IDEAS home Printed from https://ideas.repec.org/a/kap/jmgtgv/v24y2020i2d10.1007_s10997-018-9436-6.html
   My bibliography  Save this article

Ownership concentration, board characteristics and firm performance among Shariah-compliant companies

Author

Listed:
  • Nur Ain Shahrier

    (Sunway University)

  • Jessica Sze Yin Ho

    (Sunway University)

  • Sanjaya Singh Gaur

    (Sunway University)

Abstract

This paper aims to enhance the understanding of the relationship between corporate governance mechanism and firm performance among Shariah-compliant firms using an integrated theoretical framework. This study is carried out on the top 200 Shariah-compliant firms listed on the Kuala Lumpur Stock Exchange from 2014 to 2017. Given the longitudinal nature of the data, the researchers employ generalized least squares and random effect with robust and clustering standard error models to estimate the impact of ownership structure, board independence, board competence, firms’ characteristics, and debt structure on firm performance as measured by the firm’s return on assets (ROA) and return on equity (ROE). The findings show that ownership concentration has a statistically positive effect on firm performance. Having an external Chair and independent board members with an educational level beyond a bachelor’s degree also have a positive effect on firm performance while CEO duality has a statistically negative impact instead. Insider representation has a positive impact on firm performance but when these inside board members are also the owners, the impact turns negative. Furthermore, the statistical significance of holding a bachelor’s degree, master’s degree, and other type of qualifications imply the need for board members to have greater knowledge in order to positively influence ROA and ROE. This is the first study to examine the influence of corporate governance mechanism on firm performance using a multi-theoretical approach in the context of Shariah-compliant firms. The interaction terms of elements in agency theory, stakeholder/resource-based theory, and stewardship theory are used as pre-conditions to the direct effect of these regressors on firm performance.

