CHAPTER VII: CONCLUSION AND RECOMMENDATIONS FOR FUTURE
7.3. Limitation and Suggestions for Future Studies
The objective of this thesis was to evaluate corporate governance practice in Indonesian listed companies. Specifically, the relationship between the corporate governance practice and company performance is investigated. Nonetheless, this paper only observed limited periods which are 2002-2004. The limitation of the data and time were constraints.
Therefore, this paper does not address the results of the corporate governnace checklist. This thesis does not address either the results of endogenous problem of the relationship among corporate governance, ownership structure and company performance. In addition to these, this thesis does not do robustness check, for example changing the company performance:
Tobin’s Q with other proxy which are ROA and ROE. The results, however, will be addressed in another paper. Finally, this paper does not include ‘soft elements’ of corporate governance such as the process in the board governance in its investigation. Therefore, a longer time horison and an inclusion of ‘soft elements’ of corporate governance in the variables measured might make the study more comprehensive.
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Appendix 1
Summary of Literature Review
No Authors Title Research Methods
1 Abdullah, S. N. Board Composition, CEO Duality and Performance among Malaysian Listed Companies
Secondary data which consists of:
1. The lists of companies are from the main board of the Kuala Lumpur Stock Exchange from 1994-1996.
2. Data of board independence, CEO duality, and firm performance are from companies’ annual report period 1994-1996 and from Kuala Lumpur Stock Exchange Annual Handbook.
2 Abbott, L.J., Park, Y. &
Parker, S.
The Effects of Audit Committee Activity and Independence on Corporate Fraud
Secondary data from: 1. The fourth quarter Consolidated Fianancial Statements for Bank Holding Companies (from FR Y-9C) from the Federal Reserve Board.
2). Stock price and return from Center for Research in Security Prices (CRSP).
3 Adams, R. B. & Mehran, H.
2005
Corporate Performance, Board Structure and its Determinants in the Banking Industry
Secondary data from: 1. The fourth quarter Consolidated Fianancial Statements for Bank Holding Companies (from FR Y-9C) from the Federal Reserve Board.
2). Stock price and return from Center for Research in Security Prices (CRSP).
4 Adams, R. B. & Mehran, H.
2003
Is Corporate Governance Different for Bank Holding Companies?
Secondary data from: 1. The fourth quarter Consolidated Fianancial Statements for Bank Holding Companies (from FR Y-9C) from the Federal Reserve Board.
2). Stock price and return from Center for Research in Security Prices (CRSP).
5 Barnhart, S. W. &
Rosenstein, S. 1998
Board Composition, Managerial ownership, and Firm
Performance: An Empirical Analysis
Secondary data which consists of :
1. Lists of 321 firms are from the 1990 Standard and Poor’s 500;
2. Financial statement data is from the Industrial Compustat tapes;
3. Corporate governance data is from Institutional Shareholder Services (ISS).
6
Beiner, S., Drobetz, W., Schmid, F. & Zimmermann, H. 2004
‘Is Board Size an Independent Corporate Governance
Mechanism?’
Secondary data which consists of:
1. The list of 165 firms, from Swiss Performance Index.
2. Other data are from Datastream, Worldscope, Aktienfüher Schweiz 2002/2003 and the website of Finanz und Wirtschaft.
7 Bhagat, S. & Black, B. 2002 ‘The Non-Correlation Between Board Independence and Long-Term Firm Performance,’
Secondary data:
1. Database compiled by Institutional Shareholder Service (ISS) of 957 large U.S. public corporateions.
2. Stock price data from Center for Research in Security Prices (CRSP).
3. Proxy statementsfrom LEXIS/NEXIS.
4. Compustat for Accounting performance
8 Black, B.S., Jang, H. &
Kim,W. 2006
‘Does Corporate Governance Affect Firm Value?’
Primary data: Survey of corporate governance practices by the Korea Stock Exchange (KSE);
Secondary data: from the TS2000 database
maintained by the Korea Listed Companies Association (for balance sheet, income statement, and industry data); the Korean Fair Trade Commission (the list of companies affiliated with the top-30 chaebol); a KSE database (stock market and share ownership data); information on ADRs from JP Morgan and Citibank websites; Korea Statistics Office (industry classifications).
