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Form versus substance: The effect of ownership structure and corporate governance on firm value in Thailand

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  • Connelly, J. Thomas
  • Limpaphayom, Piman
  • Nagarajan, Nandu J.
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    Abstract

    We examine the relation between the quality of corporate governance practices and firm value for Thai firms, which often have complex ownership structures. We develop a comprehensive measure of corporate governance and show that, in contrast to conventional measures of corporate governance, our measurement, on average, is positively associated with Tobin’s q. Furthermore, we find that q values are lower for firms that exhibit deviations between cash flow rights and voting rights. We also find that the value benefits of complying with “good” corporate governance practices are nullified in the presence of pyramidal ownership structures, raising doubts on the effectiveness of governance measures when ownership structures are not transparent. We conclude that family control of firms through pyramidal ownership structures can allow firms to seemingly comply with preferred governance practices but also use the control to their advantage.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 36 (2012)
    Issue (Month): 6 ()
    Pages: 1722-1743

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    Handle: RePEc:eee:jbfina:v:36:y:2012:i:6:p:1722-1743

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    Web page: http://www.elsevier.com/locate/jbf

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    Keywords: Corporate governance; Family ownership; Firm value; Thailand;

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    Cited by:
    1. Fairchild, Richard & Guney, Yilmaz & Thanatawee, Yordying, 2014. "Corporate dividend policy in Thailand: Theory and evidence," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 129-151.
    2. Isakov, Dušan & Weisskopf, Jean-Philippe, 2014. "Are founding families special blockholders? An investigation of controlling shareholder influence on firm performance," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 1-16.
    3. Theeravanich, Amnaj, 2013. "Director compensation in emerging markets: A case study of Thailand," Journal of Economics and Business, Elsevier, vol. 70(C), pages 71-91.
    4. Li, Wei-Xuan & Chen, Clara Chia-Sheng & French, Joseph J., 2012. "The relationship between liquidity, corporate governance, and firm valuation: Evidence from Russia," Emerging Markets Review, Elsevier, vol. 13(4), pages 465-477.

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