“The Effect of Corporate Governance on firms

performance”
By

Salma Amgad Zohny

Bachelor Thesis submitted to the Finance Department at the Faculty of Management &

Technology German University in Cairo

Student(s) registration number(s): 22-4459

Date: 7th of May 2015

Supervisor: Dr. Mona el Bannan

 
 
 
 
   
Table  of  Contents  
Table of figures:  .............................................................................................................................  3  
Abstract  ...........................................................................................................................................  4  
1. Introduction  ................................................................................................................................  5  
2. Corporate Governance  .............................................................................................................  7  
2.1 What is Corporate Governance?  ..................................................................................................  7  
2.1.1 Historical Background  ..............................................................................................................................  7  
2.1.2 Definition of Corporate Governance  ...................................................................................................  8  
2.2 Corporate Governance principles  ................................................................................................  9  
2.3 Corporate governance Mechanisms  ...........................................................................................  12  
2.3.1 Internal corporate governance  ..............................................................................................................  13  
2.3.2 External corporate governance  ............................................................................................................  14  
3. Firms Performance  ................................................................................................................  16  
3.1 Measurements of firm’s performance  .......................................................................................  16  
3.2 Determinants of firm performance  ............................................................................................  18  
4. Effect of corporate governance on firm’s performance  ...............................................  20  
4.1 Corporate Governance effect on financial profitability  ........................................................  22  
4.2 Corporate Governance Effects on Shareholder Value  ..........................................................  23  
5. Methodology  ............................................................................................................................  25  
6. Conclusions  ..............................................................................................................................  32  
7. References  ................................................................................................................................  33  
8. Appendix  ..................................................................................................................................  38  
 

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Table of figures:
 
Table  1  Model  (1):  Variables  definition  and  data  source  ...........................................................  26  
Table 2 Model (1): Variables definition and data source  .................................................................  27  
Table 3: Descriptive Statistics  ...................................................................................................................  27  
Table 4 : Correlation Matrix  ......................................................................................................................  28  
Table 5: Regression results of corporate Governance and Firms Performance  ........................  29  

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Abstract

This paper investigates the effect of corporate governance on firms’ performance in terms
of profitability by investigating the effect of board of directors and ownership concentration
on ROA, ROE, size of the firm, leverage, liquidity and cost efficiency by the OLS
regression model on SPSS which was applied on a sample of 14 Egyptian firms during the
period from 2009 till 2012. The result has showed no relationship between board of director
size and ownership concentration on firms’ performance when using different profitability
measures.

Index Terms – Corporate governance, firms’ performance, profitability

 
 
 

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1. Introduction
For the past two decades, corporate governance have become one of the most interesting
topics after a series of events that took place worldwide such as 1998 East Asia crisis, the
global wave of privatization, the takeover wave that occurred in the 1980s, and the major
crisis in the US in 1929 (Becht et.al, 2002; Murphy and Topyan, 2005). Corporate
governance manages to develop legal mechanisms that secure the expected upcoming
investors from decisions made by the management or the existing shareholders of the firm
(Nur’ainy, Nurcahyo, Sri Kurniasih and Sugiharti, 2013).

Destiny of the firms relies completely on the way firms’ are governed, as failure in
attracting future investors could lead to failure in collecting the level of capital needed by
the firm, which will intimidate the existence of a firm and hinder the economy as a whole
(Corina & Roxana, 2011). Therefore, corporate governance is considered to be one of the
main pillars that exist in controlling firms in the financial world (Azeem, Hassan & Kouser,
2013).

Furthermore, corporate governance main aspect is to boost firms’ performance, through

focusing on governance framework of guidelines and regulations in order to ensure the
supervision or observation of management performance and management accountability to
other stakeholders' advantage (Nur’iany et.al, 2013). Therefore, it can be said that corporate
governance tend to play a huge role in determining the way firms performance, so through
this paper the effect of corporate governance on firms performance will be highlighted
through different aspects.

After introducing the topic in section one, section two of this paper will be about corporate
governance. At first, corporate governance historical background and how it is defined will
be mentioned, followed by the six OECD governance principles that firms undertake, and
finally the corporate governance mechanism will be discussed including the internal and
external mechanisms.

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Afterwards, section three will be discussing the way firms’ measure their performance
through the various measurements that exist, followed by the determinants of firm
performance such as: financial profitability, turnover and powerful CEO.

Through section three, the effect of corporate governance on firms performance will be
highlighted through various aspects such as corporate governance effect on financial
profitability and corporate governance effect on shareholder value. Section five will contain
the methodology, followed by the conclusion in section six, section seven will have the
references and eight will have the appendix.

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Literature Review

2. Corporate Governance
At the beginning of this chapter allow me to direct you through different aspects of
corporate governance.

2.1 What is Corporate Governance?

First I will start by identifying the historical background behind corporate governance
phenomena and then the definition and different theories of corporate governance will
be discussed.

2.1.1 Historical Background

The formation of the concept of corporate governance has aroused completely due to a
series of events that took place such as the worldwide wave of privatization, pension
fund reform and the growth of private savings, the takeover wave of 1980s,
deregulation and integration of capital markets, the 1998 East Asia Crisis, and a series
of US scandals and corporate failures (Murphy & Topyan, 2005). Not to forget the
Asian economic crisis of 1978, which caused secession of investors from Asia and
Russia causing an absolute problem in the international business community due to the
fact that investors no longer trust in corporate management (Corina & Roxana, 2011)

The concept of corporate governance has been formulated after the year 1997 in the
European union when most of the countries started using the code of corporate
governance and principles which was developed by organization for economic
cooperation and development (OECD) which included several signs that would enhance
the legal regulations (Corina & Roxana, 2011).

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 As Marilen and Ana (2013) states that the Cadbury report was issued in the UK in year
1992, the OECD started working on a project that formulate a set of principles of
corporate governance, this set have been completed in the year 1999 which was called
OECD principles of corporate governance. 30 OECD countries approved these
principles in the year 2004, ensuring the already known and described corporate
governance practices in 1999.

According to Monks and Minow (2004), the need and significant importance of
corporate governance has increased intensively in 2002 after a series of events took
place that led to the bankruptcy of large U.S (Corina & Roxana, 2011).

2.1.2 Definition of Corporate Governance

The corporate governance concept differed due to the different perspective each author
use to define this concept; through this part I will be discussing the various definitions
found for each author.

James Wolfensohn former president of the World Bank have stated that corporate
governance term could be defined as the integration between national states
governments and the government of companies and that is why the importance of
corporate governance has increased intensely in the world economy (Marilen & Ana,
2013).

Corporate governance from Corina and Roxana’s perspective (2011) could be defined
according to two categories: narrow and broad definitions. The narrow definition
illustrates the relation between the participants involved such as the shareholders, the
management and board of directors and the way the corporation is heading and its
performance. The boarder definition according to the Cadbury report in 1992, it is
considered to be the guidelines that direct and control the corporates.

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 On the other hand, OECD principles of corporate governance characterize corporate
governance as the relation between the ways a corporate is managed, its board, its
shareholder and other stakeholders. It also states that corporate governance help
companies arrange a framework that allows them to identify their objectives and ways
to reach those objectives that are set and ways to monitor the performance (Marilen &
Ana, 2013).

Furthermore, Bedchuk and Weisbach (2010) define corporate governance as a tool used
by the suppliers of finance in order to guarantee a return from the investments that take
place. Due to the fact that returns depend on endless factors such as legal and
contractual agreements, various players attitudes and corporate governance (Shleifer &
Vishny, 1997).

2.2 Corporate Governance principles

As mentioned earlier corporate governance principles was developed by the OECD,
initiating a beneficial system for corporate governance, which targets a development in
legal and institutional regulations for financial institutions and all corporations. OECD
principles tend to be outstanding among other principles as it has a wide spread across
borders where they get to be ran without any advantage to any of the corporate practices
or board structure (Marilen & Ana, 2013).

Corporate governance principles tend to tackle different aspects such as (Marilen &
Ana, 2013)
1. Ensuring the basis for an effective corporate governance framework
2. The rights of shareholders and the main ownership functions
3. The ethical treatment of shareholders
4. The role of stakeholders in corporate governance
5. Disclosure and transparency
6. Responsibilities of the board

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 1. Ensuring the basis for an effective corporate governance framework

The main concept behind the first principle is to generate a corporate governance
framework that aims in highlighting the effect on general monetary execution, market
trustworthiness and the motivations it makes for business members and in creating and
promoting a straight forward on other words a transparent and an effective market
(OECD principles of corporate governance, 2004)

Taking into consideration the legal and administrative necessities that tend to influence
corporate governance practices, which should be held with assistance of rule of law,
transparent and enforceable. Not to forget that to ensure an effective structure, there
should be a clear distribution of responsibilities among the various authorities such as
supervisory, regulatory and enforcement authorities providing them with the power,
uprightness and assets needed in order to fulfill their professional and objective manner.
Their decisions should be as well ought to be auspicious, straightforward and completely
clarified in order to make sure that the public interest is set to be a priority and executed
(OECD principles of corporate governance, 2004).

2. The rights of shareholders and the main ownership functions

The 2nd principle of corporate governance tends to highlight and clearly identify the
rights of the shareholders. There are some Fundamental shareholder rights that ought to
incorporate the right to: 1) safe and secure strategies for proprietorship registration 2)
pass on or exchange of shares 3) acquire applicable and material data about the
corporation on regular basis 4) take part and vote on regular shareholder gatherings 5)
choose and evacuate parts of the board and 6) guarantee a share in the corporation profits.
Therefore corporate governance framework should ensure the protection and ease when
shareholders tend to exercise their rights (OECD principles of corporate governance,
2004, Babatunde & Olaniran, 2009).

