Impact of Country-Level Governance and Ownership Concentration on Firm Value in Central Europe

Shahriar, Ahanaf; Mehzabin, Saima; Azad, Md. Abul Kalam

Abstrakt

Purpose: The article considers country-level governance factors (legal/regulatory system and financial development) and ownership concentration that impact the value of non-financial firms in Central European nations, specifically by describing a study done in Austria, Czech Republic, Germany, Hungary, Slovenia, and Switzerland.

Methodology: A fixed effect panel data regression analysis was applied to a strongly balanced panel data using a collection of six diverse Central European countries’ non-financial firms across the sample period of 2010–2020.

Results: According to regression analysis, the legal and regulatory system as well as financial development have a positive relationship with firm value. The firm’s value rises as the legal and regulatory system improves. Furthermore, the growth of financial markets adds to the firm’s value. However, our study reveals a negative relationship between ownership concentration and firm value, which indicates that ownership concentration is too high to allow for effective supervision, implying that more ownership concentration lowers firm value, as the expropriation theory suggests.

Originality: The study examines the value of a firm by incorporating both country- and firm-level factors, which broadens the current literature’s insight.
Implications: Overall, our findings add to the literature on the value of non-financial firms by providing new significant information. Some of the recommendations may be beneficial to the long-term success of non-financial companies.

Słowa kluczowe

Central Europe (2)country governance (1)legal and regulatory systems (1)financial development (1)ownership concentration (1)

Powiązania

Altman, E.I. (2005). An emerging market credit scoring system for corporate bonds. Emerging Markets Review, 6(4), 311–323. [Google Scholar]
Beck, T., Demirgüç-Kunt, A., and Levine, R. (2000). A New Database on the Structure and Development of the Financial Sector. The World Bank Economic Review, 14(3), 597–605. https://doi.org/10.1093/wber/14.3.597. [Google Scholar]
Chari, A., Ouimet, P.P., and Tesar, L.L. (2010). The value of control in emerging markets. The Review of Financial Studies, 23(4), 1741–1770. [Google Scholar]
Claessens, S., and Yurtoglu, B.B. (2013). Corporate governance in emerging markets: A survey. Emerging Markets Review, 15, 1–33. https://doi.org/10.1016/j.ememar.2012.03.002. [Google Scholar]
De Miguel, A., Pindado, J., and De la Torre, C. (2004). Ownership structure and firm value: New evidence from Spain. Strategic Management Journal, 25(12), 1199–1207. [Google Scholar]
De Miguel, A., Pindado, J., and De La Torre, C. (2005). How do entrenchment and expropriation phenomena affect control mechanisms? Corporate Governance: An International Review, 13(4), 505–516. [Google Scholar]
Demirgüç-Kunt, A., and Levine, R. (2004). Financial structure and economic growth: A cross-country comparison of banks, markets, and development. MIT Press. [Google Scholar]
Demirgüç-Kunt, A., and Maksimovic, V. (1998). Law, Finance, and Firm Growth. The Journal of Finance, 53(6), 2107–2137. https://doi.org/10.1111/0022-1082.00084. [Google Scholar]
Haugen, R.A., and Baker, N.L. (1996). Commonality in the determinants of expected stock returns. Journal of Financial Economics, 41(3), 401–439. [Google Scholar]
Hoffmann, P.S. (2014). Internal corporate governance mechanisms as drivers of firm value: Panel data evidence for Chilean firms. Review of Managerial Science, 8(4), 575–604. [Google Scholar]
Iturriaga, F.J.L., and Crisóstomo, V.L. (2010). Do leverage, dividend payout, and ownership concentration influence firms’ value creation? An analysis of Brazilian firms. Emerging Markets Finance and Trade, 46(3), 80–94. [Google Scholar]
Jensen, M.C., and Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. [Google Scholar]
Kaufmann, D., Kraay, A., and Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues1. Hague Journal on the Rule of Law, 3(2), 220–246. [Google Scholar]
La Porta, R., Lopez-de-Silanes, F., and Shleifer, A. (2006). What works in securities laws? The Journal of Finance, 61(1), 1–32. [Google Scholar]
Lin, J.-C., and Tai, V.W. (2013). Corporate governance and analyst behavior: Evidence from an emerging market. Asia-Pacific Journal of Financial Studies, 42(2), 228–261. [Google Scholar]
Lins, K.V. (2003). Equity ownership and firm value in emerging markets. Journal of Financial and Quantitative Analysis, 38(1), 159–184. [Google Scholar]
Love, I. (2011). Corporate governance and performance around the world: What we know and what we don’t. The World Bank Research Observer, 26(1), 42–70. [Google Scholar]
McConnell, J.J., and Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2), 595–612. [Google Scholar]
Morey, M., Gottesman, A., Baker, E., and Godridge, B. (2009). Does better corporate governance result in higher valuations in emerging markets? Another examination using a new data set. Journal of Banking & Finance, 33(2), 254–262. [Google Scholar]
Naceur, S.B., and Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks’ performance. Emerging Markets Review, 12(1), 1–20. [Google Scholar]
Nugraha, F.W. (2017). Local Financial Development And Firm Performance: Does Financial Outreach Really Matters Within Indonesian Archipelago? Buletin Ekonomi Moneter Dan Perbankan, 19(3), 287–318. https://doi.org/10.21098/bemp.v19i3.667. [Google Scholar]
Saona Hoffmann, P., and Vallelado González, E. (2005). Ownership Structure and Growth Opportunities as Determinants of Bank Debt: Evidence from Chilean Companies. Management Research: Journal of the Iberoamerican Academy of Management, 3(2), 121–136. https://doi.org/10.1108/15365430580001317. [Google Scholar]
Saona, P., and San Martín, P. (2016). Country level governance variables and ownership concentration as determinants of firm value in Latin America. International Review of Law and Economics, 47, 84–95. https://doi.org/10.1016/j.irle.2016.06.004 [Google Scholar]
Selarka, E. (2005). Ownership Concentration and Firm Value: A Study from the Indian Corporate Sector. Emerging Markets Finance and Trade, 41(6), 83–108. https://doi.org/10.1080/1540496X.2005.11052627 [Google Scholar]
Shleifer, A., and Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3, Part 1), 461–488. [Google Scholar]
Vintilă, G., and Gherghina, Ş. C. (2014). The Impact of Ownership Concentration on Firm Value. Empirical Study of the Bucharest Stock Exchange Listed Companies. Procedia Economics and Finance, 15, 271–279. https://doi.org/10.1016/S2212-5671(14)00500-0 [Google Scholar]
Yang, C.-C., Lee, C., Gu, Y.-X., and Lee, Y.-W. (2010). Co-determination of capital structure and stock returns—A LISREL approach: An empirical test of Taiwan stock markets. The Quarterly Review of Economics and Finance, 50(2), 222–233 [Google Scholar]

