Corporate governance and firm value: a comparative analysis of state and non-state owned companies in the context of Pakistan

2018 ◽  
Vol 18 (6) ◽  
pp. 1196-1206 ◽  
Author(s):  
Kalim Ullah Bhat ◽  
Yan Chen ◽  
Khalil Jebran ◽  
Niaz Ahmed Bhutto
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Cost Benefit Analysis ◽  
Practical Implication ◽  
Random Effect ◽  
Random Effect Model ◽  
Positive Association ◽  
Suitable Model ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Pakistan. This paper considers state- and non-state-owned enterprises and examines whether the influence of corporate governance on firm value varies across firms having different nature of ownership. Design/methodology/approach This study opts for an unbalanced sample of state- and non-state-owned enterprises for the period 2010-2014. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model, is selected using Hausman specification test. Findings The notable findings show that board independence has a significant and positive relationship with firm value only for state-owned companies. Furthermore, the results show that market capitalization and return on assets have a significant and positive association with firm value for both state- and non-state-owned enterprises. All other variables are found insignificant for both state- and non-state-owned companies, but the results are consistent with those reported in previous studies. Practical implication The findings of the study suggest that fair induction of independent directors, appropriate board size and cost-benefit analysis to conduct frequent meetings can help corporations to improve their performance. Originality/value This study is adding to the current literature by providing new insights and shows that the impact of corporate governance on firm value varies across firms of different types of ownership, i.e. state- and non-state-owned enterprises.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

scholarly journals The Relevance of Good Corporate Governance Practices to Bank Performance

2021 ◽  
Vol 4 (2) ◽  
Author(s):  
Muhammad M. Ma’aji ◽  
◽  
Ediri O. Anderson ◽  
Christine G. Colon
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Random Effect ◽  
Random Effect Model ◽  
Least Square ◽  
Annual Reports ◽  
Suitable Model ◽  
Current Guideline ◽  
Board Committees ◽  
Effect Model

The purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Cambodian banks. This paper considers foreign and domestic-owned banks in Cambodia. This study opts for a balanced sample of foreign and domestic owned banks for the period 2014-2018. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model is selected using the Hausman specification test where the result shows that the random effect model using generalized least square (GLS) regression is more suitable for the analysis. The findings show that Cambodian banks are having a substantially higher percentage of NEDs on their board, high implementation of governance procedures on board committees where on average the banks are having more than the required two board committees (audit and risk committees) as required by the Prakas on the governance of banks by National Bank of Cambodia. The average board size is around 8 members of which at least 3 members are having a postgraduate degree or a professional qualification. Policymakers need to improve on their supervisory function as the majority of the domestic and some foreign banks do not disclose their annual reports on their company website as required by the Prakas on Corporate Governance of Banks operating in Cambodia. Moreover, amendments should be made to the current corporate governance code for financial institutions as there are no explanatory notes that guide companies and therefore, the current guideline is open to individual and subjective interpretation.

scholarly journals The Relevance of Good Corporate Governance Practices to Bank Performance

2021 ◽  
Author(s):  
Muhammad M. Ma’aji ◽  
Ediri O. Anderson ◽  
Christine G. Colon
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Random Effect ◽  
Random Effect Model ◽  
Least Square ◽  
Annual Reports ◽  
Suitable Model ◽  
Current Guideline ◽  
Board Committees ◽  
Effect Model

The purpose of this paper is to examine how corporate governance instruments impact firm value in the context of Cambodian banks. This paper considers foreign and domestic-owned banks in Cambodia. This study opts for a balanced sample of foreign and domestic owned banks for the period 2014-2018. Panel data regression is adopted for estimation of main results. The suitable model, i.e. fixed and random effect model is selected using the Hausman specification test where the result shows that the random effect model using generalized least square (GLS) regression is more suitable for the analysis. The findings show that Cambodian banks are having a substantially higher percentage of NEDs on their board, high implementation of governance procedures on board committees where on average the banks are having more than the required two board committees (audit and risk committees) as required by the Prakas on the governance of banks by National Bank of Cambodia. The average board size is around 8 members of which at least 3 members are having a postgraduate degree or a professional qualification. Policymakers need to improve on their supervisory function as the majority of the domestic and some foreign banks do not disclose their annual reports on their company website as required by the Prakas on Corporate Governance of Banks operating in Cambodia. Moreover, amendments should be made to the current corporate governance code for financial institutions as there are no explanatory notes that guide companies and therefore, the current guideline is open to individual and subjective interpretation.

