Impact Of Firm-specific Characteristics Research Articles

EFFECT OF FIRM-SPECIFIC CHARACTERISTICS ON BOARD DILIGENCE: AN APPLICATION ON BIST

Purpose- The aim of this study is to investigate the effect of firm-specific characteristics on the board diligence. In this context, it is desired to investigate how firm-specific characteristics affect the number of board meetings when certain corporate-specific and audit-specific characteristics are taken under control. Methodology- In this study, it is desired to investigate the effect of firm-specific characteristics (independent variable) on the board diligence (dependent variable). In this context, the dependent variable was determined as the number of meetings held by the board of directors in a financial period. The independent variables are firm size, firm performance (ROA), financial leverage, firm age and export rate. OLS regression analysis was conducted using 540 observations obtained from 180 non-financial companies traded on the BIST between 2018-2020. Findings- The research finding shows that firm size, firm age, and export rate are positively associated with board effort. On the other hand, no significant findings could be obtained that show that firm performance and financial leverage affect the effort of the board of directors statistically. Conclusion- The findings of the study make an important contribution to the literature by providing empirical evidence on the impact of firm-specific characteristics on board effort. Larger, older and exporting companies need to work harder and be proactive. Keywords: Board of directors, board diligence, firm-specific characteristics, firm performance, regression analysis JEL Codes: M40, M41, M42

Determinants of SMEs’ financial performance: evidence from an emerging economy

Financial performance (FP) is important to every firm, especially SMEs, but FP determinants are debatable. This paper investigates determinants of FP among Ghanaian SMEs. Employing a survey data set of 238 SMEs, multiple regression analysis was performed to determine the extent to which each firm-specific characteristic and industry impact FP. The findings show that a significant relationship exists between company ownership type and FP. There is also a positive link between firm age, firm size, and FP. The industry effect is significant in the service sector. The results also show that the impact of firm-specific characteristics and industry differs across the sub-components of FP and manufacturing and service industries. The results demonstrate the relevance of the tenets of resource base view and structure-conduct-performance in explaining the SMEs' FP variations in a developing country’s context. The managerial and policy implications of the findings for both sectors have been discussed.

The Impact of Firm Specific Characteristics on The Relation Between Financial Distress And Capital Structure Decisions

Purpose – This study investigates the effect of some of the firm level variables on the relation between financial distress and capital structure decisions. Design/ methodology/approach – The manufacturing firms listed in Turkish market between 2007 and 2017 are analysed. Fixed effect panel regressions are used in the analyses. Findings – Financial distress level increases as leverage and short-term debt maturity usage increase. Firm size, return on equity, asset tangibility variables are reported as effective on the association between leverage and financial distress. Return on equity and asset tangibility have impacts on the relation between financial distress and debt maturity. Discussion – The findings show that increased debt level results in higher level of financial distress which is in line with Trade-Off Theory. As the debt level of more profitable firms increases, the financial distress level of those firms increases. Moreover, increasing debt among large firms causes higher level of financial distress. Asset tangibility is also effective in reducing negative impact of debt on financial success. Increasing long term debt among firms with higher ROE, results in increased financial distress levels. Finally, increasing long-term debt ratio among firms with higher tangibility causes higher financial distress level.

The impact of firm-specific characteristics on earnings management: evidence from GCC countries

This study aims to decide whether listed companies in GCC countries practice earnings management (EM). Further, effect of a set of firm-specific characteristics on EM practices is examined. The study sample consists of 332 listed companies during the period 2010–2015. The study estimates the discretionary accruals (DAs) using the modified Jones (1995) model as a proxy for EM to reveal EM activities. Multiple regression analysis is used to test the study hypotheses and achieve the study aims. The results reveal that companies are engaged in EM practices except for Oman and they are practicing downward EM activities (income-decreasing). The results show that the company size and leverage have an insignificant impact on EM practices in GCC countries. Company's losses affect EM for GCC countries except for Bahrain. This further evidence confirms that most GCC countries are engaged in EM and practice EM through income-decreasing discretionary accruals.

