Does board independence enhance firm value of state-owned enterprises? Evidence from India and China

2020 ◽  
Vol 32 (5) ◽  
pp. 785-800 ◽  
Author(s):  
Thenmozhi M. ◽  
Aghila Sasidharan
Keyword(s):  
Firm Value ◽  
Central Government ◽  
Stock Exchange ◽  
Board Independence ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Content Type ◽  
The Government ◽  
The Impact ◽  
India And China

Purpose This study aims to examine the effectiveness of governance in state-owned enterprises (SOEs) and explores if board independence enhances the firm value of SOEs in India and China. The study further explores the moderation impact of promoter ownership in enhancing firm value. Design/methodology/approach The study is confined to government-owned enterprises in India and China and is based on a sample of 53 central government-owned firms listed in National Stock Exchange of India and 110 state-owned firms listed in Shanghai Stock Exchange of China for the period 2010–2017. A fixed-effect panel regression analysis has been used to examine the effect of board independence on firm value. Findings The study found that board independence adds value to the SOEs in India and China and the presence of independent directors (IDs) in the board of SOEs act as better monitors of performance to protect the interest of minority shareholders. Probably, they minimize agency conflict and provide resources to the firm and management. The greater the government shareholdings, the board independence further enhances value of SOEs in India and China. Practical implications Compliance with guidelines on IDs in SOEs serves as an effective corporate governance mechanism and the presence of IDs can signal better firm performance. The government promoters align with the IDs in better monitoring of SOE performance. Originality/value The study is unique and contributes to the literature by examining the impact of board independence on firm value in the context of SOEs in India and China and also provides insight on the effect of promoter ownership on the effectiveness on board independence.

The performance of the Broad Based Black Economic Empowerment compliant listed property firms in South Africa

2016 ◽  
Vol 34 (1) ◽  
pp. 3-26 ◽  
Author(s):  
Omokolade Akinsomi ◽  
Katlego Kola ◽  
Thembelihle Ndlovu ◽  
Millicent Motloung
Keyword(s):  
Stock Returns ◽  
Factor Model ◽  
Stock Exchange ◽  
Sharpe Ratio ◽  
Economic Empowerment ◽  
Content Type ◽  
Black Economic ◽  
Black Economic Empowerment ◽  
The Government ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of Broad-Based Black Economic Empowerment (BBBEE) on the risk and returns of listed and delisted property firms on the Johannesburg Stock Exchange (JSE). The study was investigated to understand the impact of Black Economic Empowerment (BEE) property sector charter and effect of government intervention on property listed markets. Design/methodology/approach – The study examines the performance trends of the listed and delisted property firms on the JSE from January 2006 to January 2012. The data were obtained from McGregor BFA database to compute the risk and return measures of the listed and delisted property firms. The study employs a capital asset pricing model (CAPM) to derive the alpha (outperformance) and beta (risk) to examine the trend amongst the BEE and non-BEE firms, Sharpe ratio was also employed as a measurement of performance. A comparative study is employed to analyse the risks and returns between listed property firms that are BEE compliant and BEE non-compliant. Findings – Results show that there exists differences in returns and risk between BEE-compliant firms and non-BEE-compliant firms. The study shows that BEE-compliant firms have higher returns than non-BEE firms and are less risky than non-BEE firms. By establishing this relationship, this possibly affects the investor’s decision to invest in BEE firms rather than non-BBBEE firms. This study can also assist the government in strategically adjusting the policy. Research limitations/implications – This study employs a CAPM which is a single-factor model. Further study could employ a multi-factor model. Practical implications – The results of this investigation, with the effects of BEE on returns, using annualized returns, the Sharpe ratio and alpha (outperformance), results show that BEE firms perform better than non-BEE firms. These results pose several implications for investors particularly when structuring their portfolios, further study would need to examine the role of BEE on stock returns in line with other factors that affect stock returns. The results in this study have several implications for government agencies, there may be the need to monitor the effect of the BEE policies on firm returns and re-calibrate policies accordingly. Originality/value – This study investigates the performance of listed property firms on the JSE which are BEE compliant. This is the first study to investigate listed property firms which are BEE compliant.

