An Investigation on the Relationship between Corporate Governance and Growth Strategy with Value Creation in Tehran Stock Exchange (TSE)

Abstract

An Investigation on the Relationship between Corporate Governance and Growth Strategy with Value Creation in Tehran Stock Exchange (TSE) Abdolreza Ghasempour Abstract The present paper evaluated the role of corporate governance and growth strategy on value creation. As for the variables of value creation, economic value added, market value added, Jensen's alpha, return on assets, and return on equity were examined, sales growth and income growth were considered for growth strategy, and variables of percentage of institutional investors, percentage of non-bound members, CEO duality, CEO replacement, and auditor tenure were used as indicators of corporate governance. For testing research hypotheses, the authors utilized multiple regression and financial data of 111 sample companies for the period of 2001 to 2010. The findings indicated that sales growth was positively associated with all indices of value creation. However, income growth was only positively associated with the return on assets. Moreover, economic value added was solely positively associated with CEO duality. There were no associations whatsoever between market value added and Jensen's alpha as well as all indices of corporate governance. A negative and significant relationship was observed between return on assets and auditor tenure, and finally, return on equity was negatively associated with auditor tenure and CEO replacement. According to the results, corporate governance had little to do with value creation in Iran. Full Text: PDF DOI: 10.15640/ijat.v4n2a6