Does Ownership Structure Mitigate Myopic Decision in Asset Sales?
- Does Ownership Structure Mitigate Myopic Decision in Asset Sales?
- 정기위; 손성규[손성규]
- Ownership structure; business myopia; asset sales; family firms; foreign investor; earnings management; performance.
- Issue Date
- 회계저널, v.23, no.3, pp.189 - 220
- This study employs income of fixed and long-term investment asset sales to determine whether governance is effective in mitigating business myopia. Even though fixed and long-term investment assets are categorized in the asset account of the balance sheet, those are possessed by the firms for different reasons. Fixed assets are held for using in operations such as producing goods or providing services while receiving an interest income or dividend is the main purpose for possessing long-term investment assets. Therefore, effective governance in mitigating business myopia reduces opportunistic fixed asset sales.
In empirical tests, we examine the relationship between ownership structure and abnormal income of asset sales. First, we find that family firms are less likely to engage in opportunistic fixed asset disposal than non-family firms. This suggests that family firms reduce managerial myopia which leads the managers to focus more heavily on short-term profits rather than on long-term profits. However, family firms engage in opportunistic long-term investment asset disposal. We conclude that family firms rather than non-family firms are effective ownership structures in mitigating business myopia.
Second, we test whether the ownership of foreign investors is related to the opportunistic fixed and long-term investment asset sales. We show that foreign investors reduce opportunistic fixed asset sales. This means that foreign investors take actions that constrain the managers’ myopic view. Similar to family firms, foreign investors do not prevent the sale of long-term investment asset for earnings management.
The paper reveals an interesting insight that assets are disposed for the purpose of manipulating accounting income. Furthermore, by employing abnormal income of fixed and long-term investment assets we find whether the governance is effective in mitigating business myopia. In addition, we alleviate measurement problems by using abnormal income of asset sale.
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