2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage
| Format: | General Document |
|---|
| _version_ | 1860798084494131200 |
|---|---|
| building | INTELEK Repository |
| collection | Online Access |
| collectionurl | https://intelek.unisza.edu.my/intelek/pages/search.php?search=!collection3 |
| copyright | Copyright©PWB2025 |
| country | Malaysia |
| date | 2024-01-08 |
| format | General Document |
| id | 15857 |
| institution | UniSZA |
| internalnotes | Sila masukkan subject wajib Dissertations, Academic. Terima kasih... |
| originalfilename | 15857_5e505f97611f3d0.pdf |
| person | Ahmad Rajab Jwailes |
| recordtype | oai_dc |
| resourceurl | https://intelek.unisza.edu.my/intelek/pages/view.php?ref=15857 |
| sourcemedia | Server storage Scanned document |
| spelling | 15857 https://intelek.unisza.edu.my/intelek/pages/view.php?ref=15857 https://intelek.unisza.edu.my/intelek/pages/search.php?search=!collection3 General Document Malaysia Library Staff (Top Management) Library Staff (Management) Library Staff (Support) Terengganu Faculty of Business and Management English application/pdf 1.5 Server storage Scanned document Universiti Sultan Zainal Abidin UniSZA Private Access Universiti Sultan Zainal Abidin SAMBox 2.3.4; modified using iTextSharp™ 5.5.10 ©2000-2016 iText Group NV (AGPL-version) 258 Copyright©PWB2025 Ownership Structure Corporate governance 2024-01-08 15857_5e505f97611f3d0.pdf Ahmad Rajab Jwailes Impact Of Firm-Specific Variables CEO’s Characteristics Speed Of Adjustment Towards Target Leverage Capital structure Leverage (Finance) Chief executive officers Ownership 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage The utilisation of a firm's capital structure, or leverage, constitutes one of the strategic decisions aimed at maximizing the firm's value. Achieving the optimal leverage involves striking a balance between the tax benefits and the costs associated with financial distress. However, deviations in transaction costs impede the immediate adjustment from the current leverage to the optimal level, ultimately leading to a decrease in firm value. Furthermore, Jordanian firms encounter challenges in swiftly rectifying this deviation due to the financial system in Jordan. This issue has become prominent in Jordan, resulting in limitations of variations in the speed of adjustment across firms, industries, years, and countries. The objective of this study is to examine the determinants of the speed of adjustment (SOA) of Jordanian listed firms by utilising target leverage and SOA models based on dynamic capital structure theories, agency theory, and upper echelon theory. Initially, this study estimated the average SOA and the determinants of target leverage using the dynamic capital structure model. Subsequently, it scrutinized the impacts of firm-specific variables, chief executive officers' (CEO) characteristics, and ownership structure on the SOA toward target leverage. Lastly, the study investigated the moderating effect of ownership concentration on the relationship between firm-specific variables, CEO’s characteristics, and SOA toward target leverage. The methodology employed for the target leverage model involved applying the system generalized method of moments (SYS-GMM). The final sample consisted of 138 non-financial firms listed on the Amman Stock Exchange during the period from 2008 to 2020. The study revealed that Jordanian firms were under-adjusted, indicating that they had not achieved the necessary adjustment toward the target leverage. The results remain robust across alternative estimators using a quantile regression approach. The findings demonstrated that firm-specific factors had a relative influence on SOA for Jordanian firms, with firm size and tangibility having a positive impact on SOA. In contrast, profitability exhibited a significant negative relationship between SOA and the distance from the target leverage, suggesting rapid adjustment. The SOA model indicated that highly educated and more experienced CEO could make quicker adjustments toward the target leverage, aligning with dynamic capital structure theories. The results also aligned with the upper echelon theory, supporting the argument that firms' strategic decisions reflect the characteristics of their CEO. Additionally, the results unveiled the role of the largest shareholder and CEO’s entrenchment behaviour in adjusting toward the target leverage. This implies that the largest shareholders exercise their voting rights based on the amount involved in re-adjusting the transaction costs. One of the key implications of this study is that there should be a broader range of financing options available in the Jordanian financial market to improve the under-adjusted financing behaviour. Furthermore, highly educated and more experienced CEO play a crucial role in managing a firm's strategic performance by maximizing shareholders' wealth through an optimal capital structure. Additionally, the rights of the largest shareholders in voting decisions enforce choices that maximize the value of their investments. Dissertations, Academic Sila masukkan subject wajib Dissertations, Academic. Terima kasih... Thesis |
