Asia-Pacific Financial Markets

, Volume 25, Issue 4, pp 325–340 | Cite as

A New Measure of Control-Cash Flow Deviation: Cases in Taiwan

  • Pei-Gi Shu
  • Sue-Jane ChiangEmail author
  • Man-Yin Chen


The traditionally defined measure of deviation fails to capture the possibility that controlling owners might pledge their shares for bank loans and with that money from bank loans to amplify their personal leverage in the stock market. In this study we construct a newly defined measure of deviation that includes pledge ratio into the definition. Using a sample of 2777 firm-year observations in the sampling period of 2011–2015, we find that the newly defined measure of deviation is negatively correlated with firm’s performance and are more capable of dictating firm’s performance than the traditionally defined measure. We further find that the newly defined deviation could better contrast the performance measures between normal firms and financially-distressed firms.


Control right Cash flow right Deviation Pledging ratio 


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Copyright information

© Springer Japan KK, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Graduate Institute of Business AdministrationFu Jen Catholic UniversityNew Taipei CityTaiwan
  2. 2.Department of Business AdministrationFu Jen Catholic UniversityNew Taipei CityTaiwan

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