Corporate Governance, Firm Performance and Financial Leverage across Developed and Emerging Economies
Abstract
:1. Introduction
2. Literature Review
2.1. Corporate Governance and Firm Performance
2.1.1. Board Size and Firm Performance
2.1.2. Board Independence and Firm Performance
2.1.3. Board Diversity (Women Directorship) and Firm Performance
2.1.4. CEO Duality and Firm Performance
2.2. Corporate Governance and Leverage
2.2.1. Board Size and Leverage
2.2.2. Board Independence and Financial Leverage
2.2.3. Female Directorship and Financial Leverage
2.2.4. CEO Duality and Leverage
2.3. Effect of Leverage on Firm Performance
2.4. The Relationship between Corporate Governance and Firm Performance with the Mediating Effects of Financial Leverage
3. Data and Research Methodology
3.1. Data and Samples
3.2. Research Methodology
3.3. Dependent Variables
4. Empirical Results and Discussion
4.1. The Effects of Corporate Governance on Financial Leverage
4.2. The Effects of Corporate Governance and Financial Leverage on Firm Performance
4.3. The Mediating Effect of Financial Leverage
5. Conclusions
Author Contributions
Funding
Conflicts of Interest
References
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Country | Population | Samples | Percent |
---|---|---|---|
Austria | 143 | 11 | 0.4 |
Belgium | 156 | 12 | 0.44 |
China | 1290 | 97 | 3.61 |
Denmark | 267 | 20 | 0.75 |
Finland | 363 | 27 | 1.02 |
France | 866 | 65 | 2.42 |
Germany | 1080 | 81 | 3.02 |
Great Britain | 1874 | 141 | 5.25 |
Hong Kong | 145 | 11 | 0.41 |
India | 717 | 54 | 2.01 |
Japan | 4860 | 366 | 13.61 |
Korea | 1249 | 94 | 3.5 |
Pakistan | 1695 | 128 | 4.75 |
Switzerland | 624 | 47 | 1.75 |
Taiwan | 1542 | 116 | 4.32 |
Turkey | 213 | 16 | 0.6 |
United States | 18,633 | 1282 | 50.07 |
Total | 35,717 | 2568 | 100 |
Variables | Description | Definition | Reference |
---|---|---|---|
BSIZE | Board size | A number of board of directors, including a chairperson and independent directors. | (Obradovich and Gill 2013; Detthamrong et al. 2017) |
BI | Board independence | The ratio of the number of independent directors to the number of all directors. | (Detthamrong et al. 2017) |
WD | Women directorship | The ratio of the number of female directors to the total number of directors. | (Detthamrong et al. 2017) |
CEOD | CEO duality | CEO duality is a dummy variable which take a value of one if the CEO is also the chairperson of the board of directors, and zero otherwise. | (Obradovich and Gill 2013; Detthamrong et al. 2017) |
LEV | Financial leverage | The ratio of total debt to total assets. | (Obradovich and Gill 2013; Detthamrong et al. 2017) |
ROA | Return on assets | The ratio of earnings before interest and taxes to total assets. | (Detthamrong et al. 2017) |
FSIZE | Firm size | The natural logarithm of total assets. | (Obradovich and Gill 2013; Detthamrong et al. 2017) |
SG | Sales growth | Current year sales less previous year sales by previous year sales | (Ferreira et al. 2010; Detthamrong et al. 2017) |
BI | BSIZE | CEOD | LEV | ROA | SG | FSIZE | WD | |
---|---|---|---|---|---|---|---|---|
Mean | 0.511 | 8.287 | 0.261 | 0.734 | 1.590 | 0.308 | 23.054 | 0.615 |
Median | 0.571 | 8.000 | 0.000 | 0.600 | 0.049 | 0.100 | 22.273 | 1.000 |
Maximum | 0.990 | 18.000 | 1.000 | 0.794 | 32.370 | 102.649 | 78.510 | 1.000 |
Minimum | 0.000 | 5.000 | 0.000 | 0.004 | −2.179 | −0.995 | 0.010 | 0.000 |
Std. Dev. | 0.283 | 1.870 | 0.439 | 0.908 | 0.016 | 3.052 | 6.182 | 0.487 |
Probability | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
Observations | 2568 | 2568 | 2568 | 2568 | 2568 | 2568 | 2568 | 2568 |
ROA | LEV | FSIZE | CEOD | BI | BSIZE | WD | SG | |
---|---|---|---|---|---|---|---|---|
ROA | 1 | |||||||
LEV | −0.0674 | 1 | ||||||
FSIZE | 0.0509 | 0.1139 | 1 | |||||
CEOD | −0.0087 | −0.0314 | −0.0936 | 1 | ||||
BI | 0.0131 | −0.0835 | −0.0666 | 0.0616 | 1 | |||
BSIZE | 0.0018 | −0.0367 | −0.0311 | 0.0243 | 0.0316 | 1 | ||
