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

Xiaoxiang Zhang, Jo Ting Wei, Hsin-Hung Wu

Research output: Contribution to journalArticle

6 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)1005-1029
Number of pages25
JournalAsia Pacific Journal of Management
Volume30
Issue number4
DOIs
Publication statusPublished - 2013 Dec 1

Fingerprint

Financial information
Market discipline
Shareholders
Management turnover
Restatements
Emerging economies
Governance
Institutional environment
Team management
Minority shareholders
Private benefits of control
Taiwan
Trigger
Legitimacy
Legitimacy theory
Family ownership
Safety
Institution-based view
Build-to-order

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management

Cite this

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