Search results
1 – 10 of over 64000The development of standardized fixed-income securities and organized secondary markets in which to price and trade the securities is a widely recognized factor in the emergence…
Abstract
Purpose
The development of standardized fixed-income securities and organized secondary markets in which to price and trade the securities is a widely recognized factor in the emergence of modern developed economies. However, the ongoing global financial crisis has exposed the existence of a fundamental and costly conflict between lender and borrower property rights when debt is securitized that has imperiled some fixed-income markets in their present form. This paper aims to suggest a new non-debt concept for fixed-income finance that avoids the conflict inherent in securitized debt.
Design/methodology/approach
The paper considers how to build the foundation of non-debt fixed-income technology on property law instead of contract law.
Findings
Fixed-income products based on the new technology expose investors to lower loss risk than investors incur with analogous debt-based products. Such products could lower the cost of fixed-income finance and contribute to the global restoration of fixed-income market liquidity.
Research limitations/implications
Variations in property law across venues imply that the new financial technology is not implementable in all legal systems.
Originality/value
The new financial technology could represent an opportunity for the Islamic financial industry to expand its fixed-income horizons in the global financial markets. The upside both within and beyond the Islamic community could be dramatic.
Details
Keywords
This paper aims to examine the mediating effect of dividend payout on the relationship between internal governance mechanisms (board of directors and ownership structure) and the…
Abstract
Purpose
This paper aims to examine the mediating effect of dividend payout on the relationship between internal governance mechanisms (board of directors and ownership structure) and the free cash flow level.
Design/methodology/approach
Linear regression models are used to investigate such relationships applying data from a sample of 207 non-financial firms listed on the Gulf Cooperation Council countries’ stock markets between 2009 and 2016. To test the significance of mediating effect, the author uses the Sobel test.
Findings
The author finds a partial mediation effect of dividend on the relationship between both board independence and managerial ownership and the level of free cash flow. The results confirm the major role of outside directors in corporate governance. This governance mechanism contributes to the protection of shareholders’ interests through a generous dividend policy. However, the author finds that large managerial shareholdings increase the level of free cash flow through lower dividend payouts. This result suggests that powerful managers follow their preference of retaining excess cash to their own interests.
Practical implications
This paper offers insights to policy-makers of emerging economies interested in the development of the corporate governance. This study provides guidance for firms in the construction and implementation of their own corporate governance policies.
Originality/value
The main contribution of the present paper is to examine the dividend payout as a potential mediating variable between internal governance mechanisms and free cash flow. Moreover, it highlights the issue of efficient management of substantial funds in Sharia-compliant and non-Sharia-compliant firms.
Details
Keywords
The purpose of the paper is to clarify the relationship between stakeholder interests and the ownership of a company, and to specify the distinctions between three types of…
Abstract
Purpose
The purpose of the paper is to clarify the relationship between stakeholder interests and the ownership of a company, and to specify the distinctions between three types of maximization: shareholder‐, stakeholder‐owner‐ and total stakeholder maximization.
Design/methodology/approach
This conceptual paper first analyzes how company‐related rents are connected to different stakeholder groups. These rents are defined as the monetary and non‐monetary returns from stakeholder involvement in a company, in excess of what stakeholders could achieve from their best alternatives. The paper distinguishes between general stakeholder benefits and the additional owner benefits a stakeholder secures by having controlling ownership. The stakeholder having the highest net benefits (benefits minus costs), and thus paying the highest price for ownership, will be the controlling owner. The controlling stakeholder‐owners' benefits are those which are maximized by the company. This leads to the second part of the paper, which analyzes different types of maximization.
Findings
The general type of maximization that companies pursue is stakeholder‐owner maximization. Maximization of shareholder value is a special case of stakeholder‐owner maximization. Only under quite restrictive assumptions is shareholder maximization larger or equal to stakeholder‐owner maximization. Total stakeholder maximization is calculated on the sum of the returns to all stakeholders including shareholders. Because of problems of measurement and practical application, total stakeholder maximization is difficult or impossible to achieve. Firms generally approximate to total stakeholder maximization by implementing stakeholder‐owner maximization under constraints defined by other stakeholder interests. With stronger regulation, pressure from different stakeholder groups, and more emphasis on corporate social responsibility, the decision area where the company can simultaneously maximize stakeholder‐owners' returns and stakeholder interests will be increased.