The effect of intangible assets on sustainable growth and firm value – Evidence on intellectual capital investment in companies listed on Bucharest Stock Exchange

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Catalin Ionita ◽  
Elena Dinu
Keyword(s):  
Growth Rate ◽  
Intellectual Capital ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Listed Companies ◽  
Sustainable Growth ◽  
Content Type ◽  
Sustainable Growth Rate ◽  
The Impact

PurposeThe present study investigates the connection between company investments in intellectual capital (IC) and how they translate into financial value. The aim is to test the impact of intangible assets on the firm value and its sustainable growth.Design/methodology/approachThe research employs computation models to determine the sustainable growth rate (SGR) and the firm value (FV), and by using the ordinary least squares (OLS) model through a linear regression assesses the relationship between the dependent variables and expenditures on intangibles like R&D, IT programs and patents. A sample of 42 companies has been selected out of the 78 listed at Bucharest Stock Exchange (BSE), based on the appropriateness of the information disclosed in the financial reports for the period 2016–2019.FindingsThe results show that intangibles classified as innovative competences (R&D and Patents) do not have a positive impact on SGR and FV in listed companies from Romania. Moreover, R&D has a negative and significant effect on FV, while IT Programs have a positive and significant impact on FV, but not on the SGR. Variables categorised as economic competencies (Brands, Shares held in associates and jointly controlled entities) and firm structure-specific variables (Leverage, Firm Performance) seem to have a significant effect on SGR and FV. Shares held in associates and jointly controlled entities is the variable that can have the biggest impact when it comes to FV for companies listed at BSE.Research limitations/implicationsDue to non-disclosure of specific information by some companies, or lack of investments in intangibles the sample had to be reduced and does not cover all listed companies.Practical implicationsCompanies listed on the Regulated Market from the Bucharest Stock Exchange should maintain their scale of liabilities at a reasonable level when financing intangible assets in order to ensure corporate long-term and sustainable development. Also, these companies should maintain awareness about the importance of intangible assets and invest more in specific sub-components, in order to sustain competitive advantage. Recognizing the roles of intangibles, managers need to develop strategies to invest in profitable intangibles by reasonably allocating their limited resources, in order to achieve sustainable growth and increase company success.Originality/valueStudies concerning the relation between investments in intangibles and sustainable growth rate and firm value of listed Romanian companies are very scarce. This paper reveals new research, never before undertaken, concerning expenditures on intangibles by Romanian companies and the valuation of such investments on Bucharest Stock Exchange.

Corporate Governance Mechanism on Financial Performance (Evidence from the Indonesia’s Listed State-owned Enterprises)

2021 ◽  
Vol 1 (1) ◽  
pp. 24-34
Author(s):  
Anak Agung Kompiyang Ratih Maldini ◽  
Pananda Pasaribu ◽  
Christian Haposan Pangaribuan
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Positive Impact ◽  
Stock Exchange ◽  
Governance Structure ◽  
Board Independence ◽  
Governance Mechanism ◽  
Good Corporate Governance ◽  
Corporate Governance Mechanism ◽  
The Impact

Objective – This study aims to find the impact of privatization, which proxied by good corporate governance toward the financial performance of SOEs in Indonesia. Methodology – This study used 16 privatized SOEs that are listed in Indonesia Stock Exchange and also 16 privatized non-SOEs as the comparison. The data is collected from the year 2014 to 2018 and analyzed by using multiple regression panel data. Findings – This study found that director size and board independence have a positive impact toward SOEs financial performance. The director size and board independences have a positive significant impact toward the SOEs financial performance while the privatized non-SOEs is not significantly affected Novelty – This study examines proper governance structure in SOEs and non-SOEs, thus providing new insights about good corporate governance regulation in the Indonesian context.

