Corporate governance and firm performance : a study of family and non-family controlled firms in Singapore.

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 research is an indication that there may be an over-emphasis on corporate governance mechanisms on analysing the financial performance of companies.