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 3. The Equitable treatment of shareholders

The 3rd OECD principle highlights the way shareholders should be treated which clarify
that all shareholders who tend to belong to the same class should be dealt with equally by
which, all shares ought to convey the same rights. Not to forget that all investors ought to
have the capacity to get data about the rights connected to all arrangement and classes of
shares before they buy. Any adjustments in voting rights ought to be favored by those
classes of shares whom are adversely influenced (OECD principles of corporate
governance, 2004).

In order to ensure the equitable treatment of shareholders as well, conflict of interests and
using unpublished (inside) information of the company in order to trade stocks should be
extremely restricted in corporate governance framework (OECD principles of corporate
governance, 2004).

4. The role of stakeholders in corporate governance

Corporate governance framework should definitely acknowledge the rights of the

stakeholder, which are identified and protected by the law or by the common agreement
between the parties. The law tend to ensure Stakeholders’ welfare, as they ought the right
to take corrective actions against any violations concerning their rights and to freely
deliver any doubts about unethical or illegal acts to the board and their rights are not
allowed to be endangered for doing so (OECD principles of corporate governance, 2004).

In addition Stakeholders should be allowed to engage in the corporate governance process

where they get to have access to applicable, sufficient and dependable data on regular
basis, which will help in the development and enhancement of performance mechanism
for the employee presence (OECD principles of corporate governance, 2004).
5. Disclosure and transparency

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 Furthermore corporate governance framework has to guarantee that a precise disclosure is
generated that involve, but not restricted to material data on organization goals,
significant share proprietorship and voting rights, foreseeable risk factors and business
arrangements transactions (OECD principles of corporate governance, 2004).

In order to ensure the transparency and disclosure, high quality standards of accounting,
financial and non-financial disclosures should take place on all information arrangement.
Along with an annual audit from an external, independent and qualified auditor, who will
be able to guarantee to the board and shareholders that the financial statements clearly
show the existing financial position of the corporation (OECD principles of corporate
governance, 2004).

6. Responsibilities of the board

In order to ensure an effective corporate governance framework, responsibilities of the

board should be clearly identified and stated. Which includes that the board members
have to treat all shareholders reasonably as the decisions they make tend to affect the
various shareholders in an unexpected manner. In addition, the board implements a
highly ethical standards taking into consideration the stakeholders interest. The board
should as well guarantee the vital direction of the organization, through sufficient
checking of management (OECD principles of corporate governance, 2004).

2.3 Corporate governance Mechanisms

Brown & Caylor (2005) states that when we get to think about governance, it is
considered beneficial rather than straight forward to assort the procedures and
characteristics as either internal or external mechanism (Baber, Liang & Zhu, 2012) That
is why through this section I will be highlighting the internal and external mechanism.

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2.3.1 Internal corporate governance
The internal governance system tends to reflect the collaboration between the corporate
associates in particular management, employee and directors (Baber et. al, 2012). Those
internal factors, which include managerial proficiency, administration structure,
ownership structure which influences the corporate ability to deal with any external
factors. Therefore the identified well-governed corporation is the one that is able to
stabilize the three corporate associates mentioned earlier, while achieving all of the
corporate monetary duties and different commitments to a wide exhibit of stakeholders
(Babatunde & Olaniran, 2009).

2.3.1.1 Board of Directors

The board could be defined as the main and most important internal governance
mechanism, which is the link between the management and owners, different
stakeholders and the outside world (Mousa & Desoky, 2012). Moreover the boards of
directors tend to serve in favor of the shareholders and they may have commitment to
different stakeholders under different statutory and intentional provisions (Babatunde &
Olaniran, 2009).

Therefore the board needs to be independent from management in order to be an auditor

for shareholders; there are two methods that can identify the independence of the board.
The first method is through the percentages that identify the number of outside directors
that are present in the board and the second method is if the CEO represents the board
chairperson (Mousa & Desoky, 2012, Bhagat & Bolton, 2008). Furthermore, having
outside directors in the board tends to minimize agency problems and boost earnings
quality and that is why it is considered to be a sufficient corporate governance
mechanism (Mousa & Desoky, 2012). Director independence has as well revealed a
significance effect on CEO turnover, executive compensation decisions and the
incidence of fraud (Bedchuck & Weisbach, 2010).
2.3.1.2 Ownership structure

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 This is another internal corporate governance mechanism that tends to minimize the
agency problems. Large shareholders can use their voting powers that are more likely
going to affect managerial behavior, which leads to the fact that they will operate more
beneficial corporate governance. Therefore in order to avoid the fact that there might be
large shareholders with voting rights that will definitely influence management decisions
in a way, internal constrains on managerial discrimination should be enforced on
ownership. Furthermore Agency costs can be minimized through the perfect
combination of ownership and control within each owner manager (Babatunde &
Olaniran, 2009, Mousa & Desoky, 2012, Huyghebaert & Wang, 2012).

       2.3.2 External corporate governance

The second corporate governance mechanism is External corporate governance, which
involves formal legal and regulatory liability in order to make sure that competition
between the companies are guided by mutual standards such as fairness, transparency,
accountability and responsibility that will secure all people who are in contact with the
corporation such as shareholders, workers, the environment, consumers and even
competitors from any offensive practices that could take place (Babatunde & Olaniran,
2009, Baber et.al ,2012). Therefore external governance system aim to ease or hinder
the stakeholders’ presence from the governance process (Baber et.al, 2012). Through this
section I will be highlighting different external governance mechanisms.

2.3.2.1 Take over

Hanson and Song (2006) have stated that outside shareholders have an obvious influence
on directors' turnover, which makes turnover highly responsive to firm performance. In
Britain and the United States, two of the nations where large shareholders are less
regular, a specific mechanism for consolidating proprietorship has risen, which is called
the hostile takeover. In a normal hostile takeover, a bidder makes a delicate offer to the
scattered shareholders of the target firm, and if the offer is to be accepted then they get

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 control of the target firm and so they can replace, or at any rate control, the management.
Therefore, takeovers can accordingly be referred to as quick fire mechanism for
proprietorship concentration (Shleifer & Vishny, 1997)

Furthermore there are two techniques than can occur in order to prevent Hostile
takeover, the first one is to provide a friendly mediation and give them the power to
negotiate any offers with the bidders. The second is to try to gain the turnover bid in
order to avoid any hostile turnover. The technique used is called the White Knight
(Calcagno & Falconieri, 2008).

2.3.2.2 Merger and Acquisition

Mergers and acquisitions (M&As) are considered to be an assertive growth strategy for
all companies around the world, which is due to the constant desire of stakeholders for
an increased shareholder value. Mergers and acquisition could be defined as the
dominant technique used to reach organizational growth. In addition, perspective
towards the benefit of M&As has changed extremely as companies in the 1990s used to
perceive Mergers and acquisition as a tool used for cost saving, however nowadays
M&As is considered to be a strategic tool used for corporate growth, which is regarded
as challenge as a tough challenge (McDonald, Coulthard & De Lange, 2005).

Furthermore, Not only Merger and acquisition can give an opportunity for companies to
achieve various profits in terms of economies of scale, achieving synergy, cost savings,
and increased products and more efficient distribution channels. But also they can
benefit any company from a strategic perspective such as the benefits of having brand
new products, proficiency and skills, it also gives the company an edge to expand their
geographical reach and the privilege of reconstructing the existing industry or a brand
new one could be created according to the need of the company (McDonald et.al, 2005).

Due to all the benefits stated earlier, executive’s intentions tend to be stimulated to
acquire or merge with other organization, as companies merging tend to help firm entry

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 to a new industry or product space easily or even benefit from a strategy perspective
through helping the firm become more progressive than on its own (Marks & Mirvis,
2011).

3. Firms Performance
According to Mollick (2012), what differentiates the performance of a certain firm to the
other is due to the fact that firm’s performance is derived from the process by which
each firm undertake rather than individuals who are employees in the firm. Therefore a
good performance is quite related to a good process that requires organizational factors
such as firm resources, competence and routines (Mollick, 2012). Moreover Not only
organizational factors play a role in affecting a firms performance, but also there are
external factors such as macroeconomic events that takes place unexpectedly as
macroeconomic changes can cause a change in cash flows or values intensely, exceeding
the management control over the values (Ionesco, 2012).

In order for any firm to evaluate its performance, there are several measures that can be
applied to know the performance position of a firm such as financial tools that are
derived from balance sheets and P&L statement data, or derived from stock market
values and non-financial tools that reflects the operational perspective such as quality
(Obermaier & Donhauser, 2012).

3.1 Measurements of firm’s performance

Profit has always been over the time, a major tool in identifying and evaluating corporate
performance. Earnings ratio for instance has been used in order to evaluate the level of
profits that can be reached by a firm. Furthermore, there are various measurements tools
that can be used to express profit ratio such as: Net profit Margin (NPM), Return on
investment (ROI), Return on Asset (ROA) and Return on equity (ROE). Those
measurements tend to identify the level of management efficiency according to the level

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 of profits reached, which means that the higher the level of profits reached the higher the
efficiency of managers that are in charge of the firm (Nur’ainy et.al, 2013).

In addition, a tool of measurement has been developed in the 80’s that acknowledges the
weaknesses in evaluating firms performance, this tool is knows as Economic Value
Added (EVA). This tool is used in measuring the added value of an investment to the
firm so if the EVA is positive that means that the firm has succeeded in having returns
that exceed the cost of capital, creating a value for the firms investors. However, it has
been argued that using accounting profits is not enough in evaluating the firms’
performance due to the fact that there would have been no accounting profits, if it were
not aided by the firm capability to generate cash (Nur’ainy et. al, 2013).

