Analysis of the Role of Corporate Governance on Listed Firm’s Capital Structure: The East African Stock Markets Perspective

2019 ◽  
Vol 9 (3) ◽  
pp. 143
Author(s):  
Erick Lusekelo Mwambuli
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Stock Markets ◽  
Debt Ratio ◽  
East African ◽  
African Region ◽  
Listed Firms ◽  
Governance Practices ◽  
East African Region

This paper examine the role of corporate governance on listed firm’s capital structure decisions in developing economies, East African stock markets. To achieve the objective of this paper, we used a strongly balanced panel dataset of 320 observations (i.e. a sample of 32 non-financial listed firms in East African region from 2006-2015. Measures for capital structure decisions were short term debt ratio (STDR),long term debt ratio (LTDR) and total debt ratio (TDR) as dependent variables and explanatory (independent) variable was corporate governance practices measured by researcher-constructed index consisting of 28 corporate governance provisions ;thus the corporate governance practices index (CGPI). Furthermore, the effects of control variable such as firm size (SIZ), the level of economic development (GDP) and industry dummies were also examined. The panel corrected standard errors (PCSEs) regression model was employed for corporate governance practices and capital structure decisions to analyze the data. Our results indicate a statistically significant negative effect of corporate governance practices on capital structure decisions at 5% significance level. Our paper contributes to both literature and the practical implications, because our paper provides a first insight of the corporate governance practices and its effects on capital structure decisions for the East African regional stock markets. The paper recommends to securities markets regulatory authorities in East African region such as East African member states securities regulatory authority (EASRA) and their respective countries securities markets regulatory authorities to stimulates new efforts towards better corporate governance practices to listed firms in the regional bloc due to its statistically significant effects on capital structure decisions and future study can be extended after considering external corporate governance mechanisms.

scholarly journals How Does Board Structure Characteristics Affect Capital Structure Decisions? Evidence from East African Stock Markets

2018 ◽  
Vol 2 (1) ◽  
pp. 1
Author(s):  
Erick Lusekelo Mwambuli
Keyword(s):  
Capital Structure ◽  
Stock Markets ◽  
Securities Markets ◽  
Board Structure ◽  
Debt Ratio ◽  
East African ◽  
African Region ◽  
Listed Firms ◽  
Structure Characteristics ◽  
East African Region

This research examines the board structure characteristics and its effects on capital structure decisions in developing economies, East African stock markets. To achieve the objective of this research, we used a strongly balanced panel dataset of 320 observations (i.e. a sample of 32 non-financial listed firms in East African region from 2006-2015. Measures for capital structure decisions were short term debt ratio (STDR),long term debt ratio (LTDR) and total debt ratio (TDR) as dependent variables and explanatory (independent) variable was board structure characteristics measured by researcher-constructed index consisting of 10 board structure characteristics provisions; thus the board structure characteristics index (BSCI), furthermore, the effects of control variable such as firm size (SIZ),the level of economic development (GDP) and industry dummies were also examined. The panel corrected standard errors (PCSEs) regression model was employed for board structure characteristics and capital structure decisions to analyze the data. Our results indicate a statistically significant negative effect of board structure characteristics on capital structure decisions (except on short term debt where it’s insignificant) all models at 5% significance level. Our study is very innovative in both corporate finance and accounting literature and the practical implications because our study provides a first insight of the board structure characteristics and its effects on capital structure decisions for East African stock markets context. The study recommends to securities markets regulatory authorities in East African region such as East African member states securities regulatory authority (EASRA) and their respective countries securities markets regulatory authorities to stimulates new efforts towards better board structure provisions to listed firms in the regional bloc due to its statistically significant effects on financing behavior and future research can be extended after inclusion of both listed and unlisted firms.

scholarly journals Does Corporate Capital Structure influence Corporate Financial Performance in Developing Economies? Evidence from East African Stock Markets

2016 ◽  
Vol 3 (1) ◽  
pp. 97 ◽  
Author(s):  
Erick Lusekelo Mwambuli
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Significant Influence ◽  
Stock Markets ◽  
Developing Economies ◽  
Corporate Financial Performance ◽  
Internal Source ◽  
Debt Ratio ◽  
East African ◽  
Listed Firms