| spellingShingle | 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage |
| state | Terengganu |
| subject | Corporate governance Capital structure Leverage (Finance) Chief executive officers Ownership Dissertations, Academic |
| summary | The utilisation of a firm's capital structure, or leverage, constitutes one of the strategic decisions aimed at maximizing the firm's value. Achieving the optimal leverage involves striking a balance between the tax benefits and the costs associated with financial distress. However, deviations in transaction costs impede the immediate adjustment from the current leverage to the optimal level, ultimately leading to a decrease in firm value. Furthermore, Jordanian firms encounter challenges in swiftly rectifying this deviation due to the financial system in Jordan. This issue has become prominent in Jordan, resulting in limitations of variations in the speed of adjustment across firms, industries, years, and countries. The objective of this study is to examine the determinants of the speed of adjustment (SOA) of Jordanian listed firms by utilising target leverage and SOA models based on dynamic capital structure theories, agency theory, and upper echelon theory. Initially, this study estimated the average SOA and the determinants of target leverage using the dynamic capital structure model. Subsequently, it scrutinized the impacts of firm-specific variables, chief executive officers' (CEO) characteristics, and ownership structure on the SOA toward target leverage. Lastly, the study investigated the moderating effect of ownership concentration on the relationship between firm-specific variables, CEO’s characteristics, and SOA toward target leverage. The methodology employed for the target leverage model involved applying the system generalized method of moments (SYS-GMM). The final sample consisted of 138 non-financial firms listed on the Amman Stock Exchange during the period from 2008 to 2020. The study revealed that Jordanian firms were under-adjusted, indicating that they had not achieved the necessary adjustment toward the target leverage. The results remain robust across alternative estimators using a quantile regression approach. The findings demonstrated that firm-specific factors had a relative influence on SOA for Jordanian firms, with firm size and tangibility having a positive impact on SOA. In contrast, profitability exhibited a significant negative relationship between SOA and the distance from the target leverage, suggesting rapid adjustment. The SOA model indicated that highly educated and more experienced CEO could make quicker adjustments toward the target leverage, aligning with dynamic capital structure theories. The results also aligned with the upper echelon theory, supporting the argument that firms' strategic decisions reflect the characteristics of their CEO. Additionally, the results unveiled the role of the largest shareholder and CEO’s entrenchment behaviour in adjusting toward the target leverage. This implies that the largest shareholders exercise their voting rights based on the amount involved in re-adjusting the transaction costs. One of the key implications of this study is that there should be a broader range of financing options available in the Jordanian financial market to improve the under-adjusted financing behaviour. Furthermore, highly educated and more experienced CEO play a crucial role in managing a firm's strategic performance by maximizing shareholders' wealth through an optimal capital structure. Additionally, the rights of the largest shareholders in voting decisions enforce choices that maximize the value of their investments. |
| title | 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage |
| title_full | 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage |
| title_fullStr | 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage |
| title_full_unstemmed | 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage |
| title_short | 2023_The Impact of Firm-Specific Variables, CEO’s Characteristics and Ownership Structure on The Speed of Adjustment Towards Target Leverage |
| title_sort | 2023_the impact of firm-specific variables, ceo’s characteristics and ownership structure on the speed of adjustment towards target leverage |