Corporate Governance and Firm Performance: A Study of Family and Non-family Controlled Firms in Singapore

Topics: Board of directors, Non-executive director, Corporate governance Pages: 320 (10095 words) Published: October 4, 2013
Group No: 5382

NANYANG TECHNOLOGICAL UNIVERSITY
NANYANG BUSINESS SCHOOL

AB329 APPLIED RESEARCH PROJECT
Corporate Governance and Firm Performance: A Study of Family and Non-family Controlled Firms in Singapore

U1010347C
U1010546K
U1010424G

Chua Ang Hong
Ho Chuan Lui
Tee Chin Siang Bryan

Supervisor: Associate Professor Ho Kim Wai

Applied Research Project submitted to the Nanyang Business School, Nanyang Technological University in partial fulfillment for the double degree of Bachelor of Accountancy and Bachelor of Business.

Academic Year 2012/2013

TABLE OF CONTENTS

ACKNOWLEDGEMENTS………………………………………………………... ABSTRACT………………………………………………………………………… 1)
INTRODUCTION………………………………………………………...... 2)
LITERATURE REVIEW………………………………………………….. 2.1)
Family and Non-family Companies’ Performance……………......... 2.2)
Board Composition…………………………………………………. 2.3)
Directors’ Qualification…………………………………………….. 2.4)
Board Meetings……………………………………………………... 2.5)
Leadership Structure………………………………………………... 2.6)
Control Variables…………………………………………………… 3)
RESEARCH METHODOLOGY………………………………………...... 3.1)
Data……………………………………………………………......... 3.2)
Research Model and Measurement……………………………......... 3.3)
Model Specification………………………………………………… 3.4)
Approach…………………………………………………………… 4)
RESULTS AND ANALYSIS………………………………………………. 4.1)
Descriptive Analysis…………………………………………........... 4.2)
Univariate Test……………………………………………………... 4.3)
Inferential Analysis……………………………………………......... 4.4)
Multivariate Tests…………………………………………………... 4.4.1) Pooled OLS……………………………………………….. 4.4.2) Panel Data Regression…………………………………….. 5)
LIMITATIONS AND FURTHER RESEARCH…………………………. 6)
CONCLUSION……………………………………………………………... BIBLIOGRAPHY………………………………………………………………….. APPENDIX A………………………………………………………………………. APPENDIX B……………………………………………………………………….

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ACKNOWLEDGEMENTS
We would like to express our heartfelt gratitude to our Applied Research Project supervisor, Associate Professor Ho Kim Wai, for his invaluable time dedicated to guiding us throughout the course of the project. Without his support and insights, this research would definitely not have been possible.

We would also like to show our appreciation to our classmate, Nicholas Tan, who had given us some of his precious time and help in showing us how to use the programme required for our statistical analysis.

Last but not least, a big thank you goes out to each and every individual who have helped us throughout this enjoyable research journey, without which this research would not have been successful.

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ABSTRACT
For this research, we aim to investigate the relationship between corporate governance mechanisms and financial performance of firms, across family-controlled firms and non-family controlled firms. The research was conducted in Singapore due to the increasing studies undertaken in the field of family firms worldwide, coupled with the lack of understanding in this field in Singapore. A total of 100 companies were studied over the period of 2009 to 2011 from the Singapore Exchange Mainboard based on their market capitalisation. 4 corporate governance mechanisms were chosen for this study, namely Board Composition, Directors’ Qualifications, Board Meetings and Leadership Structure. These mechanisms were tested for their association through 5 hypotheses with 3 indicators of financial performance: Return on Assets, Tobin’s Q and Operating Cash Flow, with firm size taken as a control variable. A variety of statistical techniques were utilised, from correlation analysis to panel data regression, to further ascertain the associations. Directors’ Qualifications and Leadership Structure were found to influence financial performance for family firms. On the other hand, Board Meetings was significant in influencing financial performance for non-family firms. In conclusion, varying results from the...

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