The impact of ownership structure on the cost of equity in emerging markets

Abstract

Purpose The purpose of this study is to cover the ownership structure as (institutional ownership and managerial ownership) influencing the cost of equity in emerging markets. Design/methodology/approach The authors applied the regression model with the fixed-effect model in the data. Data collected from listed companies in the Iraq-Iran Stock Exchange during 2012-2017. Findings The authors found a significant positive associated between institutional ownership and the cost of equity in the Iranian and Iraqi contexts. The results also reveal a significant negative associated between managerial ownership with the cost of equity in the Iranian and Iraqi contexts. This means that when managerial ownership is increased, the cost of equity will be reduced. These results support the role of inside ownership to enhance fixed performance by reducing the cost of equity. So, managerial ownership can be a substitute for all shareholders. Moreover, the results indicate a similarity in the impact of the ownership structure on the cost of equity in the Iraqi and Iranian context, this means the similar elements among west Asian countries. Research limitations/implications Financial companies such as banks and investment companies were not listed due to the difference in the nature of their work with the other sectors in the Iranian and Iraqi stock exchanges. Moreover, the authors are heavily constrained as listed companies must continue during the study period to calculate the cost of equity. Therefore, the results are difficult to generalize widely. Practical implications This international study will enable investors in, as well as local and international investors to take the appropriate investment decision-making in the capital markets in these countries (Iraq and Iran). Moreover, it contributes significantly to helping corporate governance bloggers in Iraq and Iran understand the role of the ownership structure in corporate governance. Originality/value This is the first study of the interaction between institutional ownership, managerial ownership with the cost of equity in Iraq, the study will help complete the knowledge gap with developed markets. The results are important in future research because the authors believe that it is very important for the future to look at better for percentage levels of institutional and managerial ownership in the company ownership. Although the contribution is limited, it will provide a useful guide for more papers in other west Asian countries.

Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms

“…Entrenched managers do not distribute excess cash among shareholders [58,67,68], instead retained for personal uses due to easily accessible asset [69]. Agency theory explains the principalagent and principal-principal conflict [70][71][72][73].…”

Portfolio Returns of Islamic Indices and Stock Prices in GCC Countries: Empirical Evidence From the ARDL Model

“…In addition, comparing the performance of Islamic indicators is not easy due to the existence of an ethics index in the Islamic industry (El Khamlichi & Laaradh, 2012). Furthermore, the ownership structure depends on the cost, diversification, and risk of products (Faysal et al, 2020). In view of these perspectives, the main question in the current study focused on whether there a long-term relationship between portfolio returns of Islamic indices and stock prices in GCC countries could be found using the ARDL model.…”

Biaya Modal Perusahaan di Indonesia: Tanggung Jawab Sosial dan Tata Kelola Perusahaan

“…SIZEit = Logaritma Natural dari Total Asset perusahaan i pada periode t ............. (9) Kebijakan utang diukur dengan membandingkan jumlah utang dengan total aset dalam satu periode yang dimiliki oleh perusahaan. Proksi kebijakan utang mengikuti (Faysal et al, 2020), dan (Appuhami, 2018). COCit = β0 + β1CSRIit + β2CGovit + β3LEVit+ β4MTBit + β5ROAit + β6SIZEit + β7DTAit+ εit.......( 11) COEit = β0 + β1CSRIit + β2CGovit + β3LEVit+ β4MTBit + β5ROAit + β6SIZEit + β7DTAit+ εit.......( 12) CODit = β0 + β1CSRIit + β2CGovit + β3LEVit+ β4MTBit + β5ROAit + β6SIZEit + β7DTAit+ εit.......( 13) Dimana: COC it = biaya modal perusahaan i, tahun t COEit = biaya ekuitas perusahaan i, tahun t CODit = biaya ekuitas perusahaan i, tahun t CSRIit = indeks tanggung jawab sosial perusahaan i, tahun t CGovit= tata kelola perusahaan pada perusahaan i, tahun t SIZEit = ukuran perusahaan pada perusahaan i, tahun t LEVit = leverage pada perusahaan i, tahun t ROAit = profitabilitas pada perusahaan i, tahun t MTBit = market-to-book pada perusahaan i, tahun t CS it = struktur modal pada perusahaan i, tahun t…”