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Corporate governance and risk in Tehran Stock Exchange member companies

Number of pages: 127 File Format: word File Code: 30639
Year: 2014 University Degree: Master's degree Category: Management
Tags/Keywords: Causal model - Combined regression - corporate governance - Institutional shareholders - risk
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  • Summary of Corporate governance and risk in Tehran Stock Exchange member companies

    Academic Thesis for Master's degree

    Business Management-Financial Orientation

    Abstract

    In this research, the relationship between corporate governance and risk of companies listed on the Tehran Stock Exchange was investigated, and also the relationship between institutional shareholders and corporate governance, and on the other hand, the relationship between institutional shareholders and risk was also investigated. In terms of purpose, this research is of an applied type, and in terms of the method of collecting and analyzing information, it is in the field of descriptive research. The statistical sample includes 81 companies during the five-year period from 1386 to 1390, which were selected by the systematic elimination sampling method. The collected information was first examined by combined regression using Eviews software to check the basic assumptions of financial affairs in the form of linear equations, then these regression lines were examined in the form of a causal model and using VisualPLS software to implement the model and the research hypotheses were tested. The research findings indicate that there is a negative and inverse relationship between risk and corporate governance, and increasing the corporate governance index reduces risk. On the other hand, the research results show a positive relationship between institutional shareholders and corporate governance, as well as a negative relationship between institutional shareholders and risk. The conducted tests show that the corporate governance index and risk have a direct effect on each other, and the influence of these variables on each other was also confirmed through the intervention of the third variable, that is, institutional shareholders.

    Key words: corporate governance, risk, institutional shareholders, mixed regression, causal model

    Introduction

    Today's life continues while the shadow of uncertainty conditions [1], on all affairs, for reasons. Different has completely revolutionized the decision-making process. Changes in the prices of basic goods, changes in exchange rates, changes in interest rates and also changes in stock prices are things that today's organizations are constantly dealing with. These changes, along with other environmental changes of organizations, have caused the emergence of new scientific theories in the field of management, to the extent that chaos theory [2] has been proposed and has depicted organizations in an environment full of complexity and at the same time manageable (Rai and Saeedi, 2013, p. 44). Accept certainty, so that the value of the beneficiaries' wealth grows. Uncertainty is raised about both risk and opportunity, along with the possibility of loss or gain in value. A manager of an economic unit should manage the economic unit effectively despite the uncertainties, risks and opportunities associated with it and thus increase the company's value creation capacity (Tehran Stock Exchange, 2012, p. 2). In this way, the owners delegated the management of the company to the managers and the stock market was formed. One of the tools for the optimal allocation of resources is the stock market. Therefore, any problem that arises in the mentioned market is not only an economic problem, but it becomes a social problem in which the general interests of the society will be endangered. To solve the mentioned problems, one of the important concepts raised in the last two decades is the concept of corporate governance [3]. There are two main theoretical perspectives, including the theory of representation and the theory of stakeholders, that each of them looks at the issue of corporate governance in a different way. The agency theory looks at the problem of the agent and the employer, and the theory of the beneficiaries looks at the problem of the agent and the beneficiaries (Hass Yaganeh, 2018, p. 76). Corporate governance means laws, regulations, structures, cultures and systems that achieve the goals of accountability, transparency, justice and respect for the rights of the beneficiaries. Corporate governance, first of all, aims at the long-term life of the economic enterprise. data and tries to protect the interests of shareholders against the management of organizations. The two goals of corporate governance are (Hass Yaganeh, 2018, p. 77):

    Reducing the risk of an economic enterprise through improving and promoting transparency and accountability.

    Improving the long-term efficiency of the organization by preventing arbitrariness and irresponsibility of executive management.

    In this research, the relationship between corporate governance and risk of member companies of the Tehran Stock Exchange will be investigated, as well as the relationship between institutional shareholders and corporate governance, and on the other hand, the relationship between institutional shareholders and risk will also be investigated. However, in most cases, investors are more concerned about the risk of reduction in their investment. (Hao Li et. al, 2012, p206)

    The presence of risk in the company is normal and natural, and risk reflection and reporting is also considered normal and is generally in the company's favor. Because investors, including shareholders and creditors, will trust the company more with the knowledge of the company's risk, so their expectation of profit or interest will decrease and as a result, the cost of the company's capital will be lower (Hass Yeganeh, 2016, p. 54).