On the other hand, measures tend to differ from one firm to the other according to
manager perspective concerning the tool used to measure profits. According to Kang and
Shicdasani (1995), an industry adjusted ROA measure was used to evaluate the firm
performance however this measure tend to indicate the short term profitability of firms
operations and that is why a second measure was used as a market-based measure in
which the industry adjusted excess stock return was measured using the stock exchange
price index. Furthermore, Bowen, Rajgopal & Venkatachalam (2008) have decided to
differentiate between the accounting and stock market based tools in evaluating the
firms' performance through three tools which are the operating cash flow, ROA and
stock Returns.

Meanwhile Jayachandran, Kalaignanam& Eilert (2013) have decided to evaluate firms

performance using an extremely different tool called Tobin’s Q which is considered to
be a measure that is forward looking and predicts the future probability in comparison to
accounting based measures. Obermaier and Donhauser (2012) states that measuring the
firms performance using financial tools such as the ROI and ROS tend to be compatible
with the firm goals however they are single performance measures when being compared

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 to other tools such as the Altman’s Z-score which can be identified as a
multidimensional performance measure.

3.2 Determinants of firm performance

There are many variables that seem to affect firm’s performance, which will be
discussed further in the coming section.

Financial profitability:
Firms tend to differ due to the fundamental sources behind competitiveness which tend
to lie within the efficiency of the productivity phase involving innovation, technical
ability and enhancing organizational structure, which was proven to have an effect on
level of profitability of a firm. Therefore we can conclude that profitability, efficiency
and growth have highly relation between them (Bottazzi, Secchi & Tamagni, 2008). On
the other hand, Dawkins, Feeny & Harris (2007) stated that firms performance seem to
be affected by many factors such as the quality by which the firm is managed, innovation
implied in the product and the work organization.

Furthermore, there is a positive relation between market share and profitability because
firms with the highest market share are more likely to have higher market power, which
enable them to charge higher prices and as a result creating higher profits. According to
Brozen (1971) this assumption was argued, as he believes that the reason behind the
relation between market share and profitability is due to efficiency rather than the market
power. After all most of the theories believe that there is a relation between profitability
and market share, in which profitability is more likely to increase endlessly with market
share (Dawkins et.al, 2007).

Powerful CEO:

Powerful CEO is considered to be one of the determinants of firm performance, as CEO

in some firms tends to take all the significant decisions. Meanwhile on other firms, the

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 decisions are considered to be the collective opinion of the top executives in the firm.
Therefore the managerial decisions have either a positive or a negative effect on the
firms’ outcome, if the decision is to affect firms’ outcome positively that means that both
executive structure and organizational factors may affect the firm performance (Adams,
Almeida & Ferreira, 2005).

Moreover it is argued that the power of the CEO lies, when they are engaged in picking
the directors, due to the fact that the directors chosen by the CEO will less likely
supervise them nor disagree with them in any decisions taken. Not only does the CEO
power increase, when a firm’s performance is considered to be good as it becomes much
effortless for the CEO to provide changes, but also when the firm tends to have a poor
performance, CEO is given the power needed in order to take rapid decisions, which
tend to increase the CEO power as well. Correspondingly, it can be concluded that the
firms who have powerful CEOs are not only related to the firms with the worst
performance but also can be related to the firms with best performance (Adams et.al,
2005).

Turnover:
Turnover on the other hand, seems to be divided into two types, routine and non-routine
turnover. Routine turnover can be related to age by which there is a positive relation
between them and so we can conclude that routine turnover does not affect nor relate to
undesired firms performance in accordance to the industry-adjusted return or excessive
returns. Meanwhile non-routine turnover can be linked to undesired firm performance,
Not only does the non-routine turnover tend to have a negative effect on earnings and
stock price performance, but also they can be related to a negative effect on return on
assets (ROA). In addition, after non-turnover occurs it is found that there is a significant
improvement in firms’ performance meantime routine turnover had no significant effect
on firms' performance (Kang & Shivdasani, 1995).

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 Furthermore, knowing that there are many factors that tend to cause an abnormal stock
price variation, which is considered to be out of the hand of the top management and
bearing in mind that certain events can take place such as the death of the CEO which
will probably result in a management turnover, tend to have a negative relation to stock
price performance and firms performance (Coughlan & Schmidt, 1985). However
according to Dahya, McConnell and Travlos (2002) the negative relation that exists
between CEO turnover and firms performance can be linked to firms who consist of
outsider-dominated boards. Meanwhile Kang and Shivdasani (2005) argued, that the
number of outside directors does not affect the sensitive relation that lies between CEO
turnover and firms performance.

After the Cadbury adoption has been published, an unexpected increase in management
turnover took place, which revealed a significant increase in the sensitive relation of
management turnover and firms’ performance that was due to an increase in the number
of outside board members. However, the significant increase in turnover and in the
sensitive relation between firms’ performance and turnover does not certainly indicate an
enhancement on firms’ performance (Dahya et.al, 2002).

   4. Effect of corporate governance on firm’s performance

The main aspect behind corporate governance is to boost the firms’ performance,
through focusing on the governance framework, which contains the guidelines, and
regulations that ensure the supervision and the observation of management performance
and management accountability to the benefits of other stakeholders' (Nur’iany et.al,
2013). According to Toudas and Karathanassis (2007) shareholder friendly firms have a
positive relation between corporate governance and firms’ performance as the
management in these type of firms have the authority in making corporate decisions,
which is taken based on the decisions that the shareholders themselves would take in
order to maximize the market value of the firm.

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 Corporate governance contribute in enhancing firm performance in many aspects, as it
decreases the agency cost which is the cost carried out by shareholders due to power
authorization to management. These expenses may result in misfortunes suffered by the
organization due to the misuse of power. In addition, good corporate management tend
to decrease the cost of capital due to the decrease in risk level as a result of a decline in
the interest rate on the funds or resources that the company acquire (Nur’iany et.al,
2013).

Not only does it increase the company reputation and the value of the company stock in
the long run, but also it develop a support system for stakeholders in the enterprise
environment through the presence of the organization and its different techniques and
strategies that is needed by the organization, because they are guaranteed to get the
maximum advantage of all the activities and operations that the enterprise take in order
to generate wealth and prosperity (Nur’iany et.al, 2013).

Furthermore, studies have showed that the quality of corporate governance tend to have
a significant effect on firms performance, this relation is settled with regards to firm
features such as leverage, the size of the firm and using accounting standards (Azeem
et.al 2013).

Leverage for instance tends to direct the relationship between quality corporate
governance and firm performance by implying stronger relation for high-levered firms
and negative relationship of governance scores with performance regarding low-levered
firms. Governance scores are calculated using an index, which consist of two sections:
structure, which involves structural ownership, and independence, which contains the
independence level of the board. High scores of the index stand for the quality of the
corporate governance and vice versa. In addition, firm size tends to affect the intensity of
the relation by which there is a stronger relation for large size corporates meanwhile no
relation for small size firms. Meanwhile, the uses of accounting standards have showed

  21  
 
 no effect on the relation of corporate governance and firms’ performance (Azeem et.al,
2013).

In addition, the contribution of corporate governance during the financial crisis was
significant, as it has managed to affect the firms’ performance through regulation of
firms’ risk taking and the financial policies used. Erkens et.al stated that firms who
consist of highly independent board and ownership are the ones who faced the worst
stock returns during the financial crisis (NICOLĂESCU, 2012).

Therefore, it can be concluded that the implementation of corporate governance

principles can definitely have a clear effect on firms’ performance as shown by the EVA
measurements (Nur’iany et.al, 2013). Accordingly, immediate actions should be taken
that enforces better corporate governance in countries, as corporate governance
decreases the cost of equity which result on much bigger investments in new projects,
which will benefit the overall development of an economy as a whole (Azeem et.al,
2013).

   4.1 Corporate Governance effect on financial profitability

Corporate Governance can be described as a tool that aid firms in achieving maximum
efficiency through playing an essential role in firms sustainability, productivity and
profitability to meet the new difficulties that exists all around us in our environment
(Makki & Lodhi, 2014). In order to consider corporate governance a good one, it has to
be able to decrease the agency problem between the firm management and its
stakeholders through motivating the possible stakeholders about the expected cash
stream (Kim & Yoon, 2007). La Porta et.al (2002) argues that the level of legal
protection that the firm possess affects possible stakeholders decisions as it ensures to
them that the firms profit will definitely return to them either as interest or as a dividend
(Beiner, Drobetz, Schmid and Zimmermann, 2006). Therefore we can conclude that
corporate governance has a positive relationship with firms’ profitability, which means

  22  
 
 that poor profitability could be a result to poor corporate governance (Kim & Yoon,
2007; Joh, 2001).

Furthermore, it has been found that corporate governance tend to have a significant
relationship with long term equity return, firm value and accounting measures of
performance. As examined by Gompers et.al (2003) firms who have high equity returns,
higher value and better accounting results tend to be related to good corporate
governance unlike poorly governed firms. Studies have showed that good governed
firms are the ones who are profitable, having high market value and pay greater cash
dividend to their shareholders (Makki & Lodhi, 2014).

Moreover, Ownership has a positive and huge impact on firm profitability. As studies
showed that in both performance measures, firm benefit was to a great extent clarified by
changes in ownership. Results showed that over 70 % of the difference of ordinary
salary over the resources that exist for each firm over time can be clarified by the
changes that occur in ownership within the firm. Therefore, it can be concluded that
ownership and profitability have a positive relation by which firms profitability increases
when ownership increase as well and it tend to decrease when ownership become
intensely high or low (Joh, 2001).

     4.2 Corporate Governance Effects on Shareholder Value

Shareholder value can be determined due to the changes that occur in company’s share
market prices and the dividends that shareholders receive at the end of maturity period
(Venkiteswaran, 2000). According to Lazonick and O’Sullivan (2000), firms should
operate with regards to the interest of their owners, which are the shareholders. Studies
have claimed that firms with various institutional shareholders may react differently to
corporate governance in contrast to firms with low institutional proprietorship. Cunat et
al. states that passing a recommendation that enhances shareholder rights tend to expand
shareholder value. In addition, enabling a shareholder activism and enhancing the

  23  
 
 democracy inside firms can have a positive impact on shareholder value (Zaharia &
Zaharia, 2012).

