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CORPORATE GOVERNANCE AND COMPETITIVE ADVANTAGE

AMONG REMITTANCES IN TAGUM CITY

A Thesis
Presented to
The Thesis Committee
College of Business Administration
UM Tagum College, Tagum City

In Partial Fulfillment
Of the Requirements for the Degree
Bachelor of Science in Business Administration
Major in Financial Management

BEENAMAE S. HERSALIA
ANGEL A. MEGABON
CLIFORD JAY M. PRESORES

March 2018
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Chapter 1

INTRODUCTION

Rationale

Generally, East German economy has been tested to be changed from

a midway arranged economy to an aggressive market economy with

indistinguishable way of life from in West Germany. The general goal has

been to close the gigantic financial hole between East German and West

German states at the earliest opportunity with help from government state

specialists, the corporate division and the saving money area. The banks

have been asked to finance the transformation of formerly state owned East

German firms and the foundation and growth of new firms. Since many firms

closed down, the financing of new, small and medium-sized enterprises

(SMEs) plays a key role for the catching-up of the East German economy. It is

a stylized fact that in a market economy, a large number of jobs arise from

SMEs, while simultaneously many jobs are destroyed by closedowns of SMEs

(Davis et al., 1996). Credit restrictions have been one of the highest

impediments to firm foundations in East Germany (Steil, 1998). Many SMEs in

East Germany complained of serious financing confinements in view of

lacking value capital and a low ability of banks to concede credits (Hummel

and Ludwig, 1994).

In the Philippines banking history, since the establishment of the

Central Bank (CB) in 1949, is littered with bank runs and bank failures. As the

number of banks increased substantially in the 1960s, banking problems

became more pronounced. In 1981, the financial system experienced a

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severe liquidity crisis that had greatly shaken the public's confidence in the

financial system. But this turned out to be only a prelude to a much bigger

problem that appeared in 1983 when the economy was struck by a balance-

of- payments crisis. It is by far the worst balance-of-payments crisis in

Philippine history, and it occurred at a time when political situation had

reached its lowest ebb. This paper attempts to describe and analyses the

extent of problems in the Philippine financial system, their causes, regulatory

and supervisory responses to such problems, and the incidence of the cost of

bank failures. It is hoped that results of this study can provide lessons useful

in formulating policies and measures to deal with the problems of the financial

system (Lamberte, 1989).

In Region XI, it has been observed that remittances if not decreases in

number have failed to sustain their business operation due to the lack of

establish and strong corporate governance. This prompted the researcher to

conduct a study on corporate governance and competitive advantage among

remittances in Tagum City.

As presented in the review related literature the researchers have not

found any researcher studies in local setting specifies the corporate

governance and competitive advantage. This motivates the researcher to

investigate if there is relationship between corporate governance and

competitive advantage among remittances in Tagum City.

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Research Objectives

This study was conducted to find out the relationship between

corporate governance and competitive advantage among remittances in

Tagum City. More specifically, the study was conducted to sought answers to

the following objectives:

1. To assess the corporate governance among remittances in Tagum

City in terms of:

1.1 Consistency;

1.2 Responsibility;

1.3 Accountability;

1.4 Fairness;

1.5 Transparency; and

1.6 Effectiveness.

2. To find out the competitive advantage among remittances in Tagum

City in terms of:

2.1 Valuable;

2.2 Rare;

2.3 Inimitable; and

2.4 Non-Substitutable.

3. To determine the significant relationship between corporate

governance and competitive advantage among remittances in Tagum City.

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Hypothesis

The hypothesis of the study was tested at 0.05 level of significance

stating that there is no significant relationship between corporate governance

and competitive advantage among remittances in Tagum City, and there is no

domain in corporate governance significantly in competitive advantage among

remittances in Tagum City.

Review of Related Literature

Theories, concepts, facts, information, views and readings related to

corporate governance and competitive advantage among remittances in

Tagum City are presented in this section.

Corporate Governance

Corporate governance refers to the system through which the behavior

of a company is monitored and controlled. The significance of corporate

administration is that in present day economies substantial partnerships are

ordinarily connected with a division of work between the gatherings who give

the capital (i.e., investors) and the gatherings who deal with the assets (i.e.,

administration). Conflict of interest among the two groups might lead to

unsatisfactory monitoring of the administrative, sub-optimal levels of

investment in the firm, or some shareholders being stolen. In these scenarios

shareholders might be hurt if there are not sufficient means to guarantee that

the company is properly monitored (Cadbury, 2010).

Corporate governance has been at the cutting edge of discussion of the

financial services for a considerable length of time. Major failures in the

business world, from Enron to Lehman Brothers, have been considered as,

among other things, failures of corporate governance. As a result, in order for

a financial institution to compete on global scale investors, regulators, and

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consumers must have faith that the solid corporate governance principles are

fixed in the institutions essential. At its core, corporate governance is a set of

promises made by a corporation, and those that make the decisions for a

corporation, to the corporation’s stakeholders. It can be viewed as a system of

law, contracts, and social norms that govern the structure by which

corporations make decisions. Corporate governances are a defining feature in

organizations where the decision makers, naturally directors, are separated

from actual ownership of the corporation (Emily Samra, 2016).

Corporate governance mechanisms are so undeveloped as to

substantially retard the flow of external capital to firms. In less developed

countries, including some of the transition economies, corporate governance

mechanisms are practically non-existent. In Russia the weakness of corporate

governance mechanisms leads to significant diversion of asset by managers

of many transferred firms, and the virtual non-existence of external capital

supply to firms (boycko, Sleifer and Vishny, 2013).

