Corporate Governance, Shareholder Activism and Firm Performance in Ghana
Date
2015-07
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Publisher
University of Ghana
Abstract
This study reexamines the effect of shareholder activism, as a corporate governance mechanism,
on firm performance. The owners of the firm (the shareholders) employ the managers (the agents)
to manage the firm for them but this employment contract has the potential risk of adverse selection
and moral hazard. Hence there is the need for the shareholders to be active and monitor the firm.
This constitute shareholder activism. But the argument is whether shareholder activism improves
firm performance? Previous studies have found divergent conclusions because they all used the
traditional accounting performance measure (ROA) which is not comprehensive enough because
it does not account for the cost of equity. This study adopts contemporary value based performance
measure, which is Economic Value Added (E.V.A) and Market Value Added (M.V.A) to measure
firm performance from 2007 to 2013. These performance measures captures both costs of debt and
equity which is able to show the true value of the firm.
The regression results show that shareholder activism actually improves firm performance
(E.V.A). Implying that shareholders should be active investors and monitor their firms because
monitoring improve shareholder wealth. Investor conference should also be encouraged to
improve manager-shareholder relations so as to mitigate the agency problem.
Description
Thesis (MPhil) - University of Ghana, 2015