scholarly journals Corporate governance, institutional investor type and firm performance: Evidence from an emerging market

2021 ◽  
Vol 5 (4) ◽  
pp. 20-27
Author(s):  
Rama Sastry Vinjamury

The study analyses the role of institutional investors in improving firm performance. Unlike in developed economies where firm ownership is widely dispersed, firms in emerging economies such as India have substantial promoter shareholdings (often in a majority or close to a majority). Given the promoter control of Indian companies, the role of institutional investors as external monitors is analysed. Following Brickley, Lease, and Smith (1988) and Almazan, Hartzell, and Starks (2005), the study categorises institutional investors as pressure-sensitive and pressure-insensitive institutional investors. Panel data for non-financial firms from India included in National Stock Exchange (NSE) 500 over the period 2008–2017 is studied using fixed-effects models. The study finds that the increased ownership of pressure-insensitive institutional investors is positively associated with firm performance. Also, the increased ownership of pressure-sensitive institutional investors is negatively associated with firm performance. These findings are consistent with the view that pressure-insensitive institutional investors are more effective monitors compared to pressure-sensitive institutional investors. The study offers insights into the role of institutional investors in economies where firms have a substantial promoter shareholding. The study documents that even with a substantial promoter shareholding and control, pressure-insensitive institutional investors aid in enhancing firm value

2021 ◽  
Vol 6 (2) ◽  
pp. 87-99
Author(s):  
Naveed Anjum ◽  
Dr. Faisal Khan ◽  
Shoib Hassan ◽  
Dr. Muhammad Arif

The main aim of this research is to analyze the association between cashholding and firm performance with moderating role of corporate governance. For the purpose of analysis, secondary data of 145 non-financial firms listed at Pakistan Stock Exchange (PSX) is taken from 2006-2017. The dynamic Generalized Method of Moments (GMM) is applied to cater the problem of unobserved heterogeneity. The results of this study suggest that cash holding has a significant impact on firm performance. Moreover, corporate governance significantly moderates the relationship between cash holding and firm performance.


2019 ◽  
Vol 06 (02) ◽  
pp. 1950016
Author(s):  
Muhammad Usman Yousaf ◽  
Muhammad Kashif Khurshid ◽  
Aftab Ahmed ◽  
Muhammad Zulfiqar

Research and development is an emerging competitive advantage to gain maximum market share. This study is conducted to empirically investigate the relationship between research and development intensity and firm performance in selected non-financial firms listed at Pakistan Stock Exchange (PSX). Moreover, the role of ownership structure and board structure have been evaluated between predictor and outcome variable. For this purpose, 27 non-financial firms listed on PSX have been selected for the period of eight years from 2009 to 2016 and unbalanced panel data was obtained. Research and development intensity has been used as an independent variable. ROA, ROE, and TQ are used as measures of financial performance, i.e., dependent variable. Ownership concentration, institutional ownership, and managerial ownership are used as the proxies for ownership structure. Board size, board independence, and board meeting frequency are used as the proxies for board structure. Moreover, firm size, firm age and leverage have also been used as a control variables in data analysis. Based on data analyses, it is concluded that research and development intensity has a positive and significant relationship with all three proxies of firm performance, i.e., ROA, ROE and Tobin’s Q. Afterward, the researchers have investigated the moderating role of ownership structure and board structure between research and development intensity and three proxies of firm performance. It is also concluded that in general ownership structure as well as board structure are negatively moderating the relationship between research and development intensity and firm performance which raises a question mark on the effectiveness of corporate governance mechanism in terms of R&D performance.


