Large Shareholder’s Identity and Stock Price Synchronicity: Evidence from a MENA Market

Bino, Adel; Abu-Ghunmi, Diana; Tayeh, Mohammad; Shubita, Dua’a

doi:10.5430/ijfr.v7n1p135

Cited by 3 publications

(9 citation statements)

References 42 publications

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“…Additionally, controlling families are involved in a firm's management, which gives them great discretion over their assets and facilitates the expropriation of minority shareholders' rights (La Porta et al. , 1999; Bino et al. , 2016).…”

Section: Methodsmentioning

confidence: 99%

“…Several studies have reported that large shareholders may improve firm's corporate governance mechanisms and provide effective monitoring of management actions (Shleifer and Vishny, 1997). However, the absence of legal protection enables large shareholders to expropriate minority shareholders' rights and extract private benefits in an attempt to maximize their utility rather than monitor the firm's management and maximize firm value (Abu-Ghunmi et al, 2015;Bino et al, 2016). We argue that the impact of large shareholders on agency costs depends on the extent to which a firm's management and ownership are separate.…”

Section: Datamentioning

confidence: 99%

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Ownership structure and agency costs: evidence from the insurance industry in Jordan

Tayeh,

Mustafa,

Bino

2023

JEFAS

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PurposeThis study investigated the impact of corporate ownership structure on agency costs in the insurance industry.Design/methodology/approachThe study sample included 23 insurance companies listed on the Amman Stock Exchange (ASE) from 2010 to 2019. Panel regression was used to account for the firm- and time-specific unobservable variables and system-GMM estimation was used to address endogeneity concerns.FindingsThe results show that managerial ownership positively (negatively) affects selling, general and administrative (SG&A) expenses (assets turnover), implying that unmonitored managers engage in activities that serve their own interests rather than those of shareholders. The largest shareholder's ownership has no impact on agency costs, implying that the ownership of the largest shareholder is irrelevant. However, as the wedge between the percentage of capital owned by the largest shareholders and managers increases, SG&A expenses (efficiency ratio) decrease (increases), indicating that the existence of large non-management shareholders reduces agency costs. After accounting for the endogeneity problem, the impact of ownership structure on agency costs measured by asset turnover remains robust.Originality/valueTo the best of the authors' knowledge, this study is the first to provide unique evidence and useful insights into the determinants of agency costs from a frontier market in the Middle East and North Africa (MENA), with a focus on the insurance sector. Additionally, this study uses a new measure of separation between ownership and control by calculating the wedge between managers' and large shareholders' ownership.

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Section: Methodsmentioning

confidence: 99%

Section: Datamentioning

confidence: 99%

Ownership structure and agency costs: evidence from the insurance industry in Jordan

Tayeh,

Mustafa,

Bino

2023

JEFAS

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“…There is a limited amount of literature that examines stock price synchronicity using Jordanian data. Bino et al (2016) examined the effect of a firm's ownership structure on stock price synchronicity, finding that stock prices in Jordan have synchronous behaviour, especially when the firm is large or owned by the government; family-owned firms, however, record lower stock price synchronicity than those of firms with wider ownership.…”

Section: The Jordanian Contextmentioning

confidence: 99%

“…However, the level of the board of directors' errors and effectiveness in inspecting managers is based on the board size and board composition. Bino et al (2016) examined the effect of large shareholders' identity and stock price synchronicity in Jordan, a country with weak investor protection, and found that large Jordanian firms are more synchronous than small firms, as well as that the family-controlled firms record lower stock price synchronicity than do firms with a wider ownership. Fan and Wong (2005) documented that the Big Four auditors, as a proxy for corporate governance measurement, play big roles in emerging markets with highly concentrated ownership structures.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Hutton et al (2009) suggested that firms' financial leverage is expected to influence stock price synchronicity through its impacts on the sensitivity of firms' return to macroeconomic conditions and because it influences the division of risk-bearing between equity shareholders and debtors. Moreover, Beuselinck et al (2009) expected a negative relation between synchronicity and firms' financial leverage ratio, as firms with high financial leverage have high intrinsic risk factors that potentially force investors to collect firm-specific Bino et al (2016) found a negative relation between leverage and stock price synchronicity. Accordingly, these results support the previous argument.…”

Section: Robust Regressionmentioning

confidence: 99%

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Profit warning and its association with stock price informativeness: experimental analysis

Almasarwah¹,

Almaharmeh²,

Omush³

et al. 2020

JOIC

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Purpose This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country. Design/methodology/approach The authors used a large panel data set that related to stock price synchronicity and profit warnings percentages on the Amman Stock Exchange for the period spanning 2007–2018. Robust regression was used as a parametric test. This enabled us to obtain stronger results that fall in line with our prediction that a profit warning encourages firm investors to collect and process more firm-specific information than common market information. Findings Our findings show a significant positive effect of profit warnings on the amount of firm-specific information incorporated into stock price, which means that the greater the percentage of profit warnings the more likely that more firm-specific information will be incorporated in stock price synchronicity. In addition, corporate governance characteristics (moderating variables) significantly increase the level of the relationship between profit warnings and stock price synchronicity. Practical implications Our study results could be useful to investors, senior managers, and regulators in Jordanian firms, particularly in relation to decisions about enhancing the quality of financial statements. In addition, our results provide new evidence about the consequences of earnings announcements for information content and the informativeness of stock prices. Our methodology and evaluation of profit warnings may also demonstrate useful evidence for future researchers on profit warnings and stock price informativeness in developing economies, especially given that such evidence is scarce in developing economies. Originality/value This research is the first study of its kind on emerging markets, particularly in the Middle East. Moreover, entering the corporate governance variables as moderating variables to the robust regression was found to be more powerful than other regressions.

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Stock bar public opinion and stock price synchronicity

2023

FERM

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The stock bar has emerged as a platform for small and medium investors to voice their opinions, which can play a supervisory role of social network. Using the data of listed companies from 2008 to 2021, this paper studies the impact of public opinion on stock price synchronism. We find that stock bar public opinion has an inhibitory effect on stock price synchronicity, and this conclusion is still valid after a series of robustness tests. This inhibitory effect is more obvious in companies with integrated ownership, smaller investment weight of institutional investors and fewer analyst trail numbers. The mechanism analysis shows that the public opinion of stock bar will weaken the impact of abnormal trading. Our research supports the idea that stock bar public opinion can enhance corporate governance, ultimately leading to a reduction in stock price synchronicity. These outcomes are of significant importance in terms of increasing investor awareness of stock bar public opinion and expanding the range of influences on stock price synchronism.

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Large Shareholder’s Identity and Stock Price Synchronicity: Evidence from a MENA Market

Cited by 3 publications

References 42 publications

Ownership structure and agency costs: evidence from the insurance industry in Jordan

Ownership structure and agency costs: evidence from the insurance industry in Jordan

Profit warning and its association with stock price informativeness: experimental analysis

Stock bar public opinion and stock price synchronicity

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