Corporate Governance, Board Effectiveness, and Performance of Thai Listed Firms

Abstract

This study develops board effectiveness measurement and examines the relationship between corporate governance, board effectiveness, and firm performance (Tobin’s Q and ROAs) of Thai listed firms. The sample comprises 146 directors from Thai listed firms. Corporate governance includes percentage of blockholders, multiple directorships, and board compensation, which are investigated by using secondary data of Thai listed firms. Board effectiveness (including determinants on board strategic and monitoring actions) was assessed by a survey of CEOs and independent directors. The influence of corporate govern-­‐ ance and board effectiveness was examined on firm performance using structural equation modeling. Results indicate positive associations between high percentage of blockholders and long-term firm value. High board compensation is also positively related to long-­term firm value. Operational Review is the most important in board effectiveness and increases current year performance and long-­‐term firm value. By contrast, Strategic Framework decreases current year performance. Board-CEO-­Performance reduces long-­‐term firm value. These results suggest that the combination of corporate governance and board ef-­fectiveness improve firm performance. The findings confirm the important role of board of directors in corporate governance.