scholarly journals Board governance and IPO performance in the short-run and long-run

2008 ◽  
Vol 6 (Special Issue 1) ◽  
pp. 15-34
Author(s):  
Raymond da Silva Rosa ◽  
H.Y. Izan ◽  
Michelle Ching- Yi Lin ◽  
Suzanne Ching- Fang Lin ◽  
◽  
...  
Keyword(s):  
Initial Public Offering ◽  
Best Practice ◽  
Resource Dependence ◽  
Stock Exchange ◽  
Resource Dependence Theory ◽  
Board Governance ◽  
Board Size ◽  
Practice Recommendations ◽  
Long Run ◽  
Short Run

In light of the best practice recommendations released by the Australian Stock Exchange (ASX) in March 2003, this study tests the relationship between initial public offering (IPO) firm performance and board governance quality, captured by board size, board leadership, board composition, and director’s share ownership. Based on a sample of Australian IPO firms that lodged prospectuses with ASX between 1994 and 1999, we do not find evidence that links underpricing to board structures at the time of IPO. IPO firms’ board structures are insignificant in explaining the level of IPO underpricing, and board size is the only board governance variable significant in explaining long-run after market performance, after controlling for the size of the firm. That is, IPO firms with larger boards at the time of issuance perform better in the long-run, consistent with the resource dependence theory. Thus, we conclude that ASX’s best practice recommendations are likely to distort the market-driven practice salready in place, and our findings lead us to question the role played by the board of directors in signalling firm quality.

scholarly journals Modeling and Estimation of Cumulative Abnormal Return using VECM

2021 ◽  
Vol 7 (1) ◽  
pp. 36-49
Author(s):  
Sri Ambarwati ◽  
Eka Sudarmaji ◽  
Herlan Masrio ◽  
Ismiriati Nasip
Keyword(s):  
Initial Public Offering ◽  
Abnormal Return ◽  
Stock Exchange ◽  
Idiosyncratic Risk ◽  
Cointegration Analysis ◽  
Cumulative Abnormal Return ◽  
Firm Level ◽  
Long Run ◽  
Short Run ◽  
Public Offering

This paper examined how firm-level idiosyncratic risk varies over time. It affected initial public offering (IPO) in the presence of pump-and-dump and flipping trends during the early trading of IPO stocks in the Indonesia Stock Exchange. The paper used the IPO data taken from 181 companies during the year 2015-2019. It revisited the relationship between Cumulative Abnormal Return thirty-days (CAR30D) and Cumulative Abnormal Return five-days (CAR5D) and the Characteristics (IPO Floating shares, IPO Fund and Price) and Macroeconomics Condition (Inflation rate). It also used the cointegration analysis and VECM model. The paper found that Both LnFloat and LnPrice had causal evidence in the long-run causality or short-run with Cumulative Abnormal Return thirty days (CAR30D). We also noted that idiosyncratic risk exposure depends on IPO characteristics. It was crucial for firms going public in hot-issue markets, undervalued IPOs, and high idiosyncratic-risk issues. The model suggested that those series should cointegrate firstly. However, the variable of LnIPOFund had causal evidence in the short-run causality only.

scholarly journals The long-Run and Short-Run Analysis between Stock Market Index and Macroeconomic Variables in Jordan: Bounds Tests Approach

2019 ◽  
Vol 12 (4) ◽  
pp. 50
Author(s):  
Raed Walid Al-Smadi ◽  
Muthana Mohammad Omoush
Keyword(s):  
Stock Market ◽  
Time Series Data ◽  
Stock Exchange ◽  
Series Data ◽  
Stock Market Index ◽  
Macroeconomic Variables ◽  
Market Index ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Short Run

This paper investigates the long-run and short-run relationship between stock market index and the macroeconomic variables in Jordan. Annual time series data for the 1978–2017 periods and the ARDL bounding test are used. The results identify long-run equilibrium relationship between stock market index and the macroeconomic variables in Jordan. Jordanian policy makers have to pay more attention to the current regulation in the Amman Stock Exchange(ASE) and manage it well, thus ultimately helping financial development.