Originality/value
This paper breaks new ground by linking controlling ownership and stakeholder interests/rents. This is used to give precise definitions on three types of maximization: shareholder‐, stakeholder‐owner, and total stakeholder maximization.
Details
Keywords
Alfonsina Iona and Leone Leonida
The purpose of this paper is to identify firms in the UK adopting a policy of high cash and low leverage and investigate how executive ownership contributes to this decision.
Abstract
Purpose
The purpose of this paper is to identify firms in the UK adopting a policy of high cash and low leverage and investigate how executive ownership contributes to this decision.
Design/methodology/approach
Firms following this policy are identified both by using a fixed classification approach and the analysis of the distribution of cash and leverage. Logit analysis is then used to estimate the probability of adopting the policy as a function of executive ownership.
Findings
Extreme financial policies are suboptimal as firms adopting these policies tend to undershoot (overshoot) their target leverage (cash holdings) ratios. The impact of the executive ownership on the probability of adopting this policy is U-shaped, in line with the alignment–entrenchment hypothesis.
Practical implications
Despite the substantial presence of non-executive directors in the boards and a significant amount of shareholdings by executive directors, the firms under analysis have adopted suboptimal financial policies possibly because poorly governed or because executive ownership is the range where entrenchment is feasible.
Originality/value
This is the first attempt at recognising policies of high cash and low leverage as being explicitly interdependent. It is also the first study focussing on the UK, a country of interest, because ownership structure is relatively dispersed. Moreover, instead of choosing fixed threshold levels of the variable in defining the extreme financial policy, this paper proposes the analysis of the distribution of cash holdings and leverage and accounts for target levels of cash and leverage.
Details
Keywords
This study aims to examine the impact of ownership structure variables on the performance of Saudi listed firms.
Abstract
Purpose
This study aims to examine the impact of ownership structure variables on the performance of Saudi listed firms.
Design/methodology/approach
The impact of ownership structure variables on firm performance is examined using fixed effects and dynamic panel generalised method of moments regression approaches for 70 listed firms over the period 2016–2021. Ownership structure variables are captured by examining government, institutional, insider, foreign and family ownership, and firm performance is gauged in terms of the accounting-based measures of return on assets and the return on equity and the market-based measures of Tobin’s Q and the market-to-book ratio.
Findings
The results show that government, institutional, insider and foreign ownership all positively affect both accounting and market-based performance measures, whereas family ownership exerts a negative impact across the models. The findings support resource dependence theory, agency theory and alignment effects arguments.
Practical implications
The findings have significant implications for Saudi regulators in their effort to improve domestic capital market efficiency and investor protection, while also highlighting the need for a corporate governance code to safeguard minority shareholders. The results demonstrate that government, institutional, insider and foreign ownership exert an important impact on firm operational and market performance.
Originality/value
This study expands the literature by examining how ownership structure variables affect performance in an interesting developing country corporate context.
Details
Keywords
Ahamed Kameel Mydin Meera and Moussa Larbani
The purpose of this paper is to show that fractional reserve banking (FRB) has implications for the ownership structure of assets in the economy that violates the Islamic…
Abstract
Purpose
The purpose of this paper is to show that fractional reserve banking (FRB) has implications for the ownership structure of assets in the economy that violates the Islamic principles of ownership.
Design/methodology/approach
This is a theoretical paper that looks into the works of Islamic scholars on the issue of ownership that are based on Qur'an principles and the traditions of the Prophet, and evaluates the FRB from that perspective.
Findings
The conclusion of the paper is that money creation through FRB is creation of purchasing power out of nothing which brings about unjust ownership transfers of assets, from the economy to the bank effectively paid for by the whole economy through inflation. This transfer of ownership is not based on human effort by taking on legitimate risks and neither with the knowledge nor the consent of the initial owners. This violates the ownership principles in Islam and is tantamount to theft. It also has the elements of riba. Islamic governments should therefore not create fiat money since this is equivalent to taking assets of the people, rich and poor alike, forcefully without compensation.
Research limitations/implications
Empirical investigations into how bank loans along the years have changed the asset ownership structure in economies may shed further light.
