The determinants of corporate governance quality in Thailand

The Asian Financial Crisis prompted the adoption of Anglo-American corporate governance based models without consideration of the appropriateness of the adoption of a ‘one rule fits all’ approach for diverse jurisdictions such as Thailand. In March 2002, the Stock Exchange of Thailand introduced a Corporate Governance Code for Thai listed companies consisting of 15 principles. Thai companies are obliged to disclose their implementation of the Code annually on a “comply-or-explain” basis (Kouwenberg, 2006). The lack of mandated compliance with the Code has resulted in variations in the quality of corporate governance practice in Thai companies. This study investigates whether differences in firm-specific characteristics are able to explain this variation in the context of a developing country, Thailand.
In this study, the analysis of the quality of corporate governance practice and its relationships with firm-specific characteristics is based on corporate governance survey results conducted by the Thai Institute of Directors (IOD). This organisation rates the corporate governance practices of all listed companies as ‘Excellent’, ‘Good’, or ‘Poor’ which provides an objective and external source of a measure of corporate governance quality in Thailand. This study examined three groups of explanatory variables: performance-related, firm-structure and corporate ownership variables. This study found firm size (total assets), industry classification – financial and services industries and Big-Four auditors to be positively associated with high quality corporate governance in Thailand.