Although extensive empirical studies have been conducted on capital structure in the context of developed countries, few have been carried out on emerging markets using large…
Abstract
Although extensive empirical studies have been conducted on capital structure in the context of developed countries, few have been carried out on emerging markets using large pools of data with comprehensive modeling techniques. This paper examines the financial characteristics of Malaysian companies and their debt policies using data of 106 firms from 1992 to 1999. The results of pooled GLS regressions show that all types of debt (short‐term, long‐term, and total) are influenced by the variables for profitability, size, and tangibility—but not by growth, risk, and investment opportunity (market‐to‐book‐value ratio). Thus, the latter results are contrary to evidence from developed markets. However, when the data are classified into two sub‐periods, only in the first (1992–95) does the risk variable reveal the hypothesized positive influence on all debt ratios, reflecting Malaysia's economic uncertainty in the throes of the Asian financial crisis and implementation during the second sub‐period (1996–99) of the domestic capital control policy. Profitability has a persistent and consistent negative relationship with all types of debt ratios in both periods; this confirms the capital structure prediction of the pecking order theory in an emerging capital market.
Sakchai Jarernsiripornkul and I.M. Pandey
The purpose of this paper is to examine the governance system of autonomous universities in an emerging economy, i.e., Thailand. The authors examine the degree of freedom that…
Abstract
Purpose
The purpose of this paper is to examine the governance system of autonomous universities in an emerging economy, i.e., Thailand. The authors examine the degree of freedom that Thai autonomous universities enjoy and the process that they follow in instituting their governance system.
Design/methodology/approach
The authors use case study method of research where units of analysis are 16 public autonomous universities. Data are collected directly from the Universities and available documents and through interviews with ten informants from five universities. Data are analysed using the triangulation method before presenting findings.
Findings
The authors find that Thai autonomous universities had different degree of readiness when they were granted autonomy status by the government. According to their Acts, the universities can specify their own governance pattern, leadership recruitment, revenue management, budgeting and personnel management. With the strengthening role and accountability, the university councils have enjoyed wider space of actions in institutional governance. Size and composition of the councils differ. Big and more mature universities tend to have more members and their councils comprise more outside experts than the small ones. Thai autonomous universities’ governance structure is in the pattern of corporate-like structure. Participatory process is applied in the university decision making. Big universities are strategically directed towards being research universities, while small and newly established universities are striving to expand to health science education. In academic governance, there is an academic board which helps the council to handle academic standards and give academic related recommendations. The launch of Education Criteria for Performance Excellence Framework to standardise the country’s higher education system has become controversial and is said to lessen the universities’ degree of academic freedom. In financial autonomy, the study finds that most universities are still dependent on government budget.
Originality/value
This case study depicts the governance system of autonomous universities in Thailand, which is one of the emerging countries. Taken into account that existing literature regarding university governance, especially in the emerging countries is limited, the study, which eventually proposes recommendations for lifting these universities’ governance performance, should be able to contribute fruitful knowledge in the area.
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Adil Zahoor and Musadiq Amin Sahaf
Kaplan and Norton (1996b) claimed that there exists a sequential dependency between the four balanced scorecard perspectives (learning and growth, internal business processes…
Abstract
Purpose
Kaplan and Norton (1996b) claimed that there exists a sequential dependency between the four balanced scorecard perspectives (learning and growth, internal business processes, customer, and financial). Although theoretically supported by various researchers, the said claim has, somehow, attracted limited empirical attention. Therefore, the purpose of this paper is to investigate whether empirical evidence will support the theoretically grounded interrelations between the four balanced scorecard perspectives.
Design/methodology/approach
For this study, a total of 13 key performance indicators were identified and then clustered into the four perspectives of balanced scorecard, followed by the development of causal linkages. Data related to these indicators were collected from 1,001 employees and 985 customers of two Indian retail banks and then tested for hypothesized relationships using structural equation modeling. All the constructs were measured using scales developed in previous research works.
