scholarly journals Management ownership and firm performance: Evidence from an emerging economy

2009 ◽  
Vol 6 (4) ◽  
pp. 88-95 ◽  
Author(s):  
Talat Afza ◽  
Slahudin Choudhary
Keyword(s):  
Firm Performance ◽  
Stock Exchange ◽  
Emerging Market ◽  
Empirical Studies ◽  
Agency Problem ◽  
Emerging Economy ◽  
Cross Sectional ◽  
Insider Ownership ◽  
Developed Economies ◽  
Equity Ownership

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.

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
Keyword(s):  
Firm Performance ◽  
Institutional Investors ◽  
Firm Value ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Emerging Market ◽  
Developed Economies ◽  
Financial Firms ◽  
Pressure Sensitive

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

Do corporate boards affect firm performance? New evidence from an emerging economy

2017 ◽  
Vol 66 (6) ◽  
pp. 724-741 ◽  
Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun ◽  
Michael Seamer
Keyword(s):  
Firm Performance ◽  
Firm Value ◽  
Corporate Performance ◽  
Stock Exchange ◽  
Economic Value ◽  
Value Added ◽  
Emerging Economy ◽  
Corporate Boards ◽  
Content Type ◽  
Developed Economies

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.

Does investment in innovation impact firm performance in emerging economies? An empirical investigation of the Indian food and agricultural manufacturing industry

2021 ◽  
Vol 13 (2) ◽  
pp. 233-248
Author(s):  
Manogna R.L. ◽  
Aswini Kumar Mishra
Keyword(s):  
Firm Performance ◽  
Manufacturing Industry ◽  
Emerging Market ◽  
Developed Countries ◽  
Emerging Economy ◽  
Content Type ◽  
Agricultural Industry ◽  
Indian Food ◽  
The Impact ◽  
The Relationship

Purpose The study aims to analyze the impact of Research & Development (R&D) intensity on the firm’s performance, measured by growth of sales in the emerging market like India. Innovation strategy and its outcomes for firms may be different in developing countries as compared to developed countries. Thus, a study that focuses on the emerging economy like India, with a majority of the population dependent on agriculture, is of prime importance to the firm performance in the food and agricultural manufacturing industry. For this study, the broader focus will be on one widely recognised factor which may influence the growth rate of firms, i.e. investment in innovations which is in terms of R&D expenditure. Design/methodology/approach The paper investigates the relationship between the R&D efforts and growth of firms in the Indian food and agricultural manufacturing industry during 2001–2019. To empirically test the relationship between firm’s growth (FG) and R&D investments, system generalised method of moments technique has been used, hence enabling to avoid problems related to endogeneity and simultaneity. Findings The findings reveal that investments in innovations have a positive effect on the growth of firms in the Indian food and agricultural manufacturing industry. Investment in R&D also enables the firms to reap benefits from externalities present in the industry. Further analysis reveals that younger firms grow faster when they invest in R&D. More specifically, this paper finds evidence in the case of the food and agricultural industry that import of raw materials negatively affects the FG and export intensity positively affects the growth in the case of R&D firms. Research limitations/implications This study suggests that the government should encourage the industries to invest optimally in R&D projects by providing favourable fiscal treatments and R&D subsidies which are observed to have positive effects in various developed countries. Originality/value To the best of the author’s knowledge, the current paper is the first to analyse the impact of innovation in food and agricultural industry on firm’s performance in an emerging economy context with the latest data. This paper agrees that a government initiative to increase private R&D expenditure would have favourable effects on FG as growing investments in R&D lead to further growth of the firms.

scholarly journals The Effect of Related Party Transactions on the Performance of Indonesian Listed Companies

2021 ◽  
Vol 20 (1) ◽  
pp. 21-39
Author(s):  
Brigitta Angelica ◽  
◽  
Desya Gunawan ◽  
Jessy Christella ◽  
Yane Chandera ◽  
...  
Keyword(s):  
Firm Performance ◽  
Stock Exchange ◽  
Empirical Studies ◽  
Negative Relationship ◽  
Company Performance ◽  
Minority Shareholders ◽  
Related Party Transactions ◽  
Direct Light ◽  
Panel Data Regression ◽  
The Impact