Corporate governance and shareholder value are considered to be “two sides of the same
coin”, as corporate governance main target is to create and keep a managerial structure
that aims on providing and maintaining wealth for the firms shareholder. In addition,
corporate governance could be identified as nothing but maintaining the shareholder
value, so good corporate governance should promote for equality between the various
stakeholders (Venkiteswaran, 2000).

Furthermore, corporate governance could be described as the “exercise of ownership

rights toward the goal of increased share value”, by which they ensure that companies
perform in the long run interest of shareholders through handling the relationship that
exist between their employees, suppliers and customers (Venkiteswaran, 2000).

 
 
 

 
 
 
 
 

  24  
 
5. Methodology
5.1 Empirical Analysis
 
Through this section the hypothesis will be developed, through collecting the sample
and data, then summary statistic and correlation will take place, followed by
econometric model development.
 

5.1.1  Hypothesis  Development  

After screening the literature review, we can conclude that corporate governance has a
positive relationship with firms’ profitability, which means that poor profitability could
be a result to poor corporate governance (Kim & Yoon, 2007:13; Joh, 2001:33). Firms’
performance was measured in accordance to the profit perspective, which was
highlighted from various articles such as the financial profitability of the firm, the
powerful CEO effect on the firm and management turnover, which was all mentioned in
the literature review. As a conclusion, it can be said that there is a significant relation
that links corporate governance to firms performance through the various aspects that
was mentioned by which financial profitability tend to be positively affected by the way
firms are governed.

Therefore the purpose of this study is to measure the effect of corporate governance on
firms’ performance by the OLS regression model, through collected observations across
companies and years, resulting in a sample of 56 firm-years from 14 Egyptian firms over
the period 2009–2012 and the following hypothesis is developed.
Hypothesis 1: The positive effect of large number of board of directors on firms’
performance in terms of profitability
Hypothesis 2: The effect of high ownership concentration on firms’ performance in
terms of profitability.

  25  
 
5.1.2  Sample  and  Data    
The sample of the study includes data available in Kompass-Egypt. Observations are
pooled across companies and years, resulting in a sample of 56 firm-years from 14
companies over the period 2009–2012. Firms with missing value for any of the study
variables will be present in the regression analysis. Therefore, the number of
observations in each model will include the firms with missing data for all the variables
used in the model.
The financial data is obtained from Kompass-Egypt database, ownership and board of
directors size data is collected from KOMPASS-EGYPT Financial Yearbook. Table (1)
provides variable definitions.

Table  1  Model  (1):  Variables  definition  and  data  source  

Variables Measures Source

Dependent variable
Profitability & ROE = Net income/Total Equity Kompass-Egypt
performance Yearbook
Explanatory variables
Kompass-Egypt
BOD members Size Yearbook
BOARD

Kompass-Egypt
Largest Ownership concentration Yearbook
OWN

Debt Ratio= Debt/Total assets Kompass-Egypt

LEV Yearbook
Inventory turnover ratio= Kompass-Egypt
Cost EFF
Sales/Inventory Yearbook
Log (Total Assets) Kompass-Egypt
SIZE
Yearbook
Kompass-Egypt
Current Ratio= Current assets/ Current Yearbook
LIQ
liability
 
Notes:  The  table  presents  the  definition  and  measure  for  all  the  study  variables.      

  26  
 
Table 2 Model (1): Variables definition and data source

Variables Measures Source

Dependent variable
Profitability & ROA= Net income/Total Assets Kompass-Egypt
performance Yearbook
Explanatory variables
Kompass-Egypt
BOD Size Yearbook
BOARD
Kompass-Egypt
Largest Ownership concentration Yearbook
OWN

Debt Ratio= Debt/ Total Assets Kompass-Egypt

LEV Yearbook
Inventory turnover ratio= Sales/ Inventory Kompass-Egypt
Cost EFF
Yearbook
Kompass-Egypt
Current Ratio= Current Assets/Current Yearbook
LIQ
liabilities
Log (Total Assets) Kompass-Egypt
SIZE Yearbook

5.2 Summary statistics and correlation (Descriptive Statistics)

The descriptive statistics for the variables are reported in Table 2. Panel A displays the
descriptive statistics for the entire set of included variables.

Table 3: Descriptive Statistics

Variable Obs. Mean Std. Dev. Minimum Maximum Median

ROA 56 6.742321429 10.55642139 -13.2100000 48.3700000 5.285000000

62
ROE 56 8.45160714 20.52893149 -97.090000 54.360000 7.90500000
4
BOARD 56 8.1786 2.71767 1.00 13.00 9.0000

  27  
 
 LIQ 56 2.05928571 1.470959930 .020000 6.090000 1.54500000

LEV 48 17.91541666 19.06258036 .0100000 101.6100000 15.28000000

7 14 0
SIZE 56 8.6719643 .72072292 7.33000 10.01000 8.6600000

Cost EFF 52 1.51192308 1.437260518 .260000 5.650000 .96000000

OWN 37
55.54243243 24.01800903 20.0000000 99.2300000 52.22000000
2 09 0
Mean, Standard deviation, minimum, median and maximum. See Table 1 for variable
definitions.

After reviewing the descriptive statistics, the variables shows the following data output:
ROA shows a mean of 6.742321429, minimum of -13.2100000 and a maximum of
48.3700000, ROE has a mean of 8.45160714, minimum of -97.090000 and a maximum of
54.360000, BOARD size has a mean of 8.1786, minimum of 1.00 and a maximum of 13.00,
LIQ has a mean of 2.05928571, minimum of .020000 and a maximum of 6.090000, LEV
has a mean of 17.915416667, minimum of .0100000 and a maximum of 101.6100000,
SIZE has a mean of 8.6719643, minimum of 7.33000 and a maximum of 10.01000, Cost
EFF has a mean of 1.51192308, minimum of .260000 and a maximum of 5.650000 and
OWN shows a has of 55.542432432, minimum of 20.0000000 and a maximum of
99.2300000.

Table 4: Correlation Matrix

  Variables   1   2   3   4   5   6   7   8  
1   ROA       1                
2    ROE   .724***   1              
**
3   Board   .266   .205   1            
*** ** ***
4   LIQ   .533   .316   .347   1          
*** ***
5   LEV   -.062   -.403   -.232   -.387   1        
*** ***
6   SIZE   .402   .468   .216   -.170   .179   1      
*** *** ** ***
7   EFF   .390   .387   .292   .108   .072   .461   1    
*** *** *** **
8   OWN   -.488   -.522   -.152   -.152   .224   -.470   -.435   1  
Notes:  The  table  shows  Pearson  pairs-­‐wise  correlation  matrix.  Significant  correlation  coefficient  at  1%,  
5%  and  10%  levels  are  presented  in  Stars***,  **  and  *  respectively.  Variables  definition  is  presented  in  
Table  (1).  
 

  28  
 
5.1.3 Econometric Models
This study uses pooled OLS regression models under two main analyses to test the relation
between corporate governance and Firms performance, where observations are pooled
across firms and years for the period 2009 – 2012. Two models were developed to measure
the effect of corporate governance using the internal mechanisms such as the board of
directors’ size and ownership concentration, on firms’ performance using different
profitability measures such as the ROA and ROE.

Model 1: ROE= ß0+ ß1EFF+ ß2LEV + ß3BOARD + ß4SIZE + ß5LIQ+ß6OWN

Model 2: ROA= ß0+ ß1EFF+ ß2LEV + ß3BOARD +ß4SIZE + ß5LIQ+ ß6OWN

Model 1 has ROE, which measures firms’ performance as the dependent variable, measured
in terms of the independent variables that include cost efficiency, leverage, board size,
liquidity and ownership concentration. Meanwhile Model 2 has ROA, which is another
method in measuring firms’ performance as the dependent variable, measured in terms of
the independent variables that include cost efficiency, leverage, Board size, liquidity and
ownership concentration.

5.3 Empirical Results

Table 5: Regression results of corporate Governance and Firms Performance

Dependent V. ROE ROA

Explanatory V. Predicted Model 1 Model 2
sign
BOARD + -.079 -.002
+ -1.095 -.019
OWN + .132 .038
+ 1.623 .270
LIQ + .008 .477

  29  
 
 + .097 3.498***
LEV - -.777 .011
- -10.774*** .089
SIZE + .743 .578
+ 9.301*** 4.219***
EFF + .184 .213
+ 2.427** 1.641
Observations 31 31
F-stat 43.202*** 12.037***
R2 .915 0.751
Adj. R2 .894 0.688
Mean VIF 1.670833333 1.670833333

Model 1, which had ROE as the dependent variable, measured in terms of the independent
variables that include cost efficiency, leverage, board size, liquidity and ownership
concentration. The OLS regression model shows a negative relation between the ROE and
the board of directors and leverage, which means that when the size of BOD increases,
firms’ profitability will tend to decrease. The following results show a disagreement with
Mousa and Desouky theories, which could be due to the presence of high number of
insiders (executives) in the board of director of the firm and the dependence of BOD on
the management. Meanwhile ownership, liquidity, size and efficiency have a positive
relation with ROE. However, unlike what was mentioned in the literature review, Board of
director size, ownership and liquidity is insignificant which means that they have no effect
on firms’ performance. Moreover, leverage, size is significant at 1% and efficiency is
significant at 5%. There are 31 observations, with an F-stat of 43.202 with a significance
level of 1%, which shows the total significance level of variables in the model. The model
has an R squared of 0.915, which reflects the accuracy of the dependent variable in
describing the independent parameters.