Corporate governance can be divided into two senses. Firstly, in thinner

sense corporate governance can be defined as a formal system of

accountability of senior management to the shareholders. Secondly, in

extensive term, corporate governance includes the entire network of formal

and informal relations connecting the corporate sector and their

consequences for society in general. If we refer to early academic discussion

on corporate governance in the case of United States, it is found that the

function of corporate governance is concentrated on the merits of

multinational merger and the hostile takeover as mechanism for controlling

agency costs. It evolves into other areas of the role of institutional investors as
 6

corporate monitor and to control managerial shirking and more generally to

maximize shareholder’s value (Choudury, M, A. and Hoque, M. Z, 2010).

Corporate governance has to do with those legal and organizational

structures that look after the internal integrity of a corporation. The suggestion

here is that a company is an association and hence an organization. It is

along these lines a heap of agreements and guidelines under which it

capacities, is legitimated by lawful sanctioning and secured by the lawful

principles of any legislature and state. The implications of such legal

obligations and protection may be limited nationally or extended

internationally under agreed upon globalization rules. The very first objective

of corporate governance is to define and attain an objective standard by

means of understanding the relations between serious variables supported by

policies, programs and strategic partnerships. The last guide leads toward the

assurance of rules of action, policies and strategies by methods for

institutional accord and the activity of legitimate instruments as required by

the sort of partnership in real life. Thus there are three stages elaborate in the

determination of the basis of corporate governance. First, there is the

collective formulation of objective criteria. In view of the complex nature of

networking in corporate governance there must predictably be multiple

objective criteria interlinked in some reasonable way (Arrow, Kj, 2011).

Corporate governance plays a role in long-run tax management and

contributes to the existing literature in numerous ways. First, we add

perception into the horizon problems related to managerial and director

compensation and show that incentive compensation provides long-term

encouragements to improve performance by creating a link between higher

pay-performance sensitivity and lower taxes. Second, this is one of the first
 7

papers, to our knowledge, to empirically observe the role of governance in

corporate tax management from a long-term perspective in order to better

understand the lasting effects of governance. We find that incentive payment

drives managers to make investments into longer-horizon pay outs such as

tax management. Moreover, we find that this investment into tax management

benefits shareholders; better tax management is positively related to higher

returns to shareholders. We also address the indigeneity issues of corporate

governance and performance methods. Finally, our paper is unique in

examining which type of tax management strategy (domestic or foreign)

different firms focus on. Our results shed light into how governance can

improve firm performance and increase shareholder value in the long run

(Anat R. Admati, 2017).

Corporate governance has received much attention in recent years,

partly due to the Asian financial crisis. We review the writing on corporate

governance issues in Asia to create area particular and general exercises.

Much consideration has been given to poor corporate area execution,

however most examinations don't recommend that Asian firms were severely

run. The literature does confirm the limited protection of smaller rights in Asia,

allowing controlling shareholders to take minority shareholders. Agency

problems have been impaired by low corporate transparency, associated with

rent-seeking and relationship-based transactions, general group structures

and expansion, and risky financial structures. The controlling shareholder

bears some of agency costs in the form of share price discounts and

expenditures on monitoring, bonding and reputation building (La Porta et.al,

2010).
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Research on corporate governance makes assumptions and draws

inferences regarding the role of institutional investors. However, we have

minimal direct information in regards to how institutional financial specialists

connect with portfolio organizations in light of the fact that a large number of

these communications happen behind the scenes. That is, except institutions

publicly express their approval or disapproval of a firm’s activities or

management, little is known about their preferences and private engagements

with portfolio firms. Our goal in this paper is to correct this knowledge gap by

conducting a survey among institutional investors (Burr, Barry, 2012).

Corporate governance is the means by which smaller shareholders are

protected from expropriation by managers or monitoring shareholders.

Corporate governance could become more critical in a financial crisis for two

reasons. First, expropriation of minority shareholders could become more

severe during a crisis. JBBF (2000a) argue that a crisis can lead to greater

expropriation because managers are led to appropriate more as the expected

return on investment falls. Second, a crisis could force investors to identify

and take account of weaknesses in corporate governance that happened all

along. Argue that investors ignored weaknesses of East Asian firms while the

region was doing well economically, but quickly pulled out once the crisis

began because they believed the region lacked adequate institutional

protection for their investments. For both of these reasons, firms with weaker

corporate governance could have lost moderately more value during the crisis

(Rajan, R., Zingales, L., 2014).

Since corporate governance brings such a wide variety of explanations,

it seems appropriate to begin by setting out the approach generally agreed in

the volume. Here it is assumed that an effective system of corporate

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governance has two requirements, one micro and one macro: at the micro

level it needs to ensure that the firm, as a productive institution, functions in

pursuit of its objectives. Therefore, if we follow the traditional Anglo-American

conception of the firm as a device to further the well-being of its owner–

shareholders, good governance is a matter of ensuring that decisions are

taken and implemented in pursuit of shareholder value. Significantly, this

includes activities that accommodate the need to secure the drawback hazard

to investors (that is, responsibility of directors) and to urge chiefs to go out on

a limb to expand investor esteem (that is, urge administrators to act

innovatively (Keasey, K. and Wright, M, 2010).

Corporate governance deals with the mechanisms that ensure

investors in corporations get a return on their investments. Corporate

governance varies widely across countries and across firms. Better

governance allows firms to get to capital markets on better terms, or, in other

words firms targeting to raise reserves. We would accordingly expect that

organizations arranging will get to capital markets—particularly firms with

important development openings that can't be financed inside—to hold

instruments that submit them to better administration (Shleifer and

Vishny,2013).

