Improving Performance in New Zealand's Public Corporations: The Effect of Governance Practices



This article examines whether the corporate governance practices recommended by the New Zealand Securities Commission (NZSC) in 2004 have affected the financial performance of public sector corporate entities in New Zealand. The findings indicate that these entities have universally adopted the Securities Commission recommendations by establishing subcommittees for audit and remuneration, and having a majority of independent directors on the boards. The results show that leverage has a statistically significant positive effect on all performance measures. Both the Remuneration Committee and dividend payout have positive effects on performance when measured by sales to total assets. Board size and an Audit Committee have a positive effect on reducing agency cost. Results also show that entity risk and industry type also have a positive effect on performance and agency cost reduction. Entity size has a consistent negative effect across all performance measures.