Corporate Governance Firm Profitability And Share Valuation In The Philippines

This study examines 73 publicly listed companies in the Philippines to determine the relationship between the quality of corporate governance practices and company performance. It concludes that as a company's corporate governance practices improve, there is likely to be positive and significant impacts on its market capitalization, market valuation, and profitability. The study was jointly conducted by the Asian Development Bank, the Institute of Corporate Directors, and the University of Asia and the Pacific.

This study examines 73 publicly listed companies in the Philippines to determine the relationship between the quality of corporate governance practices and company performance. It concludes that as a company's corporate governance practices improve, there is likely to be positive and significant impacts on its market capitalization, market valuation, and profitability. The study was jointly conducted by the Asian Development Bank, the Institute of Corporate Directors, and the University of Asia and the Pacific.

This study investigates whether ownership structure has significant effects on the performance of publicly-listed companies in China, and in what way if it does. Publicly- listed stock companies allow us to quantify the ownership mix and concentration and thus provide a unique opportunity for studying the above issue. The recent literature on the role of large institutional shareholders in corporate governance provides the theoretical foundation of this study. A typical listed stock company in China has a mixed ownership structure with the state, legal persons (institutions), and domestic individuals as the three predominant groups of shareholders. Each holds about 30 percent of total outstanding shares. Employees and foreign investors together hold less than 10 percent. The ownership concentration is high with the five largest shareholders accounting for 58 percent of the outstanding shares in 1995, compared to 57.8 percent in Czech Republic, 42 percent in Germany and 33 percent in Japan. Results from our empirical analysis show that ownership structure (both the mix and concentration)indeed has significant effects on the performance of stock companies. First, there is a positive and significant correlation between ownership concentration and profitability. Second, the effect of ownership concentration is stronger for companies dominated by legal person shareholders than for those dominated by the state. Third, firms? profitability is positively correlated with the fraction of legal person shares, but it is either negatively correlated or uncorrelated with the fraction of state shares and tradable A-shares held mostly by individuals. Last, labor productivity tends to decline as the proportion of state shares increases. These results suggest the importance of large institutional shareholders in corporate governance and performance, the inefficiency of state ownership, and potential problems in an overly dispersed ownership structure.

The impact of the economic downturn and the increase in financial scandals emerging from major corporations has generated a growing interest in governance issues and has emphasized the need for companies to be transparent in their dealings with shareholders and the markets. Although the issues in Asia are fundamentally similar to those in the rest of the world, there are some crucial differences in the way in which Asian corporations acknowledge and confront these issues and in the political and legal frameworks under which they operate. Using examples of good and bad governance, Roche analyzes if the Asian approach to governance issues is unique. Business and finance students, as well as executives with an interest in Asian business or corporate governance will find this an authoritative and insightful guide to this complex and important topic.

“A well-informed and actively engaged shareholder base is a key contributor to ensuring that companies conduct their business with competence, integrity, and transparency. This requires companies to adopt the principles of good corporate governance, which is one of the main drivers of creating shareholder value and growth in our capital markets. It is in this light that I would like to congratulate SharePHIL for publishing Your Best Guide to Stock Investing to educate and guide the investing public. The handbook is a big step forward to good governance for all of us.” —Manuel V. Pangilinan, chairman, Metro Pacic Group of Companies