Corporate Governance, Disclosure Quality, and Cost of Equity: Evidence from Pakistan

Nosheen, Safia; Naveed-Ul-Haq, Naveed-Ul-Haq; Sajjad, Muhammad

doi:10.35536/ljb.2018.v6.i2.a4

Cited by 9 publications

(13 citation statements)

References 67 publications

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“…CEO tenure (TENURE) has a negative and insignificant association with the COE having a p-value of 0.000. However, the results are consistent with prior research work conducted in Pakistan by Hassan et al (2018) and Nosheen and Sajjad, 2018), by finding a negative association with the COE.…”

Section: Analysis and Resultssupporting

confidence: 92%

“…Hence, H4 has not been accepted, although the sign is negative as hypothesized. However, the results are consistent with prior research work (Hassan et al, 2018;Nosheen and Sajjad, 2018), which also found a negative impact of board size on the COE.…”

Section: Analysis and Resultssupporting

confidence: 92%

“…Similarly, Hassan et al (2018) also found a negative and insignificant association between block ownership and COE in non-financial firms listed on Pakistan stock exchange. Another study in Pakistan conducted by Nosheen and Sajjad (2018) found that ownership concentration has negative but insignificant association with the COE:…”

Section: Theoretical Framework and Hypothesis Developmentmentioning

confidence: 97%

“…Yermack (1996) also documented an inverse association involving board size and profitability and recommended that small boards enhance enterprise value. A study conducted in Pakistan on 167 non-financial firms, Nosheen and Sajjad (2018) found that board size has a negative and significant impact on the COE. However, Hassan et al (2018) also investigated the non-financial firm listed on the Pakistan stock exchange found that board size has negative and insignificant impact on the COE.…”

Section: Board Characteristics 221 Board Independence (Ined)mentioning

confidence: 99%

“…Moreover, Anwar et al (2019) working on 26 Asian countries data found that CEO duality has a positive and significant association with COE. Furthermore, a study conducted by Nosheen and Sajjad (2018) in Pakistan on non-financial firms listed on Pakistan stock exchange found that CEO duality has a negative and insignificant association with the COE of the firm. Moreover, Hassan et al (2018) investigated non-financial firms, quoted on Pakistan stock exchange found that CEO duality has a negative and significant impact on the COE.…”

Section: Board Characteristics 221 Board Independence (Ined)mentioning

confidence: 99%

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The impact of corporate governance on the cost of equity

Yang

Sarwar

Ali

2019

AJAR

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Purpose In view of organizational inertia, with the occurrence of a major event, though resource rigidity minimizes, however simultaneously, it increases process rigidity, which creates difficulties in motivating managers and dealing with the agency problem. Therefore, keeping in mind the high demand created by the China–Pakistan Economic Corridor and Naya Pakistan Housing Scheme in the cement sector of Pakistan, the purpose of this paper is to investigate the impact of corporate governance (CG) on the cost of equity (COE) in the cement sector, to deal with the problems surging during and after the completion of these projects and highlight further opportunities for the cement sector of Pakistan. Design/methodology/approach CG is a qualitative concept therefore, eight proxies have been used to measure it along with the two control variables. This study uses balance panel data of six years from 2012 to 2017, collected from 18 companies of the cement sector of Pakistan. Descriptive statistics have been used to describe the data, correlation matrix to see the nature of the relationship, and Pooled OLS as the estimation technique, while to analyze the data a statistical package 13 has been used. To measure the COE, the Capital Asset Pricing Model (CAPM) has been used. Findings Regression results suggest that block ownership, insider ownership and the board size are insignificant, while CEO tenure is negatively and significantly associated with the COE. Non-executive directors, independence and CEO duality are insignificant; however, diversity is positively and significantly associated with the COE. Moreover, the mean value of the COE is 8.22 percent for the cement sector, while the coefficient of determination of the model under study is 74 percent. Research limitations/implications This paper is based on the data from the cement sector of Pakistan only. Therefore, this is the reason that these results cannot be generalized on the whole economy of Pakistan. Practical implications This study helps in finding out the COE value specific to the cement sector, which will help this sector to evaluate the capital budgeting decision more precisely and accurately than before. Moreover, the association of diversity as positive, while independence as negative with the COE highlights a room for improvement in the implementation of CG codes by SECP. This study also helps to mitigate the impact of inertia, the after-effects of high demand, and managing the agency problem in the cement sector. Originality/value This is the first study using CG data collected just after the revised promulgation of CG codes in 2012, along with a wide range of eight proxies measuring CG and its impact on the COE in the cement sector.

