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Article
Publication date: 4 September 2023

Memoona Sajid, Hashmat Shabbir and Raheel Safdar

The purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also…

Abstract

Purpose

The purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.

Design/methodology/approach

Data are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.

Findings

The study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.

Practical implications

The findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.

Originality/value

The novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.

Details

Asian Review of Accounting, vol. 32 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 13 June 2022

Malik Abu Afifa, Isam Saleh, Aseel Al-shoura and Hien Vo Van

The direct nexus between board characteristics, earnings management (EM) practices and dividend payout is examined in this study, followed by an examination of the indirect…

Abstract

Purpose

The direct nexus between board characteristics, earnings management (EM) practices and dividend payout is examined in this study, followed by an examination of the indirect mediation impact of EM practices in the nexus between board characteristics and dividend payout. It aims to provide new empirical evidence from the Jordanian market, which is an emerging market.

Design/methodology/approach

The study population consists of all service firms that were listed on the Amman Stock Exchange (ASE) between 2012 and 2019. Due to the lack of availability of their complete data during the period, four service firms were omitted from the population; hence, a sample of 43 service firms was acquired over the time frame (2012–2019), yielding a total of 344 firm-year observations. Moreover, panel data analysis was employed in this study, and data for the study were acquired from yearly reports as well as the ASE's database.

Findings

Based on the GMM estimator findings, board size and independence have a negative and significant influence on the EM, but CEO/chairman duality has a positive and significant impact. Simultaneously, the impacts of female representation on the board of directors and the number of board meetings were both positive but insignificant. The findings also found that four board characteristics, including board size, female representation on the board of directors, CEO/chairman duality and the number of board meetings, had a significant negative or positive effect on dividend payout, while board independence did not. Additional findings show that EM practices have a direct negative insignificant effect on dividend payout, whereas EM practices partially mediate the relationship between board characteristics and dividend payout.

Research limitations/implications

The current study's limitation is that it only searched in Jordanian service firms listed on ASE from 2012 to 2019 to fulfill the study's objectives; thus, we urge that future work explores the study models for other sectors, whether in Jordan or other growing markets such as the Middle East and North Africa.

Practical implications

The findings of this study may be utilized by analysts, investors and other strategic decision-makers to enhance Jordan's financial market's efficiency and efficacy. These findings will improve policymakers' willingness to impose appropriate constraints, perhaps boosting Jordan's financial market performance and efficacy. These findings may also help investors make more enlightened judgments by utilizing board characteristics and EM factors that predict firm dividend policy.

Originality/value

Contradictions in the results of earlier investigations inspired the current study, with the findings filling a gap in the existing literature. This study differs from previous studies by constructing a novel research model and analyzing the mediating influence of EM in the nexus between board characteristics and dividend payout.

Details

International Journal of Emerging Markets, vol. 19 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 18 October 2023

Suvra Roy, Ben R. Marshall, Hung T. Nguyen and Nuttawat Visaltanachoti

The purpose of this study is to investigate (1) how managers respond to stock price crashes, (2) why they respond and (3) how their responses affect shareholders.

Abstract

Purpose

The purpose of this study is to investigate (1) how managers respond to stock price crashes, (2) why they respond and (3) how their responses affect shareholders.

Design/methodology/approach

This study employs a panel regression with various firm-level controls and firm- and year-fixed effects. The sample is comprised of 101,532 firm-year observations with 11,727 unique firms from 1950 to 2019. Using mutual fund flow redemption pressure as an exogenous variable to stock price crashes, the paper provides further evidence of the causality of documented findings.

Findings

Management becomes more focused on improving transparency, raising investment efficiency, reducing agency conflicts and regaining the trust of shareholders by investing in social capital and employee welfare. These actions increase firm value. This study also suggests that management undertakes these actions out of concern for their tenure of employment.

Originality/value

The catalysts of stock price crashes are well documented, but much less is known about what happens following stock price crashes. This study provides more insights into the understanding of corporate crisis management practices following adverse events.

Details

International Journal of Managerial Finance, vol. 20 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 3 July 2023

Karen Watkins-Fassler, Lázaro Rodríguez-Ariza, Virginia Fernández-Pérez and Guadalupe del Carmen Briano-Turrent

This study analyses interlocking directorates from the perspective of an emerging market, Mexico, where formal institutions are weak, and family firms with high ownership…

Abstract

Purpose

This study analyses interlocking directorates from the perspective of an emerging market, Mexico, where formal institutions are weak, and family firms with high ownership concentration dominate. It responds to recent calls in the literature on interlocks, which urge the differentiation between family and non-family businesses and to complete more research on emerging economies.

Design/methodology/approach

A database was constructed for 89 non-financial companies (52 family-owned) listed on the Mexican Stock Exchange (BMV) from 2001 to 2014. This period includes normal times and an episode of financial crisis (2009–2010). To test the hypotheses, a dynamic panel model (in two stages) is used, applying GMM.

