An empirical investigation of agency costs and ownership structure in unlisted small businesses

The study uses panel data to investigate agency costs, both principal-agent (PA) and principal-principal (PP), in 240 small businesses not listed on the New Zealand Stock Exchange. Results show that both forms of agency cost vary according to industry, the life of the business and size. The results indicate that the degree of owner involvement in the business influences firm PA and PP agency costs. Moreover, this study finds non-linear relationship between agency costs and ownership structure align with convergence of interest hypothesis and managerial entrenchment hypothesis. It is noted that the distortion between equity returns and debt returns gives rise to a preference for quasi-equity and distorts the productive base and effective pricing of risk. The analysis indicates there is considerable variability in the burden of agency cost and that this raises the potential for regulatory and policy reforms that may enhance the productivity and growth in the sector

Corporate governance and financial performance of Sri Lankan listed companies 2006-2010

This thesis investigates the effect of corporate governance practices have on the financial performance and agency costs of multinational subsidiaries and local public companies in Sri Lanka. In particular, this study examines (i) the relationship between corporate governance mechanisms of Sri Lankan listed companies, financial performance, principal-agent and principal-principal agency costs (ii) corporate governance practices and compliance differences of multinational company subsidiaries (MNCs) and local public companies (LPCs) in Sri Lanka, (iii) whether voluntary compliance with the new corporate code had an effect on firm financial performance and agency costs and (iv) corporate governance and firm financial performance differences across quantiles of performance proxies in MNCs and LPCs. Corporate governance has become a major issue since the collapse of major companies around the world. Additionally, the Asian financial crisis in 1997 showed the need for legislative reforms to strengthen corporate governance practices in that region. Now, it is widely believed that good corporate governance is an important factor in improving firm financial performance in both developed and developing financial markets. Until the mid-1990s, corporate governance was popularly known in Sri Lanka as, the systems used to control and direct companies. A real effort to codify the principle of corporate governance in a structured manner in Sri Lanka was made in 1996. Since the financial year commencing April 2008, Sri Lankan listed firms have been subject to mandated rules on corporate governance by the Securities and Exchange Commission of Sri Lanka. The main purpose of this new mandatory corporate governance rule is promoting accountability, transparency and overall efficiency in corporate governance best practice. This thesis makes a number of contributions to corporate governance and firm financial performance knowledge in several ways. First, it provides evidence of the relationship between corporate governance practices and firm financial performance and agency costs. Second, in contrast to most existing studies that use data from developed countries, this research considers how differences in institutional and governance systems between countries may impact firm financial performance, agency costs and corporate governance relationships. Third, this research is the first direct study of firm financial performance, agency costs and corporate governance practices for listed Sri Lankan companies. Data needed to test various hypotheses are sourced from the Handbook of Listed Companies - 2007, Fact Book - 2008 and Data library CD issued by the Colombo Stock Exchange (CSE). Further data have been collected from companies listed on the (CSE) during 2006-2010 that published audited annual reports. For the LPCs and MNC subsidiary companies, the sampling period is 2006 through 2010. The focus of this thesis is on the governance variables that have been highlighted by the Sri Lankan Corporate governance best practice code (2008) and also other governance variables that are supported in the literature as providing an appropriate structure for the institutions in the environment in which they operate. Statistical issues such as controlling the endogenity effect and reverse causality effect of corporate governance variables indicate is appropriate to employ dynamic panel generalised method of moment estimators to explore the relationship between corporate governance variables, financial performance and agency costs. Various other statistical techniques including as ANOVA test, panel tobit regression, difference-in-difference method, quantile regression are used to check hypotheses relevant in this study. The findings indicate that there is positive relationship between corporate governance and firm financial performance and a negative relationship between corporate governance and firm agency costs. However, the process by which the firm financial performance and agency costs affect MNC subsidiaries and LPCs is different. These results also support the central argument in corporate governance that the institutional and cultural differences determine the effect of complying corporate governance and financial performance and agency costs. Although Sri Lanka basically follows an Anglo-American model of corporate governance, country institutional and cultural differences create a unique corporate governance environment in Sri Lanka. It is important to further develop the corporate governance code incorporating country specific characteristics rather than inherit bundles of corporate governance mechanisms from other developed countries. However, as this study shows, some mandatory corporate governance mechanisms have negative impacts on firm financial performance and/or increase company agency conflicts. A corporate governance framework appropriate for each organisation structure as “one size does not fit all” seems preferable. Guidelines encompassing an “or explain” exemption clause may be particularly beneficial in emerging economies

