U.S. data on securities class actions and hedge funds’ Schedule 13D filings during the 2001–2019 period, I document the following. Sued firms are more likely than control firms to be subject to hedge fund intervention following litigation. Compared with sued firms without such intervention, sued firms targeted by hedge funds improve their corporate governance and performance more significantly after litigation, consistent with hedge funds influencing the corporate actions of sued firms via voice. Further analysis reveals that such intervention is primarily driven by hedge funds that initiate their investments in a sued firm after litigation, but not by those that already held stakes in the sued firm before litigation. Hedge funds who held shares of the sued firm before litigation are more likely than other types of institutional investors to preemptively dispose of their stakes in the sued firm before litigation begins. This evidence is consistent with informed hedge funds deploying an exit strategy to deal with agency conflicts. Finally, hedge funds with more litigation experience are more likely to intervene in the management of other non-litigated firms in their investment portfolios. I interpret this result as evidence of the externalities of litigation on the behavior of hedge funds. In summary, this study provides a comprehensive understanding of the voice and exit strategies that hedge funds undertake around shareholder litigation.

Conflict in public relations agency-client relationships : a survey of public relations agencies and clients (advertising)

Bourland, Pamela Gale University of Georgia 1995 국내박사

The Impact of Cost Stickiness on Investment Efficiency

지가영 성균관대학교 일반대학원 2017 국내박사

This paper investigates whether and how cost stickiness affects over-investment in capital and labor, and whether there are negative moderating effects of cost stickiness on the relationship between over-investment and future firm performance. Prior literature in investment efficiency provides evidence that the economic frictions caused by agency conflicts lead to suboptimal investment, such as over- or under- investment. However, most prior studies provide only indirect empirical evidence, using corporate governance or the quality of financial reporting as a proxy for agency conflicts, in examining the association between agency conflicts and investment efficiency. Therefore, I use the existence of cost stickiness as the explicit phenomenon of agency conflicts and try to provide the evidence that agency conflicts lead to over-investment in capital and labor, by investigating whether there is a difference in investment decisions between firms with and without cost-stickiness behavior. I perform empirical analyses using samples that consist of 23,196 firm-year observations from 1993 to 2015. The empirical results are summarized as follows. My results are consistent with the notion that firms with stickier costs over-invest in both capital and labor more than firms without it. First, the firms with stickier costs caused by agency conflicts would increase unutilized capital resources or the number of employees under their control beyond optimal levels in order to obtain more personal utility, power, compensation, and prestige. Also, managers may not lay off employees who are under their control even though they perform poorly. Second, in both capital and labor, the relationship between over-investment and future firm performance is more pronounced for the firms with stickier costs. Therefore, if over-investment is caused by agency conflicts, the over-investment could hurt future firm performance more. Overall, the findings of this study contribute to a better understanding of the influence of cost-stickiness behavior, especially on over-investment (investment efficiency). This paper also finds the direct causal relationship between agency conflicts and over-investment (investment efficiency) using cost stickiness.

Essays on Networks in Macroeconomics and Finance

Zhu, Wu ProQuest Dissertations & Theses University of Penn 2021 해외박사(DDOD)

