Firm value and corporate governance : evidence from the Stock Exchange of Thailand

Abstract

The purpose of this thesis is to investigate whether corporate governance benefits investors, in terms of stock returns. Using data from 100 companies listed in the Stock Exchange of Thailand with 2001-2002 as the base year, a corporate governance index was constructed in order to measure the firms’ levels of governance. Tests examine whether the corporate governance index influences stock returns and firm value. Evidence shows that there is no relation between the governance index and stock returns when using data of the same period. This result is the same even with a one-year lag in the governance index. The study shows that there is a connection between changes in the corporate governance index and changes in stock returns during 2001-2002. These results imply that corporate governance is an important factor to explain stock returns in the Thai market. Moreover, evidence shows that corporate governance creates value to investors, so outside investors benefit from using firms’ governance as a part of their investing decision.