These statement on corporate governance by driving approach making

bodies are specifically imitated in the predominant scholarly school of thought

on corporate administration—'office hypothesis'— which, for every one of its

disparities and refinements, at last observes corporate administration as 'a

strategy to affirm that financial specialists get themselves an arrival. However,

while stakeholder theory embraces a broader set of corporate constituencies,

these actors are still integrated into corporate governance arrangements on

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the basis of firms’ contractual (employees, creditors, suppliers) or non-

contractual responsibilities (affected communities, government, interest

groups), and remain secondary to shareholder interests (Post et al. Friedman

and Miles 2011).

Competitive Advantage

Competitive advantage can be achieved through internal resources or

a group of internal resources from the firm. However, to obtain this advantage,

the resources must be valuable, exploring the opportunities and neutralizing

threats to the environment of the firm; rare, not being present in any rival or

potential rival company; inimitable, so that others cannot imitate them; non-

substitutable, meaning they do not have strategic equivalents (Barney, 1991).

Inside the field of bibliometric, there is maintained enthusiasm for how

countries "contend" as far as scholarly trains, and what determinants clarify

why nations may have a particular preferred standpoint in one control over

another. However, this literature has not, to date, presented a comprehensive

organized model that could be used in the explanation of a country’s research

profile and academic output. In this paper, we use frameworks from

international business and economics to present such a model. Study makes

four major contributions. First, we include a very wide collection of countries

and disciplines, clearly including the Social Sciences, which inappropriately

are excluded in most bibliometric studies. Second, we apply theories of

revealed comparative advantage and the competitive advantage of nations to

academic disciplines. Third, we cluster our 34 nations into five unique

gatherings that have inimitable blends of discovered relative preferred

standpoint in five important orders. Finally, based on our experimental work

and prior literature, we present an theoretical diamond that details factors

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likely to explain a country’s research profile and competitiveness in certain

disciplines (Bertsch, 2010).

Competitive advantage in either cost or differentiation is a function of a

company’s value chain. An organization's cost position mirrors the aggregate

expense of playing out the entirety of its esteem exercises in respect to rivals.

Each esteem action has cost drivers that decide the potential wellsprings of a

cost advantage. Similarly, a company’s ability to differentiate itself reflects the

contribution of each value activity toward fulfillment of buyer needs. Many

numbers of an organization's exercises—not simply its physical item or

administration—add to separation. Purchaser needs, thus, depend not just on

the effect of the organization's item on the purchaser yet in addition on the

organization's different exercises (for instance, coordination or after-deal

administrations) (Michael E. Porter, 2010).

This paper tries to find out why shadow banking system has become

so competitive in the global financial system and how it can be controlled. For

this reason, we use Porter’s diamond model to find the competitive

advantages of shadow banking. Based on the results of this study it can be

concluded that factor conditions, chance and government do not contribute to

the competitiveness of shadow banking industry. On the other hand, the

outcomes recommended that related and supporting enterprises, firm system,

structure and contention, and request conditions add to the aggressiveness of

shadow managing an account industry. It is essential to regulate the activities

of shadow banking industry in order to avoid this industry from creating

systemic risk (Arash Riasi, 2015).

The condition for a development to yield lease for the firm is the

foundation of new upper hand. The connection between upper hand a lease,
 12

that lease over the long haul accomplished just when a firm can procure

strange benefits for its contributions, and when different firms can't copy the

item attributes that return these irregular benefits. When a firm is able to

operate with productivity relative to competitors, thus creating a pricing

advantages, or when the product compromises so much customer value that

command prices which far exceed costs (von Hipple, 2011).

Competitive advantage and posits that a firm’s strategy is defined as

the managers’ theory about how to gain and sustain competitive

advantage. The creator exhibits how a firm makes its upper hand by

making more financial incentive than its opponents, and clarifies that

productivity relies on esteem, cost, and expenses. The relationship among

these factors is discovered in the context of high-technology consumer

goods – laptop computers and cars. Analyzing the transaction of firm

assets, capacities, and skills, the section stresses that both must be

available to have center abilities fundamental to picking up and managing

upper hand through procedure. Next, the section describe the value chain

by which a firm changes contributions to yields, including an incentive at

each phase through the essential exercises of research, improvement,

generation, promoting and deals, and client benefit, which thus depend

upon fundamental help exercises that include esteem in a roundabout way

(Frank T. Rothaermel, 2016).

Some scholars hold that dynamic capability is one of the key in

searching for competitive advantage in strategic management. But there are

still arguments on the definition and effects of dynamic competencies and the

role of environmental dynamism. In the perspective of Chinese-like emerging

economies, from a strategic process perspective, this study defines dynamic

 13

capability as the firms' potential to systematically solve problems, formed by

its propensity to sense opportunities and threats, to make timely decisions,

and to implement strategic decisions and changes efficiently to ensure the

right direction, and also explores the relationship between dynamic

capabilities and competitive advantage and, the role environmental dynamism

plays. With an experimental investigation of 217 enterprises in China, this

examination finds that dynamic abilities do essentially emphatically influence

upper hand, and natural dynamism is a driver instead of a mediator

(Barreto,2010).

The study focuses on social innovations that create social value and

competitive advantage. In the system, three organizational segments upgrade

CSI: key arrangement, institutional components, and lucidity in expectation.

Three institutional components empower CSI forms: partner commitment,

operational structures and forms, and authoritative culture. Coordinating CSI

into methodology and activities makes open doors for co-creation, in this way

making shared esteem and improving upper hand. This investigation finishes

up by featuring administrative ramifications and future research openings

(Murray, Caulier-Grice, & Mulgan, 2010).

