The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms

Mohamad Helmi Hidthiir · Muhammad Farhan Basheer · Saira Ghulam Hassan

15 citations0/0 files storedResearch in World Economy

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Corporate Finance and Governance Financial Analysis and Corporate Governance Working Capital and Financial Performance

Abstract

Purpose- The prime objective of the current study is to investigate the interdepended of financial decision. In addition to that the impact of different level of managerial ownership on the interdepended of financial decisions is also examined agency theory, pecking order theory and the signaling theory are used as the theoretical lenses to draw the theocratical framework.Design/methodology/approach- The balance panel of 161 nonfinancial firm over the period of five years from 2013 to 2017 is used to achieve the research objectives. Polled OLS, Fixed effect and Random effect estimates are employed to answer the reach questions Findings- The managerial ownership with an average mean ownership of 39 is appeared at the top. Interestingly more than 75 percent firms are being controlled by mangers and in more than 60 percent firms of our sample the controlling managers hold more than 40 percent of shares. The Wu Hausman test is performed to determine the existence of the endogeneity problem. The results indicates that the financial decisions namely cash holding decisions, financing decisions and investment decisions has significant impact on each other. Where the managerial ownership is in nonlinear relationship with financial decisions. The results of the study are also providing support to agency theory, pecking order theory and the signaling theoryResearch implications- The study will be helpful for policymakers, researchers, corporate personals and financial institutions in understanding the interrelationship between financing decisions and the role of managerial ownership in there interdepended.Originality/value- The study is among the pioneering studies on the issue and will provide policy guideline on the said issues.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1977Determinants of corporate borrowing 1996Agency costs of free cash flow, corporate finance, and takeovers 1992A Modest Proposal for Improved Corporate Governance 2003Corporate cash holdings: An empirical investigation of UK companies 2003The impact of leverage on firm investment: Canadian evidence 2002The link between dividend policy and institutional ownership

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