  30  
 
Furthermore model 2, which has ROA as the dependent variable, measured in terms of the
independent variables that include cost efficiency, leverage, Board size, liquidity and
ownership concentration. The OLS regression model shows a negative relation between
board of directors and ROE, which means that when the size of BOD increases, firms’
profitability will tend to decrease. Results have showed a disagreement here as well with
Mousa and Desouky theories, which could be due to the presence of insiders in the board
of director of the firm and the dependence of BOD on the management. Meanwhile
ownership, liquidity, leverage, size and efficiency have a positive relation with ROE. The
positive relation between leverage and ROE indicates that the firms’ management is
inefficient. However as in model 1, the board of director size, ownership, efficiency and
leverage is insignificant which means that they have no effect on firms’ performance.
Moreover liquidity and size had a significance of 1%. There are 31 observations, with an
F-stat 12.037 with a significance level of 1%, which is lower than model (1) by 31.165
showing the total significance level of variables in the model. The model has an R
squared of 0.751,which is less than model (2) by 0.164, which reflects less accuracy of the
dependent variable in describing the independent parameters.

 
 
 

 
 
 

  31  
 
6. Conclusions

In the literature review It was stated that there is a significant relation that links corporate
governance to firms performance, through the various aspects that was mentioned by which
financial profitability tend to be positively affected by the way firms are governed.
Meanwhile, after gathering the data of 56 firm-years from 14 Egyptian companies over the
period 2009–2012 and entering the data on SPSS in order to get an OLS regression model
as shown above, the regression has showed that Board of directors size and ownership,
which measures the corporate governance has no effect on the firms performance different
profitability measurements as the coefficient results where insignificant violating the
hypothesis developed that there is a positive effect of large board of director size on firms
performance and that ownership concentration affects firms performance.

  32  
 
 7. References

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  37  
 
8. Appendix
SAVE  OUTFILE='C:\Users\mona.elbannan\Documents\Salma_CG.sav'  
   /COMPRESSED.  
DATASET  ACTIVATE  DataSet0.  
 
SAVE  OUTFILE='C:\Users\mona.elbannan\Documents\Salma_CG.sav'  
   /COMPRESSED.  
DATASET  ACTIVATE  DataSet0.  
 
SAVE  OUTFILE='C:\Users\mona.elbannan\Documents\Salma_CG.sav'  
   /COMPRESSED.  
FREQUENCIES  VARIABLES=ROA  ROE  Net_Profit  Board  LIQ  LEV  SIZE  EFF  PRODUCT  
OWN  
   /STATISTICS=STDDEV  MINIMUM  MAXIMUM  MEAN  MEDIAN  
   /ORDER=ANALYSIS.  

Frequencies
Notes

Output Created 16-APR-2015 14:12:39

Comments
Input Data C:\Users\mona.elbannan\Documents\S
alma_CG.sav
Active Dataset DataSet0
Filter <none>
Weight <none>
Split File <none>
N of Rows in Working Data
56
File
Missing Value Handling Definition of Missing User-defined missing values are
treated as missing.
Cases Used Statistics are based on all cases with
valid data.
Syntax FREQUENCIES VARIABLES=ROA
ROE Net_Profit Board LIQ LEV SIZE
EFF PRODUCT OWN
/STATISTICS=STDDEV MINIMUM
MAXIMUM MEAN MEDIAN
/ORDER=ANALYSIS.
Resources Processor Time 00:00:00.03

  38  
 
 Elapsed Time 00:00:00.03

 
[DataSet0]  C:\Users\mona.elbannan\Documents\Salma_CG.sav  
Statistics

ROA ROE Net_Profit Board LIQ

N Valid 56 56 56 56 56

Missing 0 0 0 0 0
Mean 163147250.000
6.742321429 8.45160714 8.1786 2.05928571
00000000
Median 14014500.0000
5.285000000 7.90500000 9.0000 1.54500000
0000000
Std. Deviation 277712548.664
10.5564213962 20.528931494 2.71767 1.470959930
671000000
Minimum -
-13.2100000 -97.090000 48574000.0000 1.00 .020000
00000
Maximum 1065642999.99
48.3700000 54.360000 13.00 6.090000
9999000

Statistics

LEV SIZE EFF PRODUCT OWN

N Valid 48 56 52 56 37

Missing 8 0 4 0 19
Mean 17.915416667 8.6719643 1.51192308 .00107143 55.542432432
Median 15.280000000 8.6600000 .96000000 .00000000 52.220000000
Std. Deviation 19.0625803614 .72072292 1.437260518 .004544156 24.0180090309
Minimum .0100000 7.33000 .260000 .000000 20.0000000
Maximum 101.6100000 10.01000 5.650000 .030000 99.2300000

