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This study investigates the impact of insider-ownership of publicly traded firms on their performance, cost of debt (COD) and cost of equity. We use a sample of 104 non-finance listed companies of Pakistan for the period from 2006 to 2016. Our study is conducted in Pakistan as a developing country in which insider-ownership is dominant, and a weak external corporate governance mechanism increases the payoffs from insider-ownership. We use feasible generalized least square (FGLS) regression methods to examine these hypotheses. Based on agency theory, we find that insider-ownership enhances firm performance. Furthermore, our results show that insider-ownership reduced the COD and equity. Higher ownership decreases the opportunistic behavior of insiders. It also reduces the creditor’s perception of the likelihood of default on loan payments and reduces agency issues among shareholders. The insider will invest in positive NPV projects which will help maximize shareholders’ wealth and minimize the COD. Similarly, the relationship between insider-ownership and cost of equity is significant but negative. Supporting the convergence of interest increase in ownership helps in aligning the goals of managers and stakeholders whereby the insider will focus on value creation by minimizing equity cost.

The purpose of this paper is to use a panel of New Zealand unlisted firms from 1998 to 2009 to examine the relationship between ownership structure and firm leverage ratios. Although, the choice of the debt in capital structure is important for all firms, the scale effects may influence the degree of influence of particular financial theories upon capital structure.

To control the endogeneity effect of insider ownership, this study uses the dynamic panel generalised method of moment estimation and uses the Granger causality test to check the causality effect of leverage and insider ownership.

The findings suggest an inverse U-shape relationship of insider ownership and leverage, indicating higher insider ownership increases management entrenchment while lower insider ownership increases misalignment of the interests of management and owners. Moreover, this study finds bi-directional causation between insider ownership and firm leverage ratios.

Finance policy needs to vary across firm type, industries and firm characteristics and should match the different borrowing requirements of small business.

This paper contributes to literature by investigating whether the structure of equity ownership can impact cross-sectional variations in capital structure. Moreover, most of the capital structure research has been conducted in large markets like USA and publicly listed firms but this paper concentrates on the evidence from New Zealand unlisted businesses. Also, the econometric analysis is more robust due to controlling for the endogeneity effect of insider ownership.

The purpose of this paper is to examine the impact of insider ownership decreases on stock returns for firms undergoing seasoned equity offerings (SEOs).

Insider data were gathered for firms undergoing SEOs and this information used to compute the insider ownership percentage decreases caused by the SEOs. These insider percentage decreases and standard compounded abnormal return methodology were used to test signaling theory.

It was discovered that the short‐run and long‐run stock returns accompanying SEOs are not consistent with what signaling theory predicts. In particular, for greater decreases in insider ownership percentages, a superior market response for both short‐run tests and long‐run post‐SEO tests was often found.

Prior research has not examined how the change in insider ownership caused by a corporate event influences stock returns. Future research can build on the univariate tests by examining the impact of insider ownership within a multivariate framework.

Investors cannot profit by following the behavior of insiders by selling shares in companies where insiders lower their ownership percentages. This is because insiders appear to have personal agendas that they follow when decreasing their holdings.

This is the first study to examine how changes in insider ownership caused by a significant corporate event affect stock returns. The findings of this empirical examination challenge signaling theory as regards insider knowledge, the ability of insiders to convey their privileged knowledge (if it exists), and the capacity of outsiders to decipher and act on insider actions.

This paper attempts to investigate what kind of firms is more likely to use capital structure to signal; and in particular to investigate the impacts of corporate ownership structures on firms' capital structure signalling decisions.

The paper develops theoretical models and then uses OLS multiple regression, piecewise regression and logistic regression analysis on a set of data derived from 327 UK firms listed in the FTSE ALL share index to test the hypotheses.

The empirical results show that capital structure is not homogeneously used as a signalling tool; and firms with insider ownerships less or equal to 1.14 per cent are more likely the signallers.

Although other variables have been examined, this paper focuses on the impacts of insider ownership on capital structure signalling. Further work is required to investigate other variables that are mentioned but they are outside the scope of this paper.

This paper provides useful practical insights to both managers and investors to help them better understand and interpret firms' capital structure signals.

