New issue of the Corporate Ownership and Control journal
The recent issue of the journal Corporate Ownership and Control pays attention to issues of risk and strategic management, Islamic banking, dividend policy, CEO compensation, corporate ownership, credit rating agencies etc. More detailed issues are given below.
Sayed M. Fadel and Jasim Al-Ajmi try to determine the risk management practices of Islamic banks operating in Bahrain. The objectives of this study are to determine 1) the effect of global economic and financial crisis on risk management, 2) the severity of different types of risk facing Islamic banks, 3) the risk levels of Islamic financial modes, 4) risk assessment techniques, and 5) risk management techniques. The structure of the balance sheet, the nature of Islamic finance instruments and funding sources have a great impact on the level of risk exposure of banks and the instruments. Credit risk is found to be the most serious risk, followed by liquidity risk, market risk and operational risk, in descending order of importance.
Stefano Bozzi, Roberto Barontini and Ivan Miroshnychenko investigate the relationship between investor protection and CEO pay in family-controlled corporations. The sensitivity of pay to the institutional context is higher for a family CEO than a professional CEO, a result that corroborates the hypothesis that CEO compensation contracts in family firms are influenced by familiar connections. Overall, these results are more consistent with the hypothesis of rent extraction than with the perspective of optimal remuneration contracts.
Cid Gonçalves Filho, Carlos Alberto Gonçalves, Vera Helena Lopes and Marcos Ferreira Santos examine the impact of strategic management concepts in micro and small company performance using the StratQual measuring. Micro and small companies are, in the Brazilian economic scenario, responsible for a considerable amount of jobs created, GDP’s formation, income generation and the capacity of adapting to the market’s necessities with agility and flexibility. Studies that were carried out by SEBRAE - “Serviço Brasileiro de Apoio às Micro e Pequenas Empresas” showing that micro and small companies formulate their strategies according to the perception that the entrepreneurs have of possible markets reactions. The StratQual index is presented as a measuring instrument that aims to allow a company to verify the intensity of its strategic management’s process, its evolution, permitting comparisons between different economic sectors, and enabling benchmarking about strategic management processes. One the main results indicates that micro and small companies that perform the activities of each one (Analysis, Planning, Implementation, Control, Feedback) in the Strategic Management process’ stages with higher intensity have a superior performance.
Mohammad Ahid Ghabayen, Ahmad Omar Hardan, Zaid Jaradat and Mohannad Alshbiel examine the relationship between government ownership and bank performance in Jordan. The banking sector has been widely ignored in the past corporate governance studies due to its strict system. Using a panel data from 2004 to 2013 (147 observations/years), the multiple regression analysis shows that increasing the percentage of shareholdings leads to higher profitability. Additional government-linked banks (GLBs) generally outperform their unlinked counterparts. However, their outperformance is contingent to the significance percentage of the shareholdings. On other words, if the government shareholdings are not significant (less than 10%) the government ownership does not make a significant difference in the performance. Using panel data provide us with a significant roles played by the period of the study. The results of this study might be of interest of potential investors, policy makers, governance agencies and information users.
Imad Jabbouri and Abdelillah El Attar focuse on the relationship between dividend policy and the cost of debt in Morocco. The results show that high dividend payments reflect a low level of agency costs of equity and low information asymmetries. Consequently, creditors demand lower return for providing their capital to high dividend-paying firms. The findings reveal that creditors are less concerned with agency costs of debt. The study shows that the negative relationship between dividend payout ratios and cost of debt is more pronounced in firms with higher information asymmetries.
Hamed Kharraz and Jihene Ferchichi examine the determinants which can push the auditors to reveal the weaknesses of the internal control system in companies listed on the Stock Exchange Securities of Tunisia. The conceptual framework referred to this work is the agency theory. Authors concluded from the results of the logistic regression model that the probability of disclosure of internal control weaknesses was not significantly associated with corporate governance and ownership structure. However, some other company characteristics, e.g. the size are strongly related with probability of firms disclosing internal control weaknesses.
