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

Stephen Y L CHEUNG, In Mu Haw, Weiqiang TAN, Wenming WANG

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)

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 Sep 2014

Scopus Subject Areas

  • Accounting
  • Finance
  • Economics and Econometrics

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