Firm-specific Control Variables Research Articles

Debt maturity, governance and investment efficiency: new evidence from emerging market

PurposeThis study investigates the combined influence of corporate governance (CG) and debt maturity (DM) on the investment inefficiency among non-financial 506 NSE-listed firms in India between 2009 and 2022. Additionally, this study also investigates the moderating effect of short-term debt (STD) maturity concerning the relationship between CG and investment inefficiency.Design/methodology/approachUtilizing the residuals extracted from the Biddle et al. (2009) investment model, three different forms of investment inefficiency (investment inefficiency, overinvestment and underinvestment) were measured. To measure the internal governance of firms, a new corporate governance index (CGI) was developed using 65 new governance stipulations, whereas STD was measured as short-term debt divided by total debt. Interaction effects between CG and DM were also estimated. Employing CGI and STD along with firm-specific control variables, many pooled regression models were estimated. Endogeneity issues were addressed through two-stage least squares. Robustness checks were also conducted using the two-step system GMM, alternative measures of dependent and independent variables.FindingsThe findings demonstrate that higher CG and shortened DM increase investment efficiency. This evidence implies that firm-level governance and short-term debt reduce information asymmetry and increase management oversight. Additionally, the evidence suggested that shortened DM and CG complement one another to increase investment efficiency, suggesting companies that utilize STD to a greater (lesser) extent demonstrate a greater (lesser) impact of CG in reducing investment inefficiency.Practical implicationsThis work first advocates the establishment and implementation of robust corporate governance mechanisms to control agency conflicts, moral hazard, adverse selection and limit opportunistic behavior of managers for improving investment efficiency. Second, since interaction effects suggest a complementarity between CG and DM, it is advocated that STDs can be used to achieve optimal investment choices to control moral hazards and adverse selection and discourage suboptimal investment levels.Originality/valueThis work provides new evidence concerning the effects of CG and DM on various forms of corporate investment efficiency (investment inefficiency, overinvestment and underinvestment, using alternate measures) in an emerging economy like India having a unique institutional framework and macroeconomic environment using a newly developed firm-specific CG index for a large sample of companies using recent data.

The nexus between financing pattern, firm-specific factors, and financial performance: Panel evidence of listed SMEs in India

The study analysed the impact of financing patterns (FPs) on the financial performance of 226 listed small and medium enterprises (SMEs). Firm size, age, liquidity, sales growth (SG), and asset tangibility (AT) are treated as firm-specific control variables. The result indicates that total debt financing (TDF), short-term financing, and trade credit financing have a significant relationship with Return on Asset (ROA), whereas long-term debt financing (LTDF) does not. Further, Return on Equity (ROE) is used to confirm the robustness of the result and demonstrate the same direction of the relationship with financing. Thus, the study provides an illustrative description of relationships and helps in developing an understanding of accessing the future financial needs of SMEs.

Financial Performance and Stock Price: Evidence from Listed Manufacturing Companies in Sri Lanka

Despite several studies on the effect of financial performance in terms of profitability on stock price, existing literature provides contradictory conclusions regarding this association. Therefore, the main purpose of this study is to explore the effect of financial performance in terms of profitability on stock price, with special reference to the listed manufacturing companies in Sri Lanka from 2011 to 2021. Earnings per Share (EPS), Return on Equity (ROE), and Return on Assets (ROA) were used as proxies of profitability since the current study aims to investigate the aspect of profitability, while the average share price was used as a proxy of stock price. Moreover, the study used three firm-specific control variables, namely, Dividend per Share (DPS), Firm Size (FS), and Debt to Equity (DE). The data was collected from the published annual reports of 29 listed manufacturing companies out of 34 listed manufacturing companies. By employing fixed effect panel regression analysis, this study aims to examine whether there is an effect of financial performance in terms of profitability on stock price. Accordingly, the findings reveal a statistically significant positive effect on stock price in terms of ROA and EPS, despite ROE indicating a negative effect on stock price. Moreover, somewhat simultaneous and divergent results were indicated by the control variables. Accordingly, FS and DE demonstrated a positive association with stock prices. Contrary to this, DPS does not indicate any association with stock price. Moreover, the findings of the study provide insights to investors for encouraging investments and maximizing their investment income, to listed companies for making policy decisions connected with stock price and other investments, and to policymakers for formulating appropriate policies to promote stock investment while regulating credit policies and interest rates.