Kompletne metadane

Cytowanie zasobu

APA style

Shahriar, Ahanaf & Mehzabin, Saima & Azad, Md. Abul Kalam (2022). Impact of Country-Level Governance and Ownership Concentration on Firm Value in Central Europe. (2022). Impact of Country-Level Governance and Ownership Concentration on Firm Value in Central Europe. Central European Management Journal, 30(2), 153–170. https://doi.org/10.7206/cemj.2658-0845.79 (Original work published 6/2022n.e.)

MLA style

Shahriar, Ahanaf and Mehzabin, Saima and Azad, Md. Abul Kalam. „Impact Of Country-Level Governance And Ownership Concentration On Firm Value In Central Europe”. 6/2022n.e. Central European Management Journal, t. 30, nr 2, 2022, ss. 153–170.

Chicago style

Shahriar, Ahanaf and Mehzabin, Saima and Azad, Md. Abul Kalam. „Impact Of Country-Level Governance And Ownership Concentration On Firm Value In Central Europe”. Central European Management Journal, Central European Management Journal, 30, nr 2 (2022): 153–170. doi:10.7206/cemj.2658-0845.79.

Prawa autorskie

CC-BY

[1] Altman, E.I. (2005). An emerging market credit scoring system for corporate bonds. Emerging Markets Review, 6(4), 311–323. [Google Scholar]

[2] Beck, T., Demirgüç-Kunt, A., and Levine, R. (2000). A New Database on the Structure and Development of the Financial Sector. The World Bank Economic Review, 14(3), 597–605. https://doi.org/10.1093/wber/14.3.597. [Google Scholar]

[3] Chari, A., Ouimet, P.P., and Tesar, L.L. (2010). The value of control in emerging markets. The Review of Financial Studies, 23(4), 1741–1770. [Google Scholar]

[4] Claessens, S., and Yurtoglu, B.B. (2013). Corporate governance in emerging markets: A survey. Emerging Markets Review, 15, 1–33. https://doi.org/10.1016/j.ememar.2012.03.002. [Google Scholar]

[5] De Miguel, A., Pindado, J., and De la Torre, C. (2004). Ownership structure and firm value: New evidence from Spain. Strategic Management Journal, 25(12), 1199–1207. [Google Scholar]

