Ownership Structure, Financial Decisions and Institutional Setting: An International Analysis Through Simultaneous Equations

2012 ◽  
Author(s):  
Félix J. López-Iturriaga ◽  
Juan Antonio Rodríguez-Sanz
Keyword(s):  
Ownership Structure ◽  
Simultaneous Equations ◽  
Institutional Setting ◽  
Financial Decisions

scholarly journals Ownership Structure, Financial Decisions, and Institutional Setting: An International Analysis through Simultaneous Equations

2012 ◽  
Vol 2012 ◽  
pp. 1-12 ◽  
Author(s):  
Félix J. López-Iturriaga ◽  
Juan Antonio Rodríguez-Sanz
Keyword(s):  
Capital Structure ◽  
Ownership Structure ◽  
Common Law ◽  
Civil Law ◽  
Simultaneous Equations ◽  
Ownership Concentration ◽  
Institutional Setting ◽  
Law Firms ◽  
Financial Decisions ◽  
The Common

We analyze the mutual relations among firms’ capital structure, ownership structure, and valuation. Through the estimation of a system of simultaneous equations for a sample of 1,130 firms from 16 countries from both the common law and the civil law environments, our results confirm the differential effect of ownership structure on firms’ value in each setting. Whereas in civil law firms the higher ownership concentration results in an entrenchment and an alignment effect, in the common law firms higher ownership concentration increases the value of the firm. Second, we corroborate the endogeneity of ownership structure since we find that ownership structure is affected by the value of the firm and by the capital structure. Third, our results suggest that corporate finance decisions are taken simultaneously with other mechanisms of corporate governance and conditional on firms’ valuation.

How the Global Financial Crisis and International Trade Affected Corporate Decisions?

2021 ◽  
pp. 137-157
Author(s):  
Hasan Tekin
Keyword(s):  
International Trade ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Positive Impact ◽  
Institutional Setting ◽  
Financial Decisions ◽  
Corporate Decisions ◽  
The Global Financial Crisis ◽  
The Impact ◽  
Positive Effect

This chapter, first, draws an overview of the theoretical and conceptual framework of corporate decisions in the global financial crisis (GFC) context. Then, it shows the connectedness of corporate finance and international trade. Finally, employing a rich dataset, this chapter assesses the impact of international trade as well as the GFC on corporate financial decisions, particularly cash holdings, debt financing, and dividend payouts over the period 2002-2016. The findings show that international trade significantly affects corporate decisions. Firms with higher trade countries have higher debt level but lower cash and dividends across the globe. During the GFC, the positive impact of trade on debt shifts to negative. Also, trade has a positive effect on both cash and debt in the aftermath of the GFC. Taken together, international trade as an institutional setting influences corporate decisions and its role on cash, debt, and dividend differ during and after the GFC.

Independent directors and firm value of group-affiliated firms

2017 ◽  
Vol 25 (2) ◽  
pp. 217-236 ◽  
Author(s):  
Amrinder Khosa
Keyword(s):  
Ownership Structure ◽  
Firm Value ◽  
Value Relevance ◽  
Institutional Setting ◽  
Independent Directors ◽  
Board Independence ◽  
Outside Directors ◽  
Content Type ◽  
Listed Firms ◽  
Indian Setting

Purpose This study aims to examine the effect of board independence on firm valuation of group-affiliated firms in distinct Indian setting. Design/methodology/approach This study uses a sample of 317 listed firms comprising 1,350 firm-year observations for the period 2008-2012. The value-relevance model is used to examine the effect of board independence on market value of equity. Findings The distinct finding of an inverse relationship between board independence and firm value of group-affiliated firms in India illustrates that effective monitoring by outside directors is largely influenced by the institutional setting and ownership structure. This study does not find any evidence of different valuation when comparing non-family CEOs and family CEOs. Practical implications Independent directors play an important role to stop abusive use of related-party transactions in an environment where principal–principal conflict exists. The study’s findings will prove useful in determining whether one should rely merely on the independent status of outside directors or the influence of institutional setting on effective governance. Originality/value This paper contributes to the existing literature in the following ways: it helps to gain a better understanding of business groups which are characterised by unique governance structures and the dominance of controlling families on the board, which makes the external governance mechanisms (i.e. independent directors and non-family CEOs) ineffective and it illustrates that effective monitoring by outside directors is largely influenced by the institutional setting and ownership structure.

