THE EFFECT OF GOOD CORPORATE GOVERNANCE (GCG) MODERATION ON A CORRELATION BETWEEN FUNDAMENTAL FACTORS TO THE DIVIDEND POLICY

The research objective is to analyze the influence of moderation of the Good Corporate Governance (GCG) on the correlation among fundamental factors (liquidity, leverage, profitability, sale growth, firm size, operation of cash flow, profit volatility, capital expenditure, and detained profit) simultaneously and partially on dividend policy in non-financial companies. The population was 376 non-financial companies listed in the Indonesia Stock Exchange from 2009 to 2013. The samples were 20 companies with 100 units of analysis selected based on purposive sampling method. The data were analyzed by using the multiple-linear regression analysis and the residual test with an SPSS software program. The research result proved that simultaneously fundamental factors (liquidity, leverage, profitability, sale growth, firm size, operation of cash flow, profit volatility, capital expenditure, and detained profit) did not influence dividend policy in non-financial companies. Partially, all independent variables did not influence significantly dividend policy. Good Corporate Governance variable was the moderation variable which significantly strengthened fundamental factors with dividend policy of non-financial companies

Влияние корпоративного налога на прибыль и уровня маркетизации на структуру капитала публичных компаний Китая

В статье анализируются данные об изменении структуры капитала компаний в связи с реформой корпоративного налога на прибыль, акции которых обращаются на бирже. Изучается влияние степени маркетизации экономики в регионах на структуру капитала компаний, расположенных в них. Реформа налога на прибыль проводилась в 2008 г., ее результатом должно было стать постепенное (в течение 5 лет) снижение налога для большинства компаний с 33 до 25 %, а также повышение налога для части компаний с 15 до 25 %. Анализ изменения структуры капитала компаний вследствие повышения (понижения) налога на прибыль позволил подтвердить применимость теоремы Модильяни-Миллера и развить теорию структуры капитала применительно к условиям Китая. Для анализа использовались данные о структуре капитала 206 компаний, акции которых обращались на бирже в 2002-2006 и 2008-2011 гг. В выборку попали 75 компаний, у которых эффективная ставка налогов увеличилась, и 131 компания, у которых она снизилась. Информация о их финансовых результатах была получена из баз данных Xenophon и Guotai. Результаты анализа подтвердили гипотезу о том, что степень рыночности экономики и изменение налога на прибыль влияют на структуру капитала, что позволило сделать следующие выводы: во-первых, повышение степени маркетизации, увеличивает экономию на налоговых выплатах, возникающую при реструктуризации капитала компании; во-вторых, рост степени маркетизации региона, увеличивая экономию на налоговых выплатах приводит к росту радикальных вариантов налогового планирования, используемых публичными компаниями; в-третьих, по сравнению с изменением ставки налога на прибыль, степень маркетизации оказывает более существенное влияние на структуру корпоративного капитала; в-четвертых, из-за долгосрочного существования налоговых льгот, экономия на налоговых выплатах не имеет большого значения в отраслях производства потребительских товаров, здравоохранении и информационных технологиях. Отношение активов к пассивам китайских публичных компаний имеет тенденцию к увеличению, что, с одной стороны, отражает рост эффективности использования финансовых рычагов, а с другой - повышает операционные риски. Следовательно, в целях контроля финансовых рисков компаний необходимо стимулировать рыночные реформы и по возможности использовать льготы по налогу на прибыль.Using the 2008 corporate income tax reform as an opportunity, this paper constructs a Panel DID model to study the effect of corporate income tax and the degree of marketization on capital structure. Based on the 2008 Enterprise Income Tax Reform in China, accompanying with both rise and fall in the tax rate, the paper tests the adaptability of the Modigliani & Miller theory, and develops a capital structure theory in the context of China. Author’s used the financial data of 206 Chinese listed companies from 2002 to 2012. The financial data of listed companies were mainly taken from Xenophon database and GuoTaian database. The marketization index data were obtained from The Marketization Index in China: 2011 Report for the Relative Marketization Process in Various Regions. Industries was classified according to the Global Industry Classification Standard (GICS) and test the sensitivity of the capital structure to exogenous corporate tax rate change in different industries. The empirical results show that: firstly, the higher the degree of marketization is, the more significant the tax shield effect is; secondly, compared to the corporate income tax, differences in the degree of marketization exert a more significant effect on the corporate capital structure; thirdly, because of the long existence of tax incentives, debt tax shield is not significant in people’s livelihood industries and information technology industry; Fourthly, given the upward trend in the overall asset-liability ratio of Chinese companies, in order to control companies’ financial risk, we recommend to foster market reform and the use corporate income tax incentives where necessary. The results of research will provide a reference for future marketization reform and tax policies in different industries in China

