Corporate restructuring: empirical evidence from the UK

Corporate restructuring is perceived as a challenge to research. Prior studies do not provide conclusive evidence regarding the effects of restructuring. Since there are discernible findings, this research attempts to examine the effects of restructuring events amongst the UK listed firms. The sample firms are listed in the LSE and London AIM stock exchange. Only completed restructuring transactions are included in the study. The time horizon extends from year 1999 to 2003. A three-year floating window is assigned to examine the sample firms. The key enquiry is to scrutinise the ex post effects of restructuring on performance and value measures of firms with contrast to a matched criteria non-restructured sample. A cross sectional study employing logit estimate is undertaken to examine firm characteristics of restructuring samples. Further, additional parameters, i.e. Conditional Volatility and Asymmetry are generated under the GJR-GARCH estimate and reiterated in logit models to capture time-varying heteroscedasticity of the samples. This research incorporates most forms of restructurings, while prior studies have examined certain forms of restructuring. Particularly, these studies have made limited attempts to examine different restructuring events simultaneously. In addition to logit analysis, an event study is adopted to evaluate the announcement effect of restructuring under both the OLS and GJR-GARCH estimate supplementing our prior results. By engaging a composite empirical framework, our estimation method validates a full appreciation of restructuring effect. The study provides evidence that restructurings indicate non-trivial significant positive effect. There are some evidences that the response differs because of the types of restructuring, particularly while event study is applied. The results establish that performance measures, i.e. Operating Profit Margin, Return on Equity, Return on Assets, Growth, Size, Profit Margin and Shareholders' Ownership indicate consistent and significant increase. However, Leverage and Asset Turn Over suggest reasonable influence on restructuring across the sample period. Similarly, value measures, i.e. Abnormal Returns, Return on Equity and Cash Flow Margin suggest sizeable improvement. A notable characteristic seen coherently throughout the analysis is the decreasing proportion of Systematic Risk. Consistent with these findings, Conditional Volatility and Asymmetry exhibit similar trend. The event study analysis suggests that on an average market perceives restructuring favourably and shareholders experience significant and systematic positive gain.

Empirical studies of corporate governance in China

The thesis aims to provide empirical studies towards Chinese corporate governance. Since China initially established its stock exchange system in the 1990s, it has gone through different stages of changes to become a more market-oriented system. Extensive studies have been conducted in Chinese corporate governance, however, many were theoretical discussion focusing on the early stages and there‘s a general lack of empirical analysis. This paper provides three empirical analysis of the Chinese corporate governance: the overall market discipline efficiency, the impact of capital structure on agency costs, the status of 2005- 2006 reform that substantially modified ownership structure of Chinese listed firms and separated ownership and control of listed firms. The three empirical studies were selected to reflect four key issues that need answering: the first empirical study, using event study to detect market discipline on a collective level. This study filled a gap in the Chinese stock market literature for being the first one ever using cross-market data to test market discipline. The second empirical study endeavoured to contribute to the existing corporate governance literature regarding capital structure and agency costs. Two conclusions can be made through this study: 1) for Chinese listed firms, higher gearing means higher asset turnover ratios and ROE, i.e. more debts seem to reduce agency costs; 2) concentration level of shares appears to be irrelevant with company performance, controlling shareholders didn‘t seem to commit to the improvement of corporate assets utilization or contribute to reducing agency costs. This study addressed a key issue in Chinese corporate governance since the state has significant shareholding in most big listed companies. The discussion of corporate governance in the Chinese context would be completely meaningless without discussing the state‘s role in corporate governance, given that about 2/3 of the almost all shares were non-circulating shares controlled by the state before the 2005-2006 overhaul ownership reform. The third study focused on the 2005-2006 reform of ownership of Chinese listed firms. By collecting large-scale data covering all 64 groups of Chinese listed companies went through the reform by the end of 2006 (accounting for about 97.86% and 96.76% of the total market value of Shanghai (SSE) and Shenzhen Stock Exchange (SZSE) respectively), a comprehensive study about the ownership reform was conducted. This would be first and most comprehensive empirical study in this area. The study of separated ownership and control of listed firm is the first study conducted using the ultimate ownership concept in Chinese context.