scholarly journals Impact of Corporate Governance on the Cost of Capital: Empirical Evidence from the Non-Financial Sector of Pakistan

2021 ◽  
Vol 7 (2) ◽  
pp. 477-489
Author(s):  
Muhammad Bilal Ijaz ◽  
Muhammad Naveed ◽  
Hassan Raza
Keyword(s):  
Economic Growth ◽  
Corporate Governance ◽  
Cost Of Capital ◽  
Financial Sector ◽  
Political Connections ◽  
Board Independence ◽  
Data Set ◽  
Ceo Duality ◽  
Board Committees ◽  
The Cost

Purpose: The study looked at the effect of corporate governance on the cost of capital of firms in Pakistan's non-financial sector. Design/Methodology/Approach: The study sample is comprised of balanced data set of 175 non-financial companies listed on the Pakistan Stock Exchange between 2008 and 2018. The study used the dynamic panel GMM estimator technique. Findings: The findings revealed that an increase in the number of directors, board independence, CEO duality, and inflation negatively influence the cost of capital. On the other hand, the increase in institutional holdings increased the cost of capital. In addition, it is discovered that board committees, political connections, and economic growth do not affect the cost of capital Implications/Originality/Value:  When board size, CEO duality, board independence, and inflation increased, the cost of capital decreased in Pakistan's non-financial sector. Furthermore, board committees, political connections, company leverage, and economic growth do not affect the cost of capital in Pakistan's non-financial sector. In comparison, an increase in institutional shareholding increased the cost of capital in Pakistan's non-financial sector.

scholarly journals Corporate governance and the cost of equity: Evidence from the developing country

2021 ◽  
Vol 10 (4) ◽  
pp. 144-155
Author(s):  
Mahmoud A. Odat ◽  
Khaldoon Ahmad Al Daoud ◽  
Ziad Mohammad Zurigat
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Political Influence ◽  
Board Independence ◽  
Cost Of Equity ◽  
Board Size ◽  
Ceo Duality ◽  
Multiple Directorships ◽  
Corporate Governance Mechanisms ◽  
The Cost

This study examines the impact of corporate governance mechanisms on a firm’s cost of equity. The corporate governance mechanisms examined consist of board size, board independence, CEO duality, multiple directorships held by board members, and board political influence. To accomplish the study objective, 210 firm-year observations for manufacturing companies listed on Amman Stock Exchange (ASE) in the period 2014–2018 are analyzed using panel data analysis techniques. The results of the fixed effects regression model reveal that CEO duality and board political influence negatively affect the cost of equity, while there is no significant effect of board size, board independence, and multiple directorships on the cost of equity. The results suggest that firms’ board of directors is an important factor in mitigating the agency problem suggested by Jensen and Meckling (1976). They also suggest that information risk is priced, which is consistent with previous research such as Easley, Hvidkjaer, and O’Hara (2002), and that the board of directors plays a role in reducing that risk in capital markets.

scholarly journals The Cost of Capital of the Financial Sector

2015 ◽  
Author(s):  
Tobias Adrian ◽  
Evan Friedman ◽  
Tyler Muir
Keyword(s):  
Cost Of Capital ◽  
Financial Sector ◽  
The Cost

Accounting conservatism, corporate governance and political connections

2017 ◽  
Vol 25 (2) ◽  
pp. 288-318 ◽  
Author(s):  
Nor Farizal Mohammed ◽  
Kamran Ahmed ◽  
Xu-Dong Ji
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Political Influence ◽  
Ordinary Least Squares ◽  
Accounting Conservatism ◽  
Political Connections ◽  
Board Independence ◽  
Political Connection ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between accounting conservatism, corporate governance and political connection in listed firms in Malaysia where political influence plays a significant role in the capital market and in many business dealings. Design/methodology/approach By utilizing 824 firm-year observations comprising large listed companies over a period of four years from 2004, this study uses ordinary least squares regression models to investigate the relationship between accounting conservatism, corporate governance and political connections in Malaysia. Multiple measures of conservatism developed by Basu (1997) and Khan and Watts (2009) are employed. Findings The results show evidence of accounting conservatism (bad news being recognized earlier than good news) in Malaysia. Further, the results reveal that better corporate governance structure in terms of board independence is positively associated with accounting conservatism while management ownership is negatively associated with it. However, political connection has a negative moderating effect on the positive relationship between accounting conservatism and board independence. The results also suggest political connections have a positive association with firm’s future performance. Originality/value This study is the first in investigating the effect of political connections on accounting conservatism in Malaysian context and how political connections negatively affect the monitoring role of the corporate boards. By directly measuring political connection and controlling for various corporate governance mechanisms and firm-specific attributes, this study contributes to enhance the authors’ understanding of the political influence in financial reporting quality and firm performance in an emerging market setting.

