Author(s): Krittayakamon Thanispong, Pattanant Petchchedchoo, Siridech Kumsuprom
This research aims to investigate the influence of foreign ownership, foreign board members, earnings management on the performance of 11 Thai commercial banks listed on the Stock Exchange of Thailand. Data was collected from 2013 to 2020 utilizing the Structural Equation Modeling (SEM) statistics, path analysis, and data analysis. The results revealed that foreign ownership has a positive influence on foreign boards. Consistently with the Agency theory, when foreign investors invest, a representative is frequently assigned to carry out different responsibilities in order to maintain the interests of the invested business and oversee its performance. The foreign board has a positive influence on the performance as measured by the CAMELS financial ratio. Having a foreign board allows for efficient management resulting in better operating performance. The foreign shareholder structure that negatively influences earnings management show that foreign investors holding shares in the banks will lead to monitoring the operations of the executives or the management to prevent the executives from acting for their own benefits. It was viewed as a cause of lower earnings management. Earnings management negatively influences the performance measured by the CAMELS financial ratios. The findings implied that executives engaging in any action in earnings management will result in lower financial performance.
In addition, a causal pathway analysis that influences performance has shown that foreign ownership influences the performance as measured by CAMELS financial ratios through foreign committees and earnings management. It shows that when banks have foreign ownership holding shares and have foreign boards, they can bring their knowledge, expertise, competencies and experience to maintain in power and protect their interests, which include monitoring and preventing executives from acting on earnings management, resulting in reduced earnings management and improved performance.