Shareholder Wealth Maximization Research Articles

Overview of Financial Efficiency in India’s Power Sector

Power is an important tool for economic growth of the country. Power is vital for every form of human activity-domestic, agricultural and industrial infrastructure, such as telecommunication and transport. The demand for electricity in India is enormous and is growing steadily. This growth has been slower than a country’s economic growth. The big challenge of the power industry is to balance the demand and supply of electricity. Financial management involves planning, organizing, directing, and controlling the financial activities of an organization. Its primary goal is to maximize shareholder wealth and ensure the efficient use of resources. Financial efficiency refers to how effectively an organization utilizes its resources to generate revenue or profits. It involves minimizing costs and maximizing output or outcomes relative to inputs. The financial efficiency of India's power sector is a critical aspect of its energy infrastructure, impacting both economic growth and sustainability. The main needs of the study are the source and use of funds of the company and how to evaluate the financial performance of the company. The objective of this study is to critically evaluate and assess the financial performance of Southern Power Distribution Company of Andhra Pradesh State Limited, Tirupati.

The Effect of Company Performance, Company Complexity, Company Size on the Board of Commissioners Structure Moderated by Managerial Ownership

The role of the Board of Commissioners is very important to minimize agency problems so that shareholder wealth maximization can be achieved. Under one board, a number of studies have investigated the effect of the effectiveness of the Board of Directors on their company's performance. In Indonesia, existing research related to the effectiveness of the Board of Commissioners investigates the effectiveness of the Board of Commissioners as one of the determining factors for the possibility of financial distress and investigates effectiveness. This study aims to examine the effect of Company Performance, Company Complexity, Company Size on the Structure of the Board of Commissioners and examine whether there is a role of Managerial Ownership as a moderation in the influence of Company Performance, Company Complexity, Company Size on the Structure of the Board of Commissioners carried out by the company. This study took the research population from financial sector companies listed on the Indonesia Stock Exchange for the period 2019-2022. The type of data used in this study is secondary data in the form of company financial reports that are used as samples. The research method used in this study is a quantitative research method. The sample was selected using the purposive sampling method. For hypothesis testing, this study uses multiple linear regression analysis. Based on the results of the study, it shows that company performance has a significant effect on the Board of Commissioners Structure, then Company Complexity and Company Size do not have a significant effect on the Board of Commissioners structure. Managerial Ownership strengthens the influence of Company Performance on the Board of Commissioners Structure. Managerial Ownership does not strengthen the influence of Company Complexity and Company Size on the Board of Commissioners Structure.

CEO compensation risk and pay for luck asymmetry

Purpose This study aims to examine the effect of CEO compensation risk, as measured by the proportion of equity-based pay (option and stock awards) relative to total compensation and pay sensitivity to stock volatility, on CEO pay for luck asymmetry. This paper also empirically examines CEO compensation risk as a mediating variable between the regulatory changes and CEO pay for luck asymmetry. Design/methodology/approach This paper test the proposed two hypothesis that CEO compensation risk is positively associated with the degree of CEO pay for luck asymmetry; and the pay related regulations implemented around 2006 could mitigate the degree of CEO pay for luck asymmetry using the fixed-effects regression models. Findings Consistent with the managerial talent retention hypothesis, this paper finds that CEO compensation risk, as measured by the equity-based pay as a proportion of CEO total compensation and CEO pay sensitivity to stock volatility, is positively associated with the degree of CEO pay for luck asymmetry. In addition, this paper find that CEO pay for luck asymmetry is significantly reduced by the major regulatory changes on executive compensation implemented around 2006. Research limitations/implications This study is among the very few studies exploring the impact of CEO compensation risk on pay for luck asymmetry in the literature. While the major purpose of the widely used stock options is to align executive interests and shareholder values, it also tends to increase the risk level of CEO compensation. So, a well-designed CEO pay package should protect risk-averse CEOs from bad luck for the retention purpose, which is also beneficial to shareholder wealth maximization. Therefore, future research on executive compensation needs to examine the issue from various perspectives. Practical implications For board of directors who is responsible for the compensation of CEOs, it is necessary to consider a broad range of factors when designing an optimal CEO pay package. Social implications The findings on the impact of regulations on CEO pay for luck asymmetry suggest that the executive-pay-related regulations around 2006 have indeed achieved some of their intended goals to significantly lower pay for nonperformance asymmetry, whereby CEO pay sensitivity to stock volatility has been identified as a major mediating variable. Originality/value This study contributes to the literature on executive pay for luck asymmetry in several perspectives. First, this paper finds that CEO compensation risk has a positive impact on the degree of CEO pay for luck asymmetry. Second, this paper finds that the CEO pay for luck asymmetry has been mitigated after 2006 when various regulatory changes on executive compensation began to be implemented in the USA. To the best of the authors’ knowledge, this study is among the very few studies investigating these issues in the literature.

