Institutional ownership and simultaneity of strategic financial decisions: an empirical analysis in the case of Pakistan Stock Exchange

Simple item page
dc.contributor.authorSadaf, Rabeea
dc.contributor.authorOláh, Judit
dc.contributor.authorPopp, József
dc.contributor.authorMáté, Domicián
dc.contributor.otherEkonomická fakultacs
dc.date.accessioned2019-03-15
dc.date.available2019-03-15
dc.date.issued2019-03-15
dc.description.abstractThe traditional interpretation of corporate finance is characterized by ownership rights are widely distributed among individual stockholders, but can be managed by few managers and resulted in an agency problem. The primary objective of this research study is to investigate the relationship between institutional ownership and firms’ strategic decisions. These strategic decisions include i.e. leverage, dividend and investment decisions. The examined data is used from 170 non-financial Pakistani listed firms, characterized by a large percentage of institutional investors, with a multiple equity stake in different firms across a wide field of industries. This study is also able to show two important novelties. Firstly, the fact that previous researchers have already concentrated on the impact of institutional ownership on individual strategic decisions, as dividend or leverage policies and several unanswered questions remain. Consequently, the impact of institutional ownership has explored collectively on various strategic decisions. Secondly, this study also recognizes the determination of strategic decisions by considering the endogeneity problem with a Three-Stage Least Square (3SLS) method. Essentially, the effects of institutional ownership on firms’ leverage becomes more pronounced after including industry specific and time dummies in regression models. Based on the results, the case of increased institutional ownership of firms has a significant negative effect on leverage, and a positive effect on dividend decisions. Hence, institutional investors are seemed to prefer low leveraged and high dividend-paying firms. Moreover, this study has not able to find significant two-way relations between institutional ownership and investment decisions, so institutional investors rather focus on corporate governance and internal control of firms. Indeed, institutional investors should develop the efficiency of firms’ management to support more adequate corporate governance policies, and not only for emerging markets.en
dc.formattext
dc.format.extent17 strancs
dc.identifier.doi10.15240/tul/001/2019-1-012
dc.identifier.eissn2336-5604
dc.identifier.issn1212-3609
dc.identifier.urihttps://dspace.tul.cz/handle/15240/151429
dc.language.isoen
dc.publisherTechnická Univerzita v Libercics
dc.publisherTechnical university of Liberec, Czech Republicen
dc.publisher.abbreviationTUL
dc.relation.isbasedonAfza, T., & Nazir, M. S. (2015). Role of Institutional Shareholders’ Activism in Enhancing Firm Performance: The Case of Pakistan. Global Business Review, 16(4), 557-570. https://doi.org/10.1177/0972150915581100.
dc.relation.isbasedonAhmad, I., Oláh, J., Popp, J., & Máté, D. (2018). Does Business Group Affiliation Matter for Superior Performance? Evidence from Pakistan. Sustainability, 10(9), 3060. https://doi.org/10.3390/su10093060.
dc.relation.isbasedonAl-Najjar, B., & Taylor, P. (2008). The relationship between capital structure and ownership structure: New evidence from Jordanian panel data. Managerial Finance, 34(12), 919-933. https://doi.org/10.1108/03074350810915851.
dc.relation.isbasedonBadrinath, S. G., Kale, J. R., & Ryan, H. E. (1996). Characteristics of common stock holdings of insurance companies. Journal of Risk and Insurance, 63(1), 49-76. https://doi.org/10.2307/253516.
dc.relation.isbasedonBaltagi, B. H. (2008). Econometrics (4th ed.). Springer US.
dc.relation.isbasedonBerkovitch, E., & Kim, E. H. (1990). Financial Contracting and Leverage Induced Over- and Under-Investment Incentives. The Journal of Finance, 45(3), 765-794. https://doi.org/10.1111/j.1540-6261.1990.tb05105.x.
