Appendix I: List of Abbreviation

Transcription

1 Table of Content Appendix I: List of Abbreviation Appendix II: List of Symbols Appendix III: Control Mechanisms to Divergent Voting Right From Capital Right of the Shareholder Appendix IV: Owner Identity Analysis From La Porta. (1999) Appendix V: Measurement Process of Valuation Appendix VI: Study of Faccio & Lang (2002) Appendix VII: Sample Selection Process in Orbis Appendix VIII: 80 Firms Sample for Simple Stastics Analysis Appendix IX: 40 Firms Sample for Regression Analysis Appendix X: Regression Results

2 Appendix I: List of Abbreviation BVLTA BVSTA BVSTL BVTA CAPM CAR CR EBIT EPS HINV HNP I i LVPS M/B MC MQ MV MVCS MVD MVPS NOPLAT NPV OC OLS PV Q Q CP Q LR r RC RINV RNP ROA ROE SIC VR year-end book value of the firm s long-term assets year-end book value of the short term assets year-end book value of the short term liabilities year-end book value of total assets Capital Asset Pricing Model Cumulated Abnormal Return Capital Right Earnings Before Interest expenses and Taxes Earnings Per Share year-end historical value of inventories year-end historical value of net plant the investment cost at time t the discount rate at time t, it is also the opportunity cost of capital. liquidation value of preferred stock Market-to-Book ratio Manager-controlled Marginal Tobin's Q Market Value year-end market value of outstanding common stock year-end market value of outstanding debt year-end market value of outstanding preferred stock Net Operating Profit less Adjusted Taxes Net Present Value Owner-controlled Ordinary Least Squares Present Value Tobin's Q Tobin s Q estimated by Chung Tobin's Q by Lindenberg the quasi-permanent rate of return. year-end replacement costs of production capacity year-end replacement costs of inventories year-end replacement costs of net plant Returen on Assets Returen on Equity Standard Industrial Classification Voting Right

3 Appendix II: List of Symbols AGE Beta_t DEBT Dispersed_D DIV Family_D G_t G_t-1 Govern_D IND Institution_D INV LIQ ROE_t ROE_t-1 SIZE SUMVR_23 Tobin's Q_t Tobin's Q_t-1 VR/CR_1 VR_1 Adjusted R-square R-square Logarithm of the number of years between the observation year and firm founding year Beta of the firm Long-term debt divided by total assets Dummy variable of dispersed owner identity. Number of different SIC codes of two-digit groups the firm has Dummy variable of family owner identity. Growth rate of the year-end book value of total assets Growth rate of the year-end book value of total assets during the earlier year Dummy variable of government owner identity. The first digit of the SIC code of the firm Dummy variable of institutional owner identity. Net cash used by investing divided by the total assets Net cash from operating activities divided by current liabilities Return on Equity Profit before taxes divided by shareholder equity in the earlier year' Logarithm of sales Sum of the voting right of the second and third largest shareholders Tobin's Q ratio calculated according to Chung's methodology Tobin's Q ratio calculated according to Chung's methodology using data from the earlier year Ratio of the voting right of the largest shareholder divided by its cash flow right Voting right of the largest shareholer

4 Appendix III: Control Mechanisms to Divergent Voting Right From Capital Right of the Shareholder There are three mechanisms in diverging voting right from capital right: crossholding, pyramiding and dual-class equity. Crossholding defines the ownership situation where the firm A is controlled by another firm, which is controlled by A (Faccio, 2002). So the firm controls its own stocks directly and indirectly. According to Bebchuk & Morck (2000), companies in crossholding structures are horizontally connected by the cross-holding of shares. The power of the central controller is reinforced and entrenches by this connection. Pyramiding is a sub form of control chains, where a shareholder control a second-tier holding company that in turn controls that operating company, thus, the shareholder could control the operating company through the control chain (Bebchuk & Morck, 2000). Pyramids are the vertical control chain comparing with the crossholding which is more resembles the horizontal control chain. Pyramids are found to be the most popular mechanism for concentrating control at low equity involvement (La Porta et al, 1997). Dual class equity allows managers to sell the stocks in the market while still retaining a large portion of voting right by issuing different classes of shares with differential voting rights to different investors (Bebchuk & Morck, 2000). The classes of the equity are onevote-one-share and shares with less or even no voting right. Dual-class equity is used to retain the voting right after a private company goes public. According to Faccio (2002), the dual class equity is not common in countries such as Belgium, Portugal and Spain, but it is widely used in countries such as Sweden, Switzerland, Italy and South. Shareholders also combined several kinds of control mechanisms to maintain the controlling statue; this is defined as multiple control chain (Bertrand & Mullainathan,).