This paper examines the statistically significant influence which capital structure has had on corporate financial performance of listed non-financial companies in East African stock markets. It used panel data of 272 observations including 34 East African non-financial listed firms listed in East African stock markets such as Dar Es Salaam Stock Market (DSE), Nairobi Securities Exchange (NSE) and Uganda Securities Exchange (USE) for a period of 8 years {i.e. 2006-2013}.Using the Panel Corrected Standard Errors (PCSEs) and Fixed Effect (FE),the study formulated two (2) econometric models with return on assets (ROA) and return on equity (ROE) as dependent variables and measures of corporate financial performance respectively, three (3) independent variables such as short term debt ratio (STDR),long term debt ratio (LTDR) and total debt ratio (TDR) as a measure of capital structure, furthermore the study used size of the firm (SIZ) as a control variable in order to control the differences in firm’s operating environment. The result indicate that capital structure has a negative and statistically significant influence on East African listed firm’s financial performance at 5% significance level. These results show that in average profitable listed firms in East African prefers to use internal source of financing in their capital structure as compared to external source of financing {like Debts-STDR,LTDR and TDR} and this results are supporting pecking order theory. Lastly the study recommends to corporate financial managers of East African non-financial listed firms should reduce financing their operations and growth by debt (STDR,LTDR and TDR) on their capital structure in order to enhance their corporate financial performance, regulatory authorities in East African region such as East African member states securities regulatory authority (EASRA) to formulate policies that will improving of financial markets in the region in order to reduce the cost of debt, further research could examine the influence {if any} of capital structure on sector wise (as per industry-like Manufacturing firms) for East African non-financial listed firms, take into account more control variables which are likely to influence financial performance such as macroeconomic variables (like gross domestic product - GDP) and consider other capital structure theories like ,market timing theory, agency theory which were not considered in our study.

scholarly journals The relationship between Malaysian public-listed firms’ corporate governance and their capital structure

2019 ◽  
Vol 16 (3) ◽  
pp. 98-112
Author(s):  
Fahed Abdullah Abdlazez ◽  
Alhashmi Aboubaker Lasyoud ◽  
Abdlmutaleb Boshanna
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Annual Reports ◽  
Debt Ratio ◽  
Short Term ◽  
Listed Firms ◽  
Governance Practices ◽  
Equity Ratio ◽  
The Relationship

The purpose of this paper is to investigate the relationship between corporate governance practices and capital structure of public-listed companies in Malaysia. Using the annual reports of 273 Malaysian public-listed firms on the Bursa Malaysia between 2008 and 2012, hierarchical multiple regression analysis was conducted. Corporate governance was measured by variables including board size, CEO duality, ownership structure, and board meeting. Capital structure was measured through four variables: debt-to-equity ratio, long-term debts, short-term debts, and debt ratio. The findings indicated that corporate governance practices have a positive influence on the debt-equity ratio, long-term debt, short-term debt and a debt ratio of capital structure. However, corporate governance practices’ influence on the debt ratio is found statistically insignificant. The findings also indicate that firm size moderates the relationship between corporate governance variables and capital structure. Empirically, these findings are useful for measuring and understanding financing decisions taken by the Malaysian public listed firms. It also offers insights to policymakers interested in enhancing the role of corporate governance in formulating management strategies.

scholarly journals Corporate Governance Practices and Firm’s Capital Structure Decisions: An Empirical Evidence of An Emerging Economy

2017 ◽  
Vol 6 (4) ◽  
pp. 115
Author(s):  
Hassan M. Hafez
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Emerging Economies ◽  
Descriptive Statistics ◽  
Systematic Research ◽  
Hausman Test ◽  
Listed Firms ◽  
Growing Body ◽  
Governance Practices ◽  
Main Driver

There is a growing body of literature that recognises the importance of corporate governance practices on capital structure decisions. However, results are not consistent and only a few studies have been able to draw on any systematic research trying to quantify the relation between corporate governance practices and capital structure decisions and to acquire bits of knowledge of such relation of listed firms in Emerging Economies. Because of the fact that impact use of the corporate governance rules can have on capital structure decisions.The main driver of this research is to investigate the sound use of the Egyptian corporate governance practices on capital structure decisions of listed firms in Egypt over the period 2007 to 2016 utilizing a sample of 50 listed firms in EGX 100. Empirical results demonstrate the significant relationship between various inner and outer corporate governance practices and capital structure decisions of listed firms in Egypt. The findings were quantitatively approved through utilizing E-Views programming for examining panel data. Descriptive statistics, Multi-Collinearity test, Hausman test and multiple regression have been utilized to distinguish the major determinates of capital structure decisions and assess whether it has a significant impact on capital structure decisions. 

scholarly journals Determinants of Capital Structure within the Context of Corporate Governance in Egypt

2018 ◽  
Vol 13 (8) ◽  
pp. 26 ◽  
Author(s):  
Hanaa A. El-Habashy
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Emerging Economy ◽  
Managerial Ownership ◽  
Listed Firms ◽  
Western Countries ◽  
Specific Factors ◽  
The Impact ◽  
The Capital Structure

This study aims to investigate the characteristics of corporate governance that impact the capital structure decisions in listed firms in Egypt, to test the efficiency of the research results conducted in the developed Western countries in an emerging economy. A sample of 240 observations from the most active non-financial companies collected in the period 2009-2014 was used for hypothesis testing. Multiple regression models (OLS) were used for data analysis. Seven variables are used in measuring the attributes of corporate governance; they are the managerial ownership, institutional shareholding, shares owned by a large block, board size, board composition, separation of CEO/Chair positions and audit type. Four ratios were calculated for measuring the capital structure, they are long-term and short-term debt to assets, total debt to assets and debt to equity. The results suggest that corporate governance attributes have a significant impact on the capital structure decisions of listed Egyptian companies. In addition, firm-specific factors such as profitability, tangibility, growth opportunities, corporate tax, firm size and non-debt tax shields influence the choice of capital structure in Egypt. The results showed the same relationship with what was obtained in developed Western countries. The paper offers some contribution in the literature and helps to understand the impact of corporate governance on Egypt's capital structure as an emerging economy.

