Uncover the secrets behind Taiwanese family-controlled groupings' stock performance! This research delves into the intriguing "year-end anomaly" in Taiwanese stock markets, focusing on family-controlled groupings. The study reveals that these groupings exhibit significantly higher average abnormal returns in December compared to individually listed companies, showcasing a distinctive market behavior related to corporate finance and investments. The research meticulously analyzes data from 1992 to 1997, identifying specific criteria that define this anomaly, which offers insights into the dynamics of financial markets. This paper's empirical results suggest the "ornamenting motive" of family-controlled groupings as a key factor behind the anomaly. By identifying company size, currency translation losses, cash flow, and investment gains, it contrasts the willingness and capability of these groupings to engage in year-end earning management, enriching economic theory and shedding light on financial risk management practices. Ultimately, this paper provides valuable insights for investors, economists, and policymakers seeking to understand the complexities of Asian financial markets and the impact of corporate governance structures on stock performance. It encourages further research into the nuances of family-controlled businesses and their influence on market anomalies, potentially enhancing investment strategies and regulatory frameworks.
Published in the Review of Pacific Basin Financial Markets and Policies, this paper aligns with the journal's focus on financial markets and economic policies within the Pacific region. By examining the unique year-end anomaly in Taiwanese family-controlled groupings, the paper contributes to the journal's exploration of market behaviors and corporate governance structures, offering insights relevant to the journal's readership and advancing understanding of Pacific Basin financial dynamics.