Corporate Governance and Business Performance Analysis Report

This report examines the impact of corporate governance on business performance, focusing on the professional firm Tan, Chan and Partners. It explores the definition of corporate governance, the characteristics of good corporate governance, and the benefits it offers, such as improved internal controls, increased accountability, and enhanced shareholder value. The research includes a literature review covering key concepts like leadership, accountability, and sustainability. The report utilizes a case study method to analyze Tan, Chan and Partners, highlighting how corporate governance practices can lead to better business outcomes. The findings suggest that an independent board and alignment of voting rights with cash flow rights can positively influence firm performance. The report also emphasizes the importance of adhering to corporate governance principles for long-term sustainability and competitiveness.

Running head: CORPORATE GOVERNANCE AND BUSINESS PERFORMANCE
Corporate Governance and Business Performance
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Executive Summary
The primary purpose of this report is to find out how corporate governance has an impact on
business performance. It analyses the corporate management of the professional firm Tan,
Chan and Partners that provides services like statutory audit and taxation planning. It states
how corporate governance helps the organisations to survive in a competitive environment. It
was deduced with the help of research carried out at the firm Tan, Chan and Partners that an
independent board would lead to better performance in an organization and the deviation
between that of voting right along with cash flow right is related in a negative manner to that
of the performance of the firm (Jin and Park 2015).

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Table of Contents
1. Introduction............................................................................................................................3
1.1 Background......................................................................................................................3
1.2Purpose of research...........................................................................................................3
1.3 Research Questions..........................................................................................................4
2. Literature Review...................................................................................................................4
2.1 Definition of Corporate Governance................................................................................4
2.2 Good Corporate Governance............................................................................................7
2.3 Benefits............................................................................................................................9
3. Research Method..................................................................................................................11
3.1 Research Philosophy......................................................................................................11
3.2 Research approach.........................................................................................................12
3.3 Research Design.............................................................................................................12
3.4 Case Study Method........................................................................................................13
Conclusion................................................................................................................................15
References:...............................................................................................................................17

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1. Introduction
1.1 Background
Corporate Governance comprises of the system of rules and practices by taking recourse to
which a company is controlled. It involves the balancing of interests in relation to the
stakeholders, customers, government along with the community. It provides the framework
that helps in obtaining the objectives of the company. Performance Management refers to
analytical process that enables the management of an organisation to achieve the pre-selected
goals. It involves the consolidation in relation to the management information that is relevant
for the progress of the organization (Tricker and Tricker 2015). It takes into account the
interventions that are made by the managers to improve the future performance of the
employees. Tan, Chan and Partners is one of the leading professional firm in Singapore that
is led by Mr. Tan Chin Ren and they provide professional services like statutory audit,
taxation planning and financial advisory. It is also involved in outsourcing, accounting along
with book keeping. The firm is dedicated to serve the client base and provides human service
programs that are innovative (Al-Janadi, Rahman and Omar 2013). The corporate
governance of the firm aims at serving the customer base and at the same time implement
policies that can help in improving the performance of the employees. This report highlights
the corporate governance in relation to Tan Chan and Partners and how it helps in
augmenting the business performance (Van Grembergen and De Haes 2017).

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1.2Purpose of research
The aim of research is to find out about corporate governance, important aspects in relation to
good corporate governance and advantages of good corporate governance (Padachi,
Ramsurrun and Ramen 2017).
1.3 Research Questions
The Research Questions are:
 What is corporate governance?
 What is considered as good corporate governance?
 What are the benefits of good corporate governance?
2. Literature Review
2.1 Definition of Corporate Governance
Corporate governance refers to the system with the help of which the companies are directed.
Board of directors are responsible in a company for governance in relation to the companies.
The main role of shareholders revolves around providing appointment to directors so that
they are satisfied that the structure of government is appropriate (McCahery, Sautner and
Starks 2016). It is the board who sets the strategic aims of the company, provide leadership
so that they can be put into effect and and supervise the management on the arena of
stewardship (Fox, Gilson and Palia 2016).

