THE EFFECTS OF CORPORATE GOVERNANCE ON CORPORATE PERFORMANCE IN THE SINGAPORE CONTEXT

Abstract

In recent years, the issue of corporate governance has gained increasing attention in the business world in a bid to introduce tighter and stricter monitoring mechanisms and to align the interests between the management, the board and shareholders in enhancing shareholders’ value. This is in line with the agency theory which predicts that the lack of proper incentive alignment will lead to a conflict of interest and when coupled with a lack of an effective internal and external monitoring environment, corporate performance will suffer. However, there are mixed results regarding the relationship between corporate governance and corporate performance in the international arena. In my study of companies listed on Singapore Exchange (SGX) Mainboard, I have explored the relationships between the share ownership of institutional investors, Singapore’s sovereign wealth funds, board of directors, chairman and Chief Executive Officer (CEO), the audit quality and the average stock returns across all the public-listed firms. Results show that there is a positive relationship between the share ownership of board of directors and CEO, audit quality and average stock returns across all the public-listed firms. On the other hand, there is a negative relationship between the share ownership of the chairman and the average stock returns