5 Appendix IV: Owner Identity Analysis From La Porta. (1999) Table 1 20 Largest Firms in 27 Countries Allocation to Different Owner Identities Note: cutoff at 10% Source: La Porta et al. 1999, p. 493

6 Appendix V: Measurement Process of Valuation Tobin s Q There are two approaches for calculating Tobin s q: by Lindenberg & Ross (1981) and Chung & Pruitt (1994), respectively. Lindenberg & Ross (1981) use the formula: Where = Tobin s Q by Lindenberg = year-end market value of outstanding financial claims, = year-end replacement costs of production capacity, = year-end market value of outstanding debt, = year-end market value of outstanding common stock, = year-end market value of outstanding preferred stock, = year-end book value of total assets, = year-end replacement costs of net plant, = year-end historical value of net plant, = year-end replacement costs of inventories, and = year-end historical value of inventories. This formula uses the sum of market value of outstanding debt, common stock and preferred stock to represent the market value of the firm and uses the sum of replacement values of the fixed assets and inventories and the book values of the rest of the assets to represent the total replacement costs of the production capacity. Other researchers further developed or modified this approach with enhancements in data processing (Perfect & Wiles 1995, Lewellen & Badrinath 1997, Lee & Tompkins 1999). The other approach was based on the formula supported by. They estimated the Tobin s Q as the following formula:

7 Where = Tobin s Q estimated by Chung = year-end market value of common stock = liquidation value of preferred stock = year-end book value of the firm s long-term assets = year-end book value of the short term liabilities = year-end book value of the short term assets = year-end book value of the total assets of the firm This Tobin s Q calculation assumes that the replacement costs of the plant, equipment and inventories are equal with their book values. And it proxy the market value of the debt as the book value of long term debt plus the book value of the short term liabilities net the book value of the short term assets. Marginal Q The assumption of the marginal q is that any investment should be estimated of its net present value (NPV) before the implementation. The firm should only invest when the NPV is positive, which means that the investment is value creating; otherwise, the firm is should reject the investment because it will subtract value from the shareholders. The present value of the investment and the return on a marginal investment (the approximation of marginal q) could be expressed in the following formula: Where, = the present value of the cash flows generated by the investment at time t

8 = the investment cost at time t = the discount rate at time t, it is also the opportunity cost of capital. = the quasi-permanent rate of return.

9 Appendix VI: Study of Faccio & Lang (2002) Faccio & Lang (2002) investigates the popularity of the control mechanisms and finds the divergence level of 13 European countries. Table 2 Percentage of Firms Using Different Control Mechanisms Country Number of firms Pyramids Holdings through multiple control chains Crossholdings Controlling owner alone Management Austria Belgium Finland France Germany Ireland Italy Norway Portugal Spain Sweden Switzerland UK Total Source: Faccio & Lang (2002), p.389 Faccio & Lang only include the 3,300 firms with controlling shareholders at the 20% level. Pyramids report the percentage of firms whose largest controlling shareholder adopts pyramids as control devices. Holdings through multiple control chains report the percentage of firms whose largest controlling shareholder adopts at least 5% of holdings through multiple control chains as control devices. Cross-holdings report the percentage of firms whose largest controlling shareholder adopts cross-holdings as control devices. Controlling owner alone reports the percentage of firms that have single controlling owners. Management reports the percentage of firms whose top managers come from the largest shareholder s family. The table presents the percentage of firms controlled by different controlling owners at the 20% threshold.

