ESSAYS ON CORPORATE GOVERNANCE IN LISTED ASIAN FIRMS

Abstract

This dissertation comprises three essays on corporate governance in listed Asian firms. The first essay investigates founder-successions across 11 countries in Asia using a unique dataset that has been hand-collected. The study finds older founder firms with better performance prior to succession tend to select family successors. Founder firms gain better access to potential successors and improve organization capability via succession planning since it lays the foundation for the delivery of superior performance by family and unrelated successors. The study finds strong evidence of superior post-succession operating and stock market performance for family successors when succession occurs for the first time, after controlling for endogeneity. This result is contrary to international evidence which generally include multi-generational succession.

The second essay utilizes a unique dataset for listed firms in Hong Kong and Singapore to extend the study of the impact of boardroom networks on firm performance, by linking it to the concept of Guanxi (关系). Guanxi is an extensive network of personal relationships that can be transferred from individual directors to the corporate levels via the boardroom. Using centrality scores as a measure of connectivity of the board, the study finds that well-connected board is associated with positive firm performance, even after controlling for a wide array of factors including endogeneity. Further investigation into the reasons for such results reveals that highly connected directors facilitate corporate activities such as acquisitions, strategic alliances as well as expand the pool of suppliers. However, the effect of highly connected directors is not compatible with the existence of founder-chairman.

The third essay uses a novel representation of board connectedness to the inner circle of the directors’ network (cliques) to study the effects that cliques have on borrowing decisions for Asian firms. We find that these inner circle connections help to lower borrowing costs, reduce the level of bank borrowing, increase the use of unsecured debt and decrease the amount of short-term debt used by these firms. The results suggest that cliques connectivity affect firms’ borrow decisions via the reduction of information asymmetry and/or the increase monitoring of management.