Internationalization of SMEs: Do Board Characteristics Matter?

All around the globe, SMEs constitute the backbones of the countries' economies, with their contribution to a very high level of employment and enterprises, as well as GDP creation. Despite their significance in their economies, SMEs' engagement in export activities is limited, which could be enhanced with better corporate governance initiatives. The purpose of this study is to examine the association between one of the main components of corporate governance, i.e., board of directors (BOD), and SME internationalization. We apply stratified sampling by city, size, and sector to fairly reflect the SME population in Turkey, collecting data from 469 SMEs. To quantify the board characteristics, we construct a board index, composed of seven board-related variables. Then, we estimate cross-sectional regressions including firm-specific control variables and legal and industry dummies. Our findings show that the board index is strongly and positively associated with SME internationalization, implying SMEs can reach higher internationalization levels by fostering a more attentive approach toward the composition and functioning of their BODs. By focusing on the individual board characteristics, SMEs are likely to enhance their BODs’ monitoring and controlling functions in addition to their resource-acquiring functions, ultimately leading to higher internationalization levels.

Does Investment Climate Matter for Firm Performance? Evidence from Kenyan Manufacturing Firms

The productivity of Kenyan manufacturing firms is way lower than that of many developed economies and has generally exhibited a consistent decline over the last decade. While this productivity trend has largely been attributed to the presence of a high distortionary institutional and business regulatory environment, existing studies on the role of the investment climate in determining firm performance are ostensibly scanty. This study, thus, employed the World Bank panel enterprise data for the period 2007-2013- 2018 in assessing whether investment climate mattered for firm performance in Kenyan manufacturing firms. More particularly, the study sought to establish the role of the court system and property rights ownership in determining firm performance; a feat that remains unexplored in the Kenyan context. The random effects model was estimated while controlling for the year, industry, and firm-specific control variables. The findings revealed that while court inefficiencies significantly impeded labor productivity, property rights ownership significantly increased productivity. Further, human capital positively determines labor productivity. Concerning governance and institutional factors, ISO-certified firms were found to be significantly more productive. Conversely, business licenses and permits constrain firm productivity. Therefore, to ensure unrelenting firm productivity, speedy and just delivery of court rulings on firm-related matters is critical. Secondly, the acquisition of patents relating to product or process innovation by firms enhances product competitiveness. Thirdly, manufacturing firms should invest more in human capital. Finally, the imposition of favorable business licenses and permits by the governments globally coupled with the ISO Certification requirement by firms is integral in optimizing labor productivity.

Disasters, disaster preparedness and post disaster recovery: Evidence from Caribbean firms

Firms are exposed to various kinds of risks such as man-made and natural disasters that can negatively affect their business. The objective of this paper is to contribute to a better understanding of disasters, disaster preparedness, and post disaster recovery strategies and the private sector in Caribbean Small Island Developing States (SIDS), a region highly vulnerable to such impacts. A Stochastic Frontier Analysis (SFA) was adopted using a novel database-the Innovation, Firm Performance, and Gender (IFPG) firm-level dataset conducted in the Caribbean in 2020 to estimate the production function as well as technical efficiency scores of firms, following which the efficiency scores were regressed against disaster preparedness and post disaster recovery strategies, and other firm-specific control variables using robust standard errors clustered at the country and sector level. The results indicate that disaster preparedness and post disaster recovery strategy affect technical efficiency. In particular firms with a post disaster recovery plan to resume operations after a disaster, firms with knowledge of which parts of their business need to be operational following a disaster, and firms that ensure that their suppliers have a post disaster recovery plan experience a positive effect on technical efficiency, while firms operating in a building that is able to withstand disasters negatively affects technical efficiency.

