scholarly journals Determining Agency Theory Framework through Financial Leverage & Insider Ownership: Evidence from Pakistan

2017 ◽  
Vol 9 (3) ◽  
pp. 21 ◽  
Author(s):  
Hafiz Mustansar Javaid ◽  
Snober Javid
Keyword(s):  
Agency Theory ◽  
Stock Exchange ◽  
Cost Minimization ◽  
Agency Cost ◽  
Public Image ◽  
Insider Ownership ◽  
Financial Firms ◽  
Long Term Performance ◽  
Term Performance

Sound practices of corporate governance help firms to lift their performance and bring in investors’ confidence while enabling shareholders’ rights protection, qualifying the legal requirements and spotlight the vast public image about how they are operating their business. Most of the previous literature on agency theory in Pakistan has demonstrated connection among ownership structure on firm performance, value and profitability. This study extends the literature by proposing the effect of change in leverage & insider equity ownership on agency cost mitigation. Proxy is used to measure agency cost: Expense ratio: Operating expense / annual sales. We applied “Fixed effect” method on sample of 41 non-financial firms from four economic groups listed in Pakistan Stock Exchange from the period of 2010-2014. The practical implications of the study is that those investors who desire long term performance of the firm may perhaps invested in those firms which are owned by insiders or containing acceptable amount of debt, for the reason that such firms try to maintain & continue long term performance by agency cost minimization & shareholders’ interests protections.

Robust Statistical Analysis of Long-Term Performance For Sharia-Compliant Companies in Malaysia Stock Exchange

2017 ◽  
Vol 3 (3) ◽  
pp. 49-66
Author(s):  
Nashirah Abu Bakar ◽  
Sofian Rosbi
Keyword(s):  
Stock Exchange ◽  
Share Price ◽  
Rate Of Return ◽  
Economic Sectors ◽  
Normality Test ◽  
Challenging Situation ◽  
The Right ◽  
Long Term Performance ◽  
Term Performance

In the year of 2016, Malaysia faced with the challenge in instability of economic condition. This situation weakens Malaysian currency that gives direct impact to all economic sectors in Malaysia. Consequently, this situation gives significant impact on the performance of the sharia-compliant companies listed on the Malaysia Stock Exchange. Therefore, this research validates the long-term performance of share price using market adjusted buy and hold return (MABHR). Then, this study performed normality test to check the distribution of data for return and volatility. Next, correlation analysis performed to validate the relationship between return and volatility. The results show that the Solid Automotive Berhad gives the highest rate of return with respect to the market. While UMW Oil & Gas Corporation Berhad shows the lowest rate of return with respect to the market. The finding of this research helps economists to understand the market trend in empirical thinking. In addition, it also helps the investors to understand the market and make the right decision in investing during this challenging situation.

IPO underpricing and long-term performance in China: the perspective of price limit policy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yuxin Wang ◽  
Guanying Wang
Keyword(s):  
Initial Public Offering ◽  
Stock Exchange ◽  
Ipo Underpricing ◽  
Content Type ◽  
Price Limit ◽  
Good Policy ◽  
Public Offering ◽  
Long Term Performance ◽  
Term Performance

PurposeThe purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.Design/methodology/approachThe data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.FindingsThe first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.Practical implicationsGood policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.Originality/valueThis paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

scholarly journals The effect of decision time horizon on short termism: An experimental approach

2021 ◽  
Vol 10 (4, special issue) ◽  
pp. 293-301
Author(s):  
Abdallah Bader Mahmoud Alzoubi ◽  
Gavin Nicholson ◽  
Mohammad Bader Mahmoud Alzoubi
Keyword(s):  
Decision Making ◽  
Agency Theory ◽  
Experimental Approach ◽  
Investment Decision ◽  
Investment Decisions ◽  
Decision Time ◽  
Long Term Performance ◽  
Term Performance ◽  
Short Termism