Findings
The results indicate that employee learning and growth positively influence the internal business processes which in turn influence the customer perspective. Finally, the customer perspective has a significant positive influence on the financial performance. Further, it was also revealed that internal business processes mediate the relationship between employee learning and growth and customer perspective. Also, the relationship between internal business processes and financial performance is significantly mediated by customer perspective.
Originality/value
Majority of the previous research on causal linkages of balanced scorecard has been theoretical in nature. Whatever little empirical research is available in this regard is limited to developed nations. In a developing nation like India, these linkages have seldom been examined in the past. The study has been conducted to plug this gap in the literature and, resultantly, provide further insights into the interrelations of the balanced scorecard perspectives.
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Erdinc Karadeniz, Serkan Yilmaz Kandir, Mehmet Balcilar and Yildirim Beyazit Onal
The purpose of this paper is to investigate the factors affecting capital structure decisions of Istanbul Stock Exchange (ISE) lodging companies.
Abstract
Purpose
The purpose of this paper is to investigate the factors affecting capital structure decisions of Istanbul Stock Exchange (ISE) lodging companies.
Design/methodology/approach
A model based on the trade‐off and pecking order theories is specified and implications of both theories are empirically tested. The model is estimated using a dynamic panel data approach for five ISE companies for the period of 1994‐2006.
Findings
The findings suggest that effective tax rates, tangibility of assets, and return on assets are related negatively to the debt ratio, while free cash flow, non‐debt tax shields, growth opportunities, net commercial credit position, and firm size do not appear to be related to the debt ratio. Although the findings partially support the pecking order theory, neither the trade‐off nor the pecking order theory exactly seem to explain the capital structure of Turkish lodging companies.
Research limitations/implications
The data used in this paper are limited to five companies traded in the ISE, since the data on other companies are not available. A more detailed analysis would use data for other companies in the industry.
Practical implications
The findings of the study clearly demonstrate the importance of capital structure decisions for financial sources.
Originality/value
Although the capital structure theory is extensively examined in the finance literature, there are fewer studies covering the tourism industry, particularly Turkey. The paper establishes the determinants of the capital structure of Turkish lodging companies. The research findings should help managers to make optimal capital structure decisions.
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Basil Al-Najjar and Erhan Kilincarslan
The purpose of this paper is to investigate the impact of regulations, reforms and legal environment on dividend policy in a different institutional setting. Particularly, it…
Abstract
Purpose
The purpose of this paper is to investigate the impact of regulations, reforms and legal environment on dividend policy in a different institutional setting. Particularly, it examines the firm-level cash dividend behaviour of publicly listed firms in Turkey in the post-2003 period, since there were major economic and structural reforms as well as significant regulatory changes of dividend payout rules imposed by the supervisory bodies.
Design/methodology/approach
The paper focuses on a recent large panel data set of 264 Istanbul Stock Exchange (ISE)-listed firms over a ten-year period 2003-2012. First, it employs a modified specification of Lintner’s (1956) partial adjustment model for analysis regarding target payout ratio and dividend smoothing. Second, it performs a logit model for analysis in identifying the link between financial characteristics and the likelihood of paying dividends.
Findings
The results show that ISE firms now follow the same determinants as suggested by Lintner. They, indeed, have long-term payout ratios and adjust their cash dividends by a moderate level of smoothing, and therefore adopt stable dividend policies (although less stable policies compared to their counterparts in the developed US market) as a signalling mechanism over the period 2003-2012. Moreover, the results also report that ownership structure concentration affects the target payout ratio and dividend smoothing in the Turkish market. In addition, the results further show that more profitable, more mature and larger sized ISE firms are more likely to pay cash dividends, whereas ISE firms with higher investment opportunities and more debt are less likely to distribute cash dividends in the post-2003 period.
Originality/value
To the best of authors’ knowledge, this paper is the first major research that examines the implications of reforms and regulations on cash dividend payments and dividend smoothing over time in Turkey during its market integration process in the post-2003 period.