Determinants of voluntary formation of risk management committees

2014 ◽  
Vol 29 (7) ◽  
pp. 649-671 ◽  
Author(s):  
Nkoko Blessy Sekome ◽  
Tesfaye Taddesse Lemma
Keyword(s):  
South Africa ◽  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Emerging Economy ◽  
Board Structure ◽  
Content Type ◽  
Listed Firms ◽  
Practical Implications

Purpose – The aim of this paper is to examine the nexus between firm-specific attributes and a company’s decision to setup a separate risk management committee (RMC) as a sub-committee of the board within the context of an emerging economy, South Africa. Design/methodology/approach – The authors analyse data extracted from audited annual financial reports of 181 non-financial firms listed on the Johannesburg Securities Exchange (JSE) by using logistic regression technique. Findings – The results show a strong positive relationship between the existence of a separate RMC and board independence, board size, firm size and industry type. However, the authors fail to find support for the hypotheses that independent board chairman, auditor reputation, reporting risk and financial leverage have an influence on a firm’s decision to establish RMC as a separately standing committee in the board structure. The findings signify the role of costs associated with information asymmetry, agency, upkeep of a standalone RMC, damage to the reputation of directors and industry-specific idiosyncrasies on a firm’s decision to form a separate RMC. Research limitations/implications – As in most empirical studies, this study focuses on listed firms. Nonetheless, future studies that focus on non-listed firms could add additional insights to the literature. Investigating the role of firm-specific governance attributes other than those considered in the present study (e.g. gender of directors, ownership structure, etc.) could further enhance the understanding of antecedents of risk-management practices. Practical implications – The findings have practical implications for the investment community in assessing the quality of risk management practices of companies listed on the JSE. Furthermore, the results provide insights that are potentially useful to the King Committee and other corporate governance regulators in South Africa in their effort to improve corporate governance practices. Originality/value – The present study focuses on firms drawn from an emerging economy which has profound economic, institutional, political and cultural differences compared to advanced economies, which have received a disproportionately higher share of attention in prior studies. Thus, the study contributes additional insights to the literature on corporate risk management from the perspective of an emerging economy.

scholarly journals Performance, corporate governance and new regulation

2017 ◽  
Vol 9 (18) ◽  
Author(s):  
Heriberto García
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Financial Market ◽  
Information Disclosure ◽  
Potential Growth ◽  
Listed Firms ◽  
Risk Return ◽  
Corporate Governance Code ◽  
Governance Practices ◽  
The Relationship

Abstract. After the adoption of the Corporate Governance Code (Code) in Mexico, many companies increased financial performance and the leveraged during the following five years; we investigated the effect of how those firms improved the corporate governance practices and how was translated into better risk return company. We analyzed how and where better corporate governance practices affects performance and what was the relationship with Transparency, New Regulation and Governance Practices. Also we explored the gaps between transparency and information disclosure of Mexican Firms listed in U.S stockexchange and non U.S listed firms our findings were related to the potential growth of the Mexico Financial Market, Law and Finance.Keywords: corporate governance, financial performance, regulationResumen. Después de la adopción del Código de Gobierno Corporativo en México, algunas compañías incrementaron el desempeño financiero y el uso de deuda durante los siguientes cinco anos, nuestra investigación se enfoca en como dichas compañías mejoraron sus prácticas de gobierno corporativo y como estas prácticas se han traducido en un mejor relación de riesgo y rendimiento. En esta investigación exploramos cómo y en dónde mejores prácticas de gobierno corporativo afectan el desempeño y qué relación tiene con laTransparencia, Nuevas Regulaciones y prácticas de Gobierno Corporativo. Con lo anterior también identificamos aquellas compañías que cotizan fuera de México para identificar potenciales diferencias en dichas prácticas.Palabras clave: desempeño financiero, gobierno corporativo, regulación

scholarly journals Corporate Governance And Voluntary Disclosure In France

2013 ◽  
Vol 29 (2) ◽  
pp. 561 ◽  
Author(s):  
Carlos P. Barros ◽  
Sabri Boubaker ◽  
Amal Hamrouni
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Audit Committee ◽  
Audit Quality ◽  
Annual Reports ◽  
Managerial Ownership ◽  
Board Meeting ◽  
External Audit ◽  
Listed Firms ◽  
Governance Practices

This paper investigates the effect of corporate governance practices on the extent of voluntary disclosure in France. Using a panel of 206 non-financial French listed firms during the period 20062009, we find evidence that voluntary disclosure in annual reports increases with managerial ownership, board and audit committee independence, board meeting frequency, and external audit quality. We also find that frequency of audit committee meetings and diligence of board and auditing are associated with decreased disclosure. Additional findings show that larger, more profitable, and less indebted firms have greater voluntary disclosure.

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