Hend a, Edwin; U ama, Cyn hia A iani; Lubis, A ie Wibisono; Suk, Kim Sung
A icle
Family con ol and c ash isk in Eas Asian i ms: The
media ing ole o opaci y
Con empo a y Economics
P o ided in Coope a ion wi h:
VIZJA Uni e si y, Wa saw
Sugges ed Ci a ion: Hend a, Edwin; U ama, Cyn hia A iani; Lubis, A ie Wibisono; Suk, Kim
Sung (2025) : Family con ol and c ash isk in Eas Asian i ms: The media ing ole o opaci y,
Con empo a y Economics, ISSN 2300-8814, Uni e si y o Economics and Human Sciences in
Wa saw, Wa saw, Vol. 19, Iss. 1, pp. 100-120,
h ps://doi.o g/10.5709/ce.1897-9254.556
This Ve sion is a ailable a :
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This s udy examines amily con ol's di ec and indi ec impac s (media ed by opaci y) on c ash isk in Eas
Asian i ms. We hypo hesize ha amily con ol can mi iga e agency p oblems o bad news hoa ding due
o inc easing i m opaqueness. We chose six Eas Asia coun ies as he esea ch sample due o hei unique
ea u es ha di e om de eloped coun ies, such as ela i ely weake in es o p o ec ion and highe ea n-
ings managemen p ac ices ha migh posi i ely con ibu e o i m opaqueness. Meanwhile, Eas Asian i ms
a e also cha ac e ized by mo e concen a ed owne ship o amily sha eholde s. Ou esea ch sample is 4,847
publicly lis ed i ms (19,681 i m-yea obse a ions) in Hong Kong, Indonesia, Malaysia, Singapo e, Sou h Ko ea,
and Taiwan om 2014 o 2019. This s udy p ima ily employs pooled OLS eg ession o es he hypo heses. As a
obus ness es , we conduc Fama-MacBe h eg ession o add ess he ime-in a ian p ope y o amily con ol
measu es and unobse ed indi idual i m he e ogenei y. This s udy inds obus esul s ha amily con ol
nega i ely impac s c ash isk, whe e his ela ionship is pa ly media ed by opaci y. The e o e, we migh a gue
ha amily con ol alle ia es agency p oblems o bad news hoa ding among Eas Asian i ms.
1. In oduc ion1. In oduc ion
P ac i ione s and academicians ha e paid mo e
a en ion o he c ash e en s since he cases o
co po a e scandals a ound he yea 2000, such as
Xe ox, Wo ldCom, and En on, and he global i-
nancial c isis 2008. As a esul , schola s ha e ex-
plo ed a ious de e minan s o p edic c ash isk,
de eloping he c ash isk li e a u e s and (Habib
e al., 2018). C ash isk is he likelihood o a i m-
speci ic (idiosync a ic) s ock p ice c ash caused by
an all-a -once elease o accumula ed bad news.
While s ock p ice c ashes equen ly occu wi h un-
clea undamen al explana ions (Chen e al., 2001;
F ench, 1988), he ea lie li e a u e ela es i o le-
e age e ec s (Ch is ie, 1982), ola ili y eedback
(Campbell & Hen schel, 1992; F ench e al., 1987;
Pindyck, 1984), and bubble heo ies (Blancha d &
Wa son, 1982).
La e , schola s pos ula e wo s eams o ex-
plana ions o idiosync a ic c ashes. Fi s , he in-
es o in o ma ion-hoa ding models sugges ha
in o med in es o s conceal p i a e in o ma ion
due o sho -sale cons ain s and ixed se up cos s
o ading, which cause inc easing ading olume
and upwa d end be o e a s ock p ice c ash (Cao
Family Con ol and C ash Risk in Eas Asian Fi ms:
The Media ing Role o Opaci y
ABSTRACT
G11.
KEY WORDS:
JEL Classi ica ion:
c ash isk, amily con ol, opaci y.
1
Uni e si as Bina Nusan a a, Indonesia
2
Uni e si as Indonesia, Indonesia
3
Uni e si as Peli a Ha paan, Indonesia
Co espondence conce ning his a icle should be add essed o:
Edwin Hend a,
Uni e si as Bina Nusan a a, Indonesia,
E-mail: [email p o ec ed]
Edwin Hend a1, Cyn hia A iani U ama2, A ie Wibisono Lubis2, Sung Suk Kim3
P ima y submission: 28.10.2023 | Final accep ance: 13.06.2024
101
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10.5709/ce.1897-9254.556DOI: CONTEMPORARY ECONOMICS
Vol. 19 Issue 1 100-1202025
e al., 2002; Chen e al., 2001; Hong & S ein, 2003;
L & Wu, 2019). Second, he manage in o ma ion-
hoa ding models posi ha oppo unis ic manage s
exploi in o ma ion asymme y (opaci y) o con-
ceal bad news om co po a e ou side s (Jin & My-
e s, 2006), keeping o e alued s ock p ices o ul ill
pe sonal gains, such as highe s ock-p ice-based
compensa ion (Benmelech e al., 2010) and be e
access o cheape capi al (Jensen, 2004, 2005). To
his ex en , he second s eam o c ash isk explana-
ions is g ounded on he Agency Theo y amewo k
(Jensen & Meckling, 1976).
