Forced financial information restatements and management turnover: market discipline and large family shareholders’ intervention in an emerging economy

Zhang, Xiaoxiang, Wei, Jo-Ting and Wu, Hsin-Hung (2013) Forced financial information restatements and management turnover: market discipline and large family shareholders’ intervention in an emerging economy. Asia Pacific Journal of Management, 30 (4). pp. 1005-1029. ISSN 0217-4561

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Abstract

Using data from Taiwan, this paper investigates the market discipline effects associated with the forced financial information restatement on management turnover, and how family governance intervenes with such market discipline. By integrating legitimacy theory, the institution-based view, and multiple agency perspective, we find that market discipline associated with the forced financial information restatement can be effective to trigger management turnover in an emerging economy. Family ownership strengthens such market discipline by promoting ex-ante management turnover but weakens such market discipline by deterring immediate/ex-post management turnover. On the other hand, family board control weakens market discipline in mitigating families-minority shareholders conflicts by deterring all ex-ante, immediate, and ex-post management turnover. The analysis contributes to our understanding of a firm’s legitimacy as the dominating force in supporting an effective market discipline on management turnover in a weak institutional environment. Families play multiple governance roles to intervene with such market discipline in a weak institutional environment in order to build a management team for their investment safety and maintain a management team for family private benefits of control.

Item Type: Article
Additional Information: Online first
Keywords: Corporate governance Family control Restatements Management turnover Emerging economies Taiwan
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance > HG4001 Finance management. Business finance. Corporation finance
Depositing User: Catrina Hey
Date Deposited: 22 Jul 2013 15:27
Last Modified: 14 Nov 2014 10:30
URI: http://sro.sussex.ac.uk/id/eprint/45738
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