Financial decisions and ownership structure as control mechanisms of agency problems: evidence from Italy

2018 ◽  
Vol 18 (3) ◽  
pp. 531-563 ◽  
Author(s):  
Fabrizio Rossi ◽  
Robert Boylan ◽  
Richard J. Cebula
Keyword(s):  
Ownership Structure ◽  
Agency Costs ◽  
Generalized Method Of Moments ◽  
Control Mechanisms ◽  
Minority Shareholders ◽  
Data Set ◽  
Business Decisions ◽  
Content Type ◽  
Financial Decisions ◽  
Practical Implications

Purpose The purpose of this study is to investigate the relationship between financial decisions and ownership structure by using the control contests on a sample of Italian listed companies. Design/methodology/approach The analysis adopts a balanced panel data set of 984 firm-year observations for the period of 2002-2013, with estimation using a generalized method of moments. Findings The results appear to confirm both the hypotheses of the alignment of interests and the entrenchment effect. The entrenchment and alignment effects are not found to be alternatives but rather are found to co-exist. The presence of a coalition of minority shareholders acts as a tool to control agency costs, particularly when the coalition is instrumental in the contestability of corporate control. Practical implications These findings suggest that minority shareholders may have a larger impact than previously identified by strategically aligning with other shareholders to form coalitions. This study provides several practical implications. First, dividend payout is not necessarily a good instrument to control and monitor agency costs. This is because the payout can be used to expropriate benefits from the minority shareholders. Second, high ownership concentration does not always reduce agency costs. Third, a non-collusive coalition can be more useful in the monitoring of agency costs than other tools, such as the debt level. Originality/value This study shows that there is considerable value to the firm when individual blockholders come together in a contestable environment and become instrumental in making business decisions. The results support the contention that contestability is an excellent deterrent to dampen the expropriation of benefits to minority shareholders. This study also provides evidence that cash holding can be a good substitute for dividends and debt in the effort to limit agency costs.

scholarly journals OWNERSHIP STRUCTURES, INVESTORS CONFIDENCE AND FINANCIAL DECISIONS IN FAMILY FIRMS: EVIDENCE FROM GCC MARKETS

2018 ◽  
Vol 14 (1) ◽  
pp. 52-68
Author(s):  
Muhammad Sadiq Shahid ◽  
Keyword(s):  
Ownership Structure ◽  
Family Firms ◽  
Stock Exchange ◽  
Annual Reports ◽  
Stock Exchanges ◽  
Investment Funds ◽  
Financial Decisions ◽  
Ownership Structures ◽  
The Family ◽  
The Impact

The objective of this study is to examine the impact of financial decisions on the ownership structure. This study adopted two themes of ownership structure (e.g., 25% & 50%) that categorized the family-owned firms (FOF) and non-family firms (NFOF). The data was collected from 286 firms listed at GCC stock exchanges annual reports, stock exchange database, and Data Stream that range from 2010-2016 periods. The findings of this study showed that the FOFs have lesser investment-internal fund sensitivity than NFOFs. Though, there is an insignificant effect of the block holder on investment funds sensitivity. However, the little implication of dividend payout in FOFs as compare to NFOFs was disclosed in the results. Moreover, it wrapped up that there are less agency problems and information asymmetry in FOFs comparatively.

scholarly journals Struktur Kepemilikan dan Nilai Perusahaan pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia

2021 ◽  
Vol 7 (2) ◽  
pp. 179-190
Author(s):  
Indra Siswanti ◽  
Embun Prowanta
Keyword(s):  
Ownership Structure ◽  
Consumer Goods ◽  
Firm Value ◽  
Stock Exchange ◽  
Investment Decisions ◽  
Secondary Data ◽  
Manufacturing Companies ◽  
Financial Reports ◽  
Financial Decisions ◽  
Processing Techniques

