Under- vs over-investment: hotel firms’ value around acquisitions

2017 ◽  
Vol 29 (8) ◽  
pp. 2050-2069 ◽  
Author(s):  
Tarik Dogru
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Financial Constraints ◽  
Organizational Structures ◽  
Ordinary Least Squares ◽  
Governance Mechanism ◽  
Least Squares Regression ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose The purpose of this study is to analyze the extent to which under- and over-investment problems affect hotel firms’ value around the time when acquisitions are announced. Design/methodology/approach Hotel firms are classified based on their financial constraints (under-investment), corporate governance mechanisms (over-investment) and organizational structures. Multivariate analyses are conducted utilizing the panel ordinary least squares regression to examine the effects of financial constraints, corporate governance mechanisms and organizational structures on acquisition returns. Findings The results show that financial constraints have a larger effect on the firm value compared to the effect of corporate governance. Also, acquisitions are viewed as over-investments in poorly governed, franchising and hotel-real estate investment trust (REIT) firms. Research limitations/implications The analyses are limited to gains from acquisitions in the hotel industry. Therefore, future studies may examine the effects of capital expenditures and cash holdings on hotel firm value. Practical implications Acquisitions could help financially constrained firms reduce informational asymmetries. Firms could expand through franchising when they are financially constrained. However, franchising firms should take restrictive actions to control managers from making acquisitions. The hotel-REIT organizational form does not seem to cause under-investment problems, and it functions as an additional corporate governance mechanism. Originality/value In addition to the C-corporation organizational structure, hotel firms extensively adopt REIT and expand through franchising, which might affect under- and over-investment problems. Nonetheless, little is known about whether capital investments create or reduce value for hotel firms. This study helps to explain how financial constraints, corporate governance mechanisms and organizational structures affect hotel firms’ value.

Ownership structure and audit committee effectiveness: evidence from top GCC capitalized firms

2019 ◽  
Vol 12 (3) ◽  
pp. 407-425 ◽  
Author(s):  
Mahfoudh Abdulkarem Al-Musali ◽  
Mohammed Helmi Qeshta ◽  
Mohamed Ali Al-Attafi ◽  
Abood Mohammad Al-Ebel
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Ordinary Least Squares ◽  
Annual Reports ◽  
Least Squares Regression ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Relationship ◽  
Ownership Types

PurposeThe purpose of this study is to report on the level of audit committee (AC) effectiveness on the top capitalized firms in GCC countries and to empirically investigate the hypothesized influence of ownership types on the level of AC effectiveness.Design/methodology/approachThe empirical data were drawn from annual reports of 119 top listed firms in Gulf Co-operation Council (GCC) nations at the end of 2011. Ordinary least squares regression analysis was constructed to examine the relationships between ownership types and the level of AC effectiveness.FindingsThe findings revealed that family, government and institutional ownership, in addition to board independence, all have significant positive association with AC effectiveness, and they serve as a complement to AC effectiveness.Research limitations/implicationsThe findings of the study are important for policy makers and regulators as they could use them to understand the relationship between different corporate governance mechanisms and formulating best strategies that would help them to improve and adopt an optimal governance system constituted from interacting governance mechanisms.Originality/valueThis study is one of few that have examined the interaction between different corporate governance mechanisms. It provides insights about the relationship between AC effectiveness and other governance mechanisms in the GCC context.

Corporate governance and risk in cross-listed and Canadian only companies

2019 ◽  
Vol 57 (10) ◽  
pp. 2740-2757 ◽  
Author(s):  
Atreya Chakraborty ◽  
Lucia Gao ◽  
Shahbaz Sheikh
Keyword(s):  
Corporate Governance ◽  
Differential Effect ◽  
Composite Index ◽  
Governance Mechanism ◽  
Firm Risk ◽  
Governance Mechanisms ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to investigate if there is a differential effect of corporate governance mechanisms on firm risk in Canadian companies cross-listed on US markets and Canadian companies not cross-listed (Canadian only companies). Design/methodology/approach Using a sample comprised of all Canadian companies included in the S&P/TSX Composite Index for the period 2009–2014, this study applies OLS and fixed effect regressions to investigate the effect of corporate governance mechanisms on firm risk. Interaction variables between governance mechanisms and the cross-listing status are used to examine if this effect is different for cross-listed firms. Findings Results indicate that the effect of board characteristics such as size, independence and proportion of female directors remains the same in both cross-listed and not cross-listed firms. CEO duality and insider equity ownership impact firm risk only in cross-listed companies, while institutional shareholdings, environmental, social and governance disclosure and family control affect firm risk in Canadian only firms. Overall, the empirical results indicate that some governance mechanisms impact firm risk only in firms that cross-list, while others are well-suited for Canadian only firms. Practical implications This study suggests that some of the differences between Canadian companies that cross-list and the Canadian companies that do not cross-list in US stock markets may change the impact of governance mechanisms on firm risk. Therefore, these findings have important implications for the design of governance mechanisms in Canadian firms. Since some of these differences are common to other economies, the conclusions can be extended to companies in other countries with similar governance structures. Originality/value Although previous studies have investigated the effect of governance mechanism on firm risk, this is the first paper that studies the differential effect for companies that cross-list in US markets. Specifically, differences in the ownership structure, firm control and in the regulatory and institutional environment, may explain this differential effect. Unlike most of the previous studies that focus on the effect of individual governance mechanisms, this study uses several mechanisms and their interactions at the same time.

