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ARTICLE REVIEW I have read an article titled, The Relationship Between Corporate Governance and Finance Patterns of the

Listed Companies by Dr Mahmoud Moeinaddin and Mohsen Karimianrad which can be found in Interdisciplinary Journal of Contemporary Research in Business Vol.4, No.7; November 2012. The objective of this article is to examine the relationship between corporate governance and decision on the finance patterns through three main sources including self-financing through retained earnings, incremental debt and issuing of stocks. The focus of the research are among the listed companies in determine the right combination sources of financing by evaluating the relationship and effect of their decision towards Institutional Shareholders, Non-executive Members of the Board and on Ownership Concentration. These three management structure and ownership represent corporate governance mechanism of the companies that have significant influence on the companies financing strategies in which the decision depending on their expectations. This journal is deemed appropriate with the article discussions which regard on corporate strategy and decision making approach. The corresponding author (Moeinaddin, 2012), has the appropriate background and contributed towards many article focusing in the discipline of business and financing. His latest article on The Study of the Share Price Overreaction and the Profitability of the Contrarian Investment Strategy to Gain the Return in the Iran Stock Exchange was published in Journal of Basic and Applied Scientific Research Vol. 3, No. 1; 2013 (Moeinaddin et al., 2013). This empirical research studies the post event orientation and is classified as a correlation study that used the previous studies to provide the literature review. Required information was collected from what has been documented in the financial statements of the listed companies on Tehran Stock Exchange involving 53 listed companies in Iran in a five year period from 2006-2010. The main hypothesis of the study was on significant relationship between corporate governance mechanisms and finances patterns i.e. through retained earnings, borrowing and issuing stocks and two measures were regarded for each one, therefore three sub hypotheses were examined. It is imperative for the company to make a right financing decision in a desirable and timely manner as it can contribute to a considerable growth even in inflation situation. In relation to corporate governance, different interest of all parties concerned will determine the finance pattern of the company. The research intended to gather the former findings and conclude the dissimilarity among the studies. The research was embedded by related theories including Agency theory, Stakeholders theory and Hierarchy theory and discussions were made whether the finding is consistent with those theories. Result of this study were shown in four perspectives, the first finding provide evidence that the institutional shareholders will encourage the financing through issuing stocks rather than trough retained earnings, thus concluded that institutional shareholders have more tendency to dividends which inconsistent with the hierarchy theory. The second finding provide evidence that more ownership concentration will lead to more borrowing instead of issuing stocks in order to maintain their position, control over the firm and ultimately earn more profit. While the third finding found inverse relationship between non-executive managers and financing through retained earnings. Finally, the finding concluded that finance patterns

of the company very much depending on the corporate governance mechanism and cant be prescribed for all companies. The comparison article that I have read is titled Corporate Governance and Corporate Finance Practices in a Kuwait Stock Exchange Market Listed Firm: a survey to Confront Theory with Practice by Mutairi et al. (2010) was investigate whether the behaviour of financial managers in practice in an emerging market case is aligns with the theory exists. The article explore the issue of corporate governance mechanisms by including the importance of stakeholders, primary objectives of the firm and the ownership of top financial managers of listed firms in Kuwait in the survey tool. The survey includes questions on topics that are closely related to capital budgeting, capital structure, cost of capital and dividend policy which focus primarily on the current corporate finance practices CFOs in listed companies in the Kuwait Stock Exchange (KSE). The differences lies in the methodology whereby this research found that use of the financial tools and technique such as Capital Assets Pricing Model (CAPM), Weighted Average Cost of Capital (WACC), Net Present Value (NPV) and Internal Rate of Return (IRR) are the important method to estimate the mechanism being studied. Conclusion made was that regarding corporate governance, the general conclusion was that firms in Kuwait are striving towards maximizing profits but the agency problem might exists as managers are regarded as a top priority among firms in Kuwait where managers may not always act in the best interest of shareholders and this circumstances has an impact on the corporate performance. Another comparison article is titled Corporate Governance and Financial Decision Making in the Firms Listed on Tehran Stock Exchange written by Mokarami et al. (2012). The similarity of this research article with the reviewed article is that both are using inferential statistics and study the correlation of the post event from previous studies to provide the literature review. Sample of this study consists of 107 firms that also listed on Tehran Stock Exchange during a 9 years period (2001-2009). The research hypothesis however concentrates more on the ownership in measuring the corporate governance including the board size, board composition, CEOs task duality and CEOs tenure to study the link between various component of corporate governance and capital structure decisions in firms. The result in view suggested that firms with larger board sizes use lower debt ratios in their capital composition. Findings from these two articles are not comparable directly with the reviewed article due to inconsistency in the hypothesis and methodology undertaken. However, the underlying principal and concern of the studies very much related to each others that is the relationship between corporate governance mechanism and financing decision of the firms. The common issues highlighted were backed by the same theory i.e. agency theory where in every case of study, there is an element of agency problem in determining the right capital structure and finance patterns of the firms. Upon reading through the article published by the authors, I would like to comment on a few issues in the authors writing which are: 1) Sampling - the study is to provide answer on the relationship of corporate governance mechanism with financing decision making among listed companies in Tehran Stock Exchange. Information about financial statement of 53 listed companies in Iran in 5 years period was gathered. As of May 2012, there are 339 companies with a combined market capitalization of US$104.21 billion were listed on Tehran Stock Exchange (Tehran Stock Exchange Monthly Report, 2012). This small sampling number in comparison with total of companies listed was due to some selected criteria; among it, is only concentrate to firms that are listed in Tehran Stock Exchange before 2006 and have borrowed at least 2

