scholarly journals Effect of Ownership Structure on Corporate Diversification of Listed Firms in Kenya

2019 ◽  
Vol 2 (5) ◽  
pp. 29-46
Author(s):  
Peninah Jepkogei Tanui ◽  
Josephat Cheboi Yegon ◽  
Ronald Bonuke
Keyword(s):  
Capital Structure ◽  
Institutional Ownership ◽  
Target Population ◽  
Foreign Ownership ◽  
Moderating Effect ◽  
Corporate Diversification ◽  
Listed Firms ◽  
Low Levels ◽  
The Relationship

Purpose - This paper aimed to examine the moderating role of capital structure in the relationship between institutional and foreign ownerships on corporate diversification of listed firms at the Nairobi Securities Exchange, Kenya. Design/Methodology - The target population comprised of all the 65 listed firms at Nairobi Securities Exchange in Kenya. However, the inclusion criteria were based on all firms listed at the NSE from 2003 to 2017. Findings - Capital structure significantly moderated the relationship between institutional ownership and corporate diversification. However, there was a statistically insignificant moderating effect of capital structure in the relationship between foreign ownership and corporate diversification. Practical Implications - As to increase diversification, listed firms are suggested to have low levels of capital structure and institutional ownership. Furthermore, low levels of foreign ownership and high capital structure is vital in attaining high diversification levels. Originality - The study contribution is the moderating effect of capital structure in institutional ownership - corporate diversification linkage.

scholarly journals Capital structure, capital investment and profitability among Malaysian listed firms

2018 ◽  
Vol 7 (4.9) ◽  
pp. 14
Author(s):  
Yamunah Vaicondam ◽  
Ramakrishnan Ramakrishnan
Keyword(s):  
Capital Structure ◽  
Capital Investment ◽  
Moderating Effect ◽  
The Other ◽  
Capital Investments ◽  
Significant Positive Effect ◽  
Listed Firms ◽  
Empire Building ◽  
The Relationship ◽  
Positive Effect

Capital investments are referred as a critical managerial decision on firm's fixed asset for generating profitability. However, the empirical finding shows that not every capital investment has a significant positive effect on profitability. Literature indicates mixed results of examining the capital investment relationship with firm's profitability, which vary in respects to the debt structure. On the other hand, strong government reinforcement has pushed Malaysia up as one of the top ten countries with robust private capital investment in the year 2004. Since the capital investments are typically irreversible and hypothesized as profit generator, the first aim of this study is to examine the effect of the capital investment on the firm's profitability across firms and sectors. The second aim is to examine the moderating effect of capital structure on the relationship between capital investment and profitability across firms and sectors. This study utilized pooled ordinary least squares and fixed effect analysis across 708 non-financial Malaysian listed firms. The unbalanced datasets for the period 2001 to 2015 were employed to check the robustness of these results. This study suggested that capital investment has a strong significant positive effect on profitability measurements across Malaysian listed firms in non-financial sectors. On the other hand, the significant negative moderating effect of capital structure on the relationship between capital investment and return on capital across Malaysian listed firms reflected the perspective of empire building theory. In addition, the independent sample test engaged across sectors affirmed that moderating effect of capital structure are different across sectors. Thus, this study concluded the existence of moderating effect of capital structure on the relationship between capital investment and profitability. This study addressed the knowledge gap on the moderating effect of capital structure based on empire building theory.  

scholarly journals Capital structure, corporate performance, and life cycle: Evidence from Indonesia

2017 ◽  
Vol 14 (4) ◽  
pp. 449-461
Author(s):  
Eko Suyono ◽  
Subba Reddy Yarram ◽  
Riswan Riswan
Keyword(s):  
Regression Analysis ◽  
Life Cycle ◽  
Interest Rate ◽  
Capital Structure ◽  
Institutional Ownership ◽  
Managerial Ownership ◽  
Company Performance ◽  
The Relationship ◽  
Moderating Role

