Empirical Study of High-Financial Leverage Family Corporate, Outsider Monitoring and Corporate Performance

• Main Authors: Feng-Chung Yang, 楊豐仲
• Other Authors: Hui-Fun Yu
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/04542846460068473929

碩士 === 健行科技大學 === 國際企業經營系碩士班 === 103 === This study applies various statistical techniques including binary and multiple logistic regression procedures against family-owned companies with debt ratio larger than 50％.It further distinguish companies whose ownership and management are identical (the chairman and CEO is the same individual) from those that are not. The main objectives of this research are to find out the important factors that may affect corporate performance in order to construct a creit risk model especially for the highly leveraged family-owned companies. Using date collected from TEJ date set from the year 2000 to 2013, a number of family-owned companies are selected and then divided into two groups: those financially sound companies and those financially troubled one. Targeted companies are selected pair-wise from those of similar scale of fixed assets in the same industrial sector, based on methods first advanced by Beaver. In order to perform analyses necessary for this study, a total of 28 financial variables, 4 corporate governance variables are identified. Several standard SPSS statistical procedures are then performed on these variables. The empirical results obtained from this research suggest that for family-owned companies in which there is no separation of ownership from management and at the same time its debt ratio is great than 50％, the following variables that have the potential impact on corporate performance include: the company’s financial structure, its operating capacity, profitability, and corporate governance. Furthermore, increase of operating profit ratio and equity ratio, retention ratio, reduction of total assets turnover, and attaching greater importance to audit opinion can enhance corporate financial structure, operating capacity, profitability and corporate governance. This study also finds that the best operating strategies for family-owned companies in which there is no separation of its potential impact: increasing profitability from normal business operations (i.e. beefing up operating profit ratio), increasing shareholders’equity ratio to improve the company’s financial structure, increasing retained earnings for internal use (increasing retention ratio) to buy back its own assets (decreasing total assets turnover). The above strategies would in turn enhance operating capacity and profitability, and attaching greater importance to audit opinion as well. They would also lead to strengthened outsider monitoring, corporate governance, and to a reduction of the probability of credit risk for the highly leveraged family-owned companies. When ownership and management are not separated, it is found in this research that theodds ratio of total assets turnover (β) for highly leveraged family-owned companies is positive and as high as 67.859. This implies that if there is an increase in corporate assets, the probability of credit risk would be 66.859 times lower for every unit of asset increase. Therefore, decreasing total assets turnover is identified as the most influential factor for a family-owned company to enhance its operating capacity and corporate performance through the reduction of credit risk occurrence..