Corporate governance and firm value in Singapore.

Abstract

Recent scandals resulting from poor corporate governance practices have revealed weaknesses in corporate governance once again, and prompted the need to review current practices. We examine the relation between three identified areas of corporate governance, namely board finance expertise, chief executive officer (CEO) remuneration and risk oversight, and firm value with a sample of 296 companies taken from the Singapore Exchange Mainboard. Controlling for firm and industry specifics as well as several board characteristics, we find that board finance expertise and a larger audit committee in relation to board size enhances firm value as measured by Tobin’s Q. The presence of a stand-alone risk committee may also be related to greater firm value. Against the backdrop of the financial crisis of 2007-2008, we also investigate if there have been changes in our independent variables between 2006 and 2009, and if these changes are related to the financial crisis. The results show that only board finance expertise has changed significantly, but is not significantly related to the change in firm value due to the financial crisis. This study sheds light on how some corporate governance practices are related to firm value in Singapore. Companies can consider adopting good corporate governance practices that may enhance their firm value.