once in a time period covering 2006-2010. However, the sampling from another studies; Mokarami et al. (2012) was able to came up with bigger sample consisting 107 firms also listed in Tehran Stock Exchange during 9 years period (2001-2009). However, based on the criteria specified, even the sampling small should be able provide a reliable results as most of companies will have the same tendency on the criteria being chosen. 2) Since this is the inferential studies that only test whether two different variables are related to each other, the previous studies analysis were merely on the result and relationship between dependent variable with independent variable through the hypothesis. The author The author did not argue the previous finding and only concerned with simple descriptions of numbers by graphs, tables, and parameters that summarized sets of numbers such as the mean and standard deviation. In comparing between this article with previous findings, the methodology, sampling and background of the study were not discussed in details than might result to inconsistency among the findings and this is indeed the reason of differences finding among the studies. 3) There is no element of value added in this article, the author attempt was only to gather and compare the previous study findings and whether they are consistent with the theory. The author could give more value added solution by discussing further on other sources of financing for instances issuing of bond as a part of financing alternatives of the listed companies which will entail more contemporary financial decision. The results of this research provide insight regarding the financing pattern of the company depending on the corporate governance mechanism being adopted. I would recommend that the further study, if to be discussed is corporate governance mechanism from the Islamic perspective which could result in different outcome in view that the Islamic financing are guided by shariah principle and taking into account the concept of fairness in the corporate governance.

References Abdelsalam, O., El-Masry, A., & Elsegini, S. (2008). Board composition, ownership structure and dividend policies in an emerging market. Managerial Finance , 34 (12), 953-964. Moeinaddin, M., & Karimianrad, M. (2012). The Relationship between Corporate Governance and Finance Patterns of the Listed Companies. Interdisciplinary Journal of Contemporary Rresearch in Business , 4 (7), 489-500. Moeinaddin, M., ShahnazNayebzadeh, RasoolZareMehrjardy, & FazelYazdi, A. (2013). The Study of the Share Price Overreaction and the Profitability of the Contrarian Investment Strategy to Gain the Return in the Iran Stock Exchange. Journal of Basic and Applied Scientific Research , 3 (1), 661-669. Mokarami, M., Ahmadi, M. R., & Hosseinzadeh, A. H. (2012). Corporate Governance and Financial Decision Making in the Firm Listed on Tehran Stock Exchange. International Research Journal of Finance and Economics (93), 164-172. Mutairi, M. A., Tian, G., Hasan, H., & Tan, A. (2010). Corporate Governance and Corporate Finance Practices in a Kuwait Stock Exchange Market Listed Firm: a Survey to Confront Theory and Parctice. Corporate Governance , 5 (12), 595-615. Sharif, S. J., Salehi, M., & Bahadori, H. (2010). Ownership Structure of Iranian Evidence and Payout Ratio. Asian Social Science , 6 (7), 36-42. (2012). Tehran Stock Exchange Monthly Report.

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