Nurulyasmin Binti Ju Ahmad, Afzalur Rashid and Jeff Gow investigate the impact of CEO duality on Corporate Social Responsibility (CSR) reporting by public listed companies in Malaysia. Content analysis was used to determine the extent of CSR reporting. A reporting level index consisting of 51 items was developed based on six themes: General, Community, Environment, Human Resource, Marketplace and Other. In order to determine the relationship between CEO duality and CSR reporting, an Ordinary Least Square regression was employed. The finding of the study is that, there is no significant association between CEO duality and CSR reporting. CEOs have little interest to promote CSR as it is not cost free and may lead to loss of individual wealth. The finding of this study implies that dual leadership structure reduces checks and balance and makes CEOs less accountable to all stakeholders.
Eleonora Isaia and Marina Damilano examine that reputational concerns should discipline credit rating agencies (CRAs), eliminate any conflicts of interest, and motivate them to provide unbiased ratings. However, the recent financial crisis confirms models of CRAs’ behavior that predict inflated ratings for complex products and during booms. Authors find strong support in the data for our hypothesis. The stock price reaction to rating revisions is significantly lower after the financial crisis, particularly in the financial sector. In multivariate tests, we find that the stock price reaction is lower, on average, in the post-crisis period by 2.3%.
Halil D. Kaya and Nancy L. Lumpkin-Sowers investigate whether the number of certain types of blockholders, as well as their ownership concentrations, will increase during recessions. Using nonparametric tests, authors show that the number of outside blockholders and their ownership stake go up during the recessionary period examined. This suggests a more important monitoring role for the outside blockholder when the economy worsens. Though it does not find a statistically significant change overall in the average number of blockholders or the total percentage of shares held across the firms in our sample for the other blockholder types when the economy moves from expansion to recession, researchers do see noteworthy changes in the behavior of the affiliated and ESOP blockholder at specific ownership concentration levels when the economy shifts.
Nazrul Hisyam Ab Razak and Salmi Huwaina Palahuddin examine the association between directors’ remuneration, corporate governance structures and firm performance of 140 Malaysian listed firms which 70 firms are family firm and 70 firms are non-family. Data has been collected through annual reports in Bursa Malaysia’s database from 2005 till 2013. The results show that firm performance is positively and significantly related to directors’ remuneration, firm’s growth and size measured by ROA, ROE and Tobin’s Q. However, firms’ performance in this study is not responsive to anticipated future market valuations in Stock returns. The study also finds that family ownership leads to lower performance than non-family owned firms on accounting measurement (ROA and ROE) and market measurement (Tobin’s Q) after controlling company specific characteristics. The findings also reveal that role duality has no significant effect on accounting and market performance. Meanwhile the study explores that firm performance is negatively and significantly related to leverage. The findings can be useful to regulators to limit director’s influence over remuneration packages especially in family firm.
Linda Wimelda and Sylvia Veronica Siregar research the effect of financial institution ownership (bank institution and non-bank institution) on firm value and also whether there is a difference of the effect between financial institution ownership in form of bank institution and non-bank institution on firm value. Total observations are 270 listed firms on Indonesia Stock Exchange in 2012-2014, resulting to 809 observations. The result of this research shows that financial institution ownership in the form of bank institution has no influence on firm value while financial institution ownership in the form of non-bank institution has a positive influence on firm value. This research shows that the influence of financial institution ownership in form of non-bank institution is greater than influence of financial institution ownership in form of bank institution on firm value.
Matthias Baumann and Stephan Stubner examine the role of board control tasks in mitigating self-control problems in controlling owner family businesses. It challenges the common perception that controlling owners do not require and use board control because of the concentration of ownership and management in a single individual. Self-control problems, that is agency problems with oneself, have often been overlooked by existing studies on the relevance of control tasks. By using a multiple case study design, we demonstrate that controlling owners frequently use board control as a self-governing mechanism and develop several propositions on favorable board processes and compositions.
Christian Kammlott, Jens J. Krüger, Dirk Schiereck investigate whether and to what extent ownership structure affects cost efficiency in a sample of mainly state-owned but partially privately controlled municipal utilities in Germany. Using an empirical approach which permits the joint measurement of efficiency and assessment of the effect of ownership structure we find significantly, sizeable and robustly larger efficiency of utilities when private control is present.
To browse the papers in the issue please visit this page.