Corporate Investment and Hotel Firm Value: Does Corporate Governance Matter in Financially Constrained Firms?

2018 ◽  
Vol 59 (4) ◽  
pp. 339-351
Author(s):  
Tarik Dogru
Keyword(s):  
Corporate Governance ◽  
Corporate Finance ◽  
Firm Value ◽  
Financial Constraints ◽  
Financial Constraint ◽  
Corporate Investments ◽  
Corporate Governance Mechanisms ◽  
The Relationship ◽  
Practical Implications

Corporate investments are expected to create value for firms. Although some studies report evidence supporting such expectations, many studies document contradictory findings. However, it is not clear why corporate investments create value in some firms but reduce value in others. The purpose of this study is to examine the extent to which the quality of corporate governance and the degrees of financial constraints affect the relationship between corporate investments and hotel firm value in a unified model where both weak corporate governance and financial constraint problems are concurrently observed. Shareholders of poorly governed firms place a lower value on corporate investments compared with those of well-governed firms, whereas shareholders of financially constrained firms perceive corporate investments to be of greater value compared with those of unconstrained firms. The results further showed that CEOs of financially constrained firms make value-increasing investments despite poor corporate governance mechanisms. Theoretical and practical implications are discussed within the realm of corporate finance theories.

Does Corporate Philanthropy Increase Firm Value? The Moderating Role of Corporate Governance

2015 ◽  
Vol 57 (4) ◽  
pp. 599-635 ◽  
Author(s):  
Weichieh Su ◽  
Steve Sauerwald
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Corporate Philanthropy ◽  
Agency Cost ◽  
Outside Directors ◽  
Financial Benefit ◽  
Ceo Tenure ◽  
Corporate Governance Mechanisms ◽  
The Relationship ◽  
Moderating Role

The link between corporate philanthropy and firm value has been controversial. On one hand, corporate philanthropy is often criticized as an agency cost because it may serve narrow managerial self-interests. On the other hand, corporate philanthropy may enhance firm value because it improves the relationships between firms and their stakeholders. In this study, we argue that this controversy is contingent upon whether corporate governance mechanisms can stimulate the financial benefit of corporate philanthropy. Based on a sample of U.S. firms from 1996 to 2003, we find that CEO long-term pay positively moderates the relationship between corporate philanthropy and firm value while multiboard outside directors negatively moderate this relationship. Contrary to our expectations, we find that the relationship between corporate philanthropy and firm value enhances as CEO tenure increases. Our findings show that corporate governance plays an important moderating role in the relationship between corporate philanthropy and firm value.

Audit committee versus other governance mechanisms and the effect of investment opportunities: evidence from Palestine

2020 ◽  
Vol 20 (3) ◽  
pp. 527-544 ◽  
Author(s):  
Islam Abdeljawad ◽  
Ghassan A.I. Oweidat ◽  
Norman Mohd Saleh
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Audit Quality ◽  
Valuable Insight ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
Investment Opportunities ◽  
The Relationship

Purpose This paper aims to explore how the presence of an audit committee is associated with other corporate governance mechanisms, i.e. board structure, ownership structure and quality of external audit. The present study evaluated whether the presence of the audit committee complements or substitutes other governance mechanisms in Palestinian companies. Moreover, the effect of investment opportunities on the relationship between the formation of the audit committee and the quality of the auditor was addressed. Design/methodology/approach The association between the formation of the audit committee and other governance variables was modelled as a binary logistic model. The sample comprising 44 firms listed on Palestine exchange for the period between 2013 and 2017, amounting to 220 firm-year observations. Findings Based on the investigation, the results have indicated that board independence, the distinction between the chairman and chief executive officer function, ownership concentration and audit quality enhance the chance of audit committee formation, implying complementary effect. Contrastingly, board size and board ownership serve as a substitute to audit committee formation. It has also been found that investment opportunities act as an effective moderating factor that strengthens the relationship between audit quality and the formation of the audit committee. Originality/value The study provides valuable insight into the interaction between multiple corporate governance mechanisms within the economy of Palestine where the external uncertainty is high and investment opportunities are constrained by the decisions of the occupying authority. The findings may help regulators and policymakers in Palestine alongside those of other countries with similar environmental features to revise and update their corporate governance codes to ensure that the best control can be achieved, subsequently attracting more foreign and domestic investments.

scholarly journals Does D&O insurance matter for stock price crash risk? Evidence from an Asian emerging market

2019 ◽  
Vol 3 (1) ◽  
pp. 34-46
Author(s):  
Ming-Te Lee ◽  
Kai-Ting Nien
Keyword(s):  
Corporate Governance ◽  
Stock Price ◽  
Emerging Market ◽  
Insurance Coverage ◽  
Crash Risk ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Relationship

Purpose The purpose of this paper is to address the opposing views of the relationship between directors’ and officers’ liability insurance (D&O insurance) and stock price crash risk in a major Asian emerging stock market. Design/methodology/approach This paper finds an endogenous relationship between D&O insurance and stock price crash risk. Hence, the two-stage least squares regression analysis is used to address the endogeneity issue when the relationship is examined. Moreover, this paper further controls the quality of other corporate governance mechanisms to investigate whether D&O insurance still has an effect on stock price crash risk. Findings The effect of D&O insurance coverage is significantly negatively related to firm-specific stock price crash risk in Taiwan. More importantly, even when the quality of other corporate governance mechanisms is controlled, the negative relationship between D&O insurance coverage and firm-specific stock price crash risk remains significant. The evidence supports that D&O insurance serves as an effective external monitoring mechanism, strengthens corporate governance, and thus reduces stock price crash risk. Originality/value Emerging Asian markets suffer a dearth of research on the relationship of D&O insurance coverage and the firm-specific stock price crash risk. Investigating the relationship in Taiwan, the present study fills the research void. The findings show that D&O insurance plays an important role in reducing stock price crash risk of Taiwanese firms even when other corporate governance mechanisms are in place.

