Ownership Pattern and Governance–Performance Relation: Evidence from an Emerging Economy

2020 ◽  
pp. 097215092096669
Author(s):  
Arindam Banik ◽  
Chanchal Chatterjee
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Method Of Moments ◽  
Value Creation ◽  
Fixed Effects ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Panel Model ◽  
Governance Practices ◽  
Ownership Patterns

The article examines whether different corporate governance practices and ownership patterns influence firm performance and value creation in an emerging market context. The study establishes that the governance–performance relation depends highly on the estimation tools applied. While the pooled regression or fixed effects panel model may provide spurious and biased relations, the system generalized method of moments (GMM) model provides superior and valid results by addressing all types of endogeneity problems. The results show that firms with a separate CEO and chairperson outperform firms with CEO duality. Also, higher executive salary leads to improved firm performance. Moreover, higher promoter shareholding leads to greater value creation and improved firm performance, and domestic institutional investors (DII) have a significant impact on firm performance.

scholarly journals Corporate governance and firm performance in an emerging market: Evidence from Barbados

2019 ◽  
Vol 1 (2) ◽  
pp. 51-61
Author(s):  
Philmore Alleyne ◽  
Renée M. Thompson
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Emerging Market ◽  
Insurance Company ◽  
Life Insurance Company ◽  
Study Approach ◽  
Political Interference ◽  
Governance Practices ◽  
The Board Of Directors ◽  
And Performance

Good corporate governance practices are regarded as important in reducing risk for investors, attracting investment capital and improving the performance of companies. This paper investigates the relationship between corporate governance practices of the board of directors and firm performance of Colonial Life Insurance Company (CLICO), a large insurance company which collapsed in Barbados, and caused significant financial losses to policyholders. Using a case study approach, we used information from publicly available documents via print media and the internet to research the corporate governance practices and performance of CLICO. Findings reveal that the collapse of CLICO was a result of poor corporate governance mechanisms including lack of board independence, CEO and Chairman dual relationship, poor regulatory environment, non-functioning sub-committees, failure to manage risks, interlocking directorship, political involvement and lack of diversity. Recommendations include effective regulation, separation of the roles of CEO and Chairman, reduced political interference and more diversity.

scholarly journals Corporate governance mechanisms and firm performance: evidence from the emerging market following the revised CG code

2019 ◽  
Vol 20 (1) ◽  
pp. 158-174 ◽  
Author(s):  
Yan Wang ◽  
Kaleemullah Abbasi ◽  
Bola Babajide ◽  
Kemi C. Yekini
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Performance Indicators ◽  
Fixed Effects ◽  
Emerging Market ◽  
Board Independence ◽  
Executive Directors ◽  
Board Diversity ◽  
Content Type ◽  
The Impact

Purpose This study aims to examine the extent to which board characteristics and ownership structure affect firm performance with specific focus on providing new empirical insights following the revised corporate governance (CG) code 2012. Design/methodology/approach This study uses a sample of non-financial firms listed on Pakistan Stock Exchange (PSX)-100 index for the years 2011-2014. Firm performance is measured by accounting-based performance indicators (ROA and ROE) and market-based performance indicators (Tobin’s Q and MTB). This study uses multivariate regression techniques including fixed effects model and two-stage least squares (2SLS). Findings The findings show that board diversity increases over the two periods (pre-2012 and post-2012), whereas there are cases that companies have not fully complied with the revised CG code 2012 in terms of board independence. In addition, the multiple regression results show that firm performance is negatively and significantly associated with institutional ownership. Nevertheless, the results show that board size, board independent, board diversity and board meetings do not have significant impact on firm performance. The findings are fairly consistent and robust across two periods (pre-2012 and post 2012) and a number of econometric models that sufficiently address the potential endogeneity problems. Originality/value To the best of the authors’ knowledge, this is the first empirical study which investigates the impact of the compliance and implementation of 2012 CG code on firm performance in Pakistan. This study is different from the most prior studies in that they use independent non-executive directors rather than conventional non-executive directors to measure board independence.

A cross-firm analysis of corporate governance compliance and performance in Indonesia

2020 ◽  
Vol 35 (5) ◽  
pp. 621-643
Author(s):  
Miranda Tanjung
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Audit Quality ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Empirical Literature ◽  
Positive Contribution ◽  
Content Type ◽  
Governance Index ◽  
Governance Practices

Purpose The study aims to construct a cross-firm corporate governance index to predict firm performance. The index consists of 15 governance elements from a large sample of the Indonesian firms covering the period from 2003 to 2013. Design/methodology/approach This study presents robust results as the findings are tested by applying the generalized method of moments (GMM) estimator to eliminate endogeneity problems and unobservable heterogeneity posed by the relationship between performance and firm-level governance practices. Findings The results indicate that the corporate governance index is associated with enhanced corporate financial performance. Likewise, the findings reported under the pooled ordinary least squares and GMM also indicate corporate governance sub-indexes (elements), which have significant effects on performance: whistleblower mechanism, audit quality, board of director size and blockholders. Research limitations/implications In the emerging market context, this study supports the notion that active and self-regulated governance practices are appreciated by the market and, in the end, can have a positive impact on financial performance. The analysis adds to the empirical literature by providing insights into how governance provisions are being actively implemented in the micro level. With regard to weak governance practices, this study is consistent with previous studies, according to which, firms have the opportunity to use corporate governance as a way of differentiating themselves from other players in countries with poorly regulated investor protection and institutional settings. Originality/value This study makes a positive contribution, as it looks at the impact of Indonesia’s corporate governance compliance on the basis of a set of 15 unique governance provisions, including the findings of the positive influence of corporate governance in family business.