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Section: Analysis and Resultssupporting

confidence: 92%

Section: Analysis and Resultssupporting

confidence: 92%

Section: Theoretical Framework and Hypothesis Developmentmentioning

confidence: 97%

Section: Board Characteristics 221 Board Independence (Ined)mentioning

confidence: 99%

Section: Board Characteristics 221 Board Independence (Ined)mentioning

confidence: 99%

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The impact of corporate governance on the cost of equity

Yang

Sarwar

Ali

2019

AJAR

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The relationship between corporate governance and cost of equity: evidence from the ISIS era in Iraq

Salehi

Moradi

Faysal

2023

IJOEM

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PurposeThe cost of equity (COE) and corporate governance structure are the most critical factors affecting competition among publicly held companies. Accordingly, the present paper aims to examine the relationship between corporate governance and the COE in the wake of the Islamic State of Iraq and Syria (ISIS) in Iraq.Design/methodology/approachOur statistical sample includes 34 companies listed on the Iraq Stock Exchange from 2012 to 2017. Board structure (i.e. board size, board independence, CEO tenure, board meetings frequency and CEO duality) and ownership structure (managerial ownership, institutional ownership and state ownership) are considered proxies for corporate governance structure. Besides, the authors employ the Capital Asset Pricing Model to measure the COE as our dependent variable. Multiple regression analysis and Exploratory Factor Analysis are also used to estimate the research models.FindingsOur results suggest that corporate governance structure plays a significant role in reducing COE during the ISIS era. Furthermore, the authors find that corporate governance can be an alternative to COE reduction in Iraq’s absence of national security. Our findings also indicate that board size, board meeting frequency, managerial ownership and institutional ownership are negatively associated with COE.Research limitations/implicationsAlthough this study has been thoroughly considered and cautiously planned, the specific period chosen to conduct the research (i.e. the ISIS era) could be a significant limitation since financial disclosure of listed companies may have been of lower quality during this period. However, to relatively alleviate this limitation and maintain the authenticity of the findings, the authors exclude low-quality financial statements, particularly non-audited financial reports, from the statistical sample. Furthermore, practitioners of emerging markets that are suffering from a weak external corporate governance combination can use the findings of this paper as a guideline to compensate the existing market deficiencies by improving internal corporate governance for observing further cash sources with lower cost. The findings also propose to international agencies that the business environment in Iraq is heavily affected by the ISIS phenomenon and needs financial aid to recover from its side effects. Furthermore, macroeconomists may use this paper to make more decisive macroeconomic indicators predictions.Originality/valueThis paper is among the pioneer investigations and elaborates on how the agency conflict is resolved effectively. The board and managerial characteristics and different forms of ownership might be applicable to provide cheaper funds for companies listed in emerging markets suffering from weak external corporate governance combinations.

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The impact of ownership structure on the cost of equity in emerging markets

Faysal

Salehi

Moradi

2020

MRR

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Purpose The purpose of this study is to cover the ownership structure as (institutional ownership and managerial ownership) influencing the cost of equity in emerging markets. Design/methodology/approach The authors applied the regression model with the fixed-effect model in the data. Data collected from listed companies in the Iraq-Iran Stock Exchange during 2012-2017. Findings The authors found a significant positive associated between institutional ownership and the cost of equity in the Iranian and Iraqi contexts. The results also reveal a significant negative associated between managerial ownership with the cost of equity in the Iranian and Iraqi contexts. This means that when managerial ownership is increased, the cost of equity will be reduced. These results support the role of inside ownership to enhance fixed performance by reducing the cost of equity. So, managerial ownership can be a substitute for all shareholders. Moreover, the results indicate a similarity in the impact of the ownership structure on the cost of equity in the Iraqi and Iranian context, this means the similar elements among west Asian countries. Research limitations/implications Financial companies such as banks and investment companies were not listed due to the difference in the nature of their work with the other sectors in the Iranian and Iraqi stock exchanges. Moreover, the authors are heavily constrained as listed companies must continue during the study period to calculate the cost of equity. Therefore, the results are difficult to generalize widely. Practical implications This international study will enable investors in, as well as local and international investors to take the appropriate investment decision-making in the capital markets in these countries (Iraq and Iran). Moreover, it contributes significantly to helping corporate governance bloggers in Iraq and Iran understand the role of the ownership structure in corporate governance. Originality/value This is the first study of the interaction between institutional ownership, managerial ownership with the cost of equity in Iraq, the study will help complete the knowledge gap with developed markets. The results are important in future research because the authors believe that it is very important for the future to look at better for percentage levels of institutional and managerial ownership in the company ownership. Although the contribution is limited, it will provide a useful guide for more papers in other west Asian countries.

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Corporate Governance, Disclosure Quality, and Cost of Equity: Evidence from Pakistan

Cited by 9 publications

References 67 publications

The impact of corporate governance on the cost of equity

The impact of corporate governance on the cost of equity

The relationship between corporate governance and cost of equity: evidence from the ISIS era in Iraq

The impact of ownership structure on the cost of equity in emerging markets

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