Family p esence in public co po a ions can
mi iga e agency p oblems (Type I) due o igh
moni o ing o amily sha eholde s o di ec con ol
o amily membe s in ol ed in managemen (Fama
& Jensen, 1983). Family sha eholde s a e s ongly
incen i ized o moni o manage s due o hei con-
cen a ed and unde -di e si ied owne ship (Kim
e al., 2014). Meanwhile, amily manage s possess
s ewa dship beha io , ac ing as loyal se an s o
he amily (Da is e al., 1997). Hence, amily i ms
a e less opaque (Achlei ne e al., 2014; Ali e al.,
2007; Wang, 2006), hus less likely o hoa d bad
news. On he o he hand, amily i ms migh exac-
e ba e agency p oblems (Type II) when en enched
manage s side o con olling amily, exp op ia ing
non-con olling sha eholde s ia non-a m's-leng h
ansac ions (" unneling") (Mo ck & Yeung, 2003).
In Eas Asia, Type II agency p oblems occu among
i ms wi h excess con ol o e cash low igh s ex-
e cised ia py amid and c oss-holding s uc u es
(Claessens e al., 2000, 2002). In addi ion, amily
i ms end o manage ea nings o hide exp op ia-
ion (Leuz e al., 2003), inc easing he opaci y (An-
de son e al., 2009; Hsu e al., 2017), he eby mo e
likely o conceal bad news.
The heo y and ea lie empi ical indings sug-
ges ha opaci y is he channel ha media es c ash
isk; howe e , ecen e idence e eals a di e en
conclusion. Jin and Mye s (2006) ini ially ound a
highe c ash isk among mo e opaque coun ies. In
addi ion, Hu on e al. (2009) ind ha i ms wi h
highe inancial epo opaci y (acc ual ea nings
managemen ) also exhibi highe c ash isk. Fu -
he mo e, And eou e al. (2016, 2022) show ha i-
nancial epo opaci y is limi ed in explaining c ash
isk. They a gue ha U.S. public co po a ions be-
come mo e anspa en pos -Sa banes–Oxley pe i-
od because o s onge co po a e go e nance unc-
ions ha enhance boa d pu iew and o e sigh o
managemen 's ac ions. Ne e heless, i emains a
ques ion ma k whe he a simila phenomenon oc-
cu s among Eas Asian public i ms.
Eas Asia coun ies a e in e es ing esea ch
con ex s since hey ha e unique ea u es ha p o-
ide a p ope se ing o ou s udy. Fi s , in es o
p o ec ion and law en o cemen among Eas Asian
coun ies a e ela i ely weak compa ed o de el-
oped coun ies, leading o a mo e concen a ed
owne ship s uc u e (La Po a e al., 1998) and
highe ea nings managemen (Leuz e al., 2003).
Second, mos la ge public i ms in Eas Asia a e
con olled by amilies (Claessens e al., 2000), whe e
Type II agency con lic s a e mo e common (Claes-
sens e al., 2002). Thi d, as eme ging economies, he
inancial ma ke and co po a e go e nance sys em
a e less de eloped; hus, Eas Asian coun ies migh
exhibi highe c ash isk han de eloped coun ies
due o highe s ock p ice synch onici y and opaci y.
(Jin & Mye s, 2006; Mo ck e al., 2000).
Acco ding o he s udy backg ound abo e, he
ex en li e a u e lea es wo esea ch gaps. Fi s , he
impac o amily con ol on c ash isk has no been
examined in Eas Asia coun ies, which ha e spe-
ci ic cha ac e is ics as men ioned abo e. Second,
p e ious s udies show mixed indings ega ding he
e icacy o opaci y in explaining c ash isk (And e-
ou e al., 2022; Hu on e al., 2009; Zach o & U ama,
2021). Thi d, o he bes o ou knowledge, he si-
mul aneous ela ionship be ween amily con ol,
opaci y, and c ash isk has no been in es iga ed.
The e o e, his s udy ul ills hese h ee esea ch
gaps by examining amily con ol's di ec and indi-
ec impac s (media ed by opaci y) on c ash isk in
Eas Asia.
This pape p o ides se e al con ibu ions o
he li e a u e. Fi s , we examine he in luence o
amily con ol on c ash isk in he Eas Asian i ms'
con ex , whe e Type II ( a he han Type I) agency
p oblems a e mo e p e alen among public co -
po a ions (Claessens e al., 2002). The e o e, ou
pape complemen s S inidhi and Liao (2020), who
examined he impac o amily con ol on c ash
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isk among U.S. public co po a ions. Second, we
ea i m he ela ionship be ween amily con ol
and opaci y in Eas Asian coun ies, whe e ea n-
ings managemen le els a e highe due o ela i ely
weak in es o p o ec ion, mo e concen a ed own-
e ship, and less de eloped s ock ma ke s (Leuz e
al., 2003); he eby, ou pape ex ends Achlei ne e
al. (2014) and Hsu e al. (2017), who s udied a simi-
la opic using Ge man and U.S. samples. Thi d,
as he main con ibu ion, his pape examines he
media ing e ec o opaci y on he ela ionship be-
ween amily con ol and c ash isk using Mulle e
al.'s (2005) h ee-s ep p ocedu e. The e o e, i di -
e s om pa allel s udies examining he mode a -
ing e ec o amily con ol on he impac o busy
di ec o s (Zach o & U ama, 2021) and Co po a e
Social Responsibili y (CSR) (Yang e al., 2023) on
c ash isk. Finally, his s udy esponds o And eou
e al. (2022), who ques ion he e icacy o opaci y in
channeling c ash isk.