dc.relation.isbasedonBokpin, G. A., & Arko, A. C. (2009). Ownership structure, corporate governance and capital structure decisions of firms. Studies in Economics and Finance, 26(4), 246-256. https://doi.org/10.1108/10867370910995708.
dc.relation.isbasedonBradford, W., Chen, C., & Zhu, S. (2013). Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China. International Review of Economics and Finance, 27, 445-464. https://doi.org/10.1016/j.iref.2013.01.003.
dc.relation.isbasedonBushee, B. J. (1998). The Influence of on Institutional R & D Behavior Investors Myopic Investment. The Accounting Review, 73(3), 305-333. https://doi.org/10.2307/3069342.
dc.relation.isbasedonBushee, B. J., & Noe, C. F. (2000). Disclosure quality, institutional investors, and stock return volatility. Journal of Accounting Research, 38(October), 171-202. https://doi.org/10.2139/ssrn.146434.
dc.relation.isbasedonChaganti, R., & Damanpour, F. (1991). Institutional Ownership, Capital Structure, and Firm Performance. Institutional Ownership Strategic Management Journal Strategic Management Journal, 12(12), 479-491.
dc.relation.isbasedonChang, K., Kang, E., & Li, Y. (2016). Effect of institutional ownership on dividends: An agency-theory-based analysis. Journal of Business Research, 69(7), 2551-2559. https://doi.org/10.1016/j.jbusres.2015.10.088.
dc.relation.isbasedonChung, C. Y., & Wang, K. (2014). Do institutional investors monitor management? Evidence from the relationship between institutional ownership and capital structure. North American Journal of Economics and Finance, 30, 203-233. https://doi.org/10.1016/j.najef.2014.10.001.
dc.relation.isbasedonChung, K. H., & Zhang, H. (2011). Corporate Governance and Institutional Ownership. Journal of Financial and Quantitative Analysis, 46(1), 247-273. https://doi.org/10.1017/s0022109010000682.
dc.relation.isbasedonCoffey, B., & Fryxell, G. E. (1991). Institutional ownership of stock and dimensions of corporate social performance: An empirical examination. Journal of Business Ethics, 10(6), 437-444. https://doi.org/10.1007/BF00382826.
dc.relation.isbasedonCrutchley, C. E., Jensen, M. R. H., Jahera, J. S., & Raymond, J. E. (1999). Agency problems and the simultaneity of financial decision making. International Review of Financial Analysis, 8(2), 177-197. https://doi.org/10.1016/S1057-5219(99)00011-3.
dc.relation.isbasedonCull, R., & Xu, L. C. (2005). Institutions, ownership, and finance: The determinants of profit reinvestment among Chinese firms. Journal of Financial Economics, 77(1), 117-146. https://doi.org/10.1016/j.jfineco.2004.05.010.
dc.relation.isbasedonCyert, R., Kang, S. H., & Kumar, P. (1996). Managerial objectives and firm dividend policy: A behavioral theory and empirical evidence. Journal of Economic Behavior and Organization, 31(2), 157-174. https://doi.org/10.1016/S0167-2681(96)00897-9.
dc.relation.isbasedonDeesomsak, R., Paudyal, K., & Pescetto, G. (2004). The determinants of Capital Structure: Evidence from the Asia Pacific Region. Journal of Multinational Financial Management, 14(4), 387-405. https://doi.org/10.1063/1.2756072.
dc.relation.isbasedonDemsetz, H., & Villalonga, B. (2001). Ownership structure and corporate performance. Journal of Corporate Finance, 7(3), 209-233. https://doi.org/10.1016/S0929-1199(01)00020-7.
dc.relation.isbasedonDuggal, R., & Millar, J. A. (1999). Institutional ownership and firm performance: The case of bidder returns. Journal of Corporate Finance, 5(2), 103-117. https://doi.org/10.1016/S0929-1199(98)00018-2.
dc.relation.isbasedonEasterly, W. (2001). The political economy of growth without development: A case study of Pakistan. In Paper for the Analytical Narratives of Growth Project, Kennedy School of Government, Harvard University (pp. 1-53). Retrieved from http://relooney.fatcow.com/SI%7B_%7DExpeditionary/Mancur-Olsen%7B_%7D10.pdf.
