PhD

Permanent URI for this collectionhttps://repository.cuilahore.edu.pk/handle/123456789/47

This collection archives the complete set of theses produced by students of the COMSATS University Islamabad, Lahore Campus.

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Corporate Governance, Financial Constraints and Dividend Policy: Evidence from Pakistan
(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2018) Muhammad Azeem; FA11-PMS-002; Dr. Talat Afza; LHR TP 5327
Information asymmetry between insiders and outsiders creates various issues for a firm, such as the agency problem where managers pursue their own interests even at the cost of the wellbeing of the firm’s shareholders and probable external financial constraints where external investors discount risk by causing a surge in the cost of financing. Normally, a firm manages the issues of the agency problem and external financing constraints by omitting or initiating dividend payments. In most existing studies, scholars have focused on the direct relationship between corporate governance and dividend policies and, thus far, they have produced inconclusive and contradictory results. Most probably, these studies have not considered the role of financial constraints in dividend payment decisions. Moreover, the substantial emergence of corporate scams, along with weak regulatory environments coupled with the underdevelopment of the financial sector of Pakistan, has encouraged the study of the aforesaid tradeoff. Therefore, this study investigated the impact of corporate governance on dividend policies in the presence of financial constraints using a sample of 139 non-financial firms listed in the KSE in Pakistan, where a weak regulatory framework generates agency problems and the underdevelopment of financial sector causes financing constraints for businesses. The results reveal that, in Pakistan, dividends are an Outcome of governance practices. As the quality of firm-level governance improves, shareholders are provided with the legal strength to ultimately force firm managersto pay dividends.Along with the agency problem, the availability of external financing is an important factor related to dividend payment decisions in Pakistan. When a company is confronted with the agency problem and financial constraints simultaneously, managers try to avoid costly external financing rather than reducing agency problem. The corporate regulatory machinery of Pakistan completely inherits the characteristics of low efficiency, and as a result, the issue of unsymmetrical firm-level governance practices has emerged. Eventually, the influence of financial constraints on dividend policies also varies across different corporate governance regimes.
The Effects of Corporate Governance, Voluntary Disclosures and Information Asymmetry on Agency Cost: A Moderated Mediation Examinatio
(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2021) Samya Tahir; FA13-PMS-015; Dr. Sajid Nazir; LHR TP 7860
In light of many financial scandals during the last four decades (e.g., Enron, Parmalat, and Crescent Standard Investment Bank Limited), companies are paying more attention to resolve management's opportunistic behaviors in the form of fund expropriation, empire building, and suboptimal investments. Managers are presumed to possess additional information on a firm’s current performance and future prospects, which leads to increase information asymmetry and agency costs. Therefore, the implementation of an appropriate system of corporate governance to reduce information asymmetry constrains agents from behaving opportunistically and, as a result, reduces agency costs. Moreover, effective voluntary disclosures play an additional role in monitoring managerial activities by providing more transparency and understanding to investors and creditors about the company. Based on these arguments, this study aims to investigate the fundamental role that information asymmetry plays as a mediator in the relationship between corporate governance and agency cost. The study further evaluates the role of voluntary disclosures in moderating the mediated relationship between corporate governance and agency cost through information asymmetry. The sample of the study is selected from the non-financial firms (listed on the Pakistan Stock Exchange) during the period from 2009 to 2015. The moderated mediation is applied using PROCESS Macro to construct bootstrap confidence intervals at the 95% level to estimate the model and a “simple slope analysis” to visualize the model. The direct relationship shows that despite increasing corporate governance mechanisms, the agency cost of overinvestment is rising. However, the indirect relationship suggests that the corporate governance mechanism promotes transparency by exerting pressure on management to produce information that investors and other stakeholders can use. This creates a monitoring channel that reduces information asymmetry, thus reducing the ability of management and majority shareholders to expropriate the firm’s resources, which mitigates the overinvestment of free cash flow. The positive effect of corporate governance on agency cost in the direct relationship becomes negative in the indirect relationship, xi contingent on increased voluntary disclosures by means of an additional controlling mechanism that mitigates the agency cost. Additionally, a high level (vs. low) of voluntary disclosure index and sub-indices are better able to negatively moderate the mediated relationship. The results support the agency cost hypothesis that states that managers and dominant shareholders make suboptimal investments when disclosure quality is reduced. Despite the efforts of academia, professionals, and regulatory bodies, the disclosure of value relevant information is limited. The insights provide implications for the Pakistan Institute of Corporate Governance to ensure the effective execution of the governance rules. Likewise, it is important to set voluntary reporting standards in response to calls for additional control devices (i.e., voluntary disclosures).