Board composition and value relevance of Ghanaian firms: a seemingly unrelated regression approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ebenezer Agyemang Badu ◽  
Ebenezer Nyarko Assabil
Keyword(s):  
Best Practices ◽  
Firm Value ◽  
Value Relevance ◽  
Practical Implication ◽  
Seemingly Unrelated Regression ◽  
Board Composition ◽  
Content Type ◽  
Listed Firms ◽  
Unrelated Regression ◽  
The Impact

PurposeThe purpose of this study is to examine the connection between board composition and value relevance of financial information in Ghana.Design/methodology/approachThe study uses a panel data of 144 firm-year observations of listed firms in Ghana.FindingsThe study finds that a higher fraction of independent directors is associated with lower firm value. The study further finds that board size is positively related to firm value, whereas duality is negatively associated with firm value.Practical implicationsThe practical implication of this paper is that investors and regulators should be mindful that specifying governance composition should not only be based on “so-called” codes of best practices but also the level of the country's or the sector's development and local institutional structures.Originality/valueThis study uses five different measurements of market share and considers the impact of the provision of the Code of Best Practices in Ghana.

Disclosure of corporate social responsibility (CSR) and its implications on company value as a result of the impact of corporate governance and profitability

2020 ◽  
Vol 62 (4) ◽  
pp. 339-354
Author(s):  
Kamaliah Kamaliah
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Firm Value ◽  
Partial Least Square ◽  
Least Square ◽  
Content Type ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Impact

Purpose The purpose of this study is to examine the effect of corporate governance and corporate profitability on firm value with corporate social responsibility (CSR) disclosure as the intervening variable. Design/methodology/approach The population of this study was all companies listed in the LQ 45 Index group in the Indonesia Stock Exchange in 2013-2014. The inferential statistics used in this study applied the partial least square (PLS) based structural equation model (SEM) method with the assistance of SmartPLS 2.0. The PLS method was selected based on the consideration that there was a construct formed with reflective indicators in this study. Findings From the results of this study, it can be concluded that corporate governance does not have any effect on CSR disclosure, profitability of company has an effect on CSR disclosure, CSR disclosure has an effect on firm value. In addition, CSR disclosure does not mediate the effect of on firm value. These results showed that corporate governance can have an effect on firm value directly, and there is no role of CSR disclosure in mediating the effect of corporate governance on firm value, and profitability of company has an effect on firm value through CSR disclosure. Originality/value The originality of this research is on the reason that many studies that have been conducted still indicated the inconsistency in the results and diversity of the indicators, so that a similar research was conducted by involving the indicators used for measuring the corporate governance variable, which were the proportion of independent commissioners and audit committee. Meanwhile, for the profitability variable, return on assets and return on equity were used as the indicators.

scholarly journals Does executive ownership lead to excess target cash? The case of UK firms

2017 ◽  
Vol 17 (5) ◽  
pp. 876-895 ◽  
Author(s):  
Alfonsina Iona ◽  
Leone Leonida ◽  
Alexia Ventouri
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Cash Holdings ◽  
Logit Analysis ◽  
Governance Mechanism ◽  
Governance System ◽  
Content Type ◽  
Excess Cash ◽  
The Uk ◽  
The Impact