The impact of firm-specific characteristics on earnings management: evidence from GCC countries

The impact of firm-specific characteristics on earnings management: evidence from GCC countries

Do Firm Specific Characteristics Influence Earnings Management? Contemporary Evidence from Indian Economy

The appealing rise of using discretionary accruals in the current practices of financial reporting upsurges considerable debates and disagreement between the over generalization of earnings management and the opportunistic use of non-patterned accruals, which very often underestimates the structurally existing variation between enterprises and calls for an urgent attention on optimistic adaptation for survival with reference to the firm specific characteristics. To assess the financial reporting transparency and to regain confidence in the content of financial statement, the present study intends to explore the impact of firm specific characteristics over the earnings management practices in external financial reporting of 234 firm-year observations which encompasses 26 Indian manufacturing firms in three separate sector covering a period of nine years from March, 2007 to March, 2015. With the help of calculated Discretionary Accruals (DA) ensuing (DeAngelo, 1986) model, this study tied up DA as a predicted variable being a proxy of earnings management and firm specific characteristics namely, firm's size, age, leverage, profitability, and growth are as explanatory variables. To evaluate the impact of the criterions and to draw the conclusion, descriptive statistics, VIF, pair wise correlation and multiple regressions were used through Stata software. Findings clearly signalled that while firm size and firm's leverage represented a significant negative impact on earnings management on the one hand; firm's age, profitability and growth were found to have exercised positive influence over the discretionary accruals during the study period for all the selected firms on the other hand. Finally, the study confirmed that large firms with high leverage tend to have lower incentive of earnings management but profitable firm with prolonged existence and higher growth opportunity inclined to involve more in earnings management practices.

The Impact of Firm-Specific Characteristics on the Capital Structure of Nigerian Quoted Firms

Empirical work on capital structure in emerging markets like Nigeria has been limited and met with low explanatory power. This study investigates the determinants of capital structure in Nigeria. The population of study comprises all non-financial corporations quoted on the Nigerian Stock Exchange (NSE) for the period 1999-2014 out of which 50 companies that met the minimum data criteria were utilized. Using panel data least squares regression, modified to weighted (cross section- and period-) models, the research documents the following findings. First, the factors that exert positive influence on corporate borrowing include asset intangibility, firm age and expected inflation while those factors that exert negative influence on capital structure include asset tangibility, growth, size, volatility of earnings, profitability, liquidity, dividend-paying status and uniqueness of industry. The results were, at best, mixed with respect to the portability of pecking order, target adjustment, trade-off, agency and market conditions models. The pecking order beats the trade-off model based on the signs of coefficients of firm-specific characteristics. In order words, asymmetric information explains why smaller, less profitable, less liquid firms with more risky intangible assets and which are low dividend-payers end up relying primarily on debt financing and vice versa. The study recommends the use of leases for financially- and collateral-constrained firms.

The Structure of Ownership and Cash Flows as Determinants of Corporate Dividend Policy: Evidence from Pakistan

Dividend Policy is among the widely addressed topics in modern financial literature. The inconclusiveness of the theories on importance of dividend in determining firm’s value has made it one of the most debatable topics for the researchers (see for example, Ramcharan, 2010; Frankfurter et.al 2011; Al-Malkawi, 2014).The present study investigates the impact of firm specific characteristics on corporate dividend behavior in emerging economy of Pakistan. Three years data (2012-2015) of 100 companies listed at Karachi Stock Exchange (KSE) has been analyzed using Ordinary Least Square (OLS) regression. The results show that managerial and individual ownership, cash flow sensitivity, size and leverage are negatively whereas, operating cash-flow and profitability are positively related to cash dividend. Managerial ownership, individual ownership, operating cash flow and size are the most significant determinants of dividend behavior whereas, leverage and cash flow sensitivity do not contribute significantly in determining the level of corporate dividend payment in the firms studied in our sample. Estimated results are robust to alternative proxy of dividend behavior i.e. dividend intensity.

Exploring intellectual capital disclosure as a mediator for the relationship between IPO firm-specific characteristics and underpricing

Purpose– The purpose of this paper is to examine the direct and indirect impact of firm-specific characteristics on the level of underpricing among Malaysian initial public offerings (IPOs).Design/methodology/approach– Content analysis of IPO prospectuses was used for 331 firms underwent listing between 2002 and 2008. The extent of disclosure was computed by applying the disclosure index of Bukhet al.(2005).Findings– Of the five firm characteristics examined, there is a direct relationship between the firm’s financial performance and the level of foreign activity, and the level of underpricing, instead of being mediated through disclosure. However, some firm characteristics have direct influence on the extent of disclosure but do not have any influence on underpricing.Research limitations/implications– This empirical study concentrates on the Malaysian IPOs on a single disclosure mechanism. Other disclosure items can be examined together with the intellectual capital disclosure items.Practical implications– As the findings reveal that the extent of disclosure is relatively low in influencing the level of underpricing. Had the disclosure been higher, it may have some influence on underpricing. The accounting governance board need to regulate the disclosures of the intangible resources so that the level of underpricing can be minimized.Originality/value– This study provides new insight for the examination of direct and indirect (through disclosure) association between firm-specific characteristics and underpricing. The findings shed some lights to the IPO issuers to enhance disclosure so that the cost of capital can be reduced.