This study aims to investigate firstly, the influences of company life cycle (i.e., pioneer, growth, mature, and decline) and set of control variables (i.e, tax level, interest rate, institutional ownership, and managerial ownership) on capital structure; secondly, the influence of capital structure on company performance; and thirdly, the moderating role of each stage of the company life cycle on the relationship between capital structure and company performance. Implementing quantitative approach by using OLS Regression Analysis and Moderated Regression Analysis (MRA) on a set of the sample that consists of 157 Indonesian non-financial listed firms for 2010-2015 periods (942 firm years), findings show that company life cycle has a significant influence on capital structure. While for control variables, tax level and institutional ownership have a positive influence on the capital structure, wherein interest rate and managerial ownership have a negative effect on capital structure. Moreover, capital structure ratio influences positively on company performance. Finding also documents that pioneer and growth stages have a moderating role in strengthening the influence of capital structure on company performance, while mature and decline stages have a moderating role in weakening the influence of capital structure on company performance. This study provides important implications for corporations and business practitioners with regard to the best choice in the composition of capital structure which is able to improve company performance. On the best of our knowledge, it is the first study testing the moderating role of company life cycle on the relationship between capital structure and company performance.

scholarly journals Board Directors’ Expertise and Corporate Corruption Disclosure: The Moderating Role of Political Connections

2019 ◽  
Vol 11 (16) ◽  
pp. 4491 ◽  
Author(s):  
Masud ◽  
Bae ◽  
Manzanares ◽  
Kim
Keyword(s):  
Resource Dependence ◽  
Moderating Effect ◽  
Political Connections ◽  
Corporate Management ◽  
Positive Role ◽  
Listed Firms ◽  
Board Directors ◽  
Using Data ◽  
The Relationship

Professional expert directors extensively influence corporate corruption disclosure (CCD), while higher political connections may exacerbate corporate management. This study investigates the relationship between the presence of external experts on a board and CCD, as well as the moderating effect of political connections, on the positive role of legal experts in CCD. The study combines agency, resource dependence and stakeholder theories to show how resourceful directors on the board can promote corruption disclosure. Using data on listed firms in the Bangladeshi financial sector, the study analyzes 247 firm-year observations from 2012 to 2016. The results of a multiple regression analysis indicate that accounting experts, legal experts, political connections and corporate media visibility each have a positive and significant influence on CCD. Moreover, the moderating effect of political connections on the relationship between legal experts and CCD is negative and significant due to their higher political influences. The study has significant implications for corporate governance and for policies concerning the development of the economy while reducing corruption.

Impact of corporate governance on capital structure: mediating role of cost of capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aisha Javaid ◽  
Mian Sajid Nazir ◽  
Kaneez Fatima
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Managerial Ownership ◽  
Content Type ◽  
Mediating Role ◽  
The Relationship