2. Li e a u e Re iew and 2. Li e a u e Re iew and
Hypo heses De elopmen Hypo heses De elopmen
2.1. C ash Risk Theo ies
C ash isk heo y alls in o wo b oad ca ego ies:
in es o in o ma ion hoa ding and manage ial
hoa ding models. The in es o in o ma ion
hoa ding models heo ize ha c ash isk is he
a e ma h o delayed ading o in es o s, mainly
when nega i e in o ma ion occu s. Fo ins ance,
he "in o ma ion blockages" model posi s ha he
"in o ma ion pipeline" is in e mi en ly "clogged"
and hen eleases in o ma ion in la ge lumps due o
he p esence o ixed se up cos s o ading, such as
b oke age ees and he ime and a en ion equi ed
o execu e a ade (Cao e al., 2002). In his se ing,
some in es o s p e e o delay hei ading un il
he p ice mo emen alida es hei p i a e signals.
As a esul , his model p edic s nega i e (posi i e)
skewness ollowing s ock p ice un-ups ( un-
downs). Al e na i ely, he "di e ences o opinion"
model posi s ha s ock p ice c ashes occu ollowing
high ading olume, e lec ing opinion di e ences
be ween cons ained bea ish in es o s who canno
execu e sho -sale adings (such as mu ual unds)
ega ding he undamen al s ock alue (H. Hong &
S ein, 2003). Ins ead, hey p e e no o ade, ac ing
as "suppo buye s" un il he s ock p ice d ops o
a desi able ange. On he o he hand, unin o med
in es o s (a bi ageu s) can lea n new in o ma ion
and decide o ade when hese in o med in es o s
engage in he ma ke , inc easing ading olume
u he .
The manage ial in o ma ion hoa ding
models heo ize ha c ash isk esul s om bad
in o ma ion concealing by oppo unis ic manage s.
The "con ol and isk-bea ing" model assumes
ha manage s ha e wo choices in add essing bad
co po a e pe o mance, namely "bea ing isk" and
"abandonmen " op ions (Jin & Mye s, 2006). In a
se ing whe e he i m is pa ly opaque—ou side
in es o s canno de e mine he ue alue o he
i m; co po a e inside s ha e incen i es, such as o
secu e hei job, o conceal he bad news as long as
he i m can p oduce enough in e nal cash low o
ul ill in es o s' di idend expec a ions. Howe e ,
a e a se ies o bad pe o mances, he in e nal
cash low would no longe be su icien . The e o e,
manage s would exe cise he "abandonmen "
op ion—announcing he hoa ded bad news all a
once, causing a s ock p ice c ash. The "dynamic
a ional expec a ion" model a gues ha ully s ock-
based compensa ion has downside consequences
unde an asymme ic in o ma ion en i onmen
(Benmelech e al., 2010). When he company is no
pe o ming well, he manage has wo op ions. Fi s ,
hey may immedia ely disclose his in o ma ion o
sha eholde s, le ing he s ock p ice decline. Second,
hey may conceal he bad news, keeping he s ock
p ice o e alued. The la e op ion is mo e emp ing
since i can maximize s ock-based compensa ion
bu migh lead o a s ock p ice c ash.
2.2. C ash Risk De e minan s
The ex an li e a u e on c ash isk has examined
a ious de e minan s o c ash isk, classi ying
hem in o i e ca ego ies: (a) inancial epo ing
(co po a e disclosu e), (b) manage ial incen i es
(cha ac e is ics), (c) capi al ma ke ansac ions,
(d) in o mal ins i u ional mechanisms, and (e)
co po a e go e nance mechanisms (Habib e al.,
2018). Jin and Mye s (2006) a e among he ea lies
o s udy inancial epo ing- ela ed de e minan s o
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c ash isk. They show highe s ock-c ash equencies
and s ock-p ice synch onici y (R-squa ed) appea
in mo e opaque coun ies. Hu on e al. (2009) show
ha i ms wi h s onge ea nings managemen
p ac ices (mo e opaque) ha e highe s ock-c ash
equencies and s ock-p ice synch onici y and a e
mo e inclined owa d c ash isk. Salehi e al. (2022)
ind a nega i e ela ionship be ween he accoun ing
quali y, audi , audi o indus y specializa ion and
c ash isk. Conce ning manage s' cha ac e is ics,
i ms managed by emale CEOs exhibi lowe c ash
isk (Li & Zeng, 2019), while i ms managed by
mo e powe ul CEOs ha e highe c ash isk (Al
Mamun e al., 2020). Jeb an e al. (2020) show ha
g ea e boa d di e si y can mi iga e c ash isk. A
highe likelihood o c ash isk is also posi i ely
ela ed o ading olume (Chen e al., 2001) and
s ock liquidi y (Chang e al., 2017) as capi al ma ke
ansac ion de e minan s. C ash isk s udies wi h
in o mal ins i u ional mechanism de e minan s
ha e de eloped apidly in China. Pio oski e al.
