Corporate governance and firm value of the auto sector-an empirical evidence

Abstract

This study has aimed to investigate the most relevant governance variables which may affect automobile firms’ performance. The step-wise regression has been applied in stages on different variables incorporated in the study. The impact of all variables has been analyzed separately and model fit has been tested for 30 automobile firms. This research divulges that Chief Executive Officer (CEO) Duality was pointedly related to a firm’s performance, lending credence to the validity of the Stewardship theory. The number of independent directors on the audit committee, on the other hand, was found to be pointedly and negatively associated with firms’ performance and supported the agency theory. In this paper, the firm's size and age have a significant impact on Earnings Per Share (EPS). This study supports the stewardship theory and agency theory of corporate governance. The results expand the body of knowledge by providing empirical evidence that governance variables such as CEO duality and audit committee independence ratio have an impact on the performance of the firm. This study presents evidence that the duality of the CEO’s position and the independent audit committees is significant and of paramount importance.