scholarly journals Hedging, managerial ownership and firm value

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zaminor Zamzamir@Zamzamin ◽  
Razali Haron ◽  
Anwar Hasan Abdullah Othman
Keyword(s):  
Risk Management ◽  
Firm Value ◽  
Foreign Currency ◽  
Management Strategies ◽  
Generalized Method Of Moments ◽  
Positive Influence ◽  
Managerial Ownership ◽  
Content Type ◽  
Quality Reporting ◽  
The Impact

PurposeThis study investigates the impact of derivatives as risk management strategy on the value of Malaysian firms. This study also examines the interaction effect between derivatives and managerial ownership on firm value.Design/methodology/approachThe study examines 200 nonfinancial firms engaged in derivatives for the period 2012–2017 using the generalized method of moments (GMM) to establish the influence of derivatives and managerial ownership on firm value. The study refers to two related theories (hedging theory and managerial aversion theory) to explain its findings. Firm value is measured using Tobin's Q with return on assets (ROA) and return on equity (ROE) as robustness checks.FindingsThe study found evidence on the positive influence of derivatives on firm value as proposed by the hedging theory. However, the study concludes that managers less hedge when they owned more shares based on the negative interaction between derivatives and managerial ownership on firm value. Hedging decision among managers in Malaysian firms therefore does not subscribe to the managerial aversion theory.Research limitations/implicationsThis study focuses on the derivatives (foreign currency derivatives, interest rate derivatives and commodity derivatives) and managerial ownership that is deemed relevant and important to the Malaysian firms. Other forms of ownership such as state-/foreign owned and institutional ownership are not covered in this study.Practical implicationsThis study has important implications to managers and investors. First is on the importance of risk management using derivatives to increase firm value, second, the influence of derivatives and managerial ownership on firm value and finally, the quality reporting on derivatives exposure by firms in line with the required accounting standard.Originality/valueThere is limited empirical evidence on the impact of derivatives on firm value as well as the influence of managerial ownership on hedging decisions of Malaysian firms. This study analyzes the influence of derivatives on firm value during the period in which reporting on derivatives in financial reports is made mandatory by the Malaysian regulator, hence avoiding data inaccuracy unlike the previous studies on Malaysia. This study therefore fills the gap in the literature in relation to the risk management strategies using derivatives in Malaysia.

scholarly journals Non-linear relationship between foreign currency derivatives and firm value: evidence on Sharīʿah compliant firms

2021 ◽  
Vol 28 (2) ◽  
pp. 156-173
Author(s):  
Zaminor Zamzamir@Zamzamin ◽  
Razali Haron ◽  
Zatul Karamah Ahmad Baharul Ulum ◽  
Anwar Hasan Abdullah Othman
Keyword(s):  
Risk Management ◽  
Linear Relationship ◽  
Firm Value ◽  
Dynamic Panel Data ◽  
Content Type ◽  
Quality Reporting ◽  
Linear Framework ◽  
Non Linear ◽  
The Impact ◽  
The Relationship

PurposeThis study examines the impact of hedging on firm value of Sharīʿah compliant firms (SCFs) in a non-linear framework.Design/methodology/approachThis study employs the system-GMM for dynamic panel data to examine the influence of derivatives usage on firm value (Tobin's Q, ROA and ROE). The sample comprised of 59 non-financial SCFs engaged in derivatives from 2000 to 2017 (18 years). The Sasabuchi-Lind-Mehlum (SLM) test for U-shaped is performed to confirm the existence of the non-linear relationship.FindingsThis study concludes that hedging significantly contributes to firm value of SCFs based on the non-linear framework. This study suggests that, first, the non-linear relationship occurs due to the different degree of derivatives usage and risk. Second, firms practice selective hedging to maintain the upside potential of firm value.Research limitations/implicationsThis study has important implications. First, the importance of risk management via derivatives to increase firm value, second, the evidence of selective hedging from the non-linear relationship between derivatives and firm value and third, the need for quality reporting on derivatives engagement by firms in line with the required accounting standard on derivatives.Originality/valueThis study fills the gap in the literature in relation to the risk management strategies of SCFs in three aspects. First, re-examines the relationship using recent data. Second, examines the relationship in the non-linear framework as the limited studies found in the literature on Malaysian firms are only based on linear relationship. Third, determines whether hedging undertaken by firms is optimal as this can only be addressed using the non-linear framework. This study is robust to the various definitions of firm value (Tobin's Q, ROA and ROE) and non-linear methodologies.

