BazEkon - Biblioteka Główna Uniwersytetu Ekonomicznego w Krakowie

BazEkon home page

Meny główne

Autor
Rao Marriam (UCP Business School, Lahore, Pakistan), Khursheed Ambreen (UCP Business School, Lahore, Pakistan), Mustafa Faisal (UCP Business School, Lahore, Pakistan)
Tytuł
The Impact of Concentrated Leverage and Ownership on Firm Performance: a Case in Pakistan
Wpływ struktury własności na efektywność firm na przykładzie Pakistanu
Źródło
LogForum, 2020, vol. 16, nr 1, s. 15-31, tab., bibliogr. 55 poz.
Słowa kluczowe
Przedsiębiorstwo, Wartość przedsiębiorstwa, Inwestycje przedsiębiorstw
Enterprises, Enterprise value, Enterprises investments
Uwagi
summ.
Kraj/Region
Pakistan
Pakistan
Abstrakt
Background: The objective of this study is to determine the impact of concentrated leverage and ownership (high levels of control and power) on firm performance in the case of Pakistan's logistics sector separately in the presence and absence of growth options available to the firm. Both leverage and ownership concentration can have a significant influence on firm performance in either a positive or a negative way. Methods: In the data sample of this study, 141 companies in Pakistan listed on the Karachi Stock Exchange were selected with a study window from 2008 to 2018. The selection criteria for our sample study are based on firms with the highest market capitalization. Using a Panel based regression methodology, Generalized Methods of Estimating Equations are applied, which cover for 1st and 2nd order serial correlation and controls for endogeneity and autocorrelation problems. Results: The overall results indicate that the availability and non-availability of growth options to firms are very important factors in analyzing ownership concentration and debt influence on firm performance. This paper takes growth option availability and non-availability as dummy variables and finds that in the presence of growth options, non-linear relations are found between firm performance and ownership concentration and positive significant relations of debt with firm performance. Whereas, in the absence of growth opportunities, inverse parabola relations are depicted of ownership concentration and firm performance, and negative relations between debt and firm performance. Conclusions: Financial leverage represents a two part structure, negative in the presence of growth options and positive in the absence of growth options. The study demonstrates that high levels of power concentrated in the hands of owners leads to a convergence and entrenchment effect depicting non-linear relations with financial performance in both the availability and non-availability of growth options. Furthermore, the study also revealed that the explanatory power of results with a sales rate of growth (as a growth options measurement proxy) is higher than the Price to Earnings Ratio measurement proxy.
Pełny tekst
Pokaż
Bibliografia
Pokaż
  1. Abdullah M.I., Sarfraz M., Qun W., Chaudhary M., 2019. Ownership concentration impact on firm financial performance. LogForum 15 (1), 107-118. http://doi.org/10.17270/J.LOG.2019.317
  2. Abor J., Bokpin A.G., 2010. Investment opportunities, corporate Finance and dividend Payout policy: evidence from emerging markets. Studies in Economics and Finance, 27(3), 180-194. http://doi.org/10.1108/10867371011060018
  3. Adam T., Goyal V.K., 2008. The investment opportunity set and its proxy variables. Journal of Financial Research, 31(1), 41-63. http://doi.org/10.1111/j.14756803.2008.00231
  4. Ahmad H., Javid A., 2009. Dynamics and determinants of dividend Policy in Pakistan: evidence from Karachi stock exchange non-financial listed firms. International Research Journal of Finance and Economics, 25, 148-171. https://mpra.ub.unimuenchen.de/id/eprint/37342
  5. Ahmad M., Baek N.W., Kim D.W., Shah B.A., 2019. The Impact of Institutional Ownership on Firms' Performance Evidence From Pakistan. Asian Studies, 22(1), 27-48.
  6. Alonso P.D.A., Iturriaga F.J.L., Sanz J.A.R., 2005. Financial decisions and growth opportunities: a Spanish firm's panel data analysis. Applied Financial Economics, 15(6), 391-407. http://doi.org/10.1080/09603100500039201
  7. Arellano M., 2001. Panel data econometrics. Oxford University Press.
  8. Barclay M.J., Smith Jr C.W., 1999. The capital structure puzzle: another looks at the evidence. Journal of applied corporate finance, 12(1), 8-20. http://doi.org/10.1111/j.17456622.1999.tb00655.x
  9. Barclay M.J., Marx L.M., Smith Jr C.W., 2003. The joint determination of leverage and maturity. Journal of Corporate Finance, 9(2), 149-167. http://doi.org/10.1016/S09291199(02)00003-2
  10. Bougatef K., Chichti J., 2011. Timing of debt issues: evidence from a panel of Tunisian and French firms. Economics Bulletin, 31(2), 1188-1197.