Efficiency is a source of competitive advantage is much highlighted in

resource-based treatment. When a firm is able to overcome the limitation of

existing or standard practices to do things faster, cheaper or better than the

competition, and when the factors which yield this level of efficiency are firm-

specific competence, the firm has an advantage. It is able to produce at lower

average cost, and may be able to invite customers by selling at a price slightly

below industry equilibrium price. It is thus able to reap abnormal profits

(Peteraf, 2011).
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The competitive advantages of countries and those of companies of a

particular nationality is a subject impressive increasing attention by student of

the transnational corporation. Definitely, it has been determinants of that

interaction, as it affects the globalization of production and markets, may

provide the basis for one of the next advances in the theory of foreign value-

added activity (Dunning, 2010).

Competitive advantage is a theory that seeks to address some of the

criticisms of comparative advantage. Competitive advantage theory suggests

that states and businesses should follow policies that create high-quality

goods to sell at high prices in the market. Emphasizes productivity growth as

the focus of national strategies. Competitive advantage rests on the concept

that cheap labor is global and natural resources are not necessary for a good

economy. Competitive advantage is necessary for satisfied customers who

will receive higher value in distributed products for higher income what the

owners request from management and such requirements can be fulfilled with

organization of production, higher application and as low as possible

production costs (Ranko, Berislav, and Antun, 2012).

Firms can build up this upper hand just by making an incentive in a way

that is worrying for contenders to impersonate. Conventional wellsprings of

upper hand, for example, budgetary and characteristic assets, innovation and

economies of scale can be utilized to make esteem. However, the resource-

based argument is that these sources are increasingly accessible and easy to

imitate. Therefore, they are necessary for upper hand particularly in contrast

with a perplexing social structure, for example, a work framework. In the event

that that is along these lines, human asset arrangements and practices might
 15

be a particularly imperative wellspring of managed upper hand (Jackson and

Schuler, 2010).

Competitive advantage as the ability to stay ahead of present or

potential competition, thus superior performance reached through competitive

advantage will ensure market leadership. Also it provides the understanding

that resources held by a firm and the business strategy will have a reflective

impact on generating competitive advantage. Differentiation strategy is usually

developed around many characteristics such as product quality, technology

and innovativeness, reliability, brand image, firm reputation, durability, and

customer service, which must be difficult for rivals to imitate (Mose, 2010).

To accomplish competitive advantage, firms need to continually center

around the recognizable proof of differential item methodologies, assembling

or reshaping center abilities, procuring novel innovations, and gathering of

licensed innovation, all of which would all be able to be saddled to make the

organization effective in a profoundly focused commercial center. Identifying

what constitutes a core competence has been a subject of debate in the

literature for over 20 years (Prahalad & Hamel, 1990; Aaker, 2011).

Advantage over other competitors is not expanded simply by

possessing rare and valuable resources but by employing and deploying

those resources. Both proponents of the traditional perspective affirm this.

Determining the existence of a competitive advantage involves examining the

financial performance of a specific competitive strategy in a certain

environment. This approach distinguishes that competitive advantage is a

result of the interaction of a firm’s competitive strategy, an internal factor, and

environmental conditions, an external factor. Neither focusing on internal

factors nor the traditional view focusing on external factors fully explains
 16

competitive advantage and its sustainability. Rather, the two perspectives

counterpart each other, contributing to a better understanding of the

phenomena, competitive advantage and sustainable competitive advantage

(Amit & Schoemaker, 2010).

Correlation between Measures

Recent attempts to identify the basis of firms’ competitive advantage

have drawn upon the resource-based view of the firm. This article

supplements these efforts and advances the argument that firms’ competitive

advantage arises from their system of corporate governance. Systems of

corporate governance embody incentives, authority patterns, and norms of

legitimation that generate particular organizational propensities to create

competitive advantages and disadvantages. For comparative purposes, the

characteristics of managerial, alliance, and family governance are reviewed.

The impact of a family’s control rights over a firm’s assets generates three

dominant propensities (parsimony, personalism, and particularism). These

propensities give advantages in scarce environments, facilitate the creation

and utilization of social capital, and engender opportunistic investment

processes. The experience of firms in emerging markets is drawn upon to

illustrate the argument (Carney 2005).

Early studies in the family business field suffered from significant

methodological problems and were largely descriptive and a theoretical. But

as the field evolved and responded collectively to unceasing calls for

theoretical rigor. These examples were borrowed from other domains,

primarily financial economics and strategic management, where the primary

focus of attention was large publicly owned corporations with highly

distributed ownership. Although important insights have been resulting from

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extensions and adaptations of these imported formulations to explain the

behavior of firms, much remains to be done, and the central issues that are

unique to firms are at best indirect in these formulations. It is fair to say that

the field lacks paradigmatic coherence and that much of the family business

literature still retains a strong phenomenological flavor. We believe that

“foreign” paradigms designed for organizations where economic

instrumentality is expected fall short of sufficiently dealing with the uniqueness

of family firms. For family business studies, this practice has often led to

contradictory empirical results, unnecessary reductionism, overlying

terminology, fragmented theoretical interpretations, and a forced application of

borrowed logic to explain expressive answers (Habbershon, Williams, &

MacMillan, 2011).

Government experts around the globe are receiving strategies intended

to build the cooperation of ladies in firms' sheets. These approaches are

normally supported by the start that ladies' interest positively affects the

working of sheets and thusly on firms' execution. The theoretical and empirical

suggestion in support of this premise, however, is inconclusive. Some studies

suggest that the multiplicity that women bring to boards and their unique

management style improve boards' operation, whereas others note that the

limited experience of women in leadership positions and their lesser drive to

advance to the top moderate their effectiveness as board members (Rawls J,

2012).

