Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

Salehi, Mahdi; Arianpoor, Arash; Dalwai, Tamanna

doi:10.13106/jafeb.2020.vol7.no7.149

Cited by 30 publications

(27 citation statements)

References 46 publications

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“…MTB is useful for predicting the firms' future growth opportunities. The firm with tremendous growth opportunities is predicted to have a positive relationship with firm performance and Z -score.Leverage: Leverage is measured as the ratio of total debt to total book value of assets (Magerakis and Tzelepis, 2020; Agustia et al , 2020; Kao et al , 2019; Salehi et al , 2020). Leverage is used to examine the firm's ability to deal with business downturns and exposes businesses to the risk of its repayment ability.…”

Section: Methodsmentioning

confidence: 99%

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Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Dalwai

Salehi

2021

ARA

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PurposeThis research examines the influence of business strategy and intellectual capital on firm performance and bankruptcy risk of Oman's non-financial sector companies.Design/methodology/approachThe data comprises 380 firm-year observations collected from 2015 to 2019 for the non-financial sector companies listed on the Muscat Securities Market. This study measures business strategy using the Miles and Snow typologies and Porter's strategies as alternative measures. The study uses the Granger-causality test to measure the bi-directional causality between independent and dependent variables. The authors use alternative measurements of business strategy and 2SLS/IV estimation to validate the OLS results.FindingsAccording to the Miles and Snow typologies, most of Oman's non-financial firms were analyzers. The empirical results show a negative relationship between business strategy and return on equity (ROE), suggesting defender-type strategy leads to an increase in firm performance. The OLS results show no influence of A-VAIC on firm performance and Altman-Z score. The structural capital efficiency is positively associated with ROA, and Altman Z score consistent with the hypothesized relationship. The Granger causality test shows no inference of causality between any independent and dependent variables except for Z score and CEE.Research limitations/implicationsThe business strategy results from the firm performance and bankruptcy risk models are valuable to the researchers from an emerging market and non-financial companies' perspective. Oman's diversification strategy of its economic activities through non-financial sector companies receives an impetus through the findings of this study. As this study is limited to Oman's non-financial sector companies, future research on business strategy impact can be extended to the financial sector, other GCC, and emerging countries.Originality/valueThe findings of this study contribute to the sparse literature on business strategy in an emerging market like Oman. This study enriches the knowledge of business strategy typologies proposed by Miles and Snow, and Porter. It also contributes to the extant literature on firm performance and bankruptcy risk.

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Section: Methodsmentioning

confidence: 99%

“…Leverage: Leverage is measured as the ratio of total debt to total book value of assets (Magerakis and Tzelepis, 2020; Agustia et al , 2020; Kao et al , 2019; Salehi et al , 2020). Leverage is used to examine the firm's ability to deal with business downturns and exposes businesses to the risk of its repayment ability.…”

Section: Methodsmentioning

confidence: 99%

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Dalwai

Salehi

2021

ARA

Self Cite

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“…It was the first study that examines the relationship between CSR and tax avoidance in an international setting with different legal and institutional environment. Based on these studies, Salehi et al (2020aSalehi et al ( , 2020b examine whether firm risk-taking affects the relationship between managerial entrenchment and CSR in two developing countries (the Iran side and Iraq side) during 2011-2017. The results show that in firms with higher risk-taking, there is a strong relationship between managerial entrenchment and social responsibility both in the Iranian and Iraqi firms.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Corporate social responsibility and tax avoidance: the case of French companies

Abid

Dammak²

2021

JFRA

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Purpose The purpose of this paper is to shed light on the effect of tax avoidance on corporate social responsibility performance. It also investigates whether audit quality affects tax avoidance practices by socially responsible performance. Design/methodology/approach Based on a sample of French non-financial companies over the period 2005 to 2016, this paper uses panel data regressions. The authors apply generalized least square panel regression to overcome autocorrelation and heteroscedasticity problems. For further robustness, this paper runs instrumental variable regressions using the three-stage instrument variable method (three-stage least square). Findings The results show that firms with high CSR scores are more likely to engage in aggressive tax avoidance. The findings also show that firms audited by high-quality auditors are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices. Research limitations/implications The findings are consistent with risk management theory, which suggests that firm’s hedge against any reputational risks that might arise from avoiding taxes by engaging more in CSR. Practical implications Results have implications for policymakers in that CSR firms audited by high-quality auditors may engage in CSR to overcome any negative reactions that could be caused as a result of tax avoidance. Thus, they need to be cautious about managers’ opportunistic behavior and enhance monitoring to enforce social compliance and to be tax compliant. Originality/value This paper extends the existing literature by examining the effect of audit quality on the relationship between CSR performance and corporate tax avoidance. Audit quality is deemed to be an important governance feature that is likely to constraint managerial opportunistic behaviors. Audit quality, along with CSR performance, are associated with a higher level of tax avoidance.

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“…Meanwhile, another investigation is this area concluded there to be a strong relationship between minimised incentive for a given company to expand their adopted corporate governance mechanisms and subpar financial development and economic climate in their country (Doidge et al , 2007). Salehi et al (2020) found that the quality of corporate governance can lower the rate of capital cost in a sample of 975 observations during the period 2012 to 2018. Faysal et al (2021) also, documented a positive relationship board size and chief executive officer (CEO) tenure in reducing the CEO, and a positive role in audit quality in reducing the CEO in the Iranian context.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Corporate governance: association the spots between institutional enhancement, organisational modification and earnings quality

Almasarwah

Alrawabdeh

Masadeh

et al. 2022

JFRC

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Purpose The purpose of this paper is to explore the link between earnings quality, Audit Committees and the Board of companies located in Jordan through the lens of enhancing corporate governance. Design/methodology/approach The real earnings management (REM) and accruals earnings management models were notably used within the panel data robust regression analysis approach; these were used against certain Audit Committee characteristics (i.e. meeting frequency, amount of Board and Committee participants [both internal and external], size) and Board of Directors. Findings The former characteristics were found to have a positive relationship with REM, while the latter yielded mixed results: while there was no significant identifiable relationship between Board outsiders and REM, there was a positive relationship identified between Board meetings, Board insiders and Board size and REM. In regard to this study’s limitations, the qualitative data gathered for the Board of Directors through the lens of corporate governance enhancement should have been documented with more detail; furthermore, the study was limited to the study of just one nation. Research limitations/implications The data is limited to only a single country. More explanation for Board of Directors need qualitative understandings into corporate governance improvement. The control variables are essentially partial in a developing market context. Practical implications The different corporate governance code and guidelines improvements have varied influence on earnings quality. As predictable, boards of directors most effect on earnings quality. Improvements have included most modification to audit committees but through them slight measured effect on earnings quality. Social implications Jordan’s corporate governance improvements expected organised corporate governance practices generally in place amongst its boards, and though invoking considerable modification to audit committees, eventually included slight modification to earnings quality. However, both improved earnings quality. Originality/value This particular research appears to be the first to consider both Audit Committee and Board of Directors characteristics in one model; indeed, in this vein, this research is also the first to explore the corporate governance enhancements that initially stemmed from there being zero code or guideline regarding its use, despite it becoming required recently. Hence, the authors can say this study has high originality.

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Corporate Governance and Cost of Equity: Evidence from Tehran Stock Exchange

Cited by 30 publications

References 46 publications

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Corporate social responsibility and tax avoidance: the case of French companies

Corporate governance: association the spots between institutional enhancement, organisational modification and earnings quality

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