Agency Problems and the Choice of Auditors: Evidence from the MENA Region

AbstractWhat determines the choice of auditors in the MENA region? This paper uses the data from Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait and Bahrain and shows that the extent of agency problems in a firm dictates what sort of auditors are chosen by a firm. Our results show that high dividend payout ratios are negatively related to the appointment of one of the big-four auditors. High payout ratios are synonymous to low agency problems and thus firms feel lesser need for having one of the big-four auditors. We also show that high ownership concentration – a proxy for high agency problem – is positively related to firm’s decision of having one of the big-four auditors. High ownership concentration exacerbates agency problems between insiders and outsiders and thus induces firms to appoint one of the big-four auditors to mitigate agency problems. We also document that increased operational complexity and transactional complexity leads to hiring of one of the big-four auditors by a firm. We argue that complexity hinders investor’s ability to understand firm’s information and thus introduces agency problems. Being aware of agency problems, firms hire one of the big-four auditors to alleviate some of these problems.

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Effect of ownership concentration on capital structure: evidence from the MENA region

International Journal of Islamic and Middle Eastern Finance and Management ◽

10.1108/imefm-10-2013-0115 ◽

2015 ◽

Vol 8 (1) ◽

pp. 99-113 ◽

Cited By ~ 7

Author(s):

Omar Farooq

Keyword(s):

Capital Structure ◽

United Arab Emirates ◽

Negative Relationship ◽

Ownership Concentration ◽

Agency Conflicts ◽

Information Asymmetries ◽

Mena Region ◽

Content Type ◽

Growth Firms ◽

The Relationship

Purpose – This paper aims to document how does ownership concentration, a proxy for agency conflicts, affect capital structure of firms in emerging markets. Agency relationship between insiders and outsiders has the potential to influence corporate decision-making which, in turn, impacts firm characteristics such as leverage. Design/methodology/approach – This paper uses pooled regression analysis to document the effect of ownership concentration on capital structure in the Middle East and North Africa (MENA) region (Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait and Bahrain), during the period between 2005 and 2009. Findings – The authors show that ownership concentration negatively affects capital structure. The results also show that for a given level of ownership concentration, the proportion of debt in capital structure goes up as information asymmetries decrease. Finally, the results show that for a given ownership concentration, it is the growth firms with low information asymmetries that have a higher proportion of debt in capital structure. Research limitations/implications – The authors argue that information asymmetries associated with ownership concentration minimize the ability of firms to raise debt, thereby resulting in a negative relationship between ownership concentration and capital structure. Furthermore, reluctance on the part of controlling shareholders to accumulate excess leverage to minimize non-diversifiable risk also negatively influences capital structure. Originality/value – Most of the prior studies on the relationship between ownership concentration and capital structure have been conducted in relatively more developed markets. An important market that has failed to attract attention regarding this issue is the MENA. This paper is an attempt to fill this gap by documenting the relationship between the two in the MENA region.

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Modelling the Symmetrical and Asymmetrical Effects of Global Oil Prices on Local Food Prices: A MENA Region Application

10.21203/rs.3.rs-394222/v1 ◽

2021 ◽

Author(s):

Hadj Cherif Houda ◽

Zhenling Chen ◽

Guohua Ni

Keyword(s):

Saudi Arabia ◽

United Arab Emirates ◽

Positive Impact ◽

Oil Prices ◽

Food Prices ◽

Test Results ◽

Asymmetric Effect ◽

Short Term ◽

Mena Region

Abstract This paper explores the complex nexus between the global oil prices and the food prices of Middle East and North Africa (MENA) region during the period 2000–2020. Both linear and nonlinear models of the autoregressive distributed lag (ARDL) approach are adapted into panel data form to investigate the symmetrical and asymmetrical influence of oil prices on food prices. The key results are summarized: i) The effect of oil prices on food prices is significantly positive including both oil-exporting and oil-importing nations are verified in the long-term. The positive impact on oil-exporters—due to higher oil revenues—is greater than importing nations, leading to an increased demand for food. Additionally, the effect on oil-exporters is negative and significant in the short-term but not significant for importers. ii) The panel analysis for the MENA sample confirms the presence of negative short-term asymmetric behaviour, while in the long-term, the asymmetric effect is positive, indicating that food prices increase regardless of fluctuations in oil prices. iii) Wald test results support asymmetric co-integration for the whole sample of the MENA due to the heterogeneous response within the oil-importing and exporting samples. Specifically, the non-linear ARDL test results affirm the absence of an asymmetric nexus among oil and food prices for oil-exporting group (including Saudi Arabia, Saudi Arabia, United Arab Emirates) and Tunisia within the oil-importing group. Although there are differences in the direction and degree, the food prices of other countries are asymmetric to the oil price. This study provides recommendations that are useful to MENA countries to establish a stable mechanism for oil and food prices to ensure food security in the region.