How does human capital efficiency impact credit risk?: the case of commercial banks in the GCC

PurposeThis paper aims to assess human capital efficiency's impact on commercial banks' credit risk in six GCC member countries.Design/methodology/approachThe study employs quarterly balanced panel data of banks between 2014 and 2019. The authors use three different constructs of credit risk, namely the probability of default which is a forward-looking quantification, a book value-based infection ratio and independent opinion of credit ratings, to assess the relationship with human capital efficiency. Different macro and firm-specific control variables are introduced, including a dummy for technological innovation and a GARCH-based measure of oil price volatility.FindingsThe findings of this study reveal that human capital efficiency is negatively related to the credit risk profile and banks with higher human capital efficiency tend to have lower credit risk. These results remained robust across the three definitions of credit risk used in this study.Originality/valueThis study is unique in exploring the impact of human capital efficiency on credit risk because credit risk is not only a central determinant of bank performance but also can trigger a systemic panic. Therefore, it is vital to assess its relationship with human capital efficiency. The different constructs of credit risk are innovative with reference to human capital. Lastly, using EVA as a measure of value addition in the context of human capital efficiency is a methodological contribution.

Investor Protection and Post-Disclosure Disagreement: International Evidence

Synopsis The research problem Adding to the literature on investor protection, this study investigates whether nationwide institutional features may explain cross-country variation in post-disclosure disagreement. Motivation Previous research has revealed that the release of financial statements aggravates investor disagreement rather than attenuating it. However, most studies only obtain empirical evidence in the context of the United States; no work has examined this research question in an international setting. Another motivation for this paper is the attempt to understand the contradiction in the literature, which emphasizes micro-level determinants. By contrast, minimal attention has been paid to the macro-level institutional factors of a country’s information environment, which presumably prompts investors to shape heterogeneous beliefs. The test hypotheses H1: Countries with greater corporate transparency are associated with a lower level of post-disclosure investor disagreement. H2: Countries with stronger legal protection are associated with a lower level of post-disclosure investor disagreement. Target population Various stakeholders include firm managers, financial analysts, regulatory watchdogs, and users of earnings reports. Adopted methodology Ordinary Least Squares (OLS) Regressions Analyses Gao et al. ( 2012 ) to measure investor disagreement while we quantify corporate transparency (legal protection) by extracting the first principal component of nine countrywide characteristics pertinent to disclosure requirements (legal systems). Using a global sample from 38 countries, we perform a cross-sectional regression of post-disclosure disagreement on two proxies for investor protection after accounting for firm-specific control variables. Findings We find clear evidence of post-disclosure disagreement in all countries. Next, we document a negative relationship between corporate transparency (legal protection) and post-disclosure disagreement. Additional tests confirm that both better disclosures and strong regulations enhance information precision, accelerate information dissemination, and reduce informed trading, thus leading to a lower level of post-disclosure disagreement.