  39  
 
Frequency Table

ROA

Cumulative
Frequency Percent Valid Percent Percent

Valid -13.2100000 1 1.8 1.8 1.8

-12.8700000 1 1.8 1.8 3.6

-6.7100000 1 1.8 1.8 5.4

-3.3800000 1 1.8 1.8 7.1

-2.1600000 1 1.8 1.8 8.9

-1.9900000 1 1.8 1.8 10.7

-1.8700000 1 1.8 1.8 12.5

-1.7900000 1 1.8 1.8 14.3

-1.6300000 1 1.8 1.8 16.1

-1.4500000 1 1.8 1.8 17.9

-.4800000 1 1.8 1.8 19.6

.3700000 1 1.8 1.8 21.4

.4000000 1 1.8 1.8 23.2

.4800000 1 1.8 1.8 25.0

.5000000 1 1.8 1.8 26.8

.6400000 1 1.8 1.8 28.6

.6800000 1 1.8 1.8 30.4

.7800000 1 1.8 1.8 32.1

.8700000 1 1.8 1.8 33.9

1.0300000 1 1.8 1.8 35.7

1.2600000 1 1.8 1.8 37.5

1.6200000 1 1.8 1.8 39.3

1.9100000 1 1.8 1.8 41.1

2.2100000 1 1.8 1.8 42.9

2.6300000 1 1.8 1.8 44.6

3.6900000 1 1.8 1.8 46.4

4.1500000 1 1.8 1.8 48.2

4.9800000 1 1.8 1.8 50.0

  40  
 
 5.5900000 1 1.8 1.8 51.8

5.9200000 1 1.8 1.8 53.6

6.2800000 1 1.8 1.8 55.4

6.5600000 1 1.8 1.8 57.1

6.7300000 1 1.8 1.8 58.9

6.9000000 1 1.8 1.8 60.7

7.6100000 1 1.8 1.8 62.5

8.3500000 1 1.8 1.8 64.3

8.5200000 1 1.8 1.8 66.1

9.3000000 1 1.8 1.8 67.9

9.4500000 1 1.8 1.8 69.6

9.7600000 1 1.8 1.8 71.4

9.9400000 1 1.8 1.8 73.2

10.1000000 1 1.8 1.8 75.0

10.3000000 1 1.8 1.8 76.8

10.4400000 1 1.8 1.8 78.6

11.8800000 1 1.8 1.8 80.4

12.1900000 1 1.8 1.8 82.1

12.8800000 1 1.8 1.8 83.9

14.0400000 1 1.8 1.8 85.7

16.5700000 1 1.8 1.8 87.5

19.1100000 1 1.8 1.8 89.3

22.0900000 1 1.8 1.8 91.1

25.2600000 1 1.8 1.8 92.9

25.3500000 1 1.8 1.8 94.6

28.3100000 1 1.8 1.8 96.4

29.1100000 1 1.8 1.8 98.2

48.3700000 1 1.8 1.8 100.0

Total 56 100.0 100.0

ROE

Cumulative
Frequency Percent Valid Percent Percent

  41  
 
 Valid -97.090000 1 1.8 1.8 1.8

-23.630000 1 1.8 1.8 3.6

-20.490000 1 1.8 1.8 5.4

-18.050000 1 1.8 1.8 7.1

-7.440000 1 1.8 1.8 8.9

-3.600000 1 1.8 1.8 10.7

-3.060000 1 1.8 1.8 12.5

-2.570000 1 1.8 1.8 14.3

-2.520000 1 1.8 1.8 16.1

-2.470000 1 1.8 1.8 17.9

-2.390000 1 1.8 1.8 19.6

-.770000 1 1.8 1.8 21.4

.370000 1 1.8 1.8 23.2

.480000 1 1.8 1.8 25.0

.500000 1 1.8 1.8 26.8

.640000 1 1.8 1.8 28.6

.810000 1 1.8 1.8 30.4

1.040000 1 1.8 1.8 32.1

1.280000 1 1.8 1.8 33.9

1.650000 1 1.8 1.8 35.7

1.820000 1 1.8 1.8 37.5

2.180000 1 1.8 1.8 39.3

5.330000 1 1.8 1.8 41.1

5.430000 1 1.8 1.8 42.9

6.120000 1 1.8 1.8 44.6

6.600000 1 1.8 1.8 46.4

7.040000 1 1.8 1.8 48.2

7.850000 1 1.8 1.8 50.0

7.960000 1 1.8 1.8 51.8

8.710000 1 1.8 1.8 53.6

10.260000 1 1.8 1.8 55.4

11.090000 1 1.8 1.8 57.1

11.110000 1 1.8 1.8 58.9

13.860000 1 1.8 1.8 60.7

  42  
 
 14.030000 1 1.8 1.8 62.5

16.070000 1 1.8 1.8 64.3

16.360000 1 1.8 1.8 66.1

16.790000 1 1.8 1.8 67.9

17.120000 1 1.8 1.8 69.6

17.720000 1 1.8 1.8 71.4

17.940000 1 1.8 1.8 73.2

19.490000 1 1.8 1.8 75.0

19.610000 1 1.8 1.8 76.8

20.540000 1 1.8 1.8 78.6

21.050000 1 1.8 1.8 80.4

22.460000 1 1.8 1.8 82.1

25.170000 1 1.8 1.8 83.9

25.770000 1 1.8 1.8 85.7

26.910000 1 1.8 1.8 87.5

27.470000 1 1.8 1.8 89.3

29.710000 1 1.8 1.8 91.1

29.820000 1 1.8 1.8 92.9

32.080000 1 1.8 1.8 94.6

36.350000 1 1.8 1.8 96.4

38.420000 1 1.8 1.8 98.2

54.360000 1 1.8 1.8 100.0

Total 56 100.0 100.0

Net_Profit

Cumulative
Frequency Percent Valid Percent Percent

Valid -48574000.000000000 1 1.8 1.8 1.8

-10532000.000000000 1 1.8 1.8 3.6

-8911000.000000000 1 1.8 1.8 5.4

-6405000.000000000 1 1.8 1.8 7.1

-5927000.000000000 1 1.8 1.8 8.9

-4302000.000000000 1 1.8 1.8 10.7

  43  
 
 -2310000.000000000 1 1.8 1.8 12.5

-2245000.000000000 1 1.8 1.8 14.3

-2146000.000000000 1 1.8 1.8 16.1

-1936000.000000000 1 1.8 1.8 17.9

-961000.000000000 1 1.8 1.8 19.6

134000.000000000 1 1.8 1.8 21.4

176000.000000000 1 1.8 1.8 23.2

182000.000000000 1 1.8 1.8 25.0

568000.000000000 1 1.8 1.8 26.8

744000.000000000 1 1.8 1.8 28.6

935000.000000000 1 1.8 1.8 30.4

1334000.000000000 1 1.8 1.8 32.1

1688000.000000000 1 1.8 1.8 33.9

1939000.000000000 1 1.8 1.8 35.7

2041000.000000000 1 1.8 1.8 37.5

2043000.000000000 1 1.8 1.8 39.3

2325000.000000000 1 1.8 1.8 41.1

2881000.000000000 1 1.8 1.8 42.9

5274000.000000000 1 1.8 1.8 44.6

8197000.000000000 1 1.8 1.8 46.4

12270000.000000000 1 1.8 1.8 48.2

13241000.000000000 1 1.8 1.8 50.0

14788000.000000000 1 1.8 1.8 51.8

18477000.000000000 1 1.8 1.8 53.6

29030000.000000000 1 1.8 1.8 55.4

37212000.000000000 1 1.8 1.8 57.1

59814000.000000000 1 1.8 1.8 58.9

73255000.000000000 1 1.8 1.8 60.7

74607000.000000000 1 1.8 1.8 62.5

78042000.000000000 1 1.8 1.8 64.3

82979000.000000000 1 1.8 1.8 66.1

102232000.000000000 1 1.8 1.8 67.9

184837000.000000000 1 1.8 1.8 69.6

185937000.000000000 1 1.8 1.8 71.4

  44  
 
 190687000.000000000 1 1.8 1.8 73.2

210072000.000000000 1 1.8 1.8 75.0

227826000.000000000 1 1.8 1.8 76.8

232268000.000000000 1 1.8 1.8 78.6

234563000.000000000 1 1.8 1.8 80.4

298235000.000000000 1 1.8 1.8 82.1

325415000.000000000 1 1.8 1.8 83.9

391791000.000000000 1 1.8 1.8 85.7

460028000.000000000 1 1.8 1.8 87.5

557303000.000000000 1 1.8 1.8 89.3

631936000.000000000 1 1.8 1.8 91.1

677136000.000000000 1 1.8 1.8 92.9

830376000.000000000 1 1.8 1.8 94.6

850389000.000000000 1 1.8 1.8 96.4

1049645000.000000000 1 1.8 1.8 98.2

1065643000.000000000 1 1.8 1.8 100.0

Total 56 100.0 100.0

Board

Cumulative
Frequency Percent Valid Percent Percent

Valid 1.00 1 1.8 1.8 1.8

4.00 3 5.4 5.4 7.1

5.00 8 14.3 14.3 21.4

6.00 5 8.9 8.9 30.4

7.00 7 12.5 12.5 42.9

8.00 2 3.6 3.6 46.4

9.00 11 19.6 19.6 66.1

10.00 6 10.7 10.7 76.8

11.00 7 12.5 12.5 89.3

12.00 4 7.1 7.1 96.4

13.00 2 3.6 3.6 100.0

Total 56 100.0 100.0

  45  
 
 LIQ

Cumulative
Frequency Percent Valid Percent Percent

Valid .020000 1 1.8 1.8 1.8

.420000 1 1.8 1.8 3.6

.500000 1 1.8 1.8 5.4

.540000 1 1.8 1.8 7.1

.570000 1 1.8 1.8 8.9

.670000 1 1.8 1.8 10.7

.810000 1 1.8 1.8 12.5

.880000 2 3.6 3.6 16.1

.890000 2 3.6 3.6 19.6

.930000 2 3.6 3.6 23.2

.960000 1 1.8 1.8 25.0

.970000 1 1.8 1.8 26.8

.980000 1 1.8 1.8 28.6

.990000 1 1.8 1.8 30.4

1.040000 1 1.8 1.8 32.1

1.080000 1 1.8 1.8 33.9

1.140000 2 3.6 3.6 37.5

1.150000 1 1.8 1.8 39.3

1.230000 1 1.8 1.8 41.1

1.290000 1 1.8 1.8 42.9

1.340000 1 1.8 1.8 44.6

1.450000 1 1.8 1.8 46.4

1.510000 1 1.8 1.8 48.2

1.520000 1 1.8 1.8 50.0

1.570000 1 1.8 1.8 51.8

1.640000 1 1.8 1.8 53.6

1.710000 1 1.8 1.8 55.4

1.760000 1 1.8 1.8 57.1

1.780000 1 1.8 1.8 58.9

1.960000 1 1.8 1.8 60.7

  46  
 
 2.000000 1 1.8 1.8 62.5

2.090000 1 1.8 1.8 64.3

2.150000 1 1.8 1.8 66.1

2.200000 1 1.8 1.8 67.9

2.320000 1 1.8 1.8 69.6

2.350000 1 1.8 1.8 71.4

2.380000 1 1.8 1.8 73.2

2.910000 1 1.8 1.8 75.0

3.020000 1 1.8 1.8 76.8

3.250000 1 1.8 1.8 78.6

3.350000 1 1.8 1.8 80.4

3.590000 1 1.8 1.8 82.1

3.610000 1 1.8 1.8 83.9

3.720000 1 1.8 1.8 85.7

4.280000 1 1.8 1.8 87.5

4.380000 1 1.8 1.8 89.3

4.480000 1 1.8 1.8 91.1

4.510000 1 1.8 1.8 92.9

4.590000 1 1.8 1.8 94.6

4.940000 1 1.8 1.8 96.4

5.970000 1 1.8 1.8 98.2

6.090000 1 1.8 1.8 100.0

Total 56 100.0 100.0

LEV

Cumulative
Frequency Percent Valid Percent Percent

Valid .0100000 1 1.8 2.1 2.1

.1000000 1 1.8 2.1 4.2

.1400000 1 1.8 2.1 6.3

.1700000 1 1.8 2.1 8.3

.4200000 1 1.8 2.1 10.4

1.6400000 1 1.8 2.1 12.5

1.8400000 1 1.8 2.1 14.6

  47  
 
 2.0100000 1 1.8 2.1 16.7

2.1300000 1 1.8 2.1 18.8

2.2300000 1 1.8 2.1 20.8

2.6600000 1 1.8 2.1 22.9

2.6900000 1 1.8 2.1 25.0

3.0500000 1 1.8 2.1 27.1

3.3200000 1 1.8 2.1 29.2

3.3300000 1 1.8 2.1 31.3

3.6100000 1 1.8 2.1 33.3

5.1400000 1 1.8 2.1 35.4

5.5800000 1 1.8 2.1 37.5

7.4600000 1 1.8 2.1 39.6

