Basil Al-Najjar

The Relationship between Capital Structure and Ownership Structure: New Evidence from Jordanian Panel Data

Purpose - The study aims to investigate the comparatively under-researched relationship between ownership structure and capital structure in an emerging market. It is also one of the first studies to apply both single and reduced-form equation methods using a panel data approach. Findings - The results demonstrate that Jordanian firms follow the same determinants of capital structure as occur in developed markets, namely: profitability, firm size, growth rate, market-to-book ratio, asset structure and liquidity. In addition, institutional ownership structure is found to be determined by: assets structure, business risk (BR), growth opportunities and firm size. Finally, the results reveal that assets tangibility, firm size, growth opportunities and BR are considered to be joint determinants of ownership structure and capital structure. Practical implications - The practical implication of the study is that investors and managers should consider both capital structure and ownership structure when they take their investment decisions. Originality/value - This is the first study of the interaction between institutional ownership and capital structure in Jordan where there are differences, as regards institutional and financial structures, relative to those in developed markets.

Revisiting the capital structure puzzle: UK evidence

Purpose - This paper seeks to explore the potential drivers of corporate capital structure. Design/methodology/approach - The paper applies both fixed effects panel models and random effects tobit models to examine this issue. A sample of 379 firms is used across the period from 1991 to 2002. Findings - It is found that corporate characteristics (firm size, firm risk, firm growth rate, firm profitability and asset tangibility) and corporate governance characteristics (board size and outside directorships) are the main drivers of capital structure of UK firms. In addition, the results show that changing the definition of capital structure may result in changing the sign and the significance of these potential drivers. Originality/value - The paper argues that another dimension of the capital structure puzzle can be introduced which is related to the definition of capital structure used in prior studies. It is worth noting that the aim of this paper is not to provide an optimal set of factors that may affect the decision of capital structure, but to highlight the effect of the different definitions of capital structure that can be used by different studies, which makes the comparison between such studies difficult or even erroneous.

Future‐oriented narrative reporting: determinants and use

Purpose – The purpose of this paper is to examine the determinants of future‐oriented information in UK annual report narrative sections. The paper also investigates the association between corporate dividend policy and levels of future‐oriented information, as a proxy for information asymmetry. Design/methodology/approach – A computer‐based‐content analysis is used to measure levels of future‐oriented information. Tobit and logit regressions are then applied in order to examine the impact of firm characteristics, and corporate governance characteristics on future‐oriented disclosure. In further tests, Tobit and logit regression models are used to investigate the association between corporate dividend policy and levels of future‐oriented information. Findings – The authors find that firm size is the main factor affecting the firms’ levels of future‐oriented information. This variable is statistically significant in five regression models. In addition, the authors find that profitability, outsider directorships, and insider ownerships affect the levels of future‐oriented information. However, the significance of these variables depends on whether fixed effects or random effects models are used and whether year dummies are included or excluded in the analyses. Finally, the authors find a positive association between corporate dividend policy and information asymmetry (measured by the levels of future‐oriented information). Originality/value – This paper contributes to the existing disclosure studies in two crucial ways. First, it offers the first evidence that levels of future‐oriented information are driven by some firm characteristics, and some corporate governance mechanisms. Second, it offers the first UK evidence of the association between corporate dividend policy and information asymmetry. The results show that dividends and information asymmetry are negatively associated.

The Determinants of Audit Committee Independence and Activity: Evidence from the UK

We investigate the determinants of audit committee independence and activity in UK firms. We employ panel data analysis for non�?financial films that provide the required information for the period from 2003 to 2008. Our findings show that audit committees are more independent when firms have large boards and more insider ownership. In addition, we detect that large firms place less demand on audit independence. This study also provides new evidence that firms with more free cash flows require more audit independence. Finally, firms with large audit committees and large boards that meet more frequently are active and demand more audit committee meetings.

Empirical Modelling of Capital Structure: Jordanian Evidence

This article provides evidence about the determinants of capital structure in developing countries through studying non-financial Jordanian firms. We detect that capital structure choice in Jordan is influenced by similar set of factors suggested in the developed markets, namely, institutional ownership, profitability, business risk, asset tangibility, asset liquidity, market-to-book and firm size. The findings are consistent with the related studies in both developed and developing countries. In addition, we report that Jordanian firms have target capital structure ratios and that they adjust relatively quickly to their targets.

Dividend behaviour and smoothing new evidence from Jordanian panel data

Purpose - The purpose of this paper is to investigate dividend policy decisions in developing countries through studying Jordanian non-financial firms. It aims to highlight the issue of dividend policy and the behaviour of dividends in Jordan as an emerging market. Design/methodology/approach - The paper examines the dividend policy situation in Jordan and compares the differences between developed markets and the emerging markets in the dividend policy context. It uses previous studies and it also covers the determinants of dividend policy. Findings - The paper finds that the dividend policy in Jordan, as a developing country, is influenced by factors similar to those relating to developed countries such as: leverage ratio, institutional ownership, profitability, business risk, asset structure, growth rate and firm size. Furthermore, the factors affecting the likelihood of paying dividends are similar to those affecting the dividend policy. Finally, the results show that the Lintner model is valid for Jordanian data, and that Jordanian firms have target payout ratios and that they adjust to their target relatively faster than firms in more developed countries. Practical implications - The practical implication of the study is that investors and managers should consider the factors that affect the dividend policy when they make their profit distribution decision. Originality/value - The paper investigates the factors that affect the dividend policy and also consider the behaviour issue of dividend payments.

