Corporate Governance Levels and Stock Prices in Thailand

Abstract

Thailand has recognized the importance of good corporate governance for investors and encouraged listed companies to adhere to the principles of good corporate governance. The purpose of this research is to investigate whether corporate governance levels have relationships with stock price of companies listed in the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI). Corporate governance levels are measured by corporate governance stars of the Thai Institute of Directors Association (IOD). Also, there are five control variables including book value per share, earnings per share, market to book value of equity, debt to equity ratio and total asset. The samples of this study are firms that are disclosed in the Corporate Governance Report conducted by IOD during the period of 2014 to 2016. These firms get three stars or above.

            This study uses cross-sectional regression in order to test the hypotheses. The results show that corporate governance levels are positively associated with stock prices in the Stock Exchange of Thailand (SET) during the period of 2015 and 2016. This means that corporate governance contributes to the higher stock prices for the listed firms in the stock exchange of Thailand. This could imply that investors give importance to corporate governance levels. Good corporate governance makes investors of the Stock Exchange of Thailand confidence toward the firms.  However, no similar evidence is found in the case of the Market for Alternative Investment (MAI).