(2015) e eal ha s ock-p ice c ashes a e lowe
du ing poli ical e en s bu highe in he pos -e en
yea s. Li and Chan (2016) ind ha s a e-owned
en e p ises whe e Communis Pa y o China
commi ee membe s se e as di ec o s ha e lowe
s ock-p ice c ash isk. Hu and Wang (2018) show
ha co po a e poli ical connec ions can mi iga e
c ash isk. Jeb an e al. (2019) ind ha he deg ee
o in o mali y among di ec o s can exace ba e
c ash isk. Li and Jiang (2022) ind a posi i e
associa ion be ween ins i u ional in es o ne wo ks
and c ash isk. Jeb an e al. (2022) ind a posi i e
(nega i e) ela ionship be ween in e nal (ex e nal)
boa d social capi al and c ash isk. On he con a y,
Jin e al. (2022) ind highe c ash isk among i ms
in a eas ha adop Con ucianism. Finally, Chen e
al. (2022) show ha i ms in egions wi h s onge
ax en o cemen exhibi lowe c ash isk. S. Li e
al. (2023) ind an in e se U-shaped ela ionship
be ween he numbe o subsidia ies and c ash
isk. Aldhama i e al. (2023) ound a lowe c ash
isk among Malaysian i ms wi h a s and-alone
isk commi ee. In e ms o he ex en o he
de e minan s o co po a e go e nance mechanisms,
And eou e al. (2016) show ha CEO's s ock op ion
incen i es, ansien ins i u ional owne ship,
and ou side di ec o s' sha eholdings exace ba e
c ash isk, while accoun ing conse a ism, inside
sha eholding, boa d size, and companies' manda es
o o mal co po a e go e nance policy alle ia e
c ash isk. Finally, ecen s udies show ha
pa icula owne ship s uc u es, such as inside
owne ship (Hu e al., 2022), ins i u ional c oss-
owne ship (Hou & Liu, 2023), and ins i u ional
common owne ship (Chen e al., 2024), ha e
co po a e go e nance unc ions ha can mi iga e
c ash isk.
2.3. Bad News Hoa ding Channels
The ex an li e a u e documen s h ee bad news
hoa ding channels leading o s ock p ice c ash isk:
opaci y, o e in es men , and o e alua ion. The
opaci y channel a gues ha manage s conceal bad news
ia acc ual ea nings managemen p ac ices (Hu on
e al., 2009). The i m becomes mo e opaque as mo e
bad news is hidden, causing he s ock p ice o de ia e
om he ue alue and mo e p one o c ashes (L. Jin &
Mye s, 2006). The o e in es men channel posi s ha
manage s conceal bad news by choosing sub-op imal
in es men s o sa is y hei in e es s (Benmelech e
al., 2010). The o e alua ion channel a gues ha
manage s ha e incen i es o e ain o e alued equi y
o gain bene i s om s ock-p ice-based compensa ion,
p eciei ed pe o mance, and access o cheape capi al
(Jensen, 2004, 2005).
2.4. Family Con ol and C ash Risk
This s udy p oposes he incen i e hypo hesis ha
amily i ms ha e he incen i e o educe opaci y
and bad news hoa ding, he eby mi iga ing c ash
isk. Family i ms possess unique cha ac e is ics,
such as concen a ed owne ship (weal h) o amily
sha eholde s (Ba on ini & Cap io, 2006; Ba h e al.,
2005; S inidhi e al., 2014) and in ol emen o amily
membe s ( ounde o ounde 's descendan ) in op
managemen o boa d posi ions (Ali e al., 2007;
Ande son & Reeb, 2003, 2004). The e o e, amily i ms
bea minimum o no agency p oblems (Type I) due o
uni ied owne ship and managemen (Fama & Jensen,
1983; Jensen & Meckling, 1976). Family sha eholde s
a e long- e m-o ien ed in es o s (James, 1999); hus,
amily i ms a e less likely o be in ol ed in p ac ices
ha p oduce a sho - e m gain while sac i icing alue
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Family Con ol and C ash Risk in Eas Asian Fi ms: The Media ing Role o Opaci y
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in he long un, which migh a nish he amily's
epu a ion (Cheng, 2014), such as bad news hoa ding.
Howe e , amily i ms migh inc ease hei isk- aking
beha iou du ing ecession, such as du ing COVID
19 pe iod (Al-Maliki e al., 2023). Meanwhile, amily
manage s exhibi s ewa dship beha io ; hence, hey a e
less likely o conduc oppo unis ic p ac ices ha in lic
a inancial loss on amily sha eholde s (Donaldson &
Da is, 1991). P io empi ical s udies show ha amily
owne ship is nega i ely associa ed wi h opaqueness o
he ex en o lowe abno mal acc uals (Wang, 2006),
p o iding ea ly wa nings abou incoming bad news
(Ali e al., 2007), lowe ma ke opaci y index (Hsu e al.,
2017), and highe accoun ing conse a ism (A ab u h
e al., 2024). Family sha eholde s possess concen a ed
weal h in he company (Kim e al., 2014); hence, o he
ex en o highe cash- low igh s, amily i ms migh
exhibi he incen i e e ec (Claessens e al., 2002).
Conside ing he a gumen s abo e, we p opose he i s
hypo hesis as ollows:
H1: Family con ol nega i ely impac s c ash isk
among Eas Asian i ms.
2.5. Media ing Role o Opaci y
The "con ol and isk-bea ing" heo y sugges s
ha opaci y is he channel ha acili a es bad news
hoa ding, which leads o a s ock p ice c ash. When he
i m is pa ly opaque, ou side in es o s can lea n abou
mac oeconomic bu no i m-speci ic in o ma ion
indica ed by a highe s ock p ice synch onici y
(R-squa ed). Jin and Mye s (2006) ind a posi i e
ela ionship be ween R-squa ed, opaqueness, and
c ash isk. Al e na i ely, Hu on e al. (2009) posi ha
manage s u ilize acc ual ea nings managemen as he
bad news hoa ding ehicle, hus ep esen ing opaci y
o indi idual i ms. Besides, hey also ound a posi i e
ela ionship be ween inancial epo opaci y and c ash
isk.
