Nexus between corporate governance practices and cost of capital in PSX listed firms

Arslan, Muhammad; Abidin, Sazali

doi:10.1080/23322039.2019.1600222

Cited by 17 publications

(19 citation statements)

References 92 publications

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“…In this study, the multivariate regression model will be applied to test the hypotheses using the methodology used by Bozec et al (2014), Afkhami Rad (2014), Khan (2016), Arslan and Abidin (2019) and Dakhlaoui and Gana (2020). …”

Section: Methodsmentioning

confidence: 99%

“…Moreover, these results supported by the view that managerial ownership plays an active role in taking risks with other investors in the company’s performance and alleviating the agency’s problem (Huang et al , 2009). Moreover, other studies argue that managerial ownership is a significant positive associated with the cost of equity capital (Arslan and Abidin, 2019; Dakhlaoui and Gana, 2020). According to Khan (2016), find a positive impact on the cost of equity.…”

Section: Theoretical Literature and Hypothesis Developmentmentioning

confidence: 98%

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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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Section: Methodsmentioning

confidence: 99%

Section: Theoretical Literature and Hypothesis Developmentmentioning

confidence: 98%

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

Faysal

Salehi

Moradi

2020

MRR

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“…However, between board size and capital costs, there is a negative correlation. It shows that companies with big boards in Pakistan might suffer cheaper capital expenditures than those with smaller boards (Arslan & Abidin, 2019). H1: Board size has negative capital cost relationships.…”

Section: Literature Review Board Sizementioning

confidence: 99%

“…There is a negative association between board size and the cost of capital. It suggests that the size of boards of directors may suffer cheaper capital expenditures in Pakistan than those with smaller boards (Arslan & Abidin, 2019).…”

Section: Econometric Modelmentioning

confidence: 99%

Impact of Corporate Governance on the Cost of Capital: Empirical Evidence from the Non-Financial Sector of Pakistan

Ijaz

Naveed

Hassan

2021

JAFEE

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Purpose: The study looked at the effect of corporate governance on the cost of capital of firms in Pakistan's non-financial sector. Design/Methodology/Approach: The study sample is comprised of balanced data set of 175 non-financial companies listed on the Pakistan Stock Exchange between 2008 and 2018. The study used the dynamic panel GMM estimator technique. Findings: The findings revealed that an increase in the number of directors, board independence, CEO duality, and inflation negatively influence the cost of capital. On the other hand, the increase in institutional holdings increased the cost of capital. In addition, it is discovered that board committees, political connections, and economic growth do not affect the cost of capital Implications/Originality/Value: When board size, CEO duality, board independence, and inflation increased, the cost of capital decreased in Pakistan's non-financial sector. Furthermore, board committees, political connections, company leverage, and economic growth do not affect the cost of capital in Pakistan's non-financial sector. In comparison, an increase in institutional shareholding increased the cost of capital in Pakistan's non-financial sector.

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“…Second, Pakistan's constitution requires that all laws conform to Islam. Although the fiduciary duties set by the Security and Exchange Commission of Pakistan are initially based on Anglo-American common law and shareholding model of corporate governance, more importantly, they must also conform to Islamic business ethics (Ibrahim 2006;Arslan and Abidin 2019). In this regard, strong Islamic notions are incorporated in Pakistani corporate governance code, such as accountability, transparency, and responsibility.…”

Section: Institutional Context: Pakistan Code Of Corporate Governancementioning

confidence: 99%

Corporate Governance and Cost of Capital: Evidence from Emerging Market

Khan

Javeed

Cuong

et al. 2020

Risks

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This study used a researcher self-constructed corporate governance index as a proxy to measure the firm-level corporate governance compliance and disclosure with the 2002 Pakistani Code of Corporate Governance, to examine the relationship between corporate governance and cost of capital. We found a negative and significant association between the Pakistani Corporate Governance Index (PCGI) and block ownership with the firm-level cost of capital. On average, better-governed Pakistani listed firms tend to be associated with a lower cost of capital than their poorly governed counterparts are. As an emerging market, good corporate governance practices are mainly related to minimise corporate failure and assist firms in attracting capital at a lower cost.

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Nexus between corporate governance practices and cost of capital in PSX listed firms

Cited by 17 publications

References 92 publications

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

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

Impact of Corporate Governance on the Cost of Capital: Empirical Evidence from the Non-Financial Sector of Pakistan

Corporate Governance and Cost of Capital: Evidence from Emerging Market

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