Corporate Ownership Structure, Board characters, CEO compensation and Firm Performance

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Chapter 4: Discussion and Analysis

The analysis is completed with value of each hypothesis. Results are argued with the reference to the using date. It focuses on the data set and summary analysis from SPSS and MS Excel for the respective analysis. The sample of 100 companies is taken randomly from London Stock Market for the period of four years 2006-2009.

The chart and table (1) shows the sample industries and percentage of each industry in the sample size.

Descriptive Statistics

This table presents the mean, median and number of observations for the primary performance, governance and control variables used in this research.

Table (2)

Table 1 shows summery descriptive statistics that disclose the number of firms in the used sample. It presents that the sample of (400) which is 100 firms for four years from 2006 to 2009. In addition, it shows all the variables are used to determine the relationship between the firm performance and corporate governance. Table (3)

According to the table 2 there are significant relations between governance variables and some variables of firm performance. The highest correlation is between the firm size and leverage ratio about (.425) which reflects that the large firms favour higher leverage ratio. This result is supported by Ozkan. A, Florackis. C, (2008) and Rajen, Zinglales (1995). Similarly, firm size is significantly correlated with return on assets (ROA) and return on equity (ROE), which indicate that larger firm more proficient at using its assets and equity to generate earnings than smaller firms.

Table 2 presents a considerable correlation between the board size and firm performance such as return on assets (ROA), return on equity (ROE) (215), (177) respectively. These findings are in line with Reliably, Coles, Daniel, and Naveen (2008) who explain in their empirical researches that, the impact of board size on firm performance is positive for large firms; hence, large board of directors might be an optimal value exploit outcome for such firms. Dalton and co-workers (1999&2005) assert the larger board of director may lead to significant performance as it provides superior collective information that the board consequently need to make a controlling decisions. In addition, the larger board of directors may has larger of non-executive directors which provides greater collective information, in addition such board are more independent in monitoring and making decisions (Lehn, Sukesh, and Zhao 2004. In contrast, However, Jensen (1993) and Lipton and Lorsch (1992) suggestion is the large board might be a less effective monitor than small boards. Furthermore, Yermack (1996) found in his empirical study a negative relationship between firm performance and board size for a sample of large firms. Eisenberg et al (1998) examine the same relation between board size and firm performance by using a sample of small and medium sized firms.

Lipton and Lorsch (1992) and Jensen (1993) suggest in their empirical study that the board size should not be grater the n 8 or 9 for all fir type, by following this theory the sample reduced ...