Corporate Governance on the Company Performance in Hong Kong
Added on 2021-04-17
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Running head: CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE INHONG KONG Corporate Governance on the company performance in Hong KongName of the Student: Name of the University: Author’s Note:
1CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG Abstract This paper is concerned with understanding the relationship and the impact of corporategovernance on the performance of a company. The research has concentrated on the companiesthat are operational in Hong Kong. In the initial section, the background of the topic and thecountry that has been selected is explained in order to introduce the topic. The aims and theresearch questions that are essential in order to have an understanding of the course that will betaken in order to complete the paper has been framed. The various theories and the variables thatare related to corporate governance and the business performance of a company are explainedsuccinctly so that an idea about all the theories and the framework would be known. The kind ofdata that has been collected and the method of data collection is even addressed in this paper sothat the reader can have extensive knowledge about the entire process that has been used in orderto conclude this paper. In this paper secondary data has been used in order to find the desiredresults. Finally, analysis of the collected data is helpful in explaining the impact of corporategovernance in performance of a business.
2CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG Table of ContentsChapter 1: Introduction....................................................................................................................41.1 Background of the Study.......................................................................................................41.2 Rationale of the Study...........................................................................................................61.3 Research Aims and Objectives..............................................................................................61.4 Research Question.................................................................................................................7Chapter 2: Literature Review...........................................................................................................82.1 Introduction............................................................................................................................82.2 Agency Problems...................................................................................................................82.3 Corporate Governance and firm performance.....................................................................102.4 Board composition and company performance...................................................................122.5 Summary of the literature....................................................................................................13Chapter 3: Research Methodology................................................................................................143.1 Introduction..........................................................................................................................143.2 Justification of the choice of methodology..........................................................................143.3 Research Philosophy............................................................................................................153.4 Research Approach..............................................................................................................153.5 Research Design..................................................................................................................153.6 Data Collection Process.......................................................................................................163.7 Process of data analysis.......................................................................................................16
3CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG 3.8 Ethical Consideration...........................................................................................................16Chapter 4: Data Analysis and Discussion......................................................................................174.1 Introduction..........................................................................................................................174.2 Company Performance........................................................................................................174.3 Corporate Governance.........................................................................................................21Chapter 5: Conclusion, Recommendation and Future Work.........................................................245.1 Conclusion...........................................................................................................................245.2 Recommendation.................................................................................................................255.3 Future Research...................................................................................................................25Reference List and Bibliography...................................................................................................26
4CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG Chapter 1: Introduction1.1 Background of the StudyThe researches on corporate governance have become extensively popular in the currentyears. Corporate governance has become an issue in the developing economies after the financialcrisis and the scandals that have occurred in the past, which have led to rise in demand forenhanced corporate governance mechanisms. Effective level of corporate governance hasbecome necessary for developing and improving the performance of a company, ensuring therights of the investors, developing the investment environment and influencing development ofthe economy (Low, Roberts and Whiting 2015). Even though focus and attention has been givento the corporate governance in the developing countries, there have been several countries thatstill suffer from the inadequacy of corporate governance structure. This is looked upon as acontributing factor for the rise in the financial crisis and financial scandals. Hence, corporategovernance in the developing and developed nations has motivated and attracted reasonableconsideration in the academic researches. Corporate governance is the practices and the rules that administer the relationshipbetween the shareholders and the managers of a company as well as with the stakeholders. Itcontributes to the development and financial stability by developing the confidence in themarket, financial reliability and effectiveness of the economy. As a consequence, corporategovernance distributes the obligations and the rights among the several respondents within afirm, like the managers, boards, shareholders and the other stakeholders and confirms that theprocedures and the rules for undertaking decisions with respect to the corporate affairs areprecise and clear (Cheng, Lui and Shum 2015). The practice of corporate governance isregarded as an internal process for controlling and monitoring the management. Effective level
5CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG of corporate governance is good equipment for assisting a company to reach effective and betterperformance. The concept of corporate governance in the developed nations and economies like HongKong has been addressed by making use of several theories and articles. In accordance to theagency theory, the intention of corporate governance is to minimize the probable conflicts amongthe managers and the shareholder’s interest (Leung, Richardson and Jaggi 2014). Thestakeholder theory even has a key role to play in addressing the governance framework as theorganizations are made conscious of all the stakeholders rather than only the shareholders. Wanget al. (2014) have debated that stakeholder theory can be helpful in optimizing the performanceof an organization and the associated benefits of all the stakeholders by taking care of theinterests of all the stakeholders. In the current Asian market, there are more than 65% of the listed companies that aremanaged by the key shareholders and from those companies, more than 60% of the managers areacquaintances of the main shareholders. In Hong Kong, it is seen that family business is one ofthe forms of business and most of these companies have attained the mature or the developingstage. It is seen that businesses in Hong Kong is a combination of the control and ownership andtherefore the organizations that are functional in the country have an effective and profitableownership framework than the companies in the other nations (Ayuso et al. 2014). This researchpaper has therefore been constructed in order to have an understanding of the impact of corporategovernance on the performance of the companies from various sectors in Hong Kong. The paperin order to assess the performance of a company would look to collect secondary data with thehelp of which the researcher would be able to understand the performance of a company inaccordance to corporate governance in an effective manner.
6CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG 1.2 Rationale of the Study The justification for undertaking research on this topic has been due to the fact thatcorporate governance has been receiving greater extent of popularity among all the companiesglobally and accordingly the performance of an organization plays a key role in the developmentof the company as a whole (Foo 2015). There are several factors that has an impact on theperformance of an organization but special importance is given to corporate governance as thisprocess assists in improving internal and external relationship among the associated stakeholdersand thereby an idea can be attained as to the effectiveness of relationship of the stakeholders inthe development of the performance of a company.1.3 Research Aims and Objectives The aims and objectives of the research determines the elements and the aspects that wouldbe taken into consideration when taking the research forward and thereafter finding the resultsthat would be helpful in determining the impact of corporate governance in the performance ofthe companies that are operational in Hong Kong. The research aims and objectives are asfollows: Assess the nature and the level of development of corporate governance processes in theaspect of the business environment of Hong Kong Determine the relationship between the corporate governance practices and theperformance of the companies in Hong Kong. Recognize the theories and the concepts that are associated to corporate governance andthe extent to which they are accepted in a company in Hong Kong
7CORPORATE GOVERNANCE ON THE COMPANY PERFORMANCE IN HONG KONG 1.4 Research Question The research question that is related to this paper is as follows: Q1. Is the corporate governance framework of a company important to the performance of acompany in Hong Kong?Q2. How to create an effective corporate governance policy in order to attain the optimalperformance in the companies in Hong Kong?
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