Practical implications
It is, therefore, important that Shariah scholars render a fatwa on both the fiat money and the FRB system. Such a fatwa is urgent and pertinent before Islamic banking and finance, that operate under these systems, takes a course that may prove difficult to reverse later. The Islamic economics and finance cannot be founded upon a money system that is fundamentally equivalent to theft and riba.
Originality/value
The paper shows how the operations of Islamic banking and finance within the fiat money, FRB system are invalid from the Islamic perspective.
Details
Keywords
During recent years, financial economists have made a significant contribution to the rapid development of a vibrant and growing literature on organization structure and corporate…
Abstract
During recent years, financial economists have made a significant contribution to the rapid development of a vibrant and growing literature on organization structure and corporate governance. In reviewing the development of this literature, it becomes easy to see how the seminal contributions of Ronald Coase (awarded the Nobel Prize in Economics in 1991) have become the cornerstone of a new institutional economics. In particular, researchers following in Coase’s footsteps have clarified the conditions under which voluntary contracts between private agents can resolve a wide variety of so-called “agency problems.” More than just representing an important discovery of the significance of transaction costs and property rights for the institutional structure and functioning of the economy, Coase’s work has become an important foundation for the theory of contracts and for the whole field of “organization economics.”
Mahmud Hossain, Barry R. Marks and Santanu Mitra
The ownership structure of a corporation can alleviate the agency problem that arises between shareholders and managers of a corporation, which implies that the ownership…
Abstract
The ownership structure of a corporation can alleviate the agency problem that arises between shareholders and managers of a corporation, which implies that the ownership composition of a firm may infl uence the level of voluntary disclosure. This study investigates whether the ownership structure of U. S. based multinational corporations affects the managerial decision to voluntarily disclose quarterly foreign segment data. The empirical results show that the three ownership variables of interest, institutional stock ownership, managerial stock ownership and outside blockholder stock ownership are inversely related to the level of voluntary disclosure of quarterly foreign segment data. Therefore, it is inferred that an increase in the proportion of outstanding common stock held by these ownership groups is accompanied by a decrease in the probability that a U.S. multinational firm voluntarily discloses quarterly foreign segment data.
Details
Keywords
The purpose of this paper is to investigate the impact of different categories of ownership concentration on corporate voluntary disclosure practices in New Zealand.
Abstract
Purpose
The purpose of this paper is to investigate the impact of different categories of ownership concentration on corporate voluntary disclosure practices in New Zealand.
Design/methodology/approach
The study applies panel data regression analysis to a sample of New Zealand listed companies from 2001 to 2005. Two‐stage least squares analysis (2SLS) is conducted. Ownership concentration is categorised into four mutually exclusive ownership structures.
Findings
The paper finds that firm‐year observations characterised by financial institution‐controlled ownership structure tends to make significantly fewer (more) disclosures at high (low) concentration levels supporting expropriation. In contrast, firm‐year observations in the high (low) concentration group with government‐ and management‐controlled ownership structures exhibit considerably higher (lower) voluntary disclosure scores, suggesting a positive monitoring effect at high ownership concentration level.
Research limitations/implications
The results provide evidence for the proposition that the efficiency of large block holders' monitoring varies with the level of ownership concentration.
Practical implications
To promote transparency in capital markets, regulators can encourage or discourage certain types of large shareholding, while monitoring the level of ownership concentration by means of regulation. Investors, especially less sophisticated retail investors, will benefit from the findings that different ownership groups affect disclosure policies differently.
Originality/value
The findings strengthen the importance of differentiating ownership structures into various classes to infer the real impact of differential controlling properties on managerial disclosure decisions. Furthermore, the results reveal that the relationship between ownership concentration and voluntary disclosure practices has a non‐linear pattern.
Details
Keywords
Paolo Saona Hoffmann and Eleuterio Vallelado González
Our aim is to analyze the type of lender and the debt maturity of Chilean firms as a function of their ownership structure and their growth opportunities. We perform the empirical…
Abstract
Our aim is to analyze the type of lender and the debt maturity of Chilean firms as a function of their ownership structure and their growth opportunities. We perform the empirical analysis using an unbalanced panel data of 169 firms from 1990 to 2001. Our results show that Chilean firms with growth opportunities, ownership concentration, and a need for external funds issue short‐term bank debt to finance their new investments. This financing source is an efficient mechanism in Chile to alleviate agency and asymmetric information problems. The Chilean institutional environment influences firms’ decisions on banking debt.
Details