The effects of corporate governance mechanisms on the financial leverage–profitability relation

Purpose This paper aims to investigate the moderating effects of corporate governance mechanisms on the financial leverage–profitability relation in emerging market firms. Design/methodology/approach The paper examines the impacts by estimating the empirical model in which a firm’s accounting profitability is a dependent variable, while financial leverage, board size, board independence, CEO duality, CEO ownership, state ownership and the interaction variables are predictors. The paper uses the panel data set of 295 listed firms in Vietnam in the period 2011-2015 and two key econometric methods for panel data, namely, the two-stage least square instrumental variable and general moments method. Findings The paper finds the evidence for the significant and positive effect of board size, board independence and state ownership on the financial leverage–profitability relation. The effect of CEO duality on the financial leverage–profitability relation tends to be negative, and the impact CEO ownership inclines to be positive, although both of them are statistically insignificant. The results are consistent across different estimation methods. Originality/value This paper is the first investigating the moderating effect of various corporate governance mechanisms on the financial leverage–profitability relationship in emerging market firms

The Comparison of Efficiency and Performance of Portuguese and Ukrainian Enterprises

This article intends to analyze the performance and the efficiency of companies and to identify the key factors that may explain it. It was selected a sample with 15 enterprises: 7 Portuguese and 8 Ukrainian ones, belonging to several industries. Financial and non-financial data was collected for 6 years, during the period of 2009 to 2014. Research questions that guided this work were: Are the enterprises efficient/profitable? What factors influence enterprises’ efficiency/performance? Is there any difference between Ukrainian and Portuguese enterprises’ efficiency/performance, which factors have more influence? Which industrial sector is represented by more efficient/profitable enterprises? The main results showed that in average enterprises were efficient with low level of profitability. According to gained results several indicators were highlighted so that companies would pay more attention to them

Analyzing the determinants of financial distress in Indonesian mining companies

Purpose: The objective of the study is to analyze the effect of leverage, liquidity and managerial ownership on financial distress at mining companies in Indonesia. The study also examines the moderating role of profitability on the effects of leverage, liquidity and managerial ownership on financial distress. Design/Methodology/Approach: The population of this study is 41 mining sector companies listed in Indonesian Stock Exchange in 2013-2015. There are 17 companies as the sample of the study taken by purposive sampling method; then there are 51 units of analysis which are suitable to the predetermined criteria. Data are analyzed by descriptive statistical analysis and logistic regression for inferential conclusions. Findings: The results of the study show that the leverage has a positive effect on financial distress. Then, liquidity and managerial ownership do not have any effect on financial distress. Furthermore, profitability as the moderating variable is not proven to moderate the effect of leverage and managerial ownership on financial distress. However, profitability is proven to moderate significantly the effect of liquidity on financial distress. Practical Implications: This study has the guidance and or feedback to the company management to avoid financial distress. Originality/Value: The research places profitability as the moderating variable to analyze the simultaneous effect among leverage, liquidity, managerial ownership with profitability on financial distress. Then, it takes the mining sector companies as the sample to be analysed.peer-reviewe

