Analysing the Impact of Managerial Ownership on the Performance of Shariah-Compliant Firms in Pakistan
Bibliographic record
Abstract
This paper analyses the impact of managerial ownership upon firm performance in the Shariah-compliant firms of Pakistan. Agency theory that suggests involving managers as part of firm's ownership can help firms reduce the agency cost, has widely been applied in the corporate setup of conventional finance, however, there is growing need of academic research to find out the role and application of this theory in the Shariah-compliant organizations. All around the Muslim world, there is the rise of Shariah-compliant firms; however, little work has been done to critically evaluate such important concepts based on agency theory, it is, therefore, an optimistic approach to familiarise the idea of firm performance with the relationship of managerial ownership under Agency Theory in such organizations. In order to better understand the acceptability and adaptability of Agency Theory, the objective of this study is to examine the impact of managerial ownership upon firm performance in Shariah-compliant firms of Pakistan for the first time. This paper is based upon panel data and regression models applied to the sample of 68 Shariah-compliant firms listed on Pakistan’s Karachi Stock Exchange covering five years from 2009 to 2013. This paper tests the firm performance through two different dependent variables Tobin’s Q and ROA by regressing through OLS, Fixed effect (FE) and Random effect(RE) methods. Both models are proved empirically significant. The robust results confirm that managerial ownership (MO) has a positive and strong impact upon firm performance (Q)/ (ROA) in the Shariah-compliant firms of Pakistan. The outcomes may provide a good understanding and help in making a better decision regarding investment on the ethical grounds. It proves that more concentrated managerial ownership produces the higher firm profits. It can be also inferred that the increased proportion of managerial ownership tends to align with the interests of owners and thus help to reduce the agency conflict in our sample of Shariah-compliant firms in Pakistan. Moreover, Size (LNTA) has a positive relationship with firm performance (Q)/ (ROA) viewing that the Shariah-compliant firms depend on retained earnings. It may be due to the restricted criterion on the leverage for Shariah-compliant firms by the board of Shariah compliance. Leverage (DAR) is negatively and significantly correlated with profitability and growth (GROW) is positively and significantly correlated with firm performance (Q). In the developing and Muslim world, this study may reserve a unique place due to its virgin attempt and highlight the ignored aspect in the body of literature. These findings are of great benefit to investment managers, and Shariah cautious and other ethical investors regarding investment and portfolio related decisions.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".