dc.relation.isbasedonFama, E. F. (1974). The Empirical Relationships between the Dividend and Investment Decisions of Firms The Empirical Relationships Between the Dividend and Investment Decisions of Firms. The American Economic Review, 64(3), 304-318.
dc.relation.isbasedonFama, E. F. (1980). Agency Problems and the Theory of the Firm. Journal of Political Economy, 88(2), 288-307. https://doi.org/10.1086/260866.
dc.relation.isbasedonFama, E. F., & Jensen, M. C. (1983). Agency Problems and Residual Claims. The Journal of Law and Economics, 26(2), 327. https://doi.org/10.1086/467038.
dc.relation.isbasedonFarinha, J. (2003). Dividend Policy, Corporate Governance and the Managerial Entrenchment Hyphothesis: an Empirical Analysis. Journal of Business Finance & Accounting, 30(9-10), 1173-1209. https://doi.org/10.1111/j.0306-686X.2003.05624.x.
dc.relation.isbasedonFirth, M., Gao, J., Shen, J., & Zhang, Y. (2016). Institutional stock ownership and firms’ cash dividend policies: Evidence from China. Journal of Banking and Finance, 65, 91-107. https://doi.org/10.1016/j.jbankfin.2016.01.009.
dc.relation.isbasedonGrinstein, Y., & Michaely, R. (2005). Institutional holdings and payout policy. Journal of Finance, 60(3), 1389-1426. https://doi.org/10.1111/j.1540-6261.2005.00765.x.
dc.relation.isbasedonHackbarth, D., Hennessy, C. A., & Leland, H. E. (2007). Can the Trade-off Theory Explain Debt Structure? The Review of Financial Studies, 20(5), 1389-1428. https://doi.org/10.1093/revfin/hhl047.
dc.relation.isbasedonHassan, A., & Butt, S. A. (2009). Impact of Ownership Structure and Corporate Governance on Capital Structure of Pakistani Listed Companies. International Journal of Business and Management, 4(2), 50-57. https://doi.org/10.5539/ijbm.v4n2p50.
dc.relation.isbasedonHillman, A. J., & Dalziel, T. (2003). Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives. Academy of Management Review, 28(3), 383-396. https://doi.org/10.5465/AMR.2003.10196729.
dc.relation.isbasedonJensen, G. R., Solberg, D. P., & Zorn, T. S. (1992). Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies. The Journal of Financial and Quantitative Analysis, 27(2), 247-263. https://doi.org/10.2307/2331370.
dc.relation.isbasedonJensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, Papers and Proceedings, 77(2), 323-329. https://doi.org/10.2139/ssrn.99580.
dc.relation.isbasedonJensen, M. H., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X.
dc.relation.isbasedonJohnson, R. A., & Greening, D. W. (1999). Ownership Types on Corporate Social Performance. Academy of Management Journal, 42(5), 564-576. https://doi.org/10.2307/256977.
dc.relation.isbasedonKapteyn, A., & Fiebig, D. G. (1981). When are Two-stage and Three-stage Estimators Identical? Economic Letters, 8(1), 53-57. https://doi.org/10.1016/0165-1765(81)90092-6.
dc.relation.isbasedonKarpoff, J. M., Malatesta, P. H., & Walkling, R. A. (1996). Corporate governance and shareholder initiatives: Empirical evidence. Journal of Financial Economics, 42(3), 365-395. https://doi.org/10.1016/0304-405X(96)00883-5.
dc.relation.isbasedonKing, M. R., & Santor, E. (2008). Family values: Ownership structure, performance and capital structure of Canadian firms. Journal of Banking and Finance, 32(11), 2423-2432. https://doi.org/10.1016/j.jbankfin.2008.02.002.