Founder CEOs, business groups and firm value: evidence from an emerging market

PurposeThe impact of founder CEOs on firm value continues to be debated in the finance literature. While earlier studies suggest that founding family ownership and founding CEO structure create less value than public ownership, later studies provide contradicting evidence. This study examines how founder CEOs affect firm value in the business group context while controlling for firm-specific variables and various CEO characteristics.Design/methodology/approachThe authors use a sample of publicly listed Indian firms from 2010 to 2015 with 997 firm-year data observations. While 306 of these are in business groups, the remaining 691 are in a nonbusiness group. The authors also divide the sample into various sector subgroups, including materials (170), industrials (198), consumer (422) and others (198). They use two different models, including the fixed effect model (FEM) and pooled generalized method of moments (GMM) model to run regressions.FindingsThe authors find that firms with founder CEOs have lower firm value than those with nonfounder CEOs. These results show the importance of the role of founder CEOs in the Indian business groups. The authors further find a positive relationship between founder CEO and business group interaction variable, showing that an increase in founder CEO (or business group) increases the significance effect of business group (founder CEO) on firm performance. After separating the sample business and nonbusiness groups, the relationship between founder CEOs and firm value in both groups remains negative. Using various firm-specific control variables, the authors find that highly leveraged and smaller firms experience lower Tobin's Q. In contrast, firms with more investment in research and development perform better. Among CEO characteristics, the authors find that firms with highly educated CEOs do not perform well, while firms with older CEOs do better. Finally, they find that CEO tenure and duality are associated with lower firm performance.Originality/valueThis study adds value by providing evidence on the founder CEOs and firm performance in business groups from a fast-developing emerging market.

İşletme Sermayesi Yönetiminin Firma Performansı Üzerindeki Etkisi: Çimento Şirketleri Üzerine Bir Araştırma (The Effect of Working Capital Management on Firm Performance: A Study on Cement Companies)

Purpose – The aim of the study is to investigate the impact of working capital management on firm profitability with a sample of 16 cement firms with shares traded in Borsa Istanbul and listed in XTAST (BIST Stone and Soil Sector) index. Design/methodology/approach – A balanced panel dataset for firms’ annual data for the 16 years between 2003 and 2018 is formed. Alternative models utilizing ROA (Return on Assets) and ROE (Return on Equity) as dependent variables are originated. Cash conversion cycle; and three determinants of this cycle, namely, investory turnover, accounts receivable turnover and accounts payable turnover are the independent variables capturing working capital management. Main methodology employs panel regression analysis. Findings – A main finding in the analyses suggests that cash conversion cycle does not have a significant effect on the profitability of cement firms within studied time span. Moreover, we provide evidence on the negative impact of inventory turnover on firm profitability. While partial evidence exists on the positive effects of accounts receivable turnover and accounts payable turnover, documented finding disappears in the use of models incorporating time fixed effects. Two firm specific control variables, firm size proxied by net sales and leverage ratio have positive and negative effects on profitabiliy, respectively. Discussion – The study provides fresh evidence on the role of working capital management on firm performance. The findings focused on cement sector shed new light on how firm profitability is affected by different components of working capital management. Among the obtained findings, absence of a significant relationship between cash conversion cycle and profitability may suggest that the profitability of cement companies in Turkey is more likely determined by other factors such as leverage ratio, firm size, macroeconomic variables and other time effects.

Human capital and technical efficiency: a Stochastic Frontier Analysis of Caribbean firms

ABSTRACTTechnical efficiency is the ability of a firm to produce its maximum output using a set of inputs or to minimise the use of its inputs to produce a certain level of output. When a firm is operating at its most efficient, operating costs can be minimised, profits maximised and competitiveness improved. This study investigates the role of a firm’s human capital in impacting its technical efficiency. It uses the Productivity, Technology, Innovation survey (PROTEqIN) conducted for a sample of 13 Caribbean countries in 2014 and comprises 1,966 firms. To account for differences in efficiency of firms, a Stochastic Frontier Analysis is used to estimate the production function as well as technical efficiency scores. The efficiency scores are then regressed against workforce characteristics and other firm-specific control variables using a Tobit estimator with robust standard errors. The results suggest that workforce characteristics, in particular workforce composition in terms of the proportion of managers to total workforce and graduate and post-graduate education play an important role in influencing firm efficiency, perhaps more so than other firm-specific variables. Lastly, government technical assistance programmes in the Caribbean also act to improve firm technical efficiency.