The foregoing presentation and discussion of carious literatures had

helped bring into focus the importance on corporate governance and

competitive advantage among remittances in Tagum City. The literature had

 18

also helped the researcher realized that the corporate governance has a great

influence on the competitive advantage among remittances in Tagum City.

Theoretical Framework

This study is anchored on the preposition of Carney (2005) on his

attempts to identify the basis of firms’ competitive advantage have drawn

upon the resource-based view of the firm. This article supplements these

efforts and advances the argument that firms’ competitive advantage arises

from their system of corporate governance. Systems of corporate governance

embody incentives, authority patterns, and norms of legitimation that generate

particular organizational propensities to create competitive advantages and

disadvantages. For comparative purposes, the characteristics of managerial,

alliance, and family governance are reviewed. These propensities give

advantages in scarce environments, facilitate the creation and utilization of

social capital, and engender opportunistic investment processes. The

experience of firms in emerging markets is drawn upon to illustrate the

argument.

Corporate governance lays down the firm’s response to know and

knowable situations and circumstances. The impact of a board’s decisions on

output measures should be evaluated, not just inputs such as information

quality. The essence of good corporate governance is ensuring trustworthy

relations between the corporation and its stakeholders. Therefore, good

governance involves a lot more than compliance. Good corporate governance

is a culture and a climate of consistency, responsibility, accountability,

fairness, transparency, and effectiveness that is deployed throughout the

organization (Michael Carney 1991).

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Competitive advantage can be achieved through internal resources or

a group of internal resources from the firm. However, to obtain this advantage,

the resources must be valuable, exploring the opportunities and neutralizing

threats to the environment of the firm; rare, not being present in any rival or

potential rival company; inimitable, so that others cannot imitate them; non-

substitutable, meaning they do not have strategic equivalents (Barney, 1991).

Conceptual Framework

Presented in Figure 1 is the conceptual framework of the study. The

variable is the corporate governance with the indicator namely; consistency,

responsibility, accountability, fairness, and transparency (Michael Carney

1991).

Corporate governance is disturbed with the resolution of collective

action problems among dispersed investors and the reconciliation of conflicts

of interest between various corporate claimholders. A fundamental dilemma of

corporate governance emerges from this overview: regulation of large

shareholder intervention may provide better protection to small shareholders;

but such regulations may increase managerial discretion and scope for abuse.

The other variable is competitive advantage with the indicator namely; the

resources must be valuable, exploring the opportunities and neutralizing

threats to the environment of the firm; rare, not being present in any rival or

potential rival company; inimitable, so that others cannot imitate them; non-

substitutable, meaning they do not have strategic equivalents (Barney 1991).

There is no one answer about what is competitive advantage or one

way to measure it, and for the right reason. Nearly everything can be

considered as competitive edge, e.g. higher profit margin, greater return on

assets, valuable resource such as brand reputation or unique competence in

 20

Independent Variable Dependent Variable

Corporate Governance Competitive Advantage

 Consistency
 Responsibility  Valuable
 Accountability
 Non-substitutable
 Fairness
 Inimitable
 Transparency
 Effectiveness  Rare

Figure1. Conceptual Paradigm of the Study

 21

producing jet engines. Every company must have at least one advantage to

successfully compete in the market. If a company can’t identify one or just

doesn’t possess it, competitors soon outperform it and force the business to

leave the market.

Significance of the Study

This study will provide significant information and it’s significant about

corporate governance and competitive advantage among remittances in

Tagum City. The main purpose of this study is to know the important policy

implication and to be sustained in improving the better result to come up with

greater resources and the effect is benefits for everyone should apply the

careful strategy. This study will be extravagant to the business minded people

who wanted to know to create their future business that would be responsible

enough in the area of their business field. Through this study, it will help the

business minded people to become more knowledgeable enough and to

provide consumer’s good capabilities.

With the help of this study, it will help them in making effective decision

making. This study also focuses and concentrates on how business

establishments can create strategic and unique way in developing a business.

Definition of Terms

In order for the reader to have a better understanding on the

terminologies used in this study.

Corporate Governance. Is concerned with the resolution of collective

action problems among spread investors and the reconciliation of conflicts of

interest between various corporate claimholders. In this survey we review the

theoretical and empirical research on the main mechanisms of corporate

control, discuss the main legal and regulatory institutions in different

 22

countries, and examine the comparative corporate governance literature. A

fundamental dilemma of corporate governance emerges from this overview:

regulation of large shareholder intervention may provide better protection to

small shareholders; but such regulations may increase managerial discretion

and scope for abuse.

Competitive advantage. Nearly everything can be considered as

competitive edge, e.g. higher profit margin, greater return on assets, valuable

resource such as brand reputation or unique competence in producing jet

engines. Every company must have at least one advantage to successfully

compete in the market. If a company can’t identify one or just doesn’t possess

it, competitors soon outperform it and force the business to leave the market.
 23

Chapter 2

METHOD

This chapter discusses the research design, research locale,

population and sample, research instrument, data gathering produces and the

statistical tools used by the researchers. This will help the reads on how to

understand and where the data conducted.

Research Design

The descriptive correlation method employed in the study. A

descriptive study undertaken in order to ascertain and be able to describe the

characteristics of the variables of interest in a situation. It conducted in order

to understand and learn about the current condition, practices, situations and

phenomena that exist in the organization or system. As cited by Baguio it

involves the correlation of the data in order to determine whether the degree

of relationship exist between two or more quantifiable variables (Sekaran,

2003).