Short-termism (i.e., the sub-optimal favouring of short-term performance over long-term performance) is generally explained as an outcome of the agency relationship whereby self-interested managers and/or stock market pressures distort the balance between short and long-term performance. We investigate if short termism (Crilly, 2017; Reilly, Souder, & Ranucci, 2016) is due to cognitive bias (temporal distortion) rather than agency costs. We test these hypotheses with an experimental approach by applying a 3x2 factorial design to manipulate temporal distortion on 60 non-conflicted decision-makers. Results suggest that individuals make inconsistent investment decisions based on differing payout time horizons. Participants faced with simple comparisons between investment opportunities were consistent across different time periods and followed a model of rational decision-making. In contrast, more complex decisions led to intertemporal inconsistency. We provide evidence that: 1) individuals on the whole struggle to deal with incorporating time into business decisions in a consistent way causing us to question the link between short-termism and agency theory; 2) principals likely view investment decisions inconsistently across time and so are a cause of sub-optimal investment decision-making and 3) we need to look beyond studies of moral hazard associated with agency theory and/or myopic market pricing when investigating short-termism.

Nexus Between Discount Rate and Industrial Performance

2021 ◽  
pp. 097215092110287
Author(s):  
Ajab Khan
Keyword(s):  
Discount Rate ◽  
Capital Market ◽  
Stock Exchange ◽  
Oil Industry ◽  
Long Run ◽  
Short Run ◽  
Industrial Performance ◽  
Long Term Performance ◽  
Term Performance

This study investigates the short-run responses and long-run performances of seven industries’ stock indices with discount rate changes in the firms listed in the Pakistan Stock Exchange (PSE) between 2009 and 2018. The results indicate that short-run returns react positively to discount rate reduction, excluding the oil industry and vice versa. Therefore, long-term performance responds favourably with a reduction in the discount rate. Discount rate changes affect the apparel industry the most, while the oil industry is the least on the list. This study serves potential investors for their returns against investment among these industries. Furthermore, it works as a guideline for regulators and policymakers to manage fluctuations for a stable capital market.

scholarly journals Optimisme Investor dan Kinerja Jangka Panjang Saham Pasca Initial Public Offerings yang Listing Di Bursa Efek Indonesia

2020 ◽  
Vol 4 (1) ◽  
pp. 43-54
Author(s):  
Mu’minatus Sholichah
Keyword(s):  
Initial Public Offerings ◽  
Capital Market ◽  
Stock Exchange ◽  
Company Size ◽  
Public Offerings ◽  
Long Period ◽  
Stock Investment ◽  
Long Term Performance ◽  
Term Performance

This study discusses and analyzes from the perspective of investor optimism and long-term performance after the IPO in the Indonesian capital market. Observations will be made regarding the influence of investors on the increase in the length of shares after the IPO with control variables of company size, company age, offer size, the achievement of underwriters, profitability on the Indonesia Stock Exchange. This study uses data from 2004-2017, with 194 IPO companies from 2004-2015 in the Indonesian capital market. Testing is done by using two drunken linear regression. The results of this study indicate that investors in the Indonesian capital market not only consider irrational factors but also consider rational factors about the company's character in making decisions to buy IPO shares. The characteristics of the company include the size of the company and the size of the stock offering. This study provides benefits for IPO stock investors who rely on the benefits of initial stock investment in a relatively long period of time so as not to suffer losses

scholarly journals Sustainable Board of Directors: Evidence from the Research Productivity of Professors Serving on Boards in the Korean Market

2019 ◽  
Vol 11 (15) ◽  
pp. 4247
Author(s):  
Daeheon Choi ◽  
Chune Young Chung ◽  
Changhyeon Park ◽  
Jason Young
Keyword(s):  
Outside Directors ◽  
Short Term ◽  
Financial Firms ◽  
Publication History ◽  
Research Intensity ◽  
Long Term Performance ◽  
Term Performance ◽  
Korean Market ◽  
The Relationship

We examine the relationship between the expertise of outside directors from academia and firms’ financial performance using a unique dataset on the research publications of such directors. Specifically, we use research publication history in finance or an academic concentration in business or law as a proxy for expertise and measure the influence of this expertise on Korean financial firms’ short-term and long-term performance. We find a positive (negative) association between research intensity (a business or law concentration) and short-term corporate performance. Firms with greater information and agency problems appear to benefit more from research-intensive academic outside directors than other firms do. Thus, we propose that firms in emerging economies elect research-intensive academic outside directors to contribute to sustainable corporate governance and firm performance.

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