9 Brown, L.D. & Caylor, M. L.
2005a
‘Corporate Governance and Firm Operating Performance,’
Secondary data: Corporate governance data were obtained from Institutional Shareholder Services . Firm performance data were obtained from Compustat.
10 Brown, L.D. & Caylor, M. L.
2005b
‘Corporate Governance and Firm Performance,’
Secondary data: Corporate governance data were obtained from Institutional Shareholder Services . Firm performance data were obtained from Compustat.
11 Carter, D. A., Simkins, B. J.
& Simpson, W. G. 2003,
‘Corporate Governance, Board Diversity, and Firm Value,’
Secondary data which consists of:
1. The company lists, from Fortune 1000 firms.
2. Data on board of director characteristics for 1997, from Directorship’s board of director database, issued by Directorship (a corporate governance
consulting organisation).
3. COMPUSTAT database (for companies’ accounting data)
12 Coles, J.W., et.al
An Examination of the Relationship of Governance Mechanism to Performance
Secondary data: the Jensen and Murphy executive compensation database; The Stern Stewart Perforamnce 1000 database (for EVA and MVA); Q-file (Firm Proxy Statements); Compustat database
13 Chhaochharia, V. and Grinstein, Y.
Corporate Governance and Firm Value-the Impact og the 2002 Governance Rules
Secondary data: the Center for Research in Security Prices (CRSP) database and the Compustat database (for financial data); the Investor Responsibility Research Center (IRRC) (for board structure infornation); the Auditor Track database of Stafford Publications Inc, SEC filings of US public corporations (for auditor changes-data)
14 Darmawati, D., Khomsiyah &
Rahayu, R. G. 2004
The Relationship Between Corporate Governance and Company’s Performance,
1. Secondary data of listed companies in Jakarta Stock Exchange.
2. Sample taken based on purposive sampling of IICG institute, total sample are 53 companies, pooled data for year 2001 and 2002 (21 companies from year
2001 and 32 companies from year 2002).
3. The corporate governance implementation data, formed as Corporate Governance Perception Index (CGPI), taken from 2001 and 2002 IICG survey. 4.Financial data and stock market data taken from Indonesian Capital Market Directory 2003.
15 Davidson III, W.N., Xie, B.
& Xu, W. 2004
‘Market Reaction to Voluntary Announcements of Audit Committee Appointments: the Effect of Financial Expertise,’
Seconcary data from Lexis/Nexis business news library and Center for Research in Security Prices (CRSP) database.
16 DeAndreas, P., Azofra, V. &
Lopez, F. 2005
‘Corporate Boards in OECD Countries: Size, Composition, Functioning and Effectiveness,’
Secondary data which consists of:
1. Data of the role of board directors, board size, board composition, board meeting, and board compensation is taken from Spencer Stuart Board Index.
2. Financial data is taken from Global Vantage Database and Standard and Poors.
17 DeFond, M.L., Hann, R.N. &
Hu, X. 2005
‘Does the Market Value Financial Expertise on Audit Committee of Boards of Directors?’
Secondary data: the 2002/2003 Corporate Library Database; the Lexis/Nexis retrieval system (for Company press announcements)
18 DeZoort, F. T. & Salterio, S.
E 2001
‘The Effects of Corporate Governance Experience and Financial-Reporting and Audit Knowledge on Audit Committee Members' Judgments,’
Mail questionnaires/survey (sent to 340 Canadian companies; response rate:
20%)
19 DeZoort, F. T., Hermanson, D.R, Archambeault, D.S., &
Reed, S.A. 2002
‘Audit committee effectiveness:
A Synthesis of the Empirical Audit Committee Literature,’
Literature review
20 Evans, J., Evans, R. & Loh,
S. 2002 ‘Corporate Governance and
Declining Firm Performance,’ Secondary data from Datastream, Connect 4, Global Access Database and Company Analysis