Corporate control, corporate governance and firm performance in New Zealand

This study sets out to investigate the ownership structure of non-financial companies in New Zealand, undertaking an empirical investigation into the effects of ownership structure on both corporate governance and firm performance. In the decade prior to 1984, the New Zealand economy had been characterised by one of the slowest rates of real economic growth in the OEDC region, serious and persistent balance of payments current account deficits, a large rise in unemployment, and also a relatively high rate of inflation. The change in its business and financial environment in the mid-1980s, however, paved the way for New Zealand to become a more open economy. This study demonstrates that the New Zealand model of corporate governance is characterised by a high degree of minority ownership, which is unique and inconsistent with the Berle and Means' postulation of modern corporations with widely dispersed ownership structures. The empirical results also support the notion of the existence of a systematic pattern of differences in both Return on Equity and Sales/Asset ratios among three control groups, majority-controlled, minority-controlled, and management-controlled firms. The results supplement the US-based literature on ownership structure by illustrating that internal governance mechanism can play a role in corporate performance, and that the legislative and regulatory environment may affect this role.