This thesis consists of three essays that examine theoretically and empirically the implications of networks in business cycles, economic recovery, systemic risk, corporate finance and governance, and asset pricing. This first chapter emphasizes the role of networks in driving economic recovery from recessions and its role in asset pricing. It is based on a joint work with Yucheng Yang. The speed at which the US economy has recovered from recessions ranges from months to years. We propose a model incorporating the innovation network, the production network, and cross-sectional shocks and show that their interactions jointly explain large variations in the recovery speed across recessions in the US. We show that when the innovation network has low-rank, there exists one key direction: the impact of a shock becomes persistent only if the shock is parallel to this key direction; in contrast, the impact diminishes quickly if the shock parallels to other directions. Empirically, we estimate the model in a state-space form and document a set of new stylized facts of the US economy. First, the innovation network among sectors has low-rank. Second, the innovation network has non-negligible overlap with the production network. Third, recessions with slow recovery are those witnessing sizable negative shock to sectors central to the innovation network. Such network structures and the time-varying sectoral distribution of the shocks can well explain the large variation in the recovery speed across recessions in the US. Finally, we show that the force driving a slow-recovery yields a small but persistent process in consumption growth, and we use this process to explain several puzzles in asset pricing.The second chapter is based on the joint work with Yiqing Xing and Rakesh Vohra where we explore the agency conflicts in amplifying and propagating a shock in equity cross-holding networks. Unlike the first chapter, here, we emphasize the role of financial network and agency conflicts within the firm. We argue that firm-level agency conflicts and not just the network of interdependencies between firms, play a crucial role in amplifying or muting the propagation of exogenous shocks. Suppose firms can make investment decisions in response to an exogenous shock. If they are subject to default costs or limited liability, their investment decisions mitigate the spread of an initial shock. In the face of interest conflicts or moral hazard, firm-level investment choices amplify an initial shock. Agency conflicts counter the role of network structure in the propagation of shocks. For example, prior work argues that more integrated networks facilitate the propagation of shocks. In the presence of interest conflicts, this effect can be reversed. Under some condition, in a fully diversified network, the aggregate effect of an idiosyncratic shock via propagation does not diminish. This suggests a potentially important role that corporate governance plays in macro fluctuations.The third chapter is based on the joint work with Yu Shi and Robert Townsend where we show the business groups can significantly change the effect of credit supply shock through the equity-holding networks. Using business registry data from China, we show that internal capital markets in business groups can play the role of a financial intermediary and propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 10% local bank credit growth where corporate shareholders are located would increase subsidiaries' investment by 0.6% of their tangible fixed asset value, which accounts for 42.5% (4.3%) of the median (average) investment rateamong these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide evidence tosupport the channel.