Does corporate governance affect dividend policy in India? Firm-level evidence from new indices

Purpose The purpose of this paper is to investigate the nexus between corporate governance and dividend policy of listed Indian firms. Design/methodology/approach Using new corporate governance stipulations, five new indices were constructed, namely, overall board governance index, board structure index, audit committee index, compensation committee index and nomination committee index. Using the newly developed indices, disclosure index and different firm-specific control variables, different panel Logit and Tobit regression models were estimated for 482 non-financial and non-utility listed firms during 2006–2017. Also, before the econometric analysis, mean difference test was conducted to examine the differences in dividend behaviour and corporate governance practices during pre- and post-Companies Act, 2013 and between payers and non-payers. Findings The overall evidence suggests that the firms having stronger corporate governance tend to pay higher dividends suggesting that the firm’s propensity to pay dividends increases with the improvement in corporate governance standards. Among the corporate governance indices board structure, audit committee and disclosure norms show a significant and positive relationship, whereas compensation committee and nomination committee show a positive but insignificant relationship with dividend policy. Control variables mostly had the expected impact on the dividends of the firms. Practical implications This study suggests that the establishment of the strong and effective corporate governance system is desirable to mitigate the agency conflicts between managers and shareholders and limit managers’ opportunistic behaviour in dividend payout policy. Originality/value This study is one of the latest studies to use several newly constructed indices on corporate governance mechanism based on new stipulations which bring new evidence on their specific impact on the dividend policy for an emerging market economy like India.

The Impact of Inflation and Operating Cycle on the Corporate Cash Holdings in South-East Europe

Determining optimal cash holding is one of the most crucial issues in the corporate financial management aiming to maximise the shareholder value. The optimum of corporate cash amount is not only dependent on many company-specific factors, but it is also associated with both the corporate governance structure and the institutional and macroeconomic environment. Earlier research papers showed that at the macro level, companies adjust their cash holdings to the changes in the level of the inflation and, at the micro level, to the changes of the operating cycle linked to the turnover of the corporate cash flow.
 This paper investigates the determinants of corporate cash holdings for a sample of 868 firms from ten South-East European countries (Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Greece, Romania, Macedonia, Slovenia, Serbia and Turkey). More specifically, we investigate the influence of the inflation and the corporate operating cycle on the corporate cash holdings. Using company financial data and the country CPI for the period 2006-2015, we apply a balanced panel regression model involving the yearly change of the cash ratio as a dependent variable, and country CPI, operating cycle and other firm-specific control variables as explanatory variables.
 Results confirm that both the inflation rate and the operating cycle have substantial influence on the change of the corporate cash holdings also in the region. The relationship of the change in cash and the inflation is non-linear and best described by a U-shaped curve. That means that corporate cash holdings decrease as the level of inflation increases to a critical point but beyond that, the cash holdings start to increase. At the same time, we identified a straight linear relationship between the change in cash holdings and the length of the operating cycle. Also, we found that the change in the corporate cash holdings is positively related to the size of the company, the operating cash flow and the capital expenditures. In addition, it is inversely associated with both the change of the net working capital and the change of short and long-term debt.

Interdependence between Monetary Policy and Stock Liquidity: A Panel VAR Approach

This article examines the relationship between monetary policy and individual stock liquidity in an order-driven emerging stock market like India. This study considers stocks listed in National Stock Exchange of India (NSE) and continuously traded from April 2002 to March 2015. Considering the multiple dimensions of liquidity, this study uses five different liquidity proxies to capture the various facets of liquidity such as trading activity, price impact and transaction cost. An array of macroeconomic and firm-specific control variables are used while analysing the liquidity and monetary policy relationship. Econometric methods like panel vector autoregressive (VAR)–Granger causality test, impulse response functions and variance decomposition analysis have been employed to carry out this analysis. The empirical findings suggest that monetary policy significantly Granger-causes stock liquidity, and the expansionary monetary policy characterised by low interest rate and higher money supply is positively associated with individual stock liquidity in India. The impact of monetary policy on liquidity of individual stocks is more prominent during financial crisis. The findings of the present study have certain theoretical as well as practical implications. The market participants in equity market can improve the forecasting of liquidity of their investment portfolio by employing monetary policy along with individual asset’s characteristics. Regulators and policymakers may consider the cross-sectional relationship between stock liquidity and monetary policy as an important source of information for policy formulation and implementation. JEL Classification: E44, E51, G12

