How concentrated owners improve the performance of Asian firms

2019 ◽  
Vol 28 (1) ◽  
pp. 39-63
Author(s):  
Marc van Essen ◽  
Pursey P.M.A.R. Heugens ◽  
Patricio Duran ◽  
Sabrina F. Saleh ◽  
Steve Sauerwald ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Strategic Behavior ◽  
Meta Analysis ◽  
Chief Executive ◽  
Institutional Voids ◽  
Internal Governance ◽  
Content Type ◽  
Governance Practices ◽  
Nuanced Understanding

Purpose The purpose of this study is to investigate how concentrated owners add value to Asian firms. While prior research suggests that relational owners (i.e., business groups, top management team, board, government, banks, families, and corporation) may help firms fill institutional voids, this study proposes that it is transactional owners (i.e., foreign and institutional investors) lacking this ability who contribute most to firm performance. As these owners frequently hail from contexts with well-developed corporate governance traditions, they tend to have experience with the design and implementation of such governance practices. Design/methodology/approach This study involves a meta-analysis covering 276 studies from 17 Asian countries. Findings This study shows that transactional owners impose effective governance practices such as separating the chief executive officer (CEO) and Chair roles and assuring board independence. These practices promote decisions benefiting all shareholders, such as preventing diversification and financial over-leveraging. Originality/value This study contributes to the comparative corporate governance literature by showing that implementing internal governance practices helps improve firm performance in Asia. It also contributes to the owner identity literature by opening the black box of how transactional and relational owners differentially affect firms’ strategic behavior. Overall, this study yields a more nuanced understanding of what transactional owners contribute to Asian firms.

The association between corporate governance and firm performance – a meta-analysis

2015 ◽  
Vol 23 (3) ◽  
pp. 218-237 ◽  
Author(s):  
Sayla Sowat Siddiqui
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Firm Value ◽  
Meta Analysis ◽  
Market Value ◽  
Influential Factor ◽  
Governance Mechanisms ◽  
Internal Governance ◽  
Content Type ◽  
External Governance

Purpose – The purpose of this paper is to investigate the relationship between corporate governance and firm performance by conducting a meta-analysis of 25 previous studies. The analysis has three specific concerns, i.e. the moderating effects of legal systems (common law or civil law), governance mechanisms (external or both external and internal governance together) and performance measures (accounting or market value). Design/methodology/approach – The methodology used is the meta-analysis technique developed by Hunter et al. (1982). Findings – The findings show that the external governance mechanisms measured by anti-takeover provisions and market value of firm performance measured by Tobin’s Q and market to book value are the key moderators of this relationship. Practical implications – This paper has important implications for regulators and directors by proposing external governance to be an influential factor of firm performance. This paper is also of interest to the investors and companies by highlighting the significant relationship between corporate governance and market value of the firm. Originality/value – As the author finds that the external governance mechanism (anti-takeover provisions) exerts more influential effect on firm performance than both external and internal governance together, this research confirms the imperative for external governance to increase the firm value.

Corporate governance, globalization and firm performance in emerging economies

2018 ◽  
Vol 67 (8) ◽  
pp. 1310-1333 ◽  
Author(s):  
Neha Saini ◽  
Monica Singhania
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Panel Data ◽  
Foreign Capital ◽  
Good Governance ◽  
Foreign Ownership ◽  
Foreign Firms ◽  
Content Type ◽  
Governance Practices ◽  
The Relationship

PurposeThe purpose of this paper is to examine relationship between corporate governance (CG) and firm performance for a set of 255 foreign-funded firms in the form of foreign direct investment (FDI) and private equity (PE). The authors employ a wide range of CG measures including board size, meetings, board gender and foreign ownership which are used as the proxy of globalisation and control variables like firm age, leverage, firm size and capital expenditure to arrive at a conclusion.Design/methodology/approachPanel data set of 255 (187 companies funded by foreign capital in the form of FDI, and 68 companies having foreign capital in the form PE) companies listed on Bombay Stock Exchange, for the period of eight years (2008–2015) are analysed by using static (fixed and random effects) and dynamic (generalised method of moments (GMM)) panel data specifications to examine the relationship among CG, globalisation and firm performance.FindingsThe empirical results of static model indicate the relationship between CG and performance of foreign firms, which are not very strong in India. This is due to the fact that most of the firms are not following the guidelines and regulations strictly in the initial period of sample years. Diversity in board is found as an important variable in accessing firm performance. And the authors also found that foreign firms are very particular about the implementation of CG norms. The results of GMM model highlight the interaction term of foreign ownership with governance indicators. CG is having a positive and significant impact over performance, inferring that higher foreign ownership (in the form of FDI and PE) in firm leading to positive effect on profitability.Practical implicationsThe investor’s preference of financing a unit is guided by the performance of a firm. Investors are more inclined towards high-performing firms, and hence higher profitability leads to higher inflow of capital. The result indicates that higher accounting and market performance may be achieved by good governance practices, in turn, leading to reduced agency costs. Countries with high governance scores attract more of foreign capital. Similar to the best governed countries, the companies having good governance practices attract more foreign inflows in the form of capital.Originality/valueWhile previous literature considered a single measurement framework in the form of a CG index, the authors tried to incorporate a range of CG indicators to study the effect of globalisation and CG on firm performance. The authors segregated foreign-owned funds into two parts, especially FDI and PE. This paper examined heterogeneity in the form of FDI-funded and PE-funded firms, as no prior literature is available which has evaluated different sets of foreign funds simultaneously on CG.

