CEO Characteristics and Corporate Financing in Thailand

Previous financial crises have cast some doubt about the risk-taking behaviors of top executives. This study investigates the impact of CEO characteristics on corporate financing behaviors after the 1997 Asian financial crisis. Sample firms are non-financial listed firms on the Stock Exchange of Thailand between 2001 and 2005. We use the Ordinary Least Square (OLS) method on pooled cross-section and time-series data controlling for year and industry effects. CEO characteristics are classified into three groups—biography, network and incentives—based on the upper echelons, resource dependence and agency theories, respectively. According to the upper echelons theory, the education of CEOs has an impact on strategic choices. The result shows that CEOs with postgraduate education choose a higher level of financial leverage. Based on the resource dependence theory, networks ease difficulties to access to external resources. We find that politically connected CEOs can finance higher debt, compared to non-connected CEOs. Our findings also support the agency theory. We find that family CEOs use more debt possibly to maintain their voting power. Overall, our research shows that CEO characteristics affect financing decisions. From lenders’ point of views, some attributes of CEOs may reflect better repayment abilities of firms, thus encouraging lenders to provide higher loans. Our study also suggests that to thoroughly investigate the significance of CEOs in shaping corporate strategies, wide aspects of CEO attributes should be considered

Business Groups in Thailand: Before and after the East Asian Financial Crisis

This paper investigates how business groups in Thailand had evolved since the 1950s. We argue that political connections and foreign capital among other factors were contributable to the emerging of Thai business groups. The business groups that owned banks developed fast during the late 1980s and the early 1990s until the financial deregulation, and the establishment of the Stock Exchange of Thailand, and the Bangkok International Banking Facilities. After that the groups that do not own banks have expanded rapidly. We find that the ownership and board structure of the listed firms that belong to the top 30 business groups were not affected by the crisis. Compared to the pre-crisis period, the leverage ratio for the business groups firms has increased while the profitability has declined during the post crisis of 1997-1999. Restructuring appears to work well among group firms since it has helped improved industry-adjusted operating performance of the firms.Business Group, Corporate Governance, Ownership Structure, Restructuring, East Asian Financial Crisis

Did Families Lose or Gain Control after the East Asian Financial Crisis?

This paper investigates the ownership and control of Thai public firms in the period after the East Asian financial crisis, compared to those in the pre-crisis period. Using the comprehensive unique database of ownership and board structures, we find that the ownership and control appear to be more concentrated in the hands of controlling shareholders subsequent to the crisis. Interestingly, even though families remain the most prevalent owners of Thai firms and are still actively involved in the management after the financial crisis, their role as the controlling shareholder becomes less significant. In addition, our results show that direct shareholdings are most frequently used as a means of control in both periods. Pyramids and cross-shareholdings, however, are employed to the lesser extent following the crisis.Ownership, Controlling Shareholder, Corporate Governance, East Asian Financial Crisis, Thailand

Who's on board? Influence of diversity and network of Thai boards of directors on firm value

Using a large sample analysis of Thai listed firms, we address an important question. Do board diversity and network add value to firms? This article extends the debate on the benefits and costs of board diversity and network and their effect on the broader picture of corporate governance. The sample period straddles 2001 to 2005, which allows us to examine board characteristics in response to the Asian financial crisis. We find that diversity in age and study majors are positively related to Tobins Q ratio, while diversity in educational levels leads to lower firm value. Our results suggest that boards with diverse age groups and study areas might generate useful advice and complement each other; however, those with diverse educational levels might create costs due to possible conflicts and a lack of coordination and communication. In addition, the results show that alumni networks have a positive effect on Tobins Q ratio. The findings further suggest that board networks could bring benefits to firms. An alumni network is significant to firms because it could help firms obtain external resources. It also provides significant findings for policy makers to design best practices of directors in emerging countries

Thailand’s Student Loan Fund: An Analysis of Interest Rate Subsidies and Repayment Hardships

This paper presents analysis of the implicit subsidies and repayment hardships of Thailand’s Student Loan Fund (SLF). Comparisons are made between the current SLF with alternative similar schemes, assuming different rates of interest and loan repayment periods. We find that the implicit interest rate subsidy is about 66 per cent, with much of this being due to the fact that the scheme charges only a 1 per cent per annum nominal interest rate. The repayment hardships, measured as the proportion of a graduate’s income allocated to servicing the debt, are around 4 and 3 per cent, for female and male graduates earning average incomes by age. However, these increase to 12 and 10 per cent for female and males whose earnings are in the bottom deciles. The current SLF is generous in terms of repayment hardship for the borrowers. However, the scheme appears to be unsatisfactory in terms of the extent of implicit subsidies.can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.student loans; higher education financing

BOARD DIVERSITY, NETWORK AND FIRM VALUE

Using a large sample analysis of Thai listed firms, we address an important question. Do board diversity and network add value to firms? This article extends the debate on the benefits and costs of board diversity and network and their effect on the broader picture of corporate governance. Moreover, this article sheds light on the necessity of applying the resource dependence theory in research about boards of directors, in addition to the agency theory. We find that diversity in age and study majors are positively related to Tobin’s Q ratio, while diversity in educational levels leads to lower firm value. Our results suggest that boards with diverse age groups and study areas might generate useful advice and complement each other; however, those with diverse educational levels might create costs due to possible conflicts and a lack of coordination and communication. In addition, the results show that alumni networks have a positive effect on Tobin’s Q ratio. The findings further suggest that an alumni network is significant to firms because it could help firms obtain external resources. Overall, our research provides significant findings for policy makers to widen viewpoints about corporate governance practices and human resource development in emerging countries

Corporate Distress Prediction Models Using Governance and Financial Variables: Evidence from Thai Listed Firms during the East Asian Economic Crisis

Predicting corporate distress can have a significant impact on the economy because it serves as an efficient early warning signal. This study develops distress prediction models incorporating both governance and financial variables and examines the impact of major corporate governance attributes, i.e., ownership and board structures, on the likelihood of distress. The two widely documented methods, i.e., logit and neural network approaches are used. For an emerging market economy where ownership concentration is common, we show that not only financial factors but also corporate governance factors help determine the likelihood that a company will be in distress. Our prediction models perform relatively well. Specifically, in our logit models that incorporate governance and financial variables, more than 85% of non-financial listed firms are correctly classified in our models. When we consider the Type I error, on average the models have the Type I error of about 9%. Likewise, the neural network prediction models appear to have good results. Specifically, the average accuracy of the neural network prediction models ranges from approximately 84% to 87% with the average Type I error raging from about 10% to 16%. Such evidence indicates that the models serve as sound early warning signals and could thus be useful tools adding to supervisory resources. We also find that the presence of controlling shareholders and the board involvement by controlling shareholders reduce the probability of corporate financial distress. This evidence supports the monitoring/alignment hypothesis. Finally, our results suggest evidence of the benefits of business group affiliation in reducing the distress likelihood of member firms during the East Asian financial crisis.corporate distress, prediction model, corporate governance, neural networks, East Asian economic crisis