The inter-relationship between capital structure and dividend policy: empirical evidence from Jordanian data

The study investigates the under‐researched relationship between capital structure and dividend policy in emerging markets with regard to the Jordanian market. The empirical analysis focuses on the estimation of both single equation models and structure equation models using the reduced form equations to examine the joint determinants of capital structure and dividend policy. The study investigates whether capital structure and dividend policy theories can explain the financial decisions in emerging market such as the Jordanian market. Namely, the study examines agency theory, signalling theory, pecking order theory and bankruptcy theory. The results indicate that there is a positive relationship between debt‐to‐asset ratio on the one hand, and asset tangibility, profitability, market‐to‐book, liquidity, firm size, and industry classification on the other hand. Also, there is a negative relationship between debt‐to‐asset ratio and profitability. In addition, there is a positive relationship between dividend payout ratio on the one hand, and profitability, asset tangibility, market‐to‐book and industry classification on the other hand. Finally, the results of the reduced form equations show that capital structure and dividend policy have the following common factors: profitability; asset tangibility; market‐to‐book; industry classification; and limited evidence of institutional ownership. Therefore, the determinants of capital structure and dividend policy in emerging markets such as the Jordanian market share the same set of suggested factors with the developed markets.

The Effect of Governance Mechanisms on Small and Medium‐Sized Enterprise Cash Holdings: Evidence from the United Kingdom

This paper investigates the impact of governance mechanisms on small and medium‐sized enterprise () cash holdings from 2000 to 2009, employing static and dynamic panel data analyses. We find no evidence that firm governance index and insider ownership affect cash holdings. This might indicate that governance mechanisms in are relatively weak. We also report that chief executive officer compensation has a positive effect on cash holdings. Firm‐specific factors such as firm size, leverage, and liquidity negatively affect cash holdings, whereas the research and development ratio and operating risk are positively associated with them. Finally, have target cash holdings and adjust to these.

The association between disclosure of forward-looking information and corporate governance mechanisms: Evidence from the UK before the financial crisis period

Purpose - – This paper aims to witness the importance of corporate governance mechanisms and investigates the relationship between the quality of disclosure of forward-looking information in the narrative sections of annual reports and the governance mechanisms for non-financial UK companies. Design/methodology/approach - – Computerized content analysis using QSR NVivo 8 is used to measure the extent of forward-looking information in the narratives of the annual reports for 238 companies listed in the London Stock Exchange. Cross-sectional regression analysis is used to examine the impact of the corporate governance mechanisms on forward-looking information. Findings - – The results show that board size and the independence of the audit committee are associated with the level of voluntary disclosure of forward-looking information. Research limitations/implication - – One limitation of this study is that in controls for the effect of the financial crisis period, by selecting a representative year for a five-year period, 2006. The authors argument in using this year is based on the fact that the main variables of interest do not vary significantly with time, the cross-sectional analysis of the selected period will provide a fair view of the last five year-period. Practical implications - – The authors report the importance of some governance practices in the UK, such as the role of the board members as well as the importance of audit committee independence. Originality/value - – This paper contributes to the literature by using computerized content analysis to examine the relation between corporate governance mechanism and disclosure quality of forward-looking information using sample of companies before financial crisis period. The authors also examine governance mechanisms that are under-researched in the field of forward-looking disclosure.

The determinants of board meetings: evidence from categorical analysis

Purpose - The purpose of this paper is to investigate the determinants of the frequency of board meetings as an index for board activity including their monitoring role. Design/methodology/approach - The research sample is composed of 120 UK firms based on their market capitalization for the period from 2003 to 2008. The study applies multinomial logistic modelling and conditional logistic modelling to investigate the frequency of board meetings. Findings - The study finds that board size and structure are positively related to the frequency of board meetings. In addition, a negative impact of audit committee diligence on the frequency board meetings is reported. The study finds no evidence that the frequency of board meetings are reduced when there is a CEO duality. Finally, the results show that firm size, leverage, free cash flows, and Tobins Practical implications - This study shows the factors that affect the board effectiveness in the UK, namely that board meetings, board composition, and board size, are key indicators for good internal governance practices and, in turn, enhance board monitoring activities. Originality/value - The research offers the first major study to examine the determinants of the frequency of board meetings in UK non-financial firms. The paucity of the UK literature regarding board effectiveness in the UK reinforces the empirical importance of the results for researchers, managers, and UK policy makers.