10 Table 3 Ratio of Capital to Voting Rights of the 13 Countries Country Number of firms Mean Standard Deviation Median 1st Quartile 3rd Quartile Austria Belgium Finland France Germany Ireland Italy Norway Portugal Spain Sweden Switzerland UK 1, Total 4, Source: Faccio & Lang (2002), p392

11 Appendix VII: Sample Selection Process in Orbis Table 4 Sample Selection Process Product name Data update 14/08/2012 (n 10251) Username Source: Orbis Orbis Update number 102 Software version Export date Aarhus Business School-6767 Step result Search result 1. All active companies and companies with unknown 84,390,344 84,390,344 situation 2. Main stock exchange: OMX - Nordic Exchange 1,366 1,210 Copenhagen, OMX - Nordic Exchange Helsinki, OMX - Nordic Exchange Stockholm, Oslo Bors 3. World region/country/region in country: 3,745,830 1,167 Denmark, Finland, Norway, Sweden 4. Accounting practice: IFRS (International Financial 1,272, Reporting Standards) 5. Total assets: All companies with a known value, 8,517, , 2009, 2008, for all the selected periods 6. Listed/Unlisted companies: Publicly listed 62, Type of entities: Industrial companies 86,932, Boolean search : 1 And 2 And 3 And 4 And 5 And 6 And 7 TOTAL 574

12 Appendix VIII: 80 Firms Sample for Simple Stastics Analysis Table 5 80 Firms List Company Name Nation Company Name Nation A.P. MOLLER - MAERSK A/S Denmark STATOIL ASA Norway CARLSBERG A/S* Denmark TELENOR ASA Norway TDC A/S Denmark NORSK HYDRO ASA Norway NOVO NORDISK A/S* Denmark ORKLA ASA Norway VESTAS WIND SYSTEMS A/S Denmark YARA INTERNATIONAL ASA Norway DSV A/S* Denmark AKER ASA Norway FLSMIDTH & CO. A/S* Denmark AKER SOLUTIONS ASA Norway TORM A/S Denmark RENEWABLE ENERGY CORPORATION ASA Norway H. LUNDBECK A/S* Denmark HAFSLUND ASA Norway DFDS AS Denmark NORSKE SKOGINDUSTRIER ASA Norway DAMPSKIBSSELSKABET NORDEN A/S Denmark BONHEUR ASA Norway NOVOZYMES A/S* Denmark DOF ASA Norway NKT HOLDING A/S* Denmark WILH. WILHELMSEN HOLDING ASA Norway ROCKWOOL INTERNATIONAL A/S* Denmark MARINE HARVEST ASA Norway CHR. HANSEN HOLDING A/S Denmark AUSTEVOLL SEAFOOD ASA Norway GN STORE NORD AS Denmark PETROLEUM GEO-SERVICES ASA Norway COPENHAGEN AIRPORTS A/S Denmark SCHIBSTED ASA Norway COLOPLAST A/S Denmark SOLSTAD OFFSHORE ASA Norway WILLIAM DEMANT HOLDING A/S Denmark SEVAN MARINE ASA Norway AURIGA INDUSTRIES A/S Denmark ODFJELL ASA Norway NOKIA OYJ Finland AB VOLVO Sweden FORTUM OYJ Finland TELEFONAKTIEBOLAGET LM ERICSSON Sweden UPM-KYMMENE OYJ Finland TELIASONERA AB Sweden STORA ENSO OYJ Finland SVENSKA CELLULOSA AB SCA Sweden NESTE OIL OYJ Finland SCANIA AB Sweden METSO OYJ Finland SANDVIK AB Sweden OUTOKUMPU OYJ Finland SKANSKA AB Sweden WARTSILA OYJ Finland AB ELECTROLUX Sweden KESKO OYJ Finland ATLAS COPCO AB Sweden KONE OYJ Finland AB INDUSTRIVARDEN Sweden SANOMA OYJ Finland SSAB AB Sweden YIT OYJ Finland HENNES & MAURITZ AB Sweden M-REAL OYJ Finland SKF AB Sweden CARGOTEC OYJ Finland ASSA ABLOY AB Sweden KEMIRA OYJ Finland HEXAGON AB Sweden RAUTARUUKKI OYJ Finland SAS AB Sweden FINNAIR OYJ Finland TELE2 AB Sweden STOCKMANN OYJ ABP Finland BOLIDEN AB Sweden ELISA OYJ Finland GETINGE AB Sweden HUHTAMAKI OYJ Finland MEDA AB Sweden source: own make The firms with a star mark are the ones that do not provide full information about their ownership structure in the annual report.

