Corporate Governance and Firm Performance in Iran

This study uses data from companies listed in the Tehran Stock Exchange (TSE) for the years 2005–2006 to investigate the role of corporate governance indices on firm performance. We use board size, board independence, board leadership and institutional investors on the board as corporate governance indices and EPS, ROA and ROE as firm performance surrogates. Our regression results show that board size is negatively associated with firm performance. Moreover, the presence of outside directors strengthens the firms' performance. We find, however, no relationship between leadership structure and firm performance. Likewise, the presence of institutional investors on the board of directors is not positively associated with firm performance.

[1]  L. Starks,et al.  Institutional Investors and Executive Compensation , 2000 .

[2]  E. Fama,et al.  Size and Book-to-Market Factors in Earnings and Returns , 1995 .

[3]  M. C. Jensen,et al.  The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems , 1993, A Theory of the Firm.

[4]  John Mcconnell,et al.  Additional evidence on equity ownership and corporate value , 1990 .

[5]  Lynne L. Dallas.  Developments in U.S. Boards of Directors and the Multiple Roles of Corporate Boards , 2003 .

[6]  April Klein,et al.  Firm Performance and Board Committee Structure1 , 1998, The Journal of Law and Economics.

[7]  Stuart Rosenstein,et al.  Board Composition and Shareholder Wealth: The Case of Management Buyouts , 1992 .

[8]  Lemma W. Senbet,et al.  Corporate Governance and Board Effectiveness , 1997 .

[9]  Sok-Hyon Kang,et al.  Corporate Governance, Expected Operating Performance, and Pricing , 2004 .

[10]  Richard H. Fosberg.  Outside Directors and Managerial Monitoring , 1989 .

[11]  A. Shleifer,et al.  Management Ownership and Market Valuation: An Empirical Analysis , 1988 .

[12]  M. Roe,et al.  The Institutions of Corporate Governance , 2004 .

[13]  Karl V. Lins.  Equity Ownership and Firm Value in Emerging Markets , 2002, Journal of Financial and Quantitative Analysis.

[14]  Franklin Allen.  Corporate Governance in Emerging Economies , 2005 .

[15]  Victoria Krivogorsky.  Ownership, board structure, and performance in continental Europe , 2006 .

[16]  Loizos Heracleous.  What is the Impact of Corporate Governance on Organisational Performance , 2001 .

[17]  Murray Z. Frank,et al.  Testing the Pecking Order Theory of Capital Structure , 2000 .

[18]  C. Weir.  Corporate governance, performance and take-overs: an empirical analysis of UK mergers , 1997 .

[19]  Nuno Fernandes.  Board Compensation and Firm Performance: The Role of 'Independent' Board Members , 2005 .

[20]  A. Belkaoui,et al.  The effects of ownership structure and diversification strategy on performance , 1992 .

[21]  Paula L. Rechner,et al.  CEO duality and organizational performance: A longitudinal analysis , 1991 .

[22]  Ferdinand A. Gul,et al.  Investment opportunity set, corporate governance practices and firm performance , 2004 .

[23]  Thomas Andersson,et al.  Corporate Governance: Effects on Firm Performance and Economic Growth , 2000 .

[24]  M. Beasley.  An Empirical Analysis of the Relation between Board of Director Composition and Financial Statement Fraud , 1998 .

[25]  Jonathan L. Johnson,et al.  META-ANALYTIC REVIEWS OF BOARD COMPOSITION, LEADERSHIP STRUCTURE, AND FINANCIAL PERFORMANCE , 1998 .

[26]  M. Conyon,et al.  Board size and corporate performance: evidence from European countries , 1998 .

[27]  D. Larcker,et al.  Corporate Governance, Accounting Outcomes, and Organizational Performance , 2007 .

[28]  Shorey Peterson,et al.  The Modern Corporation and Private Property. , 1933 .

[29]  V. Mahajan,et al.  CORPORATE BOARD SIZE, COMPOSITION AND CORPORATE FAILURES IN RETAILING INDUSTRY[1] , 1985 .

[30]  M. Weisbach.  Outside directors and CEO turnover , 1988 .

[31]  Familial Control, Size and Performance in the Largest French Firms , 1980 .

[32]  Benjamin E. Hermalin,et al.  The Effects of Board Composition and Direct Incentives on Firm Performance , 1991 .

[33]  Rita D. Kosnik.  Greenmail: A Study of Board Performance in Corporate Governance , 1987 .

[34]  Yan Wang,et al.  Ownership structure and corporate governance in Chinese stock companies , 1999 .

[35]  Diane Del Guercio,et al.  The Motivation and Impact of Pension Fund Activism , 1999 .

[36]  Stijn Claessens,et al.  Who Controls East Asian Corporations? , 1999 .

[37]  Allan Chang Aik Leng,et al.  The Impact of Corporate Governance Practices on Firms' Financial Performance: Evidence from Malaysian Companies , 2004 .

[38]  A. Shleifer,et al.  A Survey of Corporate Governance , 1996 .

[39]  Jay W. Lorsch,et al.  A Modest Proposal for Improved Corporate Governance , 1992 .

[40]  D. Yermack.  Higher market valuation of companies with a small board of directors , 1996 .

[41]  Florencio López‐de‐Silanes,et al.  Law and Finance , 1996, Journal of Political Economy.

[42]  Michael P. Smith.  Shareholder Activism by Institutional Investors: Evidence from CalPERS , 1996 .

[43]  Johnny Jermias,et al.  Investigating the effect of board independence on performance across different strategies , 2006 .

[44]  U. Peyer,et al.  Board Overlap, Seat Accumulation and Share Prices , 2001 .

[45]  Martin T. Wells,et al.  Larger board size and decreasing firm value in small firms 1 We wish to thank Asiakastieto Oy for fu , 1998 .

[46]  Klaus Gugler,et al.  Corporate Governance and Economic Performance , 2001 .

[47]  P. Swan,et al.  The economics of corporate governance: Beyond the Marshallian firm☆ , 1994 .

[48]  Atulya Sarin,et al.  Ownership and Board Structures in Publicly Traded Corporations , 1998 .

[49]  Kannan Ramaswamy,et al.  Organizational ownership, competitive intensity, and firm performance: An empirical study of the Indian manufacturing sector , 2001 .

[50]  Sanjai Bhagat,et al.  The Non-Correlation between Board Independence And Long-Term Firm Performance , 1998 .

[51]  Rita D. Kosnik.  Effects of Board Demography and Directors' Incentives on Corporate Greenmail Decisions , 1990 .

[52]  E. Fama,et al.  Separation of Ownership and Control , 1983, The Journal of Law and Economics.

[53]  F. Gul,et al.  The Governance of East Asian Corporations , 2004 .

[54]  M. C. Jensen,et al.  Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit , 1976 .

[55]  Rolph E. Anderson,et al.  Multivariate Data Analysis with Readings , 1979 .