How does ownership structure affect the financing and dividend decisions of firm?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tahar Tayachi ◽  
Ahmed Imran Hunjra ◽  
Kirsten Jones ◽  
Rashid Mehmood ◽  
Mamdouh Abdulaziz Saleh Al-Faryan
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Generalized Method Of Moments ◽  
Institutional Ownership ◽  
Agency Cost ◽  
Debt Financing ◽  
Policy Implications ◽  
Managerial Ownership ◽  
Content Type ◽  
The Impact

Purpose Ownership structure deals with internal corporate governance mechanism, which plays important role in minimizing conflict of interests between shareholders and management Ownership structure is an important mechanism that influences the value of firm, financing and dividend decisions. This paper aims to examine the impact of the ownership structures, i.e. managerial ownership, institutional ownership on financing and dividend policy. Design/methodology/approach The authors use panel data of manufacturing firms from both developed and developing countries, and the generalized method of moments (GMM) is applied to analyze the results. The authors collect the data from DataStream for the period of 2010 to 2019. Findings The authors find that managerial ownership and ownership concentration have significant and positive effects on debt financing, but they have significant and negative effects on dividend policy. Institutional ownership shows a positive impact on financing decisions and dividend policy for sample firms. Originality/value This study fills the gap by proving the policy implications for both firms and investors, as managers prefer debt financing, but at the same time try to ignore dividend payment. Therefore, investors may not invest in firms with a higher proportion of managerial ownership and may choose to invest more in institutional ownership, which lowers the agency cost.

scholarly journals The effect of enterprise risk management (ERM) on firm value in manufacturing companies listed on Indonesian Stock Exchange year 2010-2013

2018 ◽  
Vol 3 (2) ◽  
pp. 224-235 ◽  
Author(s):  
Iswajuni Iswajuni ◽  
Arina Manasikana ◽  
Soegeng Soetedjo
Keyword(s):  
Risk Management ◽  
Firm Value ◽  
Stock Exchange ◽  
Enterprise Risk Management ◽  
Managerial Ownership ◽  
Manufacturing Companies ◽  
Content Type ◽  
Significant Negative Effect ◽  
Enterprise Risk ◽  
Negative Effect

Purpose The purpose of this paper is to identify the effect of enterprise risk management (ERM) with firm size, ROA and managerial ownership as control variables on firm value that is proxied by Tobin’s Q. Design/methodology/approach Population of this research was manufacturing companies listed on the Indonesian Stock Exchange (IDX) in 2010–2013. The used method in this research is multiple linear regression-ordinary least square and hypotheses testing using t-test to test the regression coefficients with level of significance of 5 percent. Findings The results showed that ERM, ROA and size of the company have a significant positive effect on the firm value. While the managerial ownership has a significant negative effect on the firm value. Originality/value The results showed that firm value increases as ERM, ROA and size of the company improves. While the managerial ownership has a significant negative effect on the firm value.

