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Title:	Simultaneous determination of major financial decisions in the presence of corporate governance factors
Authors:	Mohamed Cassim Abdul Nazar (ZP01273)
Supervisor:	Ruzita Abdul Rahim, Assoc. Prof. Dr.
Keywords:	Corporate governance Universiti Kebangsaan Malaysia -- Dissertations Dissertations, Academic -- Malaysia
Issue Date:	9-Jun-2021
Description:	This research explores the simultaneous relationships between major financial decisions (i.e., financing, dividend and investment) in the presence of corporate governance factors. The sample consisted of 198 non-financial companies listed on the Colombo Stock Exchange, Sri Lanka, over eight years from 2009 to 2016. This research also examines the role of corporate governance (i.e., managerial ownership, Board size, Board independence, and CEO duality) in influencing the major financial decisions. To examine the relationship, the estimation models consider three control variables: profitability, firm size and corporate tax. This study employs the Generalised Method of Moments (GMM) to estimate the regression models on the panel data. The results reveal that simultaneity in financial decisions only occurs in financing and investment, whereas there is only a one-way effect from dividend to financing. The former results suggest that sample firms issue debt to finance firms' growth and vice versa. However, the latter results indicate that firms issue more debt financing to pay higher dividends or compensate for reduced internal funding that has been used to pay higher dividends. Next, the results on the role of corporate governance variables lead to several conclusions. First, none of the corporate governance factors influences financing decisions in the expected ways. In contrast, managerial ownership is significantly positive on long term debt ratio, indicating investors trust their capital in management has ownership in the firms. Second, managerial ownership also plays the most important role, specifically in influencing dividend and investment decisions. This finding suggests that firms' stakeholders should pay most attention to firms' managerial ownership because it significantly increases debt financing, dividends, and investment. While investment is critical for the firms' growth and sustainability, debt financing requires firms to generate sufficient earnings consistently. They could face default and force bankruptcy if they fail to service the debt's interest and principals. The results show that the firms have already reported high debt financing levels, 48% debt ratio and 20% long term debt ratio. Instead, the firms should practice residual dividend policy to prioritise investment in deciding uses of internal funding. The results show financing has a direct and significant effect on Tobin's Q which means investors in Sri Lanka appreciate the investment. The recommendation is also supported by the third conclusion that corporate governance is most significant in influencing dividend payout. Overall, the findings have an important policy implication. Sri Lanka's corporate governance needs to suit better their firms' characteristics (family and government ownership and reliance on bank financing) to make it a more effective internal monitoring mechanism.,Ph.D
Pages:	162
Publisher:	UKM, Bangi
Appears in Collections:	Faculty of Economy and Management / Fakulti Ekonomi dan Pengurusan

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