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The present study empirically investigates the effect of corporate governance on the value of cash holding, usage of excess cash, and firm performance in concentrated and competitive industries in the context of less developed countries. The empirical analysis was conducted in the panel data setting using Pakistan as a case study. Our findings suggest a strong relationship between the value of cash holding and corporate governance, and the complementary effect of product market competition for corporate governance. This suggests that the external market discipline is also needed, in addition to good governance, to resolve agency problems in less developed countries. This is because less developed countries are usually characterized by lower competition, poor mechanisms for shareholder protection, and weak legal systems. Consequently, agency problems are greater in less developed countries compared to developed countries. Our findings also indicate that firms with good governance dissipate less excess cash on internal investment, dividends and diversification in competitive industries. Moreover, the significant positive relationship between the lagged excess cash and corporate governance dummy interaction with the dividend supports the dividend outcome model, particularly in the concentrated industries. Finally, our results suggest that the efficient utilization of excess cash, induced by good governance, leads to better corporate performance in less developed countries.
Idrees Shah; Syed Ali Shah; Muhammad Nouman; Farman Khan; Daniel Badulescu; Laura-Mariana Cismas. Corporate Governance and Cash Holding: New Insights from Concentrated and Competitive Industries. Sustainability 2021, 13, 4816 .
AMA StyleIdrees Shah, Syed Ali Shah, Muhammad Nouman, Farman Khan, Daniel Badulescu, Laura-Mariana Cismas. Corporate Governance and Cash Holding: New Insights from Concentrated and Competitive Industries. Sustainability. 2021; 13 (9):4816.
Chicago/Turabian StyleIdrees Shah; Syed Ali Shah; Muhammad Nouman; Farman Khan; Daniel Badulescu; Laura-Mariana Cismas. 2021. "Corporate Governance and Cash Holding: New Insights from Concentrated and Competitive Industries." Sustainability 13, no. 9: 4816.
This study investigates the relationship between sub-national institutional contingencies and corporate social responsibility performance (CSRP). Sub-national institutional contingencies (SNICs) play a moderating role in the link between CSRP and corporate financial performance (CFP). Using data from all A-share Chinese companies listed on the Shenzhen and Shanghai exchanges for the period 2010 to 2015, ordinary least square (OLS) regression was used as a baseline methodology to draw inferences from the data. The study uses propensity score matching (PSM) to confirm the robustness and to tackle the possible issue of endogeneity. We find reliable evidence that SNICs have a positive and significant effect on CSRP. This positive relationship is more pronounced in cross-listed companies as compared to state-owned enterprises (SOEs) and in companies located in the more developed region. Moreover, SNICs moderate the positive relationship between CSRP and CFP. The relationship is stronger in firms that are non-SOEs, are non-cross-listed, and are from less-developed regions as compared to their counterparts. The findings provide implications for regulators and individual companies. Investment in corporate social responsibility (CSR) helps companies to achieve their primary objective (i.e., financial performance). With respect to practical implications, the study indicates that policymakers, executives, and managers should refrain from “one size fits all” CSR policies. Instead, they need to simultaneously evaluate the effects of regional development, cross-listing, and ownership characteristics. Considering weak social performance by firms that are from less developed regions, are non-cross-listed, and that are non-SOEs, policymakers and the government should improve information transparency and the regulatory framework, and provide these firms with incentives. This study also provides insights for other emerging economies, especially those going through extraordinary government interventions.
Shahid Ali; Junrui Zhang; Muhammad Usman; Farman Ullah Khan; Amir Ikram; Bilal Anwar. Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China. Sustainability 2019, 11, 5478 .
AMA StyleShahid Ali, Junrui Zhang, Muhammad Usman, Farman Ullah Khan, Amir Ikram, Bilal Anwar. Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China. Sustainability. 2019; 11 (19):5478.
Chicago/Turabian StyleShahid Ali; Junrui Zhang; Muhammad Usman; Farman Ullah Khan; Amir Ikram; Bilal Anwar. 2019. "Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China." Sustainability 11, no. 19: 5478.
As an emerging economy, China modernized its economy via split-share structure reform. This reform changed the nature of ownership in state-owned enterprises (SOEs). Following this reform, we investigated the research question concerning how reductions in state ownership affect the corporate social responsibility (CSR) performance of listed firms. This study tests the hypotheses using data of Chinese listed firms between 2010 and 2015. Applying multiple regressions, we found a negative association between state reductions and CSR performance. We contribute to the existing literature by providing empirical evidence that those firms which reduce state holdings are not taking CSR activities seriously. Our study also sheds light on the worthiness and prominent status of large state owners of SOEs, as they are more likely to engage in social activities. This study provides fruitful implications for policy-makers and practitioners about state holdings, which may either hinder or enhance the corporate social performance.
Farman Ullah Khan; Junrui Zhang; Muhammad Usman; Alina Badulescu; Muhammad Safdar Sial. Ownership Reduction in State-Owned Enterprises and Corporate Social Responsibility: Perspective from Secondary Privatization in China. Sustainability 2019, 11, 1008 .
AMA StyleFarman Ullah Khan, Junrui Zhang, Muhammad Usman, Alina Badulescu, Muhammad Safdar Sial. Ownership Reduction in State-Owned Enterprises and Corporate Social Responsibility: Perspective from Secondary Privatization in China. Sustainability. 2019; 11 (4):1008.
Chicago/Turabian StyleFarman Ullah Khan; Junrui Zhang; Muhammad Usman; Alina Badulescu; Muhammad Safdar Sial. 2019. "Ownership Reduction in State-Owned Enterprises and Corporate Social Responsibility: Perspective from Secondary Privatization in China." Sustainability 11, no. 4: 1008.