This study aims to examine the effect of ownership structure on firm value with financial decisions and investment decisions as intervening variables. This study uses secondary data from financial reports. The population used in this study are manufacturing companies in the consumer goods sector which listed on Indonesian stock exchange 2013-2019 of 35 (thirty five) companies. While the research sample was taken using certain criteria.The number of samples obtained are 7 (seven) companies. Data processing techniques using smartPLS 3.0. The results state: 1) ownership structure has a significant effect on firm value, 2) ownership structure has a significant effect on funding decisions, 3) ownership structure has a significant effect on investment decisions, 4) funding decisions has a significant effect on firm value, 5) investment decisions has a significant effect on firm value, 6) funding decisions mediate the effect of ownership structure on firm value, 7) investment decisions mediate the effect of ownership structure on firm value. The limitation of the results of this study is that the results of this study cannot be generalized because the objects used are limited to manufacturing companies in the consumer goods sub-sector.

scholarly journals Corporate Governance, Ownership Structure and Stock Market Liquidity in Saudi Arabia: A Conceptual Research Framework

2017 ◽  
Vol 6 (4) ◽  
pp. 17
Author(s):  
Abdulaziz Mohammed Alsahlawi ◽  
Mohammed Abdullah Ammer
Keyword(s):  
Corporate Governance ◽  
Information Asymmetry ◽  
Ownership Structure ◽  
Empirical Studies ◽  
Market Liquidity ◽  
Institutional Setting ◽  
Trading Systems ◽  
Research Framework ◽  
Regulatory Policies ◽  
Conceptual Research

This paper aimed to provide a review of the literature concerning the effects of corporate governance and ownership structure on the devices of market microstructure. It provided a clear overview of empirical archival studies in literature regarding the way corporate governance and ownership structure mechanisms influence market liquidity, with focusing on the Saudi institutional setting. It aimed to pinpoint the differences and similarities in empirical outcomes of studies and determine the areas that call for further exploration. On the basis of the thorough review of literature and the theoretical basis, our study proposed a conceptual research framework. The framework is based on the premise that effective corporate governance can lead to enhanced disclosure quality, which in turn, lead to mitigating the information asymmetry and ultimately, enhanced market liquidity. Although theoretical studies argued the presence of the relationship between corporate governance, ownership and liquidity, we find that outcomes from empirical studies are still mixed. Majority of extant studies, with majority in the context of the U.S. firms, provide ambiguous results, making it challenging to reconcile the differences among them. Our paper provides important guidance for both new and experienced researchers, and it has implications for stock exchange authorities in terms of adopting effective regulatory policies and efficient trading systems to tackle information asymmetry.

Financial decisions as determinants of ownership structure

2008 ◽  
Vol 34 (12) ◽  
pp. 868-885 ◽  
Author(s):  
Julio Pindado ◽  
Chabela de la Torre
Keyword(s):  
Ownership Structure ◽  
Financial Decisions

scholarly journals Environmental, Social, and Governance Disclosure, Ownership Structure and Cost of Capital: Evidence from the UAE

2020 ◽  
Vol 12 (18) ◽  
pp. 7706 ◽  
Author(s):  
Nejla Ould Daoud Ellili
Keyword(s):  
Capital Structure ◽  
Ownership Structure ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Empirical Studies ◽  
Financial Decisions ◽  
Corporate Governance Mechanisms ◽  
Financial Disclosures ◽  
The Cost ◽  
The Capital Structure

The capital structure decision is one of the most vital financial decisions of the corporation that consists of determining the optimal combination of equity and debt for the companies that would reduce the cost of capital. The examination of the capital structure has always gained importance especially in the theoretical and empirical studies while there is no study of the relationship between the environmental, social, and governance (ESG), the ownership structure, and the cost of capital. In this context, this paper aims to examine the potential impacts of the ESG disclosure and ownership structure on the cost of capital by using a sample of 30 companies listed on the UAE financial markets (Abu Dhabi Stock Exchange and Dubai Financial Market) during the period 2010–2019. The data show that there is an increasing trend in the different non-financial corporate disclosures. The empirical results of various models show that the ESG disclosure, the insider and the institutional ownerships have negative and significant impacts on the cost of capital. Furthermore, the environmental and the governance disclosures reduce the cost of capital. This paper demonstrates the strong role played by the ESG disclosure and the ownership structure in reducing the cost of capital for the companies. These results would encourage the companies in implementing the best practices of the non-financial disclosures and regulating their corporate governance mechanisms.

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