PurposeThis paper contributes to the existing literature by extending the empirical work on the relationship between corporate governance and capital structure by analyzing the mediating role of cost of capital in the non-financial firms listed on the Pakistan Stock Exchange (PSX).Design/methodology/approachThe sample for this study includes non-financial firms listed on the Pakistan Stock Exchange (formerly Karachi Stock Exchange) for the period of 2004–2016. Based on 1800 firm-year observations, three approaches of panel data analysis are applied for the step-wise analysis of the underlying study. Firstly, Pooled OLS is applied. Secondly, fixed and random effect panel regression followed by the Hausman test to check the unobservable individual heterogeneity of the data. Hausman test indicates that the fixed-effects model is the most appropriate model for the sample panel data.FindingsThe study's findings are that board size, board composition, CEO/Chair duality, institutional ownership and managerial ownership have statistically significant direct effect on the firm's financing decisions. However, CEO/Chair duality, institutional ownership and managerial ownership have significant indirect effect on firm's capital structure decisions. The interesting finding of the paper is on the evidence of mediating role of cost of capital in the nexus of corporate governance and capital structure. Moreover, some conventional determinants of capital structure, including the firm's size, asset structure of the firm, profitability, business risk and growth, are found as determinants of capital structure decisions of the firms.Research limitations/implicationsThere are a few limitations to our study which could be addressed by upcoming research. We did not include all the four mechanisms of corporate governance including board structure, audit structure, compensation structure and ownership structure. However, we used only five important attributes including board size, board composition and CEO/Chair duality form board structure, managerial ownership and institutional ownership form ownership structure of corporate governance as our explanatory variables to examine their impact on the capital structure choices of the firms. Future studies may fill this research gap by involving some other attributes of corporate governance and analyzing their effectiveness and impact on value relevant capital structure decisions. Further, due to limited time and resources, we only tested the mediating role of cost of capital, hence, future researchers can analyze the mediating and moderating roles of different variables which may influence the relationship between corporate governance and capital structure choices of the firms.Practical implicationsThe study has many valuable guidelines and practical implications for the financial managers of the corporations. Our results will facilitate the policymakers in setting their corporate governance policies and practices and making the value relevant capital structure decisions in compliance with the implications of corporate governance mechanism. In addition, our study provides the empirical evidence in accordance with the argument that good governance practices, particularly the voluntary disclosures by the firm may reduce the information asymmetry which, ultimately, reduces the agency cost and the cost of capital for the firm. However, while deciding the financial policy of the corporations, managers can use our findings in order to assess the effectiveness of corporate governance practices employed by the firm in achieving the optimal capital structure at which the weighted average cost of capital is at its minimum level.Originality/valueThis paper contributes to the literature by investigating the mediating role of the cost of capital in the relationship between corporate governance and capital structure decisions of the firms. This paper provides empirical evidence that corporate governance indirectly affects capital structure decisions through the mediating role of cost of capital.

scholarly journals Strategic Planning and Performance of Nigerian SMEs: The Moderating Role of Entrepreneurial Characteristics

2018 ◽  
Vol 9 (6) ◽  
pp. 98-108
Author(s):  
Makinde Olubisi G. ◽  
Asikhia Olalekan U.
Keyword(s):  
Strategic Planning ◽  
Target Population ◽  
Moderating Effect ◽  
Policy Implications ◽  
Hierarchical Regression ◽  
Business Policy ◽  
Entrepreneurial Characteristics ◽  
And Performance ◽  
The Relationship

Studies that considered the moderating effect of entrepreneurial characteristics on the relationship between strategic planning and performance of SMEs are few. This research is aimed at investigating the relationship between strategic planning and SME performance while also considering the moderating effect of entrepreneurial characteristics on the relationship between these two variables. The study employed the use of survey research design using the owners/managers of 4,535 SMEs registered with SMEDAN as the target population.  Correlation analysis was used to establish the extent of the relationship between strategic planning and performance of SMEs while hierarchical regression analysis was used to establish the moderating effect of entrepreneur characteristics on the relationship. Findings showed that there exist a statistically significant positive relationship between strategic planning and performance of SMEs in Lagos State, the study also indicated that entrepreneurial characteristics significantly moderates the relationship between strategic planning and performance of SMEs. The study concluded that entrepreneurial characteristics being exhibited influenced the performance of the business. Policy implications and recommendations were made. 

scholarly journals The impact of board independence and foreign ownership on financial and social performance of firms: evidence from the UAE

2020 ◽  
Vol 21 (2) ◽  
pp. 201-229 ◽  
Author(s):  
Bakr Al-Gamrh ◽  
Redhwan Al-Dhamari ◽  
Akanksha Jalan ◽  
Asghar Afshar Jahanshahi
Keyword(s):  
Social Performance ◽  
Negative Relationship ◽  
Foreign Ownership ◽  
Board Independence ◽  
Foreign Investors ◽  
Content Type ◽  
Listed Firms ◽  
The Impact ◽  
The Relationship

