Does Ownership Structure Matter?

Abstract

When investors are uncertain about the quality of a firm's future cash flows for lack of price-sensitive information, they discount the value of the firm. Firms have incentives to signal for firm quality. Various empirical studies on the US markets cite the common use of rights and bonus issues by firms to signal for quality, and much empirical evidence is consistent with this hypothesis. This study examines the significance of the information asymmetry problem between management and investor-shareholders of companies that are listed on the Stock Exchange of Singapore (SES) as implied by the announcement effects of rights and bonus issues. We find weak supporting evidence for the signalling effects of rights and bonus announcements on the SES. Our preliminary findings suggest that any information asymmetry problem that persists between management and investor-shareholders on the SES is only weakly significant, This is interesting because it raises the question of whether there are other more effective signals that could have helped resolve the information asymmetry problem on the SES. "To follow up on this question, this study attempts to analyse the ownership structures of listed companies on the SES. We explore if there is any persistent rend in ownership structures on the SES and discuss how these trends could affect firm values.