[6] De Miguel, A., Pindado, J., and De La Torre, C. (2005). How do entrenchment and expropriation phenomena affect control mechanisms? Corporate Governance: An International Review, 13(4), 505–516. [Google Scholar]

[7] Demirgüç-Kunt, A., and Levine, R. (2004). Financial structure and economic growth: A cross-country comparison of banks, markets, and development. MIT Press. [Google Scholar]

[8] Demirgüç-Kunt, A., and Maksimovic, V. (1998). Law, Finance, and Firm Growth. The Journal of Finance, 53(6), 2107–2137. https://doi.org/10.1111/0022-1082.00084. [Google Scholar]

[9] Haugen, R.A., and Baker, N.L. (1996). Commonality in the determinants of expected stock returns. Journal of Financial Economics, 41(3), 401–439. [Google Scholar]

[10] Hoffmann, P.S. (2014). Internal corporate governance mechanisms as drivers of firm value: Panel data evidence for Chilean firms. Review of Managerial Science, 8(4), 575–604. [Google Scholar]

[11] Iturriaga, F.J.L., and Crisóstomo, V.L. (2010). Do leverage, dividend payout, and ownership concentration influence firms’ value creation? An analysis of Brazilian firms. Emerging Markets Finance and Trade, 46(3), 80–94. [Google Scholar]

[12] Jensen, M.C., and Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. [Google Scholar]

[13] Kaufmann, D., Kraay, A., and Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues1. Hague Journal on the Rule of Law, 3(2), 220–246. [Google Scholar]

[14] La Porta, R., Lopez-de-Silanes, F., and Shleifer, A. (2006). What works in securities laws? The Journal of Finance, 61(1), 1–32. [Google Scholar]

[15] Lin, J.-C., and Tai, V.W. (2013). Corporate governance and analyst behavior: Evidence from an emerging market. Asia-Pacific Journal of Financial Studies, 42(2), 228–261. [Google Scholar]

[16] Lins, K.V. (2003). Equity ownership and firm value in emerging markets. Journal of Financial and Quantitative Analysis, 38(1), 159–184. [Google Scholar]

[17] Love, I. (2011). Corporate governance and performance around the world: What we know and what we don’t. The World Bank Research Observer, 26(1), 42–70. [Google Scholar]

[18] McConnell, J.J., and Servaes, H. (1990). Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2), 595–612. [Google Scholar]

[19] Morey, M., Gottesman, A., Baker, E., and Godridge, B. (2009). Does better corporate governance result in higher valuations in emerging markets? Another examination using a new data set. Journal of Banking & Finance, 33(2), 254–262. [Google Scholar]

[20] Naceur, S.B., and Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks’ performance. Emerging Markets Review, 12(1), 1–20. [Google Scholar]

[21] Nugraha, F.W. (2017). Local Financial Development And Firm Performance: Does Financial Outreach Really Matters Within Indonesian Archipelago? Buletin Ekonomi Moneter Dan Perbankan, 19(3), 287–318. https://doi.org/10.21098/bemp.v19i3.667. [Google Scholar]

[22] Saona Hoffmann, P., and Vallelado González, E. (2005). Ownership Structure and Growth Opportunities as Determinants of Bank Debt: Evidence from Chilean Companies. Management Research: Journal of the Iberoamerican Academy of Management, 3(2), 121–136. https://doi.org/10.1108/15365430580001317. [Google Scholar]

[23] Saona, P., and San Martín, P. (2016). Country level governance variables and ownership concentration as determinants of firm value in Latin America. International Review of Law and Economics, 47, 84–95. https://doi.org/10.1016/j.irle.2016.06.004 [Google Scholar]

[24] Selarka, E. (2005). Ownership Concentration and Firm Value: A Study from the Indian Corporate Sector. Emerging Markets Finance and Trade, 41(6), 83–108. https://doi.org/10.1080/1540496X.2005.11052627 [Google Scholar]

[25] Shleifer, A., and Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3, Part 1), 461–488. [Google Scholar]

[26] Vintilă, G., and Gherghina, Ş. C. (2014). The Impact of Ownership Concentration on Firm Value. Empirical Study of the Bucharest Stock Exchange Listed Companies. Procedia Economics and Finance, 15, 271–279. https://doi.org/10.1016/S2212-5671(14)00500-0 [Google Scholar]

[27] Yang, C.-C., Lee, C., Gu, Y.-X., and Lee, Y.-W. (2010). Co-determination of capital structure and stock returns—A LISREL approach: An empirical test of Taiwan stock markets. The Quarterly Review of Economics and Finance, 50(2), 222–233 [Google Scholar]

Central European Management Journal