Junket Operation: Macao’s Growing Pains or Stimulants?

Article Sidebar

Requires Subscription or Fee PDF (GBP 25)
Published: Sep 15, 2020
DOI: https://doi.org/10.5750/jgbe.v13i1.1761
Keywords:
gaming tourism industry tourism junket corporate governance financial performance Macao

Main Article Content

Jieqi Guan
Tourism College, Institute for Tourism Studies
Ming Liu
Faculty of Business Administration, University of Macau
Yui-yip Lau
Division of Business and Hospitality Management, College of Professional and Continuing Education, The Hong Kong Polytechnic University

Abstract

Two serious junket incidents happened in Macao in 2014 and 2015 which led to the significant drop in gross gaming revenue lasting for 27 consecutive months. In this paper, we investigate the importance of junket operation towards gaming companies’ financial performance and the interaction between the performance of corporate governance and junket operation. This study uses regression analysis to examine the relationships among corporate governance, financial performance, and junket promoters in Macao’s gaming tourism industry as well as the differences between those relationships under different economic conditions. The resultsreflect that when economy is booming, the corporate governance performance of gaming operators shows a decreasing trend. Under the control of corporate governance, the gaming operators tend to cooperate with junket promoters in a positive manner. In contrast, the junket operation brings negative impact on casino incomewithout the interaction of corporate governance, especially during booming economic periods. The result is aligned with the actual commission percentage over casino revenue, corporate governance score, and EPS of gaming operators. In a gaming sector, the junket operation towards casino profit and its interaction with corporate governance still overlooked in the academic study. This study not only fills in the research gap, but also provides constructive suggestions for Macao government to optimize the gaming inspection system and the rules on junket operations.

Article Details

Issue
Vol. 13 No. 1 (2020)
Section
Articles

References

AAStock. (n.d.). Stock price quote. Retrieved from http://www.aastocks.com/en/default.aspx

Abor, J. (2007). Corporate governance and financing decisions of Ghanaian listed firms. Corporate Governance: The International Journal of Business in Society, 7(1), 83-92.

Aguilera, R. V., & Jackson, G. (2003). The cross-national diversity of corporate governance: Dimensions and determinants. Academy of Management Review, 28(3), 447-465.

Berle, A., & Means G (1991). The modern corporation and private property. Transaction Publishers.

Black, B. (2001). Does corporate governance matter? A crude test using Russian data. University of Pennsylvania Law Review, 149(6), 2131-2150.

Black, B. S., Jang, H., & Kim, U. C. (2002). Does corporate governance matter?: Evidence from the Korean market (Vol. 2). KDI School of Public Policy and Management.

Blaszczynski, A., Huynh, S., Dumlao, V. J., & Farrell, E. (1998). Problem gambling within a Chinese speaking community. Journal of Gambling Studies, 14(4), 359-380.

Brown, L. D., & Caylor, M. L. (2006). Corporate governance and firm valuation. Journal of Accounting and Public Policy, 25(4), 409-434.

Campos, C. E., Newell, R. E., & Wilson, G. (2002). Corporate governance develops in emerging markets. McKinsey on Finance, 3, 15-18.

Chung, T., & Tieben, H. (2009). Macao: ten years after the handover. Journal of Current Chinese Affairs, 38(1), 7-17.

Clark, R., King, B., & Laylim, D. (1990). Tin Sin Kuk (Heavenly swindle). New South Wales: Asian Community Research Unit State Intelligence Group.

Conyon, M. J. (1997). Corporate governance and executive compensation. International Journal of Industrial Organization, 15(4), 493-509.

Danubrata, E., & Reuters, A. D. (2013, May). High-rollers from China make Singapore casinos see RED. Hong Kong Lawyer. Retrieved April 01, 2018, from http://www.hk-lawyer.org/content/high-rollers-china-make-singapore-casinos-see-red

Darweesh, M. S. (2015). Correlations between corporate governance, financial performance, and market value. Walden Dissertations and Doctoral Studies Collection, Walden University.

Denis, D. K. (2001). Twenty-five years of corporate governance research… and counting. Review of Financial Economics, 10(3), 191-212.

Dharmadasa, P., Gamage, P., & Herath, S. K. (2014). Corporate governance, board characteristics and firm performance: Evidence from Sri Lanka. South Asian Journal of Management, 21(1), 7.

Drogalas, G., Arampatzis, K., & Anagnostopoulou, E. (2016). The relationship between corporate governance, internal audit and audit committee: Empirical evidence from Greece. Corporate Ownership and Control, 14(1), 569-577.

Documentation and Information Centre of Statistics and Census Service. (2017). Tourism statistics. Retrieved March 06, 2018, from http://www.dsec.gov.mo/home_zhmo.axps

Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57-74.

Financial Services Bureau. (2016). Information of public finance. Retrieved from http://www.dsf.gov.mo/finance/public_finance_info.aspx?lang=en&FormType=0

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston, MA: Pitman.

Gaming Inspection and Coordination Bureau. Retrieved from http://www.dicj.gov.mo/web/cn/frontpage/index.html

Gillan, S., Hartzell, J. C., & Starks, L. T. (2003). Explaining corporate governance: Boards, bylaws, and charter provisions. Weinberg Center for Corporate Governance Working Paper No. 2003-03

Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1), 3-73.

Godinho, J. A. (2016). Gaming promoters in Macao: Current regulation and perspectives of reform, SSRN Electronic Journal, DOI: 10.2139/ssrn.2684818

Goyal, M. M. (2014). Corporate governance ratings: A step towards better corporate governance. Asia Pacific Journal of Research, 1(18), 93-100.

