A win-win situation for both managers and shareholders: A study of ASEAN corporate governance

Abstract

Purpose

To examine the impact of corporate governance on Cost of Capital (COC) and financial distress in the ASEAN countries.

Design/methodology/approach

We compiled a list of the 50 largest publicly listed firms by market capitalization in each of the following five East Asian countries, namely Malaysia, Singapore, Thailand, the Philippines, and Indonesia. Furthermore, we then divided the five countries into two distinctive categories – (i) Malaysia and Singapore (Common Law/strong legal protection countries) and (ii) Thailand, the Philippines, and Indonesia (Civil Law/weak legal protection countries). The annual data is collected for the time period ranging from 2006 to 2015, allowing a total observation of 1,317 firm years.

Findings

Overall, the paper supports the findings of many researchers that Board independence, promulgating good corporate governance, leads to better access to capital at lower cost, thus providing growth opportunities for ASEAN region. Taking lead from Simpson and Gleason (1999) and similar, we emphasize that during financial distress CEO duality will strengthen control systems and reduce internal discord in ASEAN firms.

Originality/value

The paper is one of the niche studies that has incorporated the difference between civil and common law rule in the study of corporate governance and its impact on financial measures of firms' in the ASEAN countries.

Citation

Ramachandran, J., Alam, N. and Goh, C.E. (2020), "A win-win situation for both managers and shareholders: A study of ASEAN corporate governance", Managerial Finance, Vol. 46 No. 8, pp. 977-1000. https://doi.org/10.1108/MF-07-2018-0308