Product market competition, state-ownership, corporate governance and firm performance

2018 ◽  
Vol 26 (1) ◽  
pp. 62-83 ◽  
Author(s):  
Li Liu ◽  
Wen Qu ◽  
Janto Haman
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Board Of Directors ◽  
Market Competition ◽  
State Ownership ◽  
Product Market Competition ◽  
Content Type ◽  
Good Corporate Governance ◽  
Governance Practices ◽  
Negative Effect

Purpose The purpose of this paper is to examine the association between firm performance and product market competition (PMC), and then examine the mitigation effect of corporate governance and/or state-ownership (SOEs) in the association between PMC and firm performance using Chinese listed firms. Design/methodology/approach The authors consider three determinants of the PMC that affect the nature of competition, and use market concentration, product substitutability and market size as proxies for PMC. The authors construct a corporate governance index which measures the extent of board independence, monitoring strength of supervisory board over board of directors, and monitoring strength of board of directors over CEO. The authors use Tobin’s Q as a proxy for firm performance. The authors use a sample of 20,706 firm-year observations listed on the Chinese stock market between 2001 and 2016 to empirically investigate the research questions proposed in the paper. Findings The authors find that higher PMC is associated with lower firm performance. The authors find that good corporate governance practices moderate the negative effect of higher PMC on firm performance. The association between higher PMC and lower performance is weaker for firms controlled by SOEs compared to non-SOEs. Further, the moderation effect of SOEs on the association between higher PMC and lower performance is more pronounced for firms with good corporate governance practices compared to firms with weak corporate governance practices. Originality/value Extant studies investigating the relationship between PMC and corporate governance suggest an either complementary or substitution relationship in developed economies. Our study highlights the interactive role played by SOEs and good corporate governance practices in firm performance in highly competitive product markets in an emerging economy. The findings provide insightful information to regulators of other emerging countries that SOEs with good corporate governance practices can play an important role in the economy by mitigating the negative effect of higher PMC on firm performance.

Corporate governance and firm performance in Latin America: a meta-analysis

2018 ◽  
Vol 31 (1) ◽  
pp. 195-211 ◽  
Author(s):  
Flávia Schwartz Maranho ◽  
Ricardo Leal
Keyword(s):  
Corporate Governance ◽  
Latin America ◽  
Firm Performance ◽  
Latin American ◽  
Boards Of Directors ◽  
Meta Analysis ◽  
Shareholder Wealth ◽  
Content Type ◽  
The Relationship ◽  
Latin American Countries

Purpose The relationship between the role played by corporate governance (CG) mechanisms and shareholder wealth is an important and mature topic in some countries and regions. However, despite the considerable number of studies, the results are still inconclusive. The purpose of this paper is to contribute to the debate around the theme in Latin America through a meta-analysis. Design/methodology/approach The study used meta-analytic procedures to review 42 articles produced by researchers from Latin American countries, whose samples were composed of Latin American firms. Findings The results suggest that CG best practices are associated with better Latin American firm performance. The evidence also suggests that results are moderated by the characteristics of boards of directors, the ownership, and control structure and various simultaneous CG mechanisms, through broad indices and special CG trading segments. Originality/Value The relationship between GC and firm performance possesses certain peculiarities in the case of Latin American countries and the literature on the region is certainly not as abundant and mature. As most of the articles reviewed were written in Portuguese and Spanish and published in local journals, the consolidation produced should also be useful for researchers throughout the world by enabling them to access their ideas.

