The effects of corporate governance on firm performance

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  • This part will be told by Kalpana Parajuli.
  • This part will be told by Avash Bhattarai.
  • This part will be told by Avash Bhattarai.
  • This part will be told by Avash Bhattarai. Plz fill the interpretation box.
  • This part will be told by Kushal Shrestha.
  • This part will be told by Avash Bhattarai.
  • The effects of corporate governance on firm performance

    1. 1. THE EFFECTS OF CORPORATE GOVERNANCE ON FIRM PERFORMANCE Avash Bhattarai Himalaya Ban Kalpana Parajuli Kushal Shrestha Venue: Uniglobe College ,Friday June 21, 2013 Presente d by
    2. 2. Author Profile  Ming-Cheng Wu Department of Business Education  Hsin-Chiang Lin Department of Business Education  I-Cheng Lin Department of Business Education  Chun-Feng Lai Department of Business Education
    3. 3. Introduction  Accounting Scandals under big names has brought suspicion towards financial reporting  Sarbanes-Oxley Act enacted on 2002  Need of CG growing, but is it really vital for developing nations!  The main purpose of this study is to examine the impact of the corporate governance mechanism on firm performance of Taiwanese Firm.  The variables, employed in this study to measure firm performance, include Return on Assets(ROA), Stock Return and Tobin’s Q.
    4. 4. Purpose of the study  The main purpose of this study is to examine the effect of corporate governance mechanism upon firm performance among listed and over-the- counter firms in Taiwan.
    5. 5. Conceptual Framework Board Structure a. Board Size b. Board independence c. CEO Duality Corporate Governance Ownership Structure d. Insider ownership e. Stock pledge ratio f. Control minus ownership Firm Performance
    6. 6. II. MODEL
    7. 7. III. SAMPLING  This study, excluding banking, finance and insurance industries, examines all the other listed and over-the-counter firms in Taiwan over the period from 2001 to 2008.  Incomplete information disclosure and cross- sectional data are omitted.
    8. 8. A. HYPOTHESIS SETTING METHODOLOGY
    9. 9. DescriptiveStatistics IV. RESULTS This study takes ROA, stock return and Tobin’s Q as the proxies to measure accounting performance, market performance and firm value, respectively. Table shows that the average of return of assets is 7.451%, the average of annual stock return is 10.214%. The average of Tobin’s Q is 1.298.
    10. 10. Pearson Correlation coefficient matrix Table demonstrates the variables of the matrix of Pearson correlation coefficient. ROA t−1 and ROA t−2 are significantly related because of the same variable measured in different periods. The absolute value of the correlation coefficient of other variables is between 0.001 and 0.414, showing no significant relation.
    11. 11. Relation between governance mechanism and corporate performance
    12. 12.  Board size is significantly and negatively related implying that, in a large size board, the diversity of insiders’ opinion has a negative impact on making decisions, which is detrimental to firm performance.  Board independence is positively and significantly related, suggesting that the more independent the board is, the better firm performance would be.  CEO duality is negatively and significantly related, inferring that, under the condition that CEOs serve as executives, the board would likely fail to be an objective supervisor, correspondingly putting firms at a disadvantage.  Insider ownership has a positive and significant relation, suggesting that higher insider ownership may reconcile authorities’ and outside shareholders’ interests, consequently making firm performance better.  The ratio of stock pledged by directors and supervisors is negative, implying that the higher ratio of pledged stock, the closer relation between directors’ individual finance and stock price would be; therefore, directors could benefit themselves at the sacrifice of small shareholders’ interest, resulting in poor firm performance.  The deviation between voting right and cash flow right is negatively and significantly related, implying that the larger gap between voting rights and cash flow rights, the more incentives controlling shareholders could have; thus they may embezzle firm asset, causing damage to small shareholders’ interest and deteriorating firm performance. V.CONCLUSION
    13. 13. Implication in Nepalese Perspective

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