The descriptive survey deal on quantitative data about the said

phenomenon. The quantitative aspect is an suitable schedule for gathering

the data was design for the target respondents to answer the questions.

Questionnaires were used for data gathering process.

The purpose of the subject was to determine if the correlation exist

between the operation management among the remittances in Tagum City

that practiced those indicators were, as the literature seemed to predict they

would be.
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Research Locale

The findings of this study are specific to the context of the remittances

in Tagum City. The possibility for the general applicability of the findings was

limited by the scope and the sample.

Accordingly, even though there could be features the findings may not

have the general applicability to other systems. Presents in figure 2 are the

map of Philippines consisting of 17 regions in which the city of Tagum

province of Davao del Norte is located in Region XI. Furthermore, presented

in the figure 2 is the vicinity map of respondents are remittances in which

located in Tagum City.

The location of the respondents is located in Tagum City. It consists of

150 remittances in Tagum City whose taking up good governance

.Population and Sample

Complete enumeration was used as the selection of the respondents.

The subjects of the study were the remittances and the respondents were 150

remittances in Tagum City. Shown in Table 1 are the respondents of study in

remittances in Tagum City.

 25

Figure 2. Map of the Philippines Highlighting Davao Del Norte

 26

Distribution of the Respondents

Name of Remittances Number of Respondents
RD Pawnshop in Tagum City 49

Mlhuiller in Tagum City 30

Western Union in Tagum City 9

Cebuana Lhuillier in Tagum City 12

Palawan in Tagum City 45

Smart Padala in Tagum City 5

Total 150

Research Instrument

The researcher constructed to supply appropriate answer to the a fore

mentioned problems covering the study, the researcher made questionnaire.

The instrument that was used indicated by the factor: consistency,

responsibility, accountability, fairness, transparency and effectiveness. This

was to assess the degree to which the services were observed among

corporate governance and competitive advantage. The tool consisted of the

following quantitative equivalent with 5 for much observed, 4 for much

observed, 3 for moderately observed, 2 for less observed, 1 for not observed.

Using the Parameter Limits was the corporate governance?

Range of Means Frequency Interpretation
4.30- 5.00 Very High This means that the corporate
governance is observed at all times.

3.50 – 4.20 High This means that the corporate

governance is observed most of the
time.

2.70 – 3.40 Moderate This means that the corporate

governance is observed moderately.
 27

1.90 – 2.60 Low This means that the corporate

governance is less observed.

1.0 – 1.80 Very Low This means that the corporate

governance is not observed.

Using the Parameter Limits was the competitive advantage?

Range of Means Frequency Interpretation

4.30 - 5.00 Very High This means that the competitive
advantage is very much evident.

3.50 – 4.20 High This means that the competitive

advantage is much evident.

2.70 – 3.40 Moderate This means that the competitive

advantage is evident.

1.90– 2.60 Low This means that the competitive

advantage is rarely evident.

1.0 – 1.80 Very Low This means that the competitive

advantage is not evident.

Data Collection

In gathering data for this study, the researchers collected the relevant

information in the formula of the questionnaires. In each component of

corporate governance and competitive advantage of remittances has been

analyzed to investigate how remittances evaluated it and how much relevant it

was when compared to others. After it was approved, the researchers

personally distributed the questionnaire to selected respondents, then

retrieved it on the other day and submitted this to their statistician for the

computation of data and statistician for the computation of data and statistical

analysis.
 28

Statistical Tools

The statistical tools that were used for data analysis and interpretations

are the following:

Mean. This statistical tool was employed to determine the significance

on the relationship between corporate governance and competitive advantage

of remittances in Tagum City.

Pearson (r). This tool was used to measure the significant relationship

between corporate governance and competitive advantage.

Multiple Regression Analysis. This statistical tool used to determine

the influence of corporate governance and competitive advantage among

remittances in Tagum City.

 29

Chapter 3

RESULTS

Presented in this chapter are the data and the results of the study.

Tables are engaged in this subheading: Level of Corporate governance

significance on the relationship between competitive advantage. With their

corresponding indicators.

Corporate Governance

Shown in the table 1 are the linear regression analysis scores for the

indicators of Corporate governance with an overall means of 4.09 describe as

a high with a standard deviation of 0.34. The high level could be attributed to

the high rating given by the respondents in all indicators. This means that the

respondent’s response to Corporate governance is observed at all times in

majority of the case in the item consistency, responsibility, accountability,

fairness, transparency and effectiveness.

The cited overall mean score was the result gathered from the

following computed means score from the highest to lowest: 4.18 or very high

for effectiveness with the standard deviation of 0.37; 4.13 or very high for

responsibility with the standard deviation of 0.42; 4.08 or high for consistency

with the standard deviation of 0.42; 4.07 or high for accountability with the

standard deviation of 0.39; 4.07 or high for transparency with the standard

deviation of 0.40.

Finally, the corporate governance that is evident in remittances in

Tagum City is on Fairness, being the indicator with the lowest mean.
 30

Table 1. Level of Corporate Governance

Indicator x SD Descriptive Level

Consistency 4.08 0.42 Very High
Responsibility 4.13 0.42 Very High
Accountability 4.07 0.39 Very High
Fairness 3.98 0.44 High
Transparency 4.07 0.40 Very High
Effectiveness 4.18 0.37 Very High
Overall 4.09 0.34 Very High
 31

Competitive Advantage

Shown in the table 2 are the linear regression analysis scores for the

indicators of Competitive advantage with an overall means of 4.10 describe as

a high with a standard deviation of 0.37. The high level could be attributed to

the high rating given by the respondents in all indicators. This means that the

respondent’s response to Competitive advantage are much evident in majority

of the case in the item valuable, rare, inimitable and non- substitutable.