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The dividend payout behaviour of firms is a well‐studied subject in finance. In recent times, the influence of macro economic factors and understanding their implications far…
Abstract
Purpose
The dividend payout behaviour of firms is a well‐studied subject in finance. In recent times, the influence of macro economic factors and understanding their implications far corporate financial decisions has assumed significant importance. The objective of this paper is to study the dividend payout behaviour of firms in India under monetary policy restrictions. Monetary policy restrictions are expected to affect the availability and cost of external fund relative to internal funds. The hypothesis is that during monetary policy restrictions the dividend payout policy changes and payouts reduce.
Design/methodology/approach
The Lintner framework is extended to examine the impact of these restrictions on the dividend payout. Balanced panel data of 571 firms for years are used, from 1989 to 1997 together with, the GMM estimator, which is the most suitable methodology in a dynamic setting.
Findings
The results show that Indian firms have lower target ratios and higher adjustment factors. The finding suggests that the restricted monetary policies have a significant influence on the dividend payout behaviour of Indian firms; they cause about a 5‐6 per cent reduction in the payout ratios.
Research limitations/implications
The findings of this paper suggest that macro‐economic policies do have an impact on corporate financing decisions. The future research should examine the impact of various other macro‐economic policies and its components on the corporate financing decisions of firms.
Practical implications
The significance of the macro economic policy variables suggests that monetary policy restrictions do have an impact on the cost of raising funds, and the information asymmetry between lenders and borrowers increases, which forces companies to reduce their dividend payout.
Orginality/value
To one's knowledge this is the first study providing evidence of the restricted monetary policy constraining the dividend payout policies of firms in India.
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Adapting to external and internal transformations is a difficult task that managers and scholars must face while attempting to keep their organisations alive and well-established…
Abstract
Adapting to external and internal transformations is a difficult task that managers and scholars must face while attempting to keep their organisations alive and well-established. This chapter explores the various decision-making tools that can assist practitioners and scholars to improve their understanding of the external scenario to determine the contemporary appropriateness of these approaches for analysing the environment and their implications for various types of organisations. The chapter investigates the barriers and drivers of these methods and proposes existing alternative paradigms created by academics and practitioners to analyse and comprehend the context. It demonstrates how these decision-making tools can be implemented by providing examples and case studies.
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Abdelaziz Hakimi, Rim Boussaada and Majdi Karmani
This paper aims to investigate the reciprocal nonlinear relationship between corporate social responsibility (CSR) and firm performance (FP).
Abstract
Purpose
This paper aims to investigate the reciprocal nonlinear relationship between corporate social responsibility (CSR) and firm performance (FP).
Design/methodology/approach
The authors used a sample of 814 European firms over the period 2008–2017. The Panel Smooth Transition Regression (PSTR) model was performed as an econometric approach.
Findings
Firstly, results show a threshold effect in the CSR–FP relationships within the two directions. More specifically, the authors found that firms are more likely to engage in CSR by surpassing a threshold of 1.231% for return on assets (ROA) and 0.821% for Tobin’s Q ratio. Secondly, the authors also found that the impact of CSR on FP is positive and significant only if the environment, social and governance score surpasses the threshold of 56.780% when the dependent variable is ROA and 41.02% when Tobin’s Q ratio measures performance.
Research limitations/implications
A significant part of the literature supports the linear relationship between CSR and FP from the unique direction (CSR → FP). This study comes to fill this gap by assessing the possible nonlinear relationship. In addition, this nonlinear relationship is tested under the two directions. Therefore, defining the threshold of FP that allows companies to engage in CSR, on the one hand, and the threshold of engagement in CSR that improves FP, on the other hand, could be an exciting topic.
Practical implications
To get the full benefit from CSR effects, firms should be with better financial performance to be socially responsible.
Originality/value
To the best of our knowledge, few studies have explored the nonlinear relationship between CSR and FP. In addition, this study raises the question of whether this relation is causal. The authors assess the two nonlinear relationships between CSR ? FP and FP ? CSR by determining the optimal thresholds.