The Effect Of Geographic Dispersion On The Initial And Long-Run IPO Performance

2017 ◽  
Vol 41 (7) ◽  
pp. 869-897 ◽  
Author(s):  
Ozgur Ozdemir
Keyword(s):  
Initial Public Offering ◽  
Abnormal Returns ◽  
Geographic Dispersion ◽  
Ipo Performance ◽  
Geographically Dispersed ◽  
Long Run ◽  
Significant Difference ◽  
Short Run ◽  
Restaurant Firms ◽  
Public Offering

This study examines the effect of geographic dispersion on the short-run and long-run initial public offering (IPO) performance of restaurant firms. Sample of the study consists of 103 restaurant IPOs conducted between 1981 and 2011. The study finds that being geographically dispersed or concentrated in a small area does not lead to a significant difference in the initial returns of restaurant IPOs. Yet the analysis shows that restaurant firms with geographically dispersed operations have significantly higher long-run returns in the post-IPO period compared with their local counterparts. This is evidenced by the significantly larger cumulative abnormal returns for geographically dispersed restaurant firms in the post-IPO period.

Board structure: an empirical study of firms in Anglo-American governance environments

2014 ◽  
Vol 40 (7) ◽  
pp. 681-699 ◽  
Author(s):  
M.I. Muller-Kahle ◽  
Liu Wang ◽  
Jun Wu
Keyword(s):  
Firm Value ◽  
Resource Dependence ◽  
Resource Dependence Theory ◽  
Board Independence ◽  
Board Structure ◽  
Board Size ◽  
Content Type ◽  
The Usa ◽  
The Uk ◽  
The Impact

Purpose – With boards of directors playing both monitoring and guidance roles, the purpose of this paper is to examine the impact of board structure on firm value in large US and UK firms using the lenses of agency and resource dependence theories. Design/methodology/approach – Using a sample of firms in the USA and the UK from 2000 to 2007, the paper conducts a panel data analysis of the impact of board structure on firm value and examine the nuances of different governance environments. Findings – The paper finds distinct differences in the impact of board independence, board size, and outside director busyness on firm value between UK and US firms. Specifically, the paper finds that board independence, board size, and board busyness all have a significant positive impact on firm value in the UK. However, the paper finds no significant relationship between board independence and firm value among US firms. Both board size and board busyness are found to be positively associated with firm value in the USA. Social implications – The paper finds strong support for resource dependence theory in the UK but limited support for agency theory in the USA. Originality/value – This paper takes a multi-country approach to examining the impact of board structure on firm value.

scholarly journals Abnormal Related Party Transactions, Political Connection, and Firm Value: Evidence from Indonesian Firms

2021 ◽  
Vol 22 (1) ◽  
pp. 461-478
Author(s):  
Supatmi Supatmi ◽  
Sutrisno Sutrisno ◽  
Erwin Saraswati ◽  
Bambang Purnomosidhi
Keyword(s):  
Firm Value ◽  
Resource Dependence ◽  
Stock Exchange ◽  
Resource Dependence Theory ◽  
Political Connections ◽  
Political Connection ◽  
Related Party Transactions ◽  
Panel Data Regression ◽  
Data Regression ◽  
Better Than

This study aims to examine the effect of abnormal related party transactions (RPTs) on firm value and to investigate political connections as a moderator of the causal relationship. Our sample is 450 Indonesian firms listed at the Indonesia Stock Exchange during the period of 2014–2017 with a total of 1,724 firm-year observations. Based on the panel data regression test, our results demonstrate that abnormal RPTs, especially account receivables-related RPTs and account payables-related RPTs, decrease firm value. Further, the results empirically show that political connections negatively affect firm value. Political connections strengthen the effects of abnormal non-account receivable RPT assets and abnormal non-account payable RPT liabilities on firm value. Our findings imply that agency theory explains the impacts of political connections of Indonesian firms better than resource dependence theory.

scholarly journals Stock market development and investment growth in Nigeria

2020 ◽  
Vol 42 ◽  
pp. 99-117
Author(s):  
Idowu Daniel Onisanwa ◽  
◽  
Mercy Ojochegbe Adaji ◽  
◽  
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Investment Climate ◽  
Stock Market Development ◽  
Turnover Ratio ◽  
Long Run ◽  
Short Run ◽  
Market Capitalisation ◽  
Investment Growth