The cited overall mean score was the result gathered from the

following computed means score from the highest to lowest:4.22 or very high

for rare with the deviation of 0.38; 4.17 or very high for non-substitutable with

the standard deviation of 0.42; 4.03 or very high for inimitable with the

standard deviation of 0.41; 3.99 or high for valuable with the standard

deviation of 0.44.

The main level of competitive advantage that was positive in

remittances in Tagum City is on Rare, being the indicator with the highest

mean.
 32

Table 2. Level of Competitive Advantage

Indicator x SD Descriptive Level

Valuable 3.99 0.44 High

Rare 4.22 0.38 Very High

Inimitable 4.03 0.41 Very High

Non- Substitutable 4.17 0.42 Very High

Overall 4.10 0.37 Very High

 33

Significant Relationship Between Corporate Governance

and Competitive Advantage

One important of this study is to determine whether or not the

corporate governance have significant relationship with competitive

advantage in remittances in Tagum City. Pearson r was used to determine the

correlation between the two variables. Results of the computation are shown

in the table 3.

The results revealed that corporate governance versus competitive

advantage yields an r-value of 0.604 which is significant. The result is due to

the p-value of 0.001 which is lower than 0.05 level of significance. This lead to

the decision that the null hypothesis which stated that there is a significant

relationship between corporate governance and competitive advantage is

rejected.

This further means that there is a relationship between two correlated.

On the basis of researches done on the relationship between corporate

governance and competitive advantage, it has been evident that the corporate

governance in remittances as a unit has an effect to the competitive

advantage. Therefore, the result of correlation exemplifies that when the

corporate governance as observed by the remittances employees is high

competitive advantage is also observed to be high.

 34

Table 3. Significance on the Relationship between Corporate Governance and

Competitive advantage among Remittances in Tagum City

Variables r-value r-squared p-value

Corporate
Governance

Competitive
Advantage

0.604* 0.3648 0.001

*Significant at 0.05 significance level.

 35

Chapter 4

DISCUSSION

The data on Corporate governance and competitive advantage among

remittances in Tagum City are presented in this chapter and said discussions

are based on the findings appeared in the previous section.

Level of Corporate Governance among Remittances in Tagum City

The respondents’ level on the corporate governance on remittances in

Tagum City is high. These mean that the corporate governance is observed at

all times in tagum city. This further means that every organization in

remittances in tagum city constantly to recognize or easy for them to

understand all the corporate governance is a culture and climate of

consistency, responsibility, accountability, fairness, transparency and

effectiveness that is deployed throughout the organization.

This result’ is in relation to the theory of Carney M. (1991) who view

that the essence of good corporate governance is ensuring trustworthy
relationship. This good governance is the responsibility of all those who
conduct the relations with the organization, it is the board of directors who
sets the tone at the top and are responsible for ensuring that the right climate
and culture exist within the organization. It is very importance that the
employees and organization interact with each other sufficiently and
effectively, for the organization to achieves their goals.

In terms of being consistency the level of corporate governance among

remittances in Tagum City was positive. This means that the corporate
governance is observed at all time. The view point of Grawe (2010) is
seeming congruent to this study. He revealed that consistency of the policies
creates the right expectations in the value chain and helps the value chain to
be stronger as a whole.
 36

With regards to responsibility, the level was very high. This indicates
that the responsibility of corporate governance among remittances in Tagum
city is positive. In line with the view of Orge, J. (2010). This means that the
employee of the organization has a responsibility to do their duties. In order to
create value, a balanced risk taking and making difficult decisions on a timely
basis are essential. Therefore, decision makers at all levels should assume
the responsibility to take initiative and be accountable for their decisions.

This was followed by accountability indicator which was on high level.

This indicates that the accountability of corporate governance in Tagum City
was positive. It means that the obligation of an employees or organization
should accept any responsibility for them and also includes the responsibility
for taking good care of money and other invested entrusted property. As
mention by Vance, Lowry, and eggett (2013) accountability is a quality in
which an employee has a willingness to accept responsibility and has a
potential obligation to explain his or her action to another person who has the
right to pass judgement on the actions as well as to the person to potential
consequences for his or her action.

A level of corporate governance in terms of fairness was also evident

among the respondents donating that the fairness among remittances in
Tagum City is positive. It means that the action of an employee requires the
process of the decision making in order to which reaching a fair and equitable
result. Decisions should be made, and should appear to be made, carefully,
honestly, and objectively, with the knowledge that even a process of the
greatest integrity does not always produce certainty and that something less
will have to do. Adam (2010) mentioned that the Fairness has been widely
applied to a business in order to describe the relationship between an
employee’s motivation and his or her perception of equitable or inequitable
treatment. Just the ideal of recognition for the job performance and the mere
act of thanking the employee will cost a feeling of satisfaction in them for help
the employee feel worthwhile and have a better outcome.

Another indicator is transparency which was on a high level. This

indicate that the transparency of corporate governance in Tagum City is
positive. It means that the organization needs to gain that trust of an
 37

employee not only for financial resources, but also for all other resources that
it uses to create value. Trust can only be gained with transparency. In lined
with views Bini Smaghi (2011) that transparency is practiced in companies,
organizations, administrations, and communities. It guides an organization's
decisions and policies on the disclosure of information to its employees and
the public, or simply the intended recipient of the information. Transparency is
also a very important element of accountability.