The impact of exchange volatility exposure on firms’ foreign-denominated debts

2019 ◽  
Vol 57 (11) ◽  
pp. 3035-3060 ◽  
Author(s):  
Yujuana Min ◽  
Oh Suk Yang
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Management Strategies ◽  
Foreign Exchange Risk ◽  
Content Type ◽  
Exchange Risk ◽  
Foreign Exchange Exposure ◽  
Foreign Exchange Volatility ◽  
Exchange Risk Management

Purpose This research began by acknowledging that conventional analysis on the foreign exchange exposure could not adequately reflect firms’ risk management strategies, which firms take actions against uncertainties raised by foreign exchange. In order to conceptualize uncertainty aroused by foreign exchange, the purpose of this paper is to develop an index that could measure corporate profits’ sensitivity to foreign exchange uncertainty and examine its possibility of utilization. Design/methodology/approach As an alternative to foreign exchange exposure, the present research derived the foreign exchange volatility exposure and analyzed the determinants of foreign currency-denominated debt in terms of foreign exchange volatility exposure. The foreign exchange volatility exposure draws from partially differentiating a firm’s operating profits to the exchange rate volatility. Findings The major findings are as follows. First, before the Asian financial crisis, South Korean enterprises had similar responses to the exchange volatility exposure as compared with the exchange exposure on procuring foreign-denominated debt. Second, since the global financial crisis (GFC), not only have Korean firms’ response mechanisms to both exposures changed, but also the significance of exchange volatility exposure has been further emphasized. Furthermore, Korean companies have dealt with exchange uncertainties by decreasing foreign-denominated debt as their foreign exchange volatility exposure increased after GFC. In contrast, the influence of conventional exchange exposure on foreign-denominated debt has diminished. Research limitations/implications Future research should focus on several points. First, additional research could extend to foreign investors who have divergent perception and consideration in regard to foreign exchange risk management. Second, research on decision making and motivation in foreign currency choice should be conducted in order to deepen academic understanding. Third, research that refines the variables added in the current research should be conducted. Finally, as a way to manage foreign exchange volatility exposure, further investigation based on this study is possible. Practical implications The results of this study have several important theoretical and empirical implications for companies’ foreign exchange risk management strategy. First, through foreign exchange volatility exposure, which can usefully take over the role of the existing foreign exchange exposure, the authors can confirm market uncertainty as being relevant to the foreign exchange risk management strategy. Second, through the financial influence that the foreign exchange volatility exposure has on the foreign currency-denominated debt, the authors can observe the Korean firms’ paradigm shifts in their foreign exchange risk management strategies. Originality/value This research confirms the importance of foreign exchange volatility exposure in the research works dealing with firms’ exchange risk management, also the possible influence of foreign exchange volatility exposure in the future might be increased as uncertainty is raised from foreign exchange escalating.

Determinants of working capital behavior: evidence from Egypt

2019 ◽  
Vol 15 (1) ◽  
pp. 39-61 ◽  
Author(s):  
Amr Ahmed Moussa
Keyword(s):  
Firm Value ◽  
Emerging Market ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Economic Conditions ◽  
Working Capital ◽  
Content Type ◽  
Cash Conversion Cycle ◽  
Industry Type ◽  
The Impact

Purpose The purpose of this paper is to empirically analyze and identify key factors affecting working capital behavior of companies listed on the Egyptian Stock Exchange. Design/methodology/approach Working capital requirement and cash conversion cycle were used to proxy working capital behavior. The study explored nine main factors widely discussed in previous research to explain working capital behavior: operating cash flow, growth opportunities, performance, firm value, age, size, leverage, economic conditions and industry type. The study employed a panel data analysis for 68 listed Egyptian industrial firms for the period 2000–2010. Different techniques of the generalized method of moments were used to test the validity of the research hypotheses. Findings The results show that working capital behavior is affected by various factors related to firm characteristics, economic conditions and industry type. Originality/value This study provides financial managers with a better understanding of the impact of different internal and macroeconomic factors on working capital behavior in an emerging market, such as Egypt’s.

