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Article
Publication date: 16 September 2022

Mutamimah Mutamimah and Pungky Lela Saputri

This study aims to analyse the role of corporate governance in moderating the effects of murabahah, mudharabah and musyarakah financing on the financing risk and financial…

Abstract

Purpose

This study aims to analyse the role of corporate governance in moderating the effects of murabahah, mudharabah and musyarakah financing on the financing risk and financial performance of Islamic banks.

Design/methodology/approach

The population for this study covered Islamic banks in Indonesia. Purposive sampling was performed, and statistical analysis was conducted using moderating regression analysis by selecting among the common, fixed and random effects models.

Findings

The results showed that murabahah financing has a positive effect on financing risk; conversely, mudharabah financing has a negative effect on financing risk. By contrast, musyarakah financing has no effect on financing risk. However, corporate governance weakens the influence of murabahah financing on financing risk and increases that of mudharabah financing on financing risk. Further, corporate governance cannot weaken the effect of musyarakah financing on financing risk. Additionally, financing risk reduces financial performance.

Research limitations/implications

This research focusses only on Indonesian Islamic banks; future research should be extended to Islamic insurance and Islamic micro finance.

Practical implications

The results serve as input for government regulations on corporate governance in Islamic bank financing and encourage Islamic banks to diversify their financing proportionally.

Social implications

This research can be used for optimising Islamic bank financing to empower the realty sector and reduce poverty.

Originality/value

Research on the role of corporate governance as a moderating variable in reducing financing risk in Islamic banks remains limited.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Book part
Publication date: 20 May 2019

H. Kiaee and M. Soleimani

In literature, a vast number of researches have tried to analyse the interaction between different financing methods and corporate governance. Some believe that good…

Abstract

In literature, a vast number of researches have tried to analyse the interaction between different financing methods and corporate governance. Some believe that good corporate governance companies are more successful in equity financing whereas others believe in positive relationship between corporate governance and debt finance. In this chapter, the authors analyse the interaction between sukuk financing and corporate governance. The authors first tried to differentiate between the financer and company's point of view in the financing decisions of different corporate governance quality companies, and then showed that, theoretically, there should be a positive relationship between murabahah sukuk and ijarah sukuk issuance and the corporate governance quality of companies in both types of views. The corporate governance characteristics of sukuk issuing companies in Iran are also analysed. The results from model estimation confirmed theoretical conclusion and corporate governance variables had positive and significant effects on the Sukuk issuance among Iranian Sukuk issuer companies.

Details

Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice
Type: Book
ISBN: 978-1-78973-007-4

Keywords

Article
Publication date: 17 May 2022

Lexis Alexander Tetteh, Amoako Kwarteng, Emmanuel Gyamera, Lazarus Lamptey, Prince Sunu and Paul Muda

The paper aims to investigate the role of corporate governance in the relationship between small businesses financing choice decisions on the business performance.

Abstract

Purpose

The paper aims to investigate the role of corporate governance in the relationship between small businesses financing choice decisions on the business performance.

Design/methodology/approach

The paper was situated within the financial growth cycle theory and stewardship theory and survey approach was adopted for data collection. The statistical analysis was conducted by using partial least square structural equation modelling.

Findings

The results indicate that the interaction of corporate governance and financing choice decisions strengthens the performance relationship. Further, corporate governance mediates the positive relationship between financing choice decisions and performance. Thus, suggesting that corporate governance can carry the effect of the financing choice decisions to business performance.

Practical implications

The findings of our research reveal that, small businesses who follow solid corporate governance procedures should expect higher business performance. This is because financing decisions alone will not assure positive business performance unless they are tied to a broader perspective of effective corporate governance practices.

Originality/value

To the best of the authors’ knowledge, this is the first study that contributes to the small business financing choice and performance literature by combining the strengths of financial growth cycle theory and stewardship theory to explain the financing choice decisions and, in particular, the role of corporate governance in the relationship. Further, the study is unique in its nature because it presents a successful model for small businesses in emerging economies to concentrate more on the role of corporate governance in enhancing business performance.

Details

International Journal of Ethics and Systems, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 3 August 2015

Faizul Haque

– This paper aims to investigate whether firm-level corporate governance has an influence on the equity financing patterns in an emerging economy such as Bangladesh.

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Abstract

Purpose

This paper aims to investigate whether firm-level corporate governance has an influence on the equity financing patterns in an emerging economy such as Bangladesh.