Suggested Citation

  • Nur Ain Shahrier & Jessica Sze Yin Ho & Sanjaya Singh Gaur, 2020. "Ownership concentration, board characteristics and firm performance among Shariah-compliant companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(2), pages 365-388, June.
    • Handle: RePEc:kap:jmgtgv:v:24:y:2020:i:2:d:10.1007_s10997-018-9436-6
    DOI: 10.1007/s10997-018-9436-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10997-018-9436-6
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10997-018-9436-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chang-Yang Lee & Ji-Hwan Lee & Ajai S. Gaur, 2017. "Are large business groups conducive to industry innovation? The moderating role of technological appropriability," Asia Pacific Journal of Management, Springer, vol. 34(2), pages 313-337, June.
    2. Jermias, Johnny & Gani, Lindawati, 2014. "The impact of board capital and board characteristics on firm performance," The British Accounting Review, Elsevier, vol. 46(2), pages 135-153.
    3. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    4. Lee, Ji-Hwan & Gaur, Ajai S., 2013. "Managing multi-business firms: A comparison between Korean chaebols and diversified U.S. firms," Journal of World Business, Elsevier, vol. 48(4), pages 443-454.
    5. Popli, Manish & Ladkani, Radha M. & Gaur, Ajai S., 2017. "Business group affiliation and post-acquisition performance: An extended resource-based view," Journal of Business Research, Elsevier, vol. 81(C), pages 21-30.
    6. Contractor, Farok & Yang, Yong & Gaur, Ajai S., 2016. "Firm-specific intangible assets and subsidiary profitability: The moderating role of distance, ownership strategy and subsidiary experience," Journal of World Business, Elsevier, vol. 51(6), pages 950-964.
    7. Vikas Kumar & Ajai S. Gaur & Chinmay Pattnaik, 2012. "Product Diversification and International Expansion of Business Groups," Management International Review, Springer, vol. 52(2), pages 175-192, April.
    8. Fabio Bertoni & Michele Meoli & Silvio Vismara, 2014. "Board Independence, Ownership Structure and the Valuation of IPOs in Continental Europe," Post-Print hal-02313136, HAL.
    9. Chinmay Pattnaik & Qiang Lu & Ajai S. Gaur, 2018. "Group Affiliation and Entry Barriers: The Dark Side Of Business Groups In Emerging Markets," Journal of Business Ethics, Springer, vol. 153(4), pages 1051-1066, December.
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    11. Ajai S. Gaur & Debmalya Mukherjee & Sanjaya S. Gaur & Florian Schmid, 2011. "Environmental and Firm Level Influences on Inter‐Organizational Trust and SME Performance," Journal of Management Studies, Wiley Blackwell, vol. 48(8), pages 1752-1781, December.
    12. Brian K. Boyd, 1995. "CEO duality and firm performance: A contingency model," Strategic Management Journal, Wiley Blackwell, vol. 16(4), pages 301-312.
    13. Gaur, Ajai S. & Kumar, Vikas & Singh, Deeksha, 2014. "Institutions, resources, and internationalization of emerging economy firms," Journal of World Business, Elsevier, vol. 49(1), pages 12-20.
    14. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
    15. Deeksha A. Singh & Ajai S. Gaur & Florian P. Schmid, 2010. "Corporate Diversification, TMT Experience, and Performance," Management International Review, Springer, vol. 50(1), pages 35-56, February.
    16. Gaur, Ajai & Kumar, Mukesh, 2018. "A systematic approach to conducting review studies: An assessment of content analysis in 25years of IB research," Journal of World Business, Elsevier, vol. 53(2), pages 280-289.
    17. Maria Bhatti & Ishaq Bhatti, 2009. "Development in legal Issues of Corporate Governance in Islamic Finance," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 25(1), pages 67-91, June.
    18. Loizos Heracleous, 2001. "What is the Impact of Corporate Governance on Organisational Performance?," Corporate Governance: An International Review, Wiley Blackwell, vol. 9(3), pages 165-173, July.
    19. Abu-Tapanjeh, Abdussalam Mahmoud, 2009. "Corporate governance from the Islamic perspective: A comparative analysis with OECD principles," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 20(5), pages 556-567.
    20. Mukherjee, Debmalya & Gaur, Ajai S. & Gaur, Sanjaya S. & Schmid, Florian, 2013. "External and internal influences on R&D alliance formation: Evidence from German SMEs," Journal of Business Research, Elsevier, vol. 66(11), pages 2178-2185.
    21. Ajai Gaur & Andrew Delios, 2015. "International Diversification of Emerging Market Firms: The Role of Ownership Structure and Group Affiliation," Management International Review, Springer, vol. 55(2), pages 235-253, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mahesh Chand Garg & Khushboo Tanwer, 2023. "Board Variables Reforms in India: Success or Failure? A Comparative Analysis Between Pre and Post Enactment Period of Companies Act, 2013," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(3), pages 531-558, September.
    2. repec:bcp:journl:v:8:y:2024:i:14:p:28-46 is not listed on IDEAS
    3. Ying Schwarte & Ping He, 2024. "The effects of institutional investors and munificence on board chair orientations," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(4), pages 1049-1077, December.
    4. Maurizio La Rocca & Francesco Fasano & Tiziana La Rocca & Neha Neha, 2024. "Women in CEO duality and firm performance in Europe," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(1), pages 177-214, March.