    Tehran Stock Exchange, as the most important and fundamental structure of Iran's capital market, has started its activity since the 40s and has gone through many ups and downs until now. Considering the necessity of the country's development and the role of the capital market in this movement, it becomes clear to delve into the issues and problems of this important institution. Official and unofficial statistics indicate the weakness of this important structure in the country's economy. For example, the trading volume in Tehran Stock Exchange is only close to 2% of the country's gross national product, while this ratio is 7.121% in England, 4.259% in Malaysia and 8.194% in Singapore, which indicates the high investment risk in these companies (Eskandari and Hosseini, 2011, pp. 31-30).

    Nowadays, companies try to maximize value in order to attract investors. have a company[4]. Increasing income and growth in profit is one of the ways that they consider for this purpose. In the Tehran Stock Exchange, companies are trying to encourage investors to invest in common stocks by increasing their annual profits. On the other hand, investors in the capital market are trying to direct their resources to the direction that is most profitable for them. If the investors do not get their desired profit, they will withdraw capital from the stock market and invest in other activities, which will reduce the trading in stocks and the stock market will fall from prosperity. Therefore, knowing the level of risk of companies can play a significant role in people's decision-making (Fakhari and Yousefnejad, 2015, p. 90).

    One of the characteristics of the capital market is the presence of various securities in the market with various risks and returns, and investors buy and sell securities according to their risk tolerance[5]. But in the Tehran Stock Exchange, tradable securities are practically limited to company shares. According to the nature of their work, investment companies have the ability to manage portfolios [6] and manage risk, so the shares of these companies should have low risk (Farzin and Esmaili, 1378, p. 1).

    It seems that corporate governance and risk have a special relationship with each other. More attention is paid to corporate governance to develop the fields related to important theories that are based on the assumption of maximizing shareholder value. From this point of view, the proper governance of large companies should lead to a focus on maximizing shareholders' wealth (Hao Li et. al, 2012, p204). The conflict of interest, which is interpreted as a representation problem, is caused by two main causes; The first is that each participant has different goals and preferences, and the second is that each does not have complete information about the other's actions, knowledge, and preferences. It is obvious that this separation, assuming the absence of effective executive mechanisms of corporate governance, will create grounds for managers to act in line with their own interests and not the interests of shareholders (Rahmani, 2010. p. 37).

    In a company, shareholders serve as an agent according to the principles of contracting with management. Since the company's goal is to maximize shareholder value, there are potentially conflicts for the company. In general, corporate governance is a set of rules and strategies to reduce the organization's conflicts to ensure that shareholder wealth is maximized. A strong governance should lead to fewer missed opportunities and fewer negative net worth projects. A strong governance should lead to statements that are less misleading.

  • Contents & References of Corporate governance and risk in Tehran Stock Exchange member companies

    List:

