Internal corporate governance mechanisms and firm performance: 3SLS empirical evidence from Thailand

Kobsidthi Silpachai
Additional contact information
Kobsidthi Silpachai: School of Management, Asian Institute of Technology, 58 Moo 9, Km. 42, Paholyothin Highway, Klong Luang, Pathum Thani 12120 Thailand

International Journal of Business Ecosystem & Strategy (2687-2293), 2023, vol. 5, issue 1, 23-36

Abstract: This paper aims to examine the effect of corporate governance (CG) on firm performance (FP). The 3SLS (Three-Stage Least Squares) regressions were performed on a system of equations based on a panel dataset of 1,768 firm-years of Thai-listed companies from 2014 to 2020. This is to assess the simultaneous linear/curvilinear relationships between CG and FP. We found that internal CG mechanisms (i.e., the board size, institutional ownership, and dividend policy) are significantly related to firm performance measured by return on equity (ROE), return on assets (ROA), and price-to-book ratio/Tobin’s Q (PBR). Board size exhibits a curvilinear relationship rather than a linear relationship with FP. This reflects the integration between resource dependency theory and stewardship theory. Relative to ROE and ROA, a board size of 10 is optimal (which is associated with a peak ROE of 14.8% and a peak ROA of 3.4%. A board size greater than ten would see a fall in ROE and ROA. Relative to PBR, a board size of 12 is optimal, with a peak PBR of 2.39 times. This study further identifies a ranking of effective CG mechanisms.

Keywords: Agency Theory; Board of Directors; Board Independence; Corporate Governance; Dividend Policy; Firm Performance; Institutional Ownership (search for similar items in EconPapers)
Date: 2023
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://bussecon.com/ojs/index.php/ijbes/article/view/382/197 (application/pdf)
https://doi.org/10.36096/ijbes.v5i1.382 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adi:ijbess:v:5:y:2023:i:1:p:23-36

Access Statistics for this article

International Journal of Business Ecosystem & Strategy (2687-2293) is currently edited by Umit Hacioglu

More articles in International Journal of Business Ecosystem & Strategy (2687-2293) from Bussecon International Academy Bussecon International Academy, School of Business, IHU, Ordu cad. F-05 Blok No 3, 34480 Basaksehir, Istanbul, Turkey. Contact information at EDIRC.
Bibliographic data for series maintained by Umit Hacioglu ().