Governance Structure, Surplus Free Cash Flow （SFCF）, and Earnings Quality： Evidence From Malaysia＊

Prior researches focus mainly on the relationship between governance structure and earnings quality. Unlike the previous researches, this study attempts to empirically examine the role of surplus free cash flow （SFCF） as a moderator in the relationship with the new requirements of Malaysian code on corporate governance （MCCG）. By using the estimated generalized least square （EGLS） upon a sample of Malaysian firms, the results show that firms with an independent chairman experience persistent earnings numbers. The results also demonstrate that the current earnings of finns with small boards and independent audit committee members are more likely to persist in the future, when SFCF is high. However, in contradiction to the authors＇ expectation is the significant, but negative and interactive effect of current earnings and audit committee competence on earnings persistence. The findings, though disappointing, suggest investors to consider both the governance structure and free cash flow （FCF） agency problem when evaluating the sustainability of firms＇ earnings. They also call for more independent directors, effective meetings, and more competent audit committee members.

Free cash flow productivity among Chinese listed companies:A comparative study of SOEs and non-SOEs

This paper investigates the free cash flow productivity of SOEs compared with non-SOEs and examines its possible determinants.We find that SOEs have slightly weak free cash flow productivity but significantly stronger than non-SOEs.Similar performance exists among commercial class I and II SOEs and public-benefit SOEs.Further analyses suggest that firm size,age,sales growth,ownership concentration,government subsidies,and industry monopoly factors cannot explain this phenomenon.The common driver for all types of SOEs to generate stronger free cash flows than non-SOEs is their stronger expense control capability.

A Study on the Privatization Decisions of China Concepts Stock Based on the Tax Shield Effect

In this paper, we construct a company value model based on the tax shield effect for overseas listing and privatization scenarios. The trade-off process of privatization decisions is simulated in the context of China concept stock companies’ reality. The results indicate that the value of tax shields, the degree of undervaluation, the ability to obtain cash flows, the risk of short selling, the cost of listing transactions, and fraud penalties are critical factors influencing the choice of privatization. The company value analysis shows that tax shield effect positively affects the probability of privatization. Furthermore, the weaker the ability of a company to obtain cash flow when listed overseas, the lower the WACC, the higher the risk of being shorted, and the higher the cost of listing transactions, the higher the probability that a company will choose to go private. Finally, numerical simulations are adopted to validate the validity of the theoretical model and the findings using SINA’s privatization as a case study. The findings can provide academic guidance and a decision-making basis on trading arrangements for CCS companies.