Purpose The aim of this paper is to investigate the dynamics between executive ownership and excess cash policy in the UK. Design/methodology/approach The authors identify firms adopting an excess policy using a joint criterion of high cash and cash higher than the target. Logit analysis is used to estimate the impact of executive ownership and other governance characteristics on the probability of adopting an excess cash policy. Findings The results suggest that, in the UK, the impact of the executive ownership on the probability of adopting an excess cash policy is non-monotonic, in line with the alignment-entrenchment hypothesis. The results are robust to different definitions of excess cash policy, to alternative specifications of the regression model, to different estimation frameworks and to alternative proxies of ownership concentration. Research limitations/implications The authors’ approach provides a new measure of the excess target cash for the firm. They show the need to identify an excess target cash policy not only by using an empirical criterion and a theoretical target level of cash, but also by capturing persistence in deviation from the target cash level. The authors’ measure of excess target cash calls into questions findings from previous studies. The authors’ approach can be used to explore whether excess cash holdings of UK firms and the impact of managerial ownership have changed from before the crisis to after the crisis. Practical implications The authors’ measure of excess target cash allows identifying in practice levels of cash which are abnormal with respect to an equilibrium level. UK firms should be cautious in using executive ownership as a corporate governance mechanism, as this may generate suboptimal cash holdings and suboptimal firm value. Excess cash policy might be driven not only by a poor corporate governance system, but also by the interplay between agency costs of managerial opportunism and cost of the external finance which further research could explore. Originality/value Actually, “how much cash is too much” is a question that has not been addressed by the literature. The authors address this question. Also, this amount of cash allows the authors to study the extent to which executive ownership contributes to explain the out-of-equilibrium persistency in the cash level.

scholarly journals The impact of social, environmental and corporate governance disclosures on firm value

2018 ◽  
Vol 8 (4) ◽  
pp. 442-458 ◽  
Author(s):  
Ahmed Aboud ◽  
Ahmed Diab
Keyword(s):  
Firm Value ◽  
Emerging Market ◽  
Positive Association ◽  
Economic Benefits ◽  
Economic Effects ◽  
Market Reactions ◽  
Content Type ◽  
Leading Role ◽  
Governance Practices ◽  
The Impact

PurposeThe purpose of this paper is to examine the impact of environmental, social, and governance (ESG) practices disclosure and firm value in the Egyptian context. This is done through investigating the influence of being listed and ranked in the Egyptian Corporate Responsibility Index on firm value during the period starting from 2007 to 2016.Design/methodology/approachUsing univariate and multivariate analyses, the findings support the economic benefits of ESG disclosures.FindingsThe authors find that firms listed in the ESG index have higher firm value, and that there is a positive association between firms’ higher rankings in the index and firm value, as measured by Tobin’sq.Research limitations/implicationsThe findings provide feedback to regulators and standard-setters in the developing countries, and more specifically the Egyptian regulators, on the benefits associated with the introduction of the sustainability index (Standard & Poor’s (S&P)/EGX ESG index). This, in turn, clarifies how the government’s efforts to promote ESG provide benefits to publicly traded firms.Practical implicationsBy linking ESG to firm value, the ESG index will enable investors to take a leading role in inducing firms to enhance transparency and disclosure, and hence, improving their reporting standards. This, in turn, will ultimately result in improving sustainability and governance practices in Egypt.Social implicationsThe reported positive market reactions to social and governance practices disclosures can motivate firms to improve their social and governance performance.Originality/valueThe study contributes to the literature by addressing the combined economic effects of social and governance disclosures on firm value, and by investigating the economic effects of such disclosures on firm value in an emerging market.

scholarly journals The effect of cash holdings and corporate governance on firm value: Evidence from the Amman Stock Exchange

2021 ◽  
Vol 10 (4, special issue) ◽  
pp. 272-281
Author(s):  
Hamza Zaki Jaradat ◽  
Ahmad Awad Alnaimi ◽  
Safaa Adnan Alsmadi
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Stock Exchange ◽  
Gender Diversity ◽  
Cash Holdings ◽  
Positive Association ◽  
Negative Effects ◽  
Amman Stock Exchange ◽  
Code Of Corporate Governance ◽  
The Impact

Much effort has been expended by the regulators in Jordan to enhance the code of corporate governance (CG); however, the effectiveness of CG mechanisms in monitoring management and enhancing the value of a firm is still a puzzle. This study aims to investigate the impact of CG and cash holdings (CH) on firm value as measured by the market-to-book ratio. The sample consists of all manufacturing firms listed on the Amman Stock Exchange (ASE) over the years 2010–2017. The study hypotheses were tested using panel regression analysis. The research findings suggest that CH have a positive association with firm value, supporting the transaction and precautionary motives for holding cash. An interesting finding is that board expertise was found to be negatively associated with firm value. Gender diversity was found to be positively related to firm value, while board size, independence, and frequency of meetings were found to be insignificant. It seems that firms in Jordan regard strong CG mechanisms to be expensive and of little value in mitigating the negative effects of a weak legal system. These findings shed new light on the influence (or the lack of it) of boards in Jordanian firms. Consequently, the study recommends that the regulatory agencies in Jordan should consider improving governance codes and Rules to increase the effectiveness of the board and governance in general.