    Abstract 1

    Chapter One: General Research

    1-1) Introduction 3

    1-2) Statement of Problem 4

    1-3) Research Question. 6

    1-4) The importance and necessity of research. 6

    1-5) research objectives. 7

    1-6) The theoretical framework of the research. 7

    1-7) research hypotheses. 10

    1-8) Conceptual and operational definition of variables 10

    1-9) Research field. 12

    Chapter Two: A review of thematic research literature

    Part One: Risk. 14

    2-1-1) Introduction. 15

    2-1-2) Risk classification. 16

    2-1-2-1) commercial and non-commercial risk. 16

    2-1-2-2) Systematic and unsystematic risk. 18

    2-1-2-3) favorable and unfavorable risk. 19

    2-1-3) financial and non-financial risks. 23

    2-1-3-1) Financial risks. 24

    2-1-4) risk measurement. 29

    2-1-5) The main elements of risk. 31

    2-1-5-1) Content 32

    2-1-5-2) Activity. 32

    2-1-5-3) conditions. 32

    2-1-5-4) consequences 32

    2-1-6) risk management. 32

    2-1-7) Risk management strategies. 33

    2-1-7-1) risk transfer. 33

    2-1-7-2) Risk avoidance. 34

    2-1-7-3) risk reduction. 34

    2-1-7-4) risk acceptance. 34

    The second part: corporate governance. 35

    2-2-1) Introduction. 36

    2-2-2) characteristics of corporate governance. 37

    2-2-3) Objectives of corporate governance. 38

    2-2-4) The main sources of corporate governance 39

    2-2-4-1) Companies Law 39

    2-2-4-2) Shares Law. 39

    2-2-4-3) Standards of stock exchange companies. 40

    2-2-5) types of corporate governance systems. 40

    2-2-5-1) Internal systems. 41

    2-2-5-2) external systems. 42

    2-2-6) Corporate governance and reforming the structure of the board of directors 43

    2-2-7) The effect of corporate governance on executives. 44

    2-2-8) Corporate governance in the stock exchange. 45

    2-2-9) Institutional shareholders. 47

    10-2-2) Major shareholders in the corporate governance system in Iran Stock Exchange. 48

    2-2-11) Presence of institutional shareholders in corporate governance. 49

    2-2-12) Institutional shareholders as observers. 51

    2-2-13) The role of institutional shareholders in monitoring and transmitting information. 52

    2-2-14) Institutional shareholders and profit management. 53

    2-2-14-1) Short-term institutional shareholders and profit management. 53

    2-2-14-2) long-term institutional shareholders and profit management. 53

    The third part: Research background. 55

    2-3-1) Introduction. 56

    2-3-2) Research conducted abroad. 56

    2-3-3) Research done inside the country. 58

    Chapter 3: Research implementation method

    3-1) Introduction 61

    3-2) Research method. 61

    3-3) statistical population. 61

    3-4) statistical sample. 61

    3-5) Measurement of research variables. 62

    3-5-1) independent variables. 62

    3-5-1-1) Corporate governance. 62

    3-5-1-2) Institutional shareholders. 63

    3-5-2) dependent variable (risk) 63

    3-5-3) moderator variables. 64

    3-5-3-1) Average sales. 64

    3-5-3-2) Combination of company assets. 64

    3-5-3-3) dividend. 65

    3-6) Data analysis method 65

    3-6-1) Research regression models. 65

    3-6-2) causal model. 71

    Chapter Four: Analysis of research data

    4-1) Introduction 75

    4-2) Description of research variables. 75

    4-3) Examining research hypotheses. 76

    4-3-1) Linear regression assumptions in time series. 76

    4-3-1-1) Kolmogorov-Smirnov test (checking the normality of variables) 76

    4-3-1-2) Ramsey-Rest test (assuming the linearity of the regression model) 77

    4-3-1-3) Chow test (stability of coefficients). 78

    4-3-1-4) unit root test. 78

    4-3-2) Examination of research hypotheses based on multiple regression. 79

    4-3-2-1) Examining the first hypothesis. 80

    4-3-2-2) Examining the second hypothesis. 81

    4-3-2-3) Examining the third hypothesis. 82

    4-3-3) Examination of research hypotheses in the form of a causal model. 83

    4-3-3-1) Test of research model hypotheses. 83

    4-3-3-2) Structural model results. 85

    Chapter Five: Discussion and Conclusion

    5-1) Introduction 93

    5-2) Conclusion. 93

    5-2-1) Description of research variables. 93

    5-2-2) Hypothesis test results 94

    5-3) Discussion. 95

    5-4) Suggestions97

    5-5) Suggestions for future research. 97

    5-6) research limitations. 98

    Sources and sources. 99

    Appendices 104

    Source:

    Sources and sources

     

     

     

     

     

     

     

     

    Persian sources:

    Azer.Adel, Momeni.Mansour, 1385, statistics and its application in management, first volume, 13th edition, Semt publications.

    Azer.Adel, Momeni.Mansour, 1385, statistics and its application in management, second volume, tenth edition, Semt publications.

    Ebrahimi Kordler.Ali, the company management system and the role of institutional shareholders in it, knowledge and research Accounting, 1386, No. 8, pp. 25-25.

