An Empirical Study of the Relationship Between Corporate Governance and Firm Performance in Thailand

Jomkwan Palitwanon

Student thesis: Master thesis


The Asian financial crisis in 1997 was the starting point for the Thai government and regulators look to more closely at corporate governance in Thailand. The World Bank and foreign investors accused poor corporate governance practice for intensifying the crisis mainly because of a concentrated ownership structure by families and individuals. Unfortunately, it is difficult for regulators to regulate ownership stake within firms. Instead, the government and regulators focus on improving mechanisms to monitor owners such as imposing requirements on a minimum percentage of independent directors, an independency of auditors and a recommendation for an independent board Chairman. This thesis aims to examine the effectiveness of certain regulations by determining possible cross- sectional relationship between governance mechanisms and corporate performance in Thailand using an OLS regression.
The results show that a firm with a Chairman who is also a major shareholder performs significantly better. On the other hand, it shows that a CEO duality structure and independent directors have negative impact on firm performance. Lastly, the evidence shows that having a large owner (defined by the ownership percentage by the largest shareholder) has a positive impact on firm performance, while a family owner (defined by the ownership percentage of the largest owner who is a family) has a negative impact on firm performance.
The results imply that some regulation requirements are still ineffective. Regulators may need to investigate whether the Anglo-Saxon model can appropriately fit the environment in Thailand. Regulators need to be able to enforce stronger definitions of their requirements to increase effectiveness of the rules. In addition, stronger enforcement of disclosure policy is crucial. On the contrary, regulators may also need to educate companies on succession models in order to improve overall firm performance and thereby the Thai capital market. Lastly, the government and regulators should collaborate to improve the institutional environment in Thailand in order to increase foreign investments and thereby facilitating firm growth and expansion opportunities. Consequently, these improvements would lead to an overall increase in GDP in Thailand.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages117
SupervisorsSteffen Brenner