Non-Mandatory Information Disclosures and Shareholders Wealth Maximization of Listed Consumer Goods Firms in Nigeria

Non-Mandatory Information Disclosures and Shareholders Wealth Maximization of Listed Consumer Goods Firms in Nigeria

The Effects of Working Capital Management on the Financial Performance of Commercial and Service Firms Listed on the Nairobi Securities Exchange in Kenya

Working capital management is critical because it affects a company’s profitability, liquidity, and investment decisions, all of which have an impact on financial performance. As a result, effective and efficient working capital management is an essential component for commercial and service businesses. Given the importance of the commercial and services industries to the Kenyan economy, the goal of this research was to investigate the impact of working capital management on the financial performance of these firms, particularly those listed on the Nairobi Securities Exchange (NSE), from 2003 to 2022. Working capital management was measured using the average age of inventory, average collection period, average payment period, and cash conversion cycle, whereas financial performance was measured using return on asset, return on equity, and net operating profit margin. Using panel regression analysis, the results showed that the average inventory age, average collection period, average payment period, and cash conversion cycle were all negatively related to financial performance for NSE-listed commercial and service firms. Based on the findings, it is recommended that Kenyan commercial and service firms adopt prudent optimal working capital management practices to improve firm financial performance and maximize shareholder wealth.

The Impact of ESG Factors on the Firm Performance

This paper examines the impact of environmental, social, and governance (ESG) factors on corporate behavior and performance. Amid increasing concerns from stakeholders, companies are pressured to prioritize ESG aspects. This study leverages stakeholder theory, which emphasizes balancing all stakeholder interests over solely maximizing shareholder wealth. A significant shift was noted in 2019 when U.S. business leaders endorsed a "Statement of Purpose" emphasizing societal benefits over shareholder interests, reflecting a broader move towards corporate social responsibility. The paper analyzes ESG's influence on three key areas: investor expectations, risk management, and long-term strategy. It highlights the mixed research findings on the correlation between ESG ratings and stock prices, noting emerging studies that explore behavioral biases in investor decisions. In terms of risk management, ESG practices are increasingly integral, with research showing that higher ESG ratings can reduce default risks. Regulatory risks are also discussed, particularly concerning climate change policies. Furthermore, the paper explores how sustainability, driven by investor and consumer activism, is becoming central to corporate long-term strategies. Models like the ISM and concepts like double materiality are used to demonstrate how ESG factors can optimize corporate performance. Ultimately, the study concludes that ESG elements significantly impact corporate behavior, suggesting a positive correlation with firm performance.

Examining Global Resource Mobilization: Strategies and Hurdles in Accessing the International Capital Market

The role of finance is indispensable for business entrepreneurs as it fuels both fixed and working capital, driving growth and operational efficiency. Financial decisions are crucial for directing business growth from its inception through various phases. Corporate finance is pivotal in exploring alternative methods to finance fixed and working capital needs. Capital markets, including domestic ones like India's Securities Exchange Board-regulated and international markets, serve as vital platforms for businesses to secure funding and ensure smooth operations. Effective corporate governance, shareholder wealth maximization, regulatory compliance, profitable project funding, and global brand recognition are key goals for corporations to sustain and thrive. This paper aims to delve into the Overseas Depositories' role in international capital markets, highlighting their contribution to funding corporations globally. It will also discuss the significance of two-way fungibility in trading shares and depository receipts across borders, and how overseas depositories facilitate finance raising for corporations. Additionally, the paper will examine the trading dynamics of American and Global depository receipts vis-à-vis shares in the international capital market context.

