Corporate governance, board structure and firm performance : evidence from Hong Kong

Pao Yue-kong Library Electronic Theses Database

Corporate governance, board structure and firm performance : evidence from Hong Kong

 

Author: Lee, Chun-cheung
Title: Corporate governance, board structure and firm performance : evidence from Hong Kong
Year: 2004
Subject: Hong Kong Polytechnic University -- Dissertations
Corporate governance -- China -- Hong Kong
Directors of corporations -- China -- Hong Kong
Department: Graduate School of Business
Pages: 107 leaves ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1781052
URI: http://theses.lib.polyu.edu.hk/handle/200/2106
Abstract: The major role of the corporate board of directors is to install governance mechanism, as well as to provide guidance for internal management, so as to enhance firm performance. According to agency theory, the separation of ownership and control gives managers the incentives and power to pursue their own interests at the expense of the owners. This has led some firms in the West to change the board structure by including more outside directors, reorganizing leadership structure and reducing board size in order to make the board more independent to act in the interests of shareholders. On the contrary, organizational theory emphasizes the importance of unity of command and cooperative relationship within an organization. This concept has led to a different setup of board structure. Hong Kong is an international financial center, a free economy, and a place where "East meets West". Western management concepts and the oriental family ownership concept are cross-influencing each other. However, there is a dearth of empirical research to understand the linkage between board structure and firm performance. In this paper, the research question is whether board structure can affect firm performance. The overall purpose is to investigate the relationship between board structure and firm performance, and examine which of the theories is more relevant to the institutional and cultural settings in Hong Kong. The empirical research here covers the top 93 listed companies during the year from 1998 to 2000. Using market-based performance measurements, the findings reveal that the proportion of outside directors and board size are positively related to Tobin's Q. The results are robust to a number of further analyses. However, there is no support for the relationship between other board structure variables, such as the proportion of grey directors and leadership structure, with Tobin's Q. When accounting-based performance measurements are used, such as ROA, ROE and ROS, there is no concrete evidence to support the hypothetical relationships. This is probably due to the fact there are many factors which can affect the accounting-based measurements, such as better monitoring by the corporate board can lead to more conservative accounting performance indicators. The contribution to literature by this thesis is the use of agency theory and organizational theory to examine this much contentious corporate governance issue in institutional and cultural settings quite different from the West. The contribution to the practice of management are highlighting the important monitoring role of outside directors, and the resource role of board size for enhancing firm performance in a business environment dominated by family ownership. However, caution has to be taken as effective monitoring and provision of critical resources cannot be made possible without the underlying context, such as institutional setup and cultural value, which supports the businesses on an on-going basis.

Files in this item

Files Size Format
b17810528.pdf 3.826Mb PDF
Copyright Undertaking
As a bona fide Library user, I declare that:
  1. I will abide by the rules and legal ordinances governing copyright regarding the use of the Database.
  2. I will use the Database for the purpose of my research or private study only and not for circulation or further reproduction or any other purpose.
  3. I agree to indemnify and hold the University harmless from and against any loss, damage, cost, liability or expenses arising from copyright infringement or unauthorized usage.
By downloading any item(s) listed above, you acknowledge that you have read and understood the copyright undertaking as stated above, and agree to be bound by all of its terms.

     

Quick Search

Browse

More Information