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Book part

Hasnah Kamardin

The main purpose of the study is to examine the influence of family directors on the firm performance of public listed companies (PLCs) in Malaysia. This study provides…

Abstract

Purpose

The main purpose of the study is to examine the influence of family directors on the firm performance of public listed companies (PLCs) in Malaysia. This study provides empirical evidence on the agency problems between controlling shareholders and minority interests in the concentrated ownership setting.

Design/methodology/approach

Samples of the study are 112 PLCs in year 2006. Two measures of firm performance are used: return on assets (ROA) and Tobin’s Q. Managerial ownership refers to the percentage shareholdings of executive directors with direct and indirect holdings. It was further categorized into family ownership and non-family ownership.

Findings

In relation to ROA, managerial ownership is found positively significant. The results also show that the positive relationship between managerial ownership is contributed by the managerial-non-family ownership. In relation to Tobin’s Q, the results show a U-shape with turning point at 31.38% for managerial ownership and 28.29% for the managerial-family ownership. The results found significant and positive relationships between managerial ownership and both measures of firm performance which indicates that managerial ownership and family ownership yield greater efficiency.

Research implications

The study highlights the effects of corporate governance on ROA and Tobin’s Q are somewhat different. It provides some evidence on the need to use appropriate measure of firm performance. The significant relationship supports the argument of Chami (1999), Fama and Jensen (1983), and DeAngelo and DeAngelo (1985) and empirical evidence of Lee (2004) that family ownership enhances monitoring activities.

Originality/value

Differentiating the types of managerial ownership into family and non-family categories enriches our knowledge about who actually contributes to the improved performance.

Details

Ethics, Governance and Corporate Crime: Challenges and Consequences
Type: Book
ISBN: 978-1-78350-674-3

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Article

Affaf Asghar, Seemab Sajjad, Aamer Shahzad and Bolaji Tunde Matemilola

Corporate governance (CG) is an ongoing interesting topic getting the attention of market participant, business regulators and researchers in today’s business environment…

Abstract

Purpose

Corporate governance (CG) is an ongoing interesting topic getting the attention of market participant, business regulators and researchers in today’s business environment. The purpose of this study is to analyze the moderating role of earnings management on CG-value and CG-risk relationship in the emerging economy of Pakistan.

Design/methodology/approach

A panel data analysis is used in this study. A panel data of 71 non-financial listed companies of Pakistan for the 2008-2017 period is considered for this study. Secondary data is collected from the annual reports of non-financial firms listed on PSX. Seven econometric equations are developed to test the research hypothesis.

Findings

The results reveal that CG significantly enhances the firm value and performance measures. Moreover, CG mitigates the practices of earning management and eliminates the risk that develops opportunistic behavior among managers to commit frauds.

Practical implications

The results of this study suggest that the board of directors (BODs) should intensify their governance role and ensure that the executives perform their duties to maximize the wealth of the shareholders and not engage in any misrepresentation of accounts that may lower the company position and decrease the firm value. Moreover, the managers should be informed about their accountability and acknowledged that at the end of the year, they would be audited by an expert’s auditors for their responsibilities. Concerning regulatory bodies, regulatory authorities should ensure that there must be at least one independent member on the board. The better-governed system reduces both agency conflicts and enhances firm value.

Originality/value

A number of studies have already been undertaken by multiple investigators to build connection among CG with firm performance, but there is not even a single study in the literature that considers CG, firm value, firm Risk and discretionary earning management as a whole in one model to generalize its results in the emerging economy of Pakistan. A fundamental element of current analyzation process addresses that this is the very first graft of study conducted in Pakistan having combination of four variables together in one revision. There is minimal work that focuses on moderating effects of earning management on the CG-value and CG-risk relationships. This study uses two standard measures of firm performance (i.e. ROA and Tobin’s Q), one proxy of earning management (DEM) and three attributes of CG (board size, audit quality and ownership structure). Previously, researchers have not investigated a model that combines variables (CG as independent and Firm performance and Firm Risk as dependent along with DEM as moderator) in a single study.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 4
Type: Research Article
ISSN: 1472-0701

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Article

Mauricio Jara-Bertin and Jean P. Sepulveda

The purpose of this paper is to introduce an earnings management dimension to compute pre-manipulated accounting performance (free of discretionary accruals) to determine…

Abstract

Purpose

The purpose of this paper is to introduce an earnings management dimension to compute pre-manipulated accounting performance (free of discretionary accruals) to determine whether family-controlled firms perform better than non-family-controlled firms.