Determinants of voluntary web-based disclosure: A comparison of the united kingdom and its former colony, New Zealand

The paper represents an attempt of enrichment of researches relating to the publication of Voluntary Information Disclosure on the Web-Sites (VDWS). The main objective of this research is to compare the extent of VDWS and the differential impact of some firm specific characteristics in the United Kingdom and New Zealand on firms’ VDWS. In fact, comparative disclosure studies tend generally to evaluate the differential impact of firm specific characteristics on information disclosure in two different legal systems (for example, common law and code law) or having different cultural values. However, few studies have analyzed this topic in countries having the same legal system and/or similar cultural values. The results illustrate a significant variation of VDWS practices across the two countries. The results show, also, that the majority of the identified determinants differ between these two countries in their significance and their sign. The principal results prove that firm size represents a positive common factor on the extent of VDWS in the two countries. The specific factors of British companies are: dispersion of ownership, performance, and the number of listing on foreign stock exchanges. Whereas those of New Zealand companies are bored independence and leverage level. Keywords: Determinants, Voluntary Disclosure, Websites, United Kingdom, New Zealand.

Impact of firm-specific characteristics on managers’ identity disclosure

Purpose – This paper aims to examine the impact of firm-specific characteristics on managers’ identity disclosure in the Gulf Cooperation Council (GCC) region. Design/methodology/approach – Research data were collected from 2010 annual reports and financial statements of 403 listed firms in the GCC countries. The data were analyzed by multiple regression models. Findings – Evidence suggesting that managers’ identity is significantly disclosed by firms that separate the office of chairman from that of chief executive officer was documented. It was also found that mature firms significantly disclose their managers’ identity. Our finding suggests that firms’ declaration that they comply with a set of corporate governance code leads them to disclose managers’ identity. However, we find that firms that are related to the state significantly disclose their managers’ identity, contrary to expectation. Research limitations/implications – One limitation is the lack of a uniform classification of industries by the stock exchanges in the GCC region. The implication of this is that researchers are lacking a uniform standard to apply in their research. Another limitation is the use of only 2010 annual reports and accounts; thus, there is a problem of inter-temporal generalizability. As markets in the GCC countries are evolving, it will be interesting to capture the state of managers’ identity disclosure after 2010. Practical implications – The paper has the potential to influence firms in the GCC region to begin disclosing managers’ personal details and other contact information. In addition, there is the prospect that market regulators in the GCC region and other emerging markets who may read this research may now require firms to disclose their managers’ identity. Originality/value – This is an Original research paper.

The role of employees for post-entry firm growth

While the majority of existing studies on the determinants of post-entry firm growth focus on the role of the founders or on the impact of firm-specific characteristics, possible effects of the characteristics of a start-up’s workforce have been widely neglected to date. In this paper we examine the role of initial worker and job characteristics (e.g., qualification, age, workload, marginal employment) of start-ups for their post‐entry employment growth. The analyses are based upon a capacious panel dataset comprising a representative 50 % sample of establishments in Germany. Our empirical results show that, inter alia, high-skilled and young workers are conducive to growth in terms of both the number of employees and full-time equivalents. With respect to flexible work forms, however, establishments using part-time employment show higher post‐entry growth only in terms of total hours worked, but a significantly lower growth with respect to the number of employees.

An Empirical Study of Corporate Governance Practices of the Banking Sector of Sri Lanka and the Impact of Firm Specific Characteristics on Disclosure Practices