Design/methodology/approach

The regression framework uses a questionnaire survey-based corporate governance index (CGI) comprising five dimensions – ownership structures, shareholder rights, independence and responsibilities of the board and management, financial reporting and disclosures and responsibility towards stakeholders. In addition, a number of semi-structured interviews have been carried out with the relevant stakeholders.

Findings

The results suggest a statistically significant positive relationship between CGI and equity capital and, thus, confirm the prediction of the agency theory.

Research limitations/implications

This study does not address endogeneity and reverse causality issues with respect to the relationship between CGI and equity finance.

Practical implications

Firms should improve their legal compliance and voluntary activism in corporate governance matters to ensure increased access to equity finance.

Originality/value

This study is among the first to examine the relationship between overall corporate governance quality and equity finance of a firm from the perspective of a bank-based emerging economy.

Details

Journal of Financial Economic Policy, vol. 7 no. 3
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 7 September 2021

Aisha Javaid, Mian Sajid Nazir and Kaneez Fatima

This paper contributes to the existing literature by extending the empirical work on the relationship between corporate governance and capital structure by analyzing the…

Abstract

Purpose

This paper contributes to the existing literature by extending the empirical work on the relationship between corporate governance and capital structure by analyzing the mediating role of cost of capital in the non-financial firms listed on the Pakistan Stock Exchange (PSX).

Design/methodology/approach

The sample for this study includes non-financial firms listed on the Pakistan Stock Exchange (formerly Karachi Stock Exchange) for the period of 2004–2016. Based on 1800 firm-year observations, three approaches of panel data analysis are applied for the step-wise analysis of the underlying study. Firstly, Pooled OLS is applied. Secondly, fixed and random effect panel regression followed by the Hausman test to check the unobservable individual heterogeneity of the data. Hausman test indicates that the fixed-effects model is the most appropriate model for the sample panel data.

Findings

The study's findings are that board size, board composition, CEO/Chair duality, institutional ownership and managerial ownership have statistically significant direct effect on the firm's financing decisions. However, CEO/Chair duality, institutional ownership and managerial ownership have significant indirect effect on firm's capital structure decisions. The interesting finding of the paper is on the evidence of mediating role of cost of capital in the nexus of corporate governance and capital structure. Moreover, some conventional determinants of capital structure, including the firm's size, asset structure of the firm, profitability, business risk and growth, are found as determinants of capital structure decisions of the firms.

Research limitations/implications

There are a few limitations to our study which could be addressed by upcoming research. We did not include all the four mechanisms of corporate governance including board structure, audit structure, compensation structure and ownership structure. However, we used only five important attributes including board size, board composition and CEO/Chair duality form board structure, managerial ownership and institutional ownership form ownership structure of corporate governance as our explanatory variables to examine their impact on the capital structure choices of the firms. Future studies may fill this research gap by involving some other attributes of corporate governance and analyzing their effectiveness and impact on value relevant capital structure decisions. Further, due to limited time and resources, we only tested the mediating role of cost of capital, hence, future researchers can analyze the mediating and moderating roles of different variables which may influence the relationship between corporate governance and capital structure choices of the firms.

Practical implications

The study has many valuable guidelines and practical implications for the financial managers of the corporations. Our results will facilitate the policymakers in setting their corporate governance policies and practices and making the value relevant capital structure decisions in compliance with the implications of corporate governance mechanism. In addition, our study provides the empirical evidence in accordance with the argument that good governance practices, particularly the voluntary disclosures by the firm may reduce the information asymmetry which, ultimately, reduces the agency cost and the cost of capital for the firm. However, while deciding the financial policy of the corporations, managers can use our findings in order to assess the effectiveness of corporate governance practices employed by the firm in achieving the optimal capital structure at which the weighted average cost of capital is at its minimum level.

Originality/value

This paper contributes to the literature by investigating the mediating role of the cost of capital in the relationship between corporate governance and capital structure decisions of the firms. This paper provides empirical evidence that corporate governance indirectly affects capital structure decisions through the mediating role of cost of capital.

Details

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

Keywords

Book part
Publication date: 1 December 2004

Fazilah Abdul Samad

This study outlines some major findings of the impact of ownership concentration on corporate performance, investment and financing decisions in the Malaysian corporate

Abstract

This study outlines some major findings of the impact of ownership concentration on corporate performance, investment and financing decisions in the Malaysian corporate sector. Earlier studies on corporate governance linked very concentrated ownership structure to weak corporate governance, thus leading firms to make poor investment and financing decisions. However, a firm that strives towards maximising shareholder’s wealth would select its investment and financing strategy with care. Thus concentrated ownership has also been found to lead to better corporate performance, and that composition of ownership is an important element to spur better corporate performance.