Exploring Corporate Finance Dynamics: A Qualitative Study on Capital Structure, Firm Value, and Dividend Policies

This qualitative study delves into the intricate dynamics of capital structure, firm value, and dividend policies within the realm of corporate finance. The research aims to explore the factors influencing financial decision-making processes and their implications for firm performance and shareholder wealth maximization. Adopting a systematic literature review approach, the study synthesizes existing theoretical frameworks, empirical evidence, and alternative perspectives to provide a comprehensive analysis of the chosen topic. The research methodology involves data collection through academic databases and scholarly sources, followed by thematic analysis to identify recurring themes and patterns in the literature. The findings highlight the multifaceted nature of financial decision-making, challenging traditional theories such as the irrelevance theory and emphasizing the significance of alternative perspectives such as the pecking order theory, signaling hypothesis, and clientele effect. Moreover, empirical evidence suggests nonlinear relationships between capital structure, firm value, and dividend policies, indicating the influence of contextual factors such as industry dynamics, regulatory environments, and market conditions. The implications drawn from this study extend to both academia and practical applications, emphasizing the need for a nuanced understanding of corporate finance dynamics to inform theory, practice, and policy in the field. By embracing interdisciplinary perspectives, methodological pluralism, and a forward-looking orientation, researchers and practitioners can contribute to the continued evolution of corporate finance theory and practice, ultimately driving innovation, efficiency, and sustainability in the corporate sector.

Firm Characteristics and Corporate Governance Mechanisms as Drivers of Corporate Social Responsibility Disclosure in Zimbabwe

This study extends the literature on the determinants of voluntary disclosure of corporate social responsibility (CSR) in a sample of 61 annual reports from the Zimbabwe Stock Exchange for the year ended 31 December 2020. The purpose of the study is to determine why firms voluntarily disclose CSR and whether corporate governance mechanisms have an impact on firms’ disclosure policy. An unweighted disclosure index consisting of 30 corporate social responsibility attributes was developed; using content analysis to determine the level of corporate social responsibility disclosure. The results show that corporate social responsibility disclosure is low, with the most corporate social responsibility information disclosed being community involvement disclosure (40%), followed by environmental disclosure (30%), products and consumer information disclosure (29%), and human resources disclosure (28%). In addition, using multiple regression analysis and after accounting for size, leverage, profitability and industry, the findings indicate that board independence and board of directors’ qualifications have a significant positive influence on corporate social responsibility disclosure whereas ownership concentration was found to be insignificant. With the exception of profitability, all other firm characteristics, leverage, firm size and industry sector were positive and significant in explaining the variation in corporate social responsibility disclosure. It appears that profitable firms are not motivated to increase corporate social responsibility disclosure. This may be consistent with the shareholder wealth maximization approach which renders corporate social responsibility disclosures as less important. Financial markets in Zimbabwe may not be sufficiently efficient in penalizing firms for incomplete corporate social responsibility disclosure and that regulators may need to mandate such disclosures if information asymmetry is to be reduced and market efficiency enhanced.

The Impact of Sustainable Practices on Creating Value for Banks in Emerging Countries

Objective: Analyze the impact of sustainable practices on the value of banks, located in 28 countries in emerging economies of Latin America, Caribbean, Africa, Asia, Europe and Middle East. Theoretical framework: The current lack of consensus on the impact of sustainable practices in the banking industry may be an indication of the existence of friction related to market efficiency, resulting from informational asymmetry, agency conflicts and lack of adequate signaling between different stakeholders. Methodology: Hypothesis H1 - Sustainable practices impact the value of the banks in the study is verified through a regression with pooled data and robustness tests. Results and conclusions: Banks consider that the adoption of sustainable practices does not add value in the short term. Research implications: A possible explanation for this fact is presented by the overinvestment hypothesis. According to it, the application of resources in sustainable activities causes banks to divert resources from their main objective of maximizing shareholder wealth to meet the demands of other stakeholders - which leads to a reduction in their value. Originality/value: Among the differences in this study is the analysis of banks located in emerging countries. The result obtained provides feedback to the financial market in its investment decisions in banks that adopt sustainable practices, especially in developing countries. Another aspect to be highlighted is the maintenance or change of policies adopted - by countries' regulatory entities - in terms of encouraging the adoption of sustainable practices by institutions.

