Corporate Governance Quality and Cost of Equity in Financial Companies

Regalli, Massimo; Soana, Maria Gaia

doi:10.5430/ijba.v3n2p2

Cited by 7 publications

(14 citation statements)

References 31 publications

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“…Institutional investors will then be less likely to play their monitoring role of managerial opportunism (Villalonga and Amit, 2006). The result is consistent with that found by Regalli and Soana (2012). In the Tunisian context, Shabou (2003) concludes that the degree of participation of financial institutions in the firm's capital has a significantly negative impact on its performance.…”

Section: Ownership Structure and Cost Of Equity Capital: Linear Vs Nonlinear Relationshipssupporting

confidence: 57%

“…Their results showed that after the financial crisis, family control is linked to a higher cost of equity capital. Regalli and Soana (2012) find that financial firms with good internal and external governance have a high cost of equity capital. They argue that companies with significant institutional investment are those for which shareholders require a high cost of equity capital.…”

Section: Ownership Structure and Cost Of Equity Capital Under The Entrenchment Thesismentioning

confidence: 97%

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Ownership structure and cost of equity capital: Tunisian evidence

Dakhlaoui

Gana

2020

IJBGE

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This paper aims to examine the effect of ownership structure on the cost of equity capital in the Tunisian context. Using panel data, the study provides evidence for a negative relationship between ownership concentration and cost of equity capital. However, most ownership composition variables validate the entrenchment effect. Results show an inverted U-shaped relationship between institutional ownership, foreign ownership and cost of equity capital. However, a U-shaped relationship is found between state ownership and the dependent variable. To alleviate endogeneity concerns and establish that the results are robust, the authors re-estimated the regressions using a dynamic approach. It supports the entrenchment effect of ownership concentration. A U-shaped relationship between this variable and the cost of equity capital is confirmed. However, a concave relationship is found when considering ownership composition variables. As for family ownership, the results from static and dynamic approaches are convergent and in favour of entrenchment effects.

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Section: Ownership Structure and Cost Of Equity Capital: Linear Vs Nonlinear Relationshipssupporting

confidence: 57%

Section: Ownership Structure and Cost Of Equity Capital Under The Entrenchment Thesismentioning

confidence: 97%

Ownership structure and cost of equity capital: Tunisian evidence

Dakhlaoui

Gana

2020

IJBGE

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“…Therefore, our results are consistent with the Agency's theory of separation of the chairman board and executive director, these results are consistent with the findings of Afkhami Rad (2014) and Asadi and Mohammadzadeh (2016). Institutional ownership (+H7) has a significant positive effect on the COE, our results supported the findings of Ashbaugh et al (2004), Ali Shah and Butt (2009), Regalli and Soana (2012), Bozec and Bozec (2010), Asadi and Mohammadzadeh (2016), and same results with leverage (+H9), the research finding supported by Zhu (2014), Houqe et al (2017). It is appeared where creditors feel the risk of liquidation or merger when there is a large proportion of institutional ownership.…”

Section: Discussion Of Research Findingssupporting

confidence: 90%

“…Institutional ownership (+H7) has a significant positive association with the COE. These results are same as Ashbaugh et al (2004), Ali Shah & Butt (2009), Regalli and Soana (2012), Bozec and Bozec (2010), Asadi and Mohammadzadeh (2016). As well as leverage (+H9) is the same results of Zhu (2014), Houqe et al (2017).…”

Section: Discussion Of Research Findingssupporting

confidence: 86%

Impact of corporate governance mechanisms on the cost of equity capital in emerging markets

Faysal

Salehi

Moradi

2020

Journal of Public Affairs

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The purpose of this study is to analyze the effects of corporate governance mechanisms on the cost of equity (COE) of Iranian and Iraqi nonfinancial companies listed in the Iran‐Iraq Stock Exchange. In order to achieve the purpose of the study all listed companies on the Iran‐Iraq Stock Exchange, was considered as population of the study during the period of 2012–2017 (137 Iranian listed companies and 34 Iraqi listed companies). In order to test the relationship between variables, the researchers used a set of statistics to estimate the multiple regression model appropriate to the study. Our results indicate a significant positive role for the board size and CEO tenure in reducing the COE. Finally, our results reveal a positive role in audit quality in reducing the COE in the Iranian context.

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“…Another critical point is that COE was found in that study was 29 percent which is much high than the average COE of America that is around 13 percent and higher than other studies as well (Huang et al, 2009;Regalli and Soana, 2012). Shah and Butt (2009) stated that there is heterogeneity among the different sectors of Pakistan.…”

Section: Introductionmentioning

confidence: 66%

The impact of corporate governance on the cost of equity

Yang

Sarwar

Ali

2019

AJAR

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Purpose In view of organizational inertia, with the occurrence of a major event, though resource rigidity minimizes, however simultaneously, it increases process rigidity, which creates difficulties in motivating managers and dealing with the agency problem. Therefore, keeping in mind the high demand created by the China–Pakistan Economic Corridor and Naya Pakistan Housing Scheme in the cement sector of Pakistan, the purpose of this paper is to investigate the impact of corporate governance (CG) on the cost of equity (COE) in the cement sector, to deal with the problems surging during and after the completion of these projects and highlight further opportunities for the cement sector of Pakistan. Design/methodology/approach CG is a qualitative concept therefore, eight proxies have been used to measure it along with the two control variables. This study uses balance panel data of six years from 2012 to 2017, collected from 18 companies of the cement sector of Pakistan. Descriptive statistics have been used to describe the data, correlation matrix to see the nature of the relationship, and Pooled OLS as the estimation technique, while to analyze the data a statistical package 13 has been used. To measure the COE, the Capital Asset Pricing Model (CAPM) has been used. Findings Regression results suggest that block ownership, insider ownership and the board size are insignificant, while CEO tenure is negatively and significantly associated with the COE. Non-executive directors, independence and CEO duality are insignificant; however, diversity is positively and significantly associated with the COE. Moreover, the mean value of the COE is 8.22 percent for the cement sector, while the coefficient of determination of the model under study is 74 percent. Research limitations/implications This paper is based on the data from the cement sector of Pakistan only. Therefore, this is the reason that these results cannot be generalized on the whole economy of Pakistan. Practical implications This study helps in finding out the COE value specific to the cement sector, which will help this sector to evaluate the capital budgeting decision more precisely and accurately than before. Moreover, the association of diversity as positive, while independence as negative with the COE highlights a room for improvement in the implementation of CG codes by SECP. This study also helps to mitigate the impact of inertia, the after-effects of high demand, and managing the agency problem in the cement sector. Originality/value This is the first study using CG data collected just after the revised promulgation of CG codes in 2012, along with a wide range of eight proxies measuring CG and its impact on the COE in the cement sector.

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Corporate Governance Quality and Cost of Equity in Financial Companies

Cited by 7 publications

References 31 publications

Ownership structure and cost of equity capital: Tunisian evidence

Ownership structure and cost of equity capital: Tunisian evidence

Impact of corporate governance mechanisms on the cost of equity capital in emerging markets

The impact of corporate governance on the cost of equity

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