The Relationship Between Corporate Governance and Firm Value: Role of Discretionary Earnings Management
(Library Information Services COMSATS University Islamaabad Lahore Campus, 2015) Sajid Nazir; FA10-PMS-001; Dr. Talat Afza; LHR TP 5287
Corporate governance practices help in enhancing firm value by effectively monitoring the managerial decisions as well as reducing the level of information asymmetry and agency problem between empowered managers and dispersed minority shareholders. The present study investigates the relationship between corporate governance and firm value for the developing economy of Pakistan. The study has also taken into consideration the moderating role of discretionary earnings management in corporate governance-firm value relationship, which is considered to be a relatively ignored research issue in corporate finance literature. In addition to focusing on individual mechanisms of corporate governance (i.e. audit, board, compensation, ownership), the present study has also constructed a composite corporate governance index to investigate the role of effective corporate governance in mitigating earnings management and enhancing firm value. The data of 208 firms listed at Karachi Stock Exchange for a time period of 2004 2011 has been used for analysis and accounting, market and economic measures of performance have been used as firm value. The study finds that corporate governance plays a vital role in enhancing firm value in long as well as short run. Constitution of internal audit committees as an effective internal audit system is essential for the enriched progress of a firm. The monetary incentives and compensation paid to the top executives motivates them to work in the best interests of the company which increases not only short term accounting value of firm but also long term market and economic value. The findings reveal that discretionary earnings management practices by corporate managers damage the firm value in long term and it could be mitigated by effective corporate governance mechanisms. Moreover, this value damaging role of discretionary earnings management negatively moderates between effective corporate governance and firm value. Firms with earnings manipulation weakens the impact of effectiveness of governance system and leads to lower firm value. Finally, the study suggests some practical implications based upon the findings for investors, policy makers and manager.
The Relationship Between Corporate Governance and Firm Value: Role of Discretionary Earnings Management
(Library Information Services, COMSATS University Islamabad, Lahore Campus, 2018) Sajid Nazir; FA10-PMS-001; Dr. Talat Afza; LHR TP 5287
Corporate governance practices help in enhancing firm value by effectively monitoring the managerial decisions as well as reducing the level of information asymmetry and agency problem between empowered managers and dispersed minority shareholders. The present study investigates the relationship between corporate governance and firm value for the developing economy of Pakistan. The study has also taken into consideration the moderating role of discretionary earnings management in corporate governance-firm value relationship, which is considered to be a relatively ignored research issue in corporate finance literature. In addition to focusing on individual mechanisms of corporate governance (i.e. audit, board, compensation, ownership), the present study has also constructed a composite corporate governance index to investigate the role of effective corporate governance in mitigating earnings management and enhancing firm value. The data of 208 firms listed at Karachi Stock Exchange for a time period of 2004 2011 has been used for analysis and accounting, market and economic measures of performance have been used as firm value. The study finds that corporate governance plays a vital role in enhancing firm value in long as well as short run. Constitution of internal audit committees as an effective internal audit system is essential for the enriched progress of a firm. The monetary incentives and compensation paid to the top executives motivates them to work in the best interests of the company which increases not only short term accounting value of firm but also long term market and economic value. The findings reveal that discretionary earnings management practices by corporate managers damage the firm value in long term and it could be mitigated by effective corporate governance mechanisms. Moreover, this value damaging role of discretionary earnings management negatively moderates between effective corporate governance and firm value. Firms with earnings manipulation weakens the impact of effectiveness of governance system and leads to lower firm value. Finally, the study suggests some practical implications based upon the findings for investors, policy makers and manager.