Value relevance of corporate governance on firm value in the comprehensive income context

Abstract

This study explored the value relevance of corporate governance (CG) mechanisms on firm value as representative of emerging market corporate governance standards. Unlike previous studies that devised their own criteria measuring CG mechanisms, this study successfully introduced corporate governance proxies that were publicly available as corporate governance proxies. Also, this study extended prior studies by introducing the new context of comprehensive income. This study further introduced hierarchical regression analysis to investigate the significant impact of corporate governance on firm value. Using an emerging market – the Stock Exchange of Thailand dataset during 2011-2012 the analysis shows that corporate governance significantly impacts firm value. It was found that in both firms with and without other comprehensive income (OCI), and the control variables including total assets, leverage ratio and earnings before interest and tax were significantly associated with firm value. For corporate governance mechanisms, the right of shareholders in terms of cash dividend payments has the most statistical significance on firm value. In addition, the right of shareholders in terms of shareholder participation in Annual General Meetings (AGM) and the equitable treatment of shareholders in terms of voting rights were more likely to add firm value than other corporate governance proxies. Finally, this study could not find any evidence that firms use other comprehensive income to increase their firm value.