  11. Carvalhal da Silva A., Subrahmanyam A., 2007. Dual-class premium, corporate governance, and the mandatory bid rule: evidence from the Brazilian stock market. Journal of Corporate Finance, 13(1), 1-24. http://doi.org/10.1016/j.jcorpfin.2006.12.00 3
  12. Chen X.C., Yur-Austin J., 2007. Re-measuring agency costs: The effectiveness of blockholders. The Quarterly Review of Economics and Finance, 47(5), 588-601. http://doi.org/10.1016/j.qref.2007.09.003
  13. Ciftci I., Tatoglu E., Wood G., Demirbag M., Zaim S., 2019. Corporate governance and firm performance in emerging markets: Evidence from Turkey. International Business Review, 28(1), 90-103. http://doi.org/10.1016/j.ibusrev.2018.08.00 4
  14. Dang V.A., 2011. Leverage, debt maturity and firm investment: An empirical analysis. Journal of Business Finance & Accounting, 38(1-2), 225-258. http://doi.org/10.1111/j.14685957.2010.02215.x
  15. Demsetz H., Villalonga B., 2001. Ownership structure and corporate performance. Journal of corporate finance, 7(3), 209-233. http://doi.org/10.1016/S09291199(01)00020-7
  16. Din S.U., Javid A.Y., 2011. Impact of managerial ownership on financial policies and the firm's performance: evidence Pakistani manufacturing firms. https://mpra.ub.unimuenchen.de/id/eprint/37560
  17. Dyck A., Zingales L., 2004. Private benefits of control: An international comparison. The journal of finance, 59(2), 537-600. http://doi.org/10.1111/j.15406261.2004.00642.x
  18. D'Mello R., Miranda M., 2010. Long-term debt and overinvestment agency problem. Journal of Banking & Finance, 34(2), 324335. http://doi.org/10.1016/j.jbankfin.2009.07.02 1
  19. De Jong A., Van Dijk R., 2007. Determinants of leverage and agency problems: A regression approach with survey data. The European Journal of Finance, 13(6), 565593. http://doi.org/10.1080/13518470701198734
  20. Driffield N., Mahambare V., Pal S., 2007. How does the ownership structure affect capital structure and firm value? Recent evidence from East Asia. Economics of Transition, 15(3), 535-573. http://doi.org/10.1111/j.14680351.2007.00291
  21. Farrukh K., Irshad S., Shams Khakwani M., Ishaque S., Ansari N.Y., 2017. Impact of dividend policy on shareholder wealth and firm performance in Pakistan. Cogent Business & Management, 4(1), 1408208.
  22. Filatotchev I., Isachenkova N., Mickiewicz T., 2007. Ownership structure and investment finance in transition economies: a survey of evidence from large firms in Hungary and Poland1. Economics of Transition, 15(3), 433-460. http://doi.org/10.1111/j.14680351.2007.00295
  23. Fama B.M., Chichti J., 2011. Interactions between free cash flow, debt policy and structure of governance: Three stage least square simultaneous model approach. Journal of Management Research, 3(2), 134.
  24. Ghalandari K., 2013. The Moderating Effects of Growth Opportunities of the Relationship between Capital Structure and Dividend Policy and Ownership Structure with Firm Value in Iran: Case Study of Tehran Securities Exchange. Research Journal of Applied Sciences, Engineering and Technology, 5(4), 1424-1431.
  25. Gursoy G., Aydogan K., 2002. Equity ownership structure, risk taking, and performance. Emerging Markets, Finance & Trade, 38(6), 6-6.
  26. Hamouri B., Al-Rdaydeh M., Ghazalat A., 2018. Effect of financial leverage on firm growth: Empirical evidence from listed firms in Amman stock exchange. Investment Management and Financial Innovations, 15(2), 154-164.
  27. Holderness C.G., Kroszner R.S., Sheehan D.P., 1999. Were the good old days that good? Changes in managerial stock ownership since the great depression. The Journal of Finance, 54(2), 435-469. http://doi.org/10.1111/0022-1082.00114
  28. Ishari M.P.S., Abeyrathna S.P.G.M., 2016. The Impact of Financial Leverage on Firms' Value (Special Reference to Listed Manufacturing Companies in Sri Lanka). International Journal of Advancement in Engineering Technology, Management and Applied Science, 3(7), 100-104. ISSN: 2349-3224
  29. Iqbal U., Usman M., 2018. Impact of Financial Leverage on Firm Performance. SEISENSE Journal of Management, 1(2), 70-78.
  30. Iturriaga F.J.L., Crisóstomo V.L., 2010. Do Leverage, dividend payout, and ownership concentration influence firms' value creation? An analysis of Brazilian firms. Emerging Markets Finance and Trade, 46(3), 80-94. http://doi.org/10.2753/REE1540496X460306
  31. Javid A.Y., Iqbal R., 2008. Ownership concentration, corporate governance and firm performance: Evidence from Pakistan. The Pakistan Development Review. 47, 643-659.
  32. Jensen M., 1986. Agency cost of free cash flow, corporate finance, and takeovers. Corporate Finance and Takeovers. American Economic Review, 76(2), 525573.