dc.relation.isbasedonKochhar, R., & David, P. (1996). Institutional Investors and Firm Innovation : A Test of Competing Hypotheses. Strategic Management Journal, 17(1), 73-84. https://doi.org/10.1002/(SICI)1097-0266(199601)17:1<73
dc.relation.isbasedonLa Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R. W., La Porta, R., Lopez-de-Silanes, F., … Vishny, R. (1999). The Quality of Government. Journal of Law, Economics and Organization, 15(1), 222-279.
dc.relation.isbasedonLi, K., Yue, H., & Zhao, L. (2009). Ownership, institutions, and capital structure: Evidence from China. Journal of Comparative Economics, 37(3), 471-490. https://doi.org/10.1016/j.jce.2009.07.001.
dc.relation.isbasedonLin, F.-L., & Chang, T. (2011). Does debt affect firm value in Taiwan? A panel threshold regression analysis. Applied Economics, 43(1), 117-128. https://doi.org/10.1080/00036840802360310.
dc.relation.isbasedonLiu, Y., Li, Y., & Xue, J. (2011). Ownership, strategic orientation and internationalization in emerging markets. Journal of World Business, 46(3), 381-393. https://doi.org/10.1016/j.jwb.2010.07.012.
dc.relation.isbasedonMak, Y. T., & Li, Y. (2001). Determinants of corporate ownership and board structure: evidence from Singapore. Journal of Corporate Finance, 7(3), 235-256. https://doi.org/10.1016/S0929-1199(01)00021-9.
dc.relation.isbasedonMaquieira, C. P., Espinosa, C. E., & Vieito, J. P. (2011). Corporate Performance and Ownership Structure: Empirical Evidence for Chile. Quarterly Journal of Finance and Accounting, 50(1), 75-96.
dc.relation.isbasedonMcConnell, J. J., & Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2), 595-612. https://doi.org/10.1016/0304-405X(90)90069-C.
dc.relation.isbasedonMichaely, R., & Vincent, C. (2013). Do Institutional Investors Influence Capital Structure Decisions? Retrieved from: http://www.nccr-finrisk.uzh.ch/media/pdf/FS_spring13_Michaely_paper.pdf.
dc.relation.isbasedonMiller, M. H., & Modigliani, F. (1961). Dividend Policy, Growth, and the Valuation of Shares. The Journal of Business, 34(4), 411-433. https://dx.doi.org/10.1086/294442.
dc.relation.isbasedonMoh’d, M. A., Perry, L. G., & Rimbey, J. N. (1998). The Impact of Ownership Structure On Corporate Debt Policy: a Time-Series Cross-Sectional Analysis. The Financial Reviews, 33, 85-98. https://doi.org/10.1111/j.1540-6288.1998.tb01384.x.
dc.relation.isbasedonMyers, S. C., & Majluf, N. S. (1984). Corporate financing and investments decisions: when firms have information that inventors do not have. Journal of Financial Economics, 13(2), 187-221.
dc.relation.isbasedonOgden, J. P., & Wu, S. (2013). Reassessing the effect of growth options on leverage. Journal of Corporate Finance, 23, 182-195. https://doi.org/10.1016/j.jcorpfin.2013.08.008.
dc.relation.isbasedonParrino, R., Sias, R. W., & Starks, L. T. (2003). Voting with their feet: Institutional ownership changes around forced CEO turnover. Journal of Financial Economics, 68(1), 3-46. https://doi.org/10.1016/S0304-405X(02)00247-7.
dc.relation.isbasedonPindado, J., & Torre, C. D. L. (2006). The role of investment, financing and dividend decisions in explaining corporate ownership structure: Empirical evidence from Spain. European Financial Management, 12(5), 661-687. https://doi.org/10.1111/j.1468-036X.2006.00272.x.
dc.relation.isbasedonRajnoha, R., Lesníková, P., & Krajčík, V. (2017). Influence of business performance measurement systems and corporate sustainability concept to overal business performance: “save the planet and keep your performance.” E&M Ekonomie a Management, 20(1), 111-128. https://doi.org/10.15240/tul/001/2017-1-008.
