Abstract

http://ssrn.com/abstract=1483362
 


 



Governance and Performance Implications of the Delisting Regulation - Evidence Form the Chinese Stock Market


Sakthi Mahenthrian


Butler University

Xiaonong Zhang


Nankai University

Henry He Huang


Yeshiva University - Sy Syms School of Business

September 30, 2009


Abstract:     
This paper examines governance and performance implications of the delisting regulation in China, which designates firms with two consecutive losses as Special Treatment (ST) firms and delists such firms should two more consecutive losses occur. We find firms that subsequently become ST firms have greater agency problem (as indicated by divergence of ownership) but comparable governance mechanisms to matching firms. We also find evidence that, after becoming ST firms, these firms reduce their agency problem without significant changes in governance structure and financial performance. Further evidence suggests that ST firms engage in earnings management after the first year of loss in an effort to improve their profitability. Our study suggests that agency problem plays an important role in financial performance, and delisting regulation does not necessarily leads to improvements in governance and performance; rather it might force firms to engage in earnings management.

Keywords: delisting regulations, distressed firms, corporate governance, earnings management

JEL Classification: G33, G34, G38

working papers series





Not Available For Download

Date posted: October 6, 2009  

Suggested Citation

Mahenthrian, Sakthi and Zhang, Xiaonong and Huang, Henry He, Governance and Performance Implications of the Delisting Regulation - Evidence Form the Chinese Stock Market (September 30, 2009). Available at SSRN: http://ssrn.com/abstract=1483362

Contact Information

Sakthi Mahenthrian (Contact Author)
Butler University ( email )
4600 Sunset Avenue
Indianapolis, IN 46208
United States
Xiaonong Zhang
Nankai University ( email )
94 Weijin Road
Tianjin, 300071
China
Henry Huang
Yeshiva University - Sy Syms School of Business ( email )
New York, NY 10033
United States
8322763834 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 474

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.375 seconds