9.4400000 1 1.8 2.1 41.7

9.6600000 1 1.8 2.1 43.8

10.1100000 1 1.8 2.1 45.8

12.8200000 1 1.8 2.1 47.9

14.8400000 1 1.8 2.1 50.0

15.7200000 1 1.8 2.1 52.1

17.1100000 1 1.8 2.1 54.2

18.9500000 1 1.8 2.1 56.3

20.2700000 1 1.8 2.1 58.3

21.8800000 1 1.8 2.1 60.4

22.2500000 1 1.8 2.1 62.5

22.9800000 1 1.8 2.1 64.6

24.3700000 1 1.8 2.1 66.7

24.4100000 1 1.8 2.1 68.8

25.3600000 1 1.8 2.1 70.8

25.7800000 1 1.8 2.1 72.9

25.8900000 1 1.8 2.1 75.0

27.1300000 1 1.8 2.1 77.1

27.1600000 1 1.8 2.1 79.2

28.0000000 1 1.8 2.1 81.3

28.4800000 1 1.8 2.1 83.3

30.0000000 1 1.8 2.1 85.4

  48  
 
 31.0000000 1 1.8 2.1 87.5

31.8200000 1 1.8 2.1 89.6

32.5600000 1 1.8 2.1 91.7

32.9500000 1 1.8 2.1 93.8

55.0000000 1 1.8 2.1 95.8

64.8600000 1 1.8 2.1 97.9

101.6100000 1 1.8 2.1 100.0

Total 48 85.7 100.0

Missing System 8 14.3
Total 56 100.0

SIZE

Cumulative
Frequency Percent Valid Percent Percent

Valid 7.33000 1 1.8 1.8 1.8

7.56000 3 5.4 5.4 7.1

7.66000 1 1.8 1.8 8.9

7.73000 1 1.8 1.8 10.7

7.74000 1 1.8 1.8 12.5

7.83000 2 3.6 3.6 16.1

7.84000 1 1.8 1.8 17.9

7.86000 1 1.8 1.8 19.6

7.89000 1 1.8 1.8 21.4

8.02000 2 3.6 3.6 25.0

8.03000 1 1.8 1.8 26.8

8.06000 2 3.6 3.6 30.4

8.34000 2 3.6 3.6 33.9

8.35000 2 3.6 3.6 37.5

8.36000 1 1.8 1.8 39.3

8.45000 1 1.8 1.8 41.1

8.47000 1 1.8 1.8 42.9

8.57000 1 1.8 1.8 44.6

8.58000 1 1.8 1.8 46.4

8.59000 1 1.8 1.8 48.2

  49  
 
 8.61000 1 1.8 1.8 50.0

8.71000 1 1.8 1.8 51.8

8.83000 1 1.8 1.8 53.6

8.85000 1 1.8 1.8 55.4

8.86000 2 3.6 3.6 58.9

8.87000 1 1.8 1.8 60.7

8.94000 2 3.6 3.6 64.3

9.04000 1 1.8 1.8 66.1

9.13000 1 1.8 1.8 67.9

9.19000 1 1.8 1.8 69.6

9.22000 1 1.8 1.8 71.4

9.25000 1 1.8 1.8 73.2

9.26000 1 1.8 1.8 75.0

9.28000 2 3.6 3.6 78.6

9.30000 1 1.8 1.8 80.4

9.44000 2 3.6 3.6 83.9

9.46000 1 1.8 1.8 85.7

9.47000 1 1.8 1.8 87.5

9.54000 1 1.8 1.8 89.3

9.56000 1 1.8 1.8 91.1

9.58000 1 1.8 1.8 92.9

9.83000 1 1.8 1.8 94.6

9.93000 1 1.8 1.8 96.4

9.97000 1 1.8 1.8 98.2

10.01000 1 1.8 1.8 100.0

Total 56 100.0 100.0

EFF

Cumulative
Frequency Percent Valid Percent Percent

Valid .260000 1 1.8 1.9 1.9

.280000 1 1.8 1.9 3.8

.300000 1 1.8 1.9 5.8

.330000 1 1.8 1.9 7.7

  50  
 
 .340000 2 3.6 3.8 11.5

.450000 3 5.4 5.8 17.3

.460000 1 1.8 1.9 19.2

.480000 1 1.8 1.9 21.2

.490000 2 3.6 3.8 25.0

.510000 1 1.8 1.9 26.9

.540000 1 1.8 1.9 28.8

.550000 1 1.8 1.9 30.8

.560000 1 1.8 1.9 32.7

.640000 1 1.8 1.9 34.6

.650000 2 3.6 3.8 38.5

.690000 1 1.8 1.9 40.4

.750000 3 5.4 5.8 46.2

.770000 1 1.8 1.9 48.1

.870000 1 1.8 1.9 50.0

1.050000 1 1.8 1.9 51.9

1.120000 1 1.8 1.9 53.8

1.150000 2 3.6 3.8 57.7

1.270000 1 1.8 1.9 59.6

1.320000 1 1.8 1.9 61.5

1.400000 1 1.8 1.9 63.5

1.420000 1 1.8 1.9 65.4

1.520000 1 1.8 1.9 67.3

1.570000 1 1.8 1.9 69.2

1.610000 1 1.8 1.9 71.2

1.710000 1 1.8 1.9 73.1

1.730000 1 1.8 1.9 75.0

1.850000 1 1.8 1.9 76.9

1.960000 1 1.8 1.9 78.8

2.000000 1 1.8 1.9 80.8

2.180000 1 1.8 1.9 82.7

2.370000 1 1.8 1.9 84.6

3.880000 1 1.8 1.9 86.5

4.050000 1 1.8 1.9 88.5

  51  
 
 4.090000 1 1.8 1.9 90.4

4.140000 1 1.8 1.9 92.3

4.570000 1 1.8 1.9 94.2

4.720000 1 1.8 1.9 96.2

5.340000 1 1.8 1.9 98.1

5.650000 1 1.8 1.9 100.0

Total 52 92.9 100.0

Missing System 4 7.1
Total 56 100.0

PRODUCT

Cumulative
Frequency Percent Valid Percent Percent

Valid .000000 52 92.9 92.9 92.9

.010000 3 5.4 5.4 98.2

.030000 1 1.8 1.8 100.0

Total 56 100.0 100.0

OWN

Cumulative
Frequency Percent Valid Percent Percent

Valid 20.0000000 2 3.6 5.4 5.4

21.6300000 1 1.8 2.7 8.1

26.5000000 1 1.8 2.7 10.8

32.0000000 2 3.6 5.4 16.2

34.7200000 1 1.8 2.7 18.9

35.0000000 1 1.8 2.7 21.6

37.0000000 3 5.4 8.1 29.7

39.3600000 1 1.8 2.7 32.4

39.3700000 1 1.8 2.7 35.1

42.8700000 1 1.8 2.7 37.8

43.5800000 2 3.6 5.4 43.2

48.0000000 2 3.6 5.4 48.6

52.2200000 1 1.8 2.7 51.4

  52  
 
 55.0000000 3 5.4 8.1 59.5

55.7000000 1 1.8 2.7 62.2

56.0000000 1 1.8 2.7 64.9

61.5300000 1 1.8 2.7 67.6

66.5000000 1 1.8 2.7 70.3

68.0000000 1 1.8 2.7 73.0

77.8900000 2 3.6 5.4 78.4

86.5000000 1 1.8 2.7 81.1

89.0000000 3 5.4 8.1 89.2

92.5000000 2 3.6 5.4 94.6

99.0000000 1 1.8 2.7 97.3

99.2300000 1 1.8 2.7 100.0

Total 37 66.1 100.0

Missing System 19 33.9
Total 56 100.0

CORRELATIONS  
   /VARIABLES=ROA  ROE  Net_Profit  Board  LIQ  LEV  SIZE  EFF  PRODUCT  OWN  
   /PRINT=TWOTAIL  NOSIG  
   /MISSING=PAIRWISE.  

Correlations
Notes

Output Created 16-APR-2015 14:14:08

Comments
Input Data C:\Users\mona.elbannan\Documents\S
alma_CG.sav
Active Dataset DataSet0
Filter <none>
Weight <none>
Split File <none>
N of Rows in Working Data
56
File
Missing Value Handling Definition of Missing User-defined missing values are
treated as missing.

  53  
 
 Cases Used Statistics for each pair of variables are
based on all the cases with valid data
for that pair.
Syntax CORRELATIONS
/VARIABLES=ROA ROE Net_Profit
Board LIQ LEV SIZE EFF PRODUCT
OWN
/PRINT=TWOTAIL NOSIG
/MISSING=PAIRWISE.
Resources Processor Time 00:00:00.00

Elapsed Time 00:00:00.05

Correlations

ROA ROE Net_Profit Board LIQ LEV

** ** * **
ROA Pearson Correlation 1 .724 .541 .266 .533 -.062

Sig. (2-tailed) .000 .000 .048 .000 .673

N 56 56 56 56 56 48
** ** * **
ROE Pearson Correlation .724 1 .510 .205 .316 -.403
Sig. (2-tailed) .000 .000 .130 .018 .005
N 56 56 56 56 56 48
** **
Net_Profit Pearson Correlation .541 .510 1 .164 .104 .015
Sig. (2-tailed) .000 .000 .228 .447 .918
N 56 56 56 56 56 48
* **
Board Pearson Correlation .266 .205 .164 1 .347 -.232
Sig. (2-tailed) .048 .130 .228 .009 .112
N 56 56 56 56 56 48
** * ** **
LIQ Pearson Correlation .533 .316 .104 .347 1 -.387
Sig. (2-tailed) .000 .018 .447 .009 .007
N 56 56 56 56 56 48
** **
LEV Pearson Correlation -.062 -.403 .015 -.232 -.387 1
Sig. (2-tailed) .673 .005 .918 .112 .007
N 48 48 48 48 48 48
** ** **
SIZE Pearson Correlation .402 .468 .737 .216 -.170 .179
Sig. (2-tailed) .002 .000 .000 .110 .211 .222
N 56 56 56 56 56 48
** ** ** *
EFF Pearson Correlation .390 .387 .418 .292 .108 .072

  54  
 
 Sig. (2-tailed) .004 .005 .002 .035 .446 .628
N 52 52 52 52 52 48
* c
PRODUCT Pearson Correlation -.135 -.079 -.141 -.310 -.080 .
Sig. (2-tailed) .320 .562 .301 .020 .556 .000
N 56 56 56 56 56 48
** ** *
OWN Pearson Correlation -.488 -.522 -.418 -.152 -.207 .224

Sig. (2-tailed) .002 .001 .010 .368 .219 .225

N 37 37 37 37 37 31

Correlations

SIZE EFF PRODUCT OWN

** ** **
ROA Pearson Correlation .402 .390 -.135 -.488

Sig. (2-tailed) .002 .004 .320 .002

N 56 52 56 37
** ** **
ROE Pearson Correlation .468 .387 -.079 -.522
Sig. (2-tailed) .000 .005 .562 .001
N 56 52 56 37
** ** *
Net_Profit Pearson Correlation .737 .418 -.141 -.418
Sig. (2-tailed) .000 .002 .301 .010
N 56 52 56 37
* *
Board Pearson Correlation .216 .292 -.310 -.152
Sig. (2-tailed) .110 .035 .020 .368
N 56 52 56 37
LIQ Pearson Correlation -.170 .108 -.080 -.207
Sig. (2-tailed) .211 .446 .556 .219
N 56 52 56 37
c
LEV Pearson Correlation .179 .072 . .224
Sig. (2-tailed) .222 .628 .000 .225
N 48 48 48 31
** ** **
SIZE Pearson Correlation 1 .461 -.383 -.470
Sig. (2-tailed) .001 .004 .003
N 56 52 56 37
** c *
EFF Pearson Correlation .461 1 . -.435
Sig. (2-tailed) .001 .000 .011
N 52 52 52 33
** c
PRODUCT Pearson Correlation -.383 . 1 .030

  55  
 
 Sig. (2-tailed) .004 .000 .858
N 56 52 56 37
** *
OWN Pearson Correlation -.470 -.435 .030 1

Sig. (2-tailed) .003 .011 .858

N 37 33 37 37

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).
c. Cannot be computed because at least one of the variables is constant.