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Figure: Pillars of Corporate Governance
Source: (Mishra and Mohanty 2014)
Corporate Governance is hence related to what the board of an organisation does and values
on which the companies are set. The corporate governance differs from that of operational
management that is carried out on day-to-day basis within the company by that of the
executives who work full-time. Armstrong has opined that good corporate governance helps
to keep the business environment fair and the companies are accountable for the actions that
they have taken. He has opined that weak corporate governance gives rise to waste and
mismanagement (Armstrong et al. 2015). Corporate governance is of crucial importance in
case of joint stock corporations but it is also important in case of cooperatives and family
business (Gow, Shin and Srinivasan 2014). Good corporate governance ensures that business
performance that is sustainable is delivered. Compliance with the principles of Corporate
Governance can help in improving access to the financial markets. It helps the organization in
relation to survival within a competitive environment with the help of mergers along with

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partnerships. It has been opined by Denis (2016), that corporate Governance provides an exit
policy and ensures that there is a smooth transfer of wealth along with that of divestment of
family assets (Denis 2016).
There are various model of corporate governance within the world. These are different on
account of the variety in relation to capitalism within which they have been embedded. The
Anglo-American model puts more stress on the aspect of interest of shareholders (McCahery,
Sautner and Starks 2016). The coordinated model can be related with that of Continental
Europe and it recognizes the interest of worker, manager and customer. Corporate
governance principles have grown in various countries and they are issued from corporations
and stock exchanges. One important guideline has been provided by the 1999 OECD
Principle of Corporate Governance. The guidelines of OECD are referred by the countries
that have developed local codes (Mishra and Mohanty 2014). On the basis of the work done
by the OECD, other private sector associations have produced Guidance on Good Practices in
Corporate Governance Disclosure (Ginena 2014). This yardstick comprises of fifty different
disclosure items that works across five wide categories:
 Auditing
 Management Structure along with process
 Corporate responsibility along with compliance
 Financial transparency
 Ownership structure (Gow, Shin and Srinivasan 2014)
In the year 2009, International Finance Corporation along with UN Global Compact brought
out a report called “Corporate Governance” that linked the environmental along with
governance responsibilities of an organisation to that of financial performance. The
guidelines that are issued by corporate managers have a tendency to be voluntary but these

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kind of documents can have a greater effect if it prompts the other companies to abide by the
similar kind of practices (Adegbite 2015). In United States, the corporations are directed by
that of state laws wherein the exchange of securities is directed by that of federal legislation.
There are plenty of U.S. states that have abided by Model Business Corporation Act. The
state law that is dominant in relation to publicly traded corporation is that of Delaware
(Broughman, Fried and Ibrahim 2014).
2.2 Good Corporate Governance
The primary ideas behind that of corporate governance code are quite straightforward-
intuitive principles that can be easily remembered. Corporate governance serves as a means
that can lead to an end and the end purpose is to help the board so that they can determine
how the company should be steered so that the business purpose can be achieved (Fox,
Gilson and Palia 2016). The five primary principles of good corporate governance are:
 Leadership
 Capability
 Accountability
 Sustainability
 Integrity (Macve 2015)
Leadership can prove to be of extensive help in steering the company so that the business
objectives can be achieved. The board should be capable enough so that it can carry out
the responsibilities. Accountability helps in communicating the stakeholders the way by
which the company is able to achieve its purpose (Bell, Filatotchev and Aguilera 2014).
It has been stated by Adegbite (2015), that sustainability helps in creating value and
allocating it on fair basis. Integrity will be able to withstand security by that of internal
along with external stakeholders (Adegbite 2015).