Corporate governance, resources, FDI commitment and firm performance

2014 ◽  
Vol 8 (3) ◽  
pp. 313-332 ◽  
Author(s):  
Ming-Tien Tsai ◽  
Wen-Hui Tung
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Stock Exchange ◽  
Chief Executive ◽  
Governance Structure ◽  
High Tech ◽  
Corporate Governance Structure ◽  
Ceo Duality ◽  
Content Type ◽  
Mean Values

Purpose – This study aims to explore the effects of corporate governance structure and resources on foreign direct investment (FDI) commitment and firm performance. Design/methodology/approach – The data are collected from high-tech firms listed by the Taiwan Stock Exchange. All selected 137 firms have complete FDI and other required data during 2007-2009. The mean values of the variables during the three-year period were used for analysis. Findings – The results indicate that both chief executive officer (CEO) duality and government shareholding affect a firm’s FDI; and the higher the management shareholding ratio, the lower the return on equity. Moreover, a large ownership of substantial shareholders can enhance a firm’s performance; and higher institutional ownership can lead to higher firm performance. Research limitations/implications – This study analyses the limited data from 137 high-tech firms in Taiwan during the three-year period of 2007-2009. Further analyses of other industries, countries and time periods are needed to generalize the conclusions. Practical implications – A firm with CEO duality should increase the ratio of government holding to mitigate the influence of CEO on FDI decisions. When a firm’s performance is poor, the ratio of managerial holdings should be reduced; conversely, the firm could attract more holdings from domestic securities and funds to improve performance. Originality/value – This study provides guidelines for shareholders to analyze governance structure and formulate their investment strategies. Corporate policymakers may use these as the principles for designing a corporate governance structure that could engender optimal firm performance.

Female executives and corporate governance

2017 ◽  
Vol 43 (10) ◽  
pp. 1056-1072 ◽  
Author(s):  
Emilia Vähämaa
Keyword(s):  
Corporate Governance ◽  
Chief Executive Officers ◽  
Chief Executive ◽  
Chief Financial Officers ◽  
Gender Quotas ◽  
Content Type ◽  
Takeover Defenses ◽  
Governance Practices ◽  
The Board Of Directors ◽  
Executive Officers

Purpose The purpose of this paper is to examine whether the gender of the top executives is associated with the strength of corporate governance mechanisms within a firm. Design/methodology/approach The paper uses panel and instrumental variable regressions on an eight-year sample of the S&P 1,500 firms. Findings The results indicate that firms with female Chief Executive Officers (CEOs) and Chief Financial Officers have higher quality governance practices. Moreover, female CEOs are documented to have the most significant influence on the governance attributes related to the board of directors and takeover defenses mechanisms. Originality/value Overall, these findings indicate that the gender of the firm’s executives may have important implications for the strength of corporate governance. The paper promotes the importance of the recent national policies in numerous countries on gender quotas at the executive level.

Corporate governance, firm performance, and business group affiliation: evidence from India

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Neeti Khetarpal Sanan ◽  
Dinesh Jaisinghani ◽  
Sangeeta Yadav
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Empirical Evidence ◽  
Emerging Economies ◽  
Chief Executive ◽  
Business Group ◽  
Independent Directors ◽  
Group Affiliation ◽  
Content Type ◽  
Business Group Affiliation

Purpose The purpose of this paper is to investigate whether, in emerging economies, the relationship between a firm’s corporate governance (CG) and its performance is associated with firm’s affiliation to a business group. Design/methodology/approach A total of 209 publicly listed firms in India during a 10-year period from 2007 to 2016 were studied, and the random effects model was employed for analysis. Findings Empirical evidence showed that board size and institutional shareholding positively impacted firm performance, whereas the proportion of independent directors negatively impacted performance. In group-affiliated firms in emerging economies, chief executive officer duality negatively impacted, whereas institutional shareholding positively impacted performance. These results are consistent with the principal–principal agency theory. The study found no discernible impact of proportion of independent directors on firm performance in group-affiliated firms. Originality/value In analyzing the governance–performance relationship and its association with business groups, this study extends current understanding by connecting business group research in emerging economies with CG and firm performance research. In examining firms from several industries over a long period of time after controlling for firm size, capital structure and spends on research and development and marketing, the results of this study offer rich empirical evidence that contributes to the extant literature on the nature of the governance–performance relationship.

Does corporate governance beget firm performance in Fortune Global 500 companies?