scholarly journals An exploration of boards of directors’ quality: The development of an index for directors attributes and the relation with firm value and performance

2011 ◽  
Vol 7 (2) ◽  
pp. 51-63
Author(s):  
Jose Elias Feres de Almeida
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Firm Value ◽  
Boards Of Directors ◽  
Poor Quality ◽  
Corporate Governance Mechanisms ◽  
Corporate Governance Codes ◽  
And Performance ◽  
High Level

In an environment with poor quality of Corporate Governance Mechanisms, the quality of directors’ attributes might exert an important role to improve firm’s value and performance. I developed an index to explore the quality of Board of Directors based on Brazilian and international corporate governance codes to measure directors qualitative attributes. The sample consist in 24 Brazilian firms that traded at NYSE in the period over 1999-2006. The results show us that board of directors with high types of attributes can improve value measured individually and by the quality index. The main results indicate that firm value improved with high types of professionals, accountants seated in boards, directors with high level of education and that participated in executive training. Keywords: Board of Directors’ Quality, Corporate Governance, Firm Value, Directors Qual

scholarly journals Corporate governance and shareholder value in listed firms: An empirical analysis in five countries (France, Italy, Japan, UK, USA)

2013 ◽  
Vol 10 (3) ◽  
pp. 36-50 ◽  
Author(s):  
Barbara Monda ◽  
Marco Giorgino
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
One Dimension ◽  
Four Dimensions ◽  
Listed Firms ◽  
Governance Systems ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
The Relationship

In this paper, we design a multi-dimensional index to measure the quality of Corporate Governance systems adopted by firms and use it to investigate the correlation between Corporate Governance quality and firm value. Unlike most studies that examine the relationship between only one dimension of Governance and firm value, we present a complex index (CGI) composed of 39 variables referable to four dimensions: Board, Remuneration, Shareholder Rights and Disclosure. By analysing a sample of 100 large companies listed on the main stock markets in five different countries over three years (2009-2011), we confirm the widespread hypothesis of the existence of a positive and statistically significant relationship between Corporate Governance, as measured by a subset of 12 variables, and firm value.

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.

scholarly journals The Effects of Financial Restatement and Corporate Governance Mechanisms on Firm Value

2019 ◽  
Vol 8 (6S3) ◽  
pp. 513-523
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Negative Impact ◽  
Governance Mechanisms ◽  
Moderating Variables ◽  
Listed Firms ◽  
Financial Restatement ◽  
Corporate Governance Mechanisms ◽  
Financial Restatements ◽  
The Relationship

This study examines the relationship between financial restatement and firm value in Malaysian public listed firms. In addition, it assesses the moderating effects provided by corporate governance mechanisms on the relationship of financial restatements and firm value. The study covers the period 2009-2015 and involves 142 public listed companies in Bursa Malaysia with financial restatements. The findings reveal that financial restatements do adversely impact firm value and that financial restatements negatively and significantly affect firm value. In terms of moderating variables, we find that the interaction between financial restatement and family ownership is negatively associated with firm value. In addition, this study also finds that the interaction between financial restatement and institutional ownership is positively and significantly associated with firm value. In conclusion, in the Malaysian context, this study establishes that financial restatement has a negative impact on firm value

scholarly journals The Effects of Financial Restatement and Corporate Governance Mechanisms on Firm Value

2019 ◽  
Vol 8 (6S3) ◽  
pp. 683-692
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Negative Impact ◽  
Governance Mechanisms ◽  
Moderating Variables ◽  
Listed Firms ◽  
Financial Restatement ◽  
Corporate Governance Mechanisms ◽  
Financial Restatements ◽  
The Relationship

This study examines the relationship between financial restatement and firm value in Malaysian public listed firms. In addition, it assesses the moderating effects provided by corporate governance mechanisms on the relationship of financial restatements and firm value. The study covers the period 2009-2015 and involves 142 public listed companies in Bursa Malaysia with financial restatements. The findings reveal that financial restatements do adversely impact firm value and that financial restatements negatively and significantly affect firm value. In terms of moderating variables, we find that the interaction between financial restatement and family ownership is negatively associated with firm value. In addition, this study also finds that the interaction between financial restatement and institutional ownership is positively and significantly associated with firm value. In conclusion, in the Malaysian context, this study establishes that financial restatement has a negative impact on firm value.

scholarly journals Investigating The Effectiveness Of Corporate Governance Code Revisions On The Perspective Of The Revision Interval

2017 ◽  
Vol 18 (3) ◽  
pp. 503-514
Author(s):  
Abdul Hadi Zulkafli ◽  
Chee-Wooi Hooy ◽  
Chai-Aun Ooi
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Positive Relationship ◽  
Significant Positive Relationship ◽  
Listed Firms ◽  
Corporate Governance Code ◽  
Non Linear ◽  
The Relationship ◽  
Practical Implications

Thisstudy investigatesthe effectiveness of corporate governancecode revisionsonfirm value using 35 countries’ public listed firms over 2007-2014.First, this study finds that progressive code revisions have significant positive relationship with firm value. Second, this study finds that theinterval ofcorporate governancecode revision is significant to influence the effectiveness of code revisions. Further analysis reveals that the relationship between code revision interval and firm value is non-linear, whichis depicted in inverted U-shaped. The findings suggest that a moderate code revision interval, i.e. 4 years once is optimal to maximize firm value. In overall, the findings of thisstudy have suggestedseveral practical implications to the development of thenationalcodesof corporate governance.

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