Before this paper, most people commonly agreed that capital structure contains signalling values. However, the findings suggest that it is not always the case.

This study aims to investigate the effect of high insider ownership on firms’ internal controls over financial reporting. In particular, it examines how high insider ownership affects the likelihood of an adverse Sarbanes–Oxley Act Section (SOX Section 404) opinion and its subsequent remediation.

Tests of hypotheses use ineffective controls and remediation models. The initial tests in this study use ineffective internal controls over financial reporting probit regression models to investigate how high insider ownership affects the ex-post likelihood of an adverse 404 opinion. Two remediation models – a multinominal probit regression and probit regression model – are used to investigate the effect of high insider ownership on the likelihood of successfully remediating an adverse 404 opinion.

Results show that while the ex-ante likelihood of an adverse SOX Section 404 auditor’s internal control opinion increases with high insider ownership, high insider ownership firms are more likely to remediate ineffective 404 controls. This study rationalizes these diverse findings by asserting that prior to an adverse 404 opinion, entrenched managers avoid internal control financial reporting oversight and monitoring. After an adverse opinion, however, and within the context of an imminent and explicit value reducing 404 opinion, powerful high insider owner managers are motivated to remedy ineffective controls.

This research synthesizes existing streams of literature on insider ownership and the effectiveness of internal control over financial reporting quality to provide new information on the effects of high insider ownership on firms’ internal controls.

This study seeks to examine how agency problems and internal capital markets in group‐affiliated firms are mutually influenced by the ownership structure, capital structure, and performance. It also aims to examine the endogeneity in group affiliation.

Using panel data, this study employs two‐stage least squares regression with the instrumental variable technique to examine the relationship among capital structure, ownership structure, and performance of group‐affiliated firms. Simultaneous equation models are constructed to identify the effects of interdependent decisions.

The empirical results indicate a U‐shaped relationship between insider ownership and performance. Moreover, the alignment of ownership and control rights determines the relationship between ownership structure and performance for group‐affiliated firms. The capital structure decisions of group‐affiliated firms are independent of firm performance and insider ownership, supporting the view that capital structure decisions of group‐affiliated firms are determined by the overall characteristics of the business group, rather than those of the individual firms.

Business groups can reduce the agency problems that occur in group affiliation by increasing the insider ownership (after a certain tunneling point), debt financing, and dividend payout.

Previous studies have paid little attention to the effects of the agency problem and the internal capital market on group affiliation. Whether endogeneity is a consequence of the common characteristics of group affiliation or a result of the simultaneity existing among ownership structure, capital structure, and performance is also unknown. This paper fills some of these gaps.

The purpose of this paper is to examine the effects of R&D manipulation on stock valuation for periods around IPOs. Insider manipulation is the difference in actual R&D change minus predicted R&D change where a negative difference indicates R&D underinvestment.

This study is designed to build on prior IPO research that has found reduced R&D expenditures when insiders lower their ownership. The paper derives an R&D manipulation variable that measures underinvestment in R&D. This variable is used in a regression methodology to test its influence on: IPO stock valuation at various points in time and post‐IPO price changes relative to the offer price.

The paper discovers that greater underinvestment in R&D is associated with greater values during the IPO stock valuation process. This association is reversed when the paper looks at short‐term valuation based on market prices. Only for bubble period IPOs do the paper finds poorer valuations for the long‐term. Larger insider ownership decreases lead to poorer valuations regardless of the period of occurrence. Greater R&D underinvestment and insider ownership decreases both lead to less underpricing.

Like prior research, the paper assumes that knowledge about the change in R&D is known at the time of the offering. Interpretations for long‐run results can be tenuous due to unexpected changes that occur over time.

Investors should note that managers are able to set higher offer prices when they inflate earnings by underinvesting in R&D. Buying at an inflated offer price with R&D manipulation leads to losses in the aftermarket with these losses associated with IPOs that occur during a bubble period.

Misrepresentation during the IPO valuation process affects those who buy shares at inflated prices. This raises ethical questions about the behavior of those involved in the issuance process.

