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. 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. 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. 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. 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. II. MODEL

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. A. HYPOTHESIS SETTING
METHODOLOGY

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. 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. Relation between governance mechanism and corporate
performance

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. Implication in Nepalese Perspective