Design/methodology/approach

The authors used Jones’ model (1991) to obtain a pre-manipulated performance measure for a sample of Chilean firms. The authors then regressed the pre-manipulated measures of accounting performance as dependent variables against the family nature of the largest shareholder using the Blundell and Bond generalized method of moments estimator.

Findings

The authors found that the pre-manipulated performance of family-controlled firms is superior to that of non-family-controlled firms. The authors also show that the presence of institutional investors in the firm’s ownership structure has a positive influence on the performance of family companies. The results suggest that earnings management behavior is not sufficient to explain the better performance of family-controlled firms that has been reported in the literature.

Originality/value

The authors provide new evidence regarding the real superior performance of family business. These results provide some degree of confidence to investors since family firms provide good quality earnings measures of financial performance.

Propósito

este estudio pretende determinar si las diferencias en performance entre empresas familiares y no familiares puede ser explicada por la existencia de manipulación contable de los retornos.

Diseño/metodología/enfoque

usamos el método de Jones (1991) para obtener una medida de retorno contable no manipulado para una muestra de empresas chilenas, y luego estimamos una regresión de tipo panel donde la medida de retorno sin manipular es la variable dependiente, la naturaleza familiar o no de la empresa es la variable independiente y una serie de variables de control. Debido a la posible endogeneidad entre retorno y tipo de empresa, usamos la técnica de Blundell y Bond (Método Generalizado de los Momentos).

Findings

encontramos que aun usando retornos libre de manipulación contable, las empresas familiares muestran un mejor desempeño que aquellas no familiares. Además, se observa que la presencia de inversionistas institucionales (AFPs) en la estructura de control de la firma, tiene un efecto positivo sobre el desempeño de las empresas familiares.

Originality/value

se presenta nueva evidencia que ratifica el mejor desempeño financiero de las empresas familiares. Además, mostramos, a diferencia de estudio previos, que la presencia de inversionistas institucionales explica parte del mejor desempeño financiero de dichas empresas. Lo anterior permite a inversionistas estar seguros que el mejor retorno de empresas familiares no se debe a la manipulación contable de las utilidades.

Details

Academia Revista Latinoamericana de Administración, vol. 29 no. 1
Type: Research Article
ISSN: 1012-8255

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Article

Abdelmohsen M. Desoky and Gehan A. Mousa

The paper aims to empirically investigate the influence of ownership concentration and identity on firm performance using a sample of 99 of the most active publicly listed…

Abstract

Purpose

The paper aims to empirically investigate the influence of ownership concentration and identity on firm performance using a sample of 99 of the most active publicly listed companies on the Egyptian Exchange (EGX).

Design/methodology/approach

Firm performance of the sampled companies was measured by two different accounting measures, namely return on assets “ROA”, return on equity “ROE”, then the ordinary least square (OLS) regression analysis and the two‐stage least square (2SLS) regression analysis were employed.

Findings

OLS and 2SLS regression analyses show that ownership concentration has significant impact on firm performance when measuring by ROE. Regarding ownership identity, OLS regression analyses by both ROA and ROE show that the overall ownership identity has a significant impact on firm performance, as well as particular types of investors such as funds. Further, ownership identity and firm performance (when measured by ROA) had a significant endogeneity problem supporting the use of 2SLS as an effective analysis tool for such investigation.

Research limitations/implications

Findings of such research may not be generalizable to different countries at different stages of development, or with different business environments and cultures. Also, the sampled companies, 99 Egyptian companies, may be a small number which needs to be extended in a future research.

Originality/value

This paper provides an empirical investigation on the association between ownership structure and firm performance in the Egyptian context. It examines the role played by two aspects of ownership structure: the fraction of shares owned by the three largest shareholding interests (ownership concentration) and the fraction of shares owned by different type of shareholders (ownership identity) including seven separate groups of owners.