This study is unique in testing how R&D manipulation and changes in insider ownership proportions impact the: IPO valuation process, post‐IPO valuation, and changes in the stock price over time relative to the offer price.

This study aims to examine the impact of corporate social responsibility (CSR) on financial constraints (FC). Furthermore, the authors investigate the moderating impact of two key ownership variables, insider and institutional ownership, separately and their interacting effect on the CSR-FC relationship.

The study sample consists of 137 nonfinancial Pakistan Stock Exchange listed firms from 2010 to 2019. Firms’ participation in socially responsible activities is measured using a multidimensional financial approach, whereas FC are determined using the WW index. The findings were observed using the dynamic generalized method of moments model.

According to the findings, CSR has a negative impact on FC. In terms of moderating impact, the interactive variable of CSR and insider ownership does not affect FC, implying that when an insider owns a majority of shares, the negative relationship between CSR and FC is weaker. The findings demonstrate the entrenchment effect of insider ownership. In terms of the moderating effect of institutional ownership, CSR and institutional ownership have a significant but positive relationship with FC, implying that when powerful institutional investors are present, the negative relationship between CSR and FC disappears, demonstrating that higher institutional ownership leads to shareholder conflicts. Finally, the interactive variable of insider and institutional ownership has no statistically significant effect on the CSR-FC relationship. This insignificant relationship does not support the substitution or complementarity effect of corporate governance.

The authors measure CSR activities using a multidimensional financial approach; however, in the future, CSR should be measured using qualitative aspects such as content analysis to strengthen the findings. Because the research is limited to a single emerging economy, Pakistan, the generalizability of the findings is limited. In the future, this research could be replicated in other emerging economies in Asia, Africa and Latin America.

The findings of the study will assist regulatory authorities, investors, financial analysts and other stakeholders in better understanding CSR practices in Pakistani firms, as well as the role of CSR and two other important aspects of internal governance mechanisms, namely, insider ownership and institutional ownership, in the CSR-FC relationship.

Few studies in the literature investigate the impact of CSR on FC. To the best of the authors’ knowledge, this is the first study of its kind in an emerging market to empirically test this relationship and further investigate the role of insider and institutional ownership in this unexplored relationship.

This study examines whether insider share ownership and personal share collateral affect corporate payout decisions.

This study estimates logit, Tobit and ordinary least squares regression models to explore how insider ownership is related to share repurchase probability, completion rates and the long-term performance following the repurchase announcements and how insider share collateral affects the above associations.

The results show that insider share ownership is negatively associated with the probability of announcing share repurchases and repurchase completion rates and is positively associated with the firm's post-announcement performance. This study further explores the incentive of insiders with high share collateral announcing share repurchases under a threat of margin call. For firms with a high percentage of insider share collateral, the results show that insider share ownership is associated with higher repurchase probability but is associated with lower repurchase completion rates and poorer post-announcement performance.

This study clarifies the interrelationships between insider ownership, insider share collateral and decisions in share repurchases and subsequent performance. This study provides evidence for both the convergence of interest and the entrenchment theories.

The purpose of this paper is to review recent research on the structure of equity ownership and its impact on firm value. In doing so, the paper outlines the main issues, surveys the more recent work, and highlights the most promising developments on this topic.

The paper is a survey – as such there is no relevant research design.

The paper commences from multiple surveys done a decade ago that find that the evidence on this topic is inconclusive. Since then, researchers have developed several promising lines of inquiry. These approaches – specifically the new focus on the identity of the blockholders, multiple blockholder interactions, as well as the use of structural modeling, and the use of changes in insider ownership – hold some promise of being able to provide more definitive answers.

The paper suggests that current researchers focus on newer approaches to analyzing the structure of equity ownership. Specifically, for research on blockholder ownership, the identity of blockholders as well as the interaction between blockholders are promising approaches to this topic. For research on insider ownership, structural models that have become recently popular as well as an emphasis on changes rather than levels of insider ownership are promising avenues of inquiry.

The paper summarizes the state of research on the structure of equity ownership and in doing so provides a quick introduction to a researcher new to this topic. In addition, the paper highlights the most promising areas of inquiry on this topic.