The Impact of Corporate Governance on the Value of the Company in the Egyptian Stock Market

E.M Elhennawy

doi:10.21272/bel.3(4).81-90.2019

Abstract

This research aims to examine the relationship between corporate governance and the value of the company in the stock market, using a sample of non-financial companies listed on the Egyptian stock exchange for the period of four years 2015-2018. The study was conducted on companies registered in the Egyptian stock market, but after the exclusion of financial institutions because they are subject to special rules for disclosure and transparency and oversight, where a sample of non-financial companies will be selected at random. And You will get the necessary data for the applied research through the financial statements and reports of the Board of Directors and reports to the audit committees of listed companies in the Egyptian stock market during the period from 2015 and 2018, and the researcher will depend on the method of regression analysis to test the research hypotheses. The research problem stems from the need to answer the following questions: 1. Does corporate governance affect the level of the company’s performance? 2. Does the performance of the company’s affect value in the stock market? 3. Does corporate governance affect the value of the company in the stock market? The research is aimed at theoretical apartment: to identify the general framework for corporate governance in the light of the latest standards and studies and analyze the most important studies that have looked at the relationship between corporate governance and performance level of the company, as well as studies that looked at the relationship between corporate governance and the company’s value in the stock market in order to benefit from the findings of previous studies in this regard. The paper presents the results of an empirical analysis, studies the impact of corporate governance on the value of the company in the Egyptian stock market, which showed that there is a positive relationship, but not significant between the corporate governance index and the ratio of market value to book value per share, and the results indicate that there is a positive relationship, but not significant between the corporate governance index and the percentage of Tobin’s Q. The results of the research can be useful through its response to the theme, which is a vital and important as it tests the relationship between corporate governance mechanisms and the performance of the company and its value in the stock market with the application in the Egyptian environment. Keywords: corporate governance, firm value, and firm performance.

Highlights

Corporate Governance is defined by OECD (2004) as the procedures and processes according to which an organization is directed and controlled
As it is assumed that the ratio of market value to book value per share is the index of corporate governance function and the proposed model takes the following form: (M/B) = β 0 + β 1 CGI + ε
Designed to study in these sub-Review statistical methods used in the analysis of the data, where adopted by researcher on statistical analysis programs ready package SPSS (Version 17), and after identifying appropriate for normal data and statistical methods and the nature of the assumptions and to analyze the data collected for the sample companies and test hypotheses of the study, where the statistical methods used included simple linear regression analysis method to test the extent of the independent variable's ability to interpret the change in each variable of the dependent variables, in addition to the foregoing, the researcher will use the test Man-Whitney, to test the differences between the two groups, as was the assumption that the moral level of significance level of acceptable equals (05 0.0)

Summary

Introduction

Corporate Governance is defined by OECD (2004) as the procedures and processes according to which an organization is directed and controlled. It shows some of the major companies in the United States and Europe, severe financial crises gripped each other effects machining issue of corporate governance and attached by the transparency and disclosure, and associated with all the confidence between citizens on the one hand, and those major institutions and managed by one hand revealed financial crises the recent collapse of a lot of international companies in the United States and the United Kingdom, as well as European countries, for a lot of cases of corruption, especially financial and accounting corruption, which had a bad impact in many areas, most notably the economic areas where marked by the process of attracting levels adequate capital in these companies a great deal of difficulties due to the incurring of shareholders where the heavy financial losses reflected negatively on the credibility of the investee companies and the capital markets through draws current and potential investors to look for alternative investment outlets, which prompted the approaching relevant on the national and international levels to conduct studies in order to identify the main reasons behind the occurrence of financial crises and to propose ways to protect the rights of shareholders and other stakeholders (Charitou and Louca, 2013)

Objectives

Results

Conclusion