Financial Constraints and Corporate Governance in Family Controlled Firms in Malaysia

2015 ◽  
Author(s):  
Ei Yet Chu ◽  
Tian So Lai ◽  
Saw-Imm Song
Keyword(s):  
Corporate Governance ◽  
Financial Constraints

scholarly journals Impact of Corporate Governance on Firms’ Financial Flexibility in the Emerging Economy: Evidence From Bangladesh

2019 ◽  
Vol 9 (4) ◽  
pp. 183
Author(s):  
Md Rashidul Islam ◽  
Man Wang ◽  
Muhammad Zulfiqar
Keyword(s):  
Corporate Governance ◽  
Firm Size ◽  
Significant Influence ◽  
Financial Constraints ◽  
Positive Impact ◽  
Financial Flexibility ◽  
Book Value ◽  
Internal Funds ◽  
Debt Capacity ◽  
The Relationship

Corporate governance has a positive impact on firm performance. Financial flexible firms are a better performer when there are financial constraints as well as financial crises. However, what motivates financial flexibility is a dearth research area in the existing finance literature. The objectives of this research are to investigate the relationship between corporate governance and financial flexibility; how corporate governance influence financial flexibility; and, what factors of corporate governance are dominant to influence financial flexibility. To pursue the research objectives we chose Cement Industry of Bangladesh as a case. We consider liquidity, Internal Funds and Unused debt capacity as the proxy of financial flexibility and Ownership Concentration, Board Size, Board Independence as Corporate Governance variables and Firm Size, Market to Book Ratio, Debt Capacity, Financial Constraints and Firm Age as control variable to estimate the relationship between corporate governance and financial flexibility. This study evidences that Board Structure has no significant influence on firms’ cash holding(Liquidity).However, Firms Age and Market to Book Value have a significant influence on firms' cash position. This study also finds that Ownership Structure has no positive impact on Firms' Unused Debt Capacity but Financial Constraints and Market to Book Value have a positive significant impact on firms' unused debt capacity. However, Firm Size has a positive relationship with Internal Funds.

Corporate Governance, Tax Avoidance, and Financial Constraints

2018 ◽  
Vol 47 (3) ◽  
pp. 651-677 ◽  
Author(s):  
Onur Bayar ◽  
Fariz Huseynov ◽  
Sabuhi Sardarli
Keyword(s):  
Corporate Governance ◽  
Financial Constraints ◽  
Tax Avoidance

Corporate Investment and Hotel Firm Value: Does Corporate Governance Matter in Financially Constrained Firms?

2018 ◽  
Vol 59 (4) ◽  
pp. 339-351
Author(s):  
Tarik Dogru
Keyword(s):  
Corporate Governance ◽  
Corporate Finance ◽  
Firm Value ◽  
Financial Constraints ◽  
Financial Constraint ◽  
Corporate Investments ◽  
Corporate Governance Mechanisms ◽  
The Relationship ◽  
Practical Implications

Corporate investments are expected to create value for firms. Although some studies report evidence supporting such expectations, many studies document contradictory findings. However, it is not clear why corporate investments create value in some firms but reduce value in others. The purpose of this study is to examine the extent to which the quality of corporate governance and the degrees of financial constraints affect the relationship between corporate investments and hotel firm value in a unified model where both weak corporate governance and financial constraint problems are concurrently observed. Shareholders of poorly governed firms place a lower value on corporate investments compared with those of well-governed firms, whereas shareholders of financially constrained firms perceive corporate investments to be of greater value compared with those of unconstrained firms. The results further showed that CEOs of financially constrained firms make value-increasing investments despite poor corporate governance mechanisms. Theoretical and practical implications are discussed within the realm of corporate finance theories.

scholarly journals CORPORATE GOVERNANCE AND FINANCIAL CONSTRAINTS IN FAMILY CONTROLLED FIRMS: EVIDENCE FROM MALAYSIA

2017 ◽  
Vol 17 (3) ◽  
Author(s):  
Ei-Yet Chu ◽  
Tian-So Lai ◽  
Saw-Imm Song
Keyword(s):  
Corporate Governance ◽  
Capital Markets ◽  
Financial Constraints ◽  
Family Firms ◽  
Independent Directors ◽  
Equity Financing ◽  
Ceo Duality ◽  
Investment Opportunities ◽  
Internal Capital ◽  
External Capital

The hypothesis of financial constraints suggests that firms will be denied profitable investment dueto inaccessible to external capital markets as debt and equity financing are no longer perfectsubstitutions after firms utilize internal capital. In view of reduced investments during globalfinancial crisis in 2008-2009, the study investigates 157 firms, whether they face the issues offinancial constraints in Malaysia. In general, non-family firms rely heavily on the external debtmarket while family controlled firms utilizing internal cash and reducing their dependence on debtmarket for their investments, confirming financial constraints in family firms. However, thepresence of CEO duality does not exaggerate the problem of financial constraints, but rather leadsfamily firms to become stagnant in their investments. Independent directors appear to beineffective in governing family firms in issuing finances for investment. Apparently, their presencein family firms reduces firms’ investment opportunities either through internal cash and externaldebt financing, which could reduce shareholders’ value in the long-term.Keywords: Investments; Financial Constraints; Corporate Governance; Duality; IndependentDirector; Family Controlled firms.

Project-Level Disclosure and Investment Efficiency: Evidence From China

2020 ◽  
pp. 0148558X2091209
Author(s):  
Jean Chen ◽  
Xinsheng Cheng ◽  
Stephen X. Gong ◽  
Youchao Tan
Keyword(s):  
Corporate Governance ◽  
Financial Constraints ◽  
Information Quality ◽  
Accounting Information ◽  
Investment Efficiency ◽  
Cross Sectional ◽  
Market Reactions ◽  
Large Sample ◽  
Listed Firms ◽  
Project Level

Different from studies that use rough proxies for aggregate accounting information quality to investigate its impact on investment efficiency, we construct a project-level measure of disclosures pertaining specifically to firms’ ongoing and future investments, using a large sample of Chinese listed firms. We first validate this measurement of project-level investment disclosure, finding that more detailed investment disclosures are associated with stronger market reactions, particularly among strong-governance firms. Furthermore, we find that project-level disclosure is associated with higher future investment efficiency for strong-governance firms, but not for weak-governance firms. Investigations into underlying channels reveal that well-governed firms with more investment disclosures face less financial constraints and are more likely to abandon poorly performing investments. Cross-sectional analyses suggest that project-level disclosure and governance play a more important role in settings where firms have stronger incentives for opportunistic disclosure. Overall, our evidence indicates that project-level disclosure interacts with corporate governance to impact investment efficiency. The results have implications for disclosure regulation and practice.

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