scholarly journals Corporate governance and firm performance in an emerging market - An exploratory analysis of Pakistan

2007 ◽  
Vol 4 (2) ◽  
pp. 216-225
Author(s):  
Mohammed Nishat ◽  
Rozina Shaheen
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Emerging Market ◽  
Director Compensation ◽  
Return On Equity ◽  
Board Of Director ◽  
Governance Index ◽  
Governance Practices

This preliminary study aims to develop a corporate governance index based on governance practices followed by the listed firms at Karachi Stock Exchange (KSE). Since the corporate governance concept is at very initial level of its implementation and practices, this study also analyses the structure of good corporate governance practices and level of awareness about new regulations of corporate governance implemented by Security Exchange Commission of Pakistan. The data is collected through a structured questionnaire covering seven corporate governance categories: audit committee, board of directors, charter/bylaws, director education, executive and director compensation, ownership, and the progressive practices during the year 2004. The results indicate that all of the firm performance measures; return on equity, net profit margin, sales growth and dividend yield (except Tobin’s Q) have their expected positive relation with corporate governance index score (Gov-Score) and are significant in correlation and decile analysis. This suggests that firms with relatively poor governance are relatively less profitable, less valuable, and pay less cash to their shareholders. The role of audit and board of director are highly associated with good performance while the governance categories related to director’s education and charter/bylaws are least associated with good performance

scholarly journals Investment opportunities, corporate governance quality, and firm performance in the UAE

2020 ◽  
Vol 10 (2) ◽  
pp. 261-276 ◽  
Author(s):  
Bakr Al-Gamrh ◽  
Ku Nor Izah Ku Ismail ◽  
Tanveer Ahsan ◽  
Abdulsalam Alquhaif
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Fixed Effects ◽  
Negative Influence ◽  
Content Type ◽  
Corporate Governance Code ◽  
Investment Opportunities ◽  
Governance Practices ◽  
Governance Quality ◽  
Corporate Governance Quality

PurposeThis paper examines the influence of investment opportunities on firm performance and evaluates corporate governance practices in the United Arab Emirates (UAE) to determine whether corporate governance quality moderates that influence.Design/methodology/approachA fixed-effects regression was employed to examine the influence of investment opportunities on firm performance and the role of corporate governance quality as a moderator for all listed firms on the Abu Dhabi Stock Exchange (ADX) and the Dubai Financial Market (DFM). We examined 501 firm-year observations for the period when the corporate governance code in the UAE was coming into force, from 2008 to 2012.FindingsThe regression results indicate that investment opportunities have a negative influence on firm performance. The corporate governance index used here shows that the level of corporate governance practiced in the UAE is weak. We also find that strong corporate governance ameliorates the negative influence of investment opportunities, which supports our hypotheses. The sub-indices of corporate governance that matter the most for moderating investment opportunities are board functioning and ethics.Practical implicationsThe results of this paper reflect the need to examine corporate governance in the context of the external environment represented by investment opportunities in our study. The findings could raise awareness of the importance of strong corporate governance practices, not only to directly improve firm performance but also through its influence on external variables. Legislators, regulators and other interested parties could use these results to examine practices in the UAE following the implementation of the corporate governance code.Originality/valueThis study contributes to the literature by evaluating the role that corporate governance quality and its components could play in firm performance and indirectly moderating other external factors (such as investment opportunities).

Using information from singletons in fixed-effects estimation: xtfesing

2020 ◽  
Vol 20 (4) ◽  
pp. 965-975
Author(s):  
Laura Magazzini ◽  
Randolph Luca Bruno ◽  
Marco Stampini
Keyword(s):  
Panel Data ◽  
Method Of Moments ◽  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Panel Data Regression ◽  
Data Regression ◽  
Method Of Moments Estimator ◽  
Fixed Effects Estimation

In this article, we describe the xtfesing command. The command implements a generalized method of moments estimator that allows exploiting singleton information in fixed-effects panel-data regression as in Bruno, Magazzini, and Stampini (2020, Economics Letters 186: Article 108519).

The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI

2018 ◽  
Vol 19 (5) ◽  
pp. 935-964 ◽  
Author(s):  
Neha Smriti ◽  
Niladri Das
Keyword(s):  
Firm Performance ◽  
Intellectual Capital ◽  
Value Creation ◽  
Generalized Method Of Moments ◽  
Value Added ◽  
Secondary Data ◽  
Share Price ◽  
Content Type ◽  
Listed Firms ◽  
The Impact

Purpose The purpose of this paper is to examine the effect of intellectual capital (IC) on financial performance (FP) for Indian companies listed on the Centre for Monitoring Indian Economy Overall Share Price Index (COSPI). Design/methodology/approach Hypotheses were developed according to theories and literature review. Secondary data were collected from Indian companies listed on the COSPI between 2001 and 2016, and the value-added intellectual coefficient (VAIC) of Pulic (2000) was used to measure IC and its components. A dynamic system generalized method of moments (SGMM) estimator was employed to identify the variables that significantly contribute to firm performance. Findings Indian listed firms appear to be performing well and efficiently utilizing their IC. Overall, human capital had a major impact on firm productivity during the study period. Furthermore, the empirical analysis showed that structural capital efficiency and capital employed efficiency were equally important contributors to firm’s sales growth and market value. The growing importance of the contribution of IC to value creation was consistently reflected in the FP of these Indian companies. Practical implications This study has robust theoretical grounds and employs a validated methodology. The present study extends knowledge of IC among academicians and managers and highlights its contribution to value creation. The findings may help stakeholders and policymakers in developing countries properly reallocate intellectual resources. Originality/value This study is the first study to evaluate IC and its relationship with traditional measures of firm performance among Indian listed firms using dynamic SGMM and VAIC models.

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