Stockholder Wealth Maximization during the Troubled Asset Relief Program Period: Is Executive Pay Harmful?

This study investigates governance mechanisms and their relation to firm value, i.e., executive compensation restrictions during the regulatory period and their effects on the performance of firms that received Troubled Asset Relief Program (TARP) funds. We employ an event study to investigate the market reactions for TARP recipients, followed by OLS regression to examine the stock return effects of 10 announcements. For comparison, we also employ a multivariate regression model (MVRM) based on a system of equations with seemingly unrelated regressions (SURs). Our evidence shows that changes in firm value have a negative and significant relationship with changes in total compensation for TARP companies that have paid back their debts to the government. However, the relationship is weaker than that for TARP companies that have not paid back the bailout money.

A Comparative Study of BSE Listed Sectoral Indices of Real Estate and Banking Industry

Purpose: Shareholders are the real owners of the company. They provide capital to the business to get a better return on their investment. Maximizing shareholder wealth has become the primary goal of today's business world. No business entity can become profitable without producing a lot for various investors. There are some strategies to determine the organization productivity and valuation of investors. A cutting-edge form of top management, economic value added (EVA) is a way of valuing shareholder wealth. This helps ensure the true productivity of the organization at the expense of value and capital. The concept was first created by Stern Stewart and Co. The company proposed 164 changes in GAAP rules to calculate real economic profit and some changes in economic capital. MVA is another modern way of valuing shareholder wealth. It describes how efficiently a company uses shareholders' assets. The study made two corrections to the calculation of economic benefit and two corrections to the related population. Real estate and banking companies listed on the Bombay Stock Exchange were selected for the study. The purpose of the audit was to determine the value of investors in BSE-listed land and bank units based on EVA and MVA over a period of five years. Speculations were tested using ANOVA and T-TEST. The audit revealed that an organization like Legend Engine Corp expanded its EVA and MVA during this period. Design/Methodology/Approach: Five BSE listed industries are considered for the present research work and analysed by using EVA and MVA. Findings/Result: A profitable sector is identified. Opportunity is provided for the investors to buy, sell, or hold the stock to generate more profits in the selected sector. It has been observed that SBI has a high typical EVA unlike various banks but it has decreased in the long run. All financial organizations have a positive relationship between EVA and MVA. Originality/Value: Among the organizations in the selected countries, Godrej Properties, and DLF are positively associated with MVA and investment wealth creation every 5 years. Choosing stocks from an industry is a big problem for investors because the market is unpredictable and offers more opportunities for traders and investors to buy sell or hold stocks and earn potential profits in the market. This study aims to compare EVA and MVA to provide some recommendations for stock and industry selection to all investors. Paper Type: Comparative research

Effect of Foreign Ownership, Audit Committee, and Financial Performance on Company Value

Corporate value is used by management in running the business to maximize shareholder wealth. Audit committees, foreign ownership, and financial performance have prospects in the future so that investors will be interested in investing. This population is a manufacturing company that pays out dividends during the period 2016 to 2021 which are listed on the Indonesia Stock Exchange. The sampling technique is 222 companies. The method used is panel data regression. The findings of foreign ownership, debt to equity, total asset turnover, net profit margin, and return on assets significantly affect company value, but audit committees, current ratios, and dividends have no significant effect on company value. It is suggested that the company can improve its financial performance to maximize profit, which reflects the company internally. In addition, foreign ownership can make decisions in the company's strategy to increase the value of the company.