Bad news hoa ding mechanism ia ea nings
managemen is consis en wi h he "equilib ium
epo ing s a egy" model (Ki schenhei e &
Melumad, 2002). The manage ends o unde - epo
(o e - epo ) o e sligh ly good (bad) news o smoo h
ea nings, adjus ing i s le el o he in es o s' expec ed
ea nings. Howe e , when he bad news is su icien ly
la ge, he manage p e e s a "big ba h" s a egy, unde -
epo ing a he maximum amoun possible in he
cu en pe iod o epo highe ea nings in he u u e,
causing an occasional s ock p ice c ash. Ne e heless,
ecen empi ical e idence inds ha inancial epo
opaci y is limi ed as an agency channel in explaining
c ash isk pos -Sa banes–Oxley pe iod (And eou
e al., 2016, 2022). To his ex en , amily i ms
migh a oid ea nings managemen p ac ices which
can damage hei epu a ion (Salehi e al., 2020).
Conside ing he a gumen s abo e, we p opose he
second hypo hesis as ollows:
H2: The ela ionship be ween amily con ol and
c ash isk is media ed by opaci y.
3. Me hodology 3. Me hodology
3.1. Da a and Sample
The esea ch sample is publicly lis ed i ms in
six Eas Asian coun ies be ween 2014 and 2019 o
which Thomson Reu e s Eikon and S&P Capi al IQ
p o ide da a on s ock p ices and inancial epo s, e-
spec i ely. We delibe a ely do no use he yea 2020
and a e o a oid bias om he COVID-19 pe iod on
he s ock ma ke . Re e ing o Claessens e al. (2000)
and Lins and Se aes (2002), we selec ed Indonesia,
Hong Kong, Malaysia, Taiwan, Singapo e, and Sou h
Ko ea as he esea ch sample because hese six coun-
ies a e eme ging economies in he Eas Asia egion.
Since he da a a e p o ided in U.S. dolla s, we ind no
di icul ies ma ching di e en cu encies ac oss coun-
ies.
The S&P Capi al IQ eco ds 8,335 publicly lis ed
i ms (41,675 i m-yea obse a ions) oge he in se-
lec ed six Eas Asian coun ies, excluding i ms ope -
a ing in he inancial se ice indus y. A e sc eening
ou i ms no lis ed on he majo s ock exchanges o
a coun y and i ms wi h no owne ship da a, he e-
maining sample consis s o 6,810 publicly lis ed i ms
(34,050 i m-yea obse a ions). Finally, ollowing
Hu on e al. (2009), we elimina e i ms ope a ing in
he inancial se ice indus y, i m-yea obse a ions
wi h less han wen y-six weeks o s ock- e u n da a
in a iscal yea , i m-yea obse a ions wi h a nega-
i e book alue o equi y, and i m-yea obse a ions
wi h inadequa e inancial da a o measu e con ol
a iables. Thus, he inal sample consis s o 16,488
i m-yea obse a ions om 2014 un il 2019. Table 1
p o ides de ails o his sample selec ion p ocedu e.
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3.2. Va iables
3.2.1. Dependen Va iables
C ash isk: This s udy de ines c ash isk as he enden-
cy o i m-speci ic s ock p ice c ashes in a yea . Following
p io s udies, we p oxy c ash isk using h ee al e na i e
measu es. The i s measu e, he nega i e skewness coe -
icien (NCSKEW), is he nega i e alue o he skewness
o he i m-speci ic weekly abno mal e u n dis ibu ion
(Chen e al., 2001), as p esen ed in Equa ion (1).
(1)
The i m-speci ic weekly abno mal e u n is deno -
ed by w
i,
= ln(1+ε
i,
), whe e ε
i,
is he eg ession esidual
o he expanded ma ke model in Equa ion (2),
(2)
n is he numbe o weekly e u ns in a iscal yea ,
and is he week in a iscal yea τ. The lead and lag
e ms o he s ock e u n (
i
) and he ma ke e u n
(
m
) a e included in he model o add ess nonsynch o-
nous ading (Dimson, 1979). The second measu e,
he down- o-up ola ili y (DUVOL), is he na u al
loga i hmic a io o he s anda d de ia ion du ing he
up weeks o he s anda d de ia ion du ing he down
weeks (Chen e al., 2001), as p esen ed in Equa ion (3).
(3)
This measu e classi ies down (up) weeks i he i m-
speci ic abno mal weekly e u n is lowe (highe ) han
he annual a e age weekly e u n, whe e n
d
is he num-
be o down weeks, and n
u
is he numbe o up weeks.
The hi d measu e, he equency o c ash weeks
(FREQ), is he numbe o i m-speci ic weekly abno -
mal e u ns ha exceed wo s anda d de ia ions below
hei mean alue in a gi en yea (Luo & Zhang, 2020).