研究目的
本文旨在探究企業社會責任 (以下簡稱企社責) 與公司業績之間的相互非線 性關係。
研究設計
研究所採用的樣本為814間歐洲公司, 涵蓋期為2008年至2017年。研究人 員使用縱橫平滑轉換模型、作為經濟計量方法和工具去進行研究。
研究結果
研究結果顯示、在有關的兩個方向內, 企社責與公司業績之間的關聯上是 存在著閾值效應的。更具體地說, 研究人員發現, 若企業的資產報酬率超過1.231%的 水平, 以及托賓的Q比率 (Tobin’s Q Ratio) 0.821%的水平的話, 它們會更願意承擔企 社責。其次, 研究結果亦顯示, 企社責對企業的業績會產生積極的影響; 另外, 只有 當資產報酬率是因變數、而環境、社會和公司治理的分數 (ESGS) 超過56.780%, 以 及當托賓的Q比率用來測量績效、而數值為41.02%時, 企社責對企業的業績所產生的 影響會較為顯著。
研究的啟示
過去的學術文獻、大部份都是以唯一的方向 (企社責 ->公司業績) 去確認 企社責與企業業績之間的線性關係。本研究評估了兩者之間可能存在的非線性關係; 而且, 這非線性關係是在有關的兩個方向下而進行測試的; 因此, 本研究一方面給可 讓公司以企社責的精神和理念去營運的企業業績的閾值下了定義; 另一方面, 又給參 與企社責為公司帶來業績的改善的閾值下了定義。這均為令人興奮的課題。
實務方面的啟示
企業若想取得因參與企社責而帶來的完全好處, 它們必須擁有更佳 的財務績效、以能盡其社會責任。
研究的原創性
盡我們所知, 探究企社責與企業業績之間的非線性關係的研究實在不 多; 而且, 本研究對這兩者的關係是否是因果關係提出了質疑; 就此, 我們藉著釐定 最佳的相對閾值、來評估企社責 ->企業業績與企業業績 ->企社責之間的兩個非線性的 關係。
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Geetanjali Pinto and Shailesh Rastogi
This study aims to evaluate the influence of corporate governance index (CGI), ownership concentration (OC) and other features on the dividends of listed Indian pharmaceutical…
Abstract
Purpose
This study aims to evaluate the influence of corporate governance index (CGI), ownership concentration (OC) and other features on the dividends of listed Indian pharmaceutical companies. The other features included are leverage, excess return over cost of equity and stock-market return. This study thus helps to provide more insights on the dividend distribution issues for a shareholder in the challenging and demanding pharma industry, especially when stakes are high.
Design/methodology/approach
The data for all 26 pharmaceutical companies which form part of the NSE NIFTY-500 index for six years (2014–2019) is procured using Centre for Monitoring Indian Economy’s (CMIEs) Prowess database. An eight-pointer scale (unweighted scale) is used to develop the CGI. For OC, this paper considers the proportion of promoters’ shareholding, domestic institutional investors’ shareholding and foreign owners’ shareholding. Both static and dynamic panel data models are used to evaluate the effect of CGI and OC on dividends.
Findings
The panel data analysis depicts that CGI significantly positively influences the dividends of pharmaceutical companies in India. Thus, the authors find support for La Porta et al.’s outcome agency model. The results also reveal that only promoters’ holdings are significantly inversely related to dividends out of the three OC variables used for this study. This discussion implies that family-run pharmaceutical companies in India tend to retain profits instead of distributing dividends.
Research limitations/implications
This study provides two direct insights for policymakers and stakeholders. First, because this study shows that CGI significantly positively influences dividends, corporate governance (CG) is an essential factor for determining dividends. Second, because the results also reveal that OC in the hands of promoters hurts dividends, it implies that the higher the promoter holding, lesser is the dividend distributed by the company. Both these results can be used as a quantitative tool by investors to assess Indian pharmaceutical companies better. However, a similar study could be directed to assess the impact of CGI and OC on dividends of other industries. Moreover, additional variables of CG and OC can also be evaluated in further detail. There is also a need to empirically validate the impact of CG and OC on a company’s performance.
Originality/value
The results are robust and reveal that variation in CGI does impact dividend policy. This aids in confirming that CG is a crucial aspect influencing dividends. The findings also add to the increasing studies across the globe evaluating the influence of CG and OC on dividends.