CORPORATE GOVERNANCE AND MEASURING THE LIKELIHOOD OF FALSE SHARE REPURCHASE: THE APPLICATION OF A ONE-SIDED RESPONSE BIAS MODEL

10.6292/AFPF.2016.07.05

Cho-Min Lin；Cheng-Hui Chang

False Share Repurchases ； One-Sided Response Bias Model ； Corporate Governance

Advances in Financial Planning and Forecasting

7期（2016 / 10 / 01）

91 - 116

英文

This study aims to estimate the likelihood of false share repurchase signaling, to identify how corporate governance factors affect the likelihood of such false signaling, and to determine the appropriateness of the proxies for false signaling used in the prior literature that are based on ex-post and indirect measurements. To the best of our knowledge, no study to date has used an ex-ante and direct approaches to estimate the likelihood of false share repurchase signaling. In filling this gap, this paper employs a direct and ex-ante estimation of managerial cheating intention, called the onesided response bias model, which was developed by Hsiao and Sun (1999). This innovative approach avoids or mitigates the noise resulting from indirect measurements, facilitates the estimation of cheating probability and assesses how corporate governance factors affect this probability. The main empirical results reveal that the increase in management holdings and block shareholders' holdings is associated with reduced managerial cheating intention with regard to share repurchases. Finally, we provide evidence that our ex-ante and direct measurements approach is more reliable than the approaches previously used in the false share repurchase literature.

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