Empirical essays on corporate governance and corporate decisions in emerging economies: the case of Oman

Elghuweel, Mohamed Isa (2015) Empirical essays on corporate governance and corporate decisions in emerging economies: the case of Oman. PhD thesis, University of Glasgow.

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Abstract

This thesis consists of three essays analysing corporate governance (CG) reforms in emerging economies, with a particular focus on Oman. The three essays focus on three closely related CG topics that quantitatively examine the extent to which Omani CG reforms have been effective in enhancing three main corporate policy decisions. In the first essay, the thesis investigates the level and determinants of voluntary CG compliance and disclosure. The central objective of this essay is to empirically examine two main research questions: First, what is the level of voluntary compliance with, and disclosure of, CG rules contained in the 2002 Omani CG Code for listed firms?; Secondly, what factors determine the level of voluntary compliance with, and disclosure of, CG recommendations contained in the 2002 Omani CG Code for listed firms? Exploring these questions has the capacity of improving current understanding of firms’ willingness to voluntarily engage in and disclose more transparent information about their CG practices. The findings indicate that Omani firms have responded positively to the 2002 CG Code’s best practice recommendations. Relying on insights from agency, legitimacy, resource dependence and signalling/stakeholder theories, the findings also suggest that ownership structure and board characteristics have significant impact on firm-level voluntary CG disclosure. Specifically, the findings suggest that government ownership, institutional ownership and foreign ownership, board size, the presence of a CG committee, and board diversity on the basis of nationality are positively related to the level of CG compliance and disclosure, whereas block ownership and board diversity on the basis of gender are negatively associated with the level of CG compliance and disclosure.

The second essay investigates how effective the CG measures contained in the 2002 Omani voluntary CG Code and other CG mechanisms proposed by other laws, such as the Companies Law, mitigate agency problems associated with capital structure (CS) decisions. The main purpose of this essay is to empirically examine the extent to which firm-level CG quality, ownership structure and board/audit characteristics influence capital structure, as well as the corporate decision (choice) to issue equity or debt in seasoned equity offerings (SEOs). This examination has the ability to expand current understanding of Omani firms’ capital structure decisions and the role that CG mechanisms can play with respect to this corporate decision. Informed by insights from tax-driven (e.g., Modigliani-Miller capital structure irrelevance and trade-off) and non-tax-driven (e.g., agency, market timing, pecking order, and signalling) capital structure theories, the empirical evidence reveals that CG is a significant determinant of capital structure decisions and SEOs. First,the findings suggest that CG index, government ownership, institutional ownership, foreign ownership, board size, audit firm size and CG committee are negatively related to capital structure, whereas block ownership is positively associated with capital structure. Second, the results indicate that firms with better governance structures, more institutional ownership and audited by big four are more likely to raise additional financing through SEOs. By contrast, firms with poor CG mechanisms, more government ownership more, foreign ownership, block ownership, large boards, and CG committee are less likely to raise additional financing through SEOs.

The final essay investigates the extent to which a broad composite CG index, corporate ownership structure, and board/audit characteristics can explain observable changes in firm-level earnings management (EM). The key objective of this essay is to investigate how effective the CG recommendations contained in the 2002 Omani CG Code and other CG mechanisms proposed by other laws, such as the Companies Law, constrain earnings management practices. The result has the potential of deepening current understanding of the ability of different CG measures to mitigate agency problems and reduce agency costs associated with earnings management. Utilising insights from agency, stakeholder, stewardship and signalling theories, the study finds that firms with better governance structures, government ownership, institutional ownership, foreign ownership, audited by big four and CG committee are negatively related to earnings management. In contrast, firms with poor CG mechanisms, more block ownership, larger boards, and CG committee are positively associated with earnings management. The reported empirical findings of the three essays are fairly robust across a number of econometric models and estimations that take into account alternative variables and potential endogeneity problems.

In brief, given the dearth of empirical evidence on the nature of CG’s influence on these three corporate policy decisions in emerging economies in particular, this thesis seeks to contribute to the literature by providing new insights with specific focus on CG reforms that have been pursued in Oman. Specifically, this thesis contributes to the limited, but steadily growing body of literature on the effectiveness of CG mechanisms in influencing a number of crucial managerial decisions, including voluntary disclosure, financing and earnings management, in emerging economies.

Item Type: Thesis (PhD)
Qualification Level: Doctoral
Keywords: Voluntary CG disclosure, corporate governance; the 2002 Omani Code of corporate governance; capital structure, earnings management, multi-theoretical approach; emerging economies; Oman; endogeneity
Subjects: H Social Sciences > HG Finance
Colleges/Schools: College of Social Sciences > Adam Smith Business School > Accounting and Finance
Funder's Name: UNSPECIFIED
Supervisor's Name: Ntim, Professor Collins and Opong, Professor Kwaku
Date of Award: 2015
Depositing User: Mr Mohamed Elghuweel
Unique ID: glathesis:2015-6449
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 08 Jun 2015 15:12
Last Modified: 15 Jun 2015 13:24
URI: http://theses.gla.ac.uk/id/eprint/6449

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