This research is conducted to analyze the gap between the existing corporate governance disclosure practices and the required practices as published by the Institute of Chartered Accountants of Sri Lanka (ICASL) (2003). The research is based on the published annual reports during a period of 2002 to 2006. A comparison has been carried out between the required disclosure practices and the annual reports and thereafter the index was developed by the researchers. The index was developed utilizing the local corporate governance guidelines along with the corporate governance guidelines of other countries as well. Subsequent to the constructing of this index, it was filled utilizing the published annual reports of Listed Licensed Commercial and Specialized Banks (LLCSB) from the years 2002 to 2006. The chosen LLCSBs were listed on the Colombo Stock Exchange as of December 2007. The total number of LLCSBs being considered for the research was twelve. Consequent to the filling of the index, the analysis of such questionnaires was a paneled data analysis. Paneled data analysis is a cross-section of LLCSBs which were surveyed periodically over a period of five years. Furthermore, the analysis was carried out on twelve LLCSBs, utilizing their five years (2002 to 2006) annual reports. The analysis was carried out utilizing E-Views (Version 5.1) for six out of the eight variables. The overall findings of this research indicate that there is a significant gap between the required and existing disclosure practices and the relationship between the Firm Specific Characteristics with disclosure practices. This is due to the fact that the model gives out a R-squared value of 94% which means that the variability of the disclosure practices is explained by the variables board size, company size, debt, firm age, profit margin and return on equity.

Ownership Structure and Cash Flows As Determinants of Corporate Dividend Policy in Pakistan

Dividend Policy is among the widely addressed topics in modern financial literature. The inconclusiveness of the theories on importance of dividend in determining firm’s value has made it one of the most debatable topics for the researchers (see for example, Ramcharan, 2001; Frankfurter et. al 2002; Al-Malkawi, 2007). The present study investigates the impact of firm specific characteristics on corporate dividend behavior in emerging economy of Pakistan. Three years data (2005-2007) of 100 companies listed at Karachi Stock Exchange (KSE) has been analyzed using Ordinary Least Square (OLS) regression. The results show that managerial and individual ownership, cash flow sensitivity, size and leverage are negatively whereas, operating cash-flow and profitability are positively related to cash dividend. Managerial ownership, individual ownership, operating cash flow and size are the most significant determinants of dividend behavior whereas, leverage and cash flow sensitivity do not contribute significantly in determining the level of corporate dividend payment in the firms studied in our sample. Estimated results are robust to alternative proxy of dividend behavior i.e. dividend intensity.

Insider Control and the FDI Location Decision

This paper examines the FDI location strategies of firms from one of the Asian NIEs (Taiwan) in a rapidly emerging market (China). Although there is a substantial literature on FDI location choice, most studies model the choice as a function of a range of location-specific attributes such as local market size, labour costs etc. Few studies consider the impact of firm-specific characteristics, other than potential country-of-origin effects. Yet locations, and especially those in emerging markets where institutions are weak and capital markets are immature, also differ in terms of their risk. Different shareholder constituencies within the parent company will typically have different preferences with regard to risk, and are therefore likely to favour some locations over others. We find that the ownership structure of the parent company matters with regard to its FDI location decision and, in particular, that both family and non-family insider shareholders exert influence over the choice of location. Furthermore we show that firms? location and entry mode choices are inter-related, and establish that the extent of their resource commitments in their foreign affiliates leads parent companies to favour locations where the perceived risks are lower. Finally we show that the efficacy of firms? external relational linkages varies according to the strength of the cultural and historic ties between the location of the foreign affiliate and the home country.

The Complementary/Substitution Effects of the Code of Best Corporate Practices in Mexico with Firm Specific Characteristics on the Improvements in the Quality of Earnings

In this study, we investigate whether or not the Code of Best Corporate Practices (Code) in Mexico is complementary to or a substitute for other corporate governance mechanisms (auditor quality, firm size and board independence). We find that the Code complements high auditor quality and substitutes for high board independence. In tests of the interactions among the firm characteristics, we find that auditor quality results in the most persistent increases in earnings quality. Although we find that size can partially substitute for auditor quality, the largest improvements in earnings quality occurs in firms with high quality auditors. This study contributes to the existing international literature on corporate governance and earnings quality by investigating the differential impact of firm specific characteristics on earnings quality. This study also contributes to the auditing literature by indicating that while auditor quality is an important corporate governance mechanism, size is a viable substitute.

Stock selection, style rotation, and risk

Using US data from June 1984 to July 1999, we show that the impact of firm-specific characteristics like size and book-to-price on future excess stock returns varies considerably over time. The impact can be either positive or negative at different times. This time variation is partially predictable. We investigate whether the partial predictability signals security mispricing or risk compensation by formulating alternative modeling strategies. The strategies are compared empirically. In particular, we allow for a state-dependent choice of investment styles rather than a once-and-for-all choice for a particular style, for example based on high book-to-price ratios or small market cap values. Using alternative ways to correct for risk, we find significant and robust excess returns to style rotating investment strategies. Business cycle oriented approaches exhibit the best overall performance. Purely statistical models for style rotation or fixed investment styles reveal less robust behavior.