Does ESG privilege climate action over social and governance issues? A content analysis of BlackRock CEO Larry Fink’s annual letters

Milton Friedman famously argued that the social responsibility of business is to maximize shareholder wealth. Friedman’s view is challenged by the proponents of corporate social responsibility who suggest that firms should consider the interests of all stakeholders, and not just shareholders. Following the stakeholder approach, BlackRock’s CEO Larry Fink has made the case that firms should use the ESG (environmental, social, and governance) metric to evaluate their performance as opposed to short-term profit maximization. Fink employs his annual “Dear CEO” letters as a platform to outline his views on ESG. While these letters focus on all three ESG dimensions, the media tends to portray Fink as a climate advocate. We examined the texts of the ten letters Fink has published since 2012 to assess the extent to which Fink focused on climate issues. We found that Fink emphasized the climate dimension over social and governance dimensions only in two letters (2020 and 2022), which suggests that the thrust of Fink’s letters differs from how the media frames them. Broadly, our paper suggests that norm advocates sometimes cannot fully control how their advocated norm is interpreted and framed. Limiting ESG to climate issues has implications for its business acceptability. Specifically, this framing links business incentives to adopt ESG to the policy salience of climate issues as well as the fortunes of both the fossil fuel industry and the renewable energy sector. Second, if businesses face a legitimacy crisis from governance shortfalls or inadequate social performance, ESG will serve as a less effective tool in alleviating stakeholder concerns.

Treasury Management Practices, Financial Performance and Sustainability in Banking Sector

Abstract This study investigated the impact of treasury management practices on financial performance of the banking sector in Nigeria. Treasury management has become a crucial component of the financial performance and sustainable growth of banks. Consequently, difficulties with treasury management practices have an immediate impact on the banking industry and financial system as a whole, which can have an indirect effect on the economic growth and development of the nation. The study used secondary data extracted from annual reports of quoted deposit money banks (DMBs) in Nigeria. Panel data analysis was utilized. Descriptive statistics, correlation matrix and ordinary least square (OLS) were employed. The explanatory variables were bank deposit liabilities and earning assets whereas return on assets (ROA) and return on equity (ROE) were used as proxies for bank financial performance. The DMBs’ data was evaluated using appropriate statistical methods. According to the findings of the study treasury management practices influence the financial performance and sustainability of Nigerian DMBs. Given the highly competitive nature of the industry and the demands for financial performance, the study concluded that there is a need for a strong, effective and efficient treasury management strategy that will maximise returns, increase the value of the company’s shares and maximise shareholder wealth.

Retail Companies: The Impact of Brand Image, Advertising, Promotional, and Capital Spending on Financial Performance

The maximisation of shareholder wealth can be achieved by attaining favourable financial performance. Consequently, the organisation can fulfil the anticipated outcomes of its owners and investors. The financial performance of a corporation serves as an indicator of its efficacy and efficiency in attaining its objectives. The organisation is facing a growing demand to enhance its operational performance by implementing innovative strategies in its business management. Continual implementation of this practice is necessary to navigate a highly competitive market environment effectively. This research employs empirical data to examine and evaluate the impact of brand image, advertising spending and promotion, and capital expenditure investment on a company's financial success. The present study centres on the examination of the retail industry in Indonesia from 2013 to 2023, utilising data obtained through the purposive sampling technique. The present study aims to gather data from prior research sources that are pertinent to the keywords "brand image," "shopping investment," and "Company financial performance." Utilise Helper Harzing's Publish or Perish tool to do this. Subsequently, the data underwent analysis through the utilisation of multiple linear regression. This study examines the research and impact of brand image on consumer shopping investment. The effect of capital on a company's financial performance will be thoroughly examined in this article.

Dividend Decisions and Market Value of Firms in Nigeria

The study investigated the factors that could influence dividend decision and value of the firm. Anchored on signaling theory, the study adopted both cross-sectional and longitudinal research designs. The population of the study consisted of all listed manufacturing firms in Nigeria. The final sample size after filtering was 41 manufacturing firms giving a total of 451 year end observations. The study adopted three separate econometric models for capturing and testing for the relationship between dividend decisions and firm value. Findings of the study revealed that profitability has a significant positive effect on dividend payout while availability of investment opportunities was found to be positive but not significant. Leverage was also found to have a negative but not significant effect on dividend payout. Further, dividend payout, profitability, leverage, and investment opportunities were found to have significant positive effect on firm value. The study concludes that dividend decisions influence value of listed manufacturing firms in Nigeria and recommends amongst others that corporate managers should implement dividend policy that will enhance shareholders wealth maximization and take care of the investment opportunities of the firm.