The high level of effectiveness indicates that the effectiveness of

corporate governances among remittances in Tagum City was positive. It
means that the employee has the ability to achieve an extent to which
targeted problems are solved. As mention Hackman (2010) that the
effectiveness defined terms performance effectiveness (controlling costs,
improving productivity and equality), employee attitude about their quality of
work life (job satisfaction, organization commitment), and employee behavior.
Group task motivates by encouraging a sense of collective responsibility for
completing a whole piece of work.

Level of Competitive Advantage among Remittances in Tagum City.

Competitive advantage can be achieved through internal resources or

a group of internal resources from the firm. However, to obtain this advantage,

the resources must be valuable, exploring the opportunities and neutralizing

threats to the environment of the firm; rare, not being present in any rival or

potential rival company; inimitable, so that others cannot imitate them; non-

substitutable, meaning they do not have strategic equivalents (Barney, 1991).

This result’ is associated with the work of Barney, (1991) who mention
that the essence of competitive advantage among remittances in Tagum City
can be achieved through internal resources or a group internal resources from
the firm.

The high level for the valuable showed that the level competitive
advantage was positive. This means that the employees should have the
capability or resource competitively valuable, to be competitively valuable, the
 38

resource or capability needs to be aligned to the company’s overall strategy; it

needs to improve their value proposition or value formula. This is a congruent
with the concept of Wills-Johnson (2010) who explained that a resource
is valuable to the extent that it helps a firm create strategies that capitalize on
opportunities and ward off threats. Southwest Airlines’ culture fits this
standard well. Most airlines struggle to be profitable, but Southwest makes
money virtually every year. One key reason is a legendary organizational
culture that inspires employees to do their very best. This culture is
also rare in that strikes, layoffs, and poor morale are common within the
airline industry.

This was followed by rare indicator which was on very high level. This
means that to be rare competitive powers help a firm to compete; they might
not be an absolute advantage, but they enable a firm to achieve advantages
and growth in some business domains. This is the line of Reed (2011) which
state that if most competitors hold the same valuable resource, then they will
likely explore their use in similar ways, thus implementing the same value
creating strategy. This would not result in any company achieving competitive
advantage as a result of owning a valuable resource.

In the same manner, the respondent had agreeable on competitive advantage

about inimitable described as very high which indicated were remittances in
Tagum City is positive. This means to be inimitable, it must be a resource or
capability that is hard for competitors to imitate. Normally it is because the
competitor power requires the following non-exhaustive, high capital intensity,
social complexity, or causal ambiguity. The viewpoint of Dierickx (2010) stated
that if valuable and rare resources are easily imitable, competitors would
quickly copy them and the potential for competitive advantage would
disappear. Resources tend to be more difficult to imitate if: (a) they are path
dependent,

Correspondingly, the respondent also presented very high level in non-

substitutable. This experimental that the non-substitutable in remittances in
Tagum City is positively observed. This means that a competitive power to be
non-substitutable is the power or advantage cannot be substituted by another
resource or capability. The above findings collaborated with the idea of Chell
 39

(2010) who pointed out that a non-substitutable resources exist when the
resource combinations of other firms cannot duplicate the strategy provided
by the resource bundle of a particular firm.

Correlation between Measures

Recent attempts to identify the basis of firms’ competitive advantage

have drawn upon the resource-based view of the firm. This article

supplements these efforts and advances the argument that firms’ competitive

advantage arises from their system of corporate governance. Systems of

corporate governance embody incentives, authority patterns, and norms of

legitimation that generate particular organizational propensities to create

competitive advantages and disadvantages. For comparative purposes, the

characteristics of managerial, alliance, and family governance are reviewed.

The impact of a family’s control rights over a firm’s assets generates three

dominant propensities (parsimony, personalism, and particularism). These

propensities give advantages in scarce environments, facilitate the creation

and utilization of social capital, and engender opportunistic investment

processes. The experience of firms in emerging markets is drawn upon to

illustrate the argument (Carney 2005).

The correlation between the overall corporate governance and

competitive advantage among remittances in Tagum City is significant. This

implies that the competitive advantage is dependent among remittances in

Tagum City.

Conclusion

Based from findings in this study, conclusions are drawn in this section.

The level of corporate governance among remittances in Tagum city is very

 40

high for consistency, very high for responsibility, very high for accountability,

high for fairness, very high for transparency, and very high for effectiveness

and the overall mean is very high in corporate governance among remittances

in Tagum City. This means that the corporate governance among remittances

were positive in Tagum City. The level of competitive advantage among

remittances in Tagum City is high for valuable, very high for rare, very high in

inimitable, and very high in non-substitutable and the overall mean is very

high in competitive advantage among remittances in Tagum City. This means

that competitive advantage among remittances in Tagum City were positive.

There is a significant relationship between corporate governance and

competitive advantage among remittances in Tagum City. The corporate

governance significantly influences competitive advantage among remittances

in Tagum City. This is line with the study of Carney (2005) which stated that

this article supplements these efforts and advances the argument that firms’

competitive advantage arises from their system of corporate governance.

Systems of corporate governance embody incentives, authority patterns, and

norms of legitimation that generate particular organizational propensities to

create competitive advantages and disadvantages.

Recommendations

In the light of the previous findings and conclusions, the following

recommendations are presented; corporate governance have an impact and

practices that the organization or individual, has an obligation to act for the

benefit of society. Moreover, as to maintain an equality of the employee

among remittances in the organization. Lastly, for the future researchers, this

study could give those who might have some interest in the research and

guide to provide resources that they need to complete the study.

 41

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