dc.relation.isbasedonRichardson, S. (2006). Over-investment of free cash flow. Review of Accounting Studies, 11(2-3), 159-189. https://doi.org/10.1007/s11142-006-9012-1.
dc.relation.isbasedonRoy, A. (2015). Dividend policy, ownership structure and corporate governance: An empirical analysis of Indian firms. Indian Journal of Corporate Governance, 8(1), 1-33. https://doi.org/10.1177/0974686215574422.
dc.relation.isbasedonRozeff, M. S. (1982). Growth, beta and agency costs as determinants of divided payout ratios. Journal of Financial Research, 5(3), 249-259. https://doi.org/10.1111/j.1475-6803.1982.tb00299.x.
dc.relation.isbasedonShleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52,(2), 737-783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x.
dc.relation.isbasedonShort, H., Zhang, H., & Keasey, K. (2002). The link between dividend policy and institutional ownership. Journal of Corporate Finance, 8(2), 105-122. https://doi.org/10.1016/S0929-1199(01)00030-X.
dc.relation.isbasedonSmith, C. W., & Warner, J. B. (1979). On financial contracting. Journal of Financial Economics, 7(2), 117-161. https://doi.org/10.1016/0304-405X(79)90011-4.
dc.relation.isbasedonState Bank of Pakistan. (2018). Financial Statement Analysis of Companies (NonFinancial) listed at KSE. Retrieved January 22, 2019, from http://www.documents.pk/docs/State_Bank_of_Pakistan_(SBP)_-_Financial_Statement_Analysis_of_Companies_(Non-Financial)_listed_at_KSE.
dc.relation.isbasedonSutopo, B., Kot, S., Adiati, A., & Lina Nur Ardila. (2018). Sustainability Reporting and Value Relevance of Financial Statements. Sustainability, 10(3), 678. https://doi.org/10.3390/su10030678.
dc.relation.isbasedonThanatawee, Y. (2012). Ownership Structure and Dividend Policy: Evidence from Thailand. International Journal of Economics and Finance, 5(1), 121-132. https://doi.org/10.5539/ijef.v5n1p121.
dc.relation.isbasedonTruong, T., & Heaney, R. (2007). Largest shareholder and dividend policy around the world. Quarterly Review of Economics and Finance, 47(5), 667-687. https://doi.org/10.1016/j.qref.2007.09.002.
dc.relation.isbasedonWilson, P. W. (1993). Detecting Outliers in Deterministic Nonparametric Frontier Models with Multiple Outputs. Journal of Business & Economic Statistics, 11(3), 319-323. https://doi.org/10.2307/1391956.
dc.relation.isbasedonZellner, A., & Theil, H. (1962). Three-Stage Least Squares: Simultaneous Estimation of Simultaneous Equations. Econometrica, 30(1), 54-78. https://doi.org/10.1007/978-94-011-2546-8_10
dc.relation.ispartofEkonomie a Managementcs
dc.relation.ispartofEconomics and Managementen
dc.relation.isrefereedtrue
dc.rightsCC BY-NC
dc.subjectstrategic decisionsen
dc.subjectendogeneityen
dc.subjectinstitutional ownershipen
dc.subject3SLSen
dc.subject.classificationG31
dc.subject.classificationG32
dc.subject.classificationG11
dc.titleInstitutional ownership and simultaneity of strategic financial decisions: an empirical analysis in the case of Pakistan Stock Exchangeen
dc.typeArticleen
local.accessopen
local.citation.epage188
local.citation.spage172
local.facultyFaculty of Economics
local.filenameEM_1_2019_12
local.fulltextyes
local.relation.abbreviationE+Mcs
local.relation.abbreviationE&Men
local.relation.issue1
local.relation.volume22
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
EM_1_2019_12.pdf
Size:
1.11 MB
Format:
Adobe Portable Document Format
Description:
článek
Download
Collections
Číslo 1