Articlegreen2019

Board, audit committee, ownership and financial performance – emerging trends from Thailand

Omar Al Farooque · Wonlop Writthym Buachoom · Lan Sun

243 citations0/0 files storedPacific Accounting Review

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Corporate Finance and Governance Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Purpose This study aims to investigate the effects of corporate board and audit committee characteristics and ownership structures on market-based financial performance of listed firms in Thailand. Design/methodology/approach It applies system GMM (generalized method of moments) as the baseline estimator approach, and ordinary least squares and fixed effects for robustness checks on a sample of 452 firms listed on the Thai Stock Exchange for the period 2000-2016. Findings Relying mainly on the system GMM estimator, the empirical results indicate some emerging trends in the Thai economy. Contrary to expectations for an emerging market and prior research findings, ownership structures, particularly ownership concentration and family ownership, appear to have no significant influence on market-based firm performance, while managerial ownership exerts a positive effect on performance. Moreover, as expected, board structure variables such as board independence; size; meeting and dual role; and audit committee meeting show significant explanatory power on market-based firm performance in Thai firms. Practical implications These findings are important for policymakers in constructing an appropriate set of governance mechanisms in an emerging market context, and for corporate entities and investors in shaping their understanding of corporate governance in the Thai institutional context. Originality/value Unlike previous literature on the Thai market, this study is the first to use the more advanced econometric method known as system GMM estimator for addressing causality/endogeneity issues in governance–performance relationships. The findings indicate new trends in the explanatory power of ownership structure variables on market-based firm performance in Thai-listed firms.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1991Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations 1998Initial conditions and moment restrictions in dynamic panel data models 1995Another look at the instrumental variable estimation of error-components models 1983Separation of Ownership and Control 1984Corporate financing and investment decisions when firms have information that investors do not have 1978Specification Tests in Econometrics 1997A Survey of Corporate Governance

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