The impact of corporate governance mechanisms on EU banks’ income smoothing behavior

2018 ◽  
Vol 18 (5) ◽  
pp. 931-953 ◽  
Author(s):  
Konstantinos Vasilakopoulos ◽  
Christos Tzovas ◽  
Apostolos Ballas
Keyword(s):  
European Union ◽  
Corporate Governance ◽  
Ordinary Least Squares ◽  
Income Smoothing ◽  
Green Paper ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

PurposeThis paper aims to investigate the impact that governance mechanisms have on European Union ‘banks income smoothing behavior.Design methodology/approachThe authors examine the impact that corporate governance mechanisms included in European Commissions’ proposals regarding the improvement of corporate governance mechanisms (Green Paper) have upon European Union banks’ accounting policy decisions regarding the level of loan loss provisions (LLPs). In addition, the authors examine whether banks’ capital structure operates as an effective internal corporate governance practice. The authors investigate the association between certain corporate governance characteristics and the level of LLPs for a sample of 98 banks from 23 European Union countries for the period of 2010-2013, in the aftermath of the 2008 financial crisis. To test the hypotheses, a multivariate regression model is run. Similar to previous research, the authors use ordinary least squares analysis to test the results.FindingsEmpirical findings provide evidence that there is a positive association between LLPs and accounting income, implying the existence of an income-smoothing pattern of provisions. In addition, the results suggest that banks managers’ decision to smooth income may differ with regard to the board structure, the level of leverage and the provision of disclosure for remuneration for chief executive officer.Originality/valueThe findings of this study contribute to the existing literature concerning banks’ income smoothing behavior. These findings can be useful to regulators, as the authors provide some evidence regarding the effectiveness of the European Union corporate governance framework.

Corporate governance risk and the agency problem

2018 ◽  
Vol 18 (2) ◽  
pp. 254-269 ◽  
Author(s):  
Walaa Wahid ElKelish
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Ordinary Least Squares ◽  
Capital Allocation ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Geographic Regions ◽  
Governance Risk ◽  
The Relationship

Purpose This study aims to investigate the relationship between corporate governance risk and agency costs across different countries. Design/methodology/approach Corporate governance risk indicators were obtained from the Institutional Shareholder Services Europe (S.A.) for 4,135 firms across 27 countries. Agency costs and other control variables were derived from companies’ annual financial reports using the DataStream database. Ordinary least squares multiple regression analysis model was used to test the study hypothesis. Findings Agency costs have a significant negative impact on corporate governance risk across countries. The extent of corporate governance mechanisms used, however, varies across geographic regions and industry types. The relationship between corporate governance risk and agency costs is more obvious in the non-financial than financial sector. These results were robust after several statistical checks. Practical implications The findings will help stakeholders, including corporate management, regulators and investors to improve corporate governance mechanisms and capital allocation decisions across countries. Originality/value Evidence is provided on the role of agency costs in corporate governance risk across geographic regions for financial and non-financial companies. The paper also overcomes common problems in corporate governance research such as construct validity, limited data and endogeneity.

Corporate governance and cost of capital in OECD countries

2020 ◽  
Vol 28 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Aws AlHares
Keyword(s):  
Corporate Governance ◽  
Cost Of Capital ◽  
Oecd Countries ◽  
Ordinary Least Squares ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Anglo American ◽  
The Cost ◽  
The Impact

Purpose The purpose of this study is to investigate the impact of corporate governance mechanisms on the cost of capital in Organisation for Economic Co-operation and Development (OECD) countries. Design/methodology/approach A panel data of 240 companies from Anglo-American and European countries between 2010 and 2017 were used. The ordinary least-squares multiple regression analysis was used to examine the relationships. The results were also robust to alternative measures and endogeneities. Findings The results showed that the corporate governance index and director ownership were negatively related to the cost of capital. Moreover, the study also reports a positive correlation between block ownership and the cost of capital. Originality/value This study extended the corporate governance literature by offering new evidence on the effect of corporate governance mechanisms on the cost of capital. Our findings will help regulators and policymakers in the OECD countries to evaluate the adequacy of the current corporate governance reforms to prevent management misconduct and scandals.