Informational Consequences of Mandatory IFRS Adoption in China

In China, International Financial Reporting Standards (IFRS) have become mandatory for listed firms in 2007. While earlier research on “voluntary” adopters has provided valuable insights on the impact of IFRS disclosure, these results cannot be generalised in a mandatory setting. We expect effects from mandatory IFRS adoption to be different from those documented for voluntary IFRS adopters since the former group is essentially forced to adopt IFRS. The empirical model, relating to stock price synchronicity with adoption of IFRS, and other firm-specific control variables were analysed using both univariate and multivariate techniques. Different types of panel data estimates were used and compared so as to interpret the results with the best-suited parameters for different data sets for different markets. Studying data covering the period from 2001-2013, the present study examines whether mandatory adoption of IFRS reduces Stock Price Synchronicity for Chinese firms. The empirical results show that IFRS adoption improves information environment by the capitalization of firm-specific information into stock prices, thereby reduces the Stock Price synchronicity. The paper further examines if the information impact was homogeneous across industries. This pattern of decrease in stock price synchronicity after adoption of IFRS is different for different industries taken for analysis. Aerospace & Defense, Automobiles Beverages, Metals & Mining, Retailer& Real Estate Operations have reduced synchronicity but other industries such as Biotech, Electric utilities, Electronic, Leisure products, Renewable energy and Telecom have increased synchronicity. For these industries, the low reliance on market wide information makes reasonable economic sense because they have relatively low demand elasticity. Hence, in demand inelastic industries, future price sensitive factors remain constant and so a changed IFRS accounting regime has little marginal impact. This study provides a different methodological approach by concentrating on Industry wide information effects from the mandatory adoption. These findings have important implications that apply not only to China, but also to other emerging and transitional economies such as India where IFRS is yet to be mandated. Moreover it will help regulators, academicians and practitioners to assess the informational benefit of adopting IFRS.

M&A Deals and Corporate Governance Framework

The escalating importance of mergers and acquisitions (M&A) has coincided with concerns about corporate governance issues. This article investigates how corporate governance mechanisms along with firm-specific control variables impact performance during M&A deals occurring between 2000-2012 in acquiring Indian telecom companies. In this research, firm performance has been measured via accounting based, market based and qualitative performance dimensions, represented by Return on Capital Employed (ROCE), Tobin's Q and Human Capital Return on Investment (HCROI) respectively. Panel data regression techniques was employed for the analysis. The learning from this study reveals that board size and firm size have significant positive relationships with ROCE and HCROI. Chairperson-CEO duality also has positive significant association with ROCE. Shareholding percentage of institutional investors was found to have a significant negative relationship with HCROI. Board independence, firm size and market share significantly affect Tobin's Q.

Corporate governance and internal controls over financial reporting in Ugandan MFIs

PurposeThe purpose of this paper is to investigate the relationship between corporate governance and internal controls over financial reporting (ICFR) of microfinance institutions (MFIs) in Uganda.Design/methodology/approachThis study was cross-sectional and correlational. In all, 70 Ugandan MFIs were surveyed and the data were analyzed using SPSS Version 20 to test the nine hypotheses which were put forward. The hypothesized relationships were tested using the ordinary least squares regression.FindingsThe findings based on multiple regression analysis suggest that board role performance, expertise and Association of Microfinance Institutions in Uganda (AMFIU) membership are significant predictors of the ICFR. However, board independence and separation of CEO and chairman roles are not significant predictors. The results also show that the firm-specific control variables (auditor type, size, accounting qualification and age) are also not significant.Research limitations/implicationsThis study has limitations in that it is cross-sectional, thus limiting monitoring changes in behavior over time and also because the effectiveness of the ICFR was assessed using perceptions.Practical implicationsEfforts by regulators and other stakeholders to improve the ICFR must focus on the corporate governance aspects such as board expertise and ensure that the board performs its roles.Originality/valueThe paper adds to the existing literature on the corporate governance and ICFR by documenting the relationship between the corporate governance and ICFR. The study complements the previous studies on the ICFR by demonstrating that board expertise and board role performance improve the ICFR. Such evidence does not currently exist. The findings also indicate that an MFI which is a member of AMFIU was found to have better ICFR supporting self-regulation.