Comparative analysis of environmental performance measures and their impact on firms' financing choices

This study investigates the roles of different measures of environmental performance in firms' financing choices. Environmental performance is measured through energy-efficiency investments, energy intensity, and energy consumption disclosures, which correspond to input-based, output-based, and disclosing perspectives, respectively. We further distinguish between debt financing and equity financing since environmental information asymmetry varies across investors, affecting the pecking order of financial sources. We use Eastern European and Central Asian firm-level data from the World Bank Enterprise Surveys conducted in 2019/2020. The study sample consists of above 3000 private firms from 42 countries. The logit model shows that alternative measures of environmental performance have varying impacts on financing. For a particular measure, it affects bank and equity financing in different ways. We also find that there is a direct joint impact of environmental investments and disclosures on equity financing. Overall, our study indicates that investors prefer to invest in eco-friendly firms rather than supporting conventional firms in reducing their environmental impacts. Hence, it is required to promote government support programs and loan guarantee programs to initiate firm-level environmental practices. Further, the complementary relationship indicates that firms may choose different environmental practices to reduce environmental information uncertainty, which improves the credibility of environmental information from the investors' perspective.publishedVersio

Capital structure and its determinants in New Zealand firms

The current study aims to empirically explore the relationship between firm characteristics, corporate governance and capital structure in New Zealand's large listed companies. Eight years of data for 40 firms listed on the NZX50 Stock Exchange, are collected and observations are analysed using a conditional quantile regression. This study finds firm-specific characteristics rather than corporate governance variables play a significant role in determining firm leverage levels. The results indicate that finance policies need to vary across firm type and firm characteristics, and should match with the different borrowing requirements of listed firms

Corruption and innovation in private firms: Does gender matter?

In this study, we examine whether bribery impairs gender-based asymmetries in product/process innovation in developing economies. Based on firm-level data from Latin American countries, we reject the proposition that women behave differently with respect to bribing on the grounds of higher ethical/moral standards. After controlling for endogeneity and non-random treatment effects, we find that, in line with the Differential association and opportunity (DAO) theory, women in positions of influence (i.e., firm ownership and top management) are equally associated with firm-level bribing. Furthermore, the results indicate that women receive, on average, a greater payoff from bribing compared to male counterparts. At a practical level for firms wishing to innovate, the question of how to gain maximum advantage from each peso paid in bribes becomes an interesting amoral exercise. Our study reveals that promoting women into high-level positions on the basis of their superior morality is an ill-conceived presumption, which is not supported empirically

Financial Inclusion and Digital Financial Services: Empirical evidence from Ghana

The paper examines the relationship between increasing accessibility to digital financial services (DFS) and financial inclusion in lower income countries (LICs). Banks and non-bank organisations use DFS and the analysis indicates non-bank-based DFS emerges as the most efficient means of delivering cost effective financial services to the previously unbanked. Mobile cellular penetration and internet usage are mutually inclusive means through which digital financial services foster financial inclusion. Analysis of data for Ghana, as a case study, uses ordinary least squares and logistic regression models. The results in Difference-In-Difference method confirms the positive significant trend of mobile money usage and negative trend of bank-based DFS facilities over the period 2011-2014 in Ghana. Unambiguous policy ramifications are emphasised, paying attention to technological deepening stimulate positive outcomes of a broader and inclusive financial system