Findings

In normal times, the advantages of Board Chairman (COB) interlocks for the performance of publicly traded Mexican family firms are obtained regardless of the weak formal institutional environment. By contrast, during financial crisis, interlocking family COBs are more likely to jointly expropriate minority shareholders with actions that further their family objectives, which mitigates the positive effect of interlocks on performance. These findings contrast with the insignificant effects of COB interlocks found for non-family corporates.

Originality/value

A new framework is proposed which, through agency theory, finds points of concordance among resource dependence and class hegemony theories, to understand the effect of interlocking directorates on the performance of family firms operating in Mexico. The results of the empirical exercise for family companies listed on BMV during normal and financial crisis periods suggest its applicability.

Details

Journal of Family Business Management, vol. 14 no. 1
Type: Research Article
ISSN: 2043-6238

Keywords

Article
Publication date: 23 November 2023

Debapriya Samal and Inder Sekhar Yadav

This study investigates the effects of elements of corporate governance along with firm specific variables on the financial leverage of listed Indian firms in the context of…

Abstract

Purpose

This study investigates the effects of elements of corporate governance along with firm specific variables on the financial leverage of listed Indian firms in the context of agency conflicts and new governance laws.

Design/methodology/approach

A series of panel ordinary least squares as well as fixed/random effects regression models of book and market value of financial leverage on variables of corporate governance (board size, board composition, board meeting, board attendance and board gender) along with a set of control variables (asset tangibility, firm size, growth, liquidity and profitability) were estimated by employing 113 listed Indian firms during 2010–2021. Dynamic panel generalized method of moments models were also estimated to check the robustness of empirical results. Further, the full sample of firms was divided into small and large board sized companies using the median approach to investigate differences between small and large board characteristics on financial leverage.

Findings

The evidence predominantly suggested that the governance variables have significant impact on leverage ratios of selected firms. Governance variables such as board size, composition, attendance and gender are significantly found to be reducing the financial leverage of firms indicating that in general these attributes in a way, through monitoring managers, put pressure on them to pursue lower financial leverage. Board meeting is found to be positive and significantly related with financial leverage suggesting that the frequency of meetings signals its monitoring ability that may influence lenders' risk assessment lowering borrowing cost. The results on small and large board sized companies indicate that firms with small boards relatively issue more debt compared to firms with large boards suggesting that small boards adopt high debt policy.

Practical implications

The main policy implication of the study is that elements of internal corporate governance is a significant governance tool that has the potential to reduce agency conflict between the managers and agents through monitoring and decision making that has tangible effects on critical corporate decisions such as capital structure choices.

Originality/value

This paper contributes to the existing literature by bringing new evidence relating to agency conflicts and capital structure decisions in an emerging market like India post adoption of new regulations related to corporate governance specified in Clause 49 of Securities and Exchange Board of India and Companies Act, 2013 as there is significant dearth of such empirical work.

Details

Journal of Advances in Management Research, vol. 21 no. 1
Type: Research Article
ISSN: 0972-7981

Keywords

Article
Publication date: 6 February 2024

Awni Rawashdeh

This study aims to examine the role of blockchain technology (BCT) in trust in financial reporting (TFR) and the use of smart contracts (USC). It aims to ascertain the mediating…

Abstract

Purpose

This study aims to examine the role of blockchain technology (BCT) in trust in financial reporting (TFR) and the use of smart contracts (USC). It aims to ascertain the mediating role of USC in the relationship between BCT and TFR, thereby contributing to the limited empirical literature in this domain.

Design/methodology/approach

Based on a sample of the accountants’ familiarity with BCT, a structural equation model was constructed and analyzed using AMOS 24. The model proposes and tests relationships between BCT, USC and TFR.

Findings

The study highlights BCT’s significant positive influence on TFR, with USC mediating this effect. It provides empirical evidence that supports the transformative potential of BCT and USC in enhancing TFR.

Practical implications

These findings have significant implications for practitioners, regulatory bodies and policymakers. By highlighting the effectiveness of BCT and USC in fostering TFR, the study makes one aware of strategies to mitigate financial malpractices. It promotes the adoption of BCT in accounting practices.

Originality/value

This study addresses a gap in the literature by investigating the complex interplay of BCT, USC and TFR. It offers a unique perspective by exploring the mediating role of USC, thereby enhancing our understanding of the mechanisms through which BCT can foster TFR.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 2 January 2024

Ismail Kalash

The aim of this research is to examine the effect of corporate sustainability performance on financial performance and the role of agency costs and business risk in determining…

Abstract

Purpose

The aim of this research is to examine the effect of corporate sustainability performance on financial performance and the role of agency costs and business risk in determining this effect.

Design/methodology/approach

This study uses the data of 83 non-financial Turkish firms listed on Istanbul Stock Exchange during the period 2014–2021. Two-step system GMM models are applied to examine the study’s hypotheses.

Findings

The results indicate a positive effect of corporate sustainability performance on financial performance, and that this effect is significant only for firms that are more likely to suffer agency costs of equity, firms with R&D expenditures and firms with lower business risk.

