Экономические науки/6.Маркетинг и Менеджмент

Zhumalina Angelina Asylbekovna

Kazakh National University named after Al-Farabi

Corporate governance effects on company performance indicators

Interests of Kazakhstan companies in the international market are extensive, but for effective integration into the international business requires more transparency of Kazakhstan companies from the perspective of corporate governance principles. For International Partners it is important to clearly understand who they are dealing with, what goals established by top management, which relationships are built with the financial stakeholders how completely and reliably going disclosure of information about company.

The main benchmark for stakeholders in a line with established practice acts a company management - international standards of corporate governance, which represent an organizational model that allows the company to protect the interests of its shareholders, customers and investors, as well as implementing a responsibility to the state and the public.

To assess the existing corporate governance practices in company on the compliance with international standards is used corporate governance rating, which is an independent assessment of the relative pros and cons of corporate governance practices in terms of interests of stakeholders.

The influence of corporate governance rating on the developing of the company is studied by Kazakh and foreign authors quite a long time.

Depending on that assess the effectiveness of the company's development is possible to distinguish two groups of indicators:

- Indicators of operational efficiency;

- Indicators of valuation.

Within the framework operating indicators, the impact of corporate governance rating can be assessed through financial ratios:

- Return on Equity, ROE;

- Net Profit Margin;

- Return on Assets, ROA [1].

Despite widespread research on the relationship between the quality of corporate governance and performance of its operating efficiency, to date, has not been proven a direct dependence of influence of corporate governance rating on the company's operating performance.

This can be explained by the fact that the current top management in Kazakh companies still do not focus their actions on the ensuring strategic effectiveness, and solves the problem of a lower order. In addition, all corporate decisions taken by governing bodies , implementing with a significant time delay, so objectively evaluate the current rating of corporate governance can only be analyzing the performance indicators that the company will achieve in the future. Given the fact that the impact of corporate governance rating is difficult to directly link to the operating performance, most of the authors are inclined to favor of using indicators of valuation to determine the impact of corporate governance rating on the efficiency of the company's development.

The cost valuation is based on the concept of VBM (Value Based Management), and assumes that corporate governance - a set of tools for monitoring and control, therefore, the better control and more effective corporate governance, the higher the rating assigned by rating agencies and higher cost of the company [3].

Within the concept of VBM is possible to allocate the following indicators which are used to assess the impact of corporate governance rating on the effectiveness of the company's development:

- An indicator of economic value added (EVA);

- An indicator of shareholder value added (SVA);

- Cash value added (CVA).

Based on submissions indicators are formed mathematical models that include a variety of operational indicators, as well as variable coefficients allowing to estimate the impact of corporate governance rating on cost of the company. Great importance of using these models are time for data collection and it's reliability.

Unfortunately, in the Republic of Kazakhstan to analyze the dynamics of cost of the company is only possible to a short time interval so the use of cost models to assess the impact of corporate governance rating have not received yet a substantial distribution. In the future, when the Kazakh the company will accumulate more statistical data, the role of cost models will certainly increase.

Due to the impossibility of an accurate assessment of influence of corporate governance rating on the performance indicators of the company, using only the operating indicators or cost models, is proposed to assess the impact of corporate governance rating through the achievement of strategic indicators.

When a company enters to the international market top management create the list of strategic goals and objectives that will be achieved through a certain period of time.

Therefore the higher the level of corporate governance (rating), the higher the work effectiveness of senior management, consequently increasing probability that the company will achieve its strategic goals in the international market.

The result of achieving the strategic goals of the company in the international market is almost always an increase in income, with the result that reflects the improvement in performance, expressed in operating performance, such as profit and profitability. Should also note that a change in operating indicators going with a time delay, so the study of the influence of corporate governance rating on the performance indicators of the company should be studied taking into account the time lag - a minimum of one year.

In order to improve the effectiveness and reliability of the assessment of the impact of corporate governance rating on the performance indicators of Kazakhstani companies entering the international markets, it is proposed to use alternative models that integrate the strategic objectives, as well as financial and non-financial indicators into a single model.

One of the most presently known models that allow for the integration of such indicators is the model of R.Coplan and D. Norton - «Balanced Scorecard». [4]

The distinctive feature of model «Balanced Scorecard» is an approach in which financial performance - is happened events, so they are not used to achieve long-term objectives. In this approach, the effectiveness of the company is estimated taking into account the strategic goals, ie, using the principle of "where the company is now" and "where the company should be tomorrow."

This allows  to link to single model the three key factors of success of company:

- Corporate Governance (the effectiveness a company governance);

- Strategic objectives (effectiveness of the company in the international market);

- The achievement of strategic objectives (effectiveness development of the company).

«Balanced Scorecard» implies that each level of management in the company developed its own performance indicators, and their number does not exceed 5-10 indicators, which allows top management to concentrate on achieving the most important ones.

The result of the study is that the use of «Balanced Scorecard» allows you to link to a single model, all factors affecting on corporate governance rating, which will allow top management to coordinate their actions to achieve the strategic goals and objectives based on the internationally accepted principles of corporate governance. As a result, top management will be focused on the achievement of strategic indicators, the company's employees are focused on the execution of tactical actions within a single strategic objective, which will form a clear corporate governance structure and thereby increase the rating of corporate governance, as well as high growth in operating indicators characterizing the efficiency of financial performance.

estimate the quality of corporate governance by international rating companies. Obtaining of international rating of corporate governance  allows investors and partners trust local companies in the international market.

As a result rating assignment corporate governance structure of the company's management based on the international principles of corporate governance that is able to attract more investment and create additional shareholder value. In order to assess the impact of rating of corporate governance  on changing of company performance, there is currently insufficient to use only financial indicators, as the range of changes occurring with the company as a result of the international rating is vast. This requires a comprehensive model, such as «Balanced Scorecard» will explore the changing set of various factors within the strategic goals and objectives of the company.

References

1. Kazakhstan Economic Trends, April-June 2000

2. Natalia N. Diugai, On capital flight from Kazakhstan, Kazakhstan Economic Trends, April-June 2000

2. Idrisov E., Kazakhstan’s Investment Climate is Still Attractive, Investor, January 2000, Almaty

3. Marchenko G., Foreign Direct Investment in Kazakhstan: Opportunities and Risks, Continent #8 (21), 19.04-02.05, 2000)