The Impact of corporate governance mechanisms on the market valuation and agency costs of listed nonfinancial firms for the period 2002-2006

• Main Authors: Atangan, Joseph M., Balane, Madeleine V., Kaw, Nicole C., Mariano, Elaine B.
• Format: text
• Language: English
• Published: Animo Repository 2008
• Subjects: Corporate governance > Philippines; Corporations > Finance; Stock exchanges > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_honors/281
• Institution: De La Salle University

This paper examines the relationship among corporate governance mechanisms, market valuation and agency costs using random effects estimation. Using panel data from 2002-2006 for 66 nonfinancial firms listed in the Philippine Stock Exchange, we find that managerial ownership, ownership concentration of blockholders, the presence of a parent company, family or group association, CEO duality and the ratio of independent directors are important governance mechanisms for the Philippines. Above all, our results stress an essential point regarding firms in the Philippines, that reputation and long-term loyalty to corporations are important considerations in internal monitoring. However, we cannot discount that firms have incentives to expropriate as a result of weak external monitoring. If incentives to expropriate are great enough and if the weak legal and institutional monitoring external regulators provide continues, incentives to protests will discontinue. Therefore, our findings put pressure on the need to improve the legal and institutional framework in the Philippines in order to support the interest of minority stockholders.