scholarly journals The impact of external financing on firm value and a corporate governance index: SME evidence

2017 ◽  
Vol 24 (2) ◽  
pp. 411-423 ◽  
Author(s):  
Basil Al-Najjar ◽  
Dana Al-Najjar
Keyword(s):  
Corporate Governance ◽  
Least Squares ◽  
Firm Value ◽  
Estimation Methods ◽  
External Financing ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Governance Index ◽  
The Impact

Purpose The purpose of this paper is to investigate the effect of external financing needs on both firm value and corporate governance mechanisms within the UK SME context. This framework is of importance because of the limited external financial resources SMEs might face. Design/methodology/approach The authors consider the endogeneity problem between corporate governance mechanisms and firm value, and hence, the three stages least squares and the instrumental variables based on two stages least squares estimation methods are employed. Findings The authors find a positive relationship between external financing needs and firm value. In addition, the authors detect that size and profitability are positively associated with firm value in the sample. Concerning the corporate governance index (CGI), the authors detect that big SMEs and those with low-debt levels have better corporate governance structures. Originality/value The authors employ a CGI for the sample which is constructed using ten corporate governance variables. The authors also examine different factors that affect SMEs 2019 governance by applying different models including logistic analysis.

scholarly journals Mekanisme Corporate Governance Terhadap Nilai Perusahaan Dengan Enterprise Risk Management Sebagai Variabel Intervening

Wahana ◽  
2020 ◽  
Vol 23 (1) ◽  
pp. 59-80
Author(s):  
J Jamaluddin ◽  
Suwardi Bambang Hermanto ◽  
F Fidiana
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Firm Value ◽  
Audit Committee ◽  
Enterprise Risk Management ◽  
Governance Mechanism ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Enterprise Risk ◽  
Corporate Governance Mechanism

Abstract. This study aims to examine the effect of corporate governance mechanism on firm value with enterprise risk management as an intervening variable on financial companies listed on the Indonesia Stock Exchange (IDX). Sample selection using purposive sampling. This study uses multiple regression analysis and simple regression to test the mediational relationship of ERM. The results of this study indicate that there is a significant influence between corporate governance mechanisms (institutional ownership, independent commissioner, and audit committee) with the firm value. But not significant in managerial ownership. The results of this study also indicate that there is a significant influence between corporate governance mechanisms (managerial ownership, independent commissioner, and audit committee) with the ERM. But it is not significant in institutional ownership. This study provides evidence that ERM mediating the effect of corporate governance mechanisms on firm value.Keyword : corporate governance mechanism, firm value, enterprise risk management. Abstrak. Penelitian ini bertujuan menguji pengaruh mekanisme corporate governance terhadap nilai perusahaan dengan enterprise risk management sebagai variabel intervening pada perusahaan perbankan yang terdaftar di Bursa Efek Indonesia (BEI). Penelitian ini menggunakan analisis regresi berganda dan regresi sederhana untuk menguji hubungan mediasional ERM. Deteksi mediasi menggunakan mediasi sederhana dengan cara pengujian causal steps. Teknik pemilihan sampel menggunakan purposive sampling. Hasil penelitian ini menunjukkan bahwa terdapat pengaruh signifikan antara mekanisme corporate governance (kepemilikan institusional, komisaris independen, dan komite audit) dengan nilai perusahaan. Namun tidak signifikan dalam kepemilikan manajerial. Hasil penelitian ini juga menunjukkan bahwa terdapatpengaruh signifikan antara mekanisme corporate governance (kepemilikan manajerial, komisaris independen, dan komite audit) dengan enterprise risk management. Namun tidak signifikan dalam kepemilikan institusional. Penelitian ini memberikan bukti bahwa ERM memediasi pengaruh mekanisme corporate governance terhadap nilai perusahaan.Kata kunci: Mekanisme corporate governance, nilai perusahaan, enterprise risk management.

