CORPORATE GOVERNANCE AND FIRM PERFORMANCE OF FAMILY OWNERSHIP, CONTROL AND MANAGEMENT FIRMS IN THAILAND

Abstract

ABSTRACT This paper examines the effectiveness of 4 corporate governance tools (board size, board composition, largest shareholder’s cash flow ownership right and cash flow to voting right ratio) in mitigating the agency costs resulting from agency problems and promoting the stewardship attitudes which lead to higher firm performance. The study utilizes 2,100 firm-year observations representing 300 non-financial Thai listed companies from 2004 to 2010. The research methodology applies the panel fixed effect regression method. The results find that most of Thai listed companies will benefit from having smaller board, more independent director fraction and higher largest shareholder’s ownership concentration level especially for family, family controlled and family management controlled firms that may have agency problem type II predominance. In addition, family management controlled firms benefit from having higher largest shareholder’s cash flow to voting right ratio. The findings challenge the current corporate governance notions that restrictions on board, ownership and control voting structures necessarily enhance Thai listed firms’ value. Keywords Corporate Governance, Board Size, Independent Directors, Cash Flow Ownership Rights, Control Voting Rights, Firm Performance, Family Ownership, Control and Management Firms, Thailand