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Identifying the Relationship Between Health Expenditures and Life Expectancy at Birth

Multidimensional Perspectives and Global Analysis of Universal Health Coverage - Advances in Medical Diagnosis, Treatment, and Care ◽

10.4018/978-1-7998-2329-2.ch011 ◽

2020 ◽

pp. 285-308 ◽

Cited By ~ 1

Author(s):

Halim Baş ◽

Muhammed Erkam Kocakaya

Keyword(s):

Saudi Arabia ◽

Life Expectancy ◽

United Arab Emirates ◽

Health Expenditures ◽

Cointegration Test ◽

Direct Impact ◽

Mena Region ◽

Disadvantaged Groups ◽

Life Expectancy At Birth ◽

The Relationship

In this study, 16 countries in the MENA region (United Arab Emirates, Bahrain, Djibouti, Algeria, Egypt, Iran, Jordan, Kuwait, Lebanon, Morocco, Malta, Oman, Qatar, Saudi Arabia, Tunisia, and Yemen) were included to the sample and was analyzed, by using a panel data method Pedroni Cointegration test, that relationship between “health expenditures” and “life expectancy at birth” in 2000-2016 period these countries. As a result of the analysis, there was no relationship between health expenditures and life expectancy at birth. Although health expenditures do not have a direct impact on life expectancy at birth, If the MENA region countries take needed measures (such as; to attach importance to institutionalization and functionality in health, focusing on disadvantaged groups, and to encourage investments of hospital and personnel), the inequalities in health outcomes would be reduced.

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The internal and external determinants of the intermediation margin of banks across MENA countries

EuroMed Journal of Business ◽

10.1108/emjb-02-2018-0013 ◽

2018 ◽

Vol 13 (3) ◽

pp. 280-290 ◽

Cited By ~ 2

Author(s):

Dorra Talbi ◽

Khemaies Bougatef

Keyword(s):

Saudi Arabia ◽

United Arab Emirates ◽

Policy Implications ◽

Mena Region ◽

Macroeconomic Factors ◽

Content Type ◽

Mena Countries ◽

Current State ◽

Interest Margins ◽

Specific Factors

Purpose The purpose of this paper is to conduct a comparative analysis of internal and external determinants of bank’s performance in Middle East and North Africa (MENA) countries. Design/methodology/approach The authors use a static unbalanced annual panel data of banks operating in eight countries pertaining to the MENA region (Tunisia, Bahrain, Egypt, Jordan, Qatar, Lebanon, Kingdom of Saudi Arabia and United Arab Emirates) over the period from 1999 to 2014. Findings The findings reveal that the determinants of intermediation margins in the MENA region differ across countries. Overall, banks interest margins are explained by both bank-specific variables and macroeconomic factors except for Saudi Arabia in which interest margins exclusively depend on bank-specific factors. Originality/value These findings contribute to the clarification and critical analysis of the current state of bank’s performance in some countries located in MENA region, which would have several crucial policy implications.

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Father Involvement and Education in the GCC

10.18502/aqf.0160 ◽

2020 ◽

Keyword(s):

Saudi Arabia ◽

Life History ◽

United Arab Emirates ◽

North Africa ◽

Father Involvement ◽

Educational Achievement ◽

Gulf Cooperation Council ◽

Mena Region ◽

Gcc Countries ◽

Education Environment

This policy brief builds on a larger father involvement study that encompasses 10 countries in the Middle East North Africa (MENA) region to identify some of the key challenges of father involvement in the Gulf Cooperation Council (GCC) countries. Using mixed methods with a modified Fatherhood Scale survey and life history interviews, the study found notable differences in father involvement in education across geographic, gender, and generational factors. Overall, fathers in GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) tend to be perceived as more encouraging of their children’s education, especially for their daughters, but are less engaged in the types of quality involvement that are key to educational achievement. Based on the findings of this study, this policy brief highlights some of the key challenges of GCC fathers’ involvement. We conclude by offering recommendations to create and support an education environment in the GCC that values quality father involvement.

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The complementary/substitution effects of post-privatization corporate governance mechanisms on firm performance in selected MENA countries

Journal of Accounting in Emerging Economies ◽

10.1108/jaee-10-2015-0070 ◽

2017 ◽

Vol 7 (3) ◽

pp. 399-420 ◽

Cited By ~ 2

Author(s):

Amira Ben Hassoun ◽

Chaker Aloui

Keyword(s):

Corporate Governance ◽

Agency Problems ◽

Superior Performance ◽

Substitution Effects ◽

Governance Mechanisms ◽

Mena Region ◽

Content Type ◽

Mena Countries ◽

Corporate Governance Mechanisms ◽

Big Four

Purpose The purpose of this paper is to expand understanding of the determinants of performance in newly privatized firms by empirically examining the interaction effect of internal corporate governance and Big Four auditors in Middle Eastern and North African countries. Specifically, the paper contributes to the existing literature by identifying whether there is a substitute or complementary relation between internal corporate governance mechanisms and Big Four auditors. Design/methodology/approach A data set of 88 NPFs of MENA countries over the period 1987-2010 is used. The methodology is based on two-stage least squares regression analysis. Findings Results show that government ownership and the proportion of outside directors can substitute for Big Four auditors. However, foreign ownership and the CEO duality reinforce each other to improve performance of NPFs. Overall, these findings suggest that in the presence of agency problems within privatization process, different combinations of internal corporate governance and Big Four auditors can serve as a monitoring response in NPFs and should yield a superior performance. Practical implications This study gives insights to policy makers’ managers and regulators who are interested in investing in MENA region. The authors argue that information regarding who is auditing the firm is very value relevant for investors investing in the MENA region. Firms with Big Four auditor as external auditors are likely to disclose better information than those that are audited by non-Big Four auditors. Originality/value This paper extends the understanding of the determinants of the post-privatization performance in MENA region. It fills the privatization literature void by introducing Big Four auditors as an external governance mechanism. To the authors’ knowledge, the authors’ work is the first study that investigates whether Big Four auditors play an important role and interact with internal corporate governance mechanisms to address the dominant/minority shareholders post-privatization agency problems.

