Document Type

Journal Article

Department/Unit

Department of Accountancy and Law

Title

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

Language

English

Abstract

© 2014 Financial Management Association International.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.

Publication Date

2014

Source Publication Title

Financial Management

Volume

43

Issue

3

Start Page

569

End Page

601

Publisher

Wiley

DOI

10.1111/fima.12034

Link to Publisher's Edition

http://dx.doi.org/10.1111/fima.12034

ISSN (print)

00463892

ISSN (electronic)

1755053X

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