A Study on the relationship of corporate governance scores of Philippine publicly listed companies with their respective financial and market performances for the period 2007 to 2010

• Main Authors: Cordova, Fatima Faye E., De Lima, Gregorio L., III, Disu, Kristel Joy A., Yu, Diane Ellice C.
• Format: text
• Language: English
• Published: Animo Repository 2011
• Subjects: Corporate governance > Philippines; Corporations > Philippines; Corporations > Finance; Corporations > Finance > Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14717
• Institution: De La Salle University

This study examines the relationship between the level of corporate governance being employed by Philippine publicly listed companies, as represented by its corporate governance scores, and its corresponding financial performances (net income, EPS, ROA, ROE) and market performances (stock prices, P/E ratio, Q-ratio) for the years 2007-2010 through a correlation test. The relationship between these variables through a pooled basis and on a year by year analysis was examined. To further determine the degree of relationship between corporate governance scores and financial and market performances, a pooled and panel regression analysis has been conducted to determine if percentage changes in corporate governance scores can significantly predict percentage changes in net income and stock prices. Also, we determined if there is significant difference on the performances (corporate governance scores, financial performances, market performances) of high corporate governance compliant companies as contrasted to the minimum corporate governance compliant companies. Lastly, an analysis of firm specific (years of operation and total assets) and industry specific (the industry which a company belongs to) characteristics has been conducted to determine if these predict and have a relationship with the level of corporate governance that a company is employing. Based on this analysis, we were able to determine a 1.) a weak relationship between corporate governance and all financial and market performance indicators except for net income which has a moderate relationship with corporate governance if the analysis is performed on a pooled basis, 2.) an improve relationship, with EPS, stock prices, net income and ROE being moderately to strongly correlated, exists between financial and market performance indicators and corporate governance scores if analyzed on a year by year basis, 3.) as provided by the panel regression, percentage change in corporate governance can significantly predict percentage change in stock prices though a negative relationship exists between the two, in which the regression being the more reliable indicator of correlation, we are convinced that the relationship is really negative, 4.) there is a significant difference among the performances of the high and minimum compliant companies, and 5.) total assets predict the corporate governance scores of a company which means that the level of corporate governance being employed by a company is dependent on firm size. The result of this study shall benefit Philippine companies, the management, investors, the Institute of Corporate Directors, regulatory bodies and the academe because corporate governance has been found out to have a relationship with financial and market performances of companies.