Corporate governance adds value to firms

Posted at 09/09/2009 12:31 AM | Updated as of 09/09/2009 12:32 AM

MANILA - Investors are willing to pay a premium to companies that exhibit good corporate governance, the Institute of Corporate Directors (ICD) yesterday said.

In a press briefing, ICD Chairman Jesus P. Estanislao said this was among the findings of a study on the relationship of share prices and corporate governance in China, Hong Kong, Indonesia, the Philippines and Thailand.

“The question as to whether in fact corporate governance makes a difference in the valuation of the firms in the stock exchanges, and in all five economies, the answer is very clearly so, and the result is that relationship is robust,” he said

While their study did not include how much more people are willing to shell out, he said a previous review showed investors in developing countries were amenable to premiums of up to 40% for highly regarded firms.

Mr. Estanislao said the ICD study, which was done by the Hong Kong Baptist University and Thailand’s Sassin School of Business, also found that Philippine corporate governance practices had improved over the last five years, and that new scores had led to significant change in the valuation of firms.

He said the study also found that investors care about shareholder treatment and company transparency, and that the Philippines’ average score compared well with the other countries.

Mr. Estanislao said the full study would be made available on Friday.