PurposeThis study examines the impact of two different types of foreign ownership—by Arab and non-Arab investors on firms' financial and social performance. It then goes on to investigate how the degree of board independence affects the aforementioned relationship between these two types of foreign investors on firm performance.Design/methodology/approachThe sample for the study is a panel of all listed firms in the Dubai Financial Market (DFM) and the Abu Dhabi Securities exchange (ADX) from 2008 to 2012.FindingsResults indicate that while Arab foreign ownership affects firms' financial and social performance negatively, non-Arab foreign ownership does so, positively. Further tests indicate that board independence weakens the negative relationship between firm financial and social performance with foreign Arab ownership and deteriorate the relationship between firm financial and social performance and non-Arab foreign ownership.Research limitations/implicationsFuture studies may extend the coverage of the study by including other countries in the region and other identities of the foreign investors.Practical implicationsThis study may help policy makers in the UAE to improve the implementation and enforcement of existing regulations concerning corporate social responsibility (CSR) and board independence. It also highlights the need to look into the monitoring role of independent board members.Originality/valueThis is the first study to examine the role of board independence on the relationship between foreign ownership and firm's financial and social performance. To the best of our knowledge, this is the first paper that attempts to enrich the understanding of foreign ownership by classifying it into Arab versus non-Arab.

Ownership structure and R&D investment: the role of identity and contestability in Spanish listed firms

2020 ◽  
Vol 33 (3/4) ◽  
pp. 405-426
Author(s):  
Laura García-García ◽  
Macarena Gonzalo Alonso-Buenaposada ◽  
M. Elena Romero-Merino ◽  
Marcos Santamaria-Mariscal
Keyword(s):  
Ownership Structure ◽  
Family Firms ◽  
Institutional Investor ◽  
Content Type ◽  
Controlling Shareholders ◽  
Listed Firms ◽  
Low Levels ◽  
The Relationship ◽  
D Investment

PurposeThe purpose of this paper is to analyze the relationship between the ownership structure and the investment in research and development (R&D) for a sample of listed Spanish companies.Design/methodology/approachFollowing the agency theory and the socioemotional wealth (SEW) perspective, the authors propose that R&D investment is affected by ownership structure, specifically by the identity of the controlling owner (family firms and firms with an institutional investor) and the level of contestability by other shareholders. In order to test these hypotheses, the authors build an original database identifying, at a 10% threshold, the ultimate shareholders of a sample of 96 Spanish firms listed during 2008–2018 (1,002 obs).FindingsThe results show that there is no significant relationship between the ownership concentration and the R&D investment. Only when the authors consider the nature of the main shareholder, the authors find that in family firms there is an inverted U relationship between ownership and R&D, so that at low levels of ownership, the R&D increases, while at high levels of ownership (that we compute around 54%) the R&D decreases. Also, when the main shareholder is an institutional investor, the greater its ownership, the higher the R&D investment. Finally, the authors test that, contrary to what mainstream suggests, contestability in family firms is higher when ownership in the hands of other family shareholders increases.Originality/valueThe work uses an original database to test a nonlinear relationship between ownership and R&D investment in family firms. Also, the study addresses a topic hardly ever discussed in the literature about R&D as it is the role of the contestability by other controlling shareholders.

scholarly journals DOES SIZE OF THE FIRM MATTER IN THE RELATIONSHIP BETWEEN FOREIGN OWNERSHIP AND DIVIDEND POLICY?

2020 ◽  
Vol 24 ◽  
Author(s):  
Adamu ‪Idris Adamu ◽  
Oyindamola Ekundayo ◽  
Hussaini Bala
Keyword(s):  
Dividend Policy ◽  
Foreign Ownership ◽  
Great Tendency ◽  
Cash Dividend ◽  
Data Set ◽  
Listed Firms ◽  
Propensity To Pay ◽  
The Relationship ◽  
Moderating Role

Prior studies have revealed that foreign shareholders have a greater influence on dividend policy. However, it is unclear how foreign owners in large firms affect the propensity to pay dividends. This paper is aimed at exploring the relationship between the propensity to pay dividends and foreign ownership. It also examined the moderating role of firm size on the relationship between the decision to pay cash dividend and foreign ownership. The study uses pooled logistic regression on a data set of non-financial listed firms on the Nigerian Stock Market from 2011 to 2015. The results showed that foreign ownership has a great tendency to influence the propensity of a firm to pay a cash dividend. The effect is more pronounced in larger firms, thus, indicating that in larger firms, foreign owners mitigate agency problems using dividends. Based on the findings, firms should be encouraged to pay a dividend to attract foreign investors and in return will help the firms to acquire the expertise of foreign owners.  