Does debt heterogeneity impact firm value? Evidence from an emerging context

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amit Tripathy ◽  
Shigufta Hena Uzma
Keyword(s):  
Firm Value ◽  
Negative Impact ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Debt Financing ◽  
Bank Debt ◽  
Content Type ◽  
Indian Context ◽  
Long Run ◽  
The Impact

PurposeThe present paper attempts to explain the impact of debt diversification and various debt financing sources on firm value. The paper also aims to address the long-run causality of various factors affecting firm value.Design/methodology/approachThe study employs a dynamic panel data model for a sample of 233 listed firms from 2010 to 2019. Two-step generalized method of moments (GMM) is devised to study the impact of firm-specific factors on firm value.FindingsThe study establishes a negative impact of debt diversification on firm value. Further, the results also signal how the choice of debt instruments has a heterogeneous effect on firm value. Non-bank debt leads to a discount in firm value, while bank debt has no effect on firm value. The long-run determinants of firm value are debt ratio, tangibility and liquidity.Research limitations/implicationsThe findings of the study would aid the mangers in making informed decisions regarding the debt financing structure. Too much reliance on non-bank debt instruments leads to a negative impact on firm value. Therefore careful evaluation is necessary before accessing multiple debt sources.Originality/valueDebt heterogeneity is globally established; however, its presence in the Indian context has not been validated extensively. The study not only validates the existence of debt diversification but also investigates how individual debt instruments affect firm value that is yet to be examined in the Indian context.

Managing risk in mergers and acquisitions activity: beyond ‘good’ and ‘bad’ management

2015 ◽  
Vol 30 (2) ◽  
pp. 160-175 ◽  
Author(s):  
Alnoor Bhimani ◽  
Mthuli Ncube ◽  
Prabhu Sivabalan
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Global Financial Crisis ◽  
Management Strategies ◽  
Future Research ◽  
Agency Conflicts ◽  
Complex Behaviour ◽  
Content Type ◽  
The Global Financial Crisis ◽  
The Impact

Purpose – This paper aims to assess the impact of the presence/absence of risk management practices on the risk of merger and acquisition (M&A) failure. Design/methodology/approach – An agency theoretic perspective is adopted, along with a mixed-methods approach to study managerial complexity beyond simply “good” and “bad”. The focus is on an agency conflicts. Findings – The authors first present an integrated framework that classifies managerial behaviour and risk management, where M&A bids can become vehicles for maximising managerial benefits rather than shareholder value. The authors proceed to consider M&A activity that benefits both managers and shareholders in the presence of risk management strategies. Research limitations/implications – The paper highlights the benefits of multiple paradigms and research paths that address dimensions captured by an agency theoretic perspective. Practical implications – The authors regard this paper as having particular significance in that the global financial crisis has impacted M&A activities and objectives, shifting the employment and related risks faced by managers. Originality/value – The paper suggests future research paths to advance the understanding of the complex behaviour of managers involved in M&A activities that go beyond the classification of “good” and “bad” managers.

Corporate diversification and firm value: evidence from emerging markets

2015 ◽  
Vol 10 (3) ◽  
pp. 294-310 ◽  
Author(s):  
Elif Akben Selçuk
Keyword(s):  
Emerging Markets ◽  
Firm Value ◽  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Corporate Diversification ◽  
Fixed Effects Model ◽  
Developed Country ◽  
Content Type ◽  
Diversified Firms ◽  
The Impact

Purpose – The purpose of this paper is to investigate the impact of corporate diversification on firm value in a sample of nine emerging markets including Brazil, Chile, Indonesia, Malaysia, Philippines, Poland, South Africa, Thailand, and Turkey. For the purpose of this study, a company is classified as diversified when it is operating in two or more lines of business defined by the two-digit SIC codes. Design/methodology/approach – Employing panel data from 1,568 companies for the period 2005-2010, this paper estimates both a fixed effects model and a dynamic generalized method of moments model. Data are collected both at company level and segment level within each firm. Findings – Overall, analysis results suggest that, for the period from 2005 to 2010, diversified firms in emerging markets are valued more compared to single-segment firms operating in similar industries, providing support for diversification premium. Originality/value – The effect of diversification on company value in emerging markets is an important managerial and public policy concern. Although the literature on developed country diversified firms is rich, only a few studies have examined diversification-value relationship in the context of developing countries. Furthermore, most previous research on the value effects of corporate diversification in emerging markets has taken the form of case studies within countries and concentrated on the 1990s. This paper tries to fill these gaps by using a larger sample and more recent data and methodology.

scholarly journals Does country governance foster revenue efficiency of Islamic and conventional banks in GCC countries?