13 Appendix IX: 40 Firms Sample for Regression Analysis Table 6 40 Firms List Company Name Nation Company Name Nation A.P. MOLLER - MAERSK A/S Denmark STATOIL ASA Norway TDC A/S Denmark TELENOR ASA Norway VESTAS WIND SYSTEMS A/S Denmark NORSK HYDRO ASA Norway TORM A/S Denmark ORKLA ASA Norway DFDS AS Denmark YARA INTERNATIONAL ASA Norway DAMPSKIBSSELSKABET NORDEN A/S Denmark AKER ASA Norway CHR. HANSEN HOLDING A/S Denmark AKER SOLUTIONS ASA Norway GN STORE NORD AS Denmark RENEWABLE ENERGY CORPORATION ASA Norway COPENHAGEN AIRPORTS A/S Denmark HAFSLUND ASA Norway COLOPLAST A/S Denmark NORSKE SKOGINDUSTRIER ASA Norway NOKIA OYJ Finland AB VOLVO Sweden FORTUM OYJ Finland TELEFONAKTIEBOLAGET LM ERICSSON Sweden UPM-KYMMENE OYJ Finland TELIASONERA AB Sweden STORA ENSO OYJ Finland SVENSKA CELLULOSA AB SCA Sweden NESTE OIL OYJ Finland SCANIA AB Sweden METSO OYJ Finland SANDVIK AB Sweden OUTOKUMPU OYJ Finland SKANSKA AB Sweden WARTSILA OYJ Finland AB ELECTROLUX Sweden KESKO OYJ Finland ATLAS COPCO AB Sweden KONE OYJ Finland AB INDUSTRIVARDEN Sweden Source: own make