Aim/purpose – The poor investment climate is one of the reasons advanced for the slow pace of growth in Nigeria; evidenced by the absence or inadequate amount of investible funds in the productive sectors. While the money market in Nigeria provides very limited investment options, the underdevelopment and underutilisation of the Nigerian Stock Market constitute a drawback to the investment climate. However, any economy desiring sustainable development requires a long-term source of fund. Therefore, this study ascertains the perfor-mance of the stock market and investment growth nexus in Nigeria.Design/methodology/approach – The study is based on the neoclassical growth theory with a slight modification in the wake of Levine’s specification (2003), an augmented investment growth relationship was specified. This study utilises the Autoregressive Distributed Lag (ARDL) in establishing the co-integration relation between stock market development and investment growth. Gross capital formation was used as a proxy for investment growth while the stock market indicators are market capitalisation ratio, total value traded ratio and turnover ratio. The study utilises data covering 1981 to 2018, sourced from the Nigerian Stock Exchange annual reports and diverse publication of the Nigerian Bureau of Statistics.Findings – The market capitalisation ratio had a negative impact on gross capital for-mation both in the short run and the long run, but its significance is only evident in the short run. The turnover ratio had a negative and significant impact on investment growth. The total value traded ratio exerted a positive and significant impact on gross capital formation both in the short run and the long run. The coefficient of the error cor-rection term was negative and statistically significant. Research implications/limitations – The total value traded ratio enhanced investment growth in Nigeria. Both market capitalisation and turnover ratio dampen investment growth. The Stock Exchange is not efficient and does not possess the amount of liquidity required to finance long term investment need in Nigeria. Emphasis on measures geared towards increasing efficiency and liquidity should be intensified by the government. Mean-while, the sectorial analysis of the impact of stock exchange movements in Nigeria and the use of other estimation techniques may create room for more robust relationships.Originality/value/contribution – The study directly investigates the capability of the Nigerian stock market in driving investment, both in the short and long run.

scholarly journals The Effect of Audit Committee Characteristics on the Profitability: Panel Data Evidence

2019 ◽  
Vol 11 (4) ◽  
pp. 104
Author(s):  
Yazan Oroud
Keyword(s):  
Panel Data ◽  
Agency Theory ◽  
Audit Committee ◽  
Resource Dependence ◽  
Stock Exchange ◽  
Fixed Effect Model ◽  
Resource Dependence Theory ◽  
Annual Reports ◽  
Industrial Firms ◽  
Industrial Companies

This study attempts to investigat the relationship between audit committee characteristics (size, independence, meeting and financial expertise) and the profitability of industrial companies listed on the Amman Stock Exchange (ASE) for the years 2013 to 2017. The model of this study is theoretically founded on both the agency theory and the resource dependence theory. To examine the developed model, the data were gathered from the annual reports of 51 listed industrial firms. To analyse the data, this study utilized the panel data methodology on 51companies with 255 observations. Moreover, this study used company size and leverage as control variables. Based on the panel data results, the fixed-effect model was used to examine the effect of the experimental variables on profitability, measured by return on investment (ROI) and return on equity (ROE). The results show that the audit committee characteristics have a significant effect on profitability of the industrial companies listed on the ASE. This study evinces that the RD theory is more significant compared to the agency theory when describing CG practices in Jordan.

scholarly journals Trends on the relationship between board size and financial and reputational corporate performance