2016 ◽  
Vol 11 (2) ◽  
pp. 181-211 ◽  
Author(s):  
Fakarudin Kamarudin ◽  
Fadzlan Sufian ◽  
Annuar Md. Nassir
Keyword(s):  
Generalized Method Of Moments ◽  
Estimation Method ◽  
Political Stability ◽  
Positive Influence ◽  
Least Square ◽  
Content Type ◽  
Gcc Countries ◽  
Conventional Banks ◽  
Revenue Efficiency ◽  
The Impact

Purpose – The purpose of this paper is to provide new empirical evidence on the impact of country governance on the revenue efficiency of Islamic and conventional banks. The empirical analysis is confined to Islamic and conventional banks operating in the Gulf Cooperation Council (GCC) countries banking sectors during the period of 2007-2011. Design/methodology/approach – The analysis comprises two main stages. In the first stage, the authors employ the data envelopment analysis (DEA) method to compute the revenue efficiency of Islamic and conventional banks. The authors then used the multivariate panel regression analysis with the ordinary least square and generalized method of moments as an estimation method to investigate the potential determinants and the effect of country governance on the revenue efficiency. Findings – The empirical findings indicate that greater voice and accountability, government effectiveness, and rule of law enhance the revenue efficiency of both Islamic and conventional banks. The authors find that regulatory quality exerts positive influence on Islamic banks, while the impact of political stability and control of corruption enhances the revenue efficiency of conventional banks. Originality/value – The study on the specific revenue efficiency concept of Islamic and conventional banking is still in its formative stage. In regards, majority of the studies that examined the effect of governance on bank efficiency have focused more on the corporate or bank governance that affects the governance within the institution. Thus, to the best of the knowledge, no study has been done to address the effect of country governance on the revenue efficiency of Islamic and conventional banks specifically on the GCC countries.

scholarly journals Improving supply chain flexibility and agility through variety management

2017 ◽  
Vol 28 (2) ◽  
pp. 464-487 ◽  
Author(s):  
Juneho Um
Keyword(s):  
Supply Chain ◽  
Structural Equation ◽  
Management Strategy ◽  
Management Strategies ◽  
Product Variety ◽  
Positive Influence ◽  
Customer Relationships ◽  
Chain Flexibility ◽  
Content Type ◽  
The Impact

Purpose A trade-off exists between product variety and supply chain (SC) performance. To help mitigate the impact on SC of increased product variety, the purpose of this paper is to examine how variety management activities including variety management strategy (VMS), supplier partnerships and close customer relationships affect SC flexibility and agility at different levels of customisation. Design/methodology/approach A survey-research methodology is employed using data from 363 manufacturing firms from the UK and South Korea. In particular, cluster analysis and structural equation modelling were used to evaluate the proposed model according to the level of customisation. Findings The results suggest that internal variety management strategy and external SC integration have a positive influence on SC flexibility and agility. Customer relationships and variety management strategies influence SC flexibility more than partnerships with suppliers whereas variety management strategies and partnerships with suppliers influence SC agility more than customer relationships. In fact, for external integration in particular, customer relationships influence SC flexibility (i.e. reaction capability) rather than agility (i.e. reaction time) whereas partnerships with suppliers influence SC agility rather than flexibility. In a high-customisation context, close customer relationships are the most effective way to increase SC flexibility, whereas partnerships with suppliers are the most effective way to increase SC agility. In a low-customisation context, a VMS and customer relationships are the most effective way to increase both SC flexibility and agility. Originality/value This paper suggests key variety management activities to aid managers to better manage product variety ambitions in SC under varying customisation profiles through internal and external approaches.

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