Do intellectual capitals matter to firm value enhancement? Evidences from Taiwan

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yensen Ni ◽  
Yi-Rung Cheng ◽  
Paoyu Huang
Keyword(s):  
Intellectual Capital ◽  
Firm Value ◽  
Stock Exchange ◽  
Emerging Market ◽  
Customer Relationship ◽  
Strategic Decisions ◽  
Content Type ◽  
Data Resource ◽  
Customer Capital ◽  
The Impact

PurposeThe purpose of this study is to find evidence of the impact of intellectual capital on firm value, and, in turn, enhance the existing literature which lacks consensus on it. By employing some distinctive proxies for human capital, innovation capital, customer capital and process capital, this study might provide valuable information for firms to make strategic decisions.Design/methodology/approachThis study uses Tobin's Q to represent firm value and various variables to be the proxies for intellectual capitals. By utilizing firm-year observations, this study applies panel data models first, and then Petersen regression models for further investigation to enhance the robustness of the empirical results.FindingsFirm value is affected positively by the average net profit per employee as well as goodwill and intangible assets. This is because firms having employees with abundant knowledge will possess advantage for innovation, and the excellent reputation, a part of goodwill for oriental firms, would encourage people to consume and invest more.Research limitations/implicationsThe constraint of data resource is the main limitation. With the limited scales and as an emerging market of Taiwan Stock Exchange, it is not confirmed whether the results are appropriate for the developed markets. Nevertheless, firms should make efforts on developing intellectual capital and corporate governance for operating businesses with competitiveness and safety.Originality/valueSince capable employees enhance the innovation, innovation improves customer's satisfaction and good customer relationship increases the sales; this study illustrates that for expanding businesses, firms should make more efforts on developing intellectual capital.

Political connections and firm value: an analysis of listed firms in Sri Lanka

2016 ◽  
Vol 28 (1) ◽  
pp. 92-106 ◽  
Author(s):  
Henk Berkman ◽  
Vidura Galpoththage
Keyword(s):  
Sri Lanka ◽  
Firm Value ◽  
Public Perception ◽  
Convincing Evidence ◽  
Political Connections ◽  
Political Connection ◽  
Content Type ◽  
Political Events ◽  
The Government ◽  
The Impact

Purpose – The purpose of this study is to use a portfolio-time-series approach to examine the impact of five important political events on the value of politically connected firms in Sri Lanka. Design/methodology/approach – This study examines five major political events to test if political connections affect market value of listed companies in Sri Lanka. Results show that despite numerous news articles and public perception suggesting otherwise, there is no convincing evidence which indicate that political connections increase firm value in Sri Lanka. Findings – The empirical results provide no evidence that political connections increase firm value in Sri Lanka. Further tests indicate that the government is not biased towards politically connected firms when granting major projects. The authors also fail to find a relation between Tobin’s Q and the level of political connection after including several common control variables. Originality/value – This study contributes to the literature on the value of political connections by using a robust event study methodology and a novel setting: Sri Lanka in the period around the end of the civil war.

The impact of board independence on accounting-based performance

2017 ◽  
Vol 33 (2) ◽  
pp. 114-130 ◽  
Author(s):  
Allam Mohammed Mousa Hamdan ◽  
Muneer Mohamed Saeed Al Mubarak
Keyword(s):  
Design Methodology ◽  
Stock Exchange ◽  
Independent Directors ◽  
Board Independence ◽  
Stewardship Theory ◽  
Ongoing Debate ◽  
Content Type ◽  
Return On Equity ◽  
Inverse Effect ◽  
The Impact

Purpose The purpose of this paper is to explore the effect of board independence on firm’s performance from the Stewardship theory perspective. Design/methodology/approach The study uses panel data of 162 firms listed in Bahrain Bourse and Saudi Stock Exchange during the period of 2013-2015. It also uses several econometric techniques to confirm the robustness of the results, such as firm fixed-effect approach and two-stage least squares (2SLS) in order to overcome the endogeneity which exists in such relations. Findings The study found an inverse effect of board independence on firm performance which was measured using two accounting-based measures: return of assets and return on equity. Based on these results, it was found that internal directors are more effective in enhancing performance of the firm than independent directors as information asymmetry problem and lack of firm-specific experience hinders the ability of independent directors of taking proper decisions that enhance firm's performance. Originality/value The study contributes to the ongoing debate about the relation between board independence and firm's performance in emerging markets, focusing on Saudi and Bahraini markets which have recently sought to form a system of laws that aims at protecting investors. The study indicates the importance of such laws rather than traditional governance measurements in enhancing performance.