3.2.2. Independen Va iables
Family con ol: This s udy de ines amily con ol
as he con olling deg ee ep esen ed by owne ship o
he amily sha eholde s—an indi idual o a nonpublic
co po a ion o he han a go e nmen , a go e nmen -
owned co po a ion, a public inancial ins i u ion, o
a public co po a ion (Claessens e al., 2000; La Po a
e al., 1999). Al hough we ealize ha he e a e many
al e na i e amily con ol p oxies in he li e a u e, we
ep esen amily con ol wi h h ee measu es due o
he limi a ions o ou da a. The i s measu e, he am-
ily i m indica o (33%) (FAM33), is a bina y indica-
o ha classi ies a i m as a amily i m i he amily
is he majo i y sha eholde wi h a leas 33% o he
owne ship (Ba h e al., 2005). The second measu e,
he amily i m indica o (51%) (FAM51), is a mo e
obus bina y indica o ha classi ies a i m as a amily
i m i he amily is he majo i y sha eholde ha owns
a leas 51% o he owne ship (Ba on ini & Cap io,
2006). The hi d measu e, he amily owne ship ac-
ion (FAMOWN), is he ac ional equi y owne ship o
amily sha eholde s (Ande son & Reeb, 2003).
Opaci y: This s udy employs he modi ied Jones's
(1991) model, which is p oposed by Dechow e al.
Table 1
Sample Selec ion
Desc ip ion Numbe o i m-yea
obse a ions
Ini ial Obse a ions 41,675
- Obse a ions no lis ed on he majo s ock exchange o a coun y (3,315)
- Obse a ions wi h no owne ship da a (4,310)
- Remaining Obse a ions
- Obse a ions wi h less han wen y-six weeks o s ock- e u n da a in a iscal yea (6,071)
- Obse a ions wi h he nega i e book alue o equi y and inadequa e inancial da a o
measu e con ol a iables
(8,120)
Final Obse a ions 19,859
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(1995) o p oxy opaci y (OPAQUE). This me hod in-
ol es wo s eps. We ealize ha his wo-s ep p oce-
du e is limi ed o he ex en ha i can gene a e biased
coe icien s and s anda d e o s, leading o inco ec
in e ences (Chen e al., 2018). Fi s , we conduc c oss-
sec ional eg ession o each sample yea o ob ain he
es ima ed eg ession coe icien s ( , and ) wi h
he model desc ibed in Equa ion (4), whe e ε
i,τ
, i, and
τ ep esen e o e ms, i ms, and yea s, espec i ely.
(4)
whe e o al acc uals (TA
i,τ
) is calcula ed wi h Equa-
ion (5).
(5)
The disc e iona y acc uals a e compu ed by hose
pa ame e es ima es, as desc ibed in Equa ion (6).
(6)
Second, inancial epo opaci y o each i m-yea
obse a ion is measu ed wi h he sum o he annual
disc e iona y acc uals' absolu e alues, as desc ibed in
Equa ion (7).
(7)
Con ol a iables: We e e o Chen e al. (2001) and
S inidhi and Liao (2020) in employing se e al a i-
ables o con ol s ock ading and i m cha ac e is ics.
Lagged c ash isk (C ashRisk) cap u es he p ope y
o condi ional skewness (Ha ey & Siddique, 1999).
Sha e u no e (TURN) ep esen s he in ensi y o in-
es o s’ disag eemen s o e he s ock's ue alue (H.
Hong & S ein, 2003). S ock e u n ola ili y (SIGMA)
cap u es he “ ola ili y eedback” p ope y—a possibil-
i y o inc easing ola ili y along wi h nega i e e u ns
(Campbell & Hen schel, 1992). Yea ly abno mal e u n
(WRET) explains he “s ock p ice e e sal” o “s ock
p ice bubble” phenomenon (Blancha d & Wa son,
1982). In addi ion o p io s udies, we in oduce a new
con ol a iable, in o ma ion disc e eness (ID), o e-
eal he deg ee o he in o ma ion low disclosed by
he i m (Da e al., 2014). Fi m size (SIZE) is an a heo-
e ic con ol widely used in inance esea ch. Howe e ,
we can p esume ha he i m size is nega i ely associ-
a ed wi h he incen i e o manage s o wi hhold bad
news due o mo e sc u iny om ou side in es o s and
analys s (Chen e al., 2001). Le e age (LEV) cap u es
he le el o deb holde s’ moni o ing unc ion in mi i-
ga ing bad news hoa ding (Wang e al., 2020). Re u n
on asse s (ROA) is an a heo e ic con ol ep esen ing-
p o i abili y.
Since his s udy employs a c oss-coun ies sam-
ple, we also added a iables o con ol he ixed e -
ec o coun y cha ac e is ics. The inancial sys em
dummy (FINSYS) cap u es di e ences be ween he
ma ke and bank-based inancial sys ems (Maksimo -
ic & Demi güc-Kun , 2002). The disclosu e equi e-
men index (DISCREQ) and an i-di ec o igh s sco e
(ADRIGHT) ep esen he soundness o he co po a e
go e nance sys em (La Po a e al., 1998, 2006). The
impo ance o he equi y ma ke sco e (IEM) cap u es
he impo an ole o he equi y ma ke (Leuz e al.,
2003). Finally, yea ly in la ion (INF) and GDP pe cap-
i a (GDPCAP) ep esen coun ies’ mac oeconomic
condi ions. Table 2 p esen s de ails o names, symbols,
and desc ip ions o all a iables.
3.3. Empi ical Models
This s udy employs he h ee-s ep p ocedu e
p oposed by Mulle e al. (2005) To es H1 and
H2, in he i s s ep, we employ OLS eg ession us-
ing he pooled model on he empi ical model de-
sc ibed in Equa ion (8), which also in e s H1.