Practical implications

The results of this study confirm the importance of regulations introduced by regulators to support the sustainability initiatives for firms that have less ability to access funds required for their investments. In addition, the findings provide important insight into the role of the persistence of corporate sustainability performance in enhancing financial performance through mitigating managers' opportunistic behavior.

Originality/value

To the author’s knowledge, this research is one of few that examine the effect of agency costs and business risk on the corporate sustainability–financial performance relationship in emerging markets.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 25 July 2023

James M. Vardaman, William E. Tabor, Darel C. Hargrove and Feigu Zhou

The role of family business staffing practices in their ultimate success remains largely unknown. The purpose of this paper is to test the notion that firms with greater family…

Abstract

Purpose

The role of family business staffing practices in their ultimate success remains largely unknown. The purpose of this paper is to test the notion that firms with greater family essence manifest their commitment by leveraging referrals as a recruitment source, which in turn is associated with higher performance. The hypothesized model posits that reduced agency costs from hiring through owner referral utilization (ORU) provide high-family essence firms with stronger performance.

Design/methodology/approach

The study draws upon a sample of 194 small and medium-sized family business owners.

Findings

Findings from OLS regression and the PROCESS model in SPSS support the hypothesis that recruiting nonfamily employees from referrals helps lessen agency conflicts and serves as an intervening mechanism in the relationship between family firm essence and firm performance.

Originality/value

This study draws on agency theory to shed light on how family firms successfully bring nonfamily employees into the fold despite their human resource limitations. The results extend theory on family businesses by demonstrating that those with higher degrees of family essence are more likely to attract applicants via ORU. Leveraging this recruiting practice allows family businesses to hire nonfamily employees who share the values and goals of the family firm, thus lowering agency costs and fostering higher performance. More broadly, the findings offer insight into the role of staffing practices in family firm success.

Details

Journal of Family Business Management, vol. 14 no. 1
Type: Research Article
ISSN: 2043-6238

Keywords

Article
Publication date: 14 March 2023

Rupjyoti Saha

This study aims to examine the relationship between corporate governance (CG) voluntary disclosure (VD) and firm valuation (FV). Moreover, the study also investigates whether VD…

Abstract

Purpose

This study aims to examine the relationship between corporate governance (CG) voluntary disclosure (VD) and firm valuation (FV). Moreover, the study also investigates whether VD mediates the impact of CG on FV or not.

Design/methodology/approach

The study is based on a panel data set of top 100 listed firms on Bombay Stock Exchange (BSE) over the period of 2014–2018 and develops CG index and VD index (VDI) in order to capture both the constructs respectively. The author adopts suitable panel data model to examine the relationship between CG, VD and FV as well as indirect impact of CG on FV through mediation of VD. Further, the author uses instrumental variables regression model for robustness check.

Findings

The author's findings reveal significant positive impact of CG on FV. Likewise, VD also exhibits significant positive impact on FV. Notably, the interaction of CG and VD complements each other in making positive contribution towards FV. In addition, the author observes that VD partially mediates the impact of CG on FV. Specifically, the outcome suggests that CG apart from having direct impact on FV also influences the same through the mediation of VD. Moreover, as the direction of indirect impact coincide with direct impact, such indirect impact has complementary relationship with the direct impact, implying that when CG makes direct contribution towards improving FV, CG's contribution toward FV through mediation of VD also increases.

Originality/value

To the best of the author's knowledge, this is the first endeavor in the extant literature that examines the interaction performance impact of CG and VD. Further, the author also provides primary evidence on the mediating impact of VD in the relationship between CG and FV.

Details

Journal of Accounting in Emerging Economies, vol. 14 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 25 March 2024

Saleh F.A. Khatib, Dewi Fariha Abdullah and Hamzeh Al Amosh

The literature has dealt with the relationship between board characteristics (BC) and firm performance (FP) on a large scale. However, it yielded inconsistent results. Thus, this…

Abstract

Purpose

The literature has dealt with the relationship between board characteristics (BC) and firm performance (FP) on a large scale. However, it yielded inconsistent results. Thus, this paper aims to examine the indirect relationship between BC and FP through the mediating role of the capital structure (CS).

Design/methodology/approach

This study used a sample of 528 non-financial companies listed on Bursa Malaysia from 2015 to 2019. Also, a two-step system generalised method of moments estimation technique was applied.

Findings

The results show that board diversity and the frequency of board meetings positively affect financial performance, and it is negatively influenced by board turnover, size and independence. Also, the results indicate a positive relationship between the independence of the board and all CS variables. Importantly, the findings support the policy-setting role of the board of directors where CS (measured by total debt and short-term debt) suppresses some governance mechanisms’ detrimental effect on FP. Hence, the board of directors, apart from the monitoring function, introduce various policies (financial and non-financial) that enhance the overall performance of companies.

Originality/value

These results are consistent with the agency’s perspective that management practices in selecting the optimal capital reduce agency costs and improve performance. The findings contribute to developing a broader theoretical framework that accounts for the policy-setting role of the board of directors. The current study model of corporate governance offers insight for policymakers into the role of corporate governance other than monitoring functions in organisations and how CS should be taken into consideration with corporate governance and FP association.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

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