Three Essays on Corporate Social Responsibility and Corporate Governance

Kyunghyun Kim 고려대학교 대학원 2023 국내박사

본 논문은 기업의 사회적 책임(Corporate Social Responsibility, CSR)과 기업 지배구조에 관한 세 가지 연구로 구성된다. 제1장에서는 코로나 바이러스 감염증 확산에 따른 주가 급락을 기업의 사회적 책임 수요에 대한 외생적 충격으로 활용하여 COVID-19 대유행 기간 동안 기업의 사회적 책임이 주가 성과에 미치는 영향을 살펴보았다. 제2장에서는 제품의 안전성과 기업의 사회적 책임의 중요성을 깊이 인식하게 했던 가습기 살균제 사건 기간에 기업의 사회적 책임 성과에 따라 주식시장의 기업가치 평가가 뚜렷하게 달라짐을 발견하였다. 두 논문 모두 사회적 책임에 대한 투자가 기업의 비재무적 위험을 완화시킴을 실증분석을 통해 보여준다. 제3장은 대규모 기업집단의 사회적 책임에 관련한 것으로 처음 두 논문과 달리 CSR의 부정적 측면에 관해 분석했으며, 지배주주의 소유-지배 괴리가 대규모 기업집단 계열사의 사회적 책임 이행에 중요한 결정요인이 됨을 발견하였다. 제1장 『The Value of Corporate Social Responsibility during the COVID-19 Pandemic: Evidence from Korea (COVID-19 대유행 기간 동안의 기업 사회적 책임 가치: 한국을 중심으로)』는 최근 주식시장에 발생한 외생적 충격인 COVID-19 대유행을 준실험적 환경으로 활용하여 CSR이 한국 기업의 주가 성과와 어떤 관련이 있는지 살펴보았다. 기업의 환경 및 사회 (ES) 평가를 활용하여 CSR를 측정하였다. 이중차분 분석 결과, ES 등급이 높은 기업의 주식수익률은 팬데믹 위기 동안 ES 등급이 낮은 기업에 비해 덜 하락하였다. 또한, 기업의 ES 등급이 높을수록 대유행 기간 동안의 주가 수익률 변동성이 낮아진다는 것을 발견하였다. 특히, 환경 등급이 대유행 기간 동안의 주가 성과에 대한 CSR 효과에 주요한 역할을 한다는 것을 발견하였다. 본 연구의 실증결과는 기업의 사회적 책임 이행이 비재무적 위험의 완화에 기여하며, 시장 대폭락 기간 동안 주식 시장은 기업의 ESG 정책을 재평가하여 주가에 반영함을 보여준다. 제2장 『The Value of Corporate Social Responsibility: Evidence from the Humidifier Disinfectant Scandal in Korea (기업의 사회적 책임의 가치: 한국 가습기 살균제 사건을 중심으로)』는 환경 및 사회적 문제와 밀접한 관련이 있는 한국 가습기 살균제 사건 기간에 CSR이 기업의 주가 성과에 미치는 영향을 살펴본다. 제품 안전성에 관해 시장과 사회의 관심이 집중된 사건 기간 동안, ES 등급이 높은 기업, 특히 사회적 등급이 높은 기업이 ES 등급이 낮은 기업보다 상대적으로 더 높은 주가 성과를 보이는 것을 발견하였다. 본 연구의 추정에 의하면 가습기 살균제 사건 기간 동안 기업의 ES 평가 점수가 표준편차 한 구간만큼 높은 경우 약 2.4%p 의 주가 상승이 나타났다. 본 연구 결과는 투자자들이 환경 및 사회적 문제에 관심을 기울일 때 CSR이 기업의 주가 성과에 미치는 영향이 크다는 것을 보여주며, 기업의 CSR 투자가 비금융적 위험을 크게 완화함을 시사한다. 제3장 『Agency Conflicts, Ownership Structure, and Corporate Social Responsibility (대리인 갈등, 소유 구조 및 기업의 사회적 책임)』은 기업의 소유구조가 CSR에 미치는 영향에 대해 살펴보았다. 한국의 대규모 기업집단인 재벌에 속하는 기업들로 표본을 구성하였고, 그 기업들의 ES 평가를 활용하여 CSR을 측정하였다. 분석 결과, 지배주주의 지배권과 현금흐름권의 차이 (즉, 소유-지배 괴리도)와 ES 성과, 특히 사회적 성과 사이에 양의 관계가 있다는 것을 발견하였다. 또한, 동일한 재벌에 속한 다른 계열사 간 합병으로 인해 소유-지배 괴리도가 증가할 때 ES 성과가 유의하게 증가한다는 것을 확인하였다. 추가적으로 창업자의 후손이 지배하는 대규모 기업집단은 창업자가 운영하는 대규모 기업집단보다 더 높은 CSR을 갖는 경향이 있음을 발견하였다. 본 연구의 결과는 CSR을 대리인 이론의 관점에서 보는 견해를 뒷받침하며, 이는 CSR 투자가 소액 주주의 이익을 희생시키면서 자신의 사적 이익을 추구하려는 지배주주의 유인과 관련이 있음을 시사한다. This dissertation consists of three essays on corporate social responsibility and corporate governance. The first essay titled “The Value of Corporate Social Responsibility during the COVID-19 Pandemic: Evidence from Korea” examines how corporate social responsibility (CSR) is associated with the stock performance of Korean firms during the COVID-19 pandemic, exploiting the recent pandemic-induced market crash as an experimental setting. Using firms’ Environmental and Social (ES) ratings to measure their CSR, our Difference-in-Differences analysis reveals that the returns of stocks with higher ES ratings decline less than those with lower ES ratings during the pandemic crash period. Our results further show that firms’ higher ES ratings are associated with lower stock return volatilities during the pandemic. Moreover, we find that environmental ratings play a major role in the CSR effects on the stock performance during the pandemic. Our results suggest that CSR mitigates firms’ nonfinancial risk and that the stock market factors into ES investments in revaluing firms during a market crash. The second essay titled “The Value of Corporate Social Responsibility: Evidence from the Humidifier Disinfectant Scandal in Korea” examines the effects of CSR on firms' stock performance amid a corporate scandal closely linked to ES issues, the humidifier disinfectant scandal in Korea, as a quasi-natural experiment. We find that firms with higher ES ratings, especially those with higher social ratings show significantly higher stock performance than firms with lower ES ratings during the product safety scandal. Our estimation finds that one standard deviation increase in a firm’s ES scores translates into about 2.4 percentage points higher stock returns during the scandal period. Our findings reveal that CSR is influential over a firm’s stock performance when investors pay significant attention to ES issues, suggesting that firms’ investments in CSR significantly mitigate their nonfinancial risk. The third essay titled “Agency Conflicts, Ownership Structure, and Corporate Social Responsibility” examines the effect of a firm’s ownership structure on CSR, focusing on the dark side of CSR, unlike the first two essays. Using firms that belong to Korean business groups, chaebols, as a sample and their ES ratings to measure CSR, we find a positive relationship between control-ownership disparity (i.e., a divergence between voting and cash flow rights of controlling shareholders) and ES performance, especially social performance. Additionally, we show that when control-ownership disparities increase due to mergers between other affiliated firms, ES ratings rise significantly. Moreover, chaebol firms controlled by descendant controlling families are more likely to have higher CSR than those controlled by the founders. Our results support the agency view of CSR, which suggests that the CSR investment is associated with controlling shareholders’ incentives to pursue their own private benefits at the expense of minority shareholders.