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The motive behind research in the corporate governance of financial institution is owing
to the fact that financial crisis are not sudden events but it happens on account of the
decision of individuals who work within a framework of laws and regulations (Bell,
Filatotchev and Aguilera 2014). According to Mason and Simmons (2014), corporate
governance can help in identifying the problem spots that can in due course of time pave
the path for undesired firm behaviour or instability in the system (Mason and Simmons
2014). The principal agent problem can be solved if the management is responsible for
that of value maximisation within a firm. According to ArAs (2016), the compensation
based on equity along with market for corporate control can further provide incentive for
the management so that it aligns their interest with that of the shareholders (ArAs 2016).
Executives are held responsible to that of board of directors and their constituents are that
of the shareholders who belong to the firm. In the opinion of Wang et al. (2014), value
maximisation can prove to be a powerful conceptual tool that can address problems of the
financial organisations (Wang et al. 2014) According to Shrives and Brennan (2015), in a
world where there is perfect information, interest of shareholders should be aligned to that
of the broader society. Banks can increase their profitability by pursuing productive
activities that can help in improving the quality of the financial intermediation (Shrives
and Brennan 2015).
A large body in relation to the research has stated that there is link between that of
finance and growth in developing along with that of developed economies. There are
various mechanisms that direct the financial institutions. The firms operate within a
system of social mores and laws (Christensen et al. 2015). Financial institutions have to
face the added burden of supervisory action. Every important decision within the firm like
investment and growth is greatly influenced by the internal governors like board of
directors along with that of external governor like regulator. For governing the financial

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institutions, an entity should possess both the ability along with that of the will
(Christensen et al. 2015). Related literature talks about the incentives that the regulators
face when they have to choose regarding when along with how to intervene in the arena
of markets. According to Denis (2016), the principal-agent problem can exist between
that of the owners along with manager in the same strain there can also be a disconnection
between that of the interest of society and that of the regulators. (Denis 2016).
Figure: Good Corporate Governance
Source: (Denis 2016).
2.3 Benefits
Benefits to companies

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Corporate Governance practices can lead to a better process in relation to internal control and
thus lead to greater accountability. It has been stated by Pindado and Requejo (2015), that
corporate governance can be of great help in improving the profit margins of an organisation.
Corporate governance that is smooth can create the way for future growth and the ability to
attract the equity investors-both nationally and also from abroad. It provides extensive help
in reducing the cost of credit for the corporation (Pindado and Requejo 2015). There are
businesses that look out for funds and they are often forced to adopt reforms of government at
a very high cost in case of demand of outsider during crisis. In the opinion of Ayuso et al.
(2014), on account of the foundations being in the right place, investors along with potential
partners can get more confidence so that they can invest and expand the operations of the
company (Ayuso et al. 2014).
Benefits to Shareholders
Good corporate governance can be of great help in providing incentives for board so that
they can pursue objectives which will be in the company’s interests and help in monitoring
in the effective manner. Corporate governance that is better can provide the shareholders with
greater amount of security in relation to their investment. Good corporate governance helps in
ensuring that the shareholders are made known about decisions that are concerned with issues
like amendment of statutes and sale of the assets (Ayuso et al. 2014).
Empirical research that has been carried out in the recent years supports the idea that
it is extremely important to possess good corporate governance. Research carried out has
shown that 84% of global institutional investor want to pay a premium for shares of the
company that is governed in the right direction as compared to that of one that is poorly
governed (Ginena 2014). Adoption of principles in relation to corporate governance can play
a pivotal role in augmenting corporate value in relation to the companies (Larcker et al.

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2014). Arthur Levitt who is the chairman of US Securities and Exchange Commission has
said that when a country does not have sound practices in relation to corporate governance
then the capital will flow in another direction. If the investors do not feel confident with that
of level of disclosure then the capital will also flow in another place (Klettner, Clarke and
Boersma 2014). When a country wants lax accounting along with reporting standard then the
capital will flow to other place. In this kind of a case, all the enterprises in a country have to
suffer for the results (Macve 2015).
The principles in relation to corporate governance are essential in the following areas:
 Internal controls along with internal auditors
 Independence in relation to the external auditor and their quality of audits
 Management of the factor of risk
 Oversight in relation to the preparation of the financial statements of entity (Kato, Li
and Skinner 2017).
 Review of compensation arrangement for the CEO along with other senior executive
 Resources available to the directors so that they can carry out their duty
3. Research Method
3.1 Research Philosophy
There are four kinds of research philosophy- positivism, epistemology, Interpretivism and
realism. Positivism makes use of the philosophical stance in relation to the natural scientist.
Realism is related to that of the scientific enquiry. Essence in relation to the realism revolves
around the fact that what is perceived by the senses as reality is the actual truth.
Epistemology is concerned with how reality is represented in the form of objects which is
considered real like that of computer and machines (Wang et al. 2014). Social actors are