scholarly journals Emperical Data on the Correlation between CEO Duality and the Performance of a Corporate

2015 ◽  
Vol 2 (1) ◽  
pp. 55 ◽  
Author(s):  
Emira Spahaj
Keyword(s):  
Corporate Governance ◽  
Chief Executive ◽  
Significant Implication ◽  
Corporate Board ◽  
Essential Information ◽  
Ceo Duality ◽  
Panoramic Analysis ◽  
Board Directors ◽  
The Government ◽  
The Cost

An independent CEO’s discipline is greatly influenced by the way a corporate is managed, hence improving the firm’s value in those corporate that are developing and the ones that have already developed. Additionally, the shareholders’ interest can as well be safeguarded by the CEO and the board through creation of more safeguard guidelines. Macro-economic and micro-economic level corporate experiences significant implication from the governance, whereby corporate governance that is poor may lead to corporations’ failure, for instance Worldcom and Enron experienced this type of failure. This paper scrutinizes the connection between dual and separated Chairs-CEOs structures and implications in the performance of corporate. The interest of CEO Duality emanates from the idea that CEO duality would make a difference to the performance of a firm and corporate governance . There exists controversy in the manner which the company is affected by the CEO duality. The most commonly used instruments in the implementation of corporate governance include independent directors, board size, board directors, chief executive officer, political administration, judiciary, regulatory authority and the government itself. Corporate governance also gives a specific structure via which objectives of the firm are set. Corporate governance also provides the means of accomplishing these objectives and also how to monitor the firm’s performance. Corporate success and board performance does not solely depend on the chief executive’s position or the position held by the chief. It does matter whether these two positions are held by one or two people. This Lack of adequate evidence in the scientific research in order to support the argument concerning separate or combined roles of a CEO, result in management dilemma. A theory supporting joint positions, is that integrating the positions of CEO and Chair minimizes the cost of transferring information which should take place if different persons hold the position of CEO and Chair. Since the transfer of information might be expensive, imperfect or untimely, having essential information reside in one joint CEO and Chair might enhance the individual’s ability to carry out the responsibilities of management. In the other side a theory that supporting of split CEO and Chair positions propose that the board also carry out its supervisory duty better when the Chair is a non-executive individual. The paper aims at introducing and giving a panoramic analysis of the relevant perceptions of management and corporate governance like the CEO Duality and the implications it has in the performance of corporate. Should a CEO take action simultaneously as the Corporate Board Chairman? Would the CEO Duality hamper or improve the performance of a corporate?

What drives board committee structure? Evidence from an emerging market

2019 ◽  
Vol 35 (3) ◽  
pp. 373-397 ◽  
Author(s):  
Pornsit Jiraporn ◽  
Ali Uyar ◽  
Cemil Kuzey ◽  
Merve Kilic
Keyword(s):  
Corporate Governance ◽  
Audit Quality ◽  
Emerging Market ◽  
Panel Data Analysis ◽  
Positive Association ◽  
Developed Countries ◽  
Board Structure ◽  
Ceo Duality ◽  
Content Type ◽  
Board Committees

