Ownership Structure, Monitoring Cost and Agency Theory Perspective: Evidence from Pakistan Stock Exchange
Keywords:
Agency theory, Monitoring cost, Ownership structure, PakistanAbstract
Purpose – The purpose of this study to investigate the association between ownership structure and monitoring cost in the presence of agency theory for Pakistani business environment. Additional the study also between firm performance and monitoring cost.
Research methodology – This study utilizes a sample of 97 companies listed on Pakistan stock exchange from the period of 2015-2019. Panel regression techniques is employed with fixed and random effect to estimate the association between pattern shareholdings and firm’s financial performance listed at Pakistan Stock Exchange (PSX).
Findings – This study reveals that foreign shareholdings has positive significant impact on the monitoring cost, while institutional, government and family shareholding are insignificant impact on monitoring cost in Pakistani institutional environment.
ownership, government and family ownership has not shown significant results
Limitations & Implications – The study mainly used the publically available date, hand collected from the annual reports of the sample companies. Therefore, sample size is small because data for certain variables was missing. In order to reduce the agency cost foreign shareholding should be decreased while employee shareholdings should be increased, as it will enhance commitment and motivation so productivity and performance will be enhanced.
Originality/Value – The present study will extend the body of existing literature on the corporate finance specifically the corporate governance literature by considering the monitoring cost, ownership structure and financial performance with respective an Asian emerging markets, more specifically Pakistan. The empirical findings of this study will provide guidelines to the policymakers and corporate managers to consider the quality of corporate governance with taking the corporate decisions, specifically ownership structure and agency cost.
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