Board structure and intragroup propping: Evidence from family business groups in Hong Kong

Yan-Leung Cheung, In-Mu Haw, Weiqiang Tan, Wenming Wang

    Research output: Contribution to journalJournal articlepeer-review

    13 Citations (Scopus)
    18 Downloads (Pure)

    Abstract

    Using earnings announcement events made by group member firms in Hong Kong, this study examines the governance role of boards of directors in curbing propping activities within family business groups. We find that earnings released by group member firms affect the stock prices of their nonannouncing group peers in a manner consistent with intragroup propping. More importantly, this effect is less pronounced when the announcing firms have a larger board or a board with a higher proportion of independent directors, but more pronounced when they have an executive director from their controlling families acting as board chairperson. Furthermore, the monitoring effect of boards of directors is strengthened for firms subject to new regulations increasing board power. Our results suggest that board oversight can mitigate propping activities.

    Original languageEnglish
    Pages (from-to)569-601
    Number of pages33
    JournalFinancial Management
    Volume43
    Issue number3
    DOIs
    Publication statusPublished - 1 Sept 2014

    Scopus Subject Areas

    • Accounting
    • Finance
    • Economics and Econometrics

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