WD | −0.0056 | −0.0019 | −0.008 | −0.005 | −0.0035 | 0.0048 | 1 | |
SG | −0.0018 | −0.0041 | 0.0002 | −0.0056 | −0.0028 | −0.0058 | −0.0063 | 1 |
Equation (1) | Equation (2) | Equation (3) | Equation (4) | |
---|---|---|---|---|
ROA | LEV | ROA | ROA | |
L1 | 0.014 *** (27.20) | −4.245 *** (−8.16) | 0.032 *** (19.19) | 0.1194 *** (17.50) |
L2 | 0.047 *** (8.61) | −0.037 *** (−25.37) | 0.04 *** (7.55) | 0.04 *** (7.59) |
LEV | −0.40 *** (−772.56) | −0.46 *** (−259.68) | ||
CEOD | −1.27 *** (−1027.77) | 0.10 *** (20.13) | −1.29 *** (−994.39) | |
BI | 0.02 *** (1106.21) | 0.00 (0.68) | 0.02 *** (976.15) | |
BSIZE | 0.09 *** (308.48) | 0.01 *** (6.80) | 0.08 *** (260.75) | |
WD | −0.99 *** (−717.65) | 0.00 (0.07) | −1.02 *** (−638.65) | |
FSIZE | −0.16 *** (−2829.14) | −0.02 *** (−79.94) | −0.17 *** (−7861.61) | −0.17 *** (−2369.08) |
SG | 0.09 *** (532.48) | −0.02 *** (−7.78) | 0.07 *** (1185.01) | 0.09 *** (434.26) |
C | 5.42 *** (1125.32) | 0.59 *** (40.02) | 5.90 *** (4240.97) | 5.81 *** (1169.80) |
Observations | 2568 | 2568 | 2568 | 2568 |
R-Square | 0.75 | 0.69 | 0.77 | 0.81 |
p-Value | 0.00 | 0.00 | 0.00 | 0.00 |
Equation (1) | Equation (2) | Equation (3) | Equation (4) | |
---|---|---|---|---|
ROA | LEV | ROA | ROA | |
L1 | 0.064 *** (13.46) | −0.007 *** (−5.88) | −0.0096 *** (−14.18) | −0.002 *** (−3.81) |
L2 | −0.01 *** (−297.60) | 0.111 *** (0.00) | −0.00 *** (−890.73) | −0.01 *** (−285.93) |
LEV | −7.21 *** (−7.23) | −7.24 *** (−7.25) | ||
CEOD | −29.919 *** (−11.12) | −30.096 *** (−11.21) | −0.23 *** (−4.62) | |
BI | −7.48 *** (−158.90) | −7.85 *** (−884.45) | −0.00 *** (−7.07) | |
BSIZE | −1.29 *** (−994.3) | 0.000 *** (552.60) | −29.7 *** (−11.19) | |
WD | 0.01 *** (939.18) | −1.28 *** (−972.44) | −29.9 *** (−11.31) | |
FSIZE | −1.28 *** (−972.44) | −0.04 *** (−32.45) | −0.906 *** (−3.61) | −0.911 *** (−3.62) |
SG | −7.239 *** (−7.25) | 0.044 *** (5.97) | −6.888 *** (−7.18) | −6.928 *** (−7.21) |
C | 6.36 (1.53) | 0.07 (1.18) | 8.45 (2.07) | 8.71 (2.11) |
Observations | 2568 | 2568 | 2568 | 2568 |
R-Square | 0.88 | 0.77 | 0.68 | 0.74 |
p-Value | 0.00 | 0.00 | 0.00 | 0.00 |
Equation (1) | Equation (2) | Equation (3) | Equation (4) | |
---|---|---|---|---|
ROA | LEV | ROA | ROA | |
L1 | −0.031 *** (−3.34) | −0.008 *** (−5.88) | 0.464 ** (3.01) | 0.216 *** (20.57) |
L2 | 0.04 *** (7.31) | 0.017 *** (14.04) | 0.038 *** (7.27) | 0.038 *** (7.3) |
LEV | −7.85 *** (−884.45) | −7.48 *** (−158.90) | ||
CEOD | −1.29 *** (−994.3) | 0.000 *** (552.60) | −1.28 *** (−972.44) | |
BI | 0.018 *** (976.15) | 0.000 *** (2625.20) | 0.01*** (939.18) | |
BSIZE | 0.082 *** (260.75) | 0.001 *** (2080.52) | 0.08 *** (293.67) | |
WD | −1.01 *** (−638.6) | 0.000 *** (390.52) | −1.02 *** (−573.70) | |
FSIZE | −0.16 *** (−2369.0) | 0.000 *** (1579.35) | −0.17 *** (−9560.9) | −0.16 *** (−2304.6) |
SG | 0.085 *** (434.26) | −0.00 *** (−331.69) | 0.072 *** (1152.9) | 0.082 *** (0.01) |
C | 7.94 (8.46) | 0.28 (12.90) | 9.03 (9.65) | 9.26 (9.11) |
Observations | 2568 | 2568 | 2568 | 2568 |
R-Square | 0.81 | 0.68 | 0.85 | 0.71 |
p-Value | 0.00 | 0.00 | 0.00 | 0.00 |
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Kijkasiwat, P.; Hussain, A.; Mumtaz, A. Corporate Governance, Firm Performance and Financial Leverage across Developed and Emerging Economies. Risks 2022, 10, 185. https://doi.org/10.3390/risks10100185
Kijkasiwat P, Hussain A, Mumtaz A. Corporate Governance, Firm Performance and Financial Leverage across Developed and Emerging Economies. Risks. 2022; 10(10):185. https://doi.org/10.3390/risks10100185
Chicago/Turabian StyleKijkasiwat, Ploypailin, Anwar Hussain, and Amna Mumtaz. 2022. "Corporate Governance, Firm Performance and Financial Leverage across Developed and Emerging Economies" Risks 10, no. 10: 185. https://doi.org/10.3390/risks10100185
APA StyleKijkasiwat, P., Hussain, A., & Mumtaz, A. (2022). Corporate Governance, Firm Performance and Financial Leverage across Developed and Emerging Economies. Risks, 10(10), 185. https://doi.org/10.3390/risks10100185