Abstract. The purpose of this paper is to analyze the impact of related party transactions (RPTs) on company performance using a panel data regression on 388 non-financial companies listed in Indonesia Stock Exchange during the 2015-2018 period. RPT variables used in this study are divided into several categories, namely transactions with related parties in the operational field (operational RPTs), financial field (financial RPTs), other fields (other RPTs), and total RPTs (sum of the three previous types). The study finds a significant negative relationship between financial RPTs and other RPTs on company performance. This finding is consistent with the precedent research that non-operational RPTs (i.e., financial RPTs and other RPTs) are commonly used by controlling shareholders as tunneling channels to expropriate minority shareholders. The results suggest policymakers to monitor more closely RPTs, particularly financial and other RPTs, that are more likely to be used as tunneling activities that are detrimental to firm performance. The results of this study are robust to various proxies of firm performance, providing additional empirical studies on RPTs in emerging countries with concentrated ownership structure, and shedding direct light on which type of RPTs that is mainly used as tunneling channel. Keywords: Efficient transaction hypothesis, firm performance, Indonesia, related party transactions, type II agency problem

scholarly journals Determinants of internet financial disclosure in an emerging market: lessons from Brazil

2008 ◽  
Vol 5 (2) ◽  
pp. 379-392
Author(s):  
Wesley Mendes-da-Silva ◽  
Theodore E. Christensen ◽  
Vernon J. Richardson
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Stock Exchange ◽  
Emerging Market ◽  
Financial Information ◽  
Financial Disclosure ◽  
The Internet ◽  
Cross Sectional ◽  
Market Participants ◽  
Dramatic Shift

Disclosure transparency is one of the pillars of good corporate governance. Moreover, the digital age has produced a dramatic shift in the corporate communication paradigm. As a result, companies increasingly use the Internet as a means of disseminating and disclosing financial information to shareholders, analysts and other interested capital market participants. This research examines the determinants of voluntary disclosure of financial information on the Internet by Brazilian firms. Cross-sectional analyses based on 291 non-financial companies listed on the São Paulo Stock Exchange in 2002 indicate that both firm size and the quality of corporate governance are positively related to the level of voluntary disclosure of financial information on the Internet. These results are consistent with the notion that Brazilian firms with incentives to improve financial transparency disclose more financial information on the Internet. Compared to similar Internet disclosures of U.S.-domiciled companies, this study finds that corporate governance is an incremental determinant of Internet financial disclosure for Brazilian enterprises

Family firms, family generation and performance: evidence from an emerging economy

2014 ◽  
Vol 4 (2) ◽  
pp. 197-219 ◽  
Author(s):  
Mohammad Badrul Muttakin ◽  
Arifur Khan ◽  
Nava Subramaniam
Keyword(s):  
Firm Performance ◽  
Family Firms ◽  
Emerging Market ◽  
Emerging Economy ◽  
Family Ownership ◽  
Content Type ◽  
Generation Family ◽  
And Performance ◽  
The Impact ◽  
Better Than

Purpose – The purpose of this paper is to examine the impact of family ownership on firm performance. In particular the authors investigate whether family firms outperform non-family firms and whether first generation family firms perform better than second generation family firms in an emerging economy using Bangladesh as a case. Design/methodology/approach – This study uses a data set of 141 listed Bangladeshi non-financial companies for the period 2005-2009. The methodology is based on multivariate regression analysis. Findings – The result shows that family firms perform better than their non-family counterparts. The authors also find that family ownership has a positive impact on firm performance. The analysis further reveals intergenerational differences where family firms and performance are associated positively only when founder members act as CEOs or chairmen. However, when descendents serve as CEOs or chairmen family firms are associated with poorer firm performance. Originality/value – The authors extend the findings of previous studies that investigate the family ownership and firm performance relationship in developed economy settings, but neglected emerging economies. The study also informs the literature about the intergenerational impact of family firms on performance in an emerging market.

scholarly journals FOREIGN INSTITUTIONAL SHAREHOLDERS AND CORPORATE PAYOUT POLICY

2020 ◽  
Vol 17 (2) ◽  
Author(s):  
Rahmat Setiawan ◽  
◽  
Nova Christiana ◽  
Sanju Singh ◽  
◽  
...  
Keyword(s):  
Stock Exchange ◽  
Emerging Market ◽  
Agency Problem ◽  
Payout Policy ◽  
Manufacturing Firms ◽  
Total Asset ◽  
Net Income ◽  
Institutional Shareholders