    Eskandari. Atosa, Hosseini. Yaqoub, Systematic risk status examination of companies admitted to the Tehran Stock Exchange, Planning and Budgeting Magazine, 1381, No. 77, pp. 54-29. Structural equation modeling by the partial least squares method (PLS-PM) and its application in behavioral studies, Online Psychology Journal, 1391, No. 1, pp. 55-41.

    Ansari. Abdulhamid, Dimensions of Risk Management (Definitions and Applications of Risk Management in Financial Services), Tazeh Ekhetaz, 1376, No. 67, pp. 32-29.

    Izdi Nia. Nasser, Kandahari. Mehsa, Abdini. Ahmed, Moradi. Ahmed, Review of Assets and Liabilities Management, Academic Journal of Senior Accounting and Financial Management Students, 2019, Number 8, pp. 16-33.

    Brigham. Eugene F, Earhart. Michael C., 2013, financial management in theory and practice, translated by Farahani. Alireza, second volume, first edition, Termeh Publications.

    Bahram Far. Naghi, Mehrani. Kaveh, the relationship between earnings per share, dividends and investment in companies listed on the Tehran Stock Exchange, Journal of Accounting and Auditing, 1383, No. 36, pp. 46-27.

    Tehran Stock Exchange, 1392, integrated risk management framework, publications of the stock exchange organization. Tehran securities.

    Tehrani.Reza, Pimani.Moslem, a comparative study between common risk criteria (variance and beta) and unfavorable risk criteria (half variance and unfavorable beta), financial research, 1387, period 10, number 26, pp. 92-77. 1387, No. 122, pp. pp. 58-65.

    Hass Yaganeh. Yahya, 1384, philosophy of auditing, first edition, Tehran, Scientific and Cultural Publishing Company.

    Hass Yaganeh. Yahya, corporate governance systems, accountant magazine, 1384, year 20, number 169.

    Hass Yaganeh. Yahya, Corporate governance in Iran, 1385, No. 32, pp. 32-39.

    Hass Yeganeh. Yahya, Corporate governance and risk management, Accountant magazine, 1386, year 22, No. 188, pp. 54-47. Auditors' decisions about risk and planning, Journal of Financial Engineering and Portfolio Management, 1389, No. 4, pp. 124-105.

    Ghekrit. Hamid, Mousavi. Seyed Ahmed, Investigating the role of sales factors and the financial crisis index in predicting stock returns, Journal of Accounting and Auditing Reviews, 1386, No. 47, pp. 63-82.

    Delavar.Ali, 1389, research methods in psychology and educational sciences, editor's opinion.

    Rai.Reza, Saidi.Ali, 1392, Fundamentals of financial engineering and risk management, 8th edition, Samt publications.

    Rahmani.Ali, corporate governance and risk management in the banking system, corporate governance conference proceedings, 1390, Tehran Stock Exchange Organization publications.

    Rozanejad.Mansour, Anwari.Ebrahim, the use of mixed data in econometrics, Ekhtaz Qatari Journal, 1384, second period, number 4, pp. 52-21.

    Rezaei.Farzin, Timuri.Mohammed, investigation of interactive relationships between free cash flow risk, corporate governance structure and debt policy of companies, Financial Accounting Empirical Research Journal, 1391, number 3, p. pp.115-98.

    Sataish.Mohammed Hossein, Ebrahimi.Fahimeh, Investigating the effect of corporate governance mechanisms on the information content of the profits of companies listed in the Tehran Stock Exchange, Danesh Accounting Journal, 1391, number 8, pp. 48-31.

    Sekaran.Oma, 1390, research methods in management, translated by Saebi, Mohammad Shirazi, Mahmoud, Chap. 9th, Public Administration Education Center Publications.

    Sina Qods.Ali, Corporate Governance and Board Structure Reform, Tadbir Monthly, 1387, No. 195, pp. 52-49.

    Shahiki Tash.Mohammad Nabi, Azazi.Mohammed, Gholami Bimorg.Leila, Calculation of Value at Risk (VAR) in the Tehran Stock Exchange Market, Economic Development Research Quarterly, 2013, No. 10th, pp. pp. 70-51.

    Sadeghi. Mohsen, Soroush. Abuzar, Farhanian.

Corporate governance and risk in Tehran Stock Exchange member companies
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