Details

Corporate Governance
Type: Book
ISBN: 978-0-76231-133-0

Article
Publication date: 14 March 2016

Christina Atanasova, Evan Gatev and Daniel Shapiro

– The purpose of this paper is to examine the interaction between corporate governance and capital structure for small publicly traded firms in Canada.

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Abstract

Purpose

The purpose of this paper is to examine the interaction between corporate governance and capital structure for small publicly traded firms in Canada.

Design/methodology/approach

The authors hand-collect data for all companies listed on the Canadian junior stock exchange and construct measures of corporate governance. The authors focus on a time period when the sample firms were unregulated in their governance choices. Since firms decide simultaneously on the level of corporate governance provisions and capital structure, the authors use simultaneous equation models as well as instrumental variables analysis to address endogeneity.

Findings

The authors find that a strong relation exists between small-firm capital structure and corporate governance practices. Firms with low level of collateralizable assets have low leverage and chose better corporate governance provisions. All else equal, the firms with better corporate governance are more likely to issue new equity than debt. Overall the results support theories that predict a link between corporate governance and financing policy, where small-cap firms with low debt capacity incur costly shareholder protection to facilitate access to equity financing.

Originality/value

The authors contribute to prior research by providing the first empirical evidence on the choice and impact of corporate governance on capital structure for junior small- and micro-cap firms.

Details

Managerial Finance, vol. 42 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 10 July 2007

Kavous Ardalan

The purpose of this paper is to present a paradigmatic look at corporate governance.

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Abstract

Purpose

The purpose of this paper is to present a paradigmatic look at corporate governance.

Design/methodology/approach

This paper starts with the premise that any worldview can be associated with one of the four basic paradigms: functionalist, interpretive, radical humanist, and radical structuralist. The paper looks at the current state of mainstream academic finance and notes that it is founded only on the functionalist paradigm. It argues that any view expressed with respect to corporate governance is based on one of the four paradigms or worldviews. It, therefore, discusses four views expressed with respect to the nature and role of corporate governance.

Findings

The paper emphasizes that the four views expressed are equally scientific and informative; they look at the nature and role of corporate governance from a certain paradigmatic viewpoint. Emphasizing this example in the area of corporate governance, the paper concludes that there are opportunities for mainstream academic finance, in general, and corporate governance, in particular, to benefit from contributions coming from the other three paradigms if they respect paradigm diversity.

Originality/value

The paper recommends a serious conscious thinking about the social philosophy upon which finance, in general, and corporate governance, in particular, is based and of the alternative avenues for development.

Details

International Journal of Social Economics, vol. 34 no. 8
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 1 May 2006

Tarek Ibrahim Eldomiaty and Chong Ju Choi

This paper aims at discussing the determinants of strategic transparency and the governance structure of the East Asian firms. The relatively weak institutional

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Abstract

Purpose

This paper aims at discussing the determinants of strategic transparency and the governance structure of the East Asian firms. The relatively weak institutional infrastructure in East Asia raises the question about the adaptable governance structure and transparency in the East Asian firms.

Design/methodology/approach

The paper presents theoretical underpinnings of the literature on corporate governance, corporate strategy and international business. This paper argues that one of the common factors that determine the success of corporate governance structure is the extent to which it is transparent to the market forces within particular institutional arrangements.

Findings

When the institutional arrangements favor mandatory versus voluntary corporate disclosure, this study suggests a reform measure for the East Asian corporate governance system that relies, inter alia, on the percentages of long‐term and short‐term financing to total financing. The higher the percentage of long‐term financing, the more we can infer the extent of outside investors' confidence in the future of the East Asian firms. When more active role of banks involvements with the firms' business is permitted and an effective banks' and firms' strategic transparency can be assured, the East Asian banks and stock market can both lead firms to long‐term favorable achievements. This study also suggests that the protection of both shareholder's rights and creditors' rights can go in parallel lines with the latter is to be given first priority until the investors' confidence in the near and far future of East Asia corporate governance system is built.

Originality/value

This paper extends the value of corporate governance structure to the East Asian firms through advocating the determinants of strategic transparency in East Asia.

Details

Corporate Governance: The international journal of business in society, vol. 6 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Book part
Publication date: 7 January 2015

Abstract

Details

Adoption of Anglo-American Models of Corporate Governance and Financial Reporting in China
Type: Book
ISBN: 978-1-78350-898-3

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