This study examines the effect of foreign institutional shareholders (FIS) on corporate payout policy. The study employs 97 Indonesian manufacturing firms listed on the Indonesia Stock Exchange period 2011-2015. Multivariate Tobit and Logit are employed to estimate the model. The result confirms the bird in the hand theory that FISs need assurance of their investments in the emerging market. FIS has a monitoring role over the firms since they have the ability to detect the firm’s quality and the agency problem within. The result confirms that the presence of the FIS in the firm has a positive and significant effect on both measures of corporate payout policy, dividend to net income and dividend to total asset. The presence of the FIS increases the propensity of the firm to pay a dividend.

scholarly journals Impact of managerial ownership on capital structure: a survey of Turkish firms

2008 ◽  
Vol 5 (2) ◽  
pp. 8-14
Author(s):  
Özgür Arslan
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Emerging Market ◽  
Debt Maturity ◽  
Managerial Ownership ◽  
Insider Ownership ◽  
Istanbul Stock Exchange ◽  
Dividend Smoothing ◽  
The Relationship ◽  
Considerable Support

This paper investigates the relationship between insider ownership and capital structure decisions made by managers for an emerging market. Therefore, we survey managers of 103 firms listed in the Istanbul Stock Exchange (ISE). Our findings lend considerable support to our expectation that leverage, debt maturity and dividend issues reduce ability of managers to divert resources from value maximisation. However the same monitoring and disciplining tax is not observed for stock issues. Also, our findings document that managers of firms listed in the ISE do not opt to dividend smoothing policy. Finally, the results are in line with our expectation that, the more willing are the managers to reduce asymmetric information between them and shareholders, the higher their ownership level in firms.

scholarly journals The Determinants of the Stock Price Performance of Analyst Recommendations

2019 ◽  
Vol 15 (11) ◽  
pp. 25
Author(s):  
Yaling Lin ◽  
Liang-Chien Lee ◽  
Tsung-Li Chi ◽  
Chen-Chang Lo ◽  
Wai-Shen Chung
Keyword(s):  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Firm Characteristics ◽  
Cross Sectional ◽  
Insider Ownership ◽  
Taiwan Stock Exchange ◽  
Price Performance ◽  
Abnormal Performance

This study examines the cross-sectional determinants of the price reaction to analysts’ recommendations disseminated through various type of media and for firms listed in Taiwan stock markets. We measure abnormal returns using the market model of event study. Based on the type of media (traditional media/social media) and the type of exchange (Taiwan Stock Exchange (TWSE)/Taipei Exchange (TPEx)), we classify the combined sample observations into four samples and run quantile regressions to investigate whether the relation will be uniform across various quantile levels. Our results show that the relation between firm characteristics and cumulative abnormal returns is not homogeneous across various quantiles of abnormal returns. Our evidence indicates that in general the relation tends to be stronger for firms at higher performance quantile levels and tends to be more pronounced for TWSE firms. The strongest relation is found for the Traditional/TWSE sample, where the abnormal returns are positively related to insider ownership and prior-period earnings, and negatively related to institutional shareholding and price-to-book ratio for firms in the highest abnormal performance quantile.

Price Behaviour Around Dividend Announcements in the Indian Equity Market in the Existence of Corporate Dividend Tax

2017 ◽  
Vol 18 (2) ◽  
pp. 402-415 ◽  
Author(s):  
Chanchal Chatterjee ◽  
Paromita Dutta
Keyword(s):  
Stock Returns ◽  
Firm Size ◽  
Stock Exchange ◽  
Emerging Market ◽  
Market Model ◽  
Cash Dividend ◽  
Developed Economies ◽  
Dividend Announcements ◽  
Abnormal Stock Returns ◽  
Dividend Tax

This article empirically examines the price behaviour around cash dividend announcements of the firms listed on the National Stock Exchange of India Ltd (NSE) in order to understand whether dividend announcements really influence stock returns in the market and carry meaningful information to the investors in the existence of corporate dividend tax. The article uses standard ‘event study’ methodology based on market model on a sample of 210 dividend announcements. Subsample analysis is employed for further analysis of firms of different categories. The study finds that cash dividend announcements do not necessarily generate abnormal stock returns in an emerging market, such as India. The whole sample is further divided into various subsamples on the basis of firm size and the size of payout ratio. The study finds that large payout firms experience greater stock returns compared to the smaller payout firms just after the dividend announcements. However, stock returns following dividend announcements do not vary across firm size. This article provides evidence to the managers about the non-linkage between cash dividend announcements and stock returns in an emerging market like India. This finding is contrary to the findings of many other studies that are based on the data of the developed economies.

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