Audit committee characteristics and the moderating effect of Malaysian code of corporate governance on IPO liquidity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amal Mohammed Al-Masawa ◽  
Rasidah Mohd-Rashid ◽  
Hamdan Amer Al-Jaifi ◽  
Shaker Dahan Al-Duais
Keyword(s):  
Corporate Governance ◽  
Initial Public Offerings ◽  
Audit Committee ◽  
Ordinary Least Squares ◽  
Moderating Effect ◽  
Least Squares Regression ◽  
Content Type ◽  
Code Of Corporate Governance ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the link between audit committee characteristics and the liquidity of initial public offerings (IPOs) in Malaysia, which is an emerging economy in Southeast Asia. Another purpose of this study is to examine the moderating effect of the revised Malaysian code of corporate governance (MCCG) on the link between audit committee characteristics and IPO liquidity. Design/methodology/approach The final sample consists of 304 Malaysian IPOs listed in 2002–2017. This study uses ordinary least squares regression method to analyse the data. To confirm this study’s findings, a hierarchical or four-stage regression analysis is used to compare the t-values of the main and moderate regression models. Findings The findings show that audit committee characteristics (size and director independence) have a positive and significant relationship with IPO liquidity. Also, the revised MCCG positively moderates the relationship between audit committee characteristics and IPO liquidity. Research limitations/implications This study’s findings indicate that companies with higher audit committee independence have a more effective monitoring mechanism that mitigates information asymmetry, thus reducing adverse selection issues during share trading. Practical implications Policymakers could use the results of this study in developing policies for IPO liquidity improvements. Additionally, the findings are useful for traders and investors in their investment decision-making. For companies, the findings highlight the crucial role of the audit committee as part of the control system that monitors corporate governance. Originality/value To the authors’ knowledge, this work is a pioneering study in the context of a developing country, specifically Malaysia that investigates the impact of audit committee characteristics on IPO liquidity. Previously, the link between corporate governance and IPO liquidity had not been investigated in Malaysia. This study also contributes to the IPO literature by providing empirical evidence regarding the moderating effect of the revised MCCG on the relationship between audit committee characteristics and IPO liquidity.

scholarly journals Corporate governance and conglomerate diversification strategy – evidence from Vietnam

2018 ◽  
Vol 13 (6) ◽  
pp. 1578-1596 ◽  
Author(s):  
Thi Xuan Trang Nguyen
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Board Composition ◽  
Governance Mechanisms ◽  
Content Type ◽  
Unrelated Diversification ◽  
Corporate Governance Mechanisms ◽  
Control Devices ◽  
Interest Alignment ◽  
The Relationship

Purpose The purpose of this paper is to examine the impact of internal corporate governance mechanisms, including interest alignment and control devices, on the unrelated diversification level in Vietnam. Additionally, the moderation of free cash flow (FCF) on these relationships is also tested. Design/methodology/approach The study is based on a balanced panel data set of 70 listed companies in both stock markets, Ho Chi Minh Stock Exchange and Hanoi Stock Exchange, in Vietnam for the years 2007–2014, which gives 560 observations in total. Findings The results show that if executive ownership for CEOs is increased, then the extent of diversification is likely to be reduced. However, the link between unrelated diversification level and executive stock option, another interest alignment device, cannot be confirmed. Among three control devices (level of blockholder ownership, board composition and separation of CEO and chairman positions), the study finds a positive connection between diversification and blockholder ownership, and statistically insignificant relations between the conglomerate diversification level and board composition, or CEO duality. Additionally, this study discovers a negative link between diversification and state ownership, although there is no evidence to support the change to the effect of each internal corporate governance mechanism on the diversification level of a firm between high and low FCF. Practical implications The research can be a useful reference not only for investors and managers but also for policy makers in Vietnam. This study explores the relationship among corporate governance, diversification and firm value in Vietnam, where the topics related to effectiveness of corporate governance mechanisms to public companies has been increasingly attractive to researchers since the default of Vietnam Shipbuilding Industry Group (Vinashin) happened in 2010 and the Circular No. 121/2012/TT-BTC on 26 July 2012 of the Vietnamese Ministry of Finance was issued with regulations on corporate governance applicable to listed firms in this country. Originality/value This research, first, enriches current literature on the relationship between corporate governance and firm diversification. It can be considered as a contribution to the related topic with an example of Vietnam, a developing country in Asia. Second, the research continues to prove non-unification in results showing the relationship between corporate governance and conglomerate diversification among different nations. Third, it provides a potential input for future research works on the moderation of FCF to the effects of corporate governance on diversification.

Does audit committee substitute or complement other corporate governance mechanisms

2017 ◽  
Vol 32 (7) ◽  
pp. 658-681 ◽  
Author(s):  
Yousef Hassan ◽  
Rafiq Hijazi ◽  
Kamal Naser
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Audit Committee ◽  
Negative Relationship ◽  
Governance Mechanisms ◽  
Governance System ◽  
African Countries ◽  
Content Type ◽  
Board Characteristics ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies. Design/methodology/approach Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability. Findings While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations. Research limitations/implications The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system. Originality/value To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

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