Examining the Relationship between Corporate Governance and the Corporate Performance Valuation

Subject Areas : Financial Economics

Forogh Khorshidvand ¹ , Ahmad Sarlak ²

1 - Department of Accounting, Faculty of Humanities, Islamic Azad University, Delijan ,Iran
2 - Department of Economical science, Faculty of Management, Islamic Azad University, Arak, Iran

Received: 2017-06-11 Accepted : 2017-09-20 Published : 2017-09-01

Keywords: Performance valuation, Intensity of supervision, Number of board meetings,

Abstract :

The aim of this study was to investigate the relationship between corporate governance characteristics and valuation of the firm's performance in Iran. After designing performance evaluation indexes, information of transactions made during the five-year study from 2011 to 2015 from the Stock Exchange were collected and the sample consists of 129 companies was selected by systematic elimination that was a total of 645 year-firm. In this study we used the linear regression and correlation for testing the research hypotheses, and Eviews software for analysing the data and testing hypotheses. What can be said in summary and conclusion of research hypotheses test is that, there are a significant and positive relationship between the intensity of supervision, the stock in the hands of the board, executive's changes and board size with the company's performance; in addition, we found a significant and negative relation between firm size and financial leverage with the company's performance. The other results showed no significant and positive relationship between the number of board meetings and the firm's performance; the results in this study corresponded to the documentation mentioned in the theoretical framework and financial literature.

References:

[1] Abdul Rahman, R., Haniffa, R. M., The effect of role duality on corporate performance in Malaysia, Corporate ownership and control, 2005, 2(2), P. 40–47.

[2] Adams, R. B., Mehran, H., Corporate performance, Board structure and its determinants in the banking industry. In EFA 2005 Moscow meetings. 2005.

[3] Ahmed Haji, A., The relationship between corporate governance attributes and firm performance before and after the revised code: Some Malaysian evidence. International Journal of Commerce and Management, 2014, 24(2), P.134–151.

[4] Alexander V.N., Matts Rosenberg, Corporate Governance Mechanisms and Firm Performance: Evidence from Finland, Working Paper, Swedish School of Economics and Business Administration, Helsinki, Finland, 2003, 47(3), P.4-22.

[5] Bhagat, S., Bolton, B., Director ownership, governance and performance, Journal of Financial and Quantitative Analysis, 2013, 48(1), P.105–135.

[6] Brick, I. E., Chidambaran, N. K., Board meetings, Committee structure and firm value. Journal of corporate finance, 2010, 16(4), P.533–553.

[7] Chi, W., Huang, H., Xie, H., A quantile regression analysis on corporate governance and the cost of bank loans: a research note, Review of Accounting and Finance, 2015, 14(1), P.2–19.

[8] Faleye, O., Hoitash, R., Hoitash, U., The costs of intense board monitoring, Journal of Financial Economics, 2011,101(1), P. 160–181.

[9] Jiraporn, P., Singh, M., Lee, C. I., Ineffective corporate governance: Director busyness and board committee memberships, Journal of Banking & Finance, 2009, 33(5), P. 819–828.

[10] Kim, K., Mauldin, E., Patro, S., Outside directors and board advising and monitoring performance, Journal of Accounting and Economics,2014, 57(2), P.110–131.

[11] Klapper, L. F., Love, I., Corporate governance, investor protection and performance in emerging markets, Journal of corporate Finance,2004, 10(5), P.703–728.

[12] Munisi, G., Randoy, T., Corporate governance and company performance across Sub-Saharan African countries, Journal of Economics and Business, 2003,70(15), P. 92–110.

[13] Pombo, C.  Gutiérrez, L. H., Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups, Journal of Economics and Business,2011, 63(4), P. 251–277.

[14] Sanni, M.,Ahmed Haji, A., The impact of corporate governance attributes on firm performance following the revised code: some Malaysian evidence, paper presented at the 2nd Accounting Research and Education Conference (AREC 2012). Kuala Lumpur.2012.

[15] Shawtari, F. A., Salem M. A,Hussain H. I., Alaeddin O., Corporate governance characteristics and valuation: Inferences from quantile regression, Journal of Economics, Finance and Administrative Science, 2016, 2(1), P. 112-193.