  33. Joh S.W., 2003. Corporate governance and firm profitability: evidence from Korea before the economic crisis. Journal of Financial Economics, 68(2), 287-322. http://doi.org/10.1016/S0304405X(03)00068-0
  34. Johnson S.A., 2003. Debt maturity and the effects of growth opportunities and liquidity risk on leverage. Review of Financial Studies, 16(1), 209-236. https://doi.org/10.1093/rfs/16.1.0209
  35. Khan A.A., Mustafa F., Khursheed A., Siddique F., 2018. Social Business Innovation: Comparison of operational efficiency of microfinance institutions in Pakistan. Pyrex Journal of Business and Finance Management Research, 4(3), 12-20.
  36. López-de-Foronda Ó., López-de-Silanes F., López-Iturriaga F.J., Santamaría-Mariscal M., 2019. Overinvestment, leverage and financial system liquidity: A challenging approach. BRQ Business Research Quarterly, 22(2), 96-104. http://doi.org/10.1016/j.brq.2018.08.001
  37. Lyandres E., Zhdanov A., 2005. Underinvestment or overinvestment: the effects of financial leverage on investment. Rice University working paper.
  38. Li H., Cui L., 2003. Empirical study of capital structure on agency costs in Chinese listed firms. Nature and science, 1(1), 12-20.
  39. Maury B., Pajuste A., 2005. Multiple large shareholders and firm value. Journal of Banking & Finance, 29(7), 1813-1834. http://doi.org/10.1016/j.jbankfin.2004.07.00 2
  40. Mustafa F. Khursheed A. Fatima M., 2018. Impact of global financial crisis on financially innovative microfinance institutions in South Asia. Financial Innovation, 4(1), 1-11. http://doi.org/10.1186/s40854-018-0099-8
  41. McConnell J.J., Servaes H., 1995. Equity ownership and the two faces of debt. Journal of Financial Economics, 39, 131- 57. http://doi.org/10.1016/0304405X(95)00824
  42. Miguel A.d., Pindado J., Torre C.d.l., 2004. Ownership Structure and Firm Value: New Evidence from Spain. Strategic Management Journal, 25, 1199-1207. http://doi.org/10.1002/smj.430
  43. Miller M.H., Modigliani F., 1961. Dividend policy, growth and the valuation of shares. Journal of Business, 34(4), 411-552.
  44. Myers S.C., 1977. Determinants of corporate borrowing, Journal of Financial Economics, 5(2), 147-75. http://doi.org/10.1016/0304405X(77)90015-0
  45. Najjar D.M.A., 2016. Do ownership concentration and leverage influence firms' value? Evidence from panel data in Jordan. International Journal of Business and Management, 11(6), 262. ISSN 1833-3850
  46. Ndubuisi K., Juliet I., Onyema J.I., 2019. Effect of financial leverage on profit growth of quoted non-financial firms in Nigeria. J Fin Mark. 2019; 3 (1): 9-14. J Fin Mark 2019 Volume 3 Issue 1, 10.
  47. Pindado J., de la Torre C., 2008. Financial decisions as determinants of ownership structure: Evidence from Spanish familycontrolled firms. Managerial Finance, 34(12), 868-885. http://doi.org/10.1108/03074350810915824
  48. Rahman S.M.K., 2017. Effect of Financial Leverage on Firm's Market Value Creation in Bangladesh: A Comparison between MNCs and Domestic Firms. International Journal of Corporate Finance and Accounting (IJCFA), 4(2), 41-58. http://doi.org/10.4018/IJCFA.2017070103
  49. Saidat Z., Silva M., Seaman C., 2019. The relationship between corporate governance and financial performance: Evidence from Jordanian family and nonfamily firms. Journal of Family Business Management, 9(1), 54-78.
  50. Villalonga Belen, R. Amit, 2006. How do family ownership, control and management affect firm value? Journal of Financial Economics, 80(2), 385-417.
  51. Wu L., 2004. The impact of ownership structure on debt financing of Japanese firms with the agency cost of free cash flow. In EFMA 2004 Basel Meetings Paper.
  52. Wu S., 2019. Debt financing structure, ownership concentration and firm performance: a comparison of the listed state-owned and non-state-owned CMNEs. Journal of Chinese Economic and Business Studies, 17(2), 147-168.
  53. Yasser Q.R., Mamun A.A., 2017. The impact of ownership concentration on firm performance: Evidence from an emerging market. Emerging Economy Studies, 3(1), 34-53. http://doi.org/10.1177/2394901517696647
  54. Zhang H., Li S., 2008. The Impact of Capital Structure on Agency Costs: Evidence from UK Public Companies. In Proceedings of the 16th Annual Conference on Pacific Basin Finance Economics Accounting Management Conference, 1-18.
  55. Zraiq M.A.A., Fadzil F.H.B., 2018. The impact of ownership structure on firm performance: Evidence from Jordan. International Journal of Accounting, Finance and Risk Management, 3(1), 1-4. http://doi.org/10.11648/j.ijafrm.20180301.1 2
Cytowane przez
Pokaż
ISSN
1895-2038
Język
eng
URI / DOI
http://dx.doi.org/10.17270/J.LOG.2020.375
Udostępnij na Facebooku Udostępnij na Twitterze Udostępnij na Google+ Udostępnij na Pinterest Udostępnij na LinkedIn Wyślij znajomemu