Investment opportunities, agency conflicts, contracts, and the demand for audit quality

Reed, Bradford James University of Arizona 1995 국내박사

Corporate characteristics and cash policy : stand-alone vs. corporate group firms

오병준 서울대학교 대학원 2015 국내석사

I first show that private (unlisted) stand-alone firms hold more cash reserves than private corporate group firms do. This result attributes to presence of internal capital market within corporate group firms. By combining evidence from across public and private firms as well as within public firms across different qualities of governance, I also show that stand-alone firms’ cash policy reflects much higher agency costs than group firms' in public (listed) firm samples. Specifically, agency problems not affect not only the target level of cash, but also how managers react to cash in excess of the target.

자회사 IPO로 인한 중복상장이 모회사에 미치는 영향

김슬아 고려대학교 대학원 2025 국내석사

본 연구는 자회사의 IPO에 의해 발생하는 중복상장이 모회사의 주가에 미치는 영향을 실증적으로 분석하였다. 중복상장이 소수주주의 권익 침해, 이중계상 등 지배구조적 위험을 내포하고 있다는 우려가 지속적으로 제기되어 왔으나, 이에 대한 체계적인 실증분석은 부족한 실정이다. 본 연구는 증권신고서 제출일과 자회사 상장일을 각각의 사건일로 설정하고, 누적 비정상 수익률(CAR)을 측정한 뒤 회귀분석을 통해 시장 반응의 결정요인을 검토하였다. 분석 결과, 증권신고서 제출일 시점에서는 유의미한 주가반응이 제한적이었으나, 자회사 상장 시점에는 공모규모, 구주매출 비중, 모회사 지분율, 자회사 상대규모, 동종산업 여부가 모회사 주가에 유의한 음(-)의 영향을 미치는 것으로 나타났다. 이는 투자자들이 중복상장을 단순히 기업 재무적 전략이 아닌, 이해상충의 위험이 내재된 사건으로 인식하고 있음을 보여준다. 본 연구는 중복상장에 따른 부정적 영향을 실증적으로 확인하였다는 점에서 제도개선을 위한 정책적 시사점을 제공한다. This study empirically examines the impact of subsidiary IPOs on the stock performance of their parent companies, focusing on the phenomenon of publicly listed parent-subsidiary pairs. Although concerns have been persistently raised about conflicts of interests—such as expropriation of minority shareholders and double counting of firm value—there has been a lack of systematic empirical analysis on this issue. This study designates the preliminary registration statement filing date and the subsidiary’s listing date as event dates, estimates stock market reactions, and analyzes the determinants of market responses. The results show insignificant market reactions around the registration date but reveal significant negative reactions around the listing date. Specifically, larger offering size, higher proportion of secondary shares, larger parent ownership, larger relative size of the subsidiary, and business overlap between the parent and subsidiary are associated with more negative returns. These findings suggest that investors perceive the listing of both the parent and subsidiary firms not merely as a financial strategy, but as an event with inherent conflicts of interests and governance risks. This study provides empirical evidence of the negative consequences of publicly listed parent-subsidiary pairs, offering important policy implications for regulatory reform.

(The) impact of cost stickiness on investment efficiency

Ji, Gayoung Sungkyunkwan University 2017 국내박사