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Strange Bedfellows: Why France's Emmanuel Macron and his autocratic friends are attempting to impose another strongman in the MENA Region

Insight Turkey ◽

10.25253/99.2020224.04 ◽

2020 ◽

pp. 55-71

Author(s):

Timothy Reid

Keyword(s):

Saudi Arabia ◽

Middle East ◽

United Arab Emirates ◽

Political Islam ◽

Mena Region ◽

Islamic Terrorism

France has lately edged ever closer to a number of autocracies in Africa and the Middle East. Notably, in the name of combating “Islamic terrorism” –which it links to “political Islam”– it has actively supported Libyan warlord Khalifa Haftar. While actively allying with the United Arab Emirates (UAE), Egypt, and Saudi Arabia; it has aggressively confronted Turkey and undermined the internationally recognized Libyan Government of National Accord (GNA). In doing so, France finds itself in the same camp as Russian and Janjaweed mercenaries. Since France, in theory, supports the GNA and since Turkey has been sheltering millions of refugees that otherwise would flood Europe, this hostility is hard to comprehend. The present commentary will seek to examine the premises of this policy and what may be behind its actions

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Father Involvement and Education in the GCC

10.18502/aqf.0152 ◽

2020 ◽

Author(s):

Natasha Ridge ◽

Sarah Han ◽

David Dingus

Keyword(s):

Saudi Arabia ◽

Life History ◽

United Arab Emirates ◽

North Africa ◽

Father Involvement ◽

Educational Achievement ◽

Gulf Cooperation Council ◽

Mena Region ◽

Gcc Countries ◽

Education Environment

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Board diversity and corporate payout policy: Do free cash flow and ownership concentration matter?

Corporate Ownership and Control ◽

10.22495/cocv14i1c2p9 ◽

2016 ◽

Vol 14 (1) ◽

pp. 373-383 ◽

Cited By ~ 4

Author(s):

Redhwan Ahmed AL-Dhamari ◽

Ku Nor Izah Ku Ismail ◽

Bakr Ali Al-Gamrh

Keyword(s):

Cash Flow ◽

Agency Problem ◽

Cash Flows ◽

Payout Policy ◽

Free Cash Flow ◽

Ownership Concentration ◽

Board Diversity ◽

Dividend Payout ◽

Dividend Payments ◽

Free Cash Flows

This study investigates the effect of board diversity in terms of gender and ethnicity on dividend payout policy when a firm has free cash flow agency problem. It also tests whether the probability of diverse boards would minimize free cash flow agency problem through making large dividend payments is more pronounced in firms with high ownership concentration. We find that our results differ based on how corporate dividend policy is measured, and vary by the level of free cash flows and ownership concentration. More specifically, we find that women’s (Malays’) presence on boards has positive impact on dividend yield (dividend payout), and this effect conditional on the level of free cash flows generated by firms. Our results also show that the role of female and Malay directors in forcing controlling shareholders of firms with substantial free cash flows to cash out the firms’ resources through making higher dividend payments is more prominent when the firms’ ownership structure is concentrated in the hand of largest shareholders. The findings of our study, to some extent, support the government calls for increasing the number of women participation on corporate boardrooms and the participation of Malays in corporate sector.

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AGENCY PROBLEM DALAM PENERAPAN PEMBIAYAAN AKAD MUDHARABAH PADA PERBANKAN SYARIAH

ALQALAM ◽

10.32678/alqalam.v33i1.384 ◽

2016 ◽

Vol 33 (1) ◽

pp. 46

Author(s):

Aswadi Lubis

Keyword(s):

High Risk ◽

Asymmetric Information ◽

Human Resources ◽

Moral Hazard ◽

Adverse Selection ◽

Agency Problem ◽

Agency Problems ◽

Islamic Banking ◽

The Public

The purpose of writing this article is to describe the agency problems that arise in the application of the financing with mudharabah on Islamic banking. In this article the author describes the use of the theory of financing, asymetri information, agency problems inside of financing. The conclusion of this article is that the financing is asymmetric information problems will arise, both adverse selection and moral hazard. The high risk of prospective managers (mudharib) for their moral hazard and lack of readiness of human resources in Islamic banking is among the factors that make the composition of the distribution of funds to the public more in the form of financing. The limitations that can be done to optimize this financing is among other things; owners of capital supervision (monitoring) and the customers themselves place restrictions on its actions (bonding).

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