    5. Renuka Sharma & Kiran Mehta & Archana Goel, 2023. "Non-linear relationship between board size and performance of Indian companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(4), pages 1277-1301, December.
    6. Yunieta Anny Nainggolan & Dianita Indah Prahmila & Annisa Rizkia Syaputri, 2023. "Do board characteristics affect bank risk-taking and performance? Evidence from Indonesian and Malaysian Islamic banks," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(4), pages 1115-1145, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashish Varma & Kaushal Bhalotia & Karan Gambhir, 2020. "Innovating for competitive advantage: managerial risk-taking ability counterbalances management controls," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(2), pages 389-409, June.
    2. Nuruzzaman, N. & Singh, Deeksha & Pattnaik, Chinmay, 2019. "Competing to be innovative: Foreign competition and imitative innovation of emerging economy firms," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    3. Chinmay Pattnaik & Qiang Lu & Ajai S. Gaur, 2018. "Group Affiliation and Entry Barriers: The Dark Side Of Business Groups In Emerging Markets," Journal of Business Ethics, Springer, vol. 153(4), pages 1051-1066, December.
    4. Luis Alfonso Dau & Randall Morck & Bernard Yin Yeung, 2021. "Business groups and the study of international business: A Coasean synthesis and extension," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(2), pages 161-211, March.
    5. Namrata Gupta & Anita Mirchandani, 2020. "Corporate governance and performance of microfinance institutions: recent global evidences," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(2), pages 307-326, June.
    6. Alvaro Cuervo-Cazurra & Ajai Gaur & Deeksha Singh, 2019. "Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 598-632, June.
    7. Fuad, Mohammad & Gaur, Ajai S., 2019. "Merger waves, entry-timing, and cross-border acquisition completion: A frictional lens perspective," Journal of World Business, Elsevier, vol. 54(2), pages 107-118.
    8. Popli, Manish & Ladkani, Radha M. & Gaur, Ajai S., 2017. "Business group affiliation and post-acquisition performance: An extended resource-based view," Journal of Business Research, Elsevier, vol. 81(C), pages 21-30.
    9. Kwok, Francis & Sharma, Piyush & Gaur, Sanjaya Singh & Ueno, Akiko, 2019. "Interactive effects of information exchange, relationship capital and environmental uncertainty on international joint venture (IJV) performance: An emerging markets perspective," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    10. Singh, Deeksha & Pattnaik, Chinmay & Gaur, Ajai S. & Ketencioglu, Elif, 2018. "Corporate expansion during pro-market reforms in emerging markets: The contingent value of group affiliation and diversification," Journal of Business Research, Elsevier, vol. 82(C), pages 220-229.
    11. Ajai S Gaur & Chinmay Pattnaik & Deeksha Singh & Jeoung Yul Lee, 2019. "Internalization advantage and subsidiary performance: The role of business group affiliation and host country characteristics," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1253-1282, October.
    12. Aguilera, Ruth V. & Crespí-Cladera, Rafel & Infantes, Paula M. & Pascual-Fuster, Bartolomé, 2020. "Business groups and internationalization: Effective identification and future agenda," Journal of World Business, Elsevier, vol. 55(4).
    13. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Wood, Geoffrey & Glaister, Keith W., 2018. "Board composition, family ownership, institutional distance and the foreign equity ownership strategies of Turkish MNEs," Journal of World Business, Elsevier, vol. 53(6), pages 862-879.
    14. Aggarwal, Raj & Jindal, Varun & Seth, Rama, 2019. "Board diversity and firm performance: The role of business group affiliation," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    15. Joonho Shin & Xavier Mendoza & Changbum Choi, 2022. "Do internationalizing business group affiliates perform better after promarket reforms? Evidence from Korean SMEs," Asia Pacific Journal of Management, Springer, vol. 39(2), pages 805-841, June.
    16. Chung, Hsi-Mei & Dahms, Sven, 2018. "Ownership Strategy and Foreign Affiliate Performance in Multinational Family Business Groups: A Double-edged Sword," Journal of International Management, Elsevier, vol. 24(4), pages 303-316.
    17. Areneke, Geofry & Kimani, Danson, 2019. "Value relevance of multinational directorship and cross-listing on MNEs national governance disclosure practices in Sub-Saharan Africa: Evidence from Nigeria," Journal of World Business, Elsevier, vol. 54(4), pages 285-306.
    18. Täube, Florian A. & Karna, Amit & Sonderegger, Petra, 2019. "Economic geography and emerging market clusters: A co-evolutionary study of local and non-local networks in Bangalore," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    19. Ajai S Gaur & Xufei Ma & Zhujun Ding, 2018. "Home country supportiveness/unfavorableness and outward foreign direct investment from China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(3), pages 324-345, April.
    20. Anil Nair & Mehdi Sharifi Khobdeh & Aydin Oksoy & Orhun Guldiken & Chris H. Willis, 2023. "A review of strategic management research on India," Asia Pacific Journal of Management, Springer, vol. 40(4), pages 1341-1392, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jmgtgv:v:24:y:2020:i:2:d:10.1007_s10997-018-9436-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.