The Determinants of Credit Ratings in the United Kingdom Insurance Industry

Executive Summary The Determinants of Credit Ratings in the United Kingdom Insurance Industry Academic researchers have devoted a considerable amount of attention to the activities of credit rating agencies over the past 20 years, focusing in particular on the agencies’ potential role in overseeing corporate financial strength and promoting the efficient operation of financial markets. Examinations of credit rating practices has recently extended to the insurance industry, where the complex technical nature of market transactions leads to policyholders, investors and others facing particularly acute information asymmetries at the point-of-sale. Published credit ratings are therefore seen as helping to alleviate imperfections in insurance markets by providing a third party opinion on the adequacy of an insurer’s financial health and the likelihood of it meeting obligations to policyholders and others in the future. Although the United Kingdom (UK) insurance market is now one of the five largest in the world, relatively little is known about the practices of the major firms and policy-makers which influence its operations. In particular, whilst the determinants of rating agencies’ assessments of United States (US) insurers is well documented, published studies have yet to provide comprehensive evidence about insurance company ratings in the UK. This study attempts to fill this gap by examining the ratings awarded by two of the world’s leading agencies – A.M. Best and Standard and Poor (S&P) – and establishing the extent to which organizational variables can help predict: (i) insurance firms’ decision to be rated; and (ii) the assigned ratings themselves. Our sample of UK data comprises ratings made by A.M. Best and S&P over the period 1993-1997 for both life and property-liability insurers. The panel data we use is ordinal in nature and is therefore analysed using an ordered probit model. However, because neither A.M. Best or S&P rate the full population of UK insurance firms our data set is potentially subject to selfselection bias and we therefore extend the model to correct for such problems. In particular, the paper examines the effect of eight firm-specific variables (namely, capital adequacy, profitability, liquidity, growth, size, mutual/stockowner status, reinsurance level, and short/long-term nature of business) on the ratings awarded by the two agencies, as well as on insurance firms’ decisions to volunteer for the ratings in the first place. In general terms, our evidence concurs with earlier US findings, and suggests that although the decision to be rated by either of the agencies is largely influenced by a common set of factors, the determinants of the ratings themselves appear to differ. Specifically, our first main finding is that insurers’ decisions to be rated by either A.M. Best or S&P is positively related to surplus growth, profitability and leverage. Second, while we find that A.M. Best’s ratings are positively linked to profitability and liquidity, as well as being generally higher for mutual insurers, the findings for S&P differ substantially. Although liquidity again exerted a positive influence on assigned ratings, the only other statistically significant variable was financial leverage, which had a negative sign. We believe that the results of our research are of potential importance for companies operating in insurance markets as well as for policy-makers, brokers and others. For example, the evidence that mutual insurers are generally assigned higher ratings than stock insurers suggests that certain publicly-traded insurers, in particular new entrants, might not possess sound financial strength and may require closer regulatory scrutiny than other, more established, insurance firms. In addition, the finding that liquidity has a significantly positive effect on ratings assigned by two of the world’s leading credit agencies should provide a measure of confidence about the robustness of the ratings to industry regulators, policyholders and investors in the UK. This could imply that external ratings might eventually play a role in substituting for costly industry regulation. The study concludes that although the factors influencing the decision to be rated by A.M. Best or S&P are broadly the same, a degree of variability exists in the variables which influence the actual ratings themselves. Insurance company managers should be aware of this when contemplating whether to seek an independent rating and which agency to choose for the assessment. We therefore believe that this study fills an important gap in the literature about key players in the important UK insurance market and provides a basis for the conduct of future research

Ownership structures and the leverage of listed firms in China

In this paper the relationship between leverage, performance and a firm’s ownership structure is investigated. It is an exploratory study based on listed firms in China, that is all firms listed on the Shanghai and Shenzhen stock exchanges from 1999 to 2005. The results of an empirical analysis of ownership structures and the leverage are reported in this paper. The most significant result is that foreign holdings are found to have a significant relationship with the leverage of listed firms in China. Whereas, somewhat unexpectedly, institutional ownership, through Legal Person holding companies, state ownership and private holdings are not found to have a significant relationship with the capital structure choices of firms in China. The results also suggest that some firm-specific factors that are relevant for explaining firm leverage generally referred to in studies in developed economies, such as profitability, growth opportunities, size and tax shields, are also relevant in China. The age of the firms and the industry to which they principally belong also has significant bearing. Yet direct government grants and the use of an internationally renowned auditing firm do not show a significant relationship