Hong Kong Monetary Authority. (2018). Supervisory policy manual. Retrieved from http://www.hkma.gov.hk/eng/key-functions/banking-stability/supervisory-policy-manual.shtml

Impresna Oficial. (2001, September 24). Define o regime jurídico da exploração de jogos de fortuna ou azar em casino. Bulletin-First Group. Regulations: Law 16th/NO. 2001. Bulletin No.: 39/2001. Date of Publication: 2001.9.24, Edition number: 1027. Portuguese version. Retrieved March 10, 2018, from http://bo.io.gov.mo/bo/i/2001/39/lei16_cn.asp

Impresna Oficial. (2001, October 29). Regulamenta o concurso público para a atribuição de concessões para a exploração de jogos de fortuna ou azar em casino, o contrato de concessão e os requisitos de idoneidade e capacidade financeira das concorrentes e das concessionárias. Bulletin-First Group. Regulations: 26th/NO. 2001. Administrative regulations. Bulletin No.: 44/2001. Date of Publication: 2001.10.29, Edition number: 1242. Portuguese version. Retrieved March 10, 2018, from http://bo.io.gov.mo/bo/i/2001/44/regadm26_cn.asp

Institute of Directors. (2017, October 10).The 2017 good governance report. Retrieved February 19, 2018, from https://www.iod.com/search-results?Search=The 2017 Good Governance Report

Kakanda, M. M., & Salim, B. (2017). Corporate governance, risk management disclosure, and firm performance: A theoretical and empirical review perspective. Asian Economic and Financial Review, 7(9), 836-845.

Källum, M., & Sturesson, H. (2017). Financial leverage: The impact on Swedish companies’ financial performance. Linnaeus University, Sweden.

Kelly, M. (2017). The role of the board of directors in corporate governance. CPA Ireland. Retrieved April 02, 2018, from http://www.cpaireland.ie/

Kim, J. E. J. (2010). Sunrise, sunset? Comparing the Las Vegas and Macao gaming markets in 2010. University of Nevada, Las Vegas.

Klapper, L. F., & Love, I. (2004). Corporate governance, investor protection, and performance in emerging markets. Journal of Corporate Finance, 10(5), 703-728.

Klein, P., Shapiro, D., & Young, J. (2005). Corporate governance, family ownership and firm value: The Canadian evidence. Corporate Governance: An International Review, 13(6), 769-784.

Laudwig, N. (2012). Gaming regulatory systems: How emerging jurisdictions can use the three major players as a guide in creating a tailored system for themselves. UNLV Gaming Law Journal, 3, 277-298.

Lemmon, M. L., & Lins, K. V. (2003). Ownership structure, corporate governance, and firm value: Evidence from the East Asian financial crisis. The Journal of Finance, 58(4), 1445-1468.

Leong, K. (2016, October 3). New supply paying off. MacaoBusiness.Com: Gaming. Retrieved from http://Macaobusiness.com/new-supply-paying-off/

Liu, M. T., Chang, T. T. G., Loi, E. H., & Chan, A. C. H. (2015). Macao gambling industry: current challenges and opportunities next decade. Asia Pacific Journal of Marketing and Logistics, 27(3), 499-512.

Lopez, L. (2014, June 26). Hedge funder says massive heist may have been Macao's 'Lehman' moment. Retrieved from http://www.businessinsider.com/Macaos-lehman-brothers-moment-2014-6

Lopez, L. (2015, September 14). Macao is getting rocked by reports of a $258 million casino heist. Business Insider. Retrieved from http://www.businessinsider.com/Macao-junket-heist-hurts-wynn-2015-9

Musa, F. I., & Oloruntoba, F. O. (2014). Examination of the relationship between audit committee characteristics and financial reporting quality of Nigerian Deposit banks. Euro Economica, 33(1).

Nam, S. W., & Nam, I. C. (2004). Corporate governance in Asia: Recent Evidence from Indonesia, Republic of Korea, Malaysia, and Thailand. Asian Development Bank Institute.

Okon A. E., & Afza A. N. (2014). Board characteristics and company performance: Evidence from Nigeria. Journal of Finance and Accounting, 2(3): 81-84

Orlitzky, M. (2001). Does firm size confound the relationship between corporate social performance and firm financial performance? Journal of Business Ethics, 33(2), 167-180.

Porta, R., Lopez de Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. The Journal of Finance, 54(2), 471-517.

Sanda, A. U., Mikailu, A. S., & Garba, T. (2010). Corporate governance mechanisms and firms' financial performance in Nigeria. Afro-Asian Journal of Finance and Accounting, 2(1), 22-39.

Statistics and Census Service. Retrieved from http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=b35edb8a-ed5c-4fab-b741-c91b75add059

Tachiwou, A. M. (2016). Corporate governance and firms’ financial performance of listed company in the West African monetary union (Wamu) regional financial exchange. International Journal of Economics and Finance, 8(8), 212-221.

Uzun, H., Szewczyk, S. H., & Varma, R. (2004). Board composition and corporate fraud. Financial Analysts Journal, 60(3), 33-43.

Whitley, R. (1999). Divergent capitalisms: The social structuring and change of business systems. Oxford, UK: Oxford University Press.

Wynn Macao. (2016). Wynn Macao annual & interim reports. Retrieved from http://en.wynnMacaolimited.com/phoenix.zhtml?c=231614&p=irol-reportsannual

Xiao, J. (n.d.). An introduction to the junket operation in Macao. Retrieved from http://hkmac.sysu.edu.cn:8080/Jweb_ddgayj/CN/volumn/volumn_1184.shtml

Xi, L., & Wei, C. S. (2010). The way to the diversification of Macao's social economy: A study on Macao's cultural tourism development. International Journal of Trade, Economics and Finance, 1(2), 131-135.