Author(s):  
Affaf Asghar Butt ◽  
Aamer Shahzad ◽  
Jamshaid Ahmad

This study aims to investigate whether the corporate governance (CG) moderates the link between corporate social responsibility (CSR) and firm value (FV). For this purpose, anatomization was conducted by extracting data from the published annual reports of non-financial firms listed on the Pakistan Stock Exchange. Correlation, regression, and moderation analyses were conducted to obtain the statistical outcomes. The results showed a significant direct relationship between CSR and firm performance. Additionally, it was found that the interactivity between CSR and FV weakened when CG was included as a moderator. The results of this study could be used by stakeholders to make economically sound decisions since it provides complete guidance regarding how to engage in productive CSR activities. Moreover, this study contributes to future research by examining the association between CSR and FV using CG as a moderator, in a market where, as in other developing markets, this relationship has not been the focus of research. Apart from its theoretical contributions, this study explores the role of CG as moderator, in line with research conducted in under-developed markets, which may be considered a significant contribution. 


2018 ◽  
Vol 2 (2) ◽  
pp. 5-8
Author(s):  
Chee Yoong Liew ◽  
Young Kyung Ko ◽  
Bee Lian Song ◽  
Saraniah Murthy

This manuscript is about the influence of directors’ remuneration on firm performance and whether independent directors’ tenure in the remuneration committee moderates this relationship. The results show that within family corporations in industries which are not exclusive, non-executive directors’ remuneration have a significant negative relationship with firm performance. Family firms have a stronger significant negative relationship than non-family firms. Within family firms in non-exclusive industries, there is also a positive moderating effect of independent directors’ tenure within the remuneration committee on the influence of non-executive directors’ remuneration on firm performance. In this case, corporations owned by families have a stronger positive moderating effect compared to non-family firms. Our study has significant policy implications with respect to how the Securities Commission (SC) should design and implement proper rules and regulations to govern remuneration of non-executive directors’ remuneration as well as how the SC should govern the tenure of the independent directors within the remuneration committee in East Asian emerging market firms where Agency Problem Type II is prevalent and ownership is highly concentrated


2019 ◽  
Vol 64 (02) ◽  
pp. 365-376 ◽  
Author(s):  
JONATHAN BATTEN ◽  
XUAN VINH VO

This paper investigates the link between stock market liquidity and firm value in an important emerging market, Vietnam. Specially, we examine this relationship using a sample of firms listed on the Ho Chi Minh City stock exchange for the period 2006–2014. We show that there is a negative relation between liquidity and firm value. This outcome is contrary to previous results for many developed countries. Further, we demonstrate that this result may be explained by differences in leverage effects and pricing-based theories, where stock liquidity influences firm performance via an illiquidity premium or mispricing.


2010 ◽  
Vol 5 (1) ◽  
pp. 57-66 ◽  
Author(s):  
Pınar Mandacı ◽  
Guluzar Gumus

Ownership Concentration, Managerial Ownership and Firm Performance: Evidence from TurkeyThis study examines the effects of ownership concentration and managerial ownership on the profitability and the value of non-financial firms listed on the Istanbul Stock Exchange (ISE) in the context of an emerging market. We measure the firm's performance by Return on Assets (ROA) and Tobin's Q ratios, where the former measures profitability and the latter the value of the firm. In addition, we give detailed information on the main characteristics of the ownership structures of the firms in our sample and find that ownership of Turkish firms is highly concentrated. In addition, the unlisted holding companies have the highest average percentage of shares, which supports the belief that individuals or families establish the holding companies in order to control their listed firms. After controlling for investment intensity, leverage, growth and size, we find that ownership concentration has a significantly positive effect on both firm value and profitability, while managerial ownership has a significantly negative effect on firm value.