(8)
The model abo e uses β
0
as a cons an ac o , β
1
as a coe icien o amily con ol, β
K
as coe icien s o
con ol a iables, ε
i,τ
as he e o e m, and i and τ
o indica e i ms and yea s, espec i ely. C ashRisk
i,τ
ep esen s c ash isk p oxied by h ee al e na i e
measu es: nega i e skewness coe icien (NCSKEW),
down- o-up ola ili y (DUVOL), and equency o
c ash weeks (FREQ) o i m i in he yea τ. Family
i,τ-1
ep esen s amily con ol p oxied by h ee al e na i e
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Table 2
De ini ions and Ope a ions o Va iables
Va iables Abb e ia ion Desc ip ion
Nega i e skewness coe icien NCSKEW The nega i e alue o skewness o he i m-speci ic weekly
abno mal e u n dis ibu ion (Chen e al., 2001).
Down- o-up ola ili y DUVOL The na u al loga i hmic a io o he s anda d de ia ion du -
ing he up weeks o he s anda d de ia ion du ing he down
weeks (Chen e al., 2001).
F equency o c ash weeks FREQ The numbe o i m-speci ic weekly abno mal e u n ha
alls mo e han wo s anda d de ia ions below hei mean
alue in a gi en yea (Luo & Zhang, 2020).
Family i m indica o (33%) FAM33 The dummy a iable equals 1 i a amily is he majo i y
sha eholde wi h a leas 33% o he owne ship and 0 o he -
wise (Ba h e al., 2005).
Family i m indica o (51%) FAM51 The dummy a iable equals 1 i a amily is he majo i y
sha eholde wi h a leas 51% o he owne ship and 0 o he -
wise (Ba on ini & Cap io, 2006).
Family owne ship ac ion FAMOWN The ac ional equi y owne ship o amily sha eholde s
(Ande son & Reeb, 2003).
Opaci y OPAQUE The sum o he annual disc e iona y acc uals' absolu e al-
ues (Hu on e al., 2009).
Sha e u no e TURN A e age mon hly ading olume/numbe o sha es ou -
s anding (Chen e al., 2001).
S ock e u n ola ili y SIGMA The s anda d de ia ion o i m-speci ic weekly abno mal
e u n (Chen e al., 2001).
Yea ly abno mal e u n WRET The a e age i m-speci ic abno mal weekly e u ns imes
one hund ed (S inidhi & Liao, 2020).
In o ma ion disc e eness ID Da e al.'s (2014) in o ma ion disc e eness measu e.
Fi m size SIZE Na u al log o o al asse s.
Le e age LEV To al deb / o al asse s.
Ma ke - o-book alue MTB Ma ke capi aliza ion/ o al equi y.
Re u n-on-asse s ROA Ne income/ o al asse s.
Financial sys em FINSYS The dummy a iable equals 1 o a ma ke -based coun y
and 0 o a bank-based coun y (Maksimo ic & Demi güc-
Kun , 2002).
Disclosu e equi emen s index DISCREQ The disclosu e equi emen s index o one coun y (La Po a
e al., 2006).
An i-di ec o igh s sco e ADRIGHT The an i-di ec o igh sco e o one coun y (La Po a e
al., 1998).
Impo ance o equi y ma ke
sco e
IEM The impo ance o he equi y ma ke sco e o one coun y
(Leuz e al., 2003).
In la ion INF The in la ion o one coun y in a iscal yea .
G oss domes ic p oduc pe
capi a
GDPCAP Na u al log o he GDP o one coun y in a iscal yea .
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his esul is consis en wi h And eou e al. (2016,
2022) while nega ing Hu on e al.'s (2009) inding.
4.3. Robus ness Tes s
This s udy employs Fama and MacBe h's (1973)
eg ession o add ess he ime-in a ian p ope y o
amily con ol and unobse ed indi idual he e o-
genei y as a obus ness check. The Fama–MacBe h
eg ession deals wi h panel da a by employing he
o dina y leas squa e in wo s eps. Fi s , he c oss-
sec ion obse a ions o each yea (o any pe iod
equency) a e eg essed o ob ain he yea ly slopes.
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Second, he -s a is ic o hypo hesis es ing is ob-
ained by di iding he ime-se ies a e age o he
yea ly slope by i s ime-se ies s anda d e o .
Table 8 p esen s he Fama-MacBe h eg es-
sion esul s o he impac o amily con ol on
c ash isk while con olling o o he independen
a iables. Consis en wi h he main analysis, he
nega i e in luence o amily con ol on c ash isk
is signi ican a he 5% le el, excep in column (8).
Table 9 p esen s he Fama-MacBe h eg ession
esul s o he impac o amily con ol on opaci y
while con olling o o he independen a iables.
Also consis en wi h he OLS eg ession, we ind a
nega i e e ec o amily con ol on opaci y ha is
signi ican a he 5% le el in all columns. Table 10
p esen s he Fama-MacBe h eg ession esul s o
he impac o amily con ol and opaci y on c ash
isk. Signi ican and lowe magni ude amily con-
ol coe icien s han hose in Table 8 consis en ly
show he pa ial media ion ole o opaci y on he
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Family Con ol and C ash Risk in Eas Asian Fi ms: The Media ing Role o Opaci y
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ela ionship be ween amily con ol and c ash isk.
Finally, Fama-MacBe h eg ession analyses show
ha ou hypo heses a e obus a e add essing he
ime-in a ian limi a ion o amily con ol mea-
su es and unobse ed indi idual i m e ec , which
migh bias he p e ious OLS eg ession analyses.