Board structure: an empirical study of firms in Anglo-American governance environments

2014 ◽  
Vol 40 (7) ◽  
pp. 681-699 ◽  
Author(s):  
M.I. Muller-Kahle ◽  
Liu Wang ◽  
Jun Wu
Keyword(s):  
Firm Value ◽  
Resource Dependence ◽  
Resource Dependence Theory ◽  
Board Independence ◽  
Board Structure ◽  
Board Size ◽  
Content Type ◽  
The Usa ◽  
The Uk ◽  
The Impact

Purpose – With boards of directors playing both monitoring and guidance roles, the purpose of this paper is to examine the impact of board structure on firm value in large US and UK firms using the lenses of agency and resource dependence theories. Design/methodology/approach – Using a sample of firms in the USA and the UK from 2000 to 2007, the paper conducts a panel data analysis of the impact of board structure on firm value and examine the nuances of different governance environments. Findings – The paper finds distinct differences in the impact of board independence, board size, and outside director busyness on firm value between UK and US firms. Specifically, the paper finds that board independence, board size, and board busyness all have a significant positive impact on firm value in the UK. However, the paper finds no significant relationship between board independence and firm value among US firms. Both board size and board busyness are found to be positively associated with firm value in the USA. Social implications – The paper finds strong support for resource dependence theory in the UK but limited support for agency theory in the USA. Originality/value – This paper takes a multi-country approach to examining the impact of board structure on firm value.

Risk disclosures and firm value: the role of governance in an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Surbhi Jain ◽  
Mehul Raithatha
Keyword(s):  
Firm Value ◽  
Good Governance ◽  
Negative Impact ◽  
Emerging Market ◽  
Moderating Effect ◽  
Least Square ◽  
Governance Mechanism ◽  
Content Type ◽  
Risk Disclosures ◽  
The Impact

PurposeThe objective of this paper is to investigate the impact of risk disclosures on firm value. We further investigate whether effective governance moderates the relation between risk disclosures and firm value.Design/methodology/approachWe use a sample of the top 200 Indian listed firms on NSE from 2013 to 2018. The generalised method of moments (GMM) along with the ordinary least square (OLS) is used to investigate our research problem. Further, we use the Propensity Score Matching (PSM) technique and the Heckman selection model for correcting selection bias in the robustness section.FindingsWe find that higher risk disclosures result in lower firm value. Besides, we show that better governance minimizes the negative impact of risk disclosures on firm value. This finding encourages firms to have a good governance mechanism to mitigate the adverse effects of risk disclosures in public.Originality/valueThe main contribution of our paper is to examine the moderating effect of governance between risk disclosures in the annual report and firm value (market-based and accounting-based) in the context of an emerging economy. Moreover, the paper highlights the potential moderating effect of independent directors and resourceful boards on the risk disclosures and firm value in the Indian context.

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.

Would diversified corporate boards add value? The case of banking institutions in Malaysia

2018 ◽  
Vol 10 (2/3) ◽  
pp. 218-228 ◽  
Author(s):  
Ribed Vianneca W. Jubilee ◽  
Roy W.L. Khong ◽  
Woan Ting Hung
Keyword(s):  
Firm Value ◽  
Banking Sector ◽  
Gender Diversity ◽  
Governance Structure ◽  
Corporate Boards ◽  
Board Diversity ◽  
Content Type ◽  
Banking Institutions ◽  
The Government ◽  
The Impact

Purpose Board diversity has gained increasing attention and has been widely posited as a driver for firm value. The purpose of this paper is to provide empirical evidence on the relation of gender diversity of corporate boards with the value of banking institutions in Malaysia. Design/methodology/approach The sample comprised of ten banking institutions listed on Bursa Malaysia with data observations from 2007 to 2016. Panel data techniques were employed to investigate the relationship between having female directors and firm performance in terms of values generated as indicated by Tobin’s Q. Findings The results revealed a positive relationship between the proportion of female director and the value of the bank. Interestingly, this study found that appointment of female independent directors tends to be negatively related to the value of such institutions. Practical implications There remains a shortage of research studying the impact of gender equality on corporate boards in Malaysia generally and in the banking sector specifically. Thus, this study contributes a significant knowledge on the value implication of board diversity. The findings also provide useful insights on the developmental policy initiated by the government to increase female participation in the top management. Originality/value This study contributes to the literature by bridging the knowledge gap on board diversity in the governance structure of banking institutions. It also provides theoretical contributions to the development of regulatory policy in relation to gender diversification in corporate leadership.

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