14 Table 7 Variables for Regression Company name Nation Q ROE G Beta SIZE DEBT INV LIQ AGE DIV IND Q_t-1 ROE_t-1 G_t-1 VR_1 VR/CR_1 SUMVR_23 F_D I_D G_D D_D A.P. MOLLER - MAERSK A/S D 0,77 29,95 0,08 1,17 17,55 0,24 0,07 0,83 3, ,86 10,02-0,01 50,60 1,23 20,02 1 TDC A/S D 1,01 12,40-0,25 0,45 15,06 0,36 0,06 2,00 3, ,03 13,79 0,14 59,10 1,00 12,00 1 VESTAS WIND SYSTEMS A/S D 0,31 8,64 0,10 1,56 15,75 0,13 0,11 0,02 4, ,14 24,05 0,21 5,23 1,00 10,08 1 TORM A/S D 0,94-12,22 0,10 1,25 13,37 0,54 0,06 0,00 4, ,92-1,53-0,06 32,20 1,00 26,30 1 DFDS AS D 0,77 8,63 0,48 0,38 14,09 0,29 0,11 0,26 4, ,07 0,54 0,06 36,00 1,00 40,50 1 DAMPSKIBSSELSKABET NORDEN A/S D 0,33 12,55 0,19 0,88 14,31 0,01 0,17 1,25 4, ,10 12,44-0,04 26,60 1,00 16,60 1 CHR. HANSEN HOLDING A/S D 0,90 9,61 0,03 0,41 13,26 0,40 0,03 0,65 4, ,88 3,17-0,03 59,60 1,00 8,00 1 GN STORE NORD AS D 0,32 38,99 0,37 0,96 13,44 0,11 0,04 0,39 4, ,74-0,02-0,11 11,90 1,00 9,90 1 COPENHAGEN AIRPORTS A/S D 0,87 35,27 0,07 0,11 12,98 0,41 0,03 1,68 4, ,97 25,68 0,05 53,70 1,00 43,10 1 COLOPLAST A/S D 0,43 48,49-0,03 0,45 14,06 0,20 0,04 0,86 4, ,43 42,49 0,00 39,40 2,12 14,70 1 NOKIA OYJ F 0,07 12,42 0,09 1,03 17,56 0,11 0,06 0,27 4, ,11 7,35-0,10 1,30 1,01 2,03 1 FORTUM OYJ F 1,06 19,67 0,11 0,74 15,66 0,30 0,05 0,42 4, ,00 20,36-0,02 50,76 1,00 2,57 1 UPM-KYMMENE OYJ F 0,72 8,95 0,02 1,12 16,00 0,26 0,01 0,55 2, ,74 2,84-0,01 3,53 1,00 3,76 1 STORA ENSO OYJ F 0,61 14,93 0,12 1,18 16,15 0,25 0,03 0,32 2, ,69-17,31-0,05 27,20 2,69 35,20 1 NESTE OIL OYJ F 0,58 12,26 0,17 1,15 16,29 0,28 0,14 0,58 4, ,55 13,39 0,21 50,10 1,00 4,40 1 METSO OYJ F 0,28 18,06 0,09 1,36 15,53 0,15 0,05 0,17 2, ,29 12,45 0,04 10,40 1,00 6,10 1 OUTOKUMPU OYJ F 0,47-6,03 0,16 0,58 15,26 0,26 0,03-0,32 4, ,61-19,34-0,09 30,80 1,00 12,70 1 WARTSILA OYJ F 0,17 33,45 0,01 1,16 15,33 0,12-0,02 0,30 5, ,21 37,23-0,02 17,08 1,00 7,03 1 KESKO OYJ F 0,28 14,52 0,09 0,77 15,99 0,06 0,06 0,27 4, ,30 10,80-0,01 8,88 2,54 13,92 1 KONE OYJ F 0,31 44,67 0,14 0,82 15,42 0,01 0,04 0,51 1, ,31 44,43 0,07 61,39 3,02 3,45 1 STATOIL ASA N 0,78 62,32 0,21 0,97 18,02 0,16 0,12 0,56 3, ,80 57,93 0,14 67,00 1,00 5,63 1 TELENOR ASA N 0,93 23,00 0,11 0,68 16,31 0,15 0,09 0,62 4, ,92 19,48 0,04 53,97 1,00 8,48 1 NORSK HYDRO ASA N 0,37 6,59 0,22 1,36 16,08 0,00 0,07 0,40 4, ,49 2,96-0,05 43,70 1,00 8,80 1 ORKLA ASA N 0,13 0,04-0,02 0,85 15,81 0,25 0,02 0,26 5, ,31 2,21 0,06 23,20 1,00 16,10 1 YARA INTERNATIONAL ASA N 0,50 31,77 0,13 1,13 15,94 0,17-0,01 0,57 4, ,60 12,11-0,11 36,20 1,00 9,10 1 AKER ASA N 0,83 9,16 0,05 1,07 13,78 0,43-0,01 0,15 5, ,86-16,15 0,04 66,66 1,00 4,30 1 AKER SOLUTIONS ASA N 0,34 23,17 0,07 1,74 15,59 0,19 0,05 0,11 1, ,38 35,74 0,09 40,27 1,00 7,80 1 RENEWABLE ENERGY CORPORATION ASA - REC N 0,72 8,21 0,15 1,56 14,38 0,23 0,12 0,76 2, ,74-14,69 0,32 39,74 1,00 11,80 1 HAFSLUND ASA N 0,67 1,73 0,08 0,33 14,52 0,35 0,05 0,10 4, ,71 5,16 0,11 58,50 1,09 37,30 1 NORSKE SKOGINDUSTRIER ASA N 0,91-32,68-0,06 1,89 14,70 0,40-0,01 0,08 3, ,91-8,50-0,14 5,74 1,00 7,47 1 AB VOLVO S 0,50 21,22 0,09 1,38 17,20 0,26 0,01 0,25 4, ,47-30,98-0,05 17,50 2,57 16,60 1 TELEFONAKTIEBOLAGE T LM ERICSSON S -0,01 10,87 0,19 0,92 16,94 0,10 0,04 0,27 4, ,03 4,46 0,00 19,33 3,86 17,32 1 TELIASONERA AB S 0,87 23,78 0,06 0,78 16,29 0,24 0,07 0,84 2, ,84 20,40 0,08 37,30 1,00 16,80 1 SVENSKA CELLULOSA AB SCA S 0,80 11,24 0,09 0,76 16,31 0,16 0,03 0,30 4, ,79 9,75 0,00 29,33 3,01 19,07 1 SCANIA AB S 0,46 41,73 0,14 1,26 15,98 0,22 0,02 0,46 4, ,57 6,88-0,05 70,94 1,55 18,39 1 SANDVIK AB S 0,28 28,89 0,12 1,41 16,04 0,26 0,05 0,49 5, ,29-11,98-0,06 11,70 1,00 9,00 1 SKANSKA AB S 0,10 26,24 0,09 0,95 16,43 0,01 0,05 0,12 4, ,08 25,35 0,03 28,40 3,64 9,00 1 AB ELECTROLUX S 0,23 25,74 0,16 1,08 16,29 0,11 0,06 0,21 4, ,21 18,49 0,05 29,90 2,20 12,10 1 ATLAS COPCO AB S -0,02 46,31 0,21 1,18 15,87 0,27 0,04 0,57 4, ,08 32,42-0,05 22,30 1,33 5,04 1 AB INDUSTRIVARDEN S 1,05 26,40 0,52 1,23 11,94 0,16 0,04 0,30 4, ,06 48,58 0,59 16,70 1,38 21,10 1 Source: own make