scholarly journals Ownership Structure and Financial Performance of Listed Firms in Kenya: Mediation Role of Corporate Diversification

2021 ◽  
Vol 2 (2) ◽  
pp. 16-34
Author(s):  
Dr. Peninah Jepkogei Tanui ◽  
Harrison Katana ◽  
Geoffrey Alosi ◽  
Lynda Khahenda ◽  
Vincensia Emmanuel Adhiambo
Keyword(s):  
Regression Analysis ◽  
Financial Performance ◽  
Ownership Structure ◽  
Foreign Ownership ◽  
P Value ◽  
Corporate Diversification ◽  
Panel Regression ◽  
Mediation Effects ◽  
Listed Firms

Purpose: The study aimed at examining the mediating role of corporate diversification between ownership structure and financial performance of listed firms in Kenya. Methodology/Approach/Design: As guided by explanatory research design, 65 listed firms from 2003 to 2017 were targeted. However, panel data of 35 firms were considered after excluding suspended and delisted as far as the study period is concerned. Results: The panel regression analysis finding indicated that corporate diversification positively and significantly mediated between institutional ownership and financial performance (β = .005, p-value = .000). Furthermore, there was a negative but statistically significant mediation effect of corporate diversification between foreign ownership and financial performance (β = -.0019, p-value = .023). These mediation effects existed despite the direct effect between institutional and as well foreign ownership and financial performance being statistically insignificant. Practical Implications: The study, therefore, suggested to the management of listed firms to ensure proper implementation of corporate diversification as it transmits the effect of ownership structure on financial performance. More importantly, policymakers are suggested to streamline taxation of foreign investors, tackle malpractices in the firm leading to embezzlement of investor funds. Future studies need to enlarge the scope to incorporate unlisted firms as well as firms listed in different stock exchanges in East Africa. Other types of ownership structure as managerial, family and state need to be analyzed. In addition, other forms and measures of corporate diversification could be investigated by future researchers. Originality/Value: To attain the main objective, the study used panel regression analysis and path diagrams to examine the effect of ownership structure on financial performance via corporate diversification.

scholarly journals Corporate Diversification and Financial Performance of Listed Firms in Kenya: Does Firm Size Matter?

2021 ◽  
Vol 2 (2) ◽  
pp. 65-77
Author(s):  
Peninah Jepkogei Tanui ◽  
Bramwel Murgor Serebemuom
Keyword(s):  
Financial Performance ◽  
Firm Size ◽  
Moderating Effect ◽  
P Value ◽  
Corporate Diversification ◽  
Moderation Effect ◽  
Listed Firms ◽  
Diversification Strategies ◽  
Size Matter ◽  
The Relationship

Purpose: The study tested the hypothesis about the relationship between corporate diversification and financial performance. Moreover, moderating effect of firm size on the relationship between corporate diversification and financial performance of listed firms at Nairobi securities exchange (NSE) in Kenya was tested. Methodology/Approach/Design: The study was informed by market power and resource-based view (RBV) theories. To test the hypotheses, secondary panel data were collected from 35 listed firms at NSE from 2003 to 2017. Results: From panel regression analysis output, there was a significant positive (β = 2.225, p value = .000 < .05) relationship between corporate diversification and financial performance. Furthermore, firm size had a negative and significant (β = -.155, p value = .031<.05) moderating effect in the relationship between corporate diversification and financial performance. Practical Implications: The study thus concluded that firm size had a buffering effect in the link between corporate diversification and the financial performance of listed firms in Kenya. The findings of the study could be relevant to policymakers in drafting policies that affect diversification strategies of firms. For further research, the study recommended an increase of scope, other measurement approaches, analysis of corporate diversification from different perspectives other than product, and controlling for board characteristics. Originality/Value: The study while controlling the age of the firm tested the moderation effect of firm size in the relationship between corporate diversification and financial performance.

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