Corporate governance influence on market value: analytical study

a. Dependent Variable: Leverages

Table 2 presents the results of the multiple regression models using the full data set. There are about 80 observations pooled over four years. In Panel A (Model Summary), we start with pooled data from all firms with firm characteristics. We include Board meetings and Audit Independence as the explanatory variables. The R- Square value indicates the variance in the dependent variable can be predicted from the independent variables. The result in the column R square shows that board meetings is 31.7% influencing on Tobin's Q (0.317) and the combination of board meetings and audit independence are influencing 56.5% on Tobin's Q as (R = 0.565). 27.7% of variability is explained by the predictor Board meetings and 51.1% of variability is explained by the predictors Board meetings and Audit Independence towards Tobin's Q. In Panel B (ANOVA), we examines that both board meetings and audit independence has a significantly positive impact for Tobin's Q. Since the significant value of both Board_meetings and Audit_Independence are less than 0.05, we conclude that the group of independent variables reliably predict the dependent variable (Tobin's Q). Thus, there is a statistically significant relationship between (a) Tobin's Q and Board meetings and (b) Tobin's Q and Audit Independence.

In Panel C (coefficients), the results in the column B show that the Tobin's Q is significantly negatively influenced by the board meetings whereas the Audit_Independence has a significantly positive coefficient. This tells that the amount of increase in Tobin's Q that would be predicted by a 1 unit increase in the predictors. Since the p-value for Audit Independence (0.008) is less than 0.05, there exists a significant relationship between the variables. The p-value (0.012) for Board meetings indicates that there is no significant relationship between the variables. From this result, board meetings are more influencing the Tobin's Q than Audit Independence. The analysis in Panel A and B assumes that the impact of our governance variables is the same for other firm performances. This allows us to see to what extent corporate governance variables produce a differential effect over three firm performances.

Table 3 presents the results of regressions of corporate performance on firm (Tangibility) - corporate governance variables.

In Panel A (Model Summary), Board meetings, Audit meetings, Non-Executive Directors, Audit size, Number of directors and Audit Independence are considered as the explanatory variables. 28.5% of variability is explained by the predictors towards Tangibility.

In Panel B (ANOVA), we explains that the group of independent variables (board independence, board size, audit size, their meetings and audit independence) doesn't show a statistically significant relationship with Tangibility.

In Panel C (coefficients), the results in the column B show that the Tangibility is significantly negatively influenced by the board meetings, Number of directors, NonExecutive directors and Audit meetings whereas the Audit_Independence and Audit size has a significantly positive coefficient. From Panel C, the regression equation is, Y (Tangibility) = 0.016 - 0.015(Number of Directors) - 0.134(Non-Executive Directors)- 0.001(Board Meetings) + 0.199(Audit size) + 0.405(Audit Independence) - 0.005(Audit Meetings)

The coefficients of Non-executive directors (0.022), audit size (0.030) and audit independence (0.010) shows the significant relationship with tangibility since the p- value are less than 0.05.

Table 4 presents the results of regressions of corporate performance on firm (Leverages) - corporate governance variables.

In Panel A (Model Summary), Board meetings, Audit meetings, Non-Executive Directors, Audit size, Number of directors and Audit Independence are considered as the explanatory variables. 42.4% of variability is explained by the predictors towards Leverages.

In Panel B (ANOVA), we explains that the group of independent variables (board independence, board size, audit size, their meetings and audit independence) show a statistically significant relationship with Leverages.

In Panel C (coefficients), the results in the column B show that the Leverage is significantly negatively influenced by the Audit_Independence and Audit size whereas board meetings, Number of directors, Non-Executive directors and Audit meetings has a significantly positive coefficient.

From Panel C, the regression equation is,

Y (Leverages) = 0.394 + 0.018 (Number of Directors) + 0.115 (Non-Executive Directors) + 0.012 (Board meetings) - 0.094 (Audit size) - 0.422 (Audit Independence) + 0.016 (Audit meetings)

The coefficients of Non-Executive Directors (0.029) and Audit Independence (0.004) shows there exists a statistically significant relationship with leverages since the p-values are less than 0.05. Overall, our results show that corporate governance features are important in different studies for two reasons. First, variables have different impact on performance. Second, companies have unique institutional features that influence performance.

Conclusion

The purpose of this paper is to examine whether differences in corporate governance features can explain the differences in corporate performance. Whereas most studies on the relation between performance and control focus on the United States, this study helps to improve the empirical insight into the relationship between governance and performance. The present study is an attempt in analyzing the impact of corporate governance in the determination of firm value. The study also aimed at analyzing the significant differences in the corporate governance characteristics. We assemble a small but unique data set comprising of 20 Britain companies for the period of 2018 to 2021. These data's are chosen because their corporate governance characteristics differ significantly on many dimensions. We can draw the following major conclusions from this study. The OLS regression results shows that there exists a good link of board structure and audit independence with Tobin's Q and leverages. These common corporate governance features do not have similar relationship with firm performances. Our results indicate that in cases where a statistically significant relationship with performance is observed, there is no consistency concerning the direction of such relationship. The corporate governance characteristics are found to be more important in determining performance of firms.

The significantly negative relationship between corporate board structures and performance observed in three different firm performances is driven by the ownership and lack of monitoring by holding companies. The empirical evidence provided in this study therefore suggests that it would not be sufficient to consider only the stylized facts to explain firm performance. Hence, it could be concluded that there is no universally applicable corporate governance systems and (Yoshikawa and Phan, 2003) so local laws and local business environment might have stronger influence on the governance system of each country or region (Seifert et al., 2005).

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