Details

Journal of Accounting in Emerging Economies, vol. 3 no. 2
Type: Research Article
ISSN: 2042-1168

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Book part

Ling-Foon Chan, Bany-Ariffin AN and Annual Bin Md Nasir

Corporate diversification is a strategy that enables corporations to expand their core business into other businesses. In Malaysia, corporate diversification continues to…

Abstract

Corporate diversification is a strategy that enables corporations to expand their core business into other businesses. In Malaysia, corporate diversification continues to represent a fundamental organizational structure. Some two-thirds of Malaysian firms are diversified. However, when compared to developed countries such as the US and the UK, we find that firms are moving toward non-diversification. The study is based on the population framework consisting of all of the public limited companies (PLCs) listed on the Bursa Malaysia stock exchange from 2007 to 2012. A dynamic panel model system generalized method of moments (GMM) was used to analyze the diversification and firm’s performance theories.

The empirical findings demonstrated that diversification is better than non-diversification firms for the curvilinear relationship between diversification and firm’s performance (ROA and Tobin-Q) when using the entropy index and relatedness is taken into consideration. The research further concluded that related and unrelated diversification also has a positive relationship with performance, but diversification must be the dominant (focused) and cannot be too broad in nature. Diversification that is too broad may cause a positive relationship to turn in to a negative relationship toward performance in both related and unrelated instances of diversification.

Details

Asia-Pacific Contemporary Finance and Development
Type: Book
ISBN: 978-1-78973-273-3

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Article

Mahdi Salehi, Ameneh Bazrafshan and Mahdieh Hosseinkamal

This paper aims to investigate the relationship between a CEO's ability and authority with firm performance. The authors used a sample of 127 Iranian listed firms for over…

Abstract

Purpose

This paper aims to investigate the relationship between a CEO's ability and authority with firm performance. The authors used a sample of 127 Iranian listed firms for over seven years, from 2011 to 2017.

Design/methodology/approach

The authors used data envelopment analysis (DEA) to evaluate managers' abilities, and the authors used business strategies to gauge authorities. Also, the methods of Fama–French and Herfindal–Hirschman were used for 889 firm-year observations.

Findings

The results show that managers' ability based on return on assets can affect firm performance, and skilled managers can improve performance.

Originality/value

In Iran, managers' abilities and other variables can impact it has been studied. Still, no study has been conducted on managers' strength and their level of authority with the presence of supervision on them.

Details

Journal of Facilities Management , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-5967

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Article

Bahaaeddin Ahmed Alareeni and Allam Hamdan

This paper aims to investigate whether there are relationships among corporate disclosure of environmental, social and governance (ESG) and firms’ operational (ROA)…

Abstract

Purpose

This paper aims to investigate whether there are relationships among corporate disclosure of environmental, social and governance (ESG) and firms’ operational (ROA), financial (ROE) and market performance (Tobin’s Q), and if these relationships are positives or negatives or even neutral.

Design/methodology/approach

The study sample covers US S&P 500-listed companies during the period 2009 to 2018. Panel regression analysis was used to examine the study hypotheses and achieve the study aims.

Findings

The results showed that ESG disclosure positively affects a firmsperformance measures. However, measuring ESG sub-components separately showed that environmental (EVN) and corporate social responsibility (CSR) disclosure is negatively associated with ROA and ROE. EVN and CSR disclosure is positively related to Tobin’s Q. Further, corporate governance (CG) disclosure is positively related to ROA and Tobin’s Q, and negatively related to ROE. More importantly, ESG, CSR, EVN and CG tend to be higher with firms that have high assets and high financial leverage. Furthermore, the higher level of ESG, EVN, CSR and CG disclosure, the higher the ROA and ROE.

Originality/value

The study limns a vision of the role of ESG on firm performance. This study tries to determine whether there are relationships among all ESG disclosure and FP, and if they are positive, negative or even neutral.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 7
Type: Research Article
ISSN: 1472-0701

Keywords

Content available
Article

Muhammad Naeem Shahid, Aamir Abbas, Khalid Latif, Ayesha Attique and Safwan Khalid

This study aims to identify the impact of corporate governance on performance of sugar mills. In order to study this relation, a model is constructed in which ownership…

Abstract

Purpose

This study aims to identify the impact of corporate governance on performance of sugar mills. In order to study this relation, a model is constructed in which ownership structure and independent directors are taken as independent variables. Whereas firm performance is analyzed by using proxy variables such as return on asset (ROA), return on equity (ROE) and sales growth. Moreover, size of board, working capital management (WCM) and philanthropy are taken as mediating variables between governance variables and firm performance.

Design/methodology/approach

The data of 32 sugar mills listed at Pakistan Stock Exchange for the period of four years (i.e. 2014–2017) is used for this research. Moreover, to investigate the model, generalized least squares statistical method is used to measure the relationship between variables.