15 Appendix X: Regression Results Table 8 Regression Result on Tobin's Q Linear Regression Results The REG Procedure Model: Linear_Regression_Model Dependent Variable: Tobin's Q_2010 Number of Observations Read 40 Number of Observations Used 40 Note: No intercept in model. R-Square is redefined. Analysis of Variance Sum of Mean Source DF Squares Square F Value Pr > F Model <.0001 Error Uncorrected Total Root MSE R-Square Dependent Mean Adj R-Sq Coeff Var Source: SAS regression Parameter Estimates Paramet er Standard Variable DF Estimate Error t Value Pr > t VR_ VR/CR_ SUMVR_ family institution govern dispersed SIZE DEBT INV LIQ AGE DIV IND tobin's Q_ <.0001

16 Table 9 Regression Result on ROE Linear Regression Results The REG Procedure Model: Linear_Regression_Model Dependent Variable: ROE_2010 Number of Observations Read 40 Number of Observations Used 40 Note: No intercept in model. R-Square is redefined. Analysis of Variance Sum of Mean Source DF Squares Square F Value Pr > F Model <.0001 Error Uncorrected Total Root MSE R-Square Dependent Mean Adj R-Sq Coeff Var Parameter Estimates Parameter Standard Variable DF Estimate Error t Value Pr > t VR_ VR/CR_ SUMVR_ family institution govern dispersed SIZE DEBT INV LIQ AGE DIV IND ROE_ Source: SAS regression

17 Table 10 Regression Results on Growth Linear Regression Results The REG Procedure Model: Linear_Regression_Model Dependent Variable: G_2010 Number of Observations Read 40 Number of Observations Used 40 Note: No intercept in model. R-Square is redefined. Analysis of Variance Sum of Mean Source DF Squares Square F Value Pr > F Model <.0001 Error Uncorrected Total Root MSE R-Square Dependent Mean Adj R-Sq Coeff Var Source: SAS regression Parameter Estimates Paramet er Standard Variable DF Estimate Error t Value Pr > t VR_ VR/CR_ SUMVR_ family institution govern dispersed SIZE DEBT INV LIQ AGE DIV IND G_

18 Table 11 Regression Results on Beta Linear Regression Results The REG Procedure Model: Linear_Regression_Model Dependent Variable: risk_2010 Number of Observations Read 40 Number of Observations Used 40 Note: No intercept in model. R-Square is redefined. Analysis of Variance Sum of Mean Source DF Squares Square F Value Pr > F Model <.0001 Error Uncorrected Total Root MSE R-Square Dependent Mean Adj R-Sq Coeff Var Source: SAS regression Parameter Estimates Paramet er Standard Variable DF Estimate Error t Value Pr > t VR_ VR/CR_ SUMVR_ family institution govern dispersed SIZE DEBT INV LIQ AGE DIV IND