REGRESSION  
   /MISSING  LISTWISE  
   /STATISTICS  COEFF  OUTS  R  ANOVA  COLLIN  TOL  CHANGE  
   /CRITERIA=PIN(.05)  POUT(.10)  
   /NOORIGIN  
   /DEPENDENT  ROE  
   /METHOD=ENTER  Board  OWN  LIQ  LEV  SIZE  EFF  PRODUCT  
   /RESIDUALS  DURBIN.  

Regression
Notes

Output Created 16-APR-2015 14:20:48

Comments
Input Data C:\Users\mona.elbannan\Documents\S
alma_CG.sav
Active Dataset DataSet0
Filter <none>
Weight <none>
Split File <none>
N of Rows in Working Data
56
File
Missing Value Handling Definition of Missing User-defined missing values are
treated as missing.
Cases Used Statistics are based on cases with no
missing values for any variable used.

  56  
 
 Syntax REGRESSION
/MISSING LISTWISE
/STATISTICS COEFF OUTS R
ANOVA COLLIN TOL CHANGE
/CRITERIA=PIN(.05) POUT(.10)
/NOORIGIN
/DEPENDENT ROE
/METHOD=ENTER Board OWN LIQ
LEV SIZE EFF PRODUCT
/RESIDUALS DURBIN.
Resources Processor Time 00:00:00.00

Elapsed Time 00:00:00.06

Memory Required 3580 bytes

Additional Memory Required

0 bytes
for Residual Plots

Warnings

For models with dependent variable ROE, the following variables are constants or have
missing correlations: PRODUCT. They will be deleted from the analysis.

a
Variables Entered/Removed

Variables Variables
Model Entered Removed Method

1 EFF, LEV,
Board, SIZE, . Enter
b
LIQ, OWN

a. Dependent Variable: ROE

b. All requested variables entered.

b
Model Summary

Change Statistics

Adjusted R Std. Error of the R Square

Model R R Square Square Estimate Change F Change df1
a
1 .957 .915 .894 7.860705454 .915 43.202 6

  57  
 
 b
Model Summary

Change Statistics

Model df2 Sig. F Change

1 24 .000 1.608

a. Predictors: (Constant), EFF, LEV, Board, SIZE, LIQ, OWN

b. Dependent Variable: ROE

a
ANOVA

Model Sum of Squares df Mean Square F Sig.

b
1 Regression 16017.071 6 2669.512 43.202 .000

Residual 1482.977 24 61.791

Total 17500.047 30

a. Dependent Variable: ROE

b. Predictors: (Constant), EFF, LEV, Board, SIZE, LIQ, OWN

a
Coefficients

Standardized Collinearity
Unstandardized Coefficients Coefficients Statistics

Model B Std. Error Beta t Sig. Tolerance

1 (Constant) -208.771 26.644 -7.836 .000

Board -.647 .591 -.079 -1.095 .284 .686

OWN .126 .078 .132 1.623 .118 .533

LIQ .145 1.499 .008 .097 .924 .559

LEV -.962 .089 -.777 -10.774 .000 .679

SIZE 25.543 2.746 .743 9.301 .000 .554

EFF 2.774 1.143 .184 2.427 .023 .616

a
Coefficients

Collinearity Statistics

Model VIF

1 (Constant)

Board 1.458

OWN 1.877

  58  
 
 LIQ 1.788

LEV 1.473

SIZE 1.805

EFF 1.624

a. Dependent Variable: ROE

a
Collinearity Diagnostics

Variance Proportions

Model Dimension Eigenvalue Condition Index (Constant) Board OWN LIQ

1 1 5.592 1.000 .00 .00 .00 .00

2 .724 2.778 .00 .00 .01 .04

3 .417 3.661 .00 .00 .04 .01

4 .131 6.531 .00 .00 .10 .65

5 .080 8.382 .00 .08 .50 .18

6 .055 10.106 .01 .91 .00 .10

7 .002 60.259 .99 .00 .35 .02

a
Collinearity Diagnostics

Variance Proportions

Model Dimension LEV SIZE EFF

1 1 .01 .00 .01

2 .27 .00 .07

3 .19 .00 .36

4 .41 .00 .31

5 .00 .01 .21

6 .05 .01 .00

7 .07 .98 .05

a. Dependent Variable: ROE

a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value -92.55236053 40.65089798 6.58290323 23.106327325 31

Residual -15.506498337 14.821114540 .000000000 7.030828698 31
Std. Predicted Value -4.290 1.474 .000 1.000 31

  59  
 
 Std. Residual -1.973 1.885 .000 .894 31

a. Dependent Variable: ROE

REGRESSION  
   /MISSING  LISTWISE  
   /STATISTICS  COEFF  OUTS  R  ANOVA  COLLIN  TOL  CHANGE  
   /CRITERIA=PIN(.05)  POUT(.10)  
   /NOORIGIN  
   /DEPENDENT  ROA  
   /METHOD=ENTER  Board  OWN  LIQ  LEV  SIZE  EFF  PRODUCT  
   /RESIDUALS  DURBIN.  

Regression
Notes

Output Created 16-APR-2015 14:21:40

Comments
Input Data C:\Users\mona.elbannan\Documents\S
alma_CG.sav
Active Dataset DataSet0
Filter <none>
Weight <none>
Split File <none>
N of Rows in Working Data
56
File
Missing Value Handling Definition of Missing User-defined missing values are
treated as missing.
Cases Used Statistics are based on cases with no
missing values for any variable used.
Syntax REGRESSION
/MISSING LISTWISE
/STATISTICS COEFF OUTS R
ANOVA COLLIN TOL CHANGE
/CRITERIA=PIN(.05) POUT(.10)
/NOORIGIN
/DEPENDENT ROA
/METHOD=ENTER Board OWN LIQ
LEV SIZE EFF PRODUCT
/RESIDUALS DURBIN.

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 Resources Processor Time 00:00:00.03

Elapsed Time 00:00:00.11

Memory Required 3580 bytes

Additional Memory Required

0 bytes
for Residual Plots

Warnings

For models with dependent variable ROA, the following variables are constants or have
missing correlations: PRODUCT. They will be deleted from the analysis.

a
Variables Entered/Removed

Variables Variables
Model Entered Removed Method

1 EFF, LEV,
Board, SIZE, . Enter
b
LIQ, OWN

a. Dependent Variable: ROA

b. All requested variables entered.

b
Model Summary

Change Statistics

Adjusted R Std. Error of the R Square

Model R R Square Square Estimate Change F Change df1
a
1 .866 .751 .688 5.4221649039 .751 12.037 6

b
Model Summary

Change Statistics

Model df2 Sig. F Change

1 24 .000 1.489

a. Predictors: (Constant), EFF, LEV, Board, SIZE, LIQ, OWN

b. Dependent Variable: ROA

a
ANOVA

  61  
 
 Model Sum of Squares df Mean Square F Sig.
b
1 Regression 2123.286 6 353.881 12.037 .000

Residual 705.597 24 29.400

Total 2828.883 30

a. Dependent Variable: ROA

b. Predictors: (Constant), EFF, LEV, Board, SIZE, LIQ, OWN

a
Coefficients

Standardized Collinearity
Unstandardized Coefficients Coefficients Statistics

Model B Std. Error Beta t Sig. Tolerance

1 (Constant) -74.352 18.379 -4.046 .000

Board -.008 .408 -.002 -.019 .985 .686

OWN .014 .054 .038 .270 .790 .533

LIQ 3.617 1.034 .477 3.498 .002 .559

LEV .005 .062 .011 .089 .930 .679

SIZE 7.992 1.894 .578 4.219 .000 .554

EFF 1.294 .789 .213 1.641 .114 .616

a
Coefficients

Collinearity Statistics

Model VIF

1 (Constant)

Board 1.458

OWN 1.877

LIQ 1.788

LEV 1.473

SIZE 1.805

EFF 1.624

a. Dependent Variable: ROA

a
Collinearity Diagnostics

Model Dimension Eigenvalue Condition Index Variance Proportions

  62  
 
 (Constant) Board OWN LIQ

1 1 5.592 1.000 .00 .00 .00 .00

2 .724 2.778 .00 .00 .01 .04

3 .417 3.661 .00 .00 .04 .01

4 .131 6.531 .00 .00 .10 .65

5 .080 8.382 .00 .08 .50 .18

6 .055 10.106 .01 .91 .00 .10

7 .002 60.259 .99 .00 .35 .02

a
Collinearity Diagnostics

Variance Proportions

Model Dimension LEV SIZE EFF

1 1 .01 .00 .01

2 .27 .00 .07

3 .19 .00 .36

4 .41 .00 .31

5 .00 .01 .21

6 .05 .01 .00

7 .07 .98 .05

a. Dependent Variable: ROA

a
Residuals Statistics

Minimum Maximum Mean Std. Deviation N

Predicted Value -4.395486832 23.450757980 6.563225806 8.4128586967 31

Residual -8.7444705963 8.3517131805 .0000000000 4.8497317242 31
Std. Predicted Value -1.303 2.007 .000 1.000 31
Std. Residual -1.613 1.540 .000 .894 31

a. Dependent Variable: ROA

  63  
 
Declaration  
 
 
I herewith declare that this report is in full accordance with the Plagiarism Guidelines of the
Faculty of Management & Technology at the GUC.

Signature

ID
 

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