Ownership concentration and cost of equity in Pakistan: the moderating role of disclosure and governance quality
ISSN: 1321-7348
Article publication date: 4 September 2023
Issue publication date: 1 February 2024
Abstract
Purpose
The purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.
Design/methodology/approach
Data are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.
Findings
The study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.
Practical implications
The findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.
Originality/value
The novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.
Keywords
Citation
Sajid, M., Shabbir, H. and Safdar, R. (2024), "Ownership concentration and cost of equity in Pakistan: the moderating role of disclosure and governance quality", Asian Review of Accounting, Vol. 32 No. 1, pp. 120-135. https://doi.org/10.1108/ARA-03-2023-0070
Publisher
:Emerald Publishing Limited
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