Author(s):  
Anwar Azazi

Objective – The objective of this study was to investigate empirically the relationship between the compensation of chief executive officers (CEO) and a firm’s performance in the banking industry and to examine if CEO compensation affects bank performance differently between banks with and without prospect. Methodology/Technique – The author uses two measures of performance, total return on assets and Tobin, s Q, and concentrate on total CEO compensation. All data are collected from annual reports of banks listed in Indonesia Stock Exchange for a sample of 23 commercial banks or 167 firm-year observation over the 2009-2018 period utilizing the purposive random sampling technique. CEO compensation and bank performance are then analysed employing pooled regression method. Findings – This study finds supporting evidence for the agency-related problem in the banking industry in Indonesia. It then proves that high CEO compensation does have an inverse effect on bank performance, mainly on firm value. It also provides evidence that the pay-performance also demonstrates different patterns in firms with and without prospect. Novelty – This study uses novel and hand-collected data on CEO compensation in the banking industry and developing econometric evidence regarding CEO pay-performance relating to banks with and without prospect. Type of Paper: Empirical. JEL Classification: G21, G32, M12. Keywords: CEO compensation; Financial performance; Banking industry. Reference to this paper should be made as follows: Azazi, A. 2020. CEO Compensation and Firm Performance in Emerging Market: Evidence from Indonesia Selected Listed Banks, Acc. Fin. Review, 5 (3): 95 – 109. https://doi.org/10.35609/afr.2020.5.3(2)


2012 ◽  
Vol 3 (5) ◽  
pp. 161-166 ◽  
Author(s):  
Hammad Hassan Mirza ◽  
Sumaira Andleeb . ◽  
Farzana Ramzan .

Gender diversity and firm performance, is among the new but challenging topics of research in management sciences. Many researchers have studied the role of gender diversity in enhancing firms’ performance in developed economies (see for example, Dwyer et. al, 2003; and Kang et al, 2010). Existing literature on this subject is rare in emerging economies and to the best of author’s knowledge; this is the first study on relationship of gender diversity and firm’s performance in Pakistani context. Present study focuses on the impact of presence of female directors on corporate performance using a sample of 395 listed nonfinancial companies of Karachi Stock Exchange (KSE) Pakistan from 2004 to 2009. Estimated results indicate that ratio of female directors is negatively related with firm performance.


2009 ◽  
Vol 6 (4) ◽  
pp. 88-95 ◽  
Author(s):  
Talat Afza ◽  
Slahudin Choudhary

Due to the separation of ownership and control in modern corporation, the form of relationship between firm performance and insider ownership has been the subject of empirical investigation for last many decades. It is argued, that as managers’ equity ownership increases, their interests coincide more closely with those of outside shareholders, and hence, the conflicts between managers and shareholders are likely to be resolved. Thus, management’s equity ownership helps resolve the agency problem and improve the firm’s performance (Jensen and Meckling, 1976; Agrawal and Knoeber, 1996; Chen et al., 2003). However, several studies suggest that management’s ownership does not always have a positive effect on corporate performance (Demsetz and Villalonga, 2000; Cheung and Wei, 2006). Most of the empirical studies on this issue have focused on the developed economies and there is little empirical evidence on the emerging economies in general and almost no work has been done on emerging economy of Pakistan in particular. Therefore, present study is an effort to analyze the relationship between insider ownership and firm performance in emerging market of Pakistan while taking a sample of 100 firms listed on Karachi Stock Exchange. In spite of entirely different characteristics of data, it has been observed that there is strong positive relationship between insider ownership and firm performance in Pakistan and the results of cross-sectional regression are consistent with theory of “convergence of interest” of relationship between insider ownership and firm performance. Although these results did not conform with the theory “ownership entrenchment” that have proved true in many developed economies yet the empirical results have provided the Pakistani corporate sector positive indications to solve the agency problem through stock options for their employees.


Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun ◽  
Michael Seamer

Purpose The purpose of this paper is to examine an association between board demographics and corporate performance using a sample of Pakistani firms listed on the Pakistan Stock Exchange in the 2014 year. Design/methodology/approach This study is unique in that corporate performance is examined using a mixture of performance measures: accounting-based measures (return on assets), market-based measures (Tobin’s Q, earnings per share, and total return) and economic profit measures (economic value added). Findings The results of this research show a significant positive relationship between board size, minority representation on the board and the appointment of a family director and enhanced firm performance. However, contrary to expectations, the authors also find that instead of adding value, the appointment of independent directors to Pakistani firm boards negatively impacts firm value. Originality/value This study adds to a growing body of empirical evidence that suggests that agency theory-based corporate governance recommendations adopted in developed economies may not be relevant to emerging economy firms.


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