Purpose Board committees enable boards to function effectively, as committees improve the quality of corporate governance by fulfilling specific, assigned tasks. This study aims to explore how board structure, CEO duality and audit quality are associated with board committee structure in the context of an emerging market, namely, Turkey. Design/methodology/approach The sample consisted of 122 firms listed on the Industrial Index of Borsa Istanbul for the years between 2012 and 2014, inclusive, and this yielded 366 firm-year observations. To test the hypotheses, the panel data analysis method was used, which enabled the elimination of certain problems, such as multicollinearity and estimation bias, as well as specification of the time-variant association between the predictor variables and the output variable. Findings Board size, board independence and firm size had a positive association with the number and size of board committees, whereas CEO duality had a negative association with the number and size of board committees. Moreover, the appointment of female members on audit and corporate governance committees was more frequent in firms that had a high proportion of women on their boards. Finally, audit quality was positively associated with the existence of risk committee, the overall diversity of board committees and the diversity of corporate governance committees. Research limitations/implications The study is not free from limitations. It covers the time span between 2012 and 2014; thus, readers should be cautious about generalizing these results longitudinally, as a different time periods could possibly yield different results. The second limitation concerns the fact that only industrial firms were sampled; thus, these findings may not be valid in other sectors. Practical implications The paper shifts the attention of researchers from overall board structure to board committee structure. The results of the study provide insights for policymakers, boards and shareholders. Policymakers can formulate boards and committees by considering these findings. Boards can benefit from the conclusions of this study in shaping their own structure and sub-committee structures. Current and potential shareholders may find the results of the study instructive in making investment decisions. Originality/value This study investigates the factors associated with the structure of overall and specific board committees. Additionally, while most prior research on board committees has sampled firms that are domiciled in developed countries, this study examines the subject in an emerging country context, namely Turkey. Moreover, this study adds to the literature by examining the association between audit quality and board committee structure, which has been largely neglected in prior literature.

scholarly journals The Influence of Political Connections on the Cost of Capital and the Performance of Companies Listed on B3

2018 ◽  
Vol 15 (4) ◽  
pp. 317-330 ◽  
Author(s):  
Jaison Silva ◽  
Wlamir Xavier ◽  
Cinara Gambirage ◽  
Silvio Camilo
Keyword(s):  
Cost Of Capital ◽  
Political Connections ◽  
The Cost

Corporate governance and cost of equity: empirical evidence from Latin American companies

2016 ◽  
Vol 16 (5) ◽  
pp. 831-848 ◽  
Author(s):  
Emanuele Teti ◽  
Alberto Dell’Acqua ◽  
Leonardo Etro ◽  
Francesca Resmini
Keyword(s):  
Corporate Governance ◽  
Latin American ◽  
Cost Of Capital ◽  
Negative Relationship ◽  
Developed Countries ◽  
Equity Capital ◽  
Cost Of Equity ◽  
Content Type ◽  
The Cost ◽  
The Relationship

Purpose This paper aims to investigate the extent to which corporate governance (CG) systems adopted by Latin American listed firms affect their cost of equity capital. Several studies on the link between the two aforementioned dimensions have been carried out, but none in the context of Latin American firms. Design/methodology/approach A CG index is created by taking into account the peculiarities of each country and the recommendations given by the corresponding CG institutes. In particular, to assess the level of CG quality, three sub-indexes have been identified: “Disclosure”, “Board of Directors” and “Shareholder Rights, Ownership and Control Structure”. Findings The results indicate a negative relationship between CG quality and the cost of equity. In particular, the “Disclosure” component is the one mostly affecting the cost of equity. Research limitations/implications This study contributes to the literature by adding knowledge on the relationship between CG and cost of capital considering, for the first time, the overall Latin American market. Practical implications The paper proves that institutional investors all over the world are disposed to pay a premium to invest in firms with effective CG standards; moreover, this premium is higher in emerging countries such as those analyzed in this paper, rather than in developed countries. Originality/value To the authors' knowledge, this is the first paper empirically investigating the relationship between CG and cost of capital in Latin America.

Family Ownership, Board Independence, and R&D Investment

2009 ◽  
Vol 22 (4) ◽  
pp. 347-362 ◽  
Author(s):  
Hsiang-Lan Chen ◽  
Wen-Tsung Hsu
Keyword(s):  
Corporate Governance ◽  
Investment Decisions ◽  
Family Influence ◽  
Family Ownership ◽  
Board Independence ◽  
Independent Director ◽  
Asian Countries ◽  
Ceo Duality ◽  
D Investment

Family influence is central in Asian countries; however, little research exists regarding the effects of family ownership and corporate governance on corporate investment decisions. This article examines the relationships among family ownership, board independence, and R&D investment using a sampling of Taiwanese firms. The finding of the negative family ownership—R&D investment relationship suggests that family ownership may discourage risky long-term R&D investment. Such a finding may also suggest that firms with high family ownership may use R&D investment more efficiently and thus need less R&D in relation to firms with low family ownership. In addition, the interaction of family ownership and CEO duality/independent director ratio is negatively/positively related to R&D investment, suggesting that firms with high family ownership may increase R&D investment when the CEO—chair roles are separated or when more independent outsiders are included in the board.

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