Effect of market and corporate reforms on firm performance: evidence from Kuwait
-
DOIhttp://dx.doi.org/10.21511/imfi.14(2-1).2017.02
-
Article InfoVolume 14 2017, Issue #2 (cont. 1), pp. 156-175
- 1196 Views
-
381 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Following the global financial crisis in 2008, many countries have introduced economic and corporate reforms to assure fair markets and mitigate the risk of management misconduct. In this context, Kuwait has implemented two new major laws to restructure its capital markets and improve corporate governance. The two laws ere the Capital Market Authority Law (CMAL) and Kuwait Companies Law (KCL). In this paper, the authors sought answers to two questions: (1) has the performance of the listed companies changed in response to the enforcement of the laws? and (2) was there a direct influence of the laws on that change? The authors found some evidence of significant change in performance. Moreover, they provide evidence of KCL viability as a determinant of better performance. Interestingly, CMAL was found to be inadequate for improving firm performance. Implications and recommendations for further research are provided.
- Keywords
-
JEL Classification (Paper profile tab)G30, G34, G38
-
References34
-
Tables13
-
Figures2
-
- Figure 1. Plot of means before and after CMAL
- Figure 2. Plot of means before and after KCL
-
- Table 1. Summary results of the mean and standard deviation before and after CMAL
- Table 2. Summary results of the mean and standard deviation before and after KCL
- Table 3a. Mann-Whitney U test with CMAL grouping
- Table 3b. Mann-Whitney U test with KCL grouping
- Table 4. Summary of hypotheses testing results based on KCL
- Table 5. Summary of hypotheses testing results based on CMAL
- Table 6. Results of unit root test of stationarity
- Table 7. GLS panel data regression for the banking sector
- Table 8. GLS panel data regression for the investment sector
- Table 9. GLS panel data regression for the insurance sector
- Table 10. GLS panel data regression for the real estate sector
- Table 11. GLS panel data regression for the industrial sector
- Table 12. A summary of the resulting signs of all significant effects
-
- Ahmed, E., and Hamdan, A. (2015). The Impact of Corporate Governance on Firm erformance: Evidence From Bahrain Bourse. International Management Review, 11(2), 21-37.
- Al-Deehani, T., and Al-Saad, Kh. (2007). Ownership Structure and Its Relationship with Capital Structure: An Empirical Study on the Companies Listed in the Kuwait Stock Exchange. Arab Journal of Administrative Sciences,14(2), 209-230.
- Al Haddad, Waseem, Saleh T. Alzurqan, and Fares J. Al Sufy. (2011). The Effect of Corporate Governance on the Performance of Jordanian Industrial Companies: An Empirical Study of Aman Stock Exchange. International Journal of Humanities and Social Science, 1(4), 55-69.
- Beasley, Mark S. (1996). An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud. The Accounting Review, 71(4), 443-465.
- Berger, A. N., and E. Bonaccorsi di Patti. (2006). Capital Structure and Firm. Performance: A New Approach to Testing Agency Theory and an Application to the Banking Industry. Journal of Banking and Finance, 30(4), 1065-1102.
- Bhagat, Sanjai, and Bernard Black. (2001). The Non-Correlation Between Board Independence and Long Term Firm Performance. Journal of Corporation Law, 231-274.
- Brickley, J., Coles, J., and Jarrell, G. (1997). Leadership structure: Separating the CEO and Chairman of the Board. Journal of Corporate Finance, 3, 189-220.
- Bruno, V., and Claessens, S. (2010). Corporate Governance and Regulation: Can There Be Too Much of a Good Thing? Journal of Financial Intermediation, 19(4), 461-482.
- Carney, A. (2006). Airline ownership and control: A corporate governance perspective. Journal of Air Transport Management, 12(2), 63-75.
- Chen, C. W., Lin, J. B., & Yi, B. (2008). CEO duality and firm performance- an endogenous issue. Corporate Ownership & Control, 6(1), 58-6.
- Coles, J., Lemmon, M., and Wang, Y. (2008). The joint determinants of managerial ownership,board independence, and firm performance. Working paper.
- Dahya J., Garcia, L. G., and Van Bommel, J. (2009). One Man Two Hats: What’s All the Commotion! The Financial Review, 44(2), 179-212.
- Daily, C. M., Dalton, D. R., and Canella, A. A. (2003). Corporate governance: Decades of Dialogue and Data. Academy of Management Review, 28, 20-47.
- Daines, R. (2001). Does Delaware law improve firm value? Journal of Financial Economics, 62(3), 525-558.
- Duc, Vo., and Thuy Ph. (2013). Corporate Governance and Firm’s Performance: Empirical Evidence from Vietnam, Economic Regulation Authority, Perth, Australia, 62-78.
- Eisenberg, Th., Sundgren, S., and Wells, M. (1988). Larger Board Size and Decreasing Firm Value in Small Firms. Journal of Financial Economics, 48, 35-54.
- Emile, R., Ragab, A., and Kyaw, S. (2014). The effect of corporate governance on firm performance: evidence from Egypt. Asian Economic and Financial Review, 4(12), 1865-1877.
- Jensen, M. C. (1993). The Modern Industrial Revolution, Exit and Failure Internal Control Systems. Journal of Finance, 43(3), 831-880.
- Jensen, Michael C., and William H. Meckling. (1976). Theory of the Firm: Managerial Behavior, Agency Cost and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
- Jomini Patrick. (2011). Effects of inappropriate financial regulation. Policy Brief – Grouped Economie Mondiale.
- Meckling, W., and Jensen, M. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
- Khatab, Humera, Maryam Masood, Khalid Zaman, Sundas Saleem, and Bilal Saeed. (2011). Corporate Governance and Firm Performance: A Case Study of Karachi Stock Market. International Journal of Trade, Economics and Finance, 2(1), 39-43.
- Kiel, G., and Nicholson, G. (2003). Board Composition and Corporate Performance: how the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11(3), 189-205.
- La Porta, R., Lopez-de Silanes, F., and Shleifer, A. (1999a). Corporate ownership around the world. Journal of Finance, LIV, 2, 471-517.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R. (1999b). Investor protection and corporate valuation, NBER Working Paper 7403, Cambridge, MA.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R. (2000). Investor Protection and Corporate Governance. Journal of Financial Economics, 58, 3-27.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R. (2002). Investor Protection and Corporate Valuation. The Journal of Finance, 57(3), 1147-1170.
- Omran, M., Bolbol, A., and Fatheldin, A. (2010). Corporate governance and firm performance in Arab equity markets: Does ownership concentration matter? International Review of Law and Economics, 28, 32-45.
- Shleifer, Andrea, and Robert W. Vishny. (1997). A Survey of Corporate Governance. The Journal of Finance, LII(2), 737-783.
- Singh, M., and Davidson III, W. (2003). Agency costs, ownership structure and corporate governance mechanisms. Journal of Banking & Finance, 27(5), 793-816.
- Wang, Juo-Lien, Sheu, Her-Jiun, Chung, Huimin. (2011). Corporate Governance Reform and Earnings Management. Investment Management and Financial Innovations, 8(4), 109-118.
- Wu, Ming-Cheng, Hsin-Chiang Lin, I-Cheng Lin, and Chung-Feng Lai. (2010). The Effects of Corporate Governance on Firm Performance. Working Paper.
- Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2), 185-211.
- Zahra, S. H., and Pearce, J. (1989). Boards of Directors and Corporate Financial Performance: A Review and Integrative Model. Journal of Management, 15(2), 291-334.