Impact of International Financial Reporting Standards on Stock Price Synchronicity for Asian Markets

Stock price synchronicity since the adoption of International Financial Reporting Standards (IFRS) has been significant due to its strong relationship with the economic development and capital market stability of a country. Using data from 2006–2011, the study examines whether the mandatory adoption of IFRS reduces stock price synchronicity in the Asian context. The study utilizes a sample of 1,800 firm-year observations for firms in four Asian markets—China, Hong Kong, Israel, and the Philippines—where IFRS have been mandatory since 2009. The empirical model, relating to stock price synchronicity with the adoption of IFRS, and other firm-specific control variables were analysed using both univariate and multivariate techniques. Different types of panel data estimates were used and compared so as to interpret the results with the best-suited parameters for different data sets for different markets. The empirical results support the argument that, for all four markets considered, IFRS adoption improves the information environment through the capitalization of firm-specific information into stock prices, thereby reducing the stock price synchronicity. Along with IFRS adoption, other firm-specific control variables are found to have significant influence on stock price synchronicity, such as cross-listings in foreign stock exchanges in China and Philippines, the Herfindahl index in Hong Kong, and the percentage of foreign sales in Israel. Keywords: International Financial Reporting Standards, Stock Price Synchronicity, Information Environment, Mandatory Adoption of IFRS, Asian Markets To cite this document: Archana Patro and V. K. GUPTA, Impact of International Financial Reporting Standards on Stock Price Synchronicity for Asian Markets, Contemporary Management Research, Vol.12, No.1, pp. 61-88, 2016. Permanent link to this document: http://dx.doi.org/10.7903/cmr.14160

Impact of International Financial Reporting Standards on Cost of equity Capital for Asian countries

The present study examines whether adoption of IFRS reduces Cost of equity Capital for firms in Asia. The sample consists of firms from four Asian Countries, namely China, Hong Kong, Israel and Philippines, where IFRS has been made mandatory. Data for six years covering the period from 2006-2011 has been taken for analysis. Different types of panel data estimates were used and compared so as to interpret the results with the best suited parameters for different data sets for different countries. The results vary for different countries. The firms in Hong Kong and Philippines get benefit from the reduction in their cost of equity capital after adopting IFRS, but for firms in China and Israel cost of equity capital increased. It is also evident from the study that other firm specific control variables have no impact on cost of equity capital. The study contributes to the understanding of economic consequences of adopting IFRS across Asian countries. The findings would be important not only to countries that have already adopted IFRS, but also to countries that are in the process of adopting the standard. The outcomes will have important implications for the regulators, practitioners, academicians and auditors, as well as end-users of financial statements.

The Effect of Ownership Concentration on Firm Value of Listed Companies

The purpose of this study is to explore the link between ownership concentration and the market value of listed companies using data from the selected 21 banks listed on the Nigeria Stock Exchange during the period of 2008 2012. The hypothesis formulated and tested for the study was that there is no significant relationship between ownership concentration and market value of listed companies. Ownership concentration was considered as independent variable while market value was considered as dependent variable. Ownership concentration was measured by the amount of stock owned by individual investors and large –block shareholders divided by total stock. Market value was determined using the stock prices. The firm specific control variables were loan performance, profitability and firm size of the selected companies. Descriptive statistics was used to analyze the data while least square regression method was used to draw inference on the relationship between ownership concentration and firm value. The result indicates that a positive significant relationship exists between a firm value and ownership concentration.