THE EFFECTS OF CORPORATE GOVERNANCE STRUCTURE AND FIRM CHARACTERISTIC TOWARDS ENVIRONMENTAL DISCLOSURE

This study aims to obtain empirical evidence about the effect of corporate governance structure and firm characteristic towards environmental disclosure of firms in Indonesia. Prior research review show that there is no consistency and have variety results. This research is a replication with modification of the research by Rao, et al (2012) and Burgwal and Vieira (2014) that examined the influence of corporate governance structure and firm characteristic on environmental disclosure. This study attempts to examine it with seven independent variables. These are independent commissioners, institutional ownership, board of commissioners size, proportion of women directors, firm size, profitability and industry type. The population of this study was all companies listed in Indonesia Stock Exchange (IDX) in 2012 and 2013. Sample consists of companies which disclose environmental disclosure through the GRI 3.1 index table on sustainability report so there are 59 firms that determined as samples and 59 observations of financial statements. Analysis of Covariance (ANCOVA) test was used as an analysis technique to examine the hypotheses. Statistic program in this study used SPSS 20. The results of this study showed that board of independent commissioners, board of commissioners size and industry type have significant positive effect on environmental diclosure. While institutional ownership, proportion of women directors, firm size and profitability have no significant influence on environmental disclosure. This research showed that corporate governance practices and firm characteristic in Indonesia was still minimize to control the extent of environmental disclosure

The Relationship between Economic Growth and Capital Structure of Listed Companies: Evidence of Japan, Malaysia, and Pakistan

Corporate enterprise is a natural outcome of capitalism in the course of economic development. The underwriter firms and banks etc. initially meet the capital requirements of such enterprise. Later on it is the stock exchange that carries out redistribution of shares of the enterprise. Corporate decisions on capital structure policy have long been a subject of debate and still remain an unresolved issue. The traditional view of capital structure was that it results in the weighted average cost of capital being U-shaped, which means that there exists as an optimal mix between debt and equity, at which point a firm’s value is maximised. However, Modigliani-Miller (1958), in a world of no tax and no financial distress, proved that capital structure is irrelevant to explaining firm values. When company taxes are considered, the benefits from tax shield leads Modigliani-Miller (1963) to conclude that the value maximising capital structure is extreme leverage. In a subsequent paper Miller (1977), by introducing both corporate tax and personal taxes into the model, points towards irrelevance of capital structure for any particular firm.

The Factors Influencing Corporate Social Responsibility Disclosure in the Kingdom of Saudi Arabia.

BACKGROUND: In today’s world of increased awareness regarding the concepts of corporate social responsibility (CSR) and corporate governance (CG), many firms in the developed countries consider noncompliance with CSR and CG standards as an important source of risk to their reputations with stakeholders. OBJECTIVE: The aim of this study is to investigate the relationship between the corporate social responsibility disclosure (CSRD) index and corporate factors, namely, board size, board independence, board meetings, CEO duality, a firm’s size, leverage, profitability and age. This is the first known study in the case of Saudi Arabia to use the GRI 4th edition indicators to construct the CSRD index and evaluate Saudi listed firms. Results: The results show that profitability and size factor have positive and significant association with CSR disclosure in listed Saudi firms. While CG characteristics have no impact on CSR disclosure except board independence which has a negative impact. Conclusion: The average of CSRD index among Saudi firms is too low, it is about 11% that means Saudi firms disclose 11% of the information that they have to provide for stockholders according to GRI guidelines. Furthermore, the study concludes that the most polluted sectors “Ene