The Effects of Corporate Governance on Cost of Capital and Firm Performance

Abstract

The objective of this article is to study 1) the effect of corporate governance on firm
performance 2) the effect of corporate governance on cost of capital 3) the effect of cost of capital
on firm performance. The panel data analyzed by the panel data regression, it was collected and
qualified for the study from 203 listed companies in the Stock Exchange of Thailand, during 2011-2015.
For this study, the classification of listed companies according to evaluation score granted by IOD
was used as an indicator of Corporate Governance; the ROA and the MVBV were used as indicators
of firm performance and the WACC was used as an indicator of cost of capital.
According to the findings 1) Corporate governance of listed companies that received
4-star evaluation score has positive effect on the firm performance; 2) Corporate governance
has negative effect on cost of capital, signifying that Agency theory could be applied in Thailand;
3) Cost of capital has positive effect on ROA but has negative effect on MVBV.