Effects of Board & Ownership Structure on Firm Financial Performance: An Economic Value Added Perspective

Abstract

The main objective of the study was to determine and evaluate the impact of corporate governance on firm financial performance, measured by using economic value added method. The study applied Economic value added approach to examine the effects of board and ownership structure on the performance of firms listed on the PSE over the period 2009 to 2014.The sample includes 600 observations from 100 textile firms.EVA is used to measures firm performance. The OLS regression results show a positive relationship between proportion of non-executive directors and firm performance, suggesting the powerful and influential role non- executive director’s play as a corporate governance mechanism. The board size and board meeting is positively and significant correlated to the firm performance. In terms of ownership structure, family ownership is positively but insignificantly correlated with firm performance. In contrast, a negative relationship is observed between government ownership and firm performance, implying worse firm performance when government ownership exists. Institutional ownership is also negatively correlated with firm performance.

Keywords: Ownership Structure, Board Composition, Corporate Governance, EVA.