CG Seminar

8/12/2019 CG Seminar

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Copyright by R. S. Pradhan All rights reserved.

WELCOME TO

MGT 631CORPORATE GOVERNANCE SEMINAR

(1 Credit)

Seminar 3


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CG Seminar 1 (Part I)

Reading 5: Ling Chen and Lijie Lu (2009),Family Firms, Corporate Governance and

Performance: Evidence from Zhejiang, a paper

prepared for the conference: US-China

Business Cooperation in the 21stCentury:Opportunities and Challenges for

Entrepreneurs, Indiana University, Indiana, April

15-17, 2009, pp. 1-18.

The study investigates the relationship

between CG and firm performance in

manufacturing industry in Zhejiang province.


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No consistent conclusion on studies of the

relation between family ownership and

performance. Family owned firms are more efficient than

non-family owned or vice versa?

Gorris and Fumas (1996) revealed that family

firms have higher productivity than non-

family firms, but they did not find the same

for profitability.

Wall (1998) revealed that family firms inWestern New York are less productive than

non-family firms.


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Statement of hypothesis: 4 hypotheses.

Dependent variables: performance defined in

terms of sales, value added and value addedper worker.

Independent variables: four governance

indicators: share, CEO duality, nepotism and

leverage.

A firm was regarded as afamily business if

more than 50% of shares was owned by the

owners or by the members of the largestsingle family group.


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Basic Model:

Ln Y = a0

+ a1

ln fam + a2

ln L + a3

ln K + a4

ln X

+ e

Y is the sales or value added

Fam is a dummy variable, taking the value of

1 if the firm is family business and otherwise0.

L is labor (no. of employees) and

K is capital (total assets)

Value added is measured by differencebetween sales and materials cost.

Other models are also estimated.


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Family firms are more productive than non-

family firms.

Nepotism is significantly negatively related tothe performance.

Education level of owner significantly affect

the performance of the firm in a positive

manner.

There is no significant relationship between

CEO duality and family-owned firm

performance.

Thanking you.


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Reading 6: Sunday O. Kajola (2008),

Corporate Governance and Firm

Performance: The Case of Nigerian ListedFirms, European Journal of Economics and,

Finance and Administrative Sciences, Issue 14,

EuroJournals, Inc., www.eurojournals.compp.

16-28.

Introduction

CG has been variously defined.

CG is about ensuring that the business is runwell & investors receive a fair return.

OECD defines CG as the system by which

corporations are directed and controlled.
http://www.eurojournals.com/http://www.eurojournals.com/


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Methodology:

20 non-financial firms

Study period: 2002-2006Model: PERF = b0+ b1BSIZE + b2BCOMP + b3

CEO + b4AUDCOM + e

PERF = ROE or PM

BSIZE = No. of directors in the board

BCOMP = Proportion of outside directors on

the board

CEO = Zero if the same person is both

chairman and CEO otherwise 1.

AUDCOM = Composition of audit committee

(i.e. proportion of outside member to total

member)


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Findings:

1. Mean ROE is 90% and mean PM is 2.5%

2. There is a positive and significantrelationship between ROE and board size.

3. There is a positive and significant

relationship between ROE and CEO status.

4. There is no significant relationship between

ROE, board composition, and audit committee.

5. There is a positive and significant

relationship between PM and CEO status.6. There is no significant relationship between

PM and board size, board composition, and

audit committee. Thanking you

Documents

CG Seminar