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Overall governance, firm value and deviation from one share: one vote principle

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Listed:
  • Yves Bozec
  • Richard Bozec
  • Mohamed Dia

Abstract

Purpose - The objective of this study is to investigate further the interplay between corporate governance and firm performance with special focus on a situation expected to bring larger agency costs to the firm, that is, when voting rights of the dominant shareholder exceed his/her cash flow rights. Design/methodology/approach - The research is conducted in Canada over a four‐year period from 2002 to 2005 and uses a balanced sample of 130 firms or 520 firm‐year observations. Corporate governance is measured based on the ROB corporate governance index published byThe Globe and Mail. Findings - The results clearly show a positive and significant relationship between the ROB governance scores and Tobin's Q, when there is a separation between voting and cash flow rights. In the absence of any excess voting rights, no significant relation is found between governance and performance. Practical implications - The findings suggest that regulators need to exercise caution before deciding whether or not to recommend or impose corporate governance rules for all firms, since the benefits of these rules may vary among the firms. Originality/value - The study contributes to explaining mixed international evidence on the governance‐performance relationship, while directing attention to the moderating effect of the deviation from the one share‐one vote principle. To the best of the authors' knowledge, no other study using corporate governance indices has taken into account the impact of excess voting rights despite the widespread use of that practice outside the USA.

Suggested Citation

  • Yves Bozec & Richard Bozec & Mohamed Dia, 2010. "Overall governance, firm value and deviation from one share: one vote principle," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 6(4), pages 305-328, September.
    • Handle: RePEc:eme:ijmfpp:v:6:y:2010:i:4:p:305-328
    DOI: 10.1108/17439131011074468
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    2. Hashem Valipour & Javad Moradi & Ladan Zare, 2012. "Examining the Effects of Non-Bound Board members and Ownership Structure as Corporate governance Mechanisms on Firm Value," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(2), pages 55-68, April.
    3. Ciftci, Ilhan & Tatoglu, Ekrem & Wood, Geoffrey & Demirbag, Mehmet & Zaim, Selim, 2019. "Corporate governance and firm performance in emerging markets: Evidence from Turkey," International Business Review, Elsevier, vol. 28(1), pages 90-103.
    4. Talwar SHALINI, 2018. "Multifactor Model for Estimation of Tobin’s Q for Listed Firms," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 38-47.

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