Corporate control, corporate governance and firm performance in New Zealand
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Volume 3 Number 4
Papers Corporate control, corporate governance and firm performance in New Zealand Jianguo Chen, Dar-Hsin Chen* and Huimin Chung Received: 10th August, 2006 *Department of Business Administration, National Taipei University, 151 University Rd., San Shia, Taipei County, 237 Taiwan; Tel: 886-2-2500-9820; Fax: 886-2-2502-9353; E-mail: [email protected]
Jianguo Chen is Senior Lecturer, Department of Finance, Banking and Property, Massey University, New Zealand. Dar-Hsin Chen is affiliated with the Department of Business Administration, National Taipei University, Taiwan. Huimin Chung is affiliated with the Graduate Institute of Finance, National Chiao-Tung University, Taiwan.
ABSTRACT KEYWORDS: corporate governance, ownership structure, agency problem, corporate control This study sets out to investigate the ownership structure of non-financial companies in New Zealand, undertaking an empirical investigation into the effects of ownership structure on both corporate governance and firm performance. In the decade prior to 1984, the New Zealand economy had been characterised by one of the slowest rates of real economic growth in the OEDC region, serious and persistent balance of payments current account deficits, a large rise in unemployment, and also a relatively high rate of inflation. The change in its business and financial environment in the mid1980s, however, paved the way for New Zealand to become a more open economy. This study demonstrates that the New Zealand model of corporate governance is
characterised by a high degree of minority ownership, which is unique and inconsistent with the Berle and Means’ postulation of modern corporations with widely dispersed ownership structures. The empirical results also support the notion of the existence of a systematic pattern of differences in both Return on Equity and Sales/Asset ratios among three control groups, majority-controlled, minority-controlled, and management-controlled firms. The results supplement the US-based literature on ownership structure by illustrating that internal governance mechanism can play a role in corporate performance, and that the legislative and regulatory environment may affect this role.
INTRODUCTION In the decade prior to 1984, the New Zealand economy had been characterised by one of the slowest rates of real economic growth in the OECD (Organization for Economic Cooperation and Development) region, serious and persistent balance of payments current account deficits, a large rise in unemployment, and also a relatively high rate of inflation. Furthermore, New Zealand had a financial system in which government regulations and other interventions are pervasive. However, New Zealand has experienced a decade of change in its business and financial environment; in particular, the economic deregulation of the mid-1980s
International Journal of Disclosure and Governance, Vol. 3, No. 4, 2006, pp. 263–276 © Palgrave Macmillan Ltd, 1746–6539/06 $30.00
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Corporate governance in New Zealand
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