scholarly journals Corporate Governance and Company Value: A Manufacturing Industry Case Study

2021 ◽  
Vol 4 (4) ◽  
pp. 450-461
Author(s):  
Helma Malini ◽  
Dyen Natalia ◽  
Giriati Giriati
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Audit Committee ◽  
Manufacturing Industry ◽  
Random Effect ◽  
Random Effect Model ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Book Value ◽  
The Impact

The purpose of this research is to look into the impact of corporate governance in the Indonesia Stock Exchange's Manufacturing Industry. Panel data from 73 Manufacturing Industry companies on the Indonesia Stock Exchange from 2014 to 2018 with a total of 365 observations of data whose research results were analyzed using panel data regression analysis with the Random Effect Model approach. Institutional ownership has a positive effect on Tobin's q and market book value, according to the study's findings. Tobin's q and market book value are negatively affected by foreign ownership. Meetings of the Board of Commissioners and the Audit Committee have a negative impact on stock price returns. Meetings of the board of directors, audit committee, and board of commissioners were found to have no impact on the value of the company. On the basis of these findings, it can be concluded that the results of testing the independent variables on the dependent are inconclusive and should be questioned further.

Expansion plan of Central Tiffin Room: a case on accounting

2020 ◽  
Vol 10 (3) ◽  
pp. 1-21
Author(s):  
Amith Vikram Megaravalli ◽  
Gopinath BS
Keyword(s):  
Cost Benefit Analysis ◽  
Practical Implication ◽  
Cost Benefit ◽  
Basic Knowledge ◽  
Managerial Accounting ◽  
Content Type ◽  
Academic Level ◽  
Expansion Plan ◽  
Entrepreneurial Training ◽  
The Impact

Learning outcomes The case presents students with the opportunity to do the following: students can pre-work questions; understand the relevant factors to be considered in the decision to expand; and list out the industry and macro-environment factors affecting the expansion decision. Assignment questions help understand the various measures used to evaluate the financial performance of the company; understand the practical implication of incremental analysis to estimate the profit; assess the operating profit and margin of safety of the restaurant Shri Sagar with and without expansion; and critically evaluate the impact of uncertainty on projected sales using the sensitivity model. Case overview/synopsis Shri Sagar (Central Tiffin Room – CTR) was started by Y.V. Subramanyam and his siblings (Y.V. Srikanteshwaran, Y.V. Krishna Iyer and Y.V. Ramachandran) in the 1920s, specialised in Benne (Butter) Masala dosa, Maddur Vada and Mangalore Bajji. In Bengaluru, there are few restaurants, which have the legacy of more than 50 years such as Vidyarthi Bhavan, Mavalli Tiffin Rooms and Shri Sagar (CTR). Shri Sagar has witnessed three different ownership right from 1920 to the present. Ganesh, an MBA graduate, took the active participation in the business from 2018 and found there are potential opportunities to expand the business. Although business was doing well, Ganesh wanted to assess his company’s financial strength before proceeding. He would require a financial forecast that took into account the strength of the competition and the peculiar nature of the restaurant business in Bengaluru. Ganesh wanted to assess the expansion plan; to address the proposed plan, the case had used cost–volume–profit analysis and sensitivity analysis techniques to make the students understand how these techniques can evaluate the alternatives. Complexity academic level This case is best used while teaching Managerial Accounting, which is a core course in MBA program with a module on break-even-analysis or it can also be used in an executive education class with a similar purpose. The teaching plan can be used for MBA students and entrepreneurial training programmes, which involve training on important managerial decisions, which includes business expansion, estimating business profits/revenue targets, etc. It assumes some basic knowledge of cost–benefit analysis concepts where participants have already exposed some basic understanding of break-even analysis and what-if analysis. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 1: Accounting and Finance

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