Business, Management and Economics Research
Online ISSN: 2412-1770
Print ISSN: 2413-855X
Print ISSN: 2413-855X
Volume 1 Number 6 October 2015
The Impact of Corporate Governance Mechanism on Agency Cost: An Empirical Evidence of Pakistani Listed Companies
Authors: Tariq Aziz ; Sadia Majeed ; Saba Saleem
This study attempts to investigate the role of Corporate Governance in mitigating agency cost. For this purpose a sample of 100 firms selected on the basis of 100 INDEX of Karachi Stock Exchange during the period 2007 to 2011. To do so, alternative proxies for agency costs are employing: the ratio of total sales to total assets (asset turnover) and the ratio of selling, general & administrative expenses (SG&A) to total sales. Multivariate fixed effect regression is used to analyze the data. The explanatory variables include director ownership, institutional ownership, ownership Concentration, board size, CEO/Chair duality, Non Executive Directors, Debt Ratio, remuneration structure and board independence. The analysis is controlled for the influence of company size. The results show that higher director and institutional ownership reduces the level of agency cost. Smaller sized boards also results in lowering agency cost. Board independence has positive association with asset utilization ratio. The separation of the post of CEO and chairperson and higher remuneration lower agency cost. Bank debt constitutes one of the most important Corporate Governance devices for Pakistani Listed Companies. Also, managerial ownership, managerial compensation and ownership concentration seem to play an important role in mitigating agency costs.
German Mittlestand: Any Lesson for Development and Sustainability of Small and Medium Scale Enterprises in Nigeria?
Authors: Nkechinyere R. Uwajumogu ; Ebele S. Nwokoye ; Lasbery Anochiwa ; O. R. Ojike
The small and medium scale enterprises (SMEs) sector has been identified as a critical sector for the various roles it plays in the socio-economic development of an economy. Such roles include employment generation, bedrock of entrepreneurial development, avenue for investment and innovation, poverty reduction and economic growth. It is also a source of forward and backward linkages to multinational corporations (MNCs) which will engender foreign direct investment and local technological development. In Nigeria, the SMEs are faced with many challenges which include limited access to fund; lack of capacity of managers etc. These have undermined the growth, development and sustainability of the sector. It is in order to ameliorate these numerous challenges that government over the years have formulated and implemented several policies to develop, encourage and sustain SME success in Nigeria. The study is aimed at drawing important lessons from the success stories of German Mittlestand by importing, adopting or adapting their characteristics. The Mittlestand was chosen as a benchmark because the sector is resilient and was able to weather economic storms during the economic meltdown than many of their competitors. Important lessons that could be learnt by Nigeria’s SMEs include amongst others, the importance of investing in human resources through the adoption of Germany’s dual vocational system; production of high quality goods and services; investing in research and development; provision of after sales services; having a sound business plan that consents to business inheritance, etc. On the part of government, the lessons that could be learnt include: provision of critical infrastructure; creating enabling environment for small businesses; passing and enforcing the local content bill etc.