2018 ◽  
Vol 27 (2) ◽  
pp. 183-197 ◽  
Author(s):  
Luis Antonio Orozco ◽  
Jose Vargas ◽  
Raquel Galindo-Dorado
Keyword(s):  
Empirical Evidence ◽  
Corporate Reputation ◽  
High Performance ◽  
Resource Dependence ◽  
Corporate Performance ◽  
Resource Dependence Theory ◽  
Board Structure ◽  
Board Size ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to investigate the relationship between board size (B-SIZE) and financial and reputational corporate performance in top companies ranked by the Business Monitor of Corporate Reputation – MERCO in Colombia. Design/methodology/approach This paper conducts correlations and cluster analysis in order to classify firms based on performance and control variables, using a sectional sample of 84 large companies in Colombia over the period 2008-2012. Findings This research founds that large boards are associated with high performance on corporate reputation, as stated by the resource dependence theory, and a low-financial performance, as predicted by the agency theory. However, the results indicate that there is no relation between financial and reputational performance. Research limitations/implications This research considered only large companies listed by MERCO. Therefore, the results can only be generalized for top firms in Colombia according to this list. However, results add empirical evidence to theoretical debate between B-SIZE and firm performance considering financial and reputational indicators. Practical implications According to the OECD manual of good corporate governance practices, the optimal B-SIZE has between five to nine core members. The board structure has a direct impact over the firm’s financial and reputational performance and must be carefully analyzed by shareholders to balance the size according to expected results and firm’s features like family ownership, exportation activities and norms of stock markets. Originality/value This paper contributes to the existing literature on the relationship between B-SIZE and corporate performance with the evaluation of financial and reputational results for the case of an emerging economy. In Latin America, this analysis must go beyond OECD recommendations, and shall consider the context of an emerging country based on empirical evidence.

Does Board Size Matter for Taiwanese Hotel Performance? Agency Theory or Resource Dependence Theory

2017 ◽  
Vol 59 (4) ◽  
pp. 317-324 ◽  
Author(s):  
Jie Wang ◽  
Ming-Hsiang Chen ◽  
Chin-Yi Fang ◽  
Li Tian
Keyword(s):  
Agency Theory ◽  
Resource Dependence ◽  
Positive Impact ◽  
Hotel Industry ◽  
Resource Dependence Theory ◽  
Board Size ◽  
Return On Equity ◽  
Hotel Performance ◽  
Dependence Theory ◽  
Size Matter

Due to the fast growing hotel industry in Taiwan, recent hospitality studies has paid attention to how various factors affect the Taiwanese hotel performance and offered interesting and valuable findings. To expand the financial literature of the Taiwanese hotel industry and the hospitality literature as a whole, this article is the first hospitality study to investigate how board size affects firm performance of publicly traded hotels in Taiwan. Panel regression test results reveal an interesting finding. Specifically, there is an inverted U-shaped relationship between board size and hotel performance in terms of return on assets, return on equity, and Tobin’s Q with an optimal value of board size equal to 10. This indicates that while board size up to 10 has a positive impact on hotel performance (supporting the resource dependence theory), board size can deteriorate hotel performance when it is larger than 10 (supporting the agency theory).

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Bokhtiar Hasan Aarif ◽  
Muhammad Rafiqul Islam Rafiq ◽  
Abu N.M. Wahid
Keyword(s):  
Stock Exchange ◽  
Forecast Error ◽  
Error Variance ◽  
Impulse Response Functions ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Significant Difference ◽  
Short Run ◽  
Two Indices

Purpose This paper aims to examine whether the Sharīʿah indices outperform the conventional indices as evident from Dhaka Stock Exchange (DSE). To achieve the objective, the study, first, assesses the risk adjusted returns of the Sharīʿah and conventional indices and compares the same between the two indices. Second, it examines the short-run and long-run associations between the two indices. Design/methodology/approach The DSEX Sharīʿah index and DSE broad index of the DSE are used as representatives of the Sharīʿah and conventional indices, respectively. The study uses monthly data for the period 2014–2018 and applies a number of techniques such as risk adjusted returns, Johansen’s cointegration test, vector error correction model, Granger causality test, forecast error variance decomposition and impulse response functions techniques. Findings The study reveals that albeit there is no significant difference in simple mean between the two indices, the Sharīʿah index outperforms its conventional counterpart based on the risk adjusted returns. The two indices are associated only in the long-run, while no causal relationship is spotted between them. The overall results show that the Sharīʿah index has dominance over the conventional index in Bangladesh. Research limitations/implications The study could use more pairs of indices, including additional variables such as financial crisis and macroeconomic variables. Practical implications The study has important implications to investors, especially the religious Muslims and ethical ones, who are suggested to invest their funds in the Sharīʿah index without sacrificing returns, rather be monetarily more benefited. Moreover, the other investors can generate diversification benefits by adding both Sharīʿah and conventional indices in their portfolios in the short-run. Originality/value Unlike previous studies, this study endeavors to use a comprehensive methodology to conduct its analysis. Moreover, this is supposedly the first ever effort to conduct such a study in the context of Bangladesh.

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