2016 ◽  
Vol 16 (4) ◽  
pp. 747-764 ◽  
Author(s):  
Muhammad Shaukat Malik ◽  
Durayya Debaj Makhdoom
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Data Collection ◽  
Inverse Relationship ◽  
Deductive Reasoning ◽  
Secondary Data ◽  
Annual Reports ◽  
Content Type ◽  
Governance Practices ◽  
The Impact

Purpose This paper aims to determine the impact of corporate governance practices on the financial outcomes of Fortune Global 500 Companies, thus covering impact of geographical differences (USA and non-USA) as well. Design/methodology/approach The study is a quantitative research based on a positivist paradigm using deductive reasoning and secondary data collection. Data collection has been done from secondary sources (annual reports, Edgar submissions and financial statistics from renowned financial databases such as yahoo.finance, Bloomberg, Ycharts statistics and Morningstar. Data were collected for 8 years (2005-2012). Findings The study found a strong positive relationship between corporate governance and firm performance. Smaller board sizes are found to generate better firm performance in Fortune Global 500 Companies. Frequency of board meetings have also been found to have inverse relationship with firm performance. The study supports board independence to improve transparency in board decision-making process. CEO compensation has been found to have inverse relationship with firm performance. The robustness of our results has been measured with the usage of three dependent variables, and we have found same results with varying significance level. Research limitations/implications Due to selection of globally broad sample set qualitative aspects of corporate governance could not be covered. Nevertheless, there is a need to go beyond the quantitative techniques (secondary data) of measuring corporate governance mechanisms. Practical implications The population set is unique combination of big players and global diversification. Hence, the corporate governance practices of these firms as understood from the results of this study can be bench-marked for emerging corporates of varying global context. Originality/value The research is original and unique as it significant and globally diverse population of Fortune Global 500 Companies over a period of 8 years for 11 variables of interest. Results are helpful in bench marking for the rest of market players.

Chief executive officer compensation, corporate governance and performance: evidence from KSA firms

2019 ◽  
Vol 19 (6) ◽  
pp. 1216-1235 ◽  
Author(s):  
Gaafar Abdalkrim
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Organizational Performance ◽  
Ceo Compensation ◽  
Chief Executive ◽  
Listed Companies ◽  
Future Research ◽  
Content Type ◽  
Interesting Insight ◽  
And Performance

Purpose This paper aims to examine the relation between chief executive officers (CEOs) compensation and organizational performance in KSA listed companies. It also aims at investigating the effect of corporate governance mechanisms according to this relation. Design/methodology/approach The researcher uses unbalanced panel data regression analysis on a sample of 181 KSA listed companies from 2005 to 2014. Findings The estimation result suggests that CEO Compensation is positively associated with firm performance. The results also show that corporate governance positively and significantly affect the relation between CEO Compensation and performance. Research limitations/implications This research, like any other, has some limitations that can be addressed by future research. The important limitation of this research is that the generalizability of the results is limited by the fact that the majority of the firms in the sample are from material sector which is represented by 42 (32 per cent) firms versus pharmaceutical sector which is represented by only one (1 per cent) firm. Therefore, a future research can tackle the effect of CEO compensation, corporate governance on future firm performance independently. Practical implications The findings have some important implications for stakeholders such as policymakers, listed firms managers, business owners and academic researchers in the emerging KSA market. Besides, understanding the relation between CEO compensation, corporate governance and firm performance can aid the success of corporate modernization and economic reform in KSA. Originality/value The research attempts to fill a substantial gap in the literature by providing the first rigorous econometrics evidence on CEO compensation, corporate governance and firm performance. In addition, it provides interesting insight for researches, decision-makers and board members in KSA.

Corporate governance and firm performance: does sovereign rating matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Duterval Jesuka ◽  
Fernanda Maciel Peixoto
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Latin American ◽  
Audit Committee ◽  
Chief Executive ◽  
Random Coefficients ◽  
Multilevel Regression ◽  
Latin American Studies ◽  
Content Type ◽  
The Impact

Purpose This paper aims to investigate the impact of sovereign rating and corporate governance on performance of Latin American companies between 2004 and 2018. Design/methodology/approach This study performed a multilevel regression with fixed and random coefficients for 823 companies and verified the impacts of country, firm and time levels on the performance variation. The study alternated return on assets and Tobin’ Q as dependent variables and measured governance using the following variables: board size, chief executive officer/chairman duality, CEO/board member duality, dummy for the chairman as a former CEO, audit committee, independence and expertise of the audit committee. Findings Latin American companies performed better when their respective countries have a better sovereign rating and when they adopt better board of directors and audit committee mechanisms. Sovereign rating assumes distinct roles depending on the presence or absence of governance variables. Rating and governance may be substitute mechanisms to protect investors. Originality/value To the best of the authors’ knowledge, this paper is the first to investigate the impacts of sovereign rating on firm performance in the Latin American scenario. The use of governance metrics – for example, the audit committee expertise and the dummy for chairman as a former CEO – is innovative in Latin American studies.

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