5. Conclusions5. Conclusions
C ash isk, he likelihood o a i m-speci ic s ock
p ice c ash, has caugh he a en ion o s ock ma ke
p ac i ione s and academicians. A equen i m-
speci ic s ock p ice c ash migh e ode in es o s' con-
idence in s ock in es ing (Me on, 1987), causing
di icul ies o manage s in inding equi y inancing.
The e o e, schola s explo e a ious obse able de e -
minan s ha migh p edic s ock p ice c ashes, con-
ibu ing o he li e a u e s and o c ash isk (Habib e
al., 2018). The heo y sugges s ha a s ock p ice c ash
esul s om bad news hoa ding d i en by manage s'
mo i es o secu e hei jobs (Jin & Mye s, 2006) and
main ain s ock-based p ice compensa ion (Benmelech
e al., 2010). The e o e, c ash isk e lec s Type I agency
p oblems when manage s oppo unis ically conceal
bad news, making he s ock p ice o e alued (Jensen,
2004, 2005). Howe e , in Eas Asian coun ies, whe e
in es o p o ec ion is ela i ely weake (La Po a e al.,
1999) and owne ship s uc u e is mo e concen a ed
on a single sha eholde , pa icula ly amily (Claessens
e al., 2000), he c ash isk migh indica e Type II agen-
cy p oblems (Claessens e al., 2002).
This s udy examines amily con ol's di ec and
indi ec e ec s on c ash isk in Eas Asian i ms. As he
main con ibu ion, we in es iga e whe he opaci y can
media e he ela ionship be ween amily con ol and
c ash isk. Fi s , ou esul s sugges ha amily con ol
has a di ec nega i e impac on c ash isk and opaci y.
The e o e, i is consis en wi h he incen i e hypo h-
esis ha amily con ol mi iga es bad news hoa ding
p ac ices indica ed by lowe opaci y and, consequen ly,
lowe c ash isk; hus, we may a gue ha Eas Asian
amily i ms commonly exhibi ewe agency p ob-
lems. These indings a e consis en wi h S inidhi and
Liao (2020), Wang (2006), and Hsu e al. (2017), who
ind a lowe c ash isk and accoun ing opaci y among
amily companies. Second, we ind ha opaci y pa ly
media es he ela ionship be ween amily con ol and
opaci y. This esul hen complemen s And eou e al.
(2016, 2022), who ques ioned he e icacy o inancial
epo opaci y as he agency channel o c ash isk. To
his ex en , his s udy sugges s ha , hough opaque-
ness is limi ed as a di ec channel, i s ill con ibu es as
a media ing channel ha con eys c ash isk.
This s udy also has limi a ions, lea ing oom o
u he esea ch. Fi s , his esea ch limi s i s sample
o i ms ope a ing in non- inancial indus ies; hus,
he nex esea che could examine a simila opic spe-
ci ically among public inancial companies. Second, we
limi con ol a iables o co po a e and coun y cha -
ac e is ics o add ess ixed e ec s among i ms and
ac oss coun ies. Ne e heless, we ealize ha he e a e
a ious c ash isk de e minan s om co po a e go e -
nance aspec s a he i m le el (And eou e al., 2016)
and di e ences in co po a e go e nance sys ems and
ins i u ional con ex s ac oss coun ies (L. Jin & Mye s,
2006; Leuz e al., 2003). The e o e, we sugges a u he
c oss-coun ies s udy o conduc sensi i i y analyses
in ol ing co po a e go e nance aspec s (such as boa d
s uc u e and p ocesses), co po a e go e nance sys-
ems, and ins i u ional con ex s ha migh mode a e
he e ec o amily owne ship on c ash isk. Thi d, he
dependen a iable o amily con ol possesses a ime-
in a ian p ope y. Wi h an assump ion ha he e will
no be many changes in he i m’s owne ship, his e-
sea ch sample u ilizes ecen da a on i m owne ship
limi ed o he i s laye only in classi ying amily i ms.
Then, i applies hem uni o mly o each i m-yea ob-
se a ion. Fou h, we limi he amily owne de ini-
ion o an indi idual o a nonpublic co po a ion o he
han a go e nmen , a go e nmen -owned co po a ion,
a public inancial ins i u ion, o a public co po a ion
(Claessens e al., 2000; La Po a e al., 1999). To his
ex en , we encou age u he esea ch ha iden i ies
amily i ms acco ding o he con ol igh s o amily
sha eholde s, as in Claessens e al. (2000, 2002). We
also sugges a u he s udy o examine he owne ship-
con ol wedge's impac on c ash isk, as in H. A. Hong
e al. (2017), among amily and non- amily i ms.
This s udy migh p o ide p ac ical insigh s o
in es o s and manage s. Indi idual in es o s migh
conside in es ing in amily-con olled public compa-
nies due o he ad an ages o lowe acc ual ea nings
managemen and lowe s ock p ice c ash isk; hus,
amily owne ship can subs i u e he co po a e go e -
nance moni o ing unc ion. Al hough i is s ill unclea
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whe he inancial epo opaci y is inhe en in c ash
isk (And eou e al., 2022; Zach o & U ama, 2021),
his s udy shows ha opaci y pa ly media es he c ash
isk-mi iga ing e ec o amily con ol. Meanwhile,
his s udy sugges s ha amily i ms' manage s o be
awa e o amily sha eholde s' p io i ies in long- e m
in es men o ien a ion (James, 1999) and conse ing
he amily's epu a ion (Cheng, 2014); hus, hey a e
be e o disclosing bad news immedia ely a he han
hoa ding i .
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