Findings

The results revealed that there is significant but positive relationship between independent directors and ROA while ownership structure and ROE have significant but negative relationship. Thus, the board of directors should make it sure that all stakeholders and organizations should increase the nonfamily ownership in firms for better corporate performance. Moreover, philanthropy and WCM mediate the relationship between corporate governance and firms' performance.

Practical/implications

This research work will be helpful in the corporate governance, and further researchers can conduct their study by considering executive/nonexecutive director and institutional owners as governance variables.

Originality/value

This paper fulfills an identified need to study how Corporate Governance effect the performance of firm.

Details

Journal of Asian Business and Economic Studies, vol. 27 no. 2
Type: Research Article
ISSN: 2515-964X

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Article

Josephine Darko, Zakaria Ali Aribi and Godfrey C. Uzonwanne

The purpose of this paper is to examine the relationship between corporate governance and firm performance of listed Ghanaian companies.

Abstract

Purpose

The purpose of this paper is to examine the relationship between corporate governance and firm performance of listed Ghanaian companies.

Design/methodology/approach

The paper adopts a longitudinal and cross-sectional data set of 20 sampled companies over a period of five years. The data were analyzed using a panel regression and ANOVA analysis to establish the relationship between corporate governance and firm performance. Corporate governance is defined in terms of three indices – board structure, ownership structure and corporate control, while firm performance is measured by return on assets, return on equity, net profit margin and Tobin’s Q.

Findings

The empirical results show that ownership concentration and female representation on board have a positive impact on performance. Although the results revealed no evidence to support the impact of board size and audit committee size on performance, there is significant evidence to support the fact that independent directors and audit committee frequency both adversely affect firm performance.

Research limitations/implications

The scope of this paper can be expanded to include non-listed firms. In addition, other corporate governance mechanisms could be considered to broaden the scope of the paper.

Originality/value

This paper contributes to the scarce literature on corporate governance and firm performance in developing countries, especially in sub-Saharan Africa. The paper provides useful information that is of great value to policymakers, academics and other stakeholders.

Details

Corporate Governance, vol. 16 no. 2
Type: Research Article
ISSN: 1472-0701

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Article

Zaid Saidat, Mauricio Silva and Claire Seaman

The purpose of this paper is to attempt to fill a research gap in the relationship between corporate governance mechanisms and financial performance of family and…

Abstract

Purpose

The purpose of this paper is to attempt to fill a research gap in the relationship between corporate governance mechanisms and financial performance of family and non-family firms’ by using a sample of non-financial firms listed on Amman Stock Exchange (ASE) for the period 2009–2015.

Design/methodology/approach

This research employs a quantitative method using data that include corporate governance mechanisms, firm characteristics and financial ratios of a sample of Jordanian listed firms in the ASE over the period 2009–2015. The sample covers all companies that have been part of the ASE during the period including both family and non-family firms, part of total of 228 companies listed on the ASE as of 31 December 2015. The study used accounting-based measures such as return on asset (ROA) and market-based measures such as Tobin’s Q as proxies for corporate financial performance.

Findings

The study found that board size both in term of Tobin’s Q and ROA has a negative relationship with the performance of family firms. In non-family firms, there is no systematic relationship with corporate performance. There is a strong relationship between corporate performance and independent directors in non-family firms. In addition, the authors found some evidence for a relationship between performance and independent directors in family firms. Also, results indicated that ownership concentration has an insignificant correlation with corporate performance and in family firms has a negative and significant correlation with Tobin’s Q. There is a significant relationship between local investors’ ownership and corporate performance as measured by Tobin’s Q in family and non-family firms.

Originality/value

Studies concerned with the effect of corporate governance on firm performance remains comparatively under-researched in Middle East countries and Jordan in particular (Najib, 2007; Omet, 2004; Marashdeh, 2014). Moreover, studies investigating whether the practice of corporate governance has the same impact on family firm performance are still relatively less well known than those when ownership is distributed widely (non-family firms) (Jaggi, Leung and Gul, 2009; Prencipe and Bar-Yosef, 2011). This research is seeking to fill this current gap in Jordan, which is one of the developing countries with an emerging economics that are very poorly represented in the literature.

Details

Journal of Family Business Management, vol. 9 no. 1
Type: Research Article
ISSN: 2043-6238

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