Dividend Policy and Firms’ Value Nexus: Do Walter and Gordon Relevance Theories Hold Water?

This study is an attempt to join on the argument on whether dividend policy is either relevant or irrelevant on the firms’ market value in Nigeria. To achieve this, the data were obtained from selected 20 quoted firms from ten sectors of the Nigeria economy spanning from 2015 to 2021, taking care of the variables; dividend per share, earnings per share, and market value proxied by market price per share obtained from Nigeria Exchange Group and the firms’ annual and accounting reports for the periods. In testing the specified models, all the variants of the Panel data Analysis techniques; Pooled Regression, Fixed Effects and Random Effects were employed. In addition, the prepositions of the Pooled Regression versus Fixed Effects and Random Effects versus Fixed Effects were compared using Likelihood and Hausman test respectively. The results of Pooled Regression, Fixed Effects and Random Effects found dividend per share and earnings per share significantly impacted on market value. Again, both the Likelihood and Hausman tests favour the fixed effect that the unobserved factors in firm are significant or that the correlation between observed and unobserved factors are significant. In the light of the findings, the researchers recommended among others that investors should be consistent with their dividend payment (smooth dividend payment) to attract investors. Again, this study has added to the stream of knowledge that firms should consistently pay dividends to their shareholders as a form of shareholders wealth maximization. This is a form of financial signaling or dividend announcement that will attract investors.

Corporate Governance Mechanism and Shareholders Wealth Maximization in Quoted Commercial Banks in Nigeria

This study examined the effect of corporate governance mechanism and shareholders wealth maximization of quoted commercial banks in Nigeria. The purpose is to examine how corporate governance variables affect shareholders wealth of quoted commercial banks in Nigeria. Panel data was sourced from financial statement of the quoted commercial banks from 2011 to 2020. Return on equity and return on assets were modeled as a function of board size, board composition, board independence and directors shareholdings. Panel data Ordinary least square method was used as data analysis technique. The study found that 65.7 and 70 percent of return on equity and return on assets were explained by variation in corporate governance variables. Beta coefficient of the variables found that board size and board composition have positive but no significant effect on return on equity of the quoted commercial banks while board independent and directors equity holding have negative effect on the return on equity of the quoted commercial banks. The study found that the independent variables have positive effect on return on assets of the quoted commercial banks except directors’ equity holding. From the findings, the study concludes that corporate governance variables have greater effect on return on assets than return on equity of the quoted commercial banks. From the findings, the study recommends the all corporate governance code from the regulatory authorities should well complied with by the management of the commercial banks. Directors equity holding should be reduce and its objectives integrated with the management objective of maximizing shareholders wealth

Assets Composition and Financial Performance of Listed Consumer Goods Firms in Nigeria

This study investigated the effect of asset composition on financial performance of listed consumer goods companies in Nigeria from (2012-2021). three research questions and corresponding three hypotheses were formulated for the study. Ex-post facto research design was employed in the study. The population of the study included all consumer goods manufacturing firms quoted on the Nigerian Exchange Group (NXG) (NSE) as at 31st December 2022 with a sample size of Twenty-nine (29) consumer goods manufacturing companies selected from the population sector. The study relied on secondary sources of dataset which was obtained from Annual reports of sampled companies as provided by individual companies, Nigerian Exchange Group (NXG) website and Machame Database (www.machameratios.company.site). Amongst other preliminary analysis and tests, the panel least square regression analysis was done in validating the hypotheses. The study found that property, plant and equipment have positive and significant effect on the performance of quoted manufacturing companies in Nigeria Exchange Group; Intangible assets have positive but insignificantly effect on the performance of quoted manufacturing companies in Nigeria Exchange Group; current assets has positive significant effect on the performance of manufacturing companies quoted in the Nigeria Exchange Group. Consequent on the findings of the study, it is recommended amongst others that management of manufacturing companies in the Nigeria should formulate policy that will enhance their investment in property plant and equipment as this will increase the performance of their companies and enable them achieve shareholders wealth maximization objective. The